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Element Productions, Inc. v. Editbar, LLC

Superior Court of Massachusetts, Suffolk

August 30, 2019

Element Productions, Inc.
v.
Editbar, LLC et al.

          File Date: September 6, 2019

          Judge (with first initial, no space for Sullivan, Dorsey, and Walsh): Davis, Brian A., J.

          DECISION AND ORDER REGARDING DEFENDANT MARK HANKEY’S MOTION FOR APPROVAL OF DAMAGES OFFSET RESULTING FROM PLAINTIFF ELEMENT PRODUCTIONS, INC.’S RECEIPT OF SETTLEMENT PAYMENT (DOCKET ENTRY NO. 128.0) AND ORDER FOR JUDGMENT

          Brian A. Davis Associate Justice

          This is an action in which plaintiff Element Productions, Inc. ("Element" or "Plaintiff") alleges that one of its former executives, defendant Mark Hankey ("Mr. Hankey"), clandestinely assisted former defendants Editbar, LLC ("Editbar") and Stir Films, LLC ("Stir Films") in establishing a video production business to compete against Element. The case was filed in May 2016 and litigated aggressively for more than two years. Editbar and Stir Films eventually entered into a confidential settlement with Element shortly before trial, which resulted in their dismissal from the case. The confidential settlement included a monetary payment by Editbar and Stir Films to Element (the "Editbar Settlement Payment"), the amount of which has been disclosed to the Court, but need not be further disclosed for purposes of this decision and order.

          Following Element’s settlement with Editbar and Stir Films, the case went to trial, jury-waived, in December 2018 solely on Element’s claims against Mr. Hankey, Mr. Hankey’s counterclaims against Element, and Mr. Hankey’s third-party claim against Element’s founder, Eran Lobel ("Mr. Lobel"). The trial lasted ten days. After the evidence had closed, the Court gave the parties time to submit revised proposed findings of fact and rulings of law. Closing arguments took place on April 25, 2019.

         On May 24, 2019, the Court delivered its final findings of fact and rulings of law on the parties’ claims and counterclaims from the bench. The Court found in favor of Element on its breach of contract and breach of duty of loyalty claims against Mr. Hankey, but concluded that Element had failed to prove its resulting actual damages with reasonable certainty. The Court also ruled, however, that Mr. Hankey’s breach of his duty of loyalty warranted an order directing him to repay, as equitable restitution, that portion of the compensation he received from Element during the final year of his employment which exceeded the fair value of the services he had provided to Element in the same time frame. See Meehan v. Shaughnessy, 404 Mass. 419, 438 (1989) (a fiduciary who violates his fiduciary duties can be required to forfeit "that portion of his compensation, if any, that was in excess of the worth of his services to his employer") (citation omitted). See also Chelsea Indus., Inc. v. Gaffney, 389 Mass. 1, 12-13 (1983) ("Chelsea Indus. ") (recognizing that a fiduciary can be required to forfeit his compensation for conduct that violated his fiduciary duties, even without a showing of actual injury to the employer). The total amount of restitution that Mr. Hankey was ordered to pay to Element comes to $609,500.00, which represents precisely one-half of the total compensation that Mr. Hankey received from Element between April 1, 2015 (i.e., the approximate date on which Mr. Hankey first began providing clandestine assistance to EditBar and Stir Films) and April 12, 2016 (i.e., the date on which Element officially terminated Mr. Hankey’s employment).

          Currently before the Court is Mr. Hankey’s Motion for Approval of Damages Offset Resulting from Plaintiff Element Productions, Inc.’s Receipt of Settlement Payment (the "Motion to Offset," Docket Entry No. 128.0). In a nutshell, Mr. Hankey’s Motion to Offset asks the Court to order that the amount of restitution Mr. Hankey has been ordered to pay be reduced by the amount of the Editbar Settlement Payment pursuant to G.L.c. 231B, commonly referred to as the "Joint Tortfeasors Act." Section 1 of the Joint Tortfeasors Act provides, in relevant part, that,

[e]xcept as otherwise provided in this chapter, where two or more persons become jointly liable in tort for the same injury to person or property, there shall be a right of contribution among them even though judgment has not been recovered against all or any of them.

G.L.c. 231B, § 1(a). Section 4 of the Joint Tortfeasors Act similarly provides, in relevant part, that,

[w]hen a release or covenant not to sue or not to enforce judgment is given in good faith to one of two or more persons liable in tort for the same injury ... [i]t shall not discharge any of the other tortfeasors from liability for the injury unless its terms so provide; but it shall reduce the claim against the others to the extent of any amount stipulated by the release or the covenant, or in the amount of the consideration paid for it, whichever is the greater ...

Id ., § 4(a).

          Relying upon the foregoing provisions of the Joint Tortfeasors Act, Mr. Hankey asserts that,

Element indisputably sued Hankey, EditBar, and Stir Films for their alleged joint torts, including Hankey’s alleged breach of fiduciary duty. Because Element has already received [the Editbar Settlement Payment] which the Court found resulted from those tortious activities, Hankey is entitled under ... § 4(a) [of the Joint Tortfeasors Act] ...

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