United States District Court, D. Massachusetts
BRAINTREE LABORATORIES, INC., and AFFORDABLE PHARMACEUTICALS, LLC, Plaintiffs,
BEDROCK LOGISTICS, LLC, Defendant. BEDROCK LOGISTICS, LLC, Counterclaim Plaintiff & Third-Party Plaintiff,
BRAINTREE LABORATORIES, INC., and AFFORDABLE PHARMACEUTICALS, LLC, Counterclaim Defendants,
JAMES SEARS and HENRY VILLALOBOS, Third-Party Defendants. JAMES SEARS, Third-Party Counterclaim Plaintiff,
BEDROCK LOGISTICS, LLC, Third-Party Counterclaim Defendant.
MEMORANDUM & ORDER
Talwani United States District Judge.
companies Braintree Laboratories, Inc., and Affordable
Pharmaceuticals, LLC (collectively, “Braintree”)
filed this action against transportation logistics provider
Bedrock Logistics, LLC (“Bedrock”), alleging that
one of Bedrock's sales agents, James Sears, made kickback
payments to one of Braintree's employees, Henry
Villalobos, to secure Braintree's purchase of
Bedrock's services. Bedrock filed counterclaims against
Braintree to collect on unpaid invoices, and third-party
claims against Sears and Villalobos. Sears filed third-party
counterclaims against Bedrock. Six motions are currently
pending. For the reasons set forth below, Bedrock's
Motion for Summary Judgment on all of Plaintiffs' Claims
[#128] is DENIED, Villalobos' Motion for Summary Judgment
[#123] and Sears' Motion for Summary Judgment on
Bedrock's Third-Party Claims [#132] are DENIED in part
and ALLOWED in part, Bedrock's Motion for Summary
Judgment on All of James Sears' Claims [#130] is ALLOWED,
and Bedrock's Motion to Strike the Declaration of David
M. Bovet [#155] and Motion to Strike Portions of the
Declaration of Philip Rakhunov [#154] are DENIED as moot.
Summary Judgment Standard
judgment is appropriate only “if the movant shows that
there is no genuine dispute as to any material fact and the
movant is entitled to judgment as a matter of law.”
Fed.R.Civ.P. 56(a). “A dispute is genuine if the
evidence about the fact is such that a reasonable jury could
resolve the point in the favor of the non-moving party. A
fact is material if it has the potential of determining the
outcome of the litigation.” Patco Constr. Co. v.
People's United Bank, 684 F.3d 197, 206-07 (1st Cir.
2012) (internal quotations and citations omitted). In
resolving a motion for summary judgment, the court views all
properly supported evidence in the light most favorable to
the non-movant and draws all reasonable inferences in the
non- movant's favor. Griggs-Ryan v. Smith, 904
F.2d 112, 115 (1st Cir. 1990).
light of the summary judgment standard, this background
section outlines the relevant facts that are either
undisputed as set forth in the parties' Local Rule 56.1
statements of undisputed material fact and responses or not
properly disputed for purposes of summary judgment under
Federal Rule of Civil Procedure 56(c) or (e)(2).
Additionally, where genuine disputes of fact do arise, the
court sets forth the properly supported evidence in the light
most favorable to the non-movants on each of the pending
develops, manufactures, and distributes various
pharmaceutical products. Bedrock's Responses to
Braintree's Additional Statements of Undisputed Material
Facts (“Bedrock's Resps. to Braintree's
Add'l SOF”) ¶ 1 [#158]. Braintree ships its
products nationally from its facilities in Massachusetts.
Id. ¶ 2.
a shipping logistics provider, negotiates contracts with
carriers and then sells these transportation services to
customers. Rakhunov Decl. Ex. 15 (Schaetzl Dep.) 79:1-16
[#147-15]. Bedrock connects customers to Bedrock's
Transportation Management System (“TMS”)
software, which lists the shipping rates available to the
customer for various carriers based on location, delivery
time, and type of shipment. Bedrock's Resps. to
Braintree's Add'l SOF ¶ 26 [#158]. Bedrock
calculates its TMS rates by adding the rates carriers charge
Bedrock to Bedrock's sales margins (neither of which
Bedrock discloses to its customers). Rakhunov Decl. Ex. 15
(Schaetzl Dep.) 109:2-12 [#147-15]. Bedrock's sales
margins vary customer-by-customer, and range from fifteen to
forty percent of the carrier rate. Id. at 107:14-15.
in the early 1990s, James Sears acted as an outside agent who
connected Braintree with logistics providers. Villalobos'
Statement of Undisputed Material Fact (hereinafter
“Villalobos' SOF”) Ex. A (Villalobos Dep.)
70:9-12 [#125-1]; id. Ex. B (Sears Dep.) 18:13-17
[#125-2]. Beginning in December 2007, Henry Villalobos served
as Braintree's shipping manager. Villalobos' SOF
¶ 2 [#125]. In this role, Villalobos was responsible for
deciding which shipping logistics services Braintree should
Beginning of the Braintree-Bedrock Relationship
early 2012, Sears was approached by Bedrock about taking on a
role as one of Bedrock's sales agents. Rakhunov Decl. Ex.
10 (Sears Dep.) 16:1-9, 147:14-21. Sears agreed to serve as
Bedrock's agent for Braintree's shipping needs, and
Bedrock agreed to pay Sears a commission equal to
forty-to-fifty percent of Bedrock's share of revenue for
Braintree's shipments. Bedrock's Mot. Summ. J. on
Sears' Claims Ex. 1 (Sears Dep.) 37:11-15 [#130-2].
promptly contacted Villalobos to introduce Braintree to
Bedrock's services. Rakhunov Decl. Ex. 6 (Villalobos
Dep.) 76:10-11 [#147-6]. A February 9, 2012, email from Sears
to Villalobos, which also copied Bedrock's President,
Charles McCabe, stated, “Henry, We would like to meet
this afternoon at some point. Chuck [McCabe] would ideally
like to take you out after work. We need to address some
concerns of yours and more importantly dispel some concerns
not based on fact.” Villalobos' SOF Ex. D (February
2012 Sears Email) [#125-4]. Sears and McCabe met with
Villalobos soon thereafter to discuss how Braintree could
benefit from using Bedrock's services. Rakhunov Decl. Ex.
6 (Villalobos Dep.) 76:13-25 [#147-6].
early weeks of the relationship between Braintree and
Bedrock, McCabe and Sears provided entertainment to
Villalobos, including multiple expensive dinners. Rakhunov
Decl. Ex. 10 (Sears Dep.) 78:1-11, 114:5-11 [#147-10]. For
example, McCabe, Sears, Villalobos, and Villalobos' wife
went for “a thousand dollar night out.”
Id. at 78:1-11. According to Sears, Villalobos
quipped the day after that dinner that he would “rather
have the money.” Id. McCabe, Sears, and
Villalobos went out for roughly five or six such dinners.
Id. at 114:6-7. Subsequently, Sears and Villalobos
formed an arrangement whereby Sears would pay Villalobos for
each shipment Braintree made using Bedrock's services, so
long as Villalobos used Bedrock for a certain number of
shipments each month. Villalobos' SOF Ex. A (Villalobos
Dep.) 151:8-15 [#125-1]. McCabe instructed Sears to make the
payments to Villalobos from Sears' personal accounts
rather than from any Bedrock-associated accounts. Rakhunov
Decl. Ex. 10 (Sears Dep.) 123:16-124:3
Braintree Uses Bedrock's TMS
made the decision that Braintree would begin purchasing
Bedrock's transportation logistics services, including
use of its TMS. Bedrock's Mot. Summ. J. on
Braintree's Claims Ex. 1 (Villalobos Dep.) 79:2-7
[#128-2]. When asked how he reached this decision, Villalobos
testified that, in his view, “[a]t the time what they
proposed was pretty attractive . . . . ” Id.
Further, Villalobos testified that Bedrock's TMS was easy
to use. Id. at 79:11-17. Villalobos also testified
that he decided Braintree should use Bedrock as its
transportation broker before Bedrock proposed any pricing,
and therefore before Villalobos could determine whether
Bedrock was providing better pricing than its competitors.
Id. at 79:18-23. Ultimately, Bedrock provided its
proposed pricing, and Villalobos determined that it was
“competitive.” Id. at 80:3.
Bedrock's TMS software, Villalobos inputted the
destination zip code of a shipment, the weight, and the
number of pieces or pallets, and then clicked next on the
screen. Bedrock's Mot. Summ. J. on Braintree's Claims
Ex. 1 (Villalobos Dep.) 18:3-8 [#128-2]. The TMS then
provided a list of rates from the carriers with whom Bedrock
had contracted. Id. at 18:9-11. Villalobos selected
from this list which carrier Braintree would use for a
specific shipment. Id. at 18:12-14. Villalobos was
the only Braintree employee who used the TMS software.
Bedrock's Resps. to Braintree's Add'l SOF ¶
times, Villalobos selected carriers other than those in
Bedrock's TMS. Bedrock's Mot. Summ. J. on
Braintree's Claims Ex. 1 (Villalobos Dep.) 58:15-18
[#128-2]. Villalobos did so based on factors including
service, pricing, customer preference, and location.
Id. at 143:11-17, 144:6-11.
Villalobos' job required him to verify freight invoices
sent to Braintree after completion of a shipment. As
Villalobos explained, each week he compared rates listed on
freight invoices to the prices displayed on the TMS. Rakhunov
Decl. Ex. 6 (Villalobos Dep.) 93:3-7, 146:6-7 [#147-6];
Bedrock's Mot. Summ. J. on Braintree's Claims Ex. 1
(Villalobos Dep.) 45:2-3 [#128-2]. If the TMS displayed a
rate different than that appearing on a particular invoice,
Villalobos disputed that invoice. Id. at 46:16.
Sometimes Bedrock assisted Braintree in such disputes.
Id. at 46:17-20. Braintree General Counsel Robert
Raleigh testified that freight invoices went through multiple
layers of review by both Villalobos and other shipping
department employees. Bedrock's Mot. Summ. J. on
Braintree's Claims Ex. 5 (Raleigh Dep.) 37:10-23
[#128-6]. If approved, invoices were sent to accounts
was also responsible for reviewing Bedrock's pricing to
ensure it was competitive. Bedrock's Mot. Summ. J. on
Braintree's Claims Ex. 5 (Raleigh Dep.) 198:4-9 [#128-6].
An employee who worked under Villalobos' direction
assisted him for a time. Id. at 198:10-14. However,
Villalobos testified that during the period that Braintree
used Bedrock as its “house carrier, ” Villalobos
did not price other logistics providers to see whether they
could offer a better deal to Braintree. Rakhunov Decl. Ex. 6
(Villalobos Dep.) 83:21-25 [#147-6]. At the time, Villalobos
explained, he “thought that the pricing in place was
very competitive, ” id. at 84:2-6, but he also
acknowledged that, in continuing to use Bedrock, the payments
he received from Sears were “part of” his
decisionmaking. Id. at 184:16.
Sears' Payments to Villalobos Continued Through
made payments to Villalobos monthly with personal checks or
cash, using the money he made from the commissions Bedrock
paid him on each Braintree order. Bedrock's Resps. to
Braintree's Add's SOF Ex. 3 (Sears Dep.) 81:5-11
Schaetzl worked as Bedrock's controller and was
responsible for commissions and accounts receivables for
Bedrock's outside sales representatives. Sears' SOF
in Support of Mot. Summ. J. on Bedrock's Claims
(hereinafter “Sears' SOF”) Ex. F (Schaetzl
Dep.) 128:14- 23, 193:17-19 [#134-6]. On June 26, 2012, Sears
emailed Schaetzl that “Henry, Braintree [L]abs, would
like to get paid for all the invoices that he has paid thus
far, basically thru June. I am leaving on vac. for 2 weeks
[S]unday. Can we meet thursday/fri for commissions due? If
not, let me know how many bills he has paid and I will front
it for now.” Sears' SOF Ex. A (June 2012 Emails)
October 1, 2013, Villalobos emailed Sears the following
message: “Please see email below for Bedrock payments
for the month of September. As you can see we've been
paying Bedrock on a consistent basis for the month of
September. Is there any way I can get paid possibly Thursday
or Friday of this week or on Monday of next week?”
Sears' SOF Ex. B (October 2013 Emails) [#134-2]. Sears
forwarded this email to Schaetzl. Id.
terminated McCabe in February 2014. Rakhunov Decl. Ex. 9
(Sears Aff.) ¶ 2 [#147-9]. After his termination, McCabe
called Sears and relayed certain information, recounted here
not for its truth but as the statements that Sears
subsequently sought to confirm. Sears reports that McCabe
stated that he wanted to discuss “keeping the
‘team' together.” Id. McCabe told
Sears that McCabe had met with Bedrock Vice President of
Sales William Luckett and Bedrock Truckload Division Manager
Mitch Getchell in Florida. Id. ¶ 3. McCabe also
told Sears that McCabe was going to try to recruit Luckett to
work for another logistics provider called Pursuit Logistics.
Rakhunov Decl. Ex. 10 (Sears Dep.) 125:2-6 [#147-10]. McCabe
told Sears that McCabe had told Luckett and Getchell that he
was going to take all of Bedrock's business and tell
Braintree about the payments, id., and that McCabe
would move the Braintree account from Bedrock to Pursuit
Logistics. Rakhunov Decl. Ex. 9 (Sears Aff.) ¶ 4
[#147-9]. McCabe said Luckett “threatened that he would
expose the payment arrangements between [Sears] and
Villalobos if the Braintree business was moved to Pursuit
called Getchell to confirm McCabe's account. Id.
¶ 5. Getchell told Sears that McCabe and Luckett
“got in a fight over accounts at dinner. [McCabe]
informed Luckett he would be taking all Bedrock accounts with
him to Pursuit Logistics. Luckett responded with, I will go
to Braintree Labs and expose Jim and Henry's payment
arrangement.” Id. Sears also testified that he
called Schaetzl, who confirmed that he knew of the dispute
between McCabe and Luckett during the Florida meeting.
Id. ¶ 8. Schaetzl told Sears that he believed
Luckett would follow through on his threat to expose
Sears' payment scheme. Id.
Sears spoke with McCabe, Getchell, and Schaetzl, Sears called
Luckett. Bedrock's Opp'n to Villalobos' Mot.
Summ. J. Ex. 5 (Sears Dep.) 226:12-24 [#142-5]. Sears asked
Luckett whether McCabe said anything to Luckett about Sears
and Villalobos' relationship. Id. at 227:2-8.