Source: http://masslegalresources.com/tag/environmental
Timestamp: 2019-04-20 16:57:06+00:00

Document:
At an initial hearing on the Motion, the court ruled that an evidentiary hearing was necessary to consider the defendants’ public policy arguments and scheduled an evidentiary hearing for May 1, 2017. A hearing was convened on that day. Three witnesses testified: the plaintiff’s lawyer, McLaughlin, and his brother; 23 exhibits were entered in evidence.
2 It appears undisputed that Hannon did not fulfill his obligations under the Agreement.
3 The defendants also generally assert questions concerning the validity of the terms of the assignment.
4 McLaughlin’s numerous disputes with Hannon over the last five years are recounted in at least three written decisions: Hannon v ABCD Holdings, LLC, First Circuit Court of Appeals, No. 15-2269 (Oct. 7, 2016) (the “Bankruptcy Case,” in which the First Circuit affirmed the dismissal of Hannon’s bankruptcy petition and denial of discharge based on his making false statements in financial reports filed in the bankruptcy court); ABCD Holdings, LLC v. ABC&D Recycling, Inc., Hampshire Sup. Ct. No. 12-0171 (Jan. 9, 2013) (“the Loan and Warrants Case,” in which the Superior Court (Carey, J.) found that loans to Hannon controlled entities from McLaughlin controlled entities were enforceable because Hannon was represented by competent, independent counsel when the loans were made and warrants which were issued in connection with the loans properly exercised); and ABCD Holdings, LLC v. Patrick J. Hannon, Suffolk Sup.Ct. No. 16-1840 (June 24, 2016) (the “Collection Case,” in which the Superior Court (Salinger, J.) found that ABCD was likely to succeed in obtaining a judgment on Hannon’s guarantees of loans to entities he controlled, but denying preliminary injunctive relief freezing Hannon’s assets because the relief requested could only be granted to a judgment creditor).
Based on the testimony of the witnesses, the exhibits, decisions entered in other cases, and reasonable inferences drawn therefrom, the court makes the following findings of fact, by a preponderance of the evidence.
McLaughlin has been a member of the bar of the Massachusetts Supreme Judicial Court since 1985. He is a principal in the firm, McLaughlin Brothers P.C. He represented Hannon and various businesses that Hannon controlled on a variety of matters from 2006 until 2012, but did not represent the defendants in this case (Hannon and Mass. Environmental Associates, Inc. (MEA)) prior to the time judgment entered against them. However, he did represent them in the negotiation of the Settlement Agreement with the plaintiff’s counsel, Peter Sutton, a partner in the Boston firm, Reimer & Braunstein. The Agreement was executed on November 16, 2007. As relevant to this case, it provided that if Hannon made periodic payments (in the aggregate $ 400,000) according to a schedule set out in the Agreement (the last of which was due on November 1, 2008), he and MEA would be released from any claims under the Judgment. If he breached the Agreement, the plaintiff would be entitled to enforce the Judgment, and the defendants would be credited with any payments made pursuant the Agreement.
be responsible for paying the creditor. McLaughlin described the arrangement, pursuant to which he received all payments due Hannon from Casella and then made distributions to creditors, Hannon and McLaughlin’s own law firm for legal fees, as an escrow agreement. There is, however, no evidence that a written escrow agreement was ever prepared. A schedule showing receipts from Casella and payments made to various payees, over the period January 21, 2010 to March 20, 2012, was offered in evidence. It reflects approximately $ 572,000 in receipts from Casella and 570,500 of payments made to various payees (of which $ 146,502 went to Hannon) over that period. Hannon did not challenge the accuracy of the schedule at the hearing. The court credits McLaughlin’s testimony that he only made payments out of the Casella account after clearing them with Hannon, at least to the point that McLaughlin received notice of Hannon’s bankruptcy petition.
Hannon defaulted on his payments under the Agreement. At some point, McLaughlin negotiated a reinstatement of the Agreement in return for a $ 25,000 payment, not to be counted toward the $ 400,000 settlement amount. In an email from Sutton to McLaughlin dated June 14, 2011, Sutton confirmed that Agreement was “reinstated,” but if Hannon failed to make monthly payments of $ 5,000 “the full amount of the judgment will become due.” According to the email, $ 140,500 then remained outstanding. The Casella account suggests that Hannon stopped making payments to Reimer & Braunstein, for the benefit of the plaintiff, in January, 2012. The court credits McLaughlin’s testimony that he never redirected payments from this account to other creditors that Hannon had instructed him to pay to Reimer & Braunstein.
and Warrants Case. See n. 4, supra.
In May, 2012, Hannon and his wife filed a bankruptcy petition under Chapter 11 of the Bankruptcy Code (later converted to a Chapter 7 petition). McLaughlin and ABCD Holdings filed proofs of claim in the bankruptcy proceeding, as did the plaintiff. Sutton, as attorney for the plaintiff, examined Hannon concerning the Judgment, Agreement and his assets in the course of those proceeding. McLaughlin caused ABCD Holdings and other companies he then controlled to file an adversary complaint challenging Hannon’s right to a discharge in the bankruptcy proceeding based upon allegedly false income statements filed with the Bankruptcy Court. The Bankruptcy Court found for ABCD Holdings and dismissed the petition, denying Hannon a discharge. This ruling was affirmed by the District Court and by the First Circuit Court of Appeals in the Bankruptcy Case.
of the Spinazola matter for collection or whatever you were going to send, as I want to spend some time this summer trying to get some money out of Mr. Hannon.” Thereafter, Sutton and McLaughlin negotiated over the terms of the assignment of the Judgment. Sutton demanded $ 10,000 plus 50% of whatever McLaughlin recovered, after McLaughlin was reimbursed the $ 10,000 and costs of collection, and McLaughlin agreed. McLaughlin sent Sutton drafts of the documents to memorialize their agreement. Dissatisfied with his draft, Sutton had a member of his firm prepare the transactional documents. They consisted of an “Agreement Pursuant to a Non-Recourse Assignment of Judgment and Indemnification Dated as of the 14th Day of September, 2016” and a “Non-Recourse Assignment of Judgment and Indemnification Agreement” also dated as of September 14, 2016. Under these documents, the plaintiff assigned to ABCD Holdings her rights under the Judgment. On September 15, 2015, another entity controlled by McLaughlin (Rising Tides LLC) provided Reimer & Braunstein with a check for $ 10,000.
On December 8, 2016, ABCD Holdings sold the Assignment of Judgment to King Root under exactly the same terms as ABCH Holdings purchased it from the plaintiff. In fact, McLaughlin appears to have used the same two transactional documents drafted by Reimer & Braunstein that Sutton used to sell him the Assignment, just changing the names of the parties and the dates. King Root attempted to pay ABCH Holdings for the Judgment on December 8, 2016, but that check was returned for insufficient funds as King Root then had only $ 751.14 in its checking account. Thereafter, $ 10,000 was deposited in the King Root account, and another check issued to ABCD Holdings on December 15, 2016. Also on December 15, 2016, King Root’s attorney served Hannon with the motion now before the court.
Mass.R.Civ.P. 25(c) provides: “In case of any transfer of interest, the action may be continued by or against the original party, unless the court upon motion directs the person to whom the interest is transferred to be substituted in the action or joined with the original party.” The court has found no Massachusetts case, nor any reference in the Massachusetts Practice Series, addressing the right of an assignee of a judgment to bring a motion, long after the entry of final judgment, seeking to be substituted as the party plaintiff and then to have an execution issued in its name. There are, however, federal cases in which a court has done this under the federal version of Rule 25(c), although it appears that this generally occurs when a corporate judgment creditor becomes the successor to another corporate entity by merger or other acquisition. See Vision Bank v. Algernon Land Co., L.L.C., 2012 WL 827011 (S.D. Al., March 12, 2012) and cases collected there. Whether Massachusetts would follow the federal approach, especially when a judgment is sold ten years after its entry, is not clear. However, as neither party has addressed this issue, the court will assume that it has this authority.
5 The court notes that Hannon did not testify at the hearing and did not offer any evidence to rebut McLaughlin’s assertion that he pre-cleared payments from the account or to explain why Hannon did not make monthly payments to Reimer & Braunstein when he received such a substantial payment himself.
Hannon next argues that the assignment is void because it violates public policy. In support of this proposition he cites New Hampshire Ins. Co., Inc. v. McCann, 429 Mass. 202 (1999) in which the Supreme Judicial Court stated: “We think the [legal malpractice] claim should be assignable unless some clear rule of law of professional responsibility, or some matter of public policy, necessitates that the assignment should not be enforced.” Id. at 210. In seeking to establish that a clear rule of professional responsibility is violated by the assignment in this case, Hannon directs the court to Otis v. Arbella Mut. Ins. Co., No. CA 99-2907-F, 2003 WL 21385792 (Mass. Super. Apr. 18, 2003), aff’d 443 Mass. 634. Otis, however, is another case involving the assignment of a legal malpractice claim (not a judgment), and the assignment there at issue bears no resemblance to the assignment in this case.
In Otis, the plaintiff/assignee of a legal malpractice claim was also the plaintiff in a personal injury case in which the defendant sought to avoid liability by asserting that Otis was comparatively negligent. When a judgment far in excess of the limits of the defendant’s policy entered after trial, Otis obtained an assignment of the defendant’s putative legal malpractice claim against his defense counsel, premised on the theory that defense counsel had done an inadequate job of proving that Otis’ own negligence caused the accident. Otis, using the same trial counsel that prevailed in the personal injury action, now as the assignee of the legal malpractice claim, intended to prove that he was the principal cause of his own injuries and the assignor’s defense lawyers were negligent. The Superior Court properly concluded that under these circumstances, Otis and his lawyer were both engaging in “disreputable public role reversal” that should not be permitted.
(1) Use confidential information relating to the representation to the disadvantage of the former client or for the lawyer’s advantage or the advantage of a third person . . . .
6 The court recognizes that the actual assignee was ABCD Holdings, which then transferred the assignment to McLaughlin’s brother’s firm, King Root. For reasons that are discussed, infra, the court disregards these corporate entities in addressing the validity of the assignment.
a set of circumstances in which a lawyer who previously represented a client in negotiating an agreement with a judgement creditor, like the one at issue here, would violate Rule 9(c) by purchasing the judgment. For example, if, as a result of a prior representation, the lawyer knew that the full amount of the judgment was still outstanding because the former client/debtor had breached the payment agreement and then sought out the judgment creditor some time later for purpose of purchasing it, this might well constitute a misuse of confidential client information. That is not what happened in this case.
Here, Hannon first accepted the possibility that his lawyer could become his creditor in 2011, when he borrowed money from McLaughlin7. In 2012, he unavoidably and permanently altered his relationship with McLaughlin when he filed for bankruptcy, defaulted on the loans, and thereby caused McLaughlin to be adverse to him in the bankruptcy proceedings. Indeed, McLaughlin was forced to pay Hannon’s bankruptcy estate some of the loan repayments because they were held to be preferences. The Judgment, the Agreement, and the McLaughlin loans all became a matter of public record in this community when they became the subject of the bankruptcy proceedings. Sutton even examined Hannon with respect to the Judgment and the Agreement during those proceedings. Finally, McLaughlin did not use confidential information to seek out the holder of the Judgment. It was Sutton who believed that he might be able to recover something for his client when he read the decision in the Collection Case which specifically explained that McLaughlin could not obtain a freeze order against Hannon’s assets because he was not yet a judgment creditor.
7 Again, the court recognizes that the loans went from McLaughlin controlled entities to Hannon controlled entities, but, for purposes of this professional responsibility analysis the court disregards the LLCs.
creditors. The court finds no evidence that McLaughlin presently has any confidential information concerning Hannon’s assets. In denying, McLaughlin preliminary relief in the Collection Case, Judge Salinger specifically pointed-out that McLaughlin’s allegations concerning Hannon’s assets were based on “information and belief.” Moreover, McLaughlin has already engaged in litigation adverse to Hannon concerning Hannon’s assets—not only in the Collection Case, but also in the adversary proceeding which McLaughlin filed against Hannon in the Bankruptcy Case.
A lawyer who has formerly represented a client in a matter shall not thereafter represent another person in the same or a substantially related matter in which that person’s interests are materially adverse to the interests of the former client unless the former client gives informed consent, confirmed in writing.
Hannon argues that the enforcement of the Judgment is a matter substantially related to the negotiation of the Agreement ten years ago. Perhaps, although Hannon stopped making payments under the Agreement many years ago, and it is obviously no longer in force. In any event, McLaughlin is not representing any party adverse to Hannon. Rather, in purchasing the Judgment, he was acting as a principal not an attorney or agent. The Rule does not address this circumstance. Rather, under many situations, McLaughlin’s actions would run afoul of Rule 19(c). In this case, for the reasons discussed above, they do not. McLaughlin was already a creditor of Hannon and adverse to him in many actions when he purchased the Judgment.
that the transfer of the assignment from ABCD Holdings to King Root did not ameliorate the optics of the situation, it made them worse. ABCD Holdings is a limited liability company with one member and manager—McLaughlin. King Root is a limited liability company with one member and manager—McLaughlin’s brother. The transaction between ABCD Holdings and King Root was not an arm’s length commercial sale. ABCD Holdings simply transferred the Judgment to King Root on exactly the same terms as ABCD Holdings purchased it from the plaintiff. In fact, McLaughlin used the transactional documents prepared by Reimer & Braunstein; he just changed the names and date. If the assignment was void as against public policy when held by McLaughlin’s LLC, it was also void when owned by his brother’s LLC.
While too much should not be read into the SJC’s decision in New Hampshire Ins. Co., Inc. v. McCann, which was case in which the SJC was addressing the broad question of whether legal malpractice claims should be assignable, there the Court stated: “We think the claim should be assignable unless some clear rule of law of professional responsibility, or some matter of public policy, necessitates that the assignment should not be enforced.” As discussed above this is not a case in which a clear rule of law or professional responsibility prevents assignment. With respect to the public policy concern raised by this assignment, McLaughlin and Hannon have been adverse to one another in a number of cases over the last five years. McLaughlin’s testimony at the evidentiary hearing suggested that their animosity has spilled-over into personal matters that have been addressed in District Courts. Under these unique circumstances, the court finds that there are no prevailing public policy reasons that prevent McLaughlin from purchasing the right to enforce an unsatisfied judgment entered ten years ago in a case in which he did not represent Hannon.
For the foregoing reasons, King Root’s motion to substitute it as the plaintiff in this action and for the issuance of an execution pursuant to G.L. c. 235, § 19 is ALLOWED. King Root shall however submit a sworn statement calculating the amount of the execution that the clerk shall issue. This statement shall credit Hannon with all payments made to plaintiff, including the $ 25,000 paid to reinstate the Agreement.
NAVY YARD FOUR ASSOCIATES, LLC vs. DEPARTMENT OF ENVIRONMENTAL PROTECTION & another.
Suffolk. April 2, 2015. – September 4, 2015.
WENDY STONE-ASHE, trustee, vs. DEPARTMENT OF ENVIRONMENTAL PROTECTION & another.
Suffolk. January 14, 2014. – July 16, 2014.
Present: Trainor, Graham, & Agnes, JJ.
HAROLD B. WASSENAR vs. DEPARTMENT OF ENVIRONMENTAL PROTECTION.
Worcester. September 17, 2013. ‑ March 5, 2014.
Present: Hanlon, Brown, & Sullivan, JJ.
Department of Environmental Protection. Penalty. Escrow. Practice, Civil, Dismissal of appeal, Waiver. Waiver.
Civil action commenced in the Superior Court Department on January 20, 2011.
JOHN MOSTYN, trustee, vs. DEPARTMENT OF ENVIRONMENTAL PROTECTION & others.
Suffolk. April 4, 2013. ‑ June 24, 2013.
Present: Meade, Milkey, & Hanlon, JJ.

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