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Meunier v. Market Strategies, Inc.

Superior Court of Massachusetts, Suffolk, Business Litigation Session

June 12, 2017

John J. Meunier et al., and the John J. Meunier 2012 Irrevocable Trust
Market Strategies, Inc

          Filed June 13, 2017


          Kenneth W. Salinger, Justice.

         John Meunier, Christy White, and the John J. Meunier 2012 Irrevocable Trust (the " Trust") claim that Market Strategies, Inc. (" MSI") breached its contractual obligations to make certain payments to Cogent Research Holdings, LLC (which the parties refer to as " Holdco"). They also claim that after signing the contract at issue MSI misrepresented its willingness and ability to pay what it owes and thereby committed deceptive acts in violation of G.L.c. 93A. Finally, Meunier and White seek declaratory judgment regarding the enforceability of certain non-competition, non-solicitation, and confidentiality agreements. MSI has moved for summary judgment.

         The Court will grant summary judgment in MSI's favor on the contract claim because Plaintiffs are not intended beneficiaries of MSI's payment obligations to Holdco as a matter of law. It will also allow MSI's motion with respect to the declaratory judgment claim because any dispute regarding enforceability of the non-competition or non-solicitation agreements is moot and Plaintiffs lack standing to challenge the confidentiality agreement on the ground that MSI committed a material breach of contract by not paying Holdco. However, the Court will deny the summary judgment motion with respect to the misrepresentation and c. 93A claims because they are independent from the contract claim.

         1. Undisputed Factual Background

         These actions arise from the May 2013 sale of Cogent Research, LLC to MSI. At the time of the transaction, Meunier, White, and the Trust were the sole owners of Cogent Research. They agreed to sell Cogent Research to MSI in exchange for an " Initial Payment" of $8.0 million, a " Delayed Payment" of $2.0 million, and a " Contingent Payment" of roughly $3.15 million that was due after MSI received additional audited financial statements of Cogent Research. Meunier and White also agreed to work for MSI for three years and entered into a non-competition, non-solicitation, and confidentiality agreement.

         Meunier, White, and the Trust created Holdco in connection with this transaction. They are the sole owners of Holdco. They transferred ownership of Cogent Research to Holdco, which in turn sold Cogent Research to MSI. The parties' purchase agreement provides that MSI was required to pay an Initial Payment, Delayed Payment, and Contingent Payment to Holdco. MSI does not have any contractual obligation to make any of these payments to Meunier, White, or the Trust.

         Although the parties' purchase agreement provides that MSI was to make the Deferred and Contingent Payments to Holdco no later than April 30, 2016, a separate subordination agreement executed at the same time modifies those terms. The parties to the subordination agreement were Holdco, MSI, and an administrative agent representing Senior Lenders of MSI. Meunier and White signed this contract on behalf of Holdco. The subordination agreement provides in § 2.1 that the obligations of MSI to make the Delayed and Contingent Payments " shall be subordinate and subject in right and time of payment . . . to the prior Payment in Full of all Senior Debt" held by the Senior Lenders. It provides in § 2.3 that, so long as Senior Debt is outstanding, MSI shall not make and Holdco shall not accept payment of any part of the Deferred and Contingent Payments if doing so would cause MSI to default under the Senior Credit Agreement.[1] And it provides in § 2.4(a) that Holdco shall not sue MSI or take any other action to enforce MSI's payment obligations under the purchase agreement until the Senior Debt is paid in full.

         2. Contract Claim

         To date, MSI has not paid any part of the $5.15 million in Deferred and Contingent payments that it owes to Holdco. Plaintiffs claim that this constitutes a breach of the purchase agreement. Meunier, White, and the Trust all sued MSI in their own names, purporting to assert their own rights as intended third-party beneficiaries of MSI's contractual promise to pay Holdco these amounts.

         MSI contends that it is entitled to summary judgment on this claim because Plaintiffs have no standing to raise it. (On the merits, MSI contends that it is required or at least permitted to withhold these payments under the subordination agreement. It does not seek summary judgment on that ground.)

         2.1. Legal Background--Intended Beneficiaries and Contract Interpretation

         The purchase agreement provides (in § 9.09) that it " will be governed by and construed and enforced in accordance with" Massachusetts law.

          " Under Massachusetts law, only intended beneficiaries, not incidental beneficiaries, can enforce a contract." See Harvard Law School Coalition for Civil Rights v. President and Fellows of Harvard College, 413 Mass. 66, 71, 595 N.E.2d 316 (1992). " One need not be a beneficiary of every provision of the contract in order to be an intended beneficiary with enforceable rights; it is enough to be the intended beneficiary of the promise one is seeking to enforce." The James Family Charitable Foundation v. State Street Bank and Trust Co., 80 Mass.App.Ct. 720, 725, 956 N.E.2d 243 (2011). An intended third-party beneficiary " stands in the shoes" of, and thus has no greater rights than, the contracting party whose rights the beneficiary seeks to enforce. Rae v. Air-Speed, ...

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