Heard: October 5, 2016.
action commenced in the Superior Court Department on November
to dismiss a third-party complaint against certain
third-party defendants were heard by Frances A. Mclntyre, J.,
and a separate motion to dismiss the third-party complaint
against another defendant was considered by Paul D. Wilson,
E. Roberts (Michael R. Hackett also present) for Tradition
(North America) Inc.
J. Bial, of the District of Columbia, for FSA Capital
Management Services, LLC.
Douglas L. Wald, of the District of Columbia (Kevin P. Martin
also present) for Trinity Plus Funding Company LLC.
McLetchie for Steven E. Goldberg.
M. Sternberg, for Ronald Jampel, was present but did not
Present: Meade, Milkey, & Kinder, JJ.
Commonwealth brought this enforcement action against the
defendant, Tradition (North America) Inc. (Tradition), a
broker for transactions involving municipal bond derivatives,
claiming that Tradition engaged in bid rigging and other
deceptive practices that harmed the Commonwealth in violation
of the Consumer Protection Act, G. L. c. 93A, § 2, and
the False Claims Act, G. L. c. 12, § 5B. Tradition
denied the allegations, asserting that it, too, was a victim
of the alleged bid-rigging scheme. Tradition filed
third-party claims against individuals and corporations with
whom it had consulted in the allegedly fraudulent
transactions, including Ronald Jampel, Steven E. Goldberg,
Trinity Plus Funding Company LLC (Trinity), and FSA Capital
Management Services, LLC (FSA) (collectively, the third-party
defendants). The third-party complaint sought contribution
from the third-party defendants pursuant to G. L. c. 231B,
§ 1 (a.), for any liability Tradition might have to the
Commonwealth (contribution claims). It also alleged various
other claims, including breach of contract, breach of the
implied covenant of good faith and fair dealing, common-law
indemnification, unfair and deceptive trade practices, fraud
and deceit, intentional and negligent misrepresentation,
civil conspiracy, unjust enrichment, and tortious
interference with contractual relations (noncontribution
motions filed pursuant to Mass.R.Civ.P. 12(b)(6), 365 Mass.
754 (1974), a Superior Court judge dismissed Tradition's
third-party claims on multiple grounds, principally that the
contribution claims were foreclosed by Tradition's
failure to secure the release of claims against the
third-party defendants in its settlement with the
Commonwealth, and the noncontribution claims were time barred
by the applicable statutes of limitation. Tradition appeals.
reasons that follow, we conclude that the contribution claims
against all third-party defendants, as well as the claims for
breach of contract and breach of the implied covenant of good
faith and fair dealing against Jampel, were properly
dismissed. We conclude that the dismissal of the remaining
noncontribution claims was error.
summarize the facts alleged in Tradition's seventy-page
second amended third-party complaint (the third-party
complaint), accepting them as true for the purpose of our
review of the motions to dismiss. Harrington
v. Costello, 467 Mass. 720, 724 (2014) .
Guaranteed investment contracts.
and quasi government entities, like the Massachusetts Water
Pollution Abatement Trust (MWPAT), often raise money by
issuing tax-exempt municipal bonds. If all of the proceeds
from a bond offering are not used immediately, such an entity
often invests idle proceeds in a municipal bond derivative,
like a government investment contract (GIC), to earn
interest. An entity selects a GIC, typically offered by major
financial institutions, through a competitive bidding process
conducted by an impartial third-party broker. Bids are
solicited from at least three parties. The broker distributes
the issuing entity's terms and conditions prior to
conducting an auction. By submitting a bid at an auction, a
bidder represents that it did not consult with any other
bidder and was not given a "last look" at competing
Tradition and the consultants.
is a subsidiary of Compagnie Financiere Tradition
(Compagnie), and provides brokerage services to a select
group of sophisticated institutional clients. Compagnie is
the third largest broker of such services in the world.
Tradition first entered the GIC market as a broker in 1998,
after being introduced to Jampel and Adrian Scott-Jones (the
consultants). The consultants proposed to conduct GIC
auctions on Tradition's behalf in full compliance with
all applicable laws and regulations. In reliance on those
representations, Tradition entered into an agreement (the
consulting agreement) with the consultants' employer,
Capital Financial Partners, Inc. (CFP), pursuant to which CFP
and the consultants agreed to "work on an exclusive
basis on business opportunities acceptable to Tradition . . .
including, but not limited to, [GICs]." Over the next
ten years, CFP and the consultants conducted approximately
138 GIC auctions across the country on Tradition's
behalf. At all times, CFP and the consultants certified to
Tradition that the auctions were conducted in a lawful
manner. According to the Commonwealth, however, that was not
The 2000 and 2004 MWPAT GIC auctions.
served as the broker for MWPAT in connection with GIC
auctions held on October 19, 2000, and November 2, 2004, at
which Trinity and FSA were the respective winning bidders.
Prior to each auction, one of the consultants, Scott-Jones,
allegedly informed Goldberg, who was representing Trinity at
the first auction and FSA at the second, of the interest rate
needed to win the auction. Armed with that information,
Trinity and FSA lowered their previously submitted bids and
still won the auctions. As a result, MWPAT was deprived of a
higher rate of return over the terms of those two contracts.
Tradition denies that it knew of the alleged fraudulent
conduct, noting, among other things, that it had no financial
incentive to engage in such wrongdoing, since it received a
flat fee for both auctions that was not contingent upon the
interest rate, yield, or other terms associated with the
March, 2007, Department of Justice subpoena.
March, 2007, Tradition received a subpoena from the United
States Department of Justice (DOJ) seeking documents
concerning numerous types of "municipal contracts"
awarded pursuant to competitive bidding, including GICs,
anywhere in the country. The subpoena sought documents
related to certain specific persons and companies: "CDR
Financial Products of Beverly Hills, California, and/or David
Rubin, and/or companies controlled by David Rubin." The
subpoena did not identify any specific State or transaction
that was under scrutiny. Nor did it identify Tradition, CFP,
or the consultants as subjects or targets of the
retained outside counsel to respond to the subpoena and
conduct an internal investigation. Outside counsel
interviewed Scott-Jones and Jampel, both of whom denied any
wrongdoing. Outside counsel also reviewed documents
responsive to the subpoena and, ultimately, concluded that
there was no evidence of wrongdoing.
May 27, ...