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Sterling Equipment, Inc. v. Gibson

United States District Court, D. Massachusetts

July 3, 2019




         Sterling Equipment, Inc. (SEI) brought this lawsuit against its former employee, Peter Gibson, for receiving $198, 000 of misappropriated funds from his wife, Wendy Gibson.[1] More specifically, the Amended Complaint sets out four claims: money had and received (Count I), unjust enrichment (Count II), and violations of the Uniform Fraudulent Transfer Act, Mass. Gen. Laws ch. 109A, § 5 (Count III) and § 6 (Count IV). SEI moves for summary judgment on the first two counts on res judicata grounds.[2] For the reasons to be explained, SEI's motion for summary judgment will be allowed.


         The facts, viewed in the light most favorable to Gibson as the nonmoving party, are as follows. In 2002, Gibson began working as a port engineer for Jay Cashman, Inc. (JCI). Gibson continued working for JCI, along with its affiliated entities, Cashman Dredging and Marine Contracting Co., LLC (CDMC) and SEI, until 2017.[3]

         In 2007, Peter moved with Wendy to Massachusetts, and continued working for CDMC as a dredge man. Wendy started working for SEI as an accounts payable clerk and receptionist, but was later promoted to controller and became responsible for SEI's accounting. In May of 2011, Peter and Wendy got married. In February of 2013, they moved to Florida, but maintained their employment with CDMC and SEI. Although they got divorced in June of 2014, they remained close and moved back in together in October of 2014. In November of 2014, they returned to Massachusetts.

         On August 22, 2014, Wendy sent a $198, 000 fraudulent wire transfer from SEI.[4] Unexplained deposits were then made to several bank accounts that Peter and Wendy jointly held. On January 3, 2018, a jury in the federal district court of Massachusetts found Wendy guilty of conversion and of breaching her fiduciary duties, and awarded SEI $198, 000 and $50, 000, respectively. On January 11, 2018, this court entered a $290, 234.74 judgment for SEI, inclusive of pre-judgment interest.

         On June 30, 2017, CDMC terminated Peter for threatening communications with coworkers about his wife's litigation and for being “complicit in, benefit[ing] from, and fail[ing] to report the fraudulent wire transfer.” Stmt of Material Facts (SOMF) (Dkt # 35), Ex. 8. In response, Peter filed a grievance with the International Union of Operating Engineers Local 25. On February 16, 2018, the Union and CDMC participated in an arbitration hearing in Newark, New Jersey conducted by Arbitrator Mattye M. Gandel of the American Arbitration Association. On May 23, 2018, the Arbitrator decided that the matter was arbitrable and that there was just cause for Peter's termination.[5] The Arbitrator ultimately concluded “beyond a reasonable doubt that [Peter] knew about the fraudulent transfer, maybe not that day, but certainly in the following days and months and benefited from [it].” Id., Ex. 4 at 23.


         Summary judgment is appropriate when, based upon the pleadings, affidavits, and depositions, “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 fact is material when it has potential of changing a case's outcome.” Doe v. Trustees of Bos. Coll., 892 F.3d 67, 79 (1st Cir. 2018). “An issue is ‘genuine' when a rational factfinder could resolve it [in] either direction.” Boudreau v. Lussier, 901 F.3d 65, 71 (1st Cir. 2018) (citation omitted).

         “‘Collateral estoppel, sometimes called issue preclusion, bars parties from re-litigating issues of either fact or law that were adjudicated in an earlier proceeding' before a court or other tribunal of competent jurisdiction.” Patton v. Johnson, 915 F.3d 827, 833 (1st Cir. 2019), quoting Robb Evans & Assocs., LLC v. United States, 850 F.3d 24, 31 (1st Cir. 2017). Since “res judicata . . . is a matter of substantive law, ” Schell v. Ford Motor Co., 270 F.2d 384, 388 (1st Cir. 1959), and “a federal court sitting in diversity jurisdiction must borrow the substantive law of the forum state, ” Cochran v. Quest Software, Inc., 328 F.3d 1, 6 (1st Cir. 2003), Massachusetts law governs the application of collateral estoppel on the arbitration award at issue here. See Ideker v. PPG Indus., Inc., 788 F.3d 849, 852 (8th Cir. 2015) (“In a diversity case like this, we apply state substantive law in deciding whether to apply collateral estoppel or issue preclusion . . . .”); Tozzolina v. Cty. of Orange, 2 F.3d 1158 (9th Cir. 1993) (Table) (“The doctrine of collateral estoppel (issue preclusion) in federal courts is controlled by state substantive law.”).[6]

         Under Massachusetts law, “it is appropriate to give issue-preclusive effect to arbitration awards where the ‘arbitration affords opportunity for presentation of evidence and argument substantially similar in form and scope to judicial proceedings.'” Pierce v. Morrison Mahoney LLP, 452 Mass. 718, 731 (2008) (citations omitted). “Issue preclusion applies when ‘(1) the issue sought to be precluded in the later action is the same as that involved in the earlier action; (2) the issue was actually litigated; (3) the issue was determined by a valid and binding final judgment; and (4) the determination of the issue was essential to the judgment.'” Alicea v. Commonwealth, 466 Mass. 228, 236 (2013) (citations omitted). “The central inquiry . . . [is] whether the issue on which preclusion is sought has been ‘the product of full litigation and careful decision.'” Miles v. Aetna Cas. & Sur. Co., 412 Mass. 424, 427 (1992) (citation omitted).

         SEI argues, and the court agrees, that the arbitration award is entitled to preclusive effect. First, the parties in this litigation are in privity with, albeit not identical to, those involved in the arbitration. See Miles v. Aetna Cas. & Sur. Co., 412 Mass. 424, 427 (1992) (“[C]ollateral estoppel, also known as issue preclusion, does not require mutuality of parties . . . .”). SEI is in privity with CDMC because they are wholly owned subsidiaries of JCI Holdings, [7] see In re Colonial Mortg. Bankers Corp., 324 F.3d 12, 19 (1st Cir. 2003) (finding privity between “sister corporations under the control of a common parent”), and Gibson is in privity with the Union that represented him in the arbitration, see DaLuz v. Dep't of Corr., 434 Mass. 40, 45 (2001) (finding privity between union members and their union). Gibson responds by asserting that he “was only a witness, and not a party to the arbitration.” Opp'n Mem. (Dkt # 39-1) at 6. While that may be true, the Union adequately represented his interests as a nonparty by arguing, in his defense, that his termination was unjust. See TLT Const. Corp. v. A. Anthony Tappe & Assocs., Inc., 48 Mass.App.Ct. 1, 5 (1999) (“A nonparty to a prior adjudication can be bound by it only where [the nonparty's] interest was represented by a party to the prior litigation.”) (citations omitted).

         Second, the issues here - (1) whether Gibson received money (2) that belonged to SEI - are the same as those raised in the arbitration. Those issues, in turn, are dispositive of SEI's claims of money had and received and unjust enrichment. “[A]n action for money had and received will lie where the defendant has received money or its equivalent which in equity and good conscience belongs to the plaintiff.” Gen. Exch. Ins. Corp. v. Driscoll, 315 Mass. 360, 365 (1944). Similarly, “[a] plaintiff asserting a claim for unjust enrichment must establish not only that the defendant received a benefit, but also that such a benefit was unjust, ‘a quality that turns on the reasonable expectations of the parties.'” Metro. Life Ins. Co. v. Cotter, 464 Mass. 623, 644 (2013) (citations omitted).

         The Arbitrator found that SEI's reasons for Gibson's termination were valid. In particular, the Arbitrator found that Gibson called two members of management to inquire about the federal lawsuit against his wife, and texted one of them “game on, ” which was interpreted as a threat. SOMF, Ex. 4 at 18-19. The Arbitrator concluded that Gibson's version of the communications “was not credible.” Id. at 19. The Arbitrator also found, as particularly pertinent here, that “[i]t was undisputed that [Wendy] committed a fraudulent wire transfer from” SEI;[8] that “there were unexplained deposits” to several bank accounts that Peter and Wendy jointly held; that Peter and Wendy spoke at least daily; that Peter “acknowledged that ‘what's hers is mine and what's mine is hers;'” and that “it [was] just not credible, given their relationship and their joint bank accounts, that” Wendy never told Peter about the fraudulent wire transfer. SOMF, Ex. 4 at 20-22. The ...

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