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MAZ Partners LP v. Shear

United States District Court, D. Massachusetts

July 13, 2017

MAZ PARTNERS LP, Individually and on Behalf of Others Similarly Situated, Plaintiff,
v.
BRUCE A. SHEAR, et al., Defendants.

          MEMORANDUM AND ORDER

          Patti B. Saris Chief United States District Judge

         The Court held a nine-day jury trial in this shareholder class action arising from a corporate merger. The Court assumes familiarity with the parties' dispute. See MAZ Partners LP v. Shear, 204 F.Supp.3d 365 (D. Mass. 2016) (summary judgment order), on reconsideration in part, 218 F.Supp.3d 132 (D. Mass. 2016).

         On March 10, 2017, the jury returned a verdict in favor of Bruce Shear and Acadia Healthcare, Inc. (the “defendants”).[1] On the special verdict form, the jury answered:

1. Has the plaintiff MAZ proven that Bruce Shear controlled a majority of the PHC Board of Directors with regard to the Board's decision to approve the merger?
Yes X No __
2. Has the defendant Bruce Shear proven that the merger was entirely fair to the Class A shareholders?
Yes ___ No X
3. Has MAZ proven that, at the time of the merger, the class suffered an economic loss caused by Shear's breach of fiduciary duty to the Class A shareholders?
Yes ___ No X

         Docket No. 419. Pursuant to the instructions on the verdict form, the jury stopped after finding no economic loss and did not answer subsequent questions on aiding-and-abetting liability and damages.

         Plaintiff MAZ Partners LP (“MAZ”) moves for judgment as a matter of law or, in the alternative, for a new trial. MAZ raises a number of issues: (1) alleged inconsistency in the jury verdict, (2) the appropriateness of one of the questions on the special verdict form, (3) the availability of equitable remedies notwithstanding the jury verdict, and (4) evidentiary error at trial. The defendants respond to those issues and also raise three alternative bases for a finding of non-liability.

         The Court ALLOWS in part the motion for judgment as a matter of law (Docket No. 423). The Court orders that Shear's pro rata share of the $5 million Class B premium be disgorged to the certified class. Otherwise, the Court DENIES the motion. The Court DENIES the motion for a new trial (Docket No. 426).

         DISCUSSION

         I. Alleged Inconsistency of Jury Verdict

         MAZ argues that the jury's answer to Question 3 -- that the class did not suffer an economic loss from Shear's breach of fiduciary duty -- is inconsistent with its determination that Shear was a controlling shareholder and that the merger was not entirely fair to the class. MAZ's objection is untimely, and in any event the jury's verdict was not inconsistent.

         A. Waiver

         MAZ failed to timely challenge the jury's special verdict as inconsistent. “[W]ith respect to special verdicts, ‘the law is perfectly clear that parties waive any claim of internal inconsistency by failing to object after the verdict is read and before the jury is discharged.'” In re Nexium (Esomeprazole) Antitrust Litig., 842 F.3d 34, 59 (1st Cir. 2016) (quoting Trainor v. HEI Hosp., LLC, 699 F.3d 19, 34 (1st Cir. 2012)). “This has been an ‘iron-clad rule' in our circuit.” Id. (quoting Rodriguez-Garcia v. Mun. of Caguas, 495 F.3d 1, 9 (1st Cir. 2007)); see also Toucet v. Mar. Overseas Corp., 991 F.2d 5, 8 (1st Cir. 1993) (“In this circuit, a ‘party waives inconsistency if it fails to object after the verdict is read and before the jury is dismissed.'” (quoting Bonilla v. Yamaha Motors Corp., 955 F.2d 150, 155-56 (1st Cir. 1992))).

         MAZ points to an older First Circuit case suggesting that the Court has discretion to disregard an inconsistent special verdict even in the absence of a timely objection. See Kavanaugh v. Greenlee Tool Co., 944 F.2d 7, 10 (1st Cir. 1991) (“The district court possesses ‘considerable discretion' when it comes to the disposition of inconsistent special verdicts . . . . Where, as here, the complaining party, whether tacitly or explicitly, accedes to the written instructions on the special verdict form and to the companion directions included in the charge to the jury, and interposes no objection to the jury's inconsistent responses until after the jury has been discharged, the district court may exercise its discretion to reject special verdicts which the court, with the agreement of all parties, correctly instructed the jury not to answer.”). But the question in Kavanaugh was whether to disregard the jury's answers to certain questions on the special verdict form that both parties agreed should not have been answered given the jury's answers to earlier questions on the form. MAZ is not asking the Court to disregard an answer to a question that the jury was instructed not to answer. MAZ's inconsistency challenge is untimely.

         B. Consistency of Verdict

         In any event, the jury verdict was not inconsistent. The jury could have concluded that the premium paid to the Class B shareholders for their high-vote stock was too large but that there was no resulting economic loss to the Class A shareholders. That conclusion was supported by testimony of the defendants' expert Andrew Capitman:

Well, one of the things that I disagree greatly with [plaintiff's expert] Mr. Morris about is simply this idea that if you weren't getting the -- if the Class Bs were not getting the premium, the buyer would have paid more for the Class As, and generally speaking, I don't see any evidence for that. I don't see any facts that would support that. But just as a matter of practicality and sort of how cheap and flinty-eyed anybody is when they're a buyer in one of these big executive positions, they don't have to pay it. They're offering a fair price for A. That's in and of itself enough. That they've got to get the Bs to come along with the deal and they've got to negotiate a deal for that, that's a separate issue. So just like you've got to pay for lawyers and accountants and bankers, this is a cost of the deal, but it's not a valuation issue.

Trial Tr. Day 8 at 94. Capitman reiterated that point in response to a juror question:

A JUROR: So if the B deal wasn't done -- is this what you're saying -- if the B deal was not done, the price of the A shares would not have changed?
THE WITNESS: Yes, that's what I'm saying. What I'm saying is that from the point of view of assessing the fairness of the deal, the question is, were the A shareholders getting paid a fair price for their PHC stock?
A JUROR: I guess my question is, would the A shares' stock price have changed if the B deal -- is there a potential for that to have happened ...

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