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Lambert-Egan v. Lambert

Superior Court of Massachusetts, Suffolk, Business Litigation Session

September 12, 2018

Wilfred J. LAMBERT et al.


          Brian A. Davis, Associate Justice of the Superior Court

          This case presents the all-too-frequently recurring scenario of an intra-family dispute over the management and operation of a family-owned business established by a prior generation of family members. The family-owned business in this instance officially is the Lambert Realty Trust (the "Realty Trust"), which owns two commercial shopping centers-one in Dorchester, Massachusetts, and one in Westwood, Massachusetts (the "Properties")-that are home to two "Lambert’s" fruit and vegetable markets ("Lambert’s Markets"). The Realty Trust is a nominee trust that was created to hold title to the Properties. Plaintiff Tracy Lambert-Egan ("Plaintiff") is the daughter of the late George Albert Lambert ("George Senior"), who founded Lambert’s Markets with his brothers, including defendant Wilfred J. Lambert ("Billy"), more than 60 years ago. Defendant George Anthony Lambert ("George Junior") is George Senior’s son and Plaintiff’s brother. The Lambert Brothers Partnership, LLP (the "LLP") is an entity that was created by the various Lambert brothers, including George Senior and Billy, long ago to acquire and manage the real estate utilized by Lambert’s Markets, including the Properties. The LLP started life as a standard partnership, but subsequently was converted to a limited liability partnership in or about 1997. The LLP is the sole beneficiary of the Realty Trust. George Senior eventually came to own fifty-five percent (55%) of the LLP, with Billy owning the remaining forty-five percent (45%). George Senior’s interest in the LLP passed to the George Senior Trust upon his death in 1999. Billy still holds his forty-five percent interest in the LLP personally.

         The foregoing facts are undisputed. Circumstances become less clear, however, when one delves into the governing agreements for the LLP and the Realty Trust. According to one view of reality, the LLP is governed by a "Partnership Agreement of Lambert Brothers Partnership," dated as of April 12, 1994 (the "Partnership Agreement").[1] The Partnership Agreement is signed by Billy and George Senior, and it purports to govern "the continuation of the business formerly conducted by Lambert Brothers Limited Partnership." Partnership Agreement, Article 2.1. It expressly provides for the creation of a "nominee trust" to hold all "Partnership properties," and it vests all authority over the nominee trust in the partners of the "Partnership" in their capacity as beneficiaries and co-trustees of the nominee trust. Id., Article 2.2.

         According to another, alternative view of reality, the LLP is governed by a "Beneficiary Agreement" that Plaintiff, Billy, George Junior, and other members of the Lambert family signed in November 2011 (the "Beneficiary Agreement").[2] The Beneficiary Agreement states, on its face, that the parties were "unable to determine" at the time "whether or not there is a formal operating agreement" for the LLP. Beneficiary Agreement, ¶ 1. It further states that, as a result, the parties,

determined ... it [to be] in the best interest of the [Realty] Trust and the preservation of the assets of the Trust, to execute the [Beneficiary] Agreement to govern the management and operation of the Trust and to restrict the transfer of beneficial interests which will pass to their respective heirs upon their deaths.

Id., ¶ 6.

         The Partnership Agreement and the Beneficiary Agreement differ in various material ways, including in how the parties are required to resolve any disputes that may arise with respect to the LLP and/or the Realty Trust. The Partnership Agreement requires that "any controversy or claim arising out of this Partnership Agreement ... be settled by binding arbitration ..." Partnership Agreement, Article 10. The Beneficiary Agreement, on the other hand, requires only that, "in the event of a dispute, the Parties will first submit to mediation for no less than ten (10) hours prior to the filing of any litigation." Beneficiary Agreement, ¶ 17. The Beneficiary Agreement also contains an in terrorem clause which provides, in relevant part, that,

any beneficiary who is unwilling to abide by the terms of this Agreement or who in any way challenges the terms of this Agreement, except for a claim of fraud on the part of any Trustee, shall immediately forfeit his or her beneficial interest in the [Realty] Trust and his or her share shall be redistributed among his or her brothers and sisters (or nieces and nephews as the case may be).

Id., ¶ 15. See also G.L.c. 190B, § 2-517 ("A provision in a will purporting to penalize an interested person for contesting the will or instituting other proceedings relating to the estate is enforceable"); Savage v. Oliszczak, 77 Mass.App.Ct. 145, 147 (2010) ("A provision forfeiting the interest of a beneficiary who contests a will is valid") (internal quotation marks and citation omitted).

         As the foregoing discussion demonstrates, the relevant history of people, events, and intra-family machinations is complex and can only be fully understood with the benefit of an illustrated program guide. Suffice it to say for present purposes that Plaintiff, who is a beneficiary of the George Senior Trust and a co-trustee of the Realty Trust, is unhappy with the management of the Properties by Billy and George Junior. She accuses Billy and George Junior of, among other things, engaging in self-dealing transactions and failing to protect the Realty Trust and the LLP from being depleted by third parties, including the Realty Trust’s bookkeeper, who purportedly embezzled more than $650, 000 from the Realty Trust. Most significantly, Plaintiff has asserted claims, both directly and derivatively, against Billy and George Junior for breach of fiduciary duty, and for aiding and abetting a breach of fiduciary duty, based on Billy’s positions as partner in the LLP and co-trustee of the Realty Trust, and George Junior’s positions as trustee of the Realty Trust and the George Senior Trust.[3] Defendants, for their part, deny any wrongdoing.

          Plaintiff filed this action in January 2018. The case recently came before the Court on Defendants’ motions to dismiss Plaintiff’s Amended Complaint on multiple grounds. First, Defendants assert that Plaintiff’s claims "aris[e] out of" the Partnership Agreement and, therefore, are barred by the mandatory arbitration clause contained in that agreement.[4] Second, Defendants assert that Plaintiff’s status as a beneficiary of the George Senior Trust does not give her standing to assert any direct or derivative claims involving the LLP or the Realty Trust. Third, George Junior asserts that Plaintiff has failed to allege sufficient facts to support her claims of breach of fiduciary duty against him. More specifically, George Junior claims that the events which form the basis for Plaintiff’s claims of breach of fiduciary duty against him occurred prior to September 2016, when George Junior stepped into the role of trustee of the Realty Trust after his mother Evelyn’s passing.

         The Court conducted a lengthy hearing on Defendants’ motions to dismiss on September 5, 2018. Upon consideration of the written submissions of the parties and the oral arguments of counsel, Defendants’ motions to dismiss will be DENIED as to all counts of the Amended Complaint for the reasons stated on the record at the hearing and further memorialized, briefly, below.

         First, a motion to dismiss is not a vehicle for resolving disputed issues of fact. In deciding a motion to dismiss under Mass.R.Civ.P. 12, "the allegations of the complaint, as well as such inferences as may be drawn therefrom in the plaintiff’s favor, are to be taken as true." Nader v. Citron, 372 Mass. 96, 98 (1977). "What is required at the pleading stage are factual allegations plausibly suggesting (not merely consistent with) an entitlement to relief," and that "possess enough heft to show that the pleader is entitled to relief." Iannacchino v. Ford Motor Co., 451 Mass. 623, 636 (2008) (internal quotation marks and citations omitted). In assessing the allegations of a complaint, the Court may not (with certain exceptions that the Court declines to apply here) look outside the "four corners" of the complaint itself. See, e.g., Mmoe v. Commonwealth, 393 Mass. 617, 620 (1985) ("Pleadings must stand or fall on their own. Oral representations and extraneous materials not incorporated by reference can neither add to nor detract from them").

         In this case, the allegations of Plaintiff’s Amended Complaint make out a reasonably plausible case that the LLP and the Realty Trust are governed by the more recent Beneficiary Agreement, not the older Partnership Agreement, and that Plaintiff’s claims against Defendants are not subject to the mandatory arbitration clause contained in the Partnership Agreement as a result. Which agreement actually governs the LLP and/or the Realty Trust simply is not an issue that this Court can resolve on a motion ...

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