United States District Court, D. Massachusetts
A. O'Toole, Jr. United States District Judge
plaintiff's claims in this case all center on the
allegation that the defendant, CT Mason, Inc. d/b/a Mason
Capital Partners (“CTM”) wrongfully ceased paying
client referral fees to it, Jackson Financial Services, LLC
(“JFS”), in breach of the parties' contract.
This case was referred to a magistrate judge for full
pretrial management. The parties cross-moved for summary
judgment, and CTM moved to amend its answer to add two
affirmative defenses. The magistrate judge issued two Reports
and Recommendations (“R&Rs”), the first (dkt.
no. 151) recommending that the defendant's motion to
amend be denied, and the second (dkt. no. 152) recommending
that both motions for summary judgment be denied. The
defendant filed objections to both R&Rs.
original complaint (dkt. no. 1) contained a single count for
breach of contract. It alleged that in 1991, Albert D. Mason
and Jackson Financial Co., Inc. (“Jackson
Financial”) (a different entity from the present
plaintiff) entered into a written “Investment Advisor
Referral Agreement, ” pursuant to which Mason, an
individual, agreed to pay Jackson Financial a referral fee
for each investment client that Jackson Financial referred to
Mason. The complaint alleged that in 2004 the Referral
Agreement was assigned by Jackson Financial to the present
plaintiff, JFS, pursuant to a written “Acknowledgement
and Consent Agreement, ” executed by “the
defendants.” It further alleged a breach of that
agreement by “the defendants, ” identified by the
complaint as Mason, Albert D. Mason, Inc. d/b/a Mason Capital
Partners, and CT Mason, Inc. d/b/a Mason Capital Partners.
The plaintiff later moved to amend the complaint by adding
additional counts for breach of the implied covenant of good
faith and fair dealing and violation of Massachusetts General
Laws Chapter 93A. The new claims were “based on the
very same overall nucleus of facts” as the original
breach of contract claim. (See Mem. of Law in Supp.
of Pl.'s Mot. for Leave to Amend Compl. at 3 (dkt. no.
point, the plaintiff settled with Mason and Albert D. Mason,
Inc., leaving CTM as the only defendant in this action.
undisputed that CTM did not execute either written agreement.
Indeed, CTM was not in existence at the time the agreements
were executed, having been incorporated in 2006. Nor is there
any allegation that thereafter CTM executed any writing
purporting to bind it to the terms of the Referral or Consent
Agreements. If, therefore, the amended complaint is construed
as pleading only breach of the written agreements, a
claim against CTM for liability under an express written
contract (as the amended complaint seems plainly to allege)
cannot succeed, and CTM would be entitled to summary judgment
on that claim, as well as on the related claims that are
dependent on the contract claim.
however, the amended complaint might instead be construed, as
the magistrate judge found, to plead against CTM breach of an
implied-in-fact contract entered into by the parties through
the course of their conduct. If it were to be so construed, I
disagree with the magistrate judge's denial of the motion
to amend the answer to add affirmative defenses that are
pertinent only to an unwritten contract. I do not think it
fair to fault CTM for having omitted to plead affirmative
defenses that would not pertain to a claim of breach of an
express written contract, which is what the amended complaint
read plainly appears to set forth. CTM says it would, if
permitted, assert the affirmative defense that the implied
“implied contract” is unenforceable pursuant to a
specific statute of frauds, Massachusetts General Laws
Chapter 259, Section 7. Under Section 7, which applies
“to a contract implied in fact or in law to pay
reasonable compensation, ” “[a]ny agreement to
pay compensation for service as a broker or finder . . .
shall be void and unenforceable unless such agreement is in
writing, signed by the party to be charged therewith, or by
some other person authorized.” Mass. Gen. Laws ch. 259,
contract alleged in the amended complaint is that CTM agreed
to pay the plaintiff a fee for each client the plaintiff
referred to CTM. At least at first blush, such a contract
appears to fall within the scope of the statute. There has
been no argument (yet, at least) that there is a writing
signed by CTM that could satisfy the statute. Because the
defense has not been formally asserted, the plaintiff has not
responded to the defendant's arguments on this point.
Accordingly, the Court invites the plaintiff to show why, on
the present summary judgment record, if the defense were
allowed to be asserted, it would not be a valid, dispositive
defense to an unsigned, implied-in-fact contract. Any
submission should be made by March 17, 2017. The defendant
shall then have until March 24, 2017 to file a reply.
 The plaintiff asserted, “Through
the addition of its claims for breach of good faith and fair
dealing and its chapter 93A claim, plaintiff is merely adding
allegations of a bad faith motive to its original breach of
contract action.” Id.
 The amended complaint refers to the
implied covenant of good faith and fair dealing, but
it does not use the word “implied” in outlining
its breach of contract claim.
 The defendant would also assert the
affirmative defense that an implied-in-fact contract is
unenforceable because it is in violation of SEC Rule 206(4)-3
under the Investment Advisor Act of 1940. 17 C.F.R. §
275.206(4)-3(a). Because the statute of frauds defense may be
the clearer of the two proposed defenses, the Court requests
that the ...