Benistar Property Exchange Trust Company, Inc.

Filing 81

Judge Nathaniel M. Gorton: ORDER entered. MEMORANDUM AND ORDER: "In accordance with the foregoing,1) Plaintiff's Motion for Partial Summary Judgment (DocketNo. 68 ) is DENIED; and 2) Defendants' Motion for Summary Judgment (Docket No. 70 ) is ALLOWED.So ordered."(Moore, Kellyann)

United States District Court
District of Massachusetts
________________________________
)
BOSTON PROPERTY EXCHANGE
)
TRANSFER COMPANY f/k/a BENISTAR )
PROPERTY EXCHANGE TRUST COMPANY, )
INC.,
)
Civil Action No.
Plaintiff,
)
08-12069-NMG
)
v.
)
)
JOSEPH IANTOSCA, Individually
)
and as Trustee of the Faxon
)
Heights Apartments Realty Trust )
and Fern Realty Trust, BELRIDGE )
CORPORATION, GAIL A. CAHALY,
)
JEFFREY M. JOHNSTON, BELLEMORE
)
ASSOCIATES, LLC, MASSACHUSETTS
)
LUMBER COMPANY, INC.,
)
Defendants.
)
________________________________ )
MEMORANDUM & ORDER
GORTON, J.
Plaintiff Boston Property Exchange Transfer Co. f/k/a
Benistar Property Exchange Trust Co. (“BPE”) brought suit against
defendants Joseph Iantosca, Belridge Corp., Gail A. Cahaly,
Jeffrey M. Johnston, Bellemore Associates, LLC and Massachusetts
Lumber Co. (collectively “the non-attorney defendants”) and
defendants Zelle McDonough & Cohen, LLP, Anthony R. Zelle, P.C.
and Nystrom Beckman & Paris, LLP (collectively “the attorney
defendants”) for negligence, malpractice, breach of fiduciary
duty, breach of contract, violation of the Massachusetts Consumer
Protection Act, Mass. Gen. Laws ch. 93A (“Chapter 93A”) and
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violation of the Connecticut Unfair Trade Practices Act
(“CUTPA”).
On February 18, 2010, this Court allowed, in part, and
denied, in part, defendants’ motion to dismiss.

Boston Prop.

Exch. Transfer Co. v. Iantosca, 686 F. Supp. 2d 138, 147 (D.
Mass. 2010).

The Court dismissed all claims against the attorney

defendants but dismissed only the claim arising under CUTPA
against the non-attorney defendants.

Currently before the Court

are the parties’ motions for summary judgment with respect to the
remaining claims against the non-attorney defendants.
I.

Background
This case arises out of the aftermath of a prior state court

action and the facts are generally not disputed.

The

non-attorney defendants previously brought suit against BPE for
securities fraud in Massachusetts state court (“the Cahaly
action”) in which they were represented by the attorney
defendants.

While that case was pending, BPE commenced a NASD

arbitration against UBS PaineWebber (“the PaineWebber
arbitration”) for having caused the losses at issue in the Cahaly
action.

BPE’s original statement of claim in the PaineWebber

arbitration alleged damages of $88 million.
In the Cahaly action, the non-attorney defendants obtained a
judgment against BPE for over $20 million.

As a part of the

collection effort, on November 3, 2004, the state court entered

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an order (“the state court order”) assigning the right to
prosecute BPE’s claims in the PaineWebber arbitration to the
non-attorney defendants.

They were represented by the attorney

defendants.
In that capacity, in July, 2005, the attorney defendants
sought leave from the arbitration panel to file an amended
statement of claims.

They sought to change the legal theory on

which the claim was brought and, rather than demanding $88
million, alleged a more modest $8.6 million in compensatory
damages as well as attorneys’ fees, interest and costs.

The

amendment setting forth a new theory of liability and the
accompanying reduction in damages was allowed over BPE’s
objection.
In December, 2005, defendants succeeded on the new theory
and the arbitration panel entered an award of $12.6 million
(primarily consisting of compensatory damages and interest)
against PaineWebber.

Plaintiff’s complaint in this action stems

from its displeasure with that award which is substantially less
than the $88 million sought by the plaintiff when it controlled
the prosecution of PaineWebber arbitration.

It claims that the

lower award was directly and proximately caused by the wrongful
acts of defendants in their prosecution of BPE’s claims and that,
as a result, defendants are liable to BPE for the difference in
those damages amounts.

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II.

Procedural History
BPE filed its complaint in this action on December 12, 2008.

The attorney defendants and the non-attorney defendants both
filed motions to dismiss the original complaint on July 16 and
July 29, 2009, respectively.

Instead of opposing those motions,

BPE filed an amended complaint on September 18, 2009, whereupon
the attorney and non-attorney defendants filed renewed motions to
dismiss the amended complaint incorporating and updating
arguments from their initial motions to dismiss.

After receiving

an extension of time, BPE filed an opposition to both motions.
On February 18, 2010, the Court allowed, in part, and
denied, in part, the defendants’ motions to dismiss.

Following

extensive discovery, plaintiff moved in May, 2011 for partial
summary judgment on the issue of liability.

Shortly thereafter,

the non-attorney defendants moved for summary judgment on all the
remaining claims.

Both motions are opposed.

III. Analysis
A.

Legal Standard

The role of summary judgment is “to pierce the pleadings and
to assess the proof in order to see whether there is a genuine
need for trial.”

Mesnick v. Gen. Elec. Co., 950 F.2d 816, 822

(1st Cir. 1991) (quoting Garside v. Osco Drug, Inc., 895 F.2d 46,
50 (1st Cir. 1990)).

The burden is on the moving party to show,

through the pleadings, discovery and affidavits, “that there is
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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).
A fact is material if it “might affect the outcome of the
suit under the governing law.”
477 U.S. 242, 248 (1986).

Anderson v. Liberty Lobby, Inc.,

“Factual disputes that are irrelevant

or unnecessary will not be counted.”

Id.

No material fact

remains in dispute where a nonmoving party fails “to make a
sufficient showing on an essential element of her case with
respect to which she has the burden of proof.”

Celotex Corp. v.

Catrett, 477 U.S. 317, 323 (1986) (“[F]ailure of proof concerning
an essential element of the nonmoving party's case necessarily
renders all other facts immaterial.”).

A genuine issue of

material fact exists only where the evidence with respect to the
material fact in dispute “is such that a reasonable jury could
return a verdict for the nonmoving party.”

Anderson, 477 U.S. at

248.
Once the moving party has satisfied its burden, the burden
shifts to the non-moving party to set forth specific facts
showing that there is a genuine, triable issue.
477 U.S. at 324.

Celotex Corp.,

The Court must view the entire record in the

light most favorable to the non-moving party and indulge all
reasonable inferences in that party’s favor.
Steeves, 994 F.2d 905, 907 (1st Cir. 1993).

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O’Connor v.
Summary judgment is

appropriate if, after viewing the record in the non-moving
party’s favor, the Court determines that no genuine issue of
material fact exists and that the moving party is entitled to
judgment as a matter of law.
B.

Application
1.

Breach of Contract (Count IV)

“The essential elements of a contract are an offer,
acceptance and an exchange of consideration or a meeting of the
minds.”

Foley v. Yacht Mgmt. Grp., Inc., No. 09-cv-11280, 2011

WL 4020835, at *4 (D. Mass. Sept. 9, 2011) (Casper, J.).

Absent

a written or verbal agreement, a contract may be implied.
There are two kinds of implied contracts, one implied in
fact and the other implied in law: the first does not
exist unless the parties manifest assent, by reason of
words or conduct, while the second is quasi or
constructive, and does not require mutual assent but is
imposed by a fiction of the law, to enable justice to be
accomplished, even when no contract was intended by the
parties.
Williston on Contracts § 1:6 (4th ed. 2010); see also United
States v. Stella Perez, 956 F. Supp. 1046, 1050-51 (D.P.R. 1997).
Quasi-contracts are typically restitutionary in nature and
intended “to award the plaintiff the reasonable value of any
benefit conferred upon the defendant.”

Williston on Contracts

§ 1:6; Mass Cash Register, Inc. v. Comtrex Systs. Corp., 901 F.
Supp. 404, 424 (D. Mass. 1995) (“No implied contract will be
found in the absence of a benefit conferred.”).
Plaintiff contends that the state court order assigning
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BPE’s legal claims against PaineWebber to the defendants created
either an express or implied contract between the parties whereby
the defendants were obligated to protect BPE’s interests and
obtain the full amount of its $88 million claim.
A court order is not, however, a contract.

The state court

order resolved a heated legal dispute between the parties by
divesting plaintiff of its property right in favor of the
defendants.

There simply was no mutual assent or voluntary

conferral of a benefit.

Accordingly, the Court will allow the

defendants’ motion for summary judgment, and deny plaintiff’s
motion, with respect to the plaintiff’s claim for breach of
contract.
2.

Negligence and Breach of Fiduciary Duty (Counts V
and VI)

To prevail on a claim for negligence or breach of fiduciary
duty under Massachusetts law, a plaintiff must prove, by a
preponderance of the evidence, that the defendant owed it a duty.
See Heinrich v. Sweet, 308 F.3d 48, 62-63 (1st Cir. 2002)
(negligence requires “a legal duty owed by defendant to
plaintiff”); Qestec, Inc. v. Krummenacker, 367 F. Supp. 2d 89, 97
(D. Mass. 2005) (breach of fiduciary duty requires “a fiduciary
duty arising from a relationship between the parties”).
Plaintiff here contends that, pursuant to the state court order,
the non-attorney defendants owed plaintiff a duty to prosecute
its arbitration claim as it existed at the time of the
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assignment.

Defendants counter that they owed plaintiff no such

duty because the state court order expressly allowed them to
supersede plaintiff’s legal claim so long as they obtained
permission from the arbitrators to do so.1
Under Massachusetts law, a defendant's right to recover
damages against a third party is a property interest that may be
reached and applied by a plaintiff.
Mass. 235, 239 (1918).

See Digney v. Blanchard, 229

Generally, the assignee of a cause of

action, even where the assignment is involuntary, has the right
to intervene in a suit and to “control the litigation and receive
its fruits.”

Piper v. Childs, 290 Mass. 560, 564 (1935).

Justice Margot Botsford of the Massachusetts Superior Court
did not limit that general right in her November 3, 2004 order.
Rather, she assigned to the defendants all of BPE’s legal claims
against PaineWebber and gave defendants the right to control the
prosecution of those claims.

Both parties had submitted briefs

which discussed the non-attorney defendants’ intention to

1

The order itself states:

After hearing, and pursuant to [Mass. Gen. Laws Ch. 223,
§ 86A and ch. 214, § 3(6),] it is Ordered that [BPE’s]
legal claims against [PaineWebber] be assigned for
prosecution to the plaintiffs in this action. Any action
that the plaintiffs, as assignees, may take with respect
to the pending NASD proceedings is a matter for the
arbitrators to decide, not this court. Any damages that
may be awarded to Benistar Property against PaineWebber
are to be held in escrow by the plaintiffs (through their
counsel) pending further order of this Court.
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supersede plaintiff’s legal claim against PaineWebber should the
motion to compel assignment be allowed.

The non-attorney

defendants explained that 1) the plaintiff’s claims against
PaineWebber arose from the customer-broker relationship,

2)

PaineWebber was grossly negligent in determining the suitability
of the trades and 3) the legal theory behind BPE’s claim against
PaineWebber was “meritless” and unworkable and would result in
“wasting and loss of property.”

In response, BPE argued that the

non-attorney defendants, “under the guise of assignment,”
intended to “prosecute newly-fashioned claims against PaineWebber
for breach of duty”.
Thus, cognizant of the defendants’ intention to replace
BPE’s original claim with a different one, Justice Botsford
ordered that any action the defendants took in their capacity as
assignees with respect to the NASD proceeding was a matter for
the arbitrators to decide.2

The only express limitation on the

prosecution of those claims was that any damages awarded were to
be held in escrow.
The state court order thus fashioned broad equitable relief
in favor of the non-attorney defendants.

2

It assigned to them any

Plaintiff’s contention that this language meant only that
the court would not “micromanage” the arbitrators is without
merit and fails to raise an issue of material fact. Defendants
have demonstrated that, in the context of the litigation, they
were authorized to change plaintiff’s legal theory and plaintiff
has no credible rejoinder.
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cause of action BPE may have had against PaineWebber and did not
require prosecution of the claim as it stood when assigned.

See

Cahaly v. Benistar Prop. Exch. Trust Co., Inc., 68 Mass. App. Ct.
668, 678-79 (2007) (upholding order and stating that “[w]here
equitable relief is appropriate, its scope is left to the
discretion of the trial judge”).

Rather, under the terms of the

order, any proposed amendment of the claim would be a matter the
defendants had to present to the arbitrator, not the state court.
Therefore, even if a court order were in fact capable of
imposing a duty of care between opposing litigants, the nonattorney defendants here owed no duty to prosecute plaintiff’s
claim as it stood and cannot be held liable under either a
negligence or breach of fiduciary duty theory.

The Court

accordingly will allow the defendants’ motion for summary
judgment, and deny plaintiff’s motion, with respect to the
plaintiff’s claims for negligence and breach of fiduciary duty.
3.

Chapter 93A (Count VII)

Chapter 93A prohibits “unfair or deceptive acts or practices
in the conduct of any trade or commerce.”
93A, § 2.

Mass. Gen. Laws ch.

To prove a Chapter 93A claim, “it is neither necessary

nor sufficient that a particular act or practice violate common
or statutory law.”

Mass. Eye & Ear Infirmary v. QLT

Phototherapeutics, Inc., 552 F.3d 47, 69 (1st Cir. 2009)
(citations omitted).

Although deception and unfairness are

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factual inquiries, “the boundaries of what may qualify for
consideration as a [Chapter] 93A violation is a question of law.”
Milliken & Co. v. Duro Textiles, LLC, 451 Mass. 547, 563 (2008)
(citation omitted).
Plaintiff contends that the defendants’ “unlawful
replacement of [BPE’s] valid legal claims against PaineWebber in
favor of pursuing their own agenda” was unfair, deceptive,
contrary to public policy and immoral.

The Court has determined,

however, that the non-attorney defendants’ actions did not exceed
the scope of the state court’s order.

Furthermore, the decision

not to pursue plaintiff’s claim as it stood at the time of
assignment was not unfair or deceptive.

The defendants

forewarned of their intent to supersede plaintiff’s legal theory
with their own and obtained permission from the arbitration panel
to do so.

Their stated purpose for the substitution was to

maximize their chance of recovery.

Plaintiff seems to contend

that the defendants’ motivation was illicit but offers no facts
or evidence to support that contention.

Accordingly, the Court

will allow the defendants’ motion for summary judgment, and deny
plaintiff’s motion, with respect to the plaintiff’s claim for
violation of Chapter 93A.

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ORDER
In accordance with the foregoing,
1)

Plaintiff’s Motion for Partial Summary Judgment (Docket
No. 68) is DENIED; and

2)

Defendants’ Motion for Summary Judgment (Docket No.
70)is ALLOWED.

So ordered.
/s/ Nathaniel M. Gorton
Nathaniel M. Gorton
United States District Judge
Dated November 15, 2011

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