Court Opinion

ID: 4102860
Source: CourtListenerOpinion
Date Created: 2016-11-29 17:13:23.328392+00
Date Added: 2024-06-11T07:45:39.123964
License: Public Domain

Supreme Court

                                                          No. 2015-298-Appeal.
                                                          (PC 11-7329)

 Michael F. Rose, Jr. et al.         :

             v.                      :

 Stephen M. Brusini et al.           :

NOTICE: This opinion is subject to formal revision before publication in the
Rhode Island Reporter. Readers are requested to notify the Opinion Analyst,
Supreme Court of Rhode Island, 250 Benefit Street, Providence, Rhode Island
02903, at Tel. 222-3258 of any typographical or other formal errors in order that
corrections may be made before the opinion is published.
                                                                Supreme Court

                                                                No. 2015-298-Appeal.
                                                                (PC 11-7329)

         Michael F. Rose, Jr. et al.          :

                     v.                       :

         Stephen M. Brusini et al.            :

              Present: Suttell, C.J., Goldberg, Flaherty, Robinson, and Indeglia, JJ.

                                         OPINION

       Justice Flaherty, for the Court. This case came before the Supreme Court on appeal by

the plaintiffs, Michael F. Rose, Jr. and RC&D, Inc. (collectively plaintiffs), from a decision of

the Superior Court granting the defendants’ motion for summary judgment in favor of Attorney

Stephen M. Brusini and the law firm Orson & Brusini Ltd. (collectively defendants). The

plaintiffs argue that the hearing justice erred when he concluded that there was no evidence of

proximate cause linking the defendants’ alleged negligence and any damages the plaintiffs may

have suffered, and that Rose’s own conduct was the proximate cause of his damages. The matter

came before this Court for oral argument on November 2, 2016, pursuant to an order directing

the parties to appear and show cause why the issues raised by this appeal should not summarily

be decided. After considering the oral and written arguments of the parties, and after a thorough

review of the record, we are of the opinion that cause has not been shown and that this case

should be decided at this time without further briefing or argument. For the reasons set forth in

this opinion, we vacate the judgment of the Superior Court.

                                               -1-
                                                I

                                        Facts and Travel

       On January 7, 2004, Rose and David Egan formed a closely held corporation, RC&D,

Inc.   RC&D provided specialized construction services, equipment, and personnel for

environmental restoration and related land development in the New England region. At first,

Rose and Egan were equal owners of the corporation. The ownership percentages later changed,

however, and Egan acquired 51 percent of the issued shares of RC&D stock and Rose held the

remaining 49 percent.      Egan was responsible for office administration and keeping and

maintaining the financial records while Rose supervised field construction operations. Rose had

very little personal involvement in managing or overseeing RC&D’s finances and he did not

have access to the company’s books and records, which Egan kept password-protected through a

software program called Quickbooks. In 2007 the two began discussing Rose’s buyout of

Egan’s 51 percent interest in RC&D. In August 2008, after negotiations became contentious,

Rose engaged defendants to represent him in connection with the buyout.

       By December 14, 2008, negotiations had progressed to a point where defendants were

able to prepare a draft purchase and sale agreement (P&S) and circulate it to the parties. One

component of the P&S involved Rose’s purchase of Egan’s shares of stock in RC&D and the

second component involved a distribution from RC&D to Egan of the company’s profits earned

through December 31, 2008. On December 16, 2008, Egan’s counsel sent a “redlined” version

of the first draft of the P&S to defendants. Two days later, Egan finally sent an email to Rose

containing some information about RC&D’s finances, including balance sheets, a projection as

of December 31 of assets and liabilities, and a schedule of accounts receivable.

                                               -2-
       On December 19, 2008, Brusini advised Rose not to sign the P&S because Egan was

refusing to provide critical financial information regarding RC&D. Later that day, during a

conference call with the parties, Brusini reiterated his advice that Rose should not execute the

P&S. And again, on December 22, 2008, Brusini called Rose to tell him the same thing, but

Rose was intent on going forward.

       By email, on December 23, 2008 at 9:55 a.m., Brusini sent a marked-up draft of the P&S

to, among others, Egan’s counsel and Rose. At 10:06 a.m. the same day, Brusini sent a letter to

Rose by email. The letter recounted their telephone conversations from December 19 and

December 22 and specified, “I cannot recommend and do not recommend that you [Rose] sign

the agreement as revised by [Egan’s counsel]” because Rose had not been involved in the

finances of the company and did not know what the finances of the company were. The letter

continued:

              “That said, I am aware that you are willing to take the risks outlined
              above and the risks generally posed by [Egan’s counsel’s] revisions,
              and that you are anxious to close these transactions as soon as
              possible. With that in mind, in the red-lined version that I sent to
              you earlier this morning I have attempted to make at least a few
              changes to [Egan’s counsel’s] version to provide you with some
              basic protections.”

The amended version of the P&S referred to in the letter included a “True-up Clause” to protect

Rose in order “to capture post-closing any amount paid to Mr. Egan in connection with the

buyout that, for any reason, [was] improper or incorrect.”

       The closing on the buyout took place on January 6, 2009, and the distribution amount

($1,204,695.75) was paid in full to Egan. After the closing, Rose finally gained full access to

RC&D’s financial books and records, including Quickbooks. The financial books and records

revealed that Egan, in the very limited information he had provided to Rose preclosing, had

                                               -3-
overstated the accounts receivable and assets and had understated the accounts payable, thereby

resulting in a considerably higher 2008 year-end distribution to Egan.         According to the

company’s books and records, the distribution paid by RC&D to Egan was approximately

$584,695.70 more than what Egan was entitled to under the terms and conditions of the P&S.

                                     Rose and Egan Litigation

         In January 2010, Egan filed a complaint against plaintiffs after Rose declined to satisfy

the remaining balance from the buyout. Rose and RC&D answered and filed counterclaims

against Egan, arguing that Egan was required to return the overpayment to RC&D, based upon

the True-up Clause that Brusini had assured Rose he could rely upon should the distribution paid

to Egan be found to exceed his entitlement. However, that litigation encountered some rough

sailing; a justice of the Superior Court declared that “there [was] an ambiguity under the

language of the agreement,” and granted partial summary judgment in favor of Egan with respect

to at least two counts of his complaint. After Rose incurred over $300,000 in litigation fees and

expenses, the parties entered into a settlement agreement on November 3, 2011.

                                     The Malpractice Action

         On December 30, 2011, plaintiffs filed suit against defendants, alleging professional

negligence and breach of contract. Rose’s primary argument was that defendants breached a

duty that they owed to Rose when they failed to advise him to invoke the statutorily enforceable

rights and remedies available to shareholders pursuant to G.L. 1956 chapter 1.2 of title 7 of the

Rhode Island Business Corporations Act (Disclosure Act), which would have provided access to

RC&D’s books and records. 1 The plaintiffs further argued that defendants negligently drafted

1
    General Laws 1956 § 7-1.2-1502 reads in pertinent part as follows:

                                                -4-
the True-up Clause, thus resulting in their inability to recover the overpaid amount in the Egan

litigation.

        In time, defendants filed a motion for summary judgment, arguing that Rose could not

demonstrate that they were liable to Rose because he had failed to follow Brusini’s clear and

documented advice, which explicitly warned against signing the P&S. In that correspondence,

Brusini outlined his concerns about the deal and specifically identified that “due to these

concerns, I [Brusini] cannot recommend and do not recommend that you [Rose] sign the [P&S].”

Nevertheless, Rose went forward with the buyout despite the letter and in the face of Egan’s

                      “(a) Each corporation shall keep correct and complete
               books and records of account * * *. Any books, records, * * * may
               be in written form or any other form capable of being converted
               into written form within a reasonable time.

                       “(b) Any * * * shareholder * * *, upon written demand
               stating the purpose for the demand, has the right to examine, in
               person, or by agent or attorney, at any reasonable time or times, for
               any proper purpose, its relevant books and records of account * * *
               and to make extracts from those books and records of account * *
               *.

                       “(c) Any officer or agent who, or a corporation which,
               refuses to allow any shareholder * * * to examine and make
               extracts from its books and records of account * * * for any proper
               purpose, is liable to the shareholder * * * in a penalty of ten
               percent (10%) of the value of the shares owned by the shareholder,
               * * * in addition to any other damages or remedy afforded him or
               her by law.

                       “(d) Nothing contained in these provisions impairs the
               power of any court of competent jurisdiction, upon proof by a * * *
               shareholder * * * to compel the production for examination * * *
               of the books and records of account * * *.

                       “(e) Upon the written request of any * * * shareholder * * *
               the corporation shall mail to the * * * shareholder * ** its most
               recent financial statements showing in reasonable detail its assets
               and liabilities and the results of its operations.”

                                               -5-
continued refusal to provide financial information. As a result, defendants asserted that the

proximate cause for any alleged damages was Rose’s own decision to proceed with the buyout

against his counsel’s advice.

       The hearing justice, in a bench decision, granted defendants’ motion for summary

judgment. The hearing justice found that defendants had a duty to plaintiffs, and, based on the

affidavit of Attorney Karen A. Pelczarski, that there was a genuine issue of fact as to whether

there was a breach of that duty.

       However, when determining whether there was a genuine issue of material fact as to

proximate cause, the hearing justice focused on two documents—Brusini’s December 23, 2008,

letter and Attorney Pelczarski’s affidavit, which had been offered in opposition to the motion for

summary judgment. The hearing justice indicated that, while Attorney Pelczarski’s affidavit

repeatedly referred to lack of care, skill, diligence, and knowledge, she never used the words

“proximate cause” in her affidavit. He further specified that there were many possibilities for

what might have occurred had defendants advised Rose of the Disclosure Act, concluding that it

would require “pure conjecture” to determine what the outcome of the transaction would have

been had defendants notified Rose of the Disclosure Act. The hearing justice went on to say,

“but what is not conjecture is that if Mr. Rose had taken defendants’ recommendation and

refused to sign the agreement, he would not have incurred the loss of which he now complains.”

As for the ambiguity that was noted by the trial justice in the Egan litigation about the True-up

Clause, the hearing justice specified that ambiguity in a document does not equate to legal

malpractice. Moreover, the hearing justice indicated that the case was settled before the efficacy

of the True-up Clause was litigated; therefore, there was no basis to conclude whether the

language employed was effective or ineffective.

                                              -6-
       The hearing justice concluded that plaintiffs had not produced any evidence to suggest

that their legal position was somehow compromised as a result of Brusini’s advice and that the

undisputed evidence demonstrated that Rose disregarded Brusini’s counsel and went forward

with the buyout without having access to the financial information. He further noted that, had

Rose simply followed Brusini’s instructions, the alleged damages would not have occurred. He

avowed that, in order to find a causal connection between Brusini’s alleged breach and Rose’s

overpayment in the buyout, a factfinder would be forced to speculate about what would have

happened had Rose been advised of his statutory rights. The hearing justice concluded that the

undisputed facts before the court were susceptible to just one inference: that Rose’s decision to

go forward with the buyout despite Brusini’s advice recommending that he not sign the P&S was

the cause of Rose’s harm. Significantly, however, the hearing justice did not refer to a separate

affidavit that Rose himself had submitted in opposition to the motion for summary judgment.

After judgment entered on behalf of defendants, Rose timely appealed.

                                                 II

                                       Standard of Review

       “This Court reviews de novo a trial justice’s decision granting summary judgment.” Sola

v. Leighton, 45 A.3d 502, 506 (R.I. 2012) (quoting Lynch v. Spirit Rent-A-Car, Inc., 965 A.2d
417, 424 (R.I. 2009)). “Summary judgment is an extreme remedy and should be granted only

when ‘the pleadings, depositions, answers to interrogatories, and admissions on file, together

with the affidavits, if any, show that there is no genuine issue as to any material fact and that the

moving party is entitled to judgment as [a] matter of law.’” Plunkett v. State, 869 A.2d 1185,

1187 (R.I. 2005) (quoting Wright v. Zielinski, 824 A.2d 494, 497 (R.I. 2003)). “Only when a

review of the admissible evidence viewed in the light most favorable to the nonmoving party

                                                -7-
reveals no genuine issues of material fact, and the moving party is entitled to judgment as a

matter of law, will this Court uphold the trial justice’s grant of summary judgment.” National

Refrigeration, Inc. v. Standen Contracting Co., 942 A.2d 968, 971 (R.I. 2008) (quoting Carlson

v. Town of Smithfield, 723 A.2d 1129, 1131 (R.I. 1999)). The party opposing “a motion for

summary judgment carries the burden of proving by competent evidence the existence of a

disputed material issue of fact and cannot rest on allegations or denials in the pleadings or on

conclusions or legal opinions.” Id. (quoting Accent Store Design, Inc. v. Marathon House, Inc.,

674 A.2d 1223, 1225 (R.I. 1996)).

                                                III

                                             Analysis

       On appeal, plaintiffs argue that the hearing justice erred when he determined there was no

evidence of proximate cause arising from any alleged negligence of defendants and that any

damage to plaintiffs was caused by Rose’s casting away his attorney’s cautions and warning and

proceeding with the closing. Rather, plaintiffs maintain that the evidence establishes that, but for

defendants’ failure to advise them of their statutory right to access the books and records of

RC&D, they would have demanded, received, and reviewed them, thereby avoiding postclosing

litigation. Additionally, plaintiffs assert that defendants’ negligence and their reliance on the

negligently drafted True-up Clause contributed to their damages. Furthermore, plaintiffs argue

that, because it is up to the factfinder to determine the issue of proximate cause, that issue is not

amenable to summary judgment.

       In his decision, the hearing justice found that Brusini’s conduct was not causally

connected to plaintiffs’ alleged damages, determining that it would require the employment of

                                                -8-
“conjecture and speculation” to conclude that Rose would have proceeded differently had he

been advised of and counseled to make use of the statutory demand procedure.

       This Court has held that “[i]n order to prevail on a negligence-based legal malpractice

claim, a plaintiff must prove by a fair preponderance of the evidence not only a defendant’s duty

of care, but also a breach thereof and the damages actually or proximately resulting therefrom to

the plaintiff.” Ciambrone v. Coia & Lepore, Ltd., 819 A.2d 207, 211 (R.I. 2003) (quoting

Richmond Square Capital Corp. v. Mittleman, 773 A.2d 882, 886 (R.I. 2001)). “Failure to prove

all three of those required elements, acts as a matter of law, to bar relief or recovery.” Vallinoto

v. DiSandro, 688 A.2d 830, 836 (R.I. 1997).

       To establish proximate cause, it must be shown “that but for the negligence of the

tortfeasor, injury to the plaintiff would not have occurred.” Contois v. Town of West Warwick,

865 A.2d 1019, 1023 (R.I. 2004) (quoting English v. Green, 787 A.2d 1146, 1151 (R.I. 2001)).

Furthermore, “[t]he causal connection between negligence and a plaintiff’s injury must be

established by competent evidence and may not be based on conjecture or speculation.”

McLaughlin v. Moura, 754 A.2d 95, 98 (R.I. 2000) (quoting Skaling v. Aetna Insurance Co., 742
A.2d 282, 288 (R.I. 1999)). Nevertheless, “proximate cause can be established by circumstantial

evidence, and specific direct evidence of * * * proximate cause is not always necessary.” Seide

v. State, 875 A.2d 1259, 1268 (R.I. 2005) (quoting Martinelli v. Hopkins, 787 A.2d 1158, 1169

(R.I. 2001)).

       “Ordinarily the determination of proximate cause * * * is a question of fact that should

not be decided by summary judgment.” Munroe v. Cheaters Holding Corp., 808 A.2d 645, 646

(R.I. 2002) (quoting Splendorio v. Bilray Demolition Co., 682 A.2d 461, 467 (R.I. 1996)).

                “However, one resisting summary judgment must assert ‘sufficient
                facts to satisfy the necessary elements of his [or her] negligence

                                               -9-
               claim’ and if a ‘plaintiff fails to present evidence identifying
               defendants’ negligence as the proximate cause of his [or her] injury
               or from which a reasonable inference of proximate cause may be
               drawn,’ then summary judgment becomes proper.” Splendorio,
682 A.2d at 467 (quoting Russian v. Life-Cap Tires Services, Inc.,
               608 A.2d 1145, 1147 (R.I. 1992)).

Furthermore, “when the facts are undisputed and are susceptible of but one inference, * * * the

question [becomes] one of law for the court * * *.” Geloso v. Kenny, 812 A.2d 814, 818 (R.I.

2002) (quoting Schenck v. Roger Williams General Hospital, 119 R.I. 510, 517, 382 A.2d 514,

518 (1977)).     Nonetheless, we have repeatedly cautioned that “complaints sounding in

negligence generally are not amenable to summary judgment and should be resolved by a fact

finding at the trial court * * *.” Hall v. City of Newport, 138 A.3d 814, 820 (R.I. 2016) (quoting

Berard v. HCP, Inc., 64 A.3d 1215, 1218 (R.I. 2013)).

       In this case, the fulcrum is whether the hearing justice correctly decided that proximate

cause could not be established based on the record before him. When he considered the motion

for summary judgment that had been filed on behalf of defendants, the hearing justice was

confronted by two affidavits in opposition to the motion. One of those affidavits was authored

by an attorney expert, and it is fair to say that the subject of that document centered on the breach

of the standard of care. The hearing justice fairly pointed out that it did not specifically address

the issue of proximate causation. 2 However, it is our opinion that Rose’s affidavit addresses the

issue of proximate cause.

2
  Although we find no fault with the hearing justice’s observation that Attorney Pelczarski’s
affidavit did not use the words “proximate cause,” she did conclude that:

               “[b]ased on * * * [d]efendants’ failure to advise Rose of the rights
               to obtain access to RC&D’s books and records that were afforded
               to him under the Disclosure [Act], it is reasonable to infer under
               the facts presented that Rose would have misunderstood and would
               have acted under the mistaken belief that he was left with no

                                               - 10 -
       In his affidavit, Rose asserted that defendants did not advise him of his statutory rights

under the Disclosure Act, but that if they had “advised [him] accordingly, [he] would certainly

have promptly authorized and instructed them to exercise [his] rights and remedies under the

Disclosure [Act].” He further swore that “[t]he issues Brusini mentioned [in his letter to Rose]

were simply not important and/or relevant to whether or not [he] proceeded with the [b]uyout.”

Additionally, Rose specified that

               “[w]henever [he] told [his] concerns to Brusini about not having
               any access to the financial records and not being able to calculate
               corporate profits for determining the correct amount of the
               [d]istribution and/or to analyze any financial transactions in the
               months leading up to the closing, Brusini told [him] that [he] could
               rely upon [the True-up Clause] if it turned out that the
               [d]istribution amount paid to Egan was incorrect.”

Rose averred that he did, indeed, rely on what Brusini told him. He maintained that “[a]t the

very least, had [he] timely received the books and records pre-closing, there wouldn’t have been

any surprises post-closing regarding the [d]istribution amount,” and he “could have, and would

have, been able to avoid the [l]itigation and the substantial legal fees, costs and expenses [he]

incurred in connection therewith.”

       Although the hearing justice repeatedly referred to Rose’s arguments as “pure

conjecture,” it is our opinion that Rose submitted enough competent evidence to fend off the

defendants’ motion for summary judgment on a question of fact relating to the defendants’

liability. Through his affidavit, Rose introduced sufficient evidence that would, at the least,

               choice but to either proceed with the purchase of Egan’s shares, or
               to decline to purchase Egan’s shares, without having the financial
               information necessary to make an informed decision about the
               Distribution.”

It could be argued that Attorney Pelczarski used the appropriate language to indicate that a jury
could draw a reasonable inference of proximate causation based on the facts produced.

                                              - 11 -
allow a jury to reasonably infer the defendants’ negligence as the proximate cause of his

damages. Moreover, when we review that evidence in the light most favorable to Rose, as we

must, it is clear that granting summary judgment on this issue of fact was inappropriate. We are

of the opinion that the hearing justice overlooked the allegations in Rose’s affidavit that raised

issues of material fact on the issue of causation that must be submitted to a trier of fact.

                                                 IV

                                             Conclusion

       For the foregoing reasons, the plaintiffs’ appeal is sustained and the final judgment

appealed from is vacated. The papers in this case are remanded to the Superior Court.

                                                - 12 -
                                 RHODE ISLAND SUPREME COURT CLERK’S
                                               OFFICE

                                 Clerk’s Office Order/Opinion Cover Sheet

TITLE OF CASE:        Michael F. Rose, Jr. et al. v. Stephen M. Brusini et al.

CASE NO:              No. 2015-298-Appeal.
                      (PC 11-7329)

COURT:                Supreme Court

DATE OPINION FILED: November 29, 2016

JUSTICES:             Suttell, C.J., Goldberg, Flaherty, Robinson, and Indeglia, JJ.

WRITTEN BY:           Associate Justice Francis X. Flaherty

SOURCE OF APPEAL:     Providence County Superior Court

JUDGE FROM LOWER COURT:

                      Associate Justice Richard A. Licht

ATTORNEYS ON APPEAL:

                      For Plaintiffs: Peter J. Brockmann, Esq.
                                      Frank F. Sallee, Esq.

                      For Defendants: J. David Freel, Esq.
                                      Paul S. Callaghan, Esq.