Superior Court of Massachusetts, Suffolk, Business Litigation Session
George Noble et al.
Christian Collias et al No. 135609
MEMORANDUM OF DECISION AND ORDER ON DEFENDANTS'
MOTIONS FOR PARTIAL SUMMARY JUDGMENT
L. Sanders, Justice
motions before this Court are yet another example of
misguided attempts by some members of the business bar to use
summary judgment as the vehicle to decide issues which by
their nature almost always require resolution at trial. Faced
with claims that include elements regarding the
defendant's knowledge and the reasonableness of
plaintiff's reliance--all questions of fact--each of the
three individual defendants ask this Court to rule that they
are nevertheless entitled to judgment in their favor as a
matter of law as to certain counts asserted against them.
They do so under the mistaken impression that, if the summary
judgment record contains testimony supporting their position,
the facts that such testimony concerns are therefore
undisputed even though there is circumstantial evidence which
would support the contrary position. " The question of
whose interpretation of the evidence is more believable . . .
'is not for the court to decide on the basis of [briefs
and transcripts] but is for the fact finder after weighing
the circumstantial evidence and assessing the credibility of
the witnesses.'" Bulwer v. Mt. Auburn
Hospital, 473 Mass. 672, 689, 46 N.E.3d 24 (2016),
quoting Lipchitz v. Raytheon Co., 434 Mass. 493,
499, 751 N.E.2d 360 (2001). With this in mind, this Court
concludes that the summary judgment motions must be
DENIED as to all counts to which they pertain,
except for two counts which add nothing to
plaintiff's case and are without any legal
case arises from plaintiffs' purchase of common stock in
the defendant Progressive Gourmet, Inc. (Progressive), a
close corporation, and plaintiff George Noble's loan to
Progressive of $300, 000. Progressive is not moving for
summary judgment. The moving parties are Progressive CEO
Richard Foster and two individuals, Christopher Collias
(Chris) and his wife Julie Collias (Julie), who hold the
majority of shares in the company and together owned one
block of stock that was sold to the plaintiffs. Julie is also
Progressive's treasurer and Chris a former CEO in the
motions before the Court do not concern the promissory note
(Count VI) and are only partially dispositive as to both
Chris and Foster. Although the three motions are not
identical as to the counts that each of them targets,
together they concern the following claims: violation of the
Blue Sky Statute, G.L.c. 110A, § 410 (Section 410)
(Count I); fraud (Count II); negligent misrepresentation
(Count III); violations of Chapter 93A (Counts IV and V); and
unjust enrichment (Count VII).
410 prohibits the sale of securities by means of any untrue
statement of material fact or material omission. The statute
offers strong protections to buyers at the same time that it
creates a strong incentive for sellers of securities to make
full disclosure. To achieve those purposes, described as both
" redressive" and " preventive, " the
statute imposes a burden of proof on the plaintiff which is
considerably lighter than that which applies to common-law
misrepresentation cases. Marram v. Kobrick Offshore Fund,
Ltd., 442 Mass. 43, 52, 809 N.E.2d 1017 (2004). Although
it does not impose strict liability, it does shift the burden
of proof with regard to what the defendant knew or should
have known at the time that the sale was made, placing that
burden on the defendant.
410(a)(2) assigns primary liability to the "
seller" of the security as that term has been construed
by the case law. See e.g., Hays v. Ellrich, 471
Mass. 592, 598-601, 31 N.E.3d 1064 (2015) (investment adviser
who solicited sale is " seller" under 410(a)(2)).
Section 410(b) assigns secondary liability to: 1) every
officer or director of the seller; 2) every person who "
directly or indirectly controls a seller, " and every
" agent who materially aided in the sale . . ."
Each of the defendants, for reasons specific to him or her,
argues that Section 410 does not apply to them. The
defendants' arguments notwithstanding, there is evidence
in the summary judgment record to support the conclusion that
all three defendants are covered by the statute. As to Foster
in particular (whose summary judgment motion as to this Count
focuses solely on this issue) this Court concludes that there
are sufficient facts from which a jury could conclude that he
acted as an " agent" for the Colliases as to that
block of stock that the Colliases sold to the plaintiffs.
410 does permit an affirmative defense to liability: if the
defendant can prove by a preponderance of the evidence that
she did not know and " in the exercise of reasonable
care, " could not have known that the statement was
false when made, then the defendant is not liable. Julie
Collias ask this Court to rule that, as a matter of law, she
has sustained that burden of proof. The plaintiffs'
memorandum submitted in opposition to her motion sets forth
in detail all the evidence in the summary judgment record
from which a rational trier of fact could reach a different
conclusion. Defendant's argument is all the more
surprising, given that the Supreme Judicial Court has
described this burden as a " heavy" one which is
" difficult to sustain." Marram v. Kobrick
Offshore Fund, Ltd., 442 Mass. at 52. Certainly, it is a
fact intensive inquiry almost always left to the factfinder.
Mass. Mut. Life Ins. Co. v. DB Structured Prods.,
110 F.Supp.3d 288, 297 (D.Mass. 2015) and cases cited
therein. Admittedly, the plaintiffs' case against Julie
appears to be weak, given her limited involvement in
Progressive and the stock sales at issue. That a plaintiff is
not likely to succeed at trial, is not the relevant
standard for summary judgment, however.
common-law claims of fraud and negligent misrepresentation
rest on the same set of allegations, the only difference
being the allocation of the burden of proof. That is, it is
incumbent on the plaintiff to prove that the
defendant had the requisite state of mind necessary for
liability to attach. The plaintiff must also prove reasonable
reliance on the misrepresentation. Defendants contend that
the evidence is insufficient as to both of these issues. The
question is not whether plaintiffs will prevail at trial,
however, but whether there is a material dispute of fact as
to these elements, which are by their nature quite fact
intensive. As a consequence, the case law is clear that
summary judgment is a disfavored remedy where it relates to a
party's knowledge or state of mind. Flesner v.
Technical Communications Corp., 410 Mass. 805, 809, 575
N.E.2d 1107 (1991); Quincy Mut. Fire Ins. Co. v.
Abernathy, 393 Mass. 81, 86, 469 N.E.2d 797 (1984);
White v. Seekonk, 23 Mass.App.Ct. 139, 141, 499
N.E.2d 842 (1986). That is equally true with respect to
whether a party exercises reasonable care, since that
necessarily depends on the circumstances. See Fox v. F& J
Gattozzi Corp., 41 Mass.App. 581, 588, 672 N.E.2d 547
(1996); see also Restatement (Second) Torts 552 (1977),
comment e (noting that what is reasonable is a "
question for the jury, unless the facts are so clear as to
permit only one conclusion"). Here, there are clearly
material fact disputes on these issues.
IV, alleging a violation of 93A in connection with the
securities sales, survives in light of this Court's
ruling regarding the fraud claim. Count V, however, alleges a
different 93A violation--namely, that the defendants fail to
make a reasonable settlement offer after receiving a 93A
demand letter. A demand letter is a condition precedent to
suit; although its purpose may be to encourage negotiation
and settlement, this Court is unaware of any case law outside
of the insurance context to suggest that the failure to make
a settlement offer in and of itself is an unfair and
deceptive practice. Indeed, there is some authority to the
contrary. See e.g., Da Silva v. U.S. Bank, N.A., 885
F.Supp.2d 500, 506 (D.Mass. 2012) and cases cited therein.
Although the defendant's response to the 93A demand
letter (or lack thereof) may be relevant to the surviving 93A
count, there is no reason for this additional count to remain
in the case.
Court also sees no legal basis for a claim of unjust
enrichment (Count VII). That is an equitable remedy which is
available only if a party does not have an adequate remedy at
law. Here, plaintiffs clearly have common-law and statutory
claims. That the plaintiffs may fall short of proving the
facts necessary to sustain recovery on those claims does not
mean that they can then rely on a theory of unjust
enrichment. So long as the legal remedies are viable, that is
enough. Ruggers, Inc. v. United States Rugby Football
Union, Ltd., 843 F.Supp.2d 139, 148 (D.Mass. 2012).
the foregoing reasons, it is ORDERED that, as to
Counts V and VII of the Complaint, the defendants'
motions are ALLOWED, so that those counts are
DISMISSED . As to the remaining counts, each
defendant's Motion is DENIED .
The penchant of some members of the
plaintiff's bar to add as many counts as possible to a
Complaint tends to exacerbate the problem highlighted by this
opinion, since this practice tends to invite summary judgment
from the other ...