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Butler v. Moore

United States District Court, D. Massachusetts

March 30, 2017

JOSEPH G. BUTLER, as Chapter 7 Trustee, and JOHN W. STRACHAN, Plaintiffs,
v.
EDWARD T. MOORE, LAWRENCE W. ROSENFELD, EASTERN TOWERS, LLC, EASTERN PROPERTIES, LLC, HORIZON TOWERS, LLC, TOWER INVESTORS TRUST, GLOVER PROPERTY MANAGEMENT, INC., 5G TOWERS, LLC, 5G INVESTMENT TRUST, LLC, TOWER ACQUISITIONS, INC., TOWER ACQUISITIONS, LLC, TOWER ACQUISITION TRUST, GROUND LEASE ACQUISITIONS, INC., GROUND LEASE ACQUISITIONS, LLC, GROUND LEASE ACQUISITION TRUST, and MIDWEST TOWERS INVESTMENT, LLC, Defendants.

          MEMORANDUM AND ORDER ON CROSS-MOTIONS FOR SUMMARY JUDGMENT AS TO REMEDY

          F. DENNIS SAYLOR IV UNITED STATES DISTRICT JUDGE.

         This action arises out of a dispute concerning a closely held business that developed towers for the cellular telephone industry. The principal dispute involves a series of transactions in which the majority owners of the business froze out the minority owners and appropriated assets and business opportunities for their own benefit. The Court previously issued a decision on liability, and the proceeding is now at the remedy stage. Familiarity with the Court's previously-issued Findings of Fact and Conclusions of Law is presumed.

         I. Procedural Background

         In November 2006, defendants Edward Moore and Lawrence Rosenfeld caused Eastern Towers, Inc., to file a voluntary petition under Chapter 7 of the Bankruptcy Code. With two very minor exceptions, plaintiff Strachan is the only remaining creditor.[1] The reference to the Bankruptcy Court was withdrawn in 2010, and the matter was then tried to the Court without a jury.

         On January 27, 2012, the Court ordered the case bifurcated into liability and remedy phases. After a bench trial as to liability, the Court issued Findings of Fact and Conclusions of Law on March 26, 2015. Following the issuance of the judgment, the Court granted defendants' motion for a new trial as to remedy on the grounds that the conclusions of law inappropriately included findings that should have been reserved for the remedy phase. Defendants have now moved for summary judgment as to the proper remedy, and plaintiffs have cross-moved for partial summary judgment as to the same issue.

         II. Additional Factual Background

         Except as noted, the following facts are either based on those Findings of Fact or are not disputed by the parties.

         A. 2010 Sale of Thirteen Towers

         1. The Court's Findings of Fact identified 33 towers that had been acquired and developed in violation of the fiduciary duties of Moore and Rosenfeld to Eastern Towers. (COL ¶ 270).

         2. Of those 33 towers, 13 were sold on September 1, 2010, to SBA Towers III, LLC, an unrelated third party. (Exs. 913.400, 913.401, 913.403).[2]

         3. The 13 towers that were sold were as follows:

a. Four towers that were formerly owned by Eastern Properties, LLC (Esko, Ivan, Manitowish, and Bergland);
b. One tower that was formerly owned by Tower Acquisition Trust or Tower Acquisitions, Inc. (South Grantham);
c. Eight towers that were formerly owned by 5G Investment Trust, LLC (Antigo, Trego, Lake Nebagamon, West Fergus Falls, Grand Rapids, Americus, Tennille, and Oakland).

(Id.).

         4. The seller of the 13 towers on September 1, 2010, was Midwest Towers Investment, LLC, a Delaware limited liability company owned and controlled by Moore and/or Rosenfeld. (Id.).[3] Midwest Towers Investment, LLC is a single member LLC owned by 5G Investment Trust. (Phillips Rpt. at 2 n. 4).

         5. Midwest Towers Investment, LLC had apparently acquired the 13 towers by means of an asset purchase agreement dated July 14, 2010. (Ex. 913.402). The sellers of the towers under that July 14, 2010 agreement were 5G Investment Trust, LLC; Eastern Properties, LLC; and Tower Acquisition Trust. (Id.).

         6. The sales price for that transaction, as reflected on the closing statement dated September 1, 2010, was $15, 464, 924.30. (Ex. 913.401). That amount included the Marblehead tower (which is not subject to the Court's remedy) and may have included other towers, but did not include the Oakland tower (which is). The Oakland tower was sold separately for a stated price of $813, 135. (See SOF ¶ 50; Floyd Rpt., Ex. 6-H).

         7. Of that approximately $15.4 million purchase price, $171, 719.39 was paid to Media Capital Advisors, Inc., as a broker fee. (Id.).

         8. Another $2, 068, 377.70 of the purchase price was paid to TB Bank in three separate wires to pay off loans that had been incurred by Eastern Properties, LLC. (Id.). That debt had been used to finance the acquisition of the towers, and involved the same loan facility that had been originally intended to be used by Eastern Towers.

         9. The remaining proceeds from the sale of the towers, after adjustments for items such as taxes and rent, totaled $13, 126, 691.19. (Ex. 913.401). That amount was paid by wire transfer on or about September 1, 2010, to the IOLTA Client Account of Lampert, Hausler & Rodman, P.C., a law firm that represents Moore and Rosenfeld. (Id.).[4]

         10. The approximately $13.1 million in proceeds from the sale of the towers were then distributed by the law firm to Moore and Rosenfeld directly or indirectly (through entities owned or controlled by them). (Id.).

         11. None of the proceeds of the sale were paid directly to Midwest Towers Investment, LLC. (Id.).

         12. Apparently because the July 10, 2010 sale included at least some other assets, plaintiffs contend, and defendants admit, that the sales price for the 13 relevant towers was $8, 433, 949. (Def. Counter-Statement of Material Facts, Dkt. No. 211, No. 46 at 14).

         13. The plaintiffs contend, and defendants admit, that the sales prices assigned to the 13 towers were as follows:

a. $482, 386 for Esko;
b. $313, 214 for Ivan;
c. $568, 778 for Manitowish;
d. $431, 580 for Bergland;
e. $475, 000 for South Grantham;
f. $2, 701, 533 for Antigo, Trego, and Lake Nebagamon;
g. $977, 899 for West Fergus Falls and Grand Rapids;
h. $1, 670, 424 for Americus and Tennille; and
i. $813, 135 for Oakland.

(Id., No. 48-50 at 14-15; Floyd Rpt., Ex. 6-H).

         14. Of the 33 towers described above, 20 have not been sold. Those towers are as follows:

         a. Towers owned by Eastern Properties, LLC:

1. Beverly
2. Franklin Church
4. Franklin Industrial
5. Weare
6. Webster
7. Pembroke
8. Carver
9. Goshen
10. Loudon
11. Hopkinton
12. Gilmanton
13. Grantham (Yankee Barn Road)
14. North Loudon

         b. Towers owned by 5G Investment Trust, LLC:

1. Hawley
2. Heritage Hills
3. Wakefield
4. Washington Borough
5. Orwigsburg

         c. Tower owned by Tower Acquisition Trust or Tower Acquisition, Inc.:

1. Newburyport

         d. Tower owned by Horizon Towers, LLC:

1. Wayland

         B. Acquisition of Ground Leases between 2008 and 2013

         1. Between 2008 and 2013, Moore and Rosenfeld acquired ground lease rights, or purchased real property, for the tower sites for the Beverly, Loudon, South Grantham, Pembroke, and Hopkinton towers. The acquisitions were conducted through a new entity called Ground Lease Acquisitions, Inc. (Def. Counter-Statement of Material Facts, Dkt. No. 211, No. 36 at 12).[5]

         2. In 2008, Ground Lease Acquisitions, Inc., acquired the ground lease for the Beverly and Loudon tower sites. (Id., No. 37 at 12).

         3. In 2008, Ground Lease Acquisitions, Inc., purchased the land on which the Loudon tower sits. (Id., No. 39 at 13).

         4. In 2009, Ground Lease Acquisitions, Inc., acquired the ground lease for the Pembroke tower site. (Id., No. 40 at 13).

         5. In 2009, Ground Lease Acquisitions, Inc., purchased the land on which the South Grantham tower sits. (Id.).

         6. In 2013, Ground Lease Acquisitions, Inc., acquired the ground lease for the Hopkinton tower site. (Id., No. 44 at 14).

         C. Acquisition of Interest in 4G Towers, LLC in 2004

         1. In 2004 and 2005, 5G Investment Trust purchased and sold a majority ownership in 4G Towers, LLC, a Massachusetts limited liability company that owned towers in Minnesota, Oregon, Wisconsin, and Washington. (Id., No. 32 at 10).

         2. At least $103, 222 of the payment made by 5G Investment Trust for its interest in 4G Towers, LLC came from Eastern Properties, LLC. (Id., No. 33 at 11-12).

         3. In 2004 and 2005, 5G Investment Trust received $3, 955, 009 in distributions from 4G Towers, LLC and recorded a profit of $1, 189, 384 from its investment. (Id., No. 34 at 11; Floyd Rpt., Ex. K).

         D. Distributions to Moore and Rosenfeld and/or Related Entities

         1. Between 2003 and 2004, Moore and Rosenfeld received at least $571, 700 in distributions from Eastern Towers, LLC and/or Eastern Towers, Inc. (Floyd Rpt., Ex. I).

         2. Between 2003 and 2014, Moore and Rosenfeld received at least $7, 630, 546 in distributions from Eastern Properties, LLC. (Id., Exs. I, J).

         3. Between 2004 and 2014, Moore and Rosenfeld received at least $285, 000 in distributions from Horizon Towers, LLC. (Id., Ex. I).

         4. Between 2005 and 2014, Moore and Rosenfeld received at least $7, 126, 909 in distributions from 5G Investment Trust. (Id.).

         5. Between 2009 and 2014, Moore and Rosenfeld received at least $507, 428 in distributions from Tower Acquisitions Trust and/or Tower Acquisitions Inc. (Id., Ex. 10-A).

         6. As noted, in 2005, Moore and Rosenfeld received an additional $3, 955, 009 in distributions from 5G Investment Trust as part of ...


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