Brennan v. Ferreira et al
Judge William G. Young: ORDER entered. MEMORANDUM AND ORDER: This Court grants Brennan's motion for leave to amend her complaint, ECF No. 41 , but dismisses counts I and II as to Leatham. SO ORDERED...(Paine, Matthew)
THOMAS F. FERREIRA, BARBARA
FERREIRA, JOHN JEFF FERREIRA,
TAMMY FERREIRA, HICKS STREET,
INC., HILDA MIRANDA, THREE BIG
DOGS IRREVOCABLE TRUST, PRESCOTT,
BULLARD & MCLEOD, RICHARD C.
and DOUGLAS LEATHAM,
The plaintiff, Linda Brennan (^'Brennan") , has brought suit
against Thomas F. Ferreira and Barbara Ferreira (collectively
^'T&B Ferreira") ;
John Jeff Ferreira and Tammy Ferreira
(collectively ^V&T Ferreira"); Hicks Street, Inc.; Hilda
Miranda; Three Big Dogs Irrevocable Trust; Prescott, Bullard &
McLeod; Richard C. Borges; and Douglas Leatham (^^Leatham") ,
alleging, inter alia, violations of the Racketeer Influenced and
Corrupt Organizations Act
Fraudulent Transfer Act
(^^RICO") , violations of the Uniform
and common law civil
Pi. Linda Brennan's Mot. Am.
and Jury Demand
Compl., Ex. 1, Am.
Brennan has moved for leave to file an amended complaint.
PI. Linda Brennan's Mot. Am.
arguing that the claims against him ought be dismissed
for failure to state a claim.
Linda Brennan's Mot. Am.
For the reasons below,
Court grants Brennan leave to file her amended complaint, but
dismisses counts I
and II against Leatham.
Brennan initially filed her complaint on December 16, 2016.
Compl. 1, ECF No. 1.
Leatham moved to dismiss the complaint.
Def. Dismiss, and the parties briefed the issues, Linda
Brennan's Opp'n Def.'s Mot. Dismiss (^^Pl.'s Opp'n"), ECF No. 35;
Law Def. Supp. Mot.
Dismiss, ECF No. 13.
On the morning of the hearing addressing Leatham's motion
to dismiss, Brennan filed a motion for leave to file an amended
Pi. Linda Brennan's Mot. Am. Compl.
opposed, maintaining that the amended complaint failed to cure
the deficiencies of the original complaint.
Brennan is a
Compl. SI 13.
creditor of T&B Ferreira under the UFTA.
She and her former husband, Andrew Brennan, were
partners with T&B Ferreira in various businesses and real estate
including F&B Enterprises,
Id. at 2.
Inc. and Land Locker,
In 1995, the Brennans and T&B Ferreira agreed to part
dividing their common business and real estate interests.
As part of their agreement,
the Brennans were to receive
monthly payments, but T&B Ferreira stopped making these payments
in August 2000,
and filed for Chapter 11 Bankruptcy on behalf of
Leatham is T&B Ferreira and J&T Ferreira's certified public
On or about December 17,
Ferreira transferred the deed to 25 Tinkham Lane, Mattapoisett,
to J&T Ferreira for $1.00,
property's fair market value.
well below the
Id. SISI 20-21.
subsequently sold the property for $435,000.00.
Brennan alleges that Leatham filed false tax returns and made
false accounting entries by charging Land Locker,
uninsured property damage,
id. SISI 56-57, that this assistance
was necessary to the Ferreiras' scheme,
Leatham knew or
id. SI 61, and that
The amended complaint asserts three causes of action
against Leatham: violation of RICO
(count I) , id. SISI 65-80;
fraudulent conveyances under the UFTA (count II), id. SISI 81-86;
and civil conspiracy (count III),
id. SISI 87-91.
contends that the amended complaint ''suffers from the same
substantive defects as the original
[c]omplaint," in that i t
does not allege sufficient facts to support Leatham's
involvement in the purported scheme to defraud creditors.
Def.'s Opp'n 1-2.
Although a court ought grant leave to amend a pleading
"when justice so requires," Fed. R. Civ. P. 15(a)(2), a district
court retains significant discretion to deny amendment if it
See Foman v. Davis, 371 U.S. 178, 182 (1962).
"In assessing futility,
the district court must apply the
standard which applies to motions to dismiss," Adorno v. Crowley
Towing & Transp. Co., 443 F.3d 122, 126 (1st Cir. 2006)
Classman v. Computervision Corp.,
90 F.3d 617,
1996)); that is, whether, accepting all factual allegations as
true, a complaint states a plausible claim to relief, see
Saldivar v. Racine, 818 F.3d 14, 18
(1st Cir. 2016)
Cardigan Mountain Sch. v. New Hampshire Ins. Co., 787 F.3d 82,
Section 1962 of Title 18 of the United States Code provides
that "[i]t shall be unlawful for any person employed by or
associated with any enterprise engaged in, or the activities of
which affect, interstate .
. commerce, to conduct or
participate, directly or indirectly,
in the conduct of such
enterprise's affairs through a pattern of racketeering activity
or collection of unlawful debt."
18 U.S.C. § 1962(c)
see also United States v.
("In order to secure a
conviction under RICO,
Government must prove both the existence of an
the connected ^pattern of racketeering activity.'").
Supreme Court has stated:
In order to "participate, directly or indirectly, in
the conduct of such enterprise's affairs," one must
have some part in directing those affairs.
the word "participate" makes clear that RICO liability
is not limited to those with primary responsibility for
the enterprise's affairs, just as the phrase "directly
or indirectly" makes clear that RICO liability is not
limited to those with a formal position in the
enterprise, but some part in directing the enterprise's
affairs is required.
The "operation or management"
test expresses this requirement in a formulation that
is easy to apply.
Ernst & Young,
Pursuant to this "operation or management test," in
order to be liable for "conducting" or "participating" in an
enterprise's affairs under section 1962(c), "one must
participate in the operation or management of the enterprise
The First Circuit consistently has held
that RICO liability does not attach where an accountant engages
in no more than ordinary accounting functions on behalf of an
See United States v. Houlihan, 92 F.3d 1271, 1298
(^MB]ecause the defendant in Reves was an
outside accounting firm that had only a contractual relationship
with the allegedly corrupt enterprise —
it audited the books
and issued financial reports, but neither controlled the
enterprise nor participated in either its operation or
RICO liability did not attach."); United States v.
37 F.3d 739,
accountants in Reves]
were undeniably involved in the
carried them out;
they neither made those decisions nor
in other words,
the accountants were outside
the chain of command through which the enterprise's affairs were
Furthermore, the Supreme Court has rejected the
argument that independent accounting professional standards
defining financial statements as ^^management's responsibility"
should apply to the term ''management of an enterprise" under
Here, construing the pleadings in the light most favorable
to Brennan, Leatham, as an accountant, still does not satisfy
the operation or management test.
The amended complaint alleges
only that Leatham "maintained the books and records on behalf of
Inc. and F & B Rubberized,
Inc. as well as other
Ferreira entities," and that Leatham, along with J&T Ferreira,
made false accounting entries (filing false tax returns and
fraudulently charging Land Locker for uninsured property damage)
to shield themselves from creditors.
There are insufficient facts,
to support an inference
that Leatham operated or managed the enterprise.
(holding, under similar factual circumstances to
that an accounting firm overvaluing a company's
audit was not
liable under RICO because the
firm could not be
said to have operated or managed the enterprise).
Brennan argues that ^^should an accountant go beyond the
actions in Reves, they run the risk .
[of being considered]
part of the management of the entity named as an enterprise,"
and that an ^'association-in-fact" enterprise may ''bring the
outside professional back into RICO's reach even if he or she
would escape under Reves."
Pl.'s Opp'n 5.
complaint, however, fails to allege facts sufficient to show
that Leatham engaged in operation or management activities in
the alleged enterprise, or in any way goes "beyond the actions
Thus, the conduct element is not satisfied and
Leatham is not subject to RICO liability under count I.
Count II: Fraudulent Conveyance under the UFTA
Massachusetts's version of the UFTA, Mass.
109A, proscribes a transfer by a debtor if made either:
with actual intent to hinder, delay, or defraud any
creditor of the debtor;
without receiving a
Mass. Gen. Laws ch. 109A, § 5(a)(l)-(2).
The second of the prohibited transactions applies when the
debtor has an unreasonably small amount of remaining assets or
or reasonable b e l i e f that
2009 WL 2579432,
t r a n s f e r would render
(D. Mass. Aug.
(citing Mass. Gen. Laws ch. 109A, § 5(a)(2)).
based on the allegations in the amended
complaint, do not fall within the ambit of the UFTA.
Court has previously noted,
in order to maintain an UFTA claim,
the defendant must be a debtor and a party to the transfer.
2009 WL 2579432,
(citing General Motors
Acceptance Corp. v. Camilleri Bros. Chevrolet of Holyoke,
109 F. Supp. 2d 58,
(D. Mass. 2000)
(Gorton, J. )
prospective transfer by a non-debtor does not fit within the
statutory meaning of fraudulent transfer.")).
Here, Leatham was
neither a debtor nor a party to the transaction.
this Court dismisses Leatham as defendant to count 11.^
^ Leatham challenges the adequacy of the entire complaint,
but does not specifically address the UFTA claim. Although
'Msjua sponte dismissals are strong medicine, and should be
dispensed sparingly," there is an exception where ^'it is crystal
clear that the plaintiff cannot prevail and that amending the
complaint would be futile." Chute v. Walker, 281 F.3d 314, 319
(1st Cir. 2002)
(internal quotations and citations omitted).
Such circumstances are present here.
Coun't III: Civil Conspiracy
Massachusetts recognizes ^^concerted action" civil
See Kurker v.
44 Mass. App. Ct.
of Torts § 876
This requires a plaintiff to allege ''a common design or an
between two or more persons to do a wrongful act
. proof of some tortious act in furtherance of the
Aetna Cas. Sur. Co. v. P & B Autobody,
(1st Cir. 1994).
'^^Key to this cause of action is a
defendant's substantial assistance
knowledge that such assistance is contributing to a common
44 Mass. App. Ct. at 189.
Courts in this district have applied a low bar for
allegations of ''substantial assistance" sufficient to survive a
motion to dismiss.
3d 565, 576 (D. Mass. 2015)
Fiorillo v. Winiker,
(denying motion to
dismiss where the plaintiff alleged that the defendant was hired
by other defendants to assist in a scheme to usurp assets from
the plaintiff and in doing so "tortiously misappropriated rents
and equipment, and represented to lenders that he was the sole
owner of [the property]").
Here, the amended complaint alleges
that Leatham took part in making false accounting entries
necessary to the Ferreiras' scheme, of which Leatham knew or
should have known.
This is adequate
to state a civil conspiracy claim against Leatham.^
For the foregoing reasons,
this Court grants Brennan's
motion for leave to amend her complaint,
and I I
^Leatham argues that he was not put on adequate notice
regarding the civil conspiracy claim against him because his
name is not mentioned specifically in count III of the
See Am. Compl. SISI 87-91. The notice standard is not
See Kadar Corp. v. Milbury, 549 F.2d 230, 234 (1st
Cir. 1977) (noting that it is ''difficult to say that a claim has
not been minimally stated" where the defendant was mentioned in
several other paragraphs of the complaint as having aided and
abetted "specific, narrowly-defined conduct," and holding this
was enough to lend "some body to the pleaders' claim").
Although Leatham is not listed by name in count III, he is
listed as a defendant in the preceding paragraphs as an alleged
RICO conspirator. Am. Compl. f 87. This is sufficient notice
Leatham i s
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