United States District Court, D. Massachusetts
JOSEPH B. SHEA, Plaintiff,
PETER MILLETT and ALM RESEARCH LLC, Defendants.
MEMORANDUM AND ORDER ON MOTION TO DISMISS
ALLISON D. BURROUGHS U.S. DISTRICT JUDGE.
October 17, 2017, Plaintiff Joseph B. Shea filed a Complaint
against Defendants Peter Millett (“Millett”) and
ALM Research LLC (“ALM”) in Middlesex Superior
Court, seeking recovery of unpaid royalties for services
rendered. [ECF No. 1-1]. Defendants jointly removed the state
court action to this Court on November 13, 2017. [ECF No. 1].
On May 3, 2018, the Court granted Defendants' Partial
Motion to Dismiss without prejudice and granted Shea leave to
file an amended pleading. [ECF No. 14 (“Motion to
Dismiss Order”)]. On May 21, 2018, Shea filed his First
Amended Complaint, which asserts claims against Millett for
breach of contract, promissory estoppel, declaratory judgment
or injunctive relief, and a violation of Mass. Gen. Laws ch.
93A. [ECF No. 15 (“Amended Complaint” or
“Am. Compl.”)]. Now pending is ALM's Motion
to Dismiss. [ECF No. 17]. For the reasons set forth below,
the Court GRANTS ALM's motion.
FACTS ALLEGED IN THE COMPLAINT
an orthopedic surgeon residing in Colorado, contributed to
the development of medical products related to shoulder
surgery. See Am. Compl. ¶¶ 2, 5, 17-18.
Millett unsuccessfully sought for years to obtain a royalty
agreement with Arthrex, Inc. (“Arthrex”), a
medical device and research company. Id. ¶ 20.
In 2010, Millett approached Shea, a Massachusetts resident
and former sales representative of Arthrex, to request
Shea's assistance in brokering a royalty agreement
between Millett and Arthrex. Id. ¶¶ 1,
21-22. Millett offered Shea 15% of any royalties paid by
Arthrex for five years in exchange for Shea's services.
Id. ¶ 22. Shea responded that he would only
accept an arrangement in which he would be compensated
throughout the life of any royalty agreement he brokered, and
proposed instead that he receive 10% of all royalties over
the life of any potential royalty agreement between Arthrex
and Millett. Id. ¶ 23. Millett accepted
Shea's proposal, and Shea proceeded to market
Millett's product to several medical device firms that
were competitors of Arthrex. Id. ¶¶ 23,
32-36. Ultimately, as a result of Shea's efforts, Arthrex
entered into a royalty agreement with Millett. Id.
then began to remit to Shea 10% of the quarterly royalty
payments that he received from Arthrex, as agreed.
Id. ¶ 45. Two years into the agreement,
however, Millett failed to timely submit Shea's quarterly
payment. Id. ¶ 47. After Shea called Millett
about the missed payment and insisted that he honor their
agreement, Millett resumed making payments to Shea.
Id. ¶ 47-49. In 2013, Millett transmitted a
“Release” to Shea purporting to impose a term
limitation on the parties' agreement for no
consideration. Id. ¶¶ 49-50. Shea rejected
the Release, and Millett continued to make payments until
October 2014, when Millett delayed payment of the third
quarter royalty payment while attempting to extract a
significant reduction in the amount of compensation due to
Shea. Id. ¶¶ 51-52. Shea rebuffed those
efforts, and Millett eventually paid him his full quarterly
payment. Id. ¶ 52. In or around December 2015,
Millett claimed that his royalty agreement with Arthrex was
scheduled to end during the first quarter of 2016, but he
failed to provide any documentation of the contract
termination to Shea in response to his requests. Id.
¶ 53. The last quarterly payment that Millett made to
Shea was in the second quarter of 2016. Id. ¶
56. In 2017, Shea learned that Millett's contract with
Arthrex was never terminated and that Arthrex has continued
to make ongoing royalty payments him. Id. ¶ 55.
When Shea confronted Millett about his continued receipt of
payments from Arthrex, Millett responded that he did not
“deserve” any further payments for his work.
STANDARD OF REVIEW
motion to dismiss for failure to state a claim, the Court
accepts as true all well-pleaded facts in the complaint and
draws all reasonable inferences in the light most favorable
to the plaintiff. United States ex rel. Hutcheson v.
Blackstone Med., Inc., 647 F.3d 377, 383 (1st Cir.
2011). While detailed factual allegations are not required,
the complaint must contain “factual allegations, either
direct or inferential, respecting each material element
necessary to sustain recovery under some actionable legal
theory.” Gagliardi v. Sullivan, 513 F.3d 301,
305 (1st Cir. 2008) (citations omitted). The facts alleged,
taken together, must “state a claim to relief that is
plausible on its face.” A.G. ex rel. Maddox v.
Elsevier, Inc., 732 F.3d 77, 80 (1st Cir. 2013) (quoting
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570
(2007)). “A claim is facially plausible if supported by
‘factual content that allows the court to draw the
reasonable inference that the defendant is liable for the
misconduct alleged.'” Eldredge v. Town of
Falmouth, 662 F.3d 100, 104 (1st Cir. 2011) (quoting
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)).
assessing the sufficiency of a complaint, the Court first
“separate[s] the complaint's factual allegations
(which must be accepted as true) from its conclusory legal
allegations (which need not be credited).”
Maddox, 732 F.3d at 80 (quoting Morales-Cruz v.
Univ. of P.R., 676 F.3d 220, 224 (1st Cir. 2012)). Next,
the Court “determine[s] whether the remaining factual
content allows a ‘reasonable inference that the
defendant is liable for the misconduct alleged.'”
Maddox, 732 F.3d at 80 (quoting
Morales-Cruz, 676 F.3d at 224). “[T]he court
may not disregard properly pled factual allegations,
‘even if it strikes a savvy judge that actual proof of
those facts is improbable.'” Ocasio-Hernandez
v. Fortuño-Burset, 640 F.3d 1, 12 (1st Cir. 2011)
(quoting Twombly, 550 U.S. at 556). “[W]here
the well-pleaded facts do not permit the court to infer more
than the mere possibility of misconduct, ” however, a
claim may be dismissed. Iqbal, 556 U.S. at 679.
seeks dismissal of Shea's Amended Complaint as to ALM on
the ground that it fails to allege that ALM committed any
wrongdoing or otherwise assert any claims against it. [ECF
No. 18 at 3]. Shea responds that, drawing all inferences in
his favor, he has stated claims against ALM as Millett's
alter ego under a reverse corporate veil piercing theory.
[ECF No. 22 at 3].
Massachusetts and Colorado law, a party may seek to pierce a
corporate veil under an alter ego theory which is equitable
in nature. “Traditional” piercing of the
corporate veil occurs when a court “imposes liability
on individual shareholders for the obligations of the
corporation.” In re Phillips, 139 P.3d 639,
644 (Colo. 2006). Shea seeks to proceed under a reverse veil
piercing theory, whereby a court “disregard[s] the
corporate fiction and allow[s] liability to be imposed on the
corporation for acts of a dominant shareholder or other
corporate insider.” Id. at 644. Under Colorado
law, “[a] court may reverse pierce the corporate veil
and obtain the assets of a corporation for the obligations of
a controlling shareholder or other corporate insider only
upon a clear showing that (1) the controlling insider and the
corporation are alter egos of each other,  . . . (2) justice
requires recognizing the substance of the relationship over
the form because the corporate fiction is utilized to
perpetuate a fraud or defeat a rightful claim, . . . and (3)
an equitable result is achieved by piercing.”
Id. at 646 (citations omitted).
Massachusetts Supreme Judicial Court “has never
explicitly, or even inferentially, adopted reverse veil
piercing in any form.” In re Raymond, 529 B.R.
455, 475-76 (Bankr. D. Mass. 2015) (noting that
“[t]here are few reported decisions addressing the
availability of the reverse veil piercing doctrine under
Massachusetts law, and those that do, reject reverse veil
piercing when insiders attempt to reverse pierce corporate
veils” (collecting cases)). In the context of
traditional corporate veil piercing, under Massachusetts law,
courts holistically consider twelve factors when determining
whether piercing the corporate veil is appropriate:
(1) common ownership; (2) pervasive control; (3) confused
intermingling of business assets; (4) thin capitalization;
(5) nonobservance of corporate formalities; (6) absence of
corporate records; (7) no payment of dividends; (8)
insolvency at the time of the litigated transaction; (9)
siphoning away of corporation's funds by dominant
shareholder; (10) nonfunctioning of officers and directors;
(11) use of the corporation for transactions of the dominant
shareholders; and (12) use of the corporation in promoting
Att'y Gen. v. M.C.K., Inc., 736 N.E.2d 373, 380
n.19 (Mass. 2000). “These factors are not simply added
up, but rather are considered in an integrated manner based
on all of the facts presented.” Lothrop v. N. Am.