Wade et al v. Clayton et al
Filing
138
Chief Judge Patti B. Saris: MEMORANDUM AND ORDER entered.The Court ALLOWS IN PART AND DENIES IN PART Defendants' motion for summary judgment (Dkt. No. 100 ); ALLOWS Third-Party Defendants' motion for summary judgment (Dkt. No 110 ); and DENIES Defendants' motion to strike (Dkt. No. 118 ). SO ORDERED.(Lara, Miguel)
UNITED STATES DISTRICT COURT
DISTRICT OF MASSACHUSETTS
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Plaintiffs,
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v.
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TOUCHDOWN REALTY GROUP, LLC,
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THOMAS CLAYTON,
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JULIAN LEWIS,
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Defendants/
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Third-Party Plaintiffs, )
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v.
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COMMONWEALTH REALTY GROUP, LLC
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d/b/a CENTURY 21 and
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LISA PAULETTE,
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Third-Party Defendants. )
___________________________________)
GREGG WADE,
KARIN WADE,
Civil Action
No. 17-10400-PBS
MEMORANDUM AND ORDER
June 7, 2019
Saris, C.J.
INTRODUCTION
This dispute arises out of a home sale in Foxborough,
Massachusetts. Plaintiffs Gregg and Karin Wade allege that the
home they purchased from Defendant Touchdown Realty Group, LLC
(“Touchdown”) did not comply with building codes in breach of
the purchase agreement and that Touchdown and Defendant Thomas
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Clayton falsely represented that the home was a three-bedroom
house, not a two-bedroom house, and that it was code-compliant.
Plaintiffs assert claims for breach of contract (Count I),
breach of the implied covenant of good faith and fair dealing
(Count II), fraud/fraudulent inducement (Count III), and
violations of Chapter 93A (Count V). They also seek a
declaratory judgment that Touchdown is an alter ego of Clayton
(Count IV).
Defendants filed a third-party complaint impleading
Plaintiffs’ real estate agent, Lisa Paulette, and her employer
Commonwealth Realty Group, LLC (“Commonwealth”), seeking
contribution and indemnification for Counts III and V.
Defendants and Third-Party Defendants have moved for summary
judgment. Defendants also have moved to strike Plaintiffs’
opposition to their motion for summary judgment.
After hearing, the Court ALLOWS IN PART AND DENIES IN PART
Defendants’ motion for summary judgment (Dkt. No. 100); ALLOWS
Third-Party Defendants’ motion for summary judgment (Dkt. No.
110); and DENIES Defendants’ motion to strike (Dkt. No. 118).
FACTUAL BACKGROUND
The following facts are undisputed except where otherwise
stated.
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I.
The Parties
In August 2018, Plaintiffs, who were moving from Michigan
with their two children, one of whom is disabled, purchased from
Touchdown the property located at 32 Oak Street, Foxborough,
Massachusetts (“32 Oak Street”). Touchdown is a Rhode Island
limited liability corporation, with its principal place of
business at 12 E. Cottage Street, Smithfield, Rhode Island.
Touchdown is in the business of buying and renovating
residential real estate for resale. Clayton’s wife, Kelly
Clayton, is Touchdown’s sales manager and sole shareholder. The
company address is also the Claytons’ home address in Rhode
Island.
Clayton, a former professional football player, is a vice
president of Better Living Real Estate, LLC (“Better Living”).
He is a licensed home improvement contractor and real estate
agent who sometimes oversees the renovation, and brokers the
sales, of properties owned by Touchdown.
Commonwealth is a foreign limited liability corporation
registered to do business in Massachusetts, and doing business
under the trade name Century 21 Commonwealth (“Century 21”).
Paulette is a real estate agent who works for Century 21.
Paulette served as Plaintiffs’ real estate agent in connection
with their purchase of 32 Oak Street.
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II.
32 Oak Street
Touchdown purchased 32 Oak Street on April 6, 2016. At that
time, it was listed as a three-bedroom home; it had historically
been taxed as a three-bedroom home; and the Title V report
referred to it as a three-bedroom home. Touchdown began
renovations on 32 Oak Street shortly after the purchase. Julian
Lewis was the general contractor responsible for the
renovations. Clayton was involved in overseeing the renovations,
but the parties dispute the extent of his involvement.
Defendants were granted a permit by the Town of Foxborough
for the renovations. The permit did not authorize any electrical
or plumbing work. The parties hotly dispute the extent of the
renovations performed by Touchdown and whether these renovations
were consistent with the applicable building codes. On August
15, 2016, the Town of Foxborough building inspector, Thomas
Wrynn, sent a letter to Clayton notifying him that Touchdown was
in violation of the town’s building codes because it failed to
pull plumbing and electrical permits as part of the initial
renovation of 32 Oak Street. Defendants subsequently hired a
plumber, Mark Mason, and an electrician, Erik Wilkinson, to
perform additional work on 32 Oak Street. Mason and Wilkinson
pulled permits for the additional work they performed.
In addition to renovating the interior of 32 Oak Street,
Touchdown installed a new distribution box and a 1500-gallon tank
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for the septic system. Even with this upgrade, 32 Oak Street’s
septic system only supported a two-bedroom home. Accordingly, the
Town of Foxborough required Touchdown to record a deed restriction
which limited the use of 32 Oak Street to two bedrooms. That deed
restriction was recorded on July 15, 2016. Clayton requested the
Town of Foxborough
to treat the property as a three-bedroom
dwelling, but the Town repeatedly told him that it could only be
used as a two-bedroom dwelling. Clayton claims that he always
understood that 32 Oak Street could be used as a three-bedroom
dwelling, notwithstanding the deed restriction.
III. Sale of 32 Oak Street
Plaintiffs began working with Paulette in their housing
search in July 2016. Plaintiffs were looking specifically for a
three-bedroom home. Touchdown first listed 32 Oak Street for
sale on July 18, 2016. The listing for the property claimed it
was a three-bedroom house but also disclosed that it was a
“[c]urrent design two bed.” Dkt. No. 105 (MLS Listing) at 2. On
July 21, 2016, after seeing the listing for 32 Oak Street,
Paulette contacted Clayton by email. Paulette asked Clayton
whether he could “explain the 2 bedroom septic system for a 3
bedroom house.” Dkt. No. 105-2 (July 21, 2016 Email) at 2.
Clayton responded that “the house is obviously a 3 bed dwelling”
but “the septic design is grandfathered in as 2 bedroom design.”
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Id. at 3. Paulette subsequently forwarded this email chain to
Plaintiffs.
On July 22, 2016, Plaintiffs submitted an offer to purchase
32 Oak Street, which Touchdown accepted. Plaintiffs subsequently
received a copy of the appraisal report for 32 Oak Street which
indicated that it was a two-bedroom dwelling. Attached to that
appraisal report was a copy of the deed restriction. Plaintiffs
only skimmed the appraisal report and did not look at its
attachments.
On August 2, 2016, Plaintiffs signed a purchase agreement
for 32 Oak Street. In relevant part, the purchase agreement
warranted that “at the time of Closing [32 Oak Street was] not
in violation of [the applicable] building and zoning codes.”
Dkt. No. 106 (Purchase Agreement) at 5. An addendum to the
purchase agreement also warranted that “SELLERS have not
received any notice that the property violates any municipal,
state or federal law, rule, regulation or ordinance.” Id. at 13.
And a further addendum warranted that “[t]here is, to the best
of the Seller’s knowledge and belief, no notice, suit, order,
decree, claim, writ, injunction or judgment relating to material
violations of any laws[,] ordinances, codes, regulations or
other requirements with respect to the premises in, of, or by
any court or governmental authority having jurisdiction over the
premises.” Id. at 16.
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The sale of 32 Oak Street to Plaintiffs closed on August
31, 2016. Following the closing, Plaintiffs hired Dennis
Schadler to renovate 32 Oak Street’s downstairs bedroom and
bathroom for their disabled daughter and also to perform some
work in the kitchen. Schadler claims that when he opened up the
walls in the basement and kitchen, he discovered improper
construction, insulation, electrical, plumbing, and fire
stopping that violated the applicable building codes. The
parties dispute whether these code violations were the product
of Touchdown’s renovation of 32 Oak Street or whether they
predated Touchdown’s ownership, and whether Touchdown knew of
the violations.
Because of the deed restriction, Plaintiffs were not able
to use the downstairs room as a bedroom for their daughter. They
want to move.
JURISDICTION
Before the Court proceeds to the merits of the summary
judgment motions, some housekeeping is in order. The amended
complaint names four defendants: Touchdown, Clayton, Lewis, and
Better Living. Plaintiffs voluntarily dismissed their claim
against Better Living on March 9, 2018. Plaintiffs assert a
claim for negligent supervision against Lewis (Count VII).
Lewis, who was served, has not answered the amended complaint,
and the other parties seem to be proceeding as if he is no
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longer part of the case. Yet Plaintiffs have not dismissed their
claim against Lewis, nor have they filed a motion for default.
He was deposed.
This is relevant here because, according to the amended
complaint and Lewis’s deposition testimony, he is a resident of
Massachusetts. So are Plaintiffs. Therefore, the parties are
nondiverse, and the Court currently lacks subject matter
jurisdiction over this case. See 28 U.S.C. § 1332(a);
Caterpillar Inc. v. Lewis, 519 U.S. 61, 68 (1996). Pursuant to
Federal Rule of Civil Procedure 21, “[m]isjoinder of parties is
not a ground for dismissing an action. On motion or on its own,
the court may at any time, on just terms, add or drop a party.”
Fed. R. Civ. P. 21. “Dismissal of a nondiverse dispensable party
has long been recognized as a way to cure a jurisdictional
defect and Rule 21 explicitly vests district courts with
authority to allow a dispensable non-diverse party to be dropped
at any time.” Cason v. P.R. Elec. Power Auth., 770 F.3d 971, 977
(1st Cir. 2014). Accordingly, the Court finds that Lewis is a
dispensable party and dismisses the claim against him in order
to cure its lack of jurisdiction.1
If any of the parties object to the dismissal of the claim against Lewis,
they must file an objection within 10 days of this order.
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MOTIONS FOR SUMMARY JUDGMENT
I.
Legal Standard
Summary judgment is appropriate when “there is no genuine
dispute as to any material fact and the movant is entitled to
judgment as a matter of law.” Fed. R. Civ. P. 56(a). The burden
is on the party moving for summary judgment to establish that
there are no genuine disputes of material fact. Carmona v.
Toledo, 215 F.3d 124, 132 (1st Cir. 2000). A dispute of fact is
considered genuine if “a reasonable jury, drawing favorable
inferences, could resolve it in favor of the nonmoving party.”
Triangle Trading Co. v. Robroy Indus., Inc., 200 F.3d 1, 2 (1st
Cir. 1999) (quotation omitted). A fact is material if “it has
the potential of determining the outcome of the litigation.”
Patco Constr. Co. v. People’s United Bank, 684 F.3d 197, 207
(1st Cir. 2012) (quotation omitted). Critically, the Court must
view the entire record in the light most favorable to the
nonmoving party and draw all reasonable inferences in its favor.
Farmers Ins. Exch. v. RNK, Inc., 632 F.3d 777, 779-80 (1st Cir.
2011).
II.
Defendants’ Motion for Summary Judgment
a. Contract and Breach of the Covenant of Good Faith and
Fair Dealing Claims (Counts I and II)
Plaintiffs allege that Defendants breached the purchase
agreement because the home was not in compliance with the
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applicable building codes.
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Defendants assert that Plaintiffs
have not submitted admissible evidence of code violations. The
thrust of the defense is that the Plaintiffs have not designated
an expert witness who has the qualifications to give an opinion
on code compliance.
Plaintiffs intend to rely on the testimony of their general
contractor, Dennis Schadler, a carpenter by trade, who
discovered the alleged code violations and performed additional
work to bring the house up to code. Federal Rule of Evidence 701
provides that “[i]f a witness is not testifying as an expert,
testimony in the form of an opinion is limited to one that is:
(a) rationally based on the witness’s perception; (b) helpful to
clearly understanding the witness’s testimony or to determining
a fact in issue; and (c) not based on scientific, technical, or
other specialized knowledge within the scope of Rule 702.” Fed.
R. Evid. 701. Under First Circuit law, lay witnesses are allowed
to offer opinion testimony based on their “experiential
expertise” so long as it is “well founded on personal knowledge
and susceptible to cross-examination.” United States v. Vega,
813 F.3d 386, 394 (1st Cir. 2016) (quoting United States v.
In their opposition, Plaintiffs assert for the first time that Defendants
also breached a separate “Repair Agreement” in which Touchdown promised to
provide Plaintiffs with “all closed work permits issued by the Town of
Foxboro, Massachusetts for recent renovations made after April 2016.” Dkt. No
115 (Wades’ Opposition) at 11-12. The Court does not address this new breach
claim because it was not raised in either the initial or amended complaints.
2
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Ayala–Pizarro, 407 F.3d 25, 28 (1st Cir. 2005)). “Such lay
expertise is ‘the product of reasoning processes familiar to the
average person in everyday life.’” Id. (quoting United States v.
García, 413 F.3d 201, 215 (2d Cir. 2005)). This includes
knowledge gained through work experience. United States v.
Maher, 454 F.3d 13, 24 (1st Cir. 2006) (“Rule 701 . . . is meant
to admit testimony based on the lay expertise a witness
personally acquires through experience, often on the job.”). On
the other hand, certain knowledge acquired on the job is too
technical to fall within the scope of Rule 701. See Vega, 813
F.3d at 395 (finding that witnesses’ “understanding [of]
technical Medicare laws and regulations” did not constitute “lay
expertise”).
Schadler is a percipient witness who remodeled the basement
and kitchen of 32 Oak Street. At the very least he can give
opinion testimony about his perception based on his knowledge
and skill as a contractor and carpenter and a summary of the
steps he took to bring 32 Oak Street up to code. For example, he
points to defective framing and insulation that he repaired in
the areas of the house remodeled by Defendants. While some of
his testimony may cross into specialized areas of technical
expertise covered by Rule 702, the Court cannot assess whether
he is qualified to offer that testimony based on the current
record. For example, Defendants complain he is not a licensed
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plumber or electrician. Schadler contends he has the requisite
experience with plumbing and electrical codes by virtue of being
a general contractor. This is an issue the Court will have to
tackle in the context of a pretrial Daubert motion.
b. Fraud/Fraudulent Inducement Claims (Count III)
Plaintiffs’ fraud claims are based on two different sets of
misrepresentations and/or omissions. First, they claim
Defendants knew of and failed to disclose the building code
violations at 32 Oak Street. Second, they contend Defendants
misled Paulette and, indirectly, Plaintiffs about 32 Oak
Street’s number of bedrooms.
Defendants assert that there is no admissible evidence they
knowingly made any misrepresentations about building code
compliance. See Int'l Totalizing Sys., Inc. v. PepsiCo, Inc.,
560 N.E.2d 749, 753 (Mass. App. Ct. 1990). In response,
Plaintiffs point to evidence that Defendants knew of the
building code violations. Specifically, Schadler will testify
that 32 Oak Street was not up to code, including the sections of
the house that Defendants renovated prior to the sale to
Plaintiffs. See Dkt. No. 114-15 (Schadler Affidavit) ¶¶ 4-7.
Several witnesses will testify that Clayton supervised the
renovation work on behalf of Touchdown. See Dkt. No. 114-1
(Zajdel Deposition) at 112:13-113:9; Dkt. No. 114-2 (Wrynn
Deposition) at 27:17-24; Dkt. No. 114-4 (Wilkinson Deposition)
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at 19:8-24. The Town of Foxborough building inspector will
testify Defendants did not originally “pull” the necessary
building permits for the renovation of 32 Oak Street and then
did not “call-in” the Town for follow-up inspections as required
by local ordinance. See Dkt. No. 114-2 (Wrynn Deposition) at
36:5-13. In mid-August 2016, just a few weeks before the sale
closed, the Town of Foxborough sent Clayton a notice of building
code violations by certified mail. Id. at 33:19-34:21. From this
evidence, a jury could reasonably conclude that Defendants knew
of the alleged building code violations.
The closer question is whether mere nondisclosure of the
building code violations, without more, is sufficient to support
a common law fraud claim. “When a ‘seller knows of a weakness in
the subject of [a] sale and does not notify the buyer of it,’
the non-disclosure does not rise to the level of fraud.”
Smith v. Zipcar, Inc., 125 F. Supp. 3d 340, 345 (D. Mass. 2015)
(quoting Greenery Rehab. Grp. v. Antaramian, 628 N.E.2d 1291,
1294 (Mass. App. Ct. 1994)). “Homeowners who sell their houses
are not liable for bare nondisclosure in circumstances where no
inquiry by a prospective buyer imposes a duty to speak.” Solomon
v. Birger, 477 N.E.2d 137, 142 (Mass. App. Ct. 1985) (holding
that the fact that vendors did not mention that “the house had
developed cracks, including one in the basement obscured by a
floor covering, [did] not constitute fraudulent concealment”).
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Instead, “[t]here must be some affirmative act of concealment to
support an action for fraud.” Id. There is no indication from
the record before the Court that Plaintiffs made an inquiry as
to 32 Oak Street’s code compliance that would create a duty to
speak for Defendants. And the affirmative acts Plaintiffs point
to are Defendants’ “hiding the lack of permits and inspections”
and “putting up walls to hide code defects.” Dkt. No. 115 at 14.
Based on the record before the Court, these are specific
instances of non-disclosure rather than affirmative acts of
concealment. Accordingly, the Court grants summary judgment to
Defendants on Plaintiffs’ common law fraud claims to the extent
they are based on non-disclosure of building code violations.
With respect to the bedroom-count issue, Defendants contend
that in Clayton’s email he informed Paulette that 32 Oak Street
was restricted to two-bedroom use, while Paulette claims he told
her nothing of the sort. The whole dispute centers around the
meaning of the July 21, 2016 email from Clayton to Paulette on
the same subject. The parties contest what Clayton meant when he
stated that 32 Oak Street was “obviously a 3 bed dwelling” and
“grandfathered in as a 2 bedroom design.” The parties also
dispute whether the Town of Foxborough told Clayton in May 2016
that 32 Oak Street could not be used as a three-bedroom dwelling
and that there would be no “grandfathering in.” When all
reasonable inferences are drawn in favor of plaintiffs, Clayton
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informed the buyers that the house could be used as a three
bedroom because it was “grandfathered in” when the Town told him
that was not the case.
Defendants also argue that Plaintiffs cannot establish that
their reliance on Clayton’s representations regarding the
bedroom count was reasonable. “Reliance is typically a question
of fact for the jury.” Clinical Tech., Inc. v. Covidien Sales,
LLC, 192 F. Supp. 3d 223, 240 (D. Mass. 2016). “However, in some
circumstances a plaintiff’s reliance on oral statements in light
of contrary written statements is unreasonable as a matter of
law.” Marram v. Kobrick Offshore Fund, Ltd., 809 N.E.2d 1017,
1031 (Mass. 2004). When an oral statement is in direct conflict
with another express written statement, “the conflict puts [a
party] ‘on notice that [they] should not rely on either
statement.’” Clinical Tech., 192 F. Supp. at 240 (quoting
Trifiro v. N.Y. Life Ins. Co., 845 F.2d 30, 33 (1st Cir. 1988)).
Plaintiffs received an appraisal report prior to the sale
which noted in several places that 32 Oak Street was a twobedroom dwelling. See, e.g., Dkt. No. 106-1 at 2-3. The
appraisal report also attached a copy of the deed restriction
which stated “at no time shall there exist more than (2) TWO
Bedrooms in, on, upon, through, over and under said Property.”
See id. at 26-27. Plaintiffs only skimmed the appraisal report
and did not read the attached deed restriction. See Dkt No. 10415
4 (K. Wade Deposition) at 94:21-95:13; Dkt. No. 105-3 (G. Wade
Deposition) at 39:5-40:12. If Defendants had simply represented
to Plaintiffs that 32 Oak Street was a three-bedroom dwelling,
then the subsequent disclosures in the appraisal report and the
deed restriction would render Plaintiffs’ reliance on that
statement unreasonable as a matter of law. However, Clayton
acknowledged that 32 Oak Street was “a 2 bedroom design” but
assured them that it was “grandfathered in” and they could
continue to use it as a three-bedroom dwelling. Accordingly, the
Clayton’s reliance on the representation that the house was
grandfathered in was not unreasonable as a matter of law.
c. Chapter 93A Claims (Count V)
Under 940 Mass. Code Regs. 3.16, it is a violation of
Chapter 93A if “[a]ny person or other legal entity . . . fails
to disclose to a buyer or prospective buyer any fact, the
disclosure of which may have influenced the buyer or prospective
buyer not to enter into the transaction.” 940 Mass. Code Regs.
3.16(2). This makes clear that non-disclosure of the building
code violations can support Plaintiffs’ Chapter 93A claim.
Defendants argue that Plaintiffs’ Chapter 93A claim did not
comply with Chapter 93A’s 30-day demand letter requirement. See
Mass. Gen. Laws ch. 93A, § 9(3). Plaintiffs have put evidence
into the record showing that they sent pre-suit demands by
either certified or first-class mail to the two most recent
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addresses for both Touchdown and Clayton. Defendants evidently
refused to accept service of the demand letters, but they were
properly mailed and delivered. See Smith v. Jenkins, 732 F.3d
51, 74 (1st Cir. 2013) (“All that the statute requires is that a
demand letter be ‘mailed or delivered’ to a prospective
respondent.”)
d. Alter Ego Claim (Count IV)
Plaintiffs seeks to pierce the corporate veil of Touchdown
and hold Clayton liable for its misdeeds as an alter ego. Under
Massachusetts law, courts consider multiple factors in
determining whether to pierce the corporate veil:
(1) common ownership; (2) pervasive control;
(3) confused intermingling of business assets;
(4) thin capitalization; (5) nonobservance of
corporate formalities; (6) absence of corporate
records; (7) no payment of dividends; (8) insolvency
at the time of the litigated transaction; (9)
siphoning away of corporation’s funds by dominant
shareholder; (10) nonfunctioning of officers and
directors; (11) use of the corporation for
transactions of the dominant shareholders; and
(12) use of the corporation in promoting fraud.
Attorney Gen. v. M.C.K., Inc., 736 N.E.2d 373, 380 n.19 (Mass.
2000). “These factors are not simply added up, but rather are
considered in an integrated manner based on all of the facts
presented.” Lothrop v. N. Am. Air Charter, Inc., 95 F. Supp. 3d
90, 101 (D. Mass. 2015); see also Middlesex Ret. Sys., LLC v.
Bd. of Assessors, 903 N.E.2d 210, 217 (Mass. 2009) (applying
alter ego doctrine to limited liability company).
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Defendants have identified three facts which militate
against disregarding Touchdown’s corporate form. First,
Touchdown is owned and operated exclusively by Kelly Clayton.
Second, Touchdown owns no interest in any other corporate
entity. Third, Clayton owns no interest in Touchdown. Meanwhile,
Plaintiffs emphasize that Defendants have not produced any
documentation related to the renovation or re-sale of 32 Oak
Street. Specifically, Touchdown has not produced an accounting
for the renovation of 32 Oak Street or evidence of compensation
to Clayton for his work on the project. Dkt. No. 116
(Plaintiffs’ SoF) ¶¶ 25-35. In fact, Kelly Clayton stated her
husband was given “just my love” for his part in remodeling and
brokering the sale of 32 Oak Street. Dkt. No. 116 (Plaintiffs’
SoF) ¶ 31. Moreover, the Claytons’ home address is the same as
Touchdown’s corporate address. While piercing the corporate veil
is meant to be a rare occurrence, see M.C.K., Inc., 736 N.E.2d
at 382, the Court cannot conclude on this record that piercing
is unavailable as a matter of law.
* * *
Accordingly, the Court allows Defendants’ motion for
summary judgment with respect to the common law fraud claims
based on non-disclosure of building code violations. In all
other respects, Defendants’ motion is denied.
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III. Third-Party Defendants’ Motion for Summary Judgment
Third-Party Defendants advance two arguments for why they
are entitled to summary judgment on Defendants’ contribution
claims. First, Third-Party Defendants have reached a good faith
settlement with Plaintiffs in connection with the alleged
misconduct, which extinguishes Defendants’ right to contribution
under Mass. Gen. Laws. ch. 231B. Second, the undisputed material
facts do not establish negligence on the part of Third-Party
Defendants. The Court only needs to address Third-Party
Defendants’ first argument.
Under Chapter 231B, “[w]hen a release or covenant not to
sue or not to enforce judgment is given in good faith to one of
two or more persons liable in tort for the same injury . . .
[i]t shall discharge the tortfeasor to whom it is given from all
liability for contribution to any other tortfeasor.” In order
secure dismissal under Chapter 231B, the moving parties “ha[ve]
the initial burden of establishing that a settlement has been
agreed upon and its nature and terms.” Noyes v. Raymond, 548
N.E.2d 196, 200 (Mass. App. Ct. 1990). The burden then shifts to
the non-moving parties to make “some showing of lack of good
faith.” Id. If the non-moving parties make such a showing, then
they are entitled to an evidentiary hearing to address whether
the settlement in fact was made in good faith. Id.; see also
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United States v. Dynamics Research Corp., 441 F. Supp. 2d 259,
268-69 (D. Mass. 2006) (applying same framework).
There is no dispute that Third-Party Defendants and
Plaintiffs entered into a settlement releasing Third-Party
Defendants from all claims arising from the sale of 32 Oak
Street. Third-Party Defendants have submitted a copy of the
agreement along with their motion, and nothing about its terms
provide any reason to believe it is the product of collusion,
fraud, dishonesty, or other wrongful conduct. See Dkt. No. 11017. It is Defendants’ burden, then, to put forward some evidence
that the settlement was entered into in bad faith. Yet
Defendants concede that they do not “have any legitimate
evidence, at this point, sufficient to trigger an evidentiary
hearing on the issue of good faith.” Dkt. No. 122 at 11. As a
Hail Mary, Defendants point to the comparatively small
settlement amount. But “[t]he amount of a settlement has no
bearing on the good faith question.” Chapman v. Bernard’s Inc.,
198 F.R.D. 575, 578 (D. Mass. 2001); see also Noyes, 548 N.E.2d
at 199 (“The fact that the amount of a settlement is low in
comparison to the plaintiff’s estimate of her own damages, by
itself, is, however, not material.”).
Meanwhile, Third-Party Defendants’ argue that common law
indemnification is inapplicable in this case. “[T]he right to
indemnity is limited to those cases where the person seeking
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indemnification is blameless, but is held derivatively or
vicariously liable for the wrongful act of another.” Ferreira v.
Chrysler Grp. LLC, 13 N.E.3d 561, 567 (Mass. 2014) (emphasis
added). The undisputed facts establish that there was no
relationship between Defendants and Third-Party Defendants that
could give rise to vicarious or derivative liability. Indeed,
they were on opposite sides of the transaction involving 32 Oak
Street, and Defendants have not identified any agreement,
contract, or legal principle by which they might be held liable
for the conduct of Third-Party Defendants. Absent any factual or
legal basis for vicarious or derivative liability, Defendants’
indemnity claims fail as a matter of law.
Accordingly, the Court allows Third-Party Defendants’
motion for summary judgment.
ORDER
For the foregoing reasons, the Court ALLOWS IN PART AND
DENIES IN PART Defendants’ motion for summary judgment (Dkt.
No. 100); ALLOWS Third-Party Defendants’ motion for summary
judgment (Dkt. No. 110); and DENIES Defendants’ motion to strike
(Dkt. No. 118).
SO ORDERED.
/s/ PATTI B. SARIS
Hon. Patti B. Saris
Chief United States District Judge
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