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Finnegan | Massashusetts Legal Resources
Posts tagged "Finnegan"
Accutrax LLC v. Finnegan, Henderson, Farabow, Garrett &Dunner, LLP (Lawyers Weekly No. 09-058-17)
No. 2017 – 1617 BLS 1
ACCUTRAX LLC
In this legal malpractice action the defendant law firm moves to dismiss on the ground
that the plaintiff, Accutrax LLC, was not the firm’s client. There is no question, however, that the
law firm was engaged to perform the legal services described in the First Amended Complaint
(FAC). There is also no question that the FAC adequately pleads a claim for professional
malpractice and the other related claims, assuming that the plaintiff is the client of Finnegan.
Thus, the issue presented is whether the sole plaintiff, Accutrax LLC, has standing as a client to
assert the claims.
The following facts are taken from the First Amended Complaint (FAC), and the
documents attached to the FAC as exhibits.
Three individuals acted as partners, or joint venturers, to patent and market a razor utility
knife. They agreed to form a Delaware LLC to pursue the project. One partner, Kildevaeld agreed
to assign his ownership and patent rights to the LLC in exchange for contributions by the other
two partners, Billado and Cumings, to commercialize and market the knife. The three partners
went to defendant, Finnegan, Henderson, Farabow, Garrett & Dunner, LLP (Finnegan) to obtain
legal counsel for their enterprise.
The partners informed Finnegan that they intended to form a Delaware LLC with the
name “Contractor Trusted, LLC.” They informed Finnegan that the LLC had not yet been
formed. Nevertheless, Finnegan prepared an engagement letter for the legal representation,
designating the client as “Contractor Trusted, LLC.” The engagement letter, dated March 4,
2013, was signed by Billado on behalf of Contractor Trusted, LLC. The engagement letter made
it clear that Finnegan’s client was Contractor Trusted, LLC and not any officer, director,
shareholder or employee of the LLC. The engagement letter attached an invoice for $ 5,000. On
March 6, 2013, the invoice was paid by a check from Billado.
The partners intended to market the knife under the name Accutrax. When they finally
incorporated the anticipated LLC, they decided to name the corporation Accutrax LLC, instead of
Contractor Trusted, LLC. Accutrax LLC was formed on June 6, 2013. No entity by the name of
Contractor Trusted, LLC was ever formed. All three partners became members of Accutrax LLC.
“Finnegan had actual as well as constructive knowledge that Kildevaeld, Billado, and Cumings
used the name Accutrax LLC instead of Contractor Trusted, LLC for their LLC.” FAC ¶ 35.
Finnegan proceeded to perform legal services. Billado provided to Finnegan a prior art
search result that he had from another attorney. Invoices for April and May 2013 were sent by
Finnegan to “Contractor Trusted, LLC” for attorney time and disbursements in connection with
the patent application for, as noted on the bills, “Accutrax.” The invoices were promptly paid by
Billado. Accutax LLC alleges that “[b]etween March 2013 and August 2013, Billado paid
Finnegan approximately $ 15,000 on behalf of the LLC for the engagement.” FAC ¶ 38.
Accutax LLC alleges that, counter to the understanding when the partners engaged
Finnegan, Finnegan prosecuted the patent application on behalf of Kildevaeld, not the LLC. A
patent for the knife was issued to Kildevaeld, individually. Finnegan did not prepare and obtain
an assignment of the patent rights from Kildevaeld to the LLC.
At some time later, after Accutrax LLC was formed, Finnegan took the position that it
represented Kildevaeld, individually, not Accutrax LLC. Finnegan denied that it represented any
corporation in connection with the patent application for the knife. The three partners continued
as members of Accutrax LLC to seek marketing opportunities for the knife. In October 2014,
Kildevaeld asserted that the patent belonged to him, and began to negotiate for a deal in his own
right. Accutrax LLC alleges that Finnegan assisted Kildevaeld with respect to his claim of
ownership of the patent rights, in violation of Finnegan’s fiduciary duty to the LLC. The dispute
between Accutrax LLC and Kildevaeld caused Accutrax LLC to be unable to secure marketing
contracts, thereby causing damage to Accutrax LLC.
The FAC indicates that Kildevaeld is no longer a member of Accutrax LLC. At oral
argument, reference was made to litigation (in another county in Massachusetts) between the
original partners who formed Accutrax LLC.
To survive a motion to dismiss, a complaint must set forth the basis for the plaintiff’s
entitlement to relief with “more than labels and conclusions.” Iannacchino v. Ford Motor Co.,
451 Mass. 623, 636, quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). At the
pleading stage, Mass. R. Civ. P. 12(b)(6) requires that the complaint set forth “factual
‘allegations plausibly suggesting (not merely consistent with)’ an entitlement to relief . . . .” Id.,
quoting Bell Atl. Corp., 550 U.S. at 557. The court must, however, accept as true the allegations
of the complaint and draw every reasonable inference in favor of the plaintiff. Curtis v. Herb
Chambers I-95, Inc., 458 Mass. 674, 676 (2011).
Finnegan’s argument to dismiss Accutrax LLC amounts to a contention that the individual
partners should be substituted as plaintiffs. Finnegan understood that it was entering into a client
relationship with a yet-to-be organized LLC. It began work knowing the corporation was not yet
organized. “It is hornbook law” that a contract with a corporation not yet in existence may be
enforced by and against the promoters of the corporation. Stonewood Capital Management, Inc.
v. Giner, 2013 WL 49771 *2 (U.S. Dist. Ct., D. Mass. 2013); Island Transportation Co., Inc. v.
Cavanaugh, 54 Mass. App. Ct. 650, 654 (2002)(promoter of nascent corporation is “liable upon,
and entitled to the benefit of, contract that he had made in behalf of the corporation to be
formed”). If the individual partners/promoters were the plaintiffs in this action, Finnegan’s
motion to dismiss would fail. Finnegan owed a duty of loyalty to all three partners. If two of the
three partners can prove that Finnegan acted to the detriment of those partners in order to benefit
a third partner, a valid claim is shown. That is the substance of the FAC.
That said, the question becomes whether the later-formed corporation may also enforce
the contract. In this case, that question is whether the later-formed corporation may assert claims
as a client of Finnegan.
Both parties cite the hoary decision of Chief Justice Holmes in Holyoke Envelope Co. v.
United States Envelope Co., 182 Mass. 171 (1902) as authority for their respective positions. In
that case, the Court articulated two theories under which a later-formed corporation could be held
to be a party to a contract formed before the corporation existed. First, the later-formed
corporation might have, after it came into existence, accepted what was an offer to contract by
the opposite party. Second, the later-formed corporation may become a party to the contract
pursuant to “an express or implied undertaking.” Id. at 175. The Court concluded that a fact
question was presented by those two legal theories and the case was remanded. Id.
I read Holyoke Envelope to suggest that whether a later-formed corporation may sue or
be sued under a contract executed before the corporation came into existence depends upon the
reasonable expectations and intent of the parties. If the parties intended and agreed to enter into a
contract with a corporation yet to be formed, and the later-formed corporation is consistent with
the parties’ expectations, the later-formed corporation may become a party to the contract either
by way of acceptance of the terms of the contract or by implication from conduct after the
corporation is formed. Whether the parties reached an agreement is a fact question.
At the motion to dismiss stage, Accutrax LLC pleads sufficient facts to support the
inference that it became the client of Finnegan and is entitled to sue for malpractice. By the terms
of the engagement letter, Finnegan expected that a yet to be formed LLC would be its client. In
fact, Finnegan specified that the LLC, not the officers, directors, shareholders or employees, was
the client. Further, Finnegan knew that the yet to be formed LLC would have as its members all
three of the partners/promoters. The LLC that was formed by the three partners/promoters
(Accutrax LLC) was perfectly in line with Finnegan’s expectations. The mere fact that the
anticipated name (Contractor Trusted, LLC) was changed to Accutrax LLC by the
partners/promoters is immaterial to the parties’ expectations and intent at the time of contract.
There was no change in the parties’ obligations and no increase in burden or standard of care to
Finnegan. Accepting the allegations of the FAC as true, Accutrax LLC states cognizable claims
arising from its status as a client of Finnegan.1
For the reasons stated above, Finnegan’s motion to dismiss (Paper No. 8) is DENIED.
1 Finnegan also argues that the FAC should be dismissed because, at the time of filing the
initial complaint, Accutrax LLC was not registered with the Massachusetts Secretary of State’s
office under G.L. c. 156C, §§ 48. Finnegan concedes that Accutrax LLC registered prior to filing
the FAC. I find that such registration ends Finnegan’s argument. See G.L. c. 156C, § 54.
Posted by Massachusetts Legal Resources - January 6, 2018 at 2:45 am
Categories: News Tags: 0905817, Accutrax, Dunner, Farabow, Finnegan, Garrett, Henderson, Lawyers, Weekly
Finnegan, et al. v. VBenx Corporation, et al. (Lawyers Weekly No. 09-049-17)
SUCV2009-03772-BLS1
J. BRENT FINNEGAN, and others
VBENX CORPORATION, and others
Plaintiffs-in–Counterclaim
Defendants-in-Counterclaim
INTERIM ORDER ON DEFENDANTS’ MOTION FOR AN AWARD OF FEES AND COSTS UNDER G.L. c. 231, §6F
Still pending in this action is the G.L. c. 231, § 6F motion brought by the defendants VBenx Corporation, Richard Baker, Peter Marcia, Walter Smith and D. Michael Sherman (collectively, VBenx)1 in which they seek an award of reasonable counsel fees and other costs incurred in defending the claims asserted against them by the plaintiffs J. Brent Finnegan, Kenneth F. Phillips, Karen W. Finnegan and Back Bay Ventures, LLC (collectively, Finnegan
1 The Court recognizes that VBenx is not actually a party to either the § 6F motion or the counterclaim for malicious prosecution as it was not a defendant in the claims prosecuted by Finnegan et al. However, the Court believes this is a convenient way to collectively refer to the defendants/plaintiffs-in-counterclaim.
and the Finnegan claims). An abbreviated review of the prolix proceedings in this eight year litigation (there are 291 docket entries) is necessary to place this motion in context.
Finnegan filed his claims on September 4, 2009; VBenx filed its counterclaims on October 28, 2009. After much pretrial sparring, the Finnegan claims were severed from VBenx’ counterclaims and proceeded to trial, without a jury, on April 25, 2011 (Lauriat, J. presiding). The case was tried over twenty-five days, concluding on June 5, 2011. 819 exhibits were entered in evidence (6.5 feet of paper according to Judge Lauriat’s Memorandum of Decision). On October 19, 2012, the Court issued extensive Findings of Fact and Rulings of Law finding in favor of VBenx with respect to all claims asserted against it. After further motions and hearings, on March 26, 2013, the Court entered a Separate and Final Judgment based upon its Findings and Rulings which dismissed all of the Finnegan claims. On May 3, 2013, Finnegan appealed; the Superior Court’s Judgment was affirmed by the Appeals Court on August 14, 2015. See Finnegan v. Baker, 88 Mass. App. Ct. 35 (2015).
In the meantime, the parties commenced litigation of VBenx’ counterclaims. Of relevance to the motion now before the court, on May 6, 2013 the parties filed a Rule 9A package including both Finnegan’s motion to dismiss the counterclaims and VBenx’ cross-motion for an award fees and costs under §6F based on the outcome of the jury-waived trial.2 It
2 It is notable that this § 6F cross-motion is based on orders entered following the trial of the Finnegan claims, the entry of a Separate and Final Judgment on those claims, and the filing of a Notice of Appeal with respect to that Final Judgment. It is nonetheless filed in response to a motion to dismiss the VBenx counterclaims, which had been severed from the Finnegan claims. This is at least odd, if not inappropriate. In any event, several of Judge Lauriat’s findings of fact suggest that there could be a factual basis for a § 6F motion. For example:
Error! Main Document Only.Further, while Finnegan maintained, under oath, up to the eve of trial, that the defendants had failed to include a “standard formula” in Smith’s Notes which required the conversion of the Notes to stock at a pre-determined price, there is no credible evidence to support that assertion. . . .
is that cross-motion which is still undecided. On October 23, 2013, the Court (Billings, J.) issued an order on these cross-motions. The Court dismissed a few of the many counterclaims asserted against Finnegan, but allowed the majority of the claims to proceed. The Court referred the § 6F motion to Judge Lauriat “for such action as he deems appropriate.” On December 20, 2013, Judge Lauriat unfortunately decided that he must recuse himself from any further involvement in this case and therefore declined to rule on the § 6F motion.
The Court (Kaplan, J. presiding) was therefore left to address the § 6F motion; although he had not presided over the jury-waived trial that was the predicate for VBenx’s claim. § 6F provides, in relevant part, that:
Upon motion of any party in any civil action in which a finding, verdict, decision, award, order or judgment has been made by a judge or justice or by a jury, auditor, master or other finder of fact, the court may determine, after a hearing, as a separate and distinct finding, that all or substantially all of the claims, defenses, setoffs or counterclaims, whether of a factual, legal or mixed nature, made by any party who was represented by counsel during most or all of the proceeding, were wholly insubstantial, frivolous and not advanced in good faith. The court shall include in such finding the specific facts and reasons on which the finding is based.
The Court concluded that it could not make a “finding of specific facts and reasons on which the finding is based,” as required by the statute, without effectively retrying the factual issues which Judge Lauriat decided following a twenty-five day trial.3 This is because the case was not one in which the legal theories underpinning Finnegan’s claims were without any basis, but rather the issued raised by the §6F motion was whether the facts alleged in support of these theories had been “advanced in good faith.”
Finnegan’s sworn testimony, verified complaints and signed affidavits notwithstanding, he is simply not credible on many important issues.
3 See Katz v. Savitsky, 10 Mass. App. Ct. 792, 793 n. 2 (1980) (Where the Appeals Court stated that “whenever proper resolution of a motion under § 6F requires an assessment of the credibility of witnesses” it should be resolved by the judge who heard the testimony.)
Following further discovery and other pretrial proceedings, Finnegan moved for summary judgment on all of the remaining counterclaims. On May 13, 2016, the Court (Kaplan, J.) ruled on this motion. It dismissed some of VBenx counterclaims but allowed several to proceed to trial—including Baker, Marcia, Smith, and Sherman’s claims against Finnegan and Phillips for malicious prosecution for having prosecuted the claims tried and dismissed by Judge Lauriat. As to the still unresolved § 6F motion the Court ruled that: “[this motion] shall be heard by the court simultaneously with the claims tried to the jury under this count.” The counterclaims were scheduled for trial on December 6, 2016, Leibensparger, J. to preside. Unfortunately, Judge Leibensparger also concluded that he must recuse himself. The trial was therefore rescheduled to begin on May 17, 2017, Kaplan J. presiding.
The trial began on the scheduled date and proceeded for nine days. Two claims were submitted to the jury for its verdict: breach of fiduciary duty and malicious prosecution. The jury found the defendants liable under both and awarded monetary damages. With respect to the claim of malicious prosecution the jury was instructed that, to find Finnegan liable, it must among other things, find that he had brought the claims previously tried to Judge Lauriat “without probable cause.” The jury was provided with the following instruction on “probable cause:”
Turning first to the question of “probable cause,” the standard for probable cause is that the defendants reasonably believed that there was a sound chance that their claims would be held valid when the case was decided. This means that the plaintiffs must either prove (1) that Finnegan and Phillips did not believe that their claims would be held valid, or (2) that their belief was not reasonable under the circumstances. Finnegan’s and Phillip’s conduct in bringing the suit against the plaintiffs must be judged by their honest and reasonable belief at the time they filed their suit and not by what may turn out later to have been the actual state of things. In deciding whether they actually believed in the validity of their claims and whether, if they did, it was reasonable for them to hold that belief, you may consider the information known to them at the time they filed the complaint and whether it was reasonable for the defendants to rely on that information given its quality, quantity and the availability of additional, available information.
The damages that the jury awarded on this count included all of the reasonable attorneys’ fees and costs incurred by the individual defendants in defending against the Finnegan claims. Thereafter, Finnegan filed a number of post-trial motions. A motion for remittitur was allowed and the remittitur accepted by VBenx. Motions for judgment notwithstanding the verdict and a new trial on liability were denied. The remittitur was not directed to the amount of attorneys’ fees and costs incurred in defending the Finnegan claims. Final Judgment entered on June 15, 2017. On July 5, 2017, Finnegan filed a Notice of Appeal from that judgment. The Appeal has been docketed in the Appeals Court, but no briefs have yet been filed.
THE § 6F MOTION
The Court concludes that it should delay ruling on the § 6F motion until the pending appeal of the Final Judgment on the counterclaims is decided. It does this for the following reasons.
First, the principal damages awarded to VBenx on its counterclaims were the fees and costs incurred in defending the Finnegan claims, which the jury awarded in the full amount requested by VBenx. Although there does not appear to be any case law addressing the issue, the Court finds that § 6F does not contemplate the award of attorneys’ fees incurred in defending claims not asserted in good faith, where the same fees have been awarded pursuant to a claim of malicious prosecution predicated on the very same judicial proceeding. Stated differently, the Court finds that § 6F and claims of malicious prosecution may not be stacked to provide a double recovery. See, e.g., Masterpiece Kitchen & Bath, Inc. v. Gordon, 425 Mass 325, 328 (1997) (Where the Supreme Judicial Court found that a purpose of § 6F was to “ameliorate the American Rule” regarding attorneys’ fees incurred in certain cases.) Moreover, the award of
attorneys’ fees as damages for malicious prosecution will entitle the plaintiff to prejudgment interest. Therefore, as a practical matter, if the jury’s damages verdict is affirmed on appeal, this will result in a substantially greater financial recovery than a § 6F award.
Also, under G.L. c. 231, § 6G, “[t]he payment of any award made pursuant to section six F shall be stayed until the completion of all appeals relating to the civil action in which the award was made.” Arguably, since a Separate and Final Judgment was entered with respect to the Finnegan claims, that language might not encompass the pending appeal from the VBenx counterclaims. However, the evidence presented with respect to the counterclaims is the evidence on which the Court would have to base its factual findings required under § 6F, as Judge Lauriat tried the Finnegan claims. Further, while the standard for the award of attorneys’ fees and costs under § 6F is not identical to the facts the jury must find to return a plaintiff’s verdict on a claim for malicious prosecution, they are functionally extreemly similar. Compare instruction quoted above and Hahn v. Planning Board of Stoughton, 403 Mass. 332, 339 (1998) (where the court held that a “frivolous undertaking” based on poor judgment rather than insincerity or ill will does not support a § 6F award.) In consequence, the Appeals Court’s decision on the appeal from the judgment on the VBenx counterclaims might well inform the Court’s analysis of the § 6F cross-motion. Also, a § 6F award can only be appealed under G.L. c. 231, § 6G to a single justice of the Appeals Court within ten days from receiving notice of the award. It seems ill advised to force the parties to engage in further, separate appellate litigation under these circumstances. See Bailey v. Striberg, 31 Mass. App. Ct 277, 282-283 (1991) (holding that appeals from a judgment and § 6F award are separate proceedings).
Finally, after appellate review is completed, the Court will still have another issue to address. VBenx is a Delaware corporation. VBenx advanced funds to Finnegan under the
relevant provisions of the VBenx by-laws to cover the costs of defending claims asserted against him by reason of his position as a director and officer of VBenx. Given the jury’s verdicts on the counterclaims, VBenx demands repayment of the funds so advanced. That demand can be addressed only after the appeal of the jury’s verdict and judgment entered pursuant thereto has been completed. See Sun-Times Media Group, Inc. v. Black, 954 A.2d 380 (Del. Ch. 2008) (where then Vice Chancellor Strine engages in an exhaustive review and analysis of Delaware law in concluding that the appropriate point at which to address whether and how much of funds previously advanced by a corporation under § 145 (e) of the DGCL must be repaid is after there has been “a final, non-appealable conclusion to [the] proceeding” which gave rise to the duty to indemnify.) Id. at 405. If it is still necessary for the Court to rule on the § 6F motion after rescript from the Appeals Court, it will do so in conjunction with the resolution of § 145 issue.
For the foregoing reasons, the court will rule on the VBenx cross-motion under § 6F after rescript from the Appeals Court enters.
Dated: November 20, 2017 read more
Posted by Massachusetts Legal Resources - December 6, 2017 at 4:53 pm
Categories: News Tags: 0904917, Corporation, Finnegan, Lawyers, VBenx, Weekly
Maling v. Finnegan, Henderson, Farabow, Garrett & Dunner, LLP, et al. (Lawyers Weekly No. 10-202-15)
SJC-11800
CHRIS E. MALING vs. FINNEGAN, HENDERSON, FARABOW, GARRETT & DUNNER, LLP, & others.[1]
Suffolk. September 8, 2015. – December 23, 2015.
Patent. Conflict of Interest. Attorney at Law, Conflict of interest, Attorney-client relationship, Representation of differing interests.
Civil action commenced in the Superior Court Department on April 25, 2013.
A motion to dismiss was heard by Janet L. Sanders, J. read more
Posted by Massachusetts Legal Resources - December 23, 2015 at 6:56 pm
Categories: News Tags: 1020215, Dunner, Farabow, Finnegan, Garrett, Henderson, Lawyers, Maling, Weekly
13-P-1995 Appeals Court
J. BRENT FINNEGAN & others[1] vs. RICHARD BAKER & others.[2]
No. 13-P-1995.
Suffolk. January 6, 2015. – August 14, 2015.
Corporation, Close corporation, Stock. Loan.
Civil action commenced in the Superior Court Department on September 4, 2009.
The case was heard by Peter M. Lauriat, J., and entry of separate and final judgment was ordered by him. read more
Posted by Massachusetts Legal Resources - August 14, 2015 at 9:37 pm
Categories: News Tags: 1111115, Baker, Finnegan, Lawyers, Weekly