John J. Mooney et al.
Diversified Business Communications et al.
Date: March 5, 2018
(with first initial, no space for Sullivan, Dorsey, and
Walsh): Salinger, Kenneth W., J.
MEMORANDUM AND ORDER ON DEFENDANTSâ MOTIONS TO
DISMISS FIVE OF SIX CLAIMS IN EACH ACTION
Kenneth W. Salinger Justice of the Superior Court
four Plaintiffs are former minority members of a closely-held
Delaware company called DBC Pri-Med, LLC. The majority member
is and was defendant Diversified Business Communications. The
three individual defendants are all managers of Pri-Med; none
of them has any ownership interest in the
January 2017 Pri-Med called Plaintiffsâ shares, as expressly
permitted in Pri-Medâs operating agreement. This LLC
Agreement provides that an appraisal firm to be selected by
the parties shall determine the value of any called (or put)
shares, based on a valuation of Pri-Med as a going concern
and without discounting that value for the illiquidity or
minority nature of any shares.
allege that Defendants carried out a scheme to artificially
deflate the value of Pri-Med in order to avoid paying
Plaintiffs a fair and proper price for redeeming their
shares. According to Plaintiffs, this scheme involved
artificially decreasing Pri-Medâs assets by selling off its
major subsidiary (a company called Amazing Charts) and
artificially increasing the companyâs liabilities by
inflating its expenses and debt.
set of Plaintiffs asserts six claims. Count One seeks a
declaratory judgment that the sale of Amazing Charts violated
the LLC Agreement, and therefore is null and void, because
Defendants did not obtain Plaintiffsâ approval. The other
claims are for breach of the LLC Agreement, breach of the
implied covenant of good faith and fair dealing in the same
contract, breach of fiduciary duty, aiding and abetting a
breach of fiduciary duty, and certain equitable relief.
have moved to dismiss all of the claims under Mass.R.Civ.P.
12(b)(6) except for the claims in Count Two for
breach of contract. The Court will order that declaratory
judgment enter in Defendantsâ favor on Count One of each
complaint, deny the motions with respect to the claim for
breach of the implied covenant of good faith and fair dealing
in Count Three, dismiss with prejudice the claims for breach
of fiduciary duty and aiding and abetting a breach of
fiduciary duty in Counts Four and Five, and dismiss without
prejudice the separate claim for equitable relief in Count
Alleged Implausibility of Claims
make an overarching argument that Plaintiffsâ basic theory of
their claims- which that Defendants deliberately stripped
Pri-Med of value in order to avoid paying Plaintiffs the
proper redemption price- is " absurd" and "
nonsensical." Defendants contend that the complaints
must therefore be dismissed because they fail to allege facts
plausibly suggesting any entitlement to relief. See generally
Lopez v. Commonwealth, 463 Mass. 696, 701 (2012) (to
survive a motion to dismiss under Mass.R.Civ.P. 12(b)(6), a
complaint or counterclaim must allege facts that, if true,
would " plausibly suggest[ ] ... an entitlement to
relief" ) (quoting Iannacchino v Ford Motor
Co., 451 Mass. 623, 636 (2008), and Bell A. Corp. v.
Twombly, 550 U.S. 544, 557 (2007)).
argument is unavailing. Defendants misconstrue
Twombly and Iannacchino . A trial court
judge cannot dismiss claims because it considers the
underlying factual allegations to be unbelievable. To the
contrary, in deciding a Rule 12(b)(6) motion, a court must
" accept as true the allegations in the complaint, draw
every reasonable inference in favor of the plaintiff, and
determine whether the factual allegations plausibly suggest
an entitlement to relief under the law." Barbuto v.
Advantage Sales & Mktg., LLC, 477 Mass. 456, 457-58
(2017). The Court must assume " that all the allegations
in the complaint are true" even they are " doubtful
in fact." Iannacchino, 451 Mass. at 636,
quoting Twombly, 550 U.S. at 555.
as the facts alleged in a complaint plausibly suggest that
the plaintiffs may be able to prove their claims, the
complaint is not subject to dismissal even if the allegations
appear to be " nonsensical," " extravagantly
fanciful," " unrealistic," or otherwise "
improbable." See Ashcroft v. Iqbal, 556 U.S.
662, 681 (2009) (" To be clear, we do not reject these
bald assertions on the ground that they are unrealistic or
nonsensical ... It is the conclusory nature of [the
plaintiffâs] allegations, rather than their extravagantly
fanciful nature, that disentitles them to the presumption of
truth" ); Twombly, 550 U.S. at 556 (" [A]
well-pleaded complaint may proceed even if it strikes a savvy
judge that actual proof of the facts alleged is
Put another way, Twombly and Iqbal
expressly declined to exclude even outlandish allegations
from a presumption of truth except to the extent they
resembled a âformulaic recitation of the elements of a ...
claimâ or other legal conclusion." Connelly v. Lane
Const. Corp., 809 F.3d 780, 789 (3d Cir. 2016), quoting
Iqbal, supra, quoting in turn Twombly, 550
U.S. at 555. And Iannacchino adopted the same
standard under Massachusetts law.
Delaware Law Governs
substantive claims in this case are governed by Delaware law.
Pri-Med was formed under the Delaware Limited Liability Act.
The breach of fiduciary duty claims are therefore governed by
Delaware law. See Harrison v. NetCentric Corp., 433
Mass. 465, 469-72 (2001). In addition, the partiesâ LLC
Agreement provides that it " shall be construed and
enforced in accordance with the laws (other than the law
governing conflict of law questions) of the State of
Delaware. This provision is enforceable. See Hodas v.
Morin, 442 Mass. 544, 549-50 (2004) (" As a rule,
â[w]here the parties have expressed a specific intent as to
the governing law, Massachusetts courts will uphold the
partiesâ choice as long as the result is not contrary to
public policyâ " ) (quoting Steranko v. Inforex,
Inc., 5 Mass.App.Ct. 253, 260 (1977)).
Declaratory Judgment- Count One
are entitled to judgment in their favor on the claims for
declaratory judgment as to whether Pri-Med could sell its
Amazing Charts subsidiary, or the InLight assets of that
subsidiary, after January 1, 2017, without the prior written
consent of the Plaintiffs.
Construing the Contract
7.9 of the LLC Agreement provided that certain corporate
actions required prior consent of at least three of the four
Plaintiffs, while they still owned the B-1 Shares of the
company. This provision states, in relevant part, that "
without the prior written consent of the Members holding a
majority of the Series B-1 Shares, the Company and the Series
A Members agree that they shall not:
(a) materially change the business focus of the Company;
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