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Erb v. Javaras

Superior Court of Massachusetts, Suffolk, Business Litigation Session

June 13, 2018

Elisha ERB, as Trustee of the Marc A. DiGeronimo Irrevocable Trust, and Marc A. DiGeronimo
v.
James D. JAVARAS et al.[1]

          File Date: June 15, 2018

          MEMORANDUM AND ORDER ON DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT

          Kenneth W. Salinger, Justice of the Superior Court

          Plaintiffs claim that James Javaras and his insurance agencies ("Defendants") engaged in a "churning" scheme by misleading Marc A. DiGeronimo and the Marc A. DiGeronimo Irrevocable Trust into repeatedly buying unnecessary, unsuitable, and expensive life insurance policies in order to increase Defendants’ commissions. DiGeronimo formed the Trust in 2002 to own life insurance policies that would be used to satisfy his anticipated future estate tax liability. Javaras served as a co-trustee of the Trust from the time it was formed until March 2013. Plaintiffs assert claims for breach of fiduciary duty, fraud, negligence, and violation of G.L.c. 93A.

         Defendants have moved for summary judgment. They argue that all the claims are time barred, that Plaintiffs released these claims or are estopped from asserting them by the same document, and that DiGeronimo has no viable claim as to the so-called "Collateral Policy" because he got exactly what he paid for.

         The Court is not convinced that Defendants are entitled to judgment in their favor as a matter of law. It will therefore DENY the summary judgment motion.

         1. Statutes of Limitations

         Defendants’ argument that most of the claims against them are barred by the applicable statute of limitations turns on disputed issues of fact that cannot be resolved on a motion for summary judgment.

         Plaintiffs filed suit on October 13, 2014. The applicable statutes of limitations therefore bar any tort claims that accrued before October 13, 2011 (see G.L.c. 260, § 2A) and any claim under G.L.c. 93A that accrued before October 13, 2010 (see G.L.c. 260, § 5A). Cf. Passatempo v. McMenimen, 461 Mass. 279, 296-97 (2012) (mere fact that allegations supporting 93A claim would also support common-law tort claim does not make 93A claim subject to shorter, three-year limitations period).

         A limitations period is tolled so long as a defendant fraudulently conceals its wrongdoing. See generally Hays v. Ellrich, 471 Mass. 592, 601-02 (2015); G.L.c. 260, § 12. "Where a fiduciary relationship exists, the failure adequately to disclose the facts that would give rise to knowledge of a cause of action constitutes fraudulent conduct and is equivalent to fraudulent concealment." Id. at 602, quoting Demoulas v. Demoulas Super Mkts., Inc., 424 Mass. 501, 519 (1997).

         Thus, where the defendant is accused of breaching a fiduciary duty, the statute of limitations is tolled until the plaintiff "has ‘actual knowledge’ that she has been injured by the fiduciary’s conduct." Id., quoting Doe v. Harbor Schools, Inc., 446 Mass. 245, 254-55 (2006). "Mere suspicion or mere knowledge that the fiduciary has acted improperly does not amount to actual knowledge that the plaintiff has suffered harm" as a result of the fiduciary’s breach of duty. Harbor Schools, 446 Mass. at 255.

         "This does not mean that the limitations clock begins only when the plaintiff has a legal claim, that is, when she realizes that the defendant has violated a law that entitles her to sue to recover damages." Hays, 471 Mass. at 602. "Rather, the clock begins when the plaintiff has ‘actual knowledge of the wrong committed by the fiduciary." Id.

          In the circumstances of this case, if a jury were to find that Javaras was acting in a fiduciary capacity when he urged DiGeronimo or the Trust to buy the disputed policies, then the limitations clock would have begun to run only when DiGeronimo or the trustee had "actual knowledge of the unsuitability of the" insurance policies and annuities. Hays, 471 Mass. at 606. That is because a fiduciary would have a legal duty to disclose that these financial products were unsuitable, and under Massachusetts law the failure to make that disclosure would constitute fraudulent concealment. Id.

         DiGeronimo has presented evidence that neither he nor the Trust had actual knowledge that Javaras had advised them to purchase unsuitable policies until sometime after March 25, 2013, when Javaras resigned as trustee of the Trust and was replaced by Elisha Erb. Thereafter Attorney Erb reviewed the various policies that Plaintiffs had purchased on Javaras’ recommendation, and concluded for the first time that the policies were unsuitable.

         If the jury were to credit that evidence, then it would find that the statutory limitations period did not start to run until sometime in 2013, which would mean that all the claims asserted in this case are timely. Summary judgment is not appropriate where, as here, "a reasonable jury could return a verdict for the nonmoving party." Dennis v. Kaskel,79 ...


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