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Donarumo v. Phillips

Superior Court of Massachusetts, Suffolk

April 2, 2018

ANDREW DONARUMO, individually & d/b/a Drew Donarumo Plumbing & Heating, Donarumo Plumbing & Heating, & Drew’s Plumbing & Heating Inc. Plaintiffs
v.
JEFFERY J. PHILLIPS, Esq. & DANIEL TREGER, Esq. Defendants

          MEMORANDUM OF DECISION AND ORDER ON DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT PURSUANT TO MASS. R. CIV. P. 56

          Robert B. Gordon Justice

         Plaintiffs Andrew Donarumo (" Mr. Donarumo"), individually and d/b/a Drew Donarumo Plumbing & Heating, Donarumo Plumbing & Heating and Drew’s Plumbing & Heating Inc. (collectively, the " Plaintiffs"), bring this legal malpractice action against their former counsel, Jeffrey J. Phillips, Esq. (" Attorney Phillips") and Daniel Treger, Esq. (" Attorney Treger"). Plaintiffs allege that the Defendants were negligent and violated Mass. G.L. c. 93A during their representation of them in a civil action arising out of the sale of Plaintiffs’ plumbing business. Presented for decision is the Defendants’ Motion for Summary Judgment Pursuant to Mass. R. Civ. P. 56. Following a hearing and for the reasons which follow, the Defendants’ motion shall be DENIED.

         FACTUAL BACKGROUND

         The following facts are drawn from the summary judgment record and the statement of undisputed material facts filed jointly by the parties under Superior Court Rule 9A(b)(5). The Court views this record in the light most favorable to the Plaintiffs, the non-moving party.

         I. The Furlong Litigation

         On January 10, 2008, Michael G. Furlong, Esq., JoAnn Furlong and Drew’s Plumbing & Heating II, Inc. (the " Furlongs") brought an action against the Plaintiffs in Superior Court, alleging that the Plaintiffs had engaged in unlawful and bad faith conduct in connection with the sale of their plumbing business to the Furlongs (the " Furlong litigation"). More specifically, the Furlongs alleged that the Plaintiffs violated contractual and common law tort duties owed to them when, immediately following the sale, the Plaintiffs opened up a new plumbing business that began competing against the company sold to the Furlongs. The Furlongs asserted several causes of action against the Plaintiffs (including violations of Chapter 93A) which, if proven, would have allowed the Furlongs to recover multiple damages and attorneys’ fees.

         On June 13, 2008, the Plaintiffs retained Attorneys Phillips and Treger (collectively, the " Defendants") to defend them in the Furlong litigation. To that end, Mr. Donarumo and Deirdre Donarumo (" Ms. Donarumo"), his spouse and the Trustee of the Donarumo Realty Trust, executed a Legal Services Agreement with the Defendants. The Defendants thereafter represented the Plaintiffs in the Furlong litigation during the case’s discovery phase, through the trial, and up until September 19, 2013, at which time the Plaintiffs directed the Defendants to cease their post-trial work on Plaintiffs’ behalf.

         A. The Defendants’ Legal Advice

         Throughout the course of the Furlong litigation, the Defendants consistently conveyed their view to the Plaintiffs that they had a very strong defense to the Furlongs’ claims and that Plaintiffs were likely to prevail at trial. Indeed, Attorney Phillips regularly characterized the Furlongs’ claims as frivolous; and, even as trial approached, Phillips maintained in an internal memorandum that " [t]his is a case about a lawyer [Furlong] who made a terrible business choice, " who " refused to accept the results of his mistake, " and who now " blame[s] everyone but himself for the business failure." The Defendants additionally assured the Plaintiffs that, even if the Furlongs prevailed at trial, the financial liability risk was just $188, 000 - the amount Mr. Donarumo earned while working in areas purportedly prohibited by the non-compete provisions of the purchase and sale agreement. With respect to the Furlongs’ Chapter 93A claim, Attorney Phillips advised Mr. Donarumo that he did not see a " smoking gun" that would make such a claim a matter of concern, and further informed Mr. Donarumo that Chapter 93A claims were typically thrown out by the judge.

         The Plaintiffs and the Furlongs engaged in intermittent settlement discussions as the litigation proceeded. Relying on Attorney Phillips’ advice, the Plaintiffs offered the Furlongs $25, 000 to settle the case during the first year of litigation, and raised their offer to $100, 000 two to three years into the case. At the same time, the Furlongs reduced their initial settlement demand of $1 million (the sale price of the plumbing business) to $925, 000, a settlement amount Attorney Phillips characterized to the Plaintiffs as " absurd." Shortly prior to trial, the Furlongs reduced their demand to $700, 000; but the highest settlement offer the Plaintiffs ever extended to the Furlongs during the five years they were represented by the Defendants was $188, 000. Attorney Phillips also notified the Furlongs’ counsel prior to trial that the Plaintiffs would reject a hypothetical mediator-suggested settlement of $600, 000.

         Unable to reach resolution, the parties completed discovery and the Plaintiffs eventually moved for summary judgment. The Court (Fabricant, J.) denied the Plaintiffs’ motion on December 6, 2010, ruling that the Furlongs had advanced several viable claims against the Plaintiffs. These included causes of action for breach of contract, breach of the implied covenant of good faith and fair dealing, fraud in the inducement, and violation of Chapter 93A. Attorney Phillips forwarded the Court’s summary judgment decision to the Plaintiffs, with a covering instruction to read it carefully and contact him to discuss.

         The matter proceeded to a bench trial in April and May of 2012. Attorney Treger served as the Plaintiffs’ lead trial counsel, assisted by another lawyer in his firm. Attorney Phillips attended trial, but did not play an active role in the proceedings. Instead, Attorney Phillips counseled Plaintiffs after each day of trial, and provided a running analysis of each witness’s testimony. Throughout the trial, Attorney Phillips continued to report to his clients that all was going well and, at one point, assured Mr. Donarumo that he " had nothing to worry about."

         On May 24, 2013, the Court (Roach, J.) issued its Memorandum and Order of Findings and Rulings, finding in favor of the Furlongs. Most critically, the Court did not credit Mr. Donarumo’s testimony, concluding that he " was prepared to say whatever he needed to say to induce the Furlongs to make the purchase, including statements which he knew or should have known were not true." The Court specifically found that Mr. Donarumo had made misrepresentations related to his post-sale plans and regarding a non-plumber’s ability to run the business. The Court cited " overwhelming" evidence that Mr. Donarumo had breached the parties’ sales contract by actively competing with the Furlongs in the private plumbing business, and observed that the methods by which Mr. Donarumo had compromised the good will of the plumbing business he had sold to the Furlongs were " legion on the trial record." The Court thus ruled in favor of the Furlongs on their breach of contract, implied covenant of good faith and fair dealing, and fraud in the inducement claims. The Court additionally found that the Plaintiffs’ conduct violated Chapter 93A and, as such, Plaintiffs were adjudged liable to the Furlongs for double damages and attorneys’ fees. The Court did not calculate Plaintiffs’ precise economic liability at that time, but instead declared that further proceedings would be held to assess damages.

         For a few months following the Court’s decision, the Defendants continued to represent Plaintiffs on post-trial work. Plaintiffs also retained Attorney Anil Madan (" Attorney Madan") to work on a post-trial motion for them. On June 27, 2013, Attorney Phillips advised the Plaintiffs that the Furlongs had advanced an unsolicited settlement demand of $3 million. Attorney Phillips referred to this offer as " interesting, " and stated that it was " based on an almost best case scenario." The Plaintiffs expressed an interest in extending a counteroffer.

         On September 19, 2013, the Plaintiffs, through Attorney Madan, advised Attorney Phillips that they would potentially be filing a malpractice action against him. Attorney Madan also conveyed to Phillips that there was " no expectation that you will do any more work on the [Furlong litigation]." Shortly thereafter, the Plaintiffs, represented by Attorney Madan, settled the Furlong litigation for $1.6 million.

         B. The Defendants’ Billing for Legal Services

         At the outset of his firm’s engagement in June of 2008, Attorney Phillips estimated to the Plaintiffs that the total legal fees and expenses through a trial in the Furlong litigation would range from $200, 000 to $300, 000. By December of 2009, however, and still ...


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