Lemelson v. Lemelson et al

Filing 30

District Judge Timothy S Hillman: ORDER AND MEMORANDUM OF DECISION entered granting 14 Motion to Dismiss for Failure to State a Claim. (Castles, Martin)

UNITED STATES DISTRICT COURT
DISTRICT OF MASSACHUSETTS
_______________________________________
)
)
CIVIL ACTION
REV. FR. EMMANUAL LEMELSON a/k/a )
)
GREGORY M. LEMELSON
)
NO. 4:15-CV-40082-TSH
)
Plaintiff,
)
)
v.
)
)
JASON D. LEMELSON
)
)
Defendant.
______________________________________ )

ORDER AND MEMORANDUM OF DECISION ON
DEFENDANT’S MOTION TO DISMISS (Docket No. 14)
October 1, 2015
HILLMAN, D.J.
Pending before this Court is Defendant’s motion to dismiss Plaintiff’s complaint for failure
to state a claim upon which relief can be granted. For the reasons set forth below, Defendant’s
motion is granted.
Background
The following facts are taken from the First Amended Complaint and Jury Demand (the
complaint) filed by Plaintiff, Rev. Fr. Emmanuel Lemelson a/k/a/ Gregory M. Lemelson
(Gregory), as well as from the exhibits submitted by Defendant, Jason D. Lemelson (Jason),
alongside his motion to dismiss.1

Gregory is a Greek Orthodox priest who resides in

Southborough, Massachusetts. Gregory is also an internationally recognized, top-performing

1

Because the two parties in this case share a surname, I shall refer to them by their given names
for the sake of clarity. I intend no disrespect.
1

hedge fund manager. He is the Chief Investment Officer of Lemelson Capital Management, LLC,
a Massachusetts LLC formed in June of 2012, which in turn is the general partner and investment
manager of The Amvona Fund, LP, a long-biased U.S. equity fund formed in July of 2012. Jason
is Gregory’s brother. Jason lives in Bellevue, Washington and is the Managing Director of Spektra
Capital, LLC, a Washington LLC formed in June of 2014. Spektra Capital, LLC is the general
partner and investment manager of the Spektra Fund, LP, which was formed in July of 2014.
In August of 2011, Jason began soliciting Gregory’s advice regarding the management of
Jason’s personal investment portfolio. In October of 2011, Jason travelled to Massachusetts to
visit Gregory, and during the visit they continued to discuss Gregory’s management of Jason’s
portfolio. Based on Gregory’s advice, Jason acquired 28,000 shares of Force Protection, Inc.
(FRPT). Four weeks later, per Gregory’s prediction, Force Protection, Inc. was acquired by
General Dynamics Corp. and the share price rose dramatically. Gregory then told Jason to sell the
stock, which he did, realizing a gain of approximately $47,880. Gregory “stated clearly with the
recommendation that he expected a fifty percent (50%) performance fee on the realized profits.”
(Docket No. 7 at ¶ 9.)
In November of 2011, also on Gregory’s instruction, Jason sold his positions in gold and
silver. This sale freed up capital to purchase 15,000 shares of Sketchers USA, Inc. (SKX). Jason
purchased an additional 7,500 shares of SKX on Gregory’s instruction shortly thereafter. Also in
November of 2011, Gregory told Jason that he should invest in Western Digital Corp. (WDC);
specifically he told Jason to purchase $200,000 worth of the stock and advised him to hold it until
Gregory instructed otherwise. Jason capitulated by purchasing 8,500 shares. During November
and December of 2011, Jason communicated to Gregory that he was not presently interested in

2

managing his own investments. In December 2011, Jason transferred $950,000 into an equity
portfolio for Gregory’s management.
Also in December of 2011, on Gregory’s instruction, Jason purchased 20,000 shares of
Corning, Inc. (GLW) and 15,750 shares of American Greetings Corp. (AM). By January of 2012,
after just a few months of Gregory’s management, Jason’s portfolio had made a gain of
approximately $190,000. Beginning in January of 2012, however, Gregory claims that Jason
began misrepresenting to third parties that he (Jason) was the source of the gains in his portfolio,
and Gregory indicated to Jason that he expected to receive credit for his own work.
By March of 2012, Jason had realized approximately $320,000 in equity gains as a result
of Gregory’s management of his portfolio. Following these gains, Jason asked Gregory in an email
if he would accept compensation: “[w]ill you accept performance based compensation for
managing the capital? I’ve paid other hedge funds in the past and don’t see why your vastly
superior performance should go uncompensated.” (Docket No. 7 at ¶ 26.) Soon after, “Jason and
[Gregory] orally agreed that Jason would compensate [Gregory] with a performance fee of fifty
percent (50%) of any gains from [Gregory’s] investments and management of Jason’s portfolio.”
(Docket No. 7 at ¶ 26.) Gregory mentioned in an email dated April 2, 2012, however, that Jason
had indicated a strong desire to pay a “management / performance fee,” which Gregory “of course”
had “declined,” and Gregory offered Jason to donate $10,000 to a certain church instead. (Docket
No. 16-8 at 2.) Gregory noted in this email that $10,000 would have been approximately the
amount that Jason would have paid a standard hedge fund in commission for the recent sale of
FRPT stock.
In March of 2012, Gregory invited Jason to join him in the formation of a new hedge fund.
They discussed costs, operations, potential names, development, and overall strategies for the

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hedge fund. Gregory was to serve as the fund’s investment manager and Jason was to be
responsible for client services and fundraising. Gregory indicated that the commissions paid from
the hedge fund’s management firm should be divided in half.
In continuing to manage Jason’s personal portfolio, Gregory instructed Jason to acquire
shares of National Presto Industries, Inc. (NPK); Jason purchased approximately 4,215 shares. In
his capacity of having direct access to and control over Jason’s brokerage account, in April of 2012
Gregory sold 20,000 shares of GLW for a realized gain of $30,600, as well as 22,500 shares of
SKX for a realized gain of $40,275. Gregory also sold Jason’s 15,750 shares of AM for a realized
gain of $38,764 as well as his shares of NPK for a realized gain of $1,517. Also in April of 2012,
Gregory acquired $2,000,000 of WDC; he compensated Jason $500,000 and moved the
commensurate amount of stock into his own portfolio, leaving Jason’s portfolio with 39,348 shares
of WDC. As of May 10, 2012, the brokerage account managed by Gregory had made gains of
approximately $430,000.
In early May of 2012, Jason and Gregory began to disagree over the cost basis of certain
lots of the AM stock that Jason had transferred from his brokerage account into Gregory’s
brokerage account. During this time, Gregory also acquired for Jason’s brokerage account 8,489
shares of Research In Motion LTD (RIMM), which were later sold for a profit of approximately
$20,000.
Although the relationship between Gregory and Jason had now become strained, Gregory
claims that Jason had indicated in an email to him that Jason “made clear from the beginning
[Jason’s] intent has always been to offer [Gregory] performance fees for the extraordinary returns
generated.” (Docket No. 7 at ¶ 38.) On May 15, 2012, Jason wrote in an email to Gregory:
“[p]lease calculate what I owe you in performance fees.” (Docket No. 7 at ¶ 38.) Gregory

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continued to manage Jason’s brokerage account through June 1, 2012 and acquired for Jason an
additional 92,450 shares of WDC stock.
On June 1, 2012, Jason emailed Gregory to inform him that he had initiated a transfer of
all assets to a new brokerage account with a lower margin rate; Jason requested Gregory’s login
credentials so he could link this account with Gregory’s, which would give Gregory access.
Gregory and Jason disagreed about who had been responsible for negotiating the lower margin
rate. Gregory also informed Jason that it would not be practical to link the two accounts.
On June 15, 2012, Gregory advised Jason to acquire an additional $500,000 worth of WDC
stock. He told Jason that he had tried to make the trade himself but had been unable to effect the
order. Gregory asked for clarity as to who was managing Jason’s brokerage accounts. Jason did
not initially respond but later informed Gregory that he had acquired the shares of WDC at the
price point based on Gregory’s instructions. Gregory again questioned Jason about responsibility
for the management of his brokerage account on July 3, 2012. On July 10, 2012, Jason responded
by email, telling Gregory, “I do not feel a personal or professional relationship is possible
presently.” (Docket No. 16-12 at 5.) Later that day, Jason wrote to Gregory:
I will take over explicit responsibility for the account and managing
the capital. I am also aware of the potential for diminished returns
and other adverse impacts from this decision.
While there are, undoubtedly financial implications to interrupting
“someone else’s work” I believe there are far greater implications if
the pattern that has emerged is allowed to continue. My emotional
and spiritual health is more important to me than maximizing
returns.
My confidence in your ability to magnify the capital remains
unchanged and is not the basis of this decision.

5

(Docket No. 16-12 at 3.) In addition to taking control of his own investment accounts, Jason
stopped participating in the joint venture to form a hedge fund. He also did not pay Gregory any
performance fees.
Approximately one year later, Jason sold his WDC stock for the appropriate price as
previously analyzed by Gregory, for an estimated realized gain of $4,200,000 to $6,200,000. In a
press release issued in March of 2015 for the promotion of Jason’s new hedge fund, Spektra Fund,
LP, Jason touted the gains realized from the investment in WDC stock as being the result of Jason’s
own management strategy. Further, this press release described Spektra Fund, LP’s objectives,
targets, and investment strategies in a manner nearly identical to the language used by Gregory to
describe his own hedge fund, The Amvona Fund, LP. These were also the same objectives and
investment strategies that Gregory had employed in managing Jason’s portfolio.
Gregory alleges that the 50% performance fees charged to Jason’s portfolio would have
amounted to $118,407 for the non-WDC stock, and between $2,100,000 and $3,100,000 for the
WDC stock. Gregory also asserts that this money would have benefited from the 71.89% rate of
return that Gregory has achieved on behalf of The Amvona Fund, LP; thus, as of May of 2015,
Gregory claims to have suffered damages in the amount of $597,962 for the non-WDC stock and
between $7,000,000 and $10,500,000 for the WDC stock.
Gregory initiated this lawsuit in June of 2015. He asserts four counts against Jason. First,
Gregory alleges breach of contract, asserting that he and Jason formed a contract for the payment
of a 50% performance fee, and that Jason breached this contract by failing to pay the fee. Second,
Gregory alleges breach of the covenant of good faith and fair dealing, effectuated by Jason’s failure
to pay Gregory’s performance fee. Third, Gregory alleges quantum meruit / unjust enrichment,
asserting that Gregory conferred substantial benefits on Jason by managing Jason’s portfolio and

6

producing extraordinary investment gains, and that Gregory conferred these benefits with the
reasonable expectation of receiving compensation.
Fourth, Gregory alleges breach of fiduciary duty, asserting that he and Jason became joint
venturers or partners with regard to their prospective joint hedge fund. Gregory asserts that Jason
breached his fiduciary duty by unilaterally aborting their efforts to form and operate the hedge
fund and by usurping the resources and opportunity of the parties’ joint contributions, efforts, and
capital in order to form his own fund, Spektra Fund, LP. Gregory further asserts that, as an
investment advisor representative of Spektra Fund, LP, Jason has promoted and misrepresented
that the returns and success of the investment strategies and management that Gregory employed
in furtherance of the joint venture were his rather than Gregory’s. Gregory also seeks injunctive
relief enjoining Jason from making false and/or misleading representations concerning the
successful results and strategies that were not the result of Jason’s efforts, skill, or management.
Jason has now moved to dismiss Gregory’s complaint for failure to state a claim upon which relief
can be granted, pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure.
Discussion
Standard of Review
To survive a Rule 12(b)(6) motion to dismiss, a complaint must allege “a plausible
entitlement to relief.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 559 (2007). Although detailed
factual allegations are not necessary to survive a motion to dismiss, the standard “requires more
than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not
do.” Id. at 555. “The relevant inquiry focuses on the reasonableness of the inference of liability
that the plaintiff is asking the court to draw from the facts alleged in the complaint.” OcasioHernandez v. Fortuno-Burset, 640 F.3d 1, 13 (1st Cir. 2011).

7

It is a “context-specific task” to determine “whether a complaint states a plausible claim
for relief,” one that “requires the reviewing court to draw on its judicial experience and common
sense.” Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009) (internal citations omitted). “[W]here the wellpleaded facts do not permit the court to infer more than the mere possibility of misconduct, the
complaint has alleged—but it has not ‘show[n]’—that the pleader is entitled to relief.” Id. (quoting
Fed. R. Civ. P. 8(a)(2)). On the other hand, a court may not disregard properly pled factual
allegations, “even if it strikes a savvy judge that actual proof of those facts is improbable.”
Twombly, 550 U.S. at 556
In evaluating a motion to dismiss, the court must accept all factual allegations in the
complaint as true and draw all reasonable inferences in the plaintiff’s favor. Langadinos v.
American Airlines, Inc., 199 F.3d 68, 68 (1st Cir. 2000). In addition to the complaint, the court
may consider “documents the authenticity of which are not disputed by the parties; . . . documents
central to plaintiffs’ claim; [and] documents sufficiently referred to in the complaint.” Curran v.
Cousins, 509 F.3d 36, 44 (1st Cir. 2007) (quoting Watterson v. Page, 987 F.2d 1, 3 (1st Cir. 1993)).
“This is true even when the documents are incorporated into the movant’s pleadings.” Id.; see
Beddall v. State Street Bank and Trust Co., 137 F.3d 12, 17 (1st Cir. 1998) (“When . . . a
complaint’s factual allegations are expressly linked to—and admittedly dependent upon—a
document [offered by the movant] (the authenticity of which is not challenged), that document
effectively merges into the pleadings and the trial court can review it . . . .”).
Gregory’s Status as an Investment Advisor
Jason argues that the first three counts of Gregory’s complaint should be dismissed because
Gregory was not registered as an investment advisor during the time when he was managing
Jason’s portfolio. Jason cites the Massachusetts Uniform Securities Act, Mass. Gen. Laws ch.

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110A, §§ 101-417 (Massachusetts Act), which regulates—among other things—the registration
requirements of investment advisors.

Section 401(m) of the Massachusetts Act defines

“investment advisor” as “any person who, for compensation, engages in the business of advising
others, either directly or through publications or writings, as to value of securities or as to the
advisability of investing in, purchasing, or selling securities . . . .” Investment advisors are required
to register with the Commonwealth. Mass. Gen. Laws ch. 110A, § 201(c) (“It is unlawful for any
person to transact business in this commonwealth as an investment adviser or as an investment
adviser representative unless he is so registered under this chapter.”
Section 410(f) of the Massachusetts Act further provides: “No person who has made or
engaged in the performance of any contract in violation of any provision of this chapter or any rule
or order hereunder, or who has acquired any purported right under any such contract with
knowledge of the facts by reason of which its making or performance was in violation, may base
any suit on the contract.” See Crown v. Kobrick Offshore Fund, Ltd., 8 N.E.3d 281, 292 (Mass.
App. Ct. 2014) review denied, 20 N.E.3d 610 (Mass. 2014). This prohibition also applies to claims
for quantum meruit. Indus Partners, LLC v. Intelligroup, Inc., 934 N.E.2d 264, 265-66 (Mass.
App. Ct. 2010). Thus, if Gregory was acting as an un-registered investment advisor during his
management of Jason’s portfolio, he is barred from asserting claims against Jason for breach of
contract or quantum meruit / unjust enrichment stemming from these services.
In response, Gregory makes two principal arguments. First, he asserts that he was not
required to register as an investment advisor while managing Jason’s portfolio because he did not
meet the definition of that term, as set forth in section 401(m) of the Massachusetts Act (quoted
above). Gregory concedes that he provided advice to Jason regarding securities and that he
expected compensation for these services. He argues, however, that he was not “engaged in the

9

business” of doing these activities during the time when he managed Jason’s portfolio and that,
therefore, he was not acting as an investment advisor.
The Securities and Exchange Commission (SEC) has provided guidance to persons
engaged in integrated advisory services, such as financial planners, in order to determine whether
one is subject to the registration requirements of an investment advisor. See Applicability of the
Investment Advisers Act to Financial Planners, Pension Consultants, & Other Persons Who
Provide Investment Advisory Services As A Component of Other Financial Services, Release No.
1092 (Oct. 8, 1987) (hereinafter SEC Guidance Materials). Although the SEC Guidance Materials
relate to federal rather than Massachusetts law, the operable definition of “investment advisor” is
nearly identical to the provision in section 401(m) of the Massachusetts Act. See id. at 3. This
advisory document provides the following useful guidance for determining the “in the business”
element of the definition of investment advisor:
Whether a person giving advice about securities for compensation
would be “in the business” of doing so, depends upon all relevant
facts and circumstances. The staff considers a person to be “in the
business” of providing advice if the person: (i) holds himself out as
an investment adviser or as one who provides investment advice, (ii)
receives any separate or additional compensation that represents a
clearly definable charge for providing advice about securities,
regardless of whether the compensation is separate from or included
within any overall compensation, or receives transaction-based
compensation if the client implements the investment advice, or (iii)
on anything other than rare, isolated and non-periodic instances,
provides specific investment advice. . . . “[S]pecific investment
advice” includes a recommendation, analysis or report about
specific securities or specific categories of securities . . . .”
Id. at 4.
Gregory asserts that he was not “in the business” of providing investment advice while
managing Jason’s portfolio because, during this time, “he had no letterhead, had no telephone
listing and did not let it be known that he would accept any advisory clients.” (Docket No. 18 at
10

9.) Gregory also asserts in the complaint that, “[f]rom 2010 until July 2012, [Gregory] was not
engaged in the business of providing investment advice to others and did not publish any written
material that consisted of the rendering of advice on the basis of the specific investment situation
of any person.” (Docket No. 7 at ¶ 6.)
Despite Gregory’s contentions, it is clear from the factual allegations set forth in the
complaint, as well as from the exhibits submitted alongside Jason’s motion to dismiss, that
Gregory was acting as an investment advisor, as that term is defined in the Massachusetts Act,
when he managed Jason’s portfolio. The complaint sets forth in detail that Gregory provided
specific advice to Jason regarding the value of certain securities, over a period of months. The
basis of this lawsuit rests on Gregory’s contention that he performed these services with the
expectation of compensation. Regarding the “engages in the business” aspect of the definition of
investment advisor set forth in section 401(m), the facts as pled show that he satisfies this
requirement as well. Indeed, his actions satisfy all three prongs set forth in the SEC Guidance
Materials; although, because the language of this test is disjunctive, any one element would be
sufficient to constitute “engaging in the business” of investment advising. See SEC Guidance
Materials at 4; see also 19 Reg. Fin. Pl. § 3:5 (referring to the three elements as factors to be
considered in the determination of the “in the business” element of the investment advisor
definition).
Regarding the first prong of the SEC’s “in the business” test, Gregory held himself out as
an investment advisor or as one who provided investment advice by publishing articles on his
website, “amvona.com.” 2 On August 10, 2011, he authored an article on the comparable viabilities

2

Although appended to Jason’s filings rather than Gregory’s complaint, these articles are properly
before me on this motion to dismiss because their existence is central to Gregory’s claims and their
authenticity has not been challenged. See Curran, 509 F.3d at 44.
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of Western Digital Corp. stock and Seagate Technologies stock. (Docket No. 17-2 at 2.) On
December 2, 2011, he authored another post about the viability of Western Digital stock. (Docket
No. 17-5 at 2.) On January 5, 2012, he wrote an article about the past and future viability of
American Greetings Corp. stock. (Docket No. 17-4 at 2.) In all of these articles Gregory analyzed
and made predictions about the values of certain securities. In my opinion, these publications
constitute holding himself out as an investment advisor during late 2011 and early 2012, which
was when he was managing Jason’s portfolio.3 Gregory easily satisfies the second prong of the
SEC’s “in the business” test by alleging in the complaint that he and Jason agreed to a
compensation rate of 50%. Prong three is equally well established; if Gregory’s complaint
establishes anything, it is that he provided Jason with detailed recommendations and analyses
regarding specific securities, on a repeated, regular basis, consistently for a period of nearly one
year. Thus, looking to the definition of “investment advisor” set forth in section 401(m) of the
Massachusetts Act, and considering the applicable SEC Guidance Materials, I am convinced that
the facts as pled by Gregory show that he was acting as an investment advisor by managing Jason’s
portfolio.
Next, Gregory brings my attention to an exemption to the investment advisor registration
requirement for “private fund advisors.” The Massachusetts Code of Regulations defines a

3

To be clear, I am not making a finding as to whether these articles themselves constituted
sufficient actions to render Gregory an investment advisor. See Mass. Gen. Laws ch. 110A,
§ 401(m)(1)(D) (“‘Investment adviser’ shall not include . . . a publisher of any newspaper, news
column, newsletter, news magazine, or business or financial publication or service whether
communicated in hard copy form, or by electronic means, or otherwise, that does not consist of
the rendering of advice on the basis of the specific investment situation of each client”). Rather,
these articles show that Gregory was holding himself out as an investment advisor, which is
relevant to the determination of whether he was “in the business” of providing investment advice,
which in turn is an element of the general definition of “investment advisor” set forth in section
401(m).
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“Private Fund Advisor” as “an investment adviser who provides advice solely to one or more
private funds.” 950 CMR 12.205(2)(c)(1)(b). The regulations further provide a registration
exemption for private fund advisors; however, in order to be exempt, the private fund advisor must
meet certain qualification requirements, must file an exemption report with the Commonwealth,
and must pay a reporting fee. 950 CMR 12.205(2)(c)(2)(a)-(c). As stated in the complaint,
Lemelson Capital Management, LLC—of which Gregory is the Chief Investment Officer—filed
as an exempt reporting advisor with the Massachusetts Securities Division in July of 2012. This
entity, however, was formed after Gregory had stopped managing Jason’s portfolio. Nowhere in
Gregory’s complaint, nor in his memoranda, nor in any of the exhibits, has he alleged that he filed
(or was even eligible to file) as an exempt private fund advisor during the time when he was
managing Jason’s portfolio.
Because the facts and exhibits show that Gregory was acting as an unregistered, un-exempt
investment advisor when he managed Jason’s portfolio, he is now barred from asserting any
contractual or quasi-contractual rights stemming from compensation due to him for these services.
See Mass. Gen. Laws ch. 110A, § 410(f); Crown, 8 N.E.3d at 292; Indus Partners, LLC, 934
N.E.2d at 265-66; see also Uno Restaurants, Inc. v. Boston Kenmore Realty Corp., 805 N.E.2d
957, 964 (Mass. 2004) (claim for breach of covenant of good faith and fair dealing cannot be
sustained absent enforceable contract). Accordingly, Defendant’s motion to dismiss is granted
with regard to counts I, II, and III of Plaintiff’s complaint.
Breach of Fiduciary Duty
In the fourth count of the complaint, Gregory alleges that Jason owed him a fiduciary duty
on account of their relationship as partners or joint venturers in the prospective formation of their
new hedge fund beginning in March of 2012. Gregory alleges that Jason breached this duty by

13

unilaterally terminating their efforts to form the fund in July of 2012, and by later falsely
misrepresenting that Jason had been responsible for the gains in his portfolio realized during
Gregory’s management. Jason argues that this claim should be dismissed because he and Gregory
never formed a partnership and, even if they did, Jason did not breach any fiduciary duties relating
to this partnership.
Under Massachusetts law, “[a] partnership is an association of two or more persons to carry
on as co-owners a business for profit . . . .” Mass. Gen. Laws ch. 108A, § 6(1). Courts use several
factors to determine whether a partnership exists, including: “whether there is ‘(1) an agreement
by the parties manifesting their intention to associate in a partnership[,] (2) a sharing by the parties
of profits and losses, and (3) participation by the parties in the control or management of the
enterprise.’” Kansallis Finance Ltd. v. Fern, 40 F.3d 476, 478-79 (1st Cir. 1994) (quoting Fenton
v. Bryan, 604 N.E.2d 56 (Mass. App. Ct. 1992)). “It is well settled that partners owe each other a
fiduciary duty of ‘the utmost good faith and loyalty.’” Meehan v. Shaughnessy, 535 N.E.2d 1255,
1263 (Mass. 1989) (quoting Cardullo v. 434 Landau, 105 N.E.2d 843 (Mass. 1952) (additional
citations omitted). “As a fiduciary, a partner must consider his or her partners’ welfare, and refrain
from acting for purely private gain.” Id. (additional citations omitted).4
Here, the facts as alleged show that in March of 2012 Gregory and Jason made a plan to
jointly form a hedge fund. Many of the details of this plan were expressed in an email chain dated
March 28, 2012, in which Jason and Gregory discussed the structure of the fund, the name of the
fund, their roles within the fund, the website for the fund, fundraising, and payment of set-up fees.

4

For the purposes of this motion, it does not matter whether the hedge fund is considered a
partnership or a joint venture; “[j]oint venturers owe one another substantially the same fiduciary
duties as are owed by partners to one another.” Zimmerman v. Bogoff, 524 N.E.2d 849, 855 (Mass.
1988) (citing DeCotis v. D’Antona, 168, 214 N.E.2d 21 (Mass. 1966)).
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At the beginning of this email chain, Gregory wrote: “I have instructed the lawyer to proceed with
forming the fund ‘The Lemelson Partnership[.]’ The fund should be ready to receive capital in
approximately 2-4 weeks (may be closer to 4 weeks due to trip to Hong Kong). Feel free to use
this timeline in any preliminary discussions you may have with prospective investors.” (Docket
No. 16-10 at 3-4.)
The facts pled in the complaint and in this email chain may be sufficient to show a plausible
claim that Jason and Gregory formed a partnership to start a hedge fund. I need not decide this
issue, however, because even if a partnership had been formed, Gregory has not pled sufficient
facts to show that Jason breached any fiduciary duties owed to him in his capacity as a fellow
partner. Pursuant to Mass. Gen. Laws ch. 108A, § 31, dissolution of a partnership may be caused:
“(1) Without violation of the agreement between the partners, . . . (b) By the express will of any
partner when no definite term or particular undertaking is specified . . . .”; see Meehan, 535 N.E.2d
at 1260; Johnson v. Kennedy, 214 N.E.2d 276, 278 (Mass. 1966). Gregory does not allege, and
the emails do not reveal, that he and Jason agreed to participate in the hedge fund for a particular
period of time; thus, Jason had the right to lawfully terminate the venture at will, and his doing so
did not constitute a breach of fiduciary duty. See Johnson, 214 N.E.2d at 278.
Regarding Jason’s later actions of taking credit for Gregory’s successful investment
strategies to benefit Jason’s new hedge fund, Spektra Fund, LP, Gregory has not asserted that these
actions related to the proposed hedge fund conceived by the brothers in March of 2012. Jason
published a press release to promote Spektra Fund, LP, in which he took sole credit for the
spectacular record of his own portfolio, when in reality that credit was due to Gregory. However,
the successful investment strategies at issue were employed in Jason’s personal portfolio, not in
the management of the joint hedge fund proposed in March of 2012. Although Gregory’s success

15

in managing Jason’s portfolio may have provided the impetus for the parties to form a joint hedge
fund, Gregory has not alleged that the joint fund ever became operable. Furthermore, the press
release was distributed nearly three years after Jason decided to stop pursuing the joint hedge fund
project. At that point, even if a partnership or joint venture relationship had been formed earlier,
Jason no longer owed Gregory a fiduciary duty. See DeCotis v. D’Antona, 214 N.E.2d 21, 22-23
(Mass. 1966). Thus, Jason’s actions in falsely taking credit for Gregory’s success did not involve
the alleged partnership and did not constitute a breach of fiduciary duty in relation to this
partnership, if such partnership existed. Accordingly, Defendant’s motion to dismiss is granted
with regard to count IV of Plaintiff’s complaint.
Conclusion
For the foregoing reasons, the Motion by Defendant Jason D. Lemelson to Dismiss
Complaint (Docket No. 14) is granted, and all counts are hereby dismissed.

SO ORDERED.

/s/ Timothy S. Hillman
TIMOTHY S. HILLMAN
DISTRICT JUDGE

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