Irish v. Irish et al

Filing 278

Judge William G. Young: ORDER entered. MEMORANDUM AND ORDER: The motion for attorneys' fees, ECF No. 245, is DENIED. The plaintiff's proposed form of judgment, ECF No. 243, is adopted by the Court -- save for the provision regarding attorneys' fees described in paragraph 5, which shall be struck out -- and judgment shall be entered. SO ORDERED...(Paine, Matthew)

UNITED STATES DISTRICT COURT
DISTRICT OF MASSACHUSETTS
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DAWN E. IRISH,
Plaintiff,
v.
CRAIG S. IRISH,
Defendant.

CIVIL ACTION
NO. 12-12132-WGY

YOUNG, D.J.

December 11, 2015
MEMORANDUM & ORDER

I.

INTRODUCTION
On June 30, 2015, this Court found Craig Irish liable to

Dawn Irish on Counts II (breach of contract) and III (breach of
the covenant of good faith and fair dealing) of her complaint.
Findings Fact and Rulings Law 23-24, ECF No. 185.
After conducting a bench trial on the scope of damages,
this Court issued its ruling on October 6, 2015.

See Excerpt

Tr.: Judge’s Ruling (“Excerpt Tr.”), ECF No. 234.

The Court

held that Dawn Irish was entitled to a 20% interest in Craig
Irish’s proceeds from the sale of his equity interest in Nuclear
Logistic, Inc. (“NLI”) (less the sums already paid), and 50% of
his reimbursement checks.

Id. at 5.

The Court requested that

the parties prepare a proposed judgment, and noted that doing so
would not waive their appellate rights.
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Id. at 6.

On October

16, 2015, the parties submitted their proposed forms of judgment
along with memoranda in support of their proposals.

Pl.’s

Proposed Final J., ECF No. 243; Pl. Dawn Irish’s Mem. Supp.
Proposed Form J. and Pre-J. Interest Calculation (“Pl.’s Mem.”),
ECF No. 244; Def. Craig Irish’s Mem. Form J. (“Def.’s Mem.”),
ECF No. 249. 1
Having carefully considered the parties’ positions, the
Court, with one exception, adopts the judgment proposed by Dawn
Irish.

This memorandum explains the Court’s reasoning with

respect to four issues disputed by the parties: tax
considerations, reimbursement checks, prejudgment interest, and
attorneys’ fees.
II.

TAX CONSIDERATIONS
On June 30, 2015, having found that Craig Irish breached

the separation agreement of January 21, 2010 (“Separation
Agreement”), as well as the implied covenant of good faith and
fair dealing, this Court imposed a constructive trust on the

1

The parties submitted additional memoranda on two topics.
The first is pre-judgment interest, see Def.’s Craig Irish’s
Opp’n Pl. Dawn Irish’s Req. Prejudgment Interest, ECF No. 271;
Pl.’s Reply Def.’s Resp. Mem. Supp. Proposed Form J. Pre-J.
Interest Calculation, ECF No. 277. The second topic is
attorneys’ fees, see Pl.’s Mot. Award Att’ys’ Fees Incorporated
Mem. Supp., ECF No. 245; Def. Craig Irish’s Opp’n Pl. Dawn
Irish’s Mot. Award Atty’s Fees Sanctions, ECF No. 256; Pl.’s
Reply Mem. Further Supp. Mot. Award Attys’ Fees, ECF No. 269;
Def.’s Sur-Reply Further Opp’n Pl’s Mot. Award Atty’s Fees, ECF.
No. 276.
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proceeds of the sale of Craig Irish’s equity in NLI.

See

Excerpt Tr. 4, ECF No. 234; Findings Fact and Rulings Law 24
(citing Nile v. Nile, 432 Mass. 390, 401 (2000)).
Relying on this ruling, Dawn Irish posits that she is
entitled to 20% of the proceeds of the equity sold, minus the
amounts already paid to her, and calculates the baseline
monetary award as follows:
$4,320,000 (which is 20% of $21,600,000)
- $480,000 (which is the sum of the amounts already paid)
= $3,840,000.
Pl.’s Mem. 5.
Craig Irish contends that the award should reflect the
taxes “that were due (and paid)” on the proceeds of the NLI
equity.

Def.’s Mem. 3.

He argues that “Dawn is not entitled to

a windfall of receiving payment of an amount that is really a
tax liability already paid.”

Id.

The Court agrees with him in part.

Under Massachusetts

law, 2 his basic legal argument is correct: generally, he would be
entitled to subtract from his liability his prior tax payments

2

The Supreme Judicial Court has recognized that
Massachusetts law differs from federal trade secret and
intellectual property caselaw regarding the treatment of a
wrongdoer’s previously made tax payments. See Demoulas v.
Demoulas Super Mkts., Inc., 424 Mass. 501, 559 n.61 (1997)
(internal citations omitted).
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on the wrongfully obtained property.

See Demoulas v. Demoulas

Super Mkts., Inc., 424 Mass. 501, 555-59 (1997) (holding that
the defendants must pay back wrongfully obtained corporate
earnings that had been distributed to them but that they could
“deduct their tax payments” on these earnings).

Here, Craig

Irish would be entitled to a reduction in the judgment by any
taxes that he paid on the 20% of the proceeds due to Dawn Irish.
See id. (stating defendants’ “actual ‘gain’ [from their
wrongdoing] was only the net amount of the distributions, namely
the portion that they retained after the payment of taxes”).
This rule has a caveat, however: the Court cannot reduce
the amount if it has an inadequate record on which to base its
calculation of tax payments made.

See id. at 559 n.62 (“We have

rejected claims for tax deductions in instances where the
wrongdoer (who is responsible for asserting this defense) has
failed to present adequate evidence or has evinced
noncooperation in the computation of the award.”) (internal
citations omitted).

Here, Craig Irish makes only a general

allegation that “the judgment should enter so that the charges
against the funds received and held in trust recognize payment
of tax that were due (and paid).”

Def.’s Mem. 3.

He does not

address in sufficient detail the tax consequences of payment of
a portion of proceeds to Dawn Irish and does not recognize or
account for any tax benefit (if any) arising from such payment.
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In light of these circumstances, the taxes already paid on the
proceeds of the NLI equity will not be deducted.

See USM Corp.

v. Marson Fastener Corp., 392 Mass. 334, 347-48 (1984) (denying
a deduction for income taxes paid because defendants “made no
extended argument” concerning the tax benefit arising from the
awarded payment to plaintiffs); Fidelity Mgmt. & Research Co. v.
Ostrander, 40 Mass. App. Ct. 195, 202 (1996) (denying a
deduction for taxes paid because a party claiming deduction
“never proved she paid the taxes, . . . [and] provided no
accounting for the substantial tax benefit she will receive from
any restitution paid”).
Accordingly, the full 20% of the proceeds received by Craig
Irish from the sale of his hidden equity in NLI, less such sums
as have been paid to Dawn Irish, shall be paid to Dawn Irish,
viz., the sum of $3,840,000.
III. REIMBURSEMENT CHECKS
Craig Irish disagrees with this Court’s ruling of October
6, 2015, and suggests that this Court reconsider its decision
concerning the 2009 reimbursement checks because “that claim is
moot, was not made in the complaint, and even if vaguely
asserted during the pendency of this case, it has been waived.”
Def.’s Mem. 4.
This Court has already ruled that Dawn Irish is entitled to
50% of the reimbursement checks that had been received by Craig
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Irish but which had not been cashed when the parties entered
into the Separation Agreement.

Excerpt Tr. 5.

Craig Irish’s argument is nothing more than an attempt to
take a second bite of the apple.

This Court sees no occasion to

reconsider its earlier decision and reiterates its ruling that
Dawn Irish is entitled to half of the 2009 reimbursement checks,
which amounts to $26,859.74.
IV.

PRE-JUDGEMENT INTEREST
Craig Irish contends that Dawn Irish is not entitled to

pre-judgment interest.

Def.’s Mem. 3-4; Def.’s Craig Irish’s

Opp’n Pl. Dawn Irish’s Req. Prejudgment Interest (“Def.’s
Resp.”), ECF No. 271.

In contrast, Dawn Irish argues that this

Court should award either Craig Irish’s actual investment
returns during the time he had the use of her money, or
prejudgment interest at the statutory interest rate.

Pl.’s Mem.

4.
Under Massachusetts law, the prevailing party in a contract
action is entitled to prejudgment interest, beginning on the
date of breach.

See Mass. Gen Laws ch. 231, § 6C; Ramos v.

Int'l Fid. Ins. Co., 87 Mass. App. Ct. 604, 611 (citing Mass.
Gen Laws ch. 231, § 6C), review denied, 40 N.E.3d 553 (2015).
This Court has already established that Craig Irish
breached the Separation Agreement by “stating that his Financial
Statement was complete, true and accurate.”
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Findings Fact and

Rulings Law 18.

Accordingly, when Craig Irish received the

proceeds from the sale of the NLI equity he was aware of his
violation of the Separation Agreement.

Thus, the pre-judgment

interest on each payment from the NLI equity starts to accrue on
the day Craig Irish received that payment.
Because Craig Irish received the 2009 reimbursement checks
before the Separation Agreement, the pre-judgment interest on
those amounts shall begin to run on the day the parties entered
into the Separation Agreement.
V.

ATTORNEYS’ FEES
There is no sufficient basis to award attorneys’ fees to

Dawn Irish.

She suggests attorneys’ fees are in order due to

Craig Irish’s misconduct.

See generally Mot. Att’ys’ Fees;

Pl.’s Reply Mem. Further Supp. Mot. Award Att’ys’ Fees, ECF No.
269.

Urging this Court to exercise its “inherent authority to

fashion . . . an award [of attorneys’ fees,]” Mot. Att’ys’ Fees
12, Dawn Irish cites to Chambers v. NASCO, Inc., 501 U.S. 32, 46
(1991).

This is not a case, however, in which “fraud has been

practiced upon [the Court], or [during which] the very temple of
justice has been defiled[.]”

Chambers, 501 U.S. at 46 (internal

quotation marks and citation omitted).

Instead, this case is at

bottom a contract dispute, and Craig Irish’s personal mendacity
does not overcome the usual American rule that each party shall

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bear its own attorneys’ fees.

His attorneys have conducted his

defense with vigor and integrity.
VI.

CONCLUSION
The motion for attorneys’ fees, ECF No. 245, is DENIED.

The plaintiff’s proposed form of judgment, ECF No. 243, is
adopted by the Court -- save for the provision regarding
attorneys’ fees described in paragraph 5, which shall be struck
out -- and judgment shall be entered.
SO ORDERED.
/s/ William G. Young
WILLIAM G. YOUNG
DISTRICT JUDGE

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