Hansen v. Rhode Island's Only 24 Hour Truck & Auto Plaza, Inc. et al

Filing 90

Judge Nathaniel M. Gorton: ORDER entered. MEMORANDUM AND ORDER: "In accordance with the foregoing, 1) Plaintiff's Motion to Enforce Settlement (Docket No. 58 ) is ALLOWED, 2) Plaintiff's Motion to Disburse Funds Held in Escrow by the Court (Docket No. 74 ) is ALLOWED, and 3) the case is DISMISSED. So ordered."(Moore, Kellyann)

United States District Court
District of Massachusetts
________________________________
)
)
)
)
v.
)
)
RHODE ISLAND’S ONLY 24 HOUR
)
TRUCK & AUTO PLAZA, INC., BEST
)
NEW ENGLAND, INC., THOMAS A.
)
GOTAUCO, LANTIC ENERGY, LLC
)
Defendants.
)
________________________________ )
ERIC HANSEN,
Plaintiff,

Civil Case No.
12-10477-NMG

MEMORANDUM & ORDER
GORTON, J.
This action arises out of an alleged breach of a purchase
and sale agreement (“P&S”) with respect to a truck stop.
Plaintiff Eric Hansen (“Hansen”), the putative buyer, brings suit
against Rhode Island’s Only 24 Hour Truck & Auto Plaza, Inc.,
Best New England, Inc., Thomas A. Gotauco and Lantic Energy, LLC
a/k/a Lantic Green Energy (collectively, “defendants”), the
putative sellers.

I.

Background
The facts in this case are more fully described in the

Court’s memorandum and order denying judgment on the pleadings
(Docket No. 55).

In summary, the P&S, which included a financing

contingency, required plaintiff to make a $250,000 refundable
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deposit to be held in escrow by seller’s former attorneys
Hemenway & Barnes, LLP.

After plaintiff was unable to obtain

financing he terminated the P&S but defendants refused to
reimburse his deposit on the grounds that plaintiff terminated
the P&S in bad faith.

After the Court allowed a motion of the

escrow agent, the escrowed funds at issue were deposited with the
Clerk of Court.
Currently before the Court are plaintiff’s motions to
enforce the settlement agreement entered into between the parties
and for disbursement of funds in accordance with the terms of
that agreement.
II.

Procedural History
Plaintiff filed his Complaint in March, 2012 seeking a

declaratory judgment that he is entitled to reimbursement of the
$250,000 earnest-money deposit (Count I) and claiming breach of
contract (Count II), breach of the covenant of good faith and
fair dealing (Count III), fraud (Count IV), negligent
misrepresentation (Count V) and violation of the Massachusetts
Consumer Protection Act, M.G.L. c. 93A (Count VI). Defendants
have denied all allegations and asserted a counterclaim for
violation of the covenant of good faith and fair dealing.
Defendant contends that plaintiff exploited his discretionary
rights under the P&S as a pretext to terminate.
After the escrowed funds were deposited into Court, it
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denied plaintiff’s motion for judgment on the pleadings (Docket
No. 55).

On October 31, 2012, presumably unbeknownst to

plaintiff and in response to a petition for an involuntary
receivership, the Rhode Island Superior Court appointed Mark
Russo (“Receiver”) as temporary Receiver for defendant Rhode
Island's Only 24 Hour Truck & Auto Plaza, Inc. The following day
plaintiff filed an “assented to” motion for disbursement of funds
held in escrow by the Court (Docket No. 57) after reporting that
the case had been settled.

This Court declined to allow the

motion without a stipulation of dismissal and the signatures of
both parties.

On November 16, 2012, Russo was appointed as

Permanent Receiver.
On January 7, 2013, plaintiff filed the pending motion to
enforce the purported settlement agreement.

Shortly thereafter,

the Receiver filed his “objection” to plaintiff’s motion (Docket
No. 62) indicating that the Rhode Island Court had entered a
Receivership Order staying all actions against the receivership
estate.

The Receiver requested that this Court defer its

decision on the motion to enforce the settlement agreement for 30
days to allow him to petition the Rhode Island Court for
instructions on how to proceed.
On April 4, 2013, plaintiff filed an emergency motion to
enjoin the Rhode Island state court (Docket No. 70) and a motion
requesting disbursement of the funds held in escrow (Docket No.

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74).

After hearing argument on the motions at a status

conference on April 10, 2013, this Court declined to enjoin the
Rhode Island Court and took the remaining matters under
advisement.

The parties have since notified this Court that the

Rhode Island Superior Court in which the receivership is pending
has granted Receiver’s motion to reject the settlement agreement.
III. Motions to Enforce Settlement Agreement and to Disburse
Funds
Plaintiff requests that the Court enforce the settlement
agreement on the grounds that a valid contract was entered into
between the parties.

He also requests that the Court release the

funds it is holding in escrow in accordance with the terms of the
settlement agreement.
A.

Background

The parties entered settlement discussions via email in
October, 2012.

On October 24, plaintiff’s counsel sent an email

to defendants’ counsel which stated in part:
After considerable deliberation, I am writing to state
that Eric Hansen will accept Defendants’ settlement offer
that the escrow funds (being held by the Court) will be
split as follows: $235,000 to Plaintiff and $15,000 to
Defendants. There will be no other settlement payment
between the parties. I also understand that the
settlement will include mutual releases from all parties
and a dismissal of the pending action with prejudice and
without costs. To move this along, I will send you a
draft settlement agreement (and other settlement
documentation) tomorrow.
The following day, defendants’ counsel responded “Glad we
were able to get it done. Thanks.” On October 26, 2012,
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defendants’ counsel emailed drafts of a motion to distribute the
funds and the settlement agreement to plaintiff’s counsel.

On

October 29, 2012, plaintiff’s counsel responded with proposed
changes.

On October 31, 2012, at 12:20 pm, defendants’ counsel

emailed back “Okay with removal of no disparagement provision.
Lets finalize.”

Plaintiff’s counsel responded at 12:29 pm and

attached a “final version of the settlement agreement for your
clients’ signatures.” At approximately 4:00 pm that day defendant
Rhode Island’s Only was placed into involuntary receivership by a
Rhode Island Superior Court judge.
In November and December of 2012 plaintiff’s counsel
attempted to confer with Receiver regarding the settlement
agreement.

Unable to resolve the matter, in January, 2013,

plaintiff filed the pending motion to enforce the settlement
agreement.
B. Choice of Law
Plaintiff argues that Massachusetts law governs the question of
whether a binding contract was formed.
Rhode Island law should control.

Defendant responds that

Rhode Island requires a

settlement agreement to be in writing or to be presented on the
record to the Court.

Melucci v. Berthod, 687 A.2d 878, 879 (R.I.

1997). In Massachusetts an enforceable settlement agreement
arises when all of the parties to be bound mutually assent to all
material terms, even if those terms are not memorialized in a

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final writing. Basis Tech. Corp. v. Amazon.com, Inc., 71
Mass.App.Ct. 29, 40 (2008).

Having identified a conflict between

Rhode Island and Massachusetts law, this Court is obliged to
consider which law applies. See Levin v. Dalva Bros., Inc., 459
F.3d 68, 73 (1st Cir. 2006) (citation omitted) (noting initial
step in choice-of-law analysis is identification of an actual
conflict).
A federal court sitting in diversity applies the
choice-of-law framework of the forum state. Klaxon Co. v. Stentor
Elec. Mfg. Co., 313 U.S. 487, 496 (1941)).

Massachusetts applies

a “functional” approach which closely resembles the determination
laid out in the Restatement (Second) of Conflict of Laws as to
which state has the most “significant relationship” to the case.
Bushkin Associates, Inc. v. Raytheon Co., 393 Mass. 622, 632
(1985).
The geographical considerations to be taken into account in
applying the principles of the Restatement to determine the law
applicable to an issue include:
(a) the place of contracting, (b) the place of
negotiation of the contract, (c) the place of
performance, (d) the location of the subject matter of
the
contract,
and
(e)
the
domicil,
residence,
nationality, place of incorporation and place of business
of the parties.
Restatement (Second) Conflict of Laws § 188(2).

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The legal factors for the Court to consider include:
(a) the needs of the interstate and international
systems, (b) the relevant policies of the forum, (c)
the relevant policies of other interested states and
the relative interests of those states in the
determination of the particular issue, (d) the
protection of justified expectations, (e) the basic
policies underlying the particular field of law, (f)
certainty, predictability and uniformity of result, and
(g) ease in the determination and application of the
law to be applied.
Id. at § 6 (2).
Applying those factors, the Court finds that Massachusetts
law controls. The subject matter of the purported settlement
agreement is the resolution of a lawsuit pending in Massachusetts
and the disbursement of funds held in escrow in Massachusetts.
As a result, Massachusetts has a strong interest in whether or
not a valid contract was formed, particularly given that
performance of that agreement, namely the disbursement of funds
and dismissal of the lawsuit, is to occur in Massachusetts.
Applying Massachusetts law also protects the justified
expectations of the parties who reasonably should have presumed
that Massachusetts law would control given that they were
negotiating the resolution of a Massachusetts law suit and the
disbursement of funds held in Massachusetts.

Furthermore, both

the P&S and the purported settlement agreement contained
Massachusetts choice of law provisions, indicating that the
parties themselves agreed upon the application of Massachusetts
law.
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C. Settlement Agreement
Policy favors the enforcement of settlement agreements so as
to hold people to the contracts they make and to avoid costly and
time-consuming litigation. T & T Mfg. Co. v. A.T. Cross Co., 587
F.2d 533, 538 (1st Cir.1978).

As discussed above, in

Massachusetts an enforceable settlement agreement arises when the
parties to be bound mutually assent to all material terms, even
if those terms are not memorialized in a final writing. Basis
Tech., 71 Mass.App.Ct. at 40.

See also Flebotte v. Dow Jones &

Co., Inc., 97-30117-FHF, 2001 WL 35988082, at *3 (D. Mass. June
28, 2001); Rosenfield v. U.S. Trust Co., 290 Mass. 210, 216
(1935).

A settlement agreement is not enforceable, however, if

“material facts are in dispute as to the validity or terms of the
agreement”. Bandera v. City of Quincy, 344 F.3d 47, 52
(Mass.2003).
In this case it is manifest from the email exchange that the
parties entered into a valid settlement agreement.

The parties

had agreed on all the material terms, including the distribution
of $235,000 to plaintiff and $15,000 to defendants, “mutual
releases from all parties” and “dismissal of the pending action
with prejudice and without costs.”

Both parties clearly

expressed mutual assent to the terms when plaintiff’s counsel
wrote that “Eric Hansen will accept Defendants’ settlement offer”
and defendants’ counsel responded “Glad we were able to get it

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done.”
Although the parties continued to attempt to formalize the
agreement through a signed settlement document, “the parties were
proceeding to ‘memorialize’...the settlement terms, not to create
them.”

Basis Tech., 71 Mass.App.Ct. at 40. (finding that a

“present agreement upon all material terms” reached via email
“reduce[d] the later document to a mere memorialization of an
existent agreement”).

Consequently, the Court finds that the

parties entered into a binding settlement agreement.

The motion

to disburse funds will be allowed in accordance with the terms of
that agreement.

ORDER
In accordance with the foregoing,
1)

Plaintiff’s Motion to Enforce Settlement (Docket No. 58)

is ALLOWED,
2) Plaintiff’s Motion to Disburse Funds Held in Escrow by
the Court (Docket No. 74) is ALLOWED, and
3) the case is DISMISSED.

So ordered.
/s/ Nathaniel M. Gorton
Nathaniel M. Gorton
United States District Judge
Dated June 7, 2013

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