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Traverse v. The Gutierrez Co.

United States District Court, D. Massachusetts

October 30, 2018

NORMAN TRAVERSE AND NASSRINE TRAVERSE, INDIVIDUALLY AND ON BEHALF OF TECHNOLOGY PARK X LIMITED PARNTERSHIP, Plaintiffs,
v.
THE GUTIERREZ COMPANY, GUTIERREZ CONSTRUCTION COMPANY, ARTURO J. GUTIERREZ, ARTHUR J. GUTIERREZ JR., and TECHNOLOGY PARK X LIMITED PARTNERSHIP, Defendants.

          MEMORANDUM AND ORDER

          Denise J. Casper, United States District Judge

         I. Introduction

         Plaintiffs Norman Traverse (“Norman”) and Nassrine Traverse (“Nassrine”), individually and derivatively on behalf of Technology Park X Limited Partnership (collectively, “the Traverses”), bring suit against The Gutierrez Company (“TGC”), Gutierrez Construction Company, Inc. (“GCCI”), Arturo J. Gutierrez (“Arturo”), Arthur J. Gutierrez, Jr. (“Arthur”), and Technology Park X Limited Partnership (“Tech Park X”). D. 1. Arthur J. Gutierrez, Jr., Arthur J. Gutierrez, Gutierrez Construction Co., and the Gutierrez Company (“the Gutierrez Defendants”) move to dismiss certain counts of the complaint. D. 18. For the following reasons, the Court ALLOWS in part and DENIES in part the Gutierrez Defendants' motion.

         II. Standard of Review

         To survive a motion to dismiss under Fed.R.Civ.P. 12(b)(6), a complaint must “contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). The Court must distinguish between “the complaint's factual allegations (which must be accepted as true) from its conclusory legal allegations (which need not be credited).” Morales-Cruz v. Univ. of P.R., 676 F.3d 220, 224 (1st Cir. 2012). “The court then must determine whether the ‘factual content . . . allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.'” Id. (quoting Iqbal, 556 U.S. at 678). Under Rule 9(b) of the Federal Rules of Civil Procedure, a party alleging “fraud or mistake” must “state with particularity the circumstances constituting fraud or mistake.” Fed.R.Civ.P. 9(b). This requires specifying “not only . . . the false statements and by whom they were made but also identifying the basis for inferring scienter.” N. Am. Catholic Educ. Programming Found., Inc. v. Cardinale, 567 F.3d 8, 13 (1st Cir. 2009).

         III. Factual Background

         The following summary is based upon the allegations in the amended complaint, D. 15, which are accepted as true for the consideration of the motion to dismiss. Tech Park X is a limited partnership, created by the Tech Park X Limited Partnership Agreement (“LP Agreement”) in which the Traverses hold a 38 percent share, and TGC, Arturo, and Arthur, among others, all hold smaller stakes. D. 15 ¶ 12. Both TGC and GCCI are corporations owned by Arturo, who is the father of Arthur. D. 15 ¶ 9. Arthur is the President of TGC and of GCCI. D. 15 ¶ 10. Tech Park X was formed in the 1980s, with the principal asset of an office building with leasable space and the underlying land. D. 15 ¶¶ 17, 19. Over the years, other similar entities have been created with the “Tech Park” name. D. 15 ¶ 16. TGC is the “general partner” of Tech Park X and is responsible for the management of Tech Park X. D. 15 ¶ 22. Under the LP Agreement that created Tech Park X, TGC is required to pay reasonable rates for services it purchases on behalf of Tech Park X, must ensure that contracts it makes on behalf of Tech Park X with entities that it is affiliated with are in the best interests of all parties, must distribute Tech Park X surplus cash flow annually to the partnership and may not loan any funds on behalf of Tech Park X. D. 15 ¶¶ 22-25.

         Tech Park X, through TGC, paid out distributions to the partnership in 2010, 2011, and 2012, some portion of which was subsequently clawed back pursuant to an agreement between the parties. D. 15 ¶ 26. In 2011, Tech Park X paid out $2 million in distributions, out of under $7 million cash receipts, at least some of which was later clawed back. D. 15 ¶ 28. Since 2012, Tech Park X has not paid any distributions. D. 15 ¶ 26. In 2015, Tech Park X's cash receipts were $1.4 million above its 2011 cash receipts and in 2016, Tech Park X's cash receipts reached nearly $10 million. D. 15 ¶ 28. Management fees paid by Tech Park X to TGC or a TGC affiliate increased to $400, 000 in 2015 and $500, 000 in 2016, almost double the amount charged in 2013 and above the maximum permitted in the LP Agreement. D. 15 ¶ 29. Building supervision fees paid to GCCI from 2013-2016 were allegedly twice the cost of the labor incurred. D. 15 ¶ 29. Other expenses that were allegedly unreasonably high included expenses for cleaning supplies, snow removal, and accounting and auditing. D. 15 ¶¶ 30. TGC allegedly overpaid GCCI to perform certain services, such as the construction of a cafeteria, the installation of drywall in the cafeteria, improvements to the fitness center, and demolition work. D. 15 ¶¶ 37-41. The Traverses allege that the TGC wrongfully used Tech Park X funds to pay expenses for other Tech Park partnerships in which TGC had a greater ownership share; that TGC improperly awarded unreasonably expensive contracts to itself or affiliated corporations; and that TGC did not bid out contracts to obtain competitive rates. D. 15 ¶ 36.

         The complaint specifically references an incident wherein a water main broke, due to improper installation of a component by GCCI, according to an engineer's report provided by TGC. D. 15 ¶ 46. TGC, rather than pursuing claims against GCCI, paid GCCI to supervise the work to fix the water main damage. D. 15 ¶ 46.

         In a subsequent incident, TGC executed a promissory note in the amount of $2.3 million from Tech Park X to Arturo on December 31, 2014, ostensibly to document a loan from Arturo to Tech Park X. D. 15 ¶ 47. Tech Park X did not receive the funds of the purported loan, but rather Arturo paid the $2.3 million directly to TGC, and Tech Park X repaid Arturo in installments in 2015 and 2016. D. 15 ¶ 47.

         Since 2014, TGC, acting on behalf of Tech Park X, sent various financial statements and ledgers to the Traverses. D. 15 ¶ 98. Around September 2015, the Traverses began requesting additional records and financial information regarding Tech Park X. D. 15 ¶ 50. The records the Traverses received indicated to them that Tech Park X engaged in allegedly irregular financial patterns, including keeping “due to” and “due from” accounts with affiliated entities including TGC, GCCI, and other vendors, without making actual payments. D. 15 ¶ 52. The records also purportedly showed that TGC, acting on behalf of Tech Park X, transferred sums between Tech Park X, other projects, and affiliated interest, “without any apparent justification.” D. 15 ¶ 53. Included in those transactions was a transfer that appeared to reimburse TGC for expenses that it was not contractually eligible to be reimbursed for, relating to expenses maintaining the land related to both Tech Park X and another project. D. 15 ¶ 53. At one point, Tech Park X received a $200, 000 wire transfer from BOP V, another office park entity purportedly controlled by the Gutierrez family. D. 53 ¶ 55. That wire transfer came with the entry “due from BOP V.” D. 15 ¶ 55. At some point, that entry was transferred from the “due to BOP V” account to the “due to TGC” account, without any apparent reason. D. 15 ¶ 55. Additionally, Tech Park X made payments to BOP I, an entity purportedly related to BOP V, similarly without explanation. D. 15 ¶ 55.

         Nassrine sought additional information to sort through Tech Park X's complex records, but TGC purportedly obstructed and delayed responding to her request for information. D. 15 ¶ 58. She continued to seek and review documents through 2016 and 2017. D. 15 ¶ 59. On July 24, 2017, in a letter written by counsel, Nassrine wrote that TGC may have caused Tech Park X to pay unreasonably high compensation for certain services provided from 2011 forwards. D. 15 ¶ 61. The letter requested a tolling arrangement between the parties to provide an opportunity for the parties to resolve their disputes before commencing litigation. D. 15 ¶ 61. On August 10, 2017, counsel representing simultaneously Tech Park X and TGC responded to Nassrine's letter rejecting the request for a tolling agreement. D. 15 ¶ 62. Nassrine sent a follow up letter on September 8, 2017, outlining the potential claims against TGC and GCCI, and again proposed a tolling agreement. D. 15 ¶¶ 64, 65. On September 26, 2017, the same counsel representing both Tech Park X and TGC rejecting the request for a tolling agreement. D. 15 ¶ 66.

         IV. Procedural History

         On December 29, 2017, the Traverses filed a complaint in Suffolk Superior Court. D. 1-1. The Defendants subsequently removed the action to federal court. D. 1. The Traverses filed an amended complaint on February 26, 2018. D. 15. In the amended complaint, the Traverses assert the following claims: Count I, breach of the LP Agreement, against TGC; Count II, breach of fiduciary duty, against TGC, Arthur and Arturo; Count III, aiding and abetting a breach of fiduciary duty, against GCCI, Arturo and Arthur; Count IV, fraud, against TGC, GCCI, and Arthur; Count V, aiding and abetting fraud, against Arturo, Arthur, and GCCI; Count VI, a Chapter 93A claim against Arturo, Arthur and GCCI; Count VII, a Chapter 93A claim against all Defendants; Count VIII, a demand for accounting against TGC related to Tech Park X's accounts; Count IX, a claim under the Racketeer Influenced and Corrupt Organizations Act (“RICO”) against all Defendants; and Count X, a ...


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