Court Opinion

ID: 2963497
Source: CourtListenerOpinion
Date Created: 2015-09-21 21:10:58.49448+00
Date Added: 2024-06-11T15:01:41.424722
License: Public Domain

USCA1 Opinion

	

          June 28, 1995         [NOT FOR PUBLICATION]

                            UNITED STATES COURT OF APPEALS
                                FOR THE FIRST CIRCUIT

                                                     
                                 ____________________

        No. 94-2284

                                BRINKLEY & CO., INC.,

                                Plaintiff, Appellant,

                                          v.

                            VINCENT T. MATTEUCCI, ET AL.,

                                Defendants, Appellees.

                                                     
                                 ____________________

                     APPEAL FROM THE UNITED STATES DISTRICT COURT

                          FOR THE DISTRICT OF MASSACHUSETTS

                   [Hon. Edward F. Harrington, U.S. District Judge]
                                               ___________________

                                                     
                                 ____________________

                                Selya, Cyr and Stahl,

                                   Circuit Judges.
                                   ______________

                                                     
                                 ____________________

             Valeriano Diviacchi, with whom Diviacchi  Law Office was on brief
             ___________________            _____________________
        for appellant.
             Harvey  Weiner, with whom Michael  P. Duffy and  Peabody & Arnold
             ______________            _________________      ________________
        were  on brief  for appellees  Barber,  Looney, Grahn,  Synder, Levin,
        Pisegna, Kelly, Farrell and Grossman.
             Maria R. Durant, with whom Michael A. Collora and Dwyer & Collora
             _______________            __________________     _______________
        were on brief for appellee Matteucci.

                                                     
                                 ____________________

                                                     
                                 ____________________

                    Per Curiam.  Plaintiff  Brinkley & Co., Inc. ("Brinkley
                    Per Curiam.
                    __________

          Co.") appeals from a district court judgment summarily dismissing

          its complaint against Vincent Matteucci ("Matteucci"), former CEO

          of Athena Management Co., Inc. ("Athena"), and various members of

          the  law firm  of Looney  & Grossman.   As  summary judgment  was

          proper, we affirm.

                                          I
                                          I

                                     BACKGROUND1
                                     BACKGROUND
                                     __________

                    Athena  was incorporated  on August  28, 1984,  for the

          purpose of providing investment  management services.   Matteucci

          served as its  first president.   Peter Brinkley, Brinkley  Co.'s

          principal  shareholder, was  hired by  Athena  in April  1987 and

          eventually  became president  and CEO,  although he  was never  a

          shareholder.  

                    Athena  lacked financial  strength from  its inception.

          By June 30,  1987, it had  accumulated a  $648,848 deficit and  a

          negative  net worth.  In September of 1988, Brinkley Co. extended

          Athena an unsecured loan  and obtained a $100,000 demand  note in

          return.   At the  end of the following  fiscal year, Athena's net

          worth was minus $799,588 and its  financial position continued to

          erode throughout the following year as well.  

                    By September of 1989, Athena had lost seven of its nine

          clients.  Hanson Industries ("Hanson") and Nazareth Family Center

                              
          ____________________

               1We  relate the  evidence  in the  light  most favorable  to
          Brinkley Co.,  the party  resisting summary judgment.   Simon  v.
                                                                  _____
          FDIC, 48 F.3d 53, 56 (1st Cir. 1995).  
          ____

                                          2

          ("Nazareth") were  its only  remaining  clients.   On October  3,

          1989, Peter Brinkley  resigned and Matteucci resumed  the role of

          president.  On October  12, Brinkley Co. demanded payment  on its

          $100,000  note.   As payment  was not  forthcoming,  Brinkley Co.

          brought  the instant action  against Athena in  the United States

          District  Court  for  the  District of  Massachusetts.    Shortly

          thereafter, Peter Brinkley resigned as a director of Athena. 

                    On  December 9,  1989, one  Frank Griswold,  a business

          acquaintance  of Matteucci,  executed  Articles of  Incorporation

          establishing  Charles  River Management  Company,  Inc. ("Charles

          River"), a  new investment management  services company.   At the

          time, Griswold and Matteucci  understood that Matteucci would not

          be listed  as a  Charles River  stockholder or incorporator,  but

          that he would become its majority shareholder on May 1, 1990.2  

                    In  November  of  1989,  Looney  &  Grossman  undertook

          Athena's  representation  in the  Brinkley  Co.  action.3   After

          extensive  consultation, Matteucci  instructed Looney  & Grossman

          not  to  defend the  Brinkley Co.  action  against Athena  on the
          ___

          $100,000 demand note.   As a result, in due  course default judg-

                              
          ____________________

               2Matteucci's  brief  incorrectly  asserts that  there  is no
          evidence  that he planned to  join Charles River.   See Matteucci
                                                              ___
          Brief at n.13.   In a  letter dated May  30, 1991, Matteucci  in-
          formed Nazareth that  "[d]ue to a prearranged  agreement in place
          with  Frank [Griswold] at the time of incorporation, I became the
          majority shareholder of Charles River Management on May 1, 1990."

               3Brinkley  Co. contends  that Looney  & Grossman  became in-
          volved during the fall of  1988.  But though the record  reflects
          that  Looney &  Grossman  billed Matteucci  personally for  legal
          services during  that  time period,  Brinkley  Co. points  to  no
          evidence that this representation had anything to do with Athena.

                                          3

          ment was entered against Athena. 

                    On November 15, 1989,  Matteucci presented two alterna-

          tive proposals to Athena's  board of directors.  Under  the first

          proposal, Athena would  be dissolved; the  second called for  its

          complete  recapitalization.   Neither  proposal was  adopted  and

          Athena's  financial  position continued  to  worsen,  so that  by

          November 30, 1989, it had a $969,176 negative net worth.   By the

          end of calendar year 1989, it had lost an additional $142,036.  

                    On December 12, Athena was informed that Hanson, by far

          the larger of  Athena's two remaining  clients, would reduce  its

          fee payments to Athena by 60% as of January 1, 1990, and that  no

          additional funds would be invested in Hanson's short-term pension

          fund account with Athena.   These actions by Hanson  would reduce

          Athena's projected gross income for  the ensuing year by  thirty-

          seven percent.

                    Matteucci promptly called  a stockholders' meeting  for

          January  3, 1990, to  consider Athena's dissolution.   The notice

          discussed Athena's unmanageable debt and concluded as follows:

                    even if all the liabilities were forgiven, it
                    would still  be impossible to  continue since
                    Hanson Industries (our  only major  account),
                    which  has been extremely generous to Athena,
                    has reduced our fees by 60% on the  larger of
                    the two accounts that we manage for it.  As a
                    result,  we are  unable,  even  on a  minimum
                    basis, to meet the obligations of rent, tele-
                    phone,  and salaries  which are  necessary to
                    keep Athena's doors open.

                    With  seven-eighths  of  Athena's   outstanding  shares

          represented,  shareholders unanimously  voted to  liquidate.   On

          learning of the  liquidation, the two remaining Athena clients   

                                          4

          Hanson and  Nazareth     immediately terminated  their investment

          contracts.   Matteucci arranged  a sale  of Athena's  fixtures to

          Charles River, and resigned from all offices with Athena.  

                    On February 1, 1990, as previously  arranged, Matteucci

          joined Charles  River.   Shortly  thereafter,  and on  their  own

          initiative, Hanson  and Nazareth  transferred  their accounts  to

          Charles River.  In May, as planned, Matteucci became the majority

          stockholder  in Charles  River.   Approximately  one year  later,

          Looney & Grossman was retained to represent Charles River.

                                          II
                                          II

                                       ANALYSIS
                                       ANALYSIS
                                       ________

          A.   The Looney & Grossman Defendants4
          A.   The Looney & Grossman Defendants4
               ________________________________

                    As a judgment creditor, Brinkley Co. seeks to reach and

          apply  Athena's putative  cause of  action for  legal malpractice

          against the Looney  & Grossman defendants.  See Mass. Gen. L. ch.
                                                      ___

          214,    3(7) (permitting certain  causes of action  to be reached

          and applied); Bethlehem  Fabricators, Inc. v. H.D. Watts Co., 190
                        ____________________________    ______________

          N.E.  828, 833  (Mass. 1934)  ("a cause  of action  which  is not

          assignable cannot be reached and applied under [Mass. Gen. L. ch.

          214,   3(7)]").  There is no clear statement of Massachusetts law

          on whether such a cause of action may be reached and applied, and
                              
          ____________________

               4We review the summary judgment ruling de  novo to determine
                                                      __  ____
          whether 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.'" Simon, 48  F.3d at  56 (citations omitted).   The  parties
                 _____
          agree  that  the substantive  law  of  Massachusetts governs  all
          claims.

                                          5

          the  decisions in  other jurisdictions are  mixed.   The majority

          view  is that a legal malpractice claim  cannot be assigned.  See
                                                                        ___

          Continental Cas. Co. v. Pullman, Comley, Bradley & Reeves, 709 F.
          ____________________    _________________________________

          Supp. 44, 50 n.7  (D. Conn. 1989) (collecting cases),  aff'd, 929
                                                                 _____

          F.2d 103  (2d Cir. 1991).   We bypass this unsettled  question of

          Massachusetts law,  because,  as  the  district  court  correctly

          noted, Athena would have had no  viable malpractice claim against

          the Looney & Grossman defendants in any event.

                    Brinkley Co.  asserts that  Athena had three  bases for

          asserting a  malpractice claim.    First, the  Looney &  Grossman

          defendants  failed to  contest  the action  Brinkley Co.  brought

          against Athena.   Second, during  1990 certain Looney  & Grossman

          defendants  allegedly engaged  in dual representation  of Charles

          River  and  Athena.    Third, the  Looney  &  Grossman defendants

          allegedly failed to provide  Athena's creditors with the required

          bulk transfer  notice under Mass.  Gen. L.  ch. 106,    6-102, in

          connection with the sale of Athena's tangible assets.  We briefly

          address each contention in turn. 

                    First,  it is  undisputed  that Looney  & Grossman  was

          instructed by  Athena not to  answer the Brinkley  Co. complaint.
          __________ __  ______ ___

          See  Fleet Nat'l Bank v.  Anchor Media Television,  Inc., 45 F.3d
          ___  ________________     ______________________________

          546, 558 (1st  Cir. 1995)  (party may not  resort to  intentional

          self-contradiction to obtain unfair advantage).  Second, there is

          no record evidence whatsoever  that any Looney & Grossman  defen-

          dant simultaneously represented Athena and Charles River.  Third,

          the  Massachusetts bulk  transfer law  expressly applies  only to

                                          6

          "those whose  principal business is the sale  of merchandise from

          stock."  Mass.  Gen. L.  ch. 106,     6-102(3).   Athena  sold no

          merchandise  from stock, hence was not subject to the bulk trans-

          fer notice requirement.5  

                    Summary judgment  on  Brinkley Co.'s  civil  conspiracy

          claim  was appropriate  as  well.   It  is essential  to a  civil

          conspiracy claim  under Massachusetts  law that the  alleged con-

          spirators have  intended harm  to the plaintiff.   Robitaille  v.
                                                             __________

          Morse, 186  N.E. 78, 80 (Mass. 1933).   Brinkley Co. proffered no
          _____

          such evidence.  

          B.   Matteucci
          B.   Matteucci
               _________

                    Brinkley  Co. alleges  a breach  of the  fiduciary duty

          Matteucci owed as an officer of Athena.  The district court ruled

          that Matteucci owed no fiduciary duty, since  the corporate exis-

          tence of Athena had  been terminated before Matteucci first  dis-

          cussed with Griswold his plans to move over to Charles River with

          Athena's last two clients, Hanson and Nazareth.6  
                              
          ____________________

               5Since  the chapter 93A  claim brought by  Brinkley Co., see
                                                                        ___
          Mass. Gen. L. ch. 93A,    2 (unfair business practices), is based
          on the same allegations as the Brinkley Co. malpractice claim, it
          too fails.

               6The corporate opportunity doctrine,  on which the  district
          court  rested its ruling, allows a fiduciary to take advantage of
          a  business  opportunity  of  which the  principal  cannot  avail
          itself.  However,  "the corporate opportunity doctrine  is a rule
          of disclosure," Wartski  v. Bedford,  926 F.2d 11,  19 (1st  Cir.
                          _______     _______
          1991) (quoting In re Tufts  Elecs., Inc., 746 F.2d 915,  917 (1st
                         _________________________
          Cir.  1984)), which requires "a full and honest disclosure of all
          relevant circumstances to permit  a disinterested decision  maker
          to exercise its informed judgment."  Id. (quoting Dynan v. Fritz,
                                               __           _____    _____
          508  N.E.2d 1371,  1378 (Mass.  1987)).   There is  strong record
          evidence  that Matteucci failed to comply with this duty.  Conse-
          quently, we do  not rely on  the corporate opportunity  doctrine.

                                          7

                    Brinkley Co. contends on appeal that the district court

          disregarded evidence  that Matteucci breached his  fiduciary duty

          to Athena  by arranging for  the incorporation  of Charles  River

          prior to the dissolution vote on Athena.  It points to an affida-
          _____

          vit  by an Athena shareholder, stating that he would have opposed

          dissolution had he known of Matteucci's plans.  

                    A corporate  officer owes a fiduciary  duty, Wartski v.
                                                                 _______

          Bedford,  926 F.2d 11, 13 (1st Cir. 1991) (applying Massachusetts
          _______

          law),  to accord  "the  utmost good  faith  and loyalty"  to  the

          corporation.  Meehan v. Shaughnessy, 535 N.E.2d 1255, 1263 (Mass.
                        ______    ___________

          1989)  (citations  omitted).   Yet  this  fiduciary duty  is  not

          breached  simply by "secretly setting  up a new  firm during [the

          fiduciary's] tenure . .  . 'provided that in  the course of  such

          arrangements [the  fiduciary] do[es] not otherwise  act in viola-

          tion  of [his] fiduciary duties.'"  Id. at 1264 (quoting  Chelsea
                                              ___                   _______

          Indus.  v. Gaffney, 449 N.E.2d  320, 326 (Mass.  1983)).  Rather,
          ______     _______

          the corporate officer's duty is to refrain from "actively compet-

          ing  with his  employer  during the  tenure  of his  employment."
                                   ______

          Chelsea Indus., 449 N.E.2d at 326. 
          ______________

                    The scope of a corporate  officer's duty not to compete

          was outlined  in Meehan, where  law partners in  Parker, Coulter,
                           ______

          Dailey  &  White  ("Parker  Coulter") planned  and  structured  a

          competing  law  firm  while  still partners  in  Parker  Coulter.

                              
          ____________________

          See Simon, 48 F.3d at 57 n.1 (court of appeals may affirm "on any
          ___ _____
          ground supported in the record even if the issue was not pleaded,
          tried  or otherwise referred to in the proceeding below.") (cita-
          tions omitted).

                                          8

          Meehan, 535 N.E.2d  at 1257-59.   The SJC  nonetheless held  that
          ______

          there had been no breach  of their fiduciary duty.  Id.  at 1264.
                                                              ___

          The  SJC further held that  the fact that  the defendant partners

          had  induced Parker Coulter employees  to join the breakaway firm

          did not suffice to establish liability in the absence of "specif-

          ic losses resulting from this claimed breach."  Id.  at 1264 n.4.
                                                          ___

          At  the  same time,  the SJC  held  that the  defendant partners'

          secret solicitation of Parker Coulter's clients was an actionable

          breach of their fiduciary duty.  Id. at 1265.  The latter showing
                                           ___

          was not made in the instant case.            There  is  no record

          evidence that Matteucci informed either Hanson or Nazareth of the

          impending  move to  Charles  River until  after  Athena had  been
                                             _____  _____  ______ ___  ____

          dissolved and Matteucci was  no longer in its employ.   Moreover,
          _________ ___ _________

          there  is not a  scintilla of evidence  supporting Brinkley Co.'s

          allegation  that Athena  might yet  have been transformed  into a

          viable  concern.   On  the contrary,  Athena's debt  exceeded its

          assets by almost a  million dollars and it had  sustained serious

          operating losses  during its last three fiscal years.  Due to the

          projected  decline in  gross income  resulting from  Hanson's an-

          nounced cutbacks, Athena's future prospects  were grim to say the

          least.    Thus,  Athena's  vote of  dissolution  and  Matteucci's

          resignation were  anything but the untoward  developments posited

          by Brinkley Co. 

                    Accordingly, the  district court judgment  is affirmed.
                    ___________  ___  ________ _____ ________  __ ________

          Double  costs  are awarded  to the  Looney &  Grossman defendants
          ______  _____  ___

          only, pursuant to Fed. R. App. P. 38. 

                                          9