Spagnoli v. Kudej
RULING denying 88 Motion for Summary Judgment. Signed by Judge Peter C. Dorsey on 4-26-11. (Miller, K.)
UNITED STATES DISTRICT COURT
DISTRICT OF CONNECTICUT
Michael A. SPAGNOLI,
Edward J. KUDEJ, JR.,
Civil No. 3:09-cv-234 (PCD)
RULING ON DEFENDANT’S MOTION FOR SUMMARY JUDGMENT ON
This is a dispute between the two owners and shareholders, Plaintiff Michael A. Spagnoli
(“Spagnoli”) and Defendant Edward J. Kudej, Jr. (“Kudej”), of at least five companies:
Advanced Back and Neck Center, P.C. (“ABNC”); Innate, LLC; Advanced Chiropractic and
Medical Services, LLC (“ACMS”); Advance Back and Neck Center of Massachusetts (“MA
ABNC”); and Advanced Back & Neck Center of Holyoke, P.C. (“Holyoke ABNC”). Spagnoli
claims that Kudej unlawfully converted Spagnoli’s salary and distributions for ABNC, Innate,
LLC and ACMS. In his counterclaims, Kudej alleges that Spagnoli controlled MA ABNC and
Holyoke ABNC (collectively “Massachusetts entities”) to the detriment of Kudej by, inter alia,
closing the Massachusetts entities without informing Kudej, withholding distributions and
financial information about the Massachusetts entities from Kudej, and usurping customer lists
and other business assets from the Massachusetts entities. Kudej has moved for summary
judgment on his accounting counterclaim, which is the subject of the instant ruling. For the
reasons stated herein, the motion [Doc. No. 88] is denied.
I. STANDARD OF REVIEW
Summary judgment is appropriate only when “the pleadings, depositions, answers to
interrogatories, and admissions on file, together with the affidavits, if any, show that there is no
genuine issue as to any material fact and that the moving party is entitled to judgment as a matter
of law.” FED. R. CIV. P. 56(c). No genuine issue of material fact exists and summary judgment
is therefore appropriate when “the record taken as a whole could not lead a rational trier of fact to
find for the non-moving party.” Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574,
587 (1986). A material fact is one that “might affect the outcome of the suit under the governing
law,” and an issue is genuine when “the evidence is such that a reasonable jury could return a
verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).
Under Massachusetts law, “[a]n agent or fiduciary is under a duty to keep and render
accounts and, when called upon for an accounting, has the burden of proving that he properly
disposed of funds which he is shown to have received for his principal or his trust. . . .
Substantially the same principles are applicable to corporate directors and officers.” Samia v.
Cent. Oil. Co. of Worchester, 158 N.E.2d 469, 484 (Mass. 1959). “[B]ecause an action against a
controlling shareholder claiming a breach of fiduciary duty is equitable, Merola v. Exergen
Corp., 423 Mass. 461, 464, 668 N.E.2d 351 (1996), a claim for an accounting may be
maintained.” Mastromatteo v. Mastromatteo, No. 061329C, 2006 WL 3759512 (Mass. Super.
Nov. 28, 2006). An accounting may also be appropriate when corporate funds are used to pay
personal expenses or when corporate funds are commingled with a shareholder’s personal funds.
Henderson v. Axiam, Inc., No. 962572D, 1999 WL 33587312, at *59-*60 (Mass. Super. June 22,
1999). Here, it is undisputed that Spagnoli is the majority shareholder of the Massachusetts
entities, that the Massachusetts entities paid Spagnoli’s personal loan obligation, and that funds
belonging to the Massachusetts entities were diverted to the Advanced Medical Group, an entity
owned by Spagnoli and his cousin Carmino Bonavita. Because these undisputed facts establish
that Spagnoli improperly disposed of funds entrusted to him as a shareholder of the
Massachusetts entities, Kudej argues that summary judgment should be granted on his
Despite these undisputed facts, the Court believes that questions of fact remain as to the
appropriateness of an accounting. Kudej has alleged two other counterclaims—breach of
fiduciary duty and violation of the Connecticut Unfair Trade Practices Act (“CUTPA”)—against
Spagnoli for which he has not moved for summary judgment. Massachusetts courts consider an
accounting claim to be a type of remedy, and thus have held that the resolution of an accounting
claim is dependent on the resolution of the substantive claims. See, e.g., Ferola v. Allstate Life
Ins. Co., No. 050996, 2007 WL 2705534, at *19 (Mass. Super. Aug. 30, 2007) (declining to rule
on claim for accounting because “[a] determination of whether plaintiff is entitled to any of these
remedies [for accounting, declaratory judgment or constructive trust] depends on the resolution
of plaintiff's substantive claims, which the Court, as discussed above, cannot do on this summary
judgment record”); Picknik v. Sinkus, No. CA 98-1673, 2000 WL 424339, at *3 (Mass. Super.
Feb. 1, 2000) (granting summary judgment to defendant on accounting claims because
underlying claims were time-barred). Because this Court has not ruled on the merits of the
breach of fiduciary duty and CUTPA claims, it is premature to rule on the merits of the
Moreover, questions of fact exist as to the viability of Spagnoli’s defenses to the
accounting claim. His first defense is that the payments he owes to the Massachusetts entities are
readily ascertainable from the corporate records disclosed during discovery, and thus an
accounting is not necessary. “[I]n order to maintain a bill in equity for an accounting it must
appear from the specific allegations that there was a fiduciary relation between the parties and
that the account is so complicated that it cannot conveniently be taken in an action at law . . .”
Levesque, Jr. v. Ojala, No. 20034485, 2005 WL 3721859, at *25 (Mass. Super. Dec. 8, 2005)
(citing Ball v. Harrison, 312 Mass. 390, 392 (1943)). When the amount due is readily
ascertainable, there is a sufficient remedy at law and a claim for accounting will be denied. 1
Am. Jur. 2d Accounts and Accounting § 54 (“An accounting is not available in an action where
the amount due is readily ascertainable.”); see also Levesque, Jr., 2005 WL 3721859, at *25
(denying summary judgment to plaintiff on accounting claim because, inter alia, “the facts which
would underlie the necessity of an accounting” were disputed). Because questions of fact remain
as to whether Kudej has an adequate remedy at law, an accounting is not appropriate at this time.
Spagnoli has also alleged the defenses of acquiescence and unclean hands. According to
Spagnoli, Kudej signed Spagnoli’s personal line of credit guaranteed by the Massachusetts
entities, and thus Kudej acquiesced in and ratified Spagnoli’s use of the Massachusetts entities’
funds for his personal expenses. Moreover, Spagnoli alleges that Kudej diverted ABNC’s assets
to Zeldes Needle & Cooper, P.C., an entity owned by Kudej, and thus the doctrine of unclean
hands precludes any equitable remedies, including an accounting claim. See Santagate v. Tower,
833 N.E.2d 171, 180 (Mass. App. 2005) (noting that “one who comes to the court seeking equity
must come with clean hands”) (internal citation omitted). These viable defenses also raise
questions of fact that preclude summary judgment on the accounting claim.
For the foregoing reasons, Kudej’s motion for summary judgment on his accounting
counterclaim [Doc. No. 88] is denied.
Dated at New Haven, Connecticut, April 26 , 2011.
Peter C. Dorsey
United States District Judge
District of Connecticut
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