Opinion
SUCV2016-2087-H
03-27-2017
Kenneth Carr v. Cesari & McKenna, LLP et al No. 136749
Douglas H. Wilkins, Justice
MEMORANDUM OF DECISION AND ORDER ON PLAINTIFF'S EMERGENCY SPECIAL MOTION BY PLAINTIFF KENNETH CARR TO DISMISS DEFENDANTS' COUNTERCLAIMS UNDER M.G.L.c. 231, § 59H.
Douglas H. Wilkins, Justice
In this legal malpractice case brought by Kenneth Carr (" Carr"), the Defendants, Cesari and McKenna LLP and Thomas O'Konski, have filed a first amended answer, Affirmative Defenses, and Counterclaims of the Defendants Cesari and McKenna, LLP [" Cesari" ] and Thomas O'Konski." (" Counterclaims"). Carr has brought " emergency Special Motion by Plaintiff Kenneth Carr to Dismiss Defendants' Counterclaims under M.G.L.c. 231, § 59H and for a Mandatory Award of Attorneys Fees." (" Motion"). After hearing on March 20, 2017, for the reasons set forth below, the Motion is ALLOWED IN PART and DENIED IN PART.
BACKGROUND
The court incorporates the description of the allegations of Carr's Complaint set forth in its Memorandum of Decision and Order on Defendants' Rule 12(b) Motion to Dismiss, dated January 31, 2017 (" January Decision"). It also considers the following facts and allegations from the Counterclaims, Affidavits and other papers before the Court. Where necessary the Court supplements this " Background" and resolves the conflicting factual assertions in the " Discussion" below.
Cesari asserts that it represented Meridian Medical Systems, LLC (" MMS") and its predecessor since at least 1993 and provided intellectual property advice and services. Carr, supported by the Affidavit of John McKenna, Esq., a former Cesari partner, asserts that Cesari also represented him individually. All of the patents Cesari prosecuted for MMS on which Carr was the named inventor were assigned to MMS with one exception, which was assigned to MMS's intellectual property licensee. However, the parties dispute whether Carr and McKenna acknowledged that this practice would not apply to invention in question.
The Court assumes that the following allegations of the Counterclaims are true: In the summer of 2013, when Cesari learned information about the extent and nature of the dispute between Carr and MMS, Cesari decided to withdraw from representing MMS. Carr asked Cesari to continue to represent MMS, according to Cesari. Carr allegedly told Cesari that there would be no conflict and that he would provide a comfort letter to that effect. Based on that representation, Cesari continued to represent MMS with respect to all of its intellectual property and patent matters. It is undisputed that Cesari never obtained a written waiver of conflict from Carr.
In September 2013, Cesari learned that the law firm of Preti Flaherty Belliveau & Pachios, Chartered LLP (" Preti Flaherty") was representing Carr in connection with the patent application at issue and his dispute with MMS. On or about September 20, 2013, Preti Flaherty filed a power of attorney at the United States Patent and Trademark Office (" USPTO") with respect to the relevant patent application. Cesari filed a petition to recognize MMS as " applicant" of that patent application. Neither Carr nor his counsel objected to that petition or Cesari's representation of MMS.
Cesari has not been paid $85,000 for legal work it performed on patent applications for MMS, including work on patents and applications that, according to Carr, Cesari represented Carr and MMS.
DISCUSSION
The Motion challenges the Counterclaim as a so-called SLAPP suit, subject to G.L.c. 231, § 59H (" § 59H"). See Chemrisk, LLC v. Foytlin, 476 Mass. 479, 68 N.E.3d 1180 (2017). Under § 59H, the moving party must show that the claims against it are based upon " the petitioning activities alone and have no substantial basis other than or in addition to the petitioning activities." Duracraft Corp. v. Holmes Prods. Corp., 427 Mass. 156, 167-68, 691 N.E.2d 935 (1998), quoted in Fabre v. Walton, 436 Mass. 517, 522, 781 N.E.2d 780 (2002). " '[B]ased on' does not mean 'in response to': although claims and related pleadings filed in court may be classified as petitioning activities, plaintiffs are not thereby immunized from counterclaims filed in response to the claim." Duracraft, 427 Mass. at 168, n.20. The Court therefore does not evaluate the Motion generally to determine whether, as Carr contends, the counterclaims are " retaliatory." See Keystone Freight Corp. v. Bartlett Consolidated, Inc., 77 Mass.App.Ct. 304, 314, 930 N.E.2d 744 (2010) (" attribution of a motive, alone is never sufficient"). A substantial counterclaim is not necessarily a SLAPP suit simply because it may be retaliation for being sued. " A special motion to dismiss will not succeed against a 'meritorious claim[ ] with a substantial basis other than or in addition to the petitioning activities implicated' (emphasis added)." Fabre, 436 Mass. at 524, quoting Duracraft, 427 Mass. at 167. If the moving party makes the threshold showing, the burden shifts to the opposing party to " demonstrate by a preponderance of the evidence that the [moving party's] petitioning activity was devoid of any reasonable factual support or any arguable basis in law." Fabre, 436 Mass. at 524.
A.
Carr must prove by a preponderance of the evidence " that the activity at issue is 'petitioning' activity within the purview of the anti-SLAPP statute and that the claims in the litigation 'are based on the petitioning activities alone and have no substantial basis other than or in addition to the petitioning activities.'" Fabre v. Walton, 436 Mass. 517, 522, 781 N.E.2d 780 (2002), quoting Duracraft Corp. v. Holmes Prods. Crop., 427 Mass. at 167-68. See also Office One, Inc. v. Lopez, 437 Mass. 113, 122, 769 N.E.2d 749 (2002); Baker v. Parsons, 434 Mass. 543, 550, 750 N.E.2d 953 (2001). Section 59H defines " a party's exercise of its right of petition" to include " any written or oral statement made before or submitted to a[n] . . . executive or judicial body . . ."
Here, many of the Counterclaims challenge Carr's complaint itself and the allegations made therein. Filing a lawsuit " is the paradigm of petitioning activity" within the definition of § 59H. Ehrlich v. Stern, 74 Mass.App.Ct. 531, 538, 908 N.E.2d 797 (2009), citing Wenger v. Aceto, 451 Mass. 1, 5-6, 883 N.E.2d 262 (2008) (" criminal claim brought in the Dedham District Court"). See also McLarnon v. Jokisch, 431 Mass. 343, 345, 727 N.E.2d 813 (2000) (application for an abuse prevention order under G.L.c. 209A). Moreover, the Anti-SLAPP Act protects more than just the filing of the lawsuit; it also protects statements in connection with the lawsuit, including, most obviously, the allegations of the complaint itself. " [A] party's exercise of its right to petition" the judiciary, specifically includes " any written or oral statement made in connection with an issue under consideration or review by a . . . judicial body, " or " reasonably likely to encourage consideration or review of an issue by a . . . judicial body . . ." G.L.c. 231, § 59H. See generally Chemrisk, 476 Mass. at 484-85. Duracraft Corp. v. Holmes Prods. Corp., 427 Mass. at 161-64; Office One, Inc. v. Lopez, 437 Mass. at 123 (2002) (noting the " broad definition of petitioning activity protected by the statute").
" Were filing the [lawsuit] the only conduct on which the complaint in this action focused, then it is clear that the case could not proceed." Ehrlich, 74 Mass.App.Ct. at 538. However, it is possible for a lawsuit to give rise to a cause of action that has a " substantial basis other than or in addition to the petitioning activities." Duracraft, 427 Mass. at 168. For instance, in that case, violation of a " nondisclosure agreement, . . . constitute[d] a substantial basis other than Marino's petitioning activity to support Duracraft's claims." Id. Other examples of legitimate claims arising from filing suit also exist:
Many preexisting legal relationships may properly limit a party's right to petition, including enforceable contracts in which parties waive rights to otherwise legitimate petitioning. A quintessential example of such a waiver is a settlement agreement, in which a party releases legal claims against an adversary that otherwise properly could be prosecuted by petitioning the court. [Note omitted.] But neither this example nor contractual or fiduciary relationships in general exhaust the conceivable occasions in which a party assumes obligations that in turn limit the party's subsequent free exercise of speech and petitioning rights.Id. at 165-66. With this background, the Court follows the Appeals Court's instruction to rule upon each counterclaim on an all-or-nothing basis:
[T]he anti-SLAPP inquiry produces an all or nothing result as to each count the complaint contains. Either the count survives the inquiry or it does not, and the statute does not create a process for parsing counts to segregate components that can proceed from those that cannot.Ehrlich, 74 Mass.App.Ct. at 536. It concludes that the plaintiff has shown that some, but not all, of the counterclaims are based upon an exercise of their right to petition.
Section 6F : The Counterclaims contain three sections that establish their nature, purpose and function to challenge Carr's exercise of his right to file this lawsuit. The " Introduction" expressly and directly challenges Carr's complaint in this case on the ground that Carr " filed the instant lawsuit in bad faith and aware that his allegations are false and unsupportable." Counterclaims at 12. The Defendants essentially repeat these allegations in paragraphs 45-41 of the Counterclaims, which they later expressly incorporate into every count . See Counterclaims, ¶ ¶ 52, 58, 63, 67, 74. As a result, the Counterclaims, both as a whole and on an individual basis, all include allegations based on the allegedly wrongful filing of the complaint. Finally, the section entitled " Violation of Chapter 231, § 6F" states that " Carr's claims are wholly insubstantial, frivolous and not advanced in good faith." Counterclaims at 23. It seeks affirmative relief, reflected in paragraph C of the Counterclaims' prayer for relief and is, for all intents and purposes, Count VI of the Counterclaims, though not expressly labeled as such. These sections of the Counterclaims go on to particularize these challenges to the Complaint and, ultimately to assert a right to relief in the form of attorneys and costs pursuant to G.L.c. 231, § 6F. Id., 12-13, 23-24. Carr's Motion (at 7-8) begins by challenging these passages.
Section 59H attaches no significance to the fact that the Counterclaims label these portions " Introduction" and " Violation of Chapter 231, § 6F" as opposed to " Count I" and " Count VII." Rather, it assesses the " counterclaims" by reference to the " facts upon which the liability or defense is based." G.L.c. 231, § 59H. In any event, the same allegations are eventually expressly incorporated into each count.
A counterclaim alleging violation of § 6F is based on petitioning activities. See Brooks Automation, Inc. v. Blueshift Technologies, Inc., No. 05-3973-BLS2 (Mass.Super. 1/24/2006) (Gants, J.) (" This Court declared that, if Blueshift's counterclaim had been fashioned as a common-law claim of abuse of process or a statutory claim that Brooks' complaint was frivolous and in bad faith under G.L.c. 231, § 6F, the counterclaim would plainly have been based on Brooks' petitioning activities"), citing Fabre v. Walton, 436 Mass. at 523-24; Donovan v. Gardner, 50 Mass.App.Ct. 595, 740 N.E.2d 639 (2000). Moreover, there is no plausible claim for violation of § 6F until after " 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. G.L.c. 231, § 6F." At this point, therefore, the § 6F claim is baseless. To bring such a claim at the pleadings stage, without legislative authorization, is squarely " based on petitioning activity" within the meaning of § 59H and has no substantial basis beyond the petitioning activity.
Not surprisingly, the Appeals Court has ruled that the anti-SLAPP statute does not apply to postjudgment motions under G.L.c. 231, § 6F, which the Legislature specifically authorized after a finding in favor of the moving party. Coalition to Preserve the Belmont Uplands and Winn Brook Neighborhood v. Commissioner of the Department of Environmental Protection, 84 Mass.App.Ct. 1118, 996 N.E.2d 499 (2013) (Rule 1:28 Decision). The legislature did not however, sanction a SLAPP counterclaim under § 6F and has specifically prohibited it under § 59H.
Abuse of Process : After service of the Motion, but before filing, the Defendants amended the Counterclaims by, among other things, nominally removing their Abuse of Process count (although retaining much of the verbiage). They argue that this deprives the Court of authority to consider their potential exposure under the Anti-SLAPP law for alleging abuse of process in the first place. Nothing in the statute supports that position. Section 59H entitles a party to " bring a special motion to dismiss" if " the civil . . . counterclaims against said party are based on" the party's exercise of the right to petition. Unlike some other fee-shifting provisions, § 59H allows no safe harbor for a party who files an offending pleading, but withdraws it before the hearing. Compare Fed.R.Civ.P. 11(c)(2) (A motion for Rule 11 sanctions " must not be filed or be presented to the court if the challenged paper, claim, defense, contention, or denial is withdrawn or appropriately corrected within 21 days after service or within another time the court sets"). Nor does the statute confer jurisdiction on a count-by-count basis; as long as one count is dismissed under § 59H, the Court has discretion to award fees without necessarily even excluding time spent on a legitimate, surviving count. Polay v. McMahon, 468 Mass. 379, 388, 10 N.E.3d 1122 (2014). It follows a fortiori that, as long as the Court grants the special motion as to any count, the disposition of other counts imposes no jurisdictional limitation on the Court's consideration of the entire complaint. Because the Court in this case ultimately " grants [a] special motion to dismiss" the plain language of the statute provides that " the court shall award the moving party costs and reasonable attorneys fees." Connolly v. Sullivan, 76 Mass.App.Ct. 316, 318, 921 N.E.2d 1017 (2010), quoting G.L.c. 231, § 59H.
It is not even clear that the Counterclaims, as amended, actually do omit an abuse of process claim, given the allegations of ¶ 45-51, which appear to set forth the facts underlying an abuse of process claim. The rules of pleading do not require naming specific legal theories, as opposed to the facts underlying those theories. Pontremoli v. Spaulding Rehabilitation Hosp., 51 Mass.App.Ct. 622, 626 n.4, 747 N.E.2d 1261 (2001), quoting Whitinsville Plaza, Inc. v. Kotseas, 378 Mass. 85, 89, 390 N.E.2d 243 (1979).
The Defendants cited Brice Estates v. Smith, 76 Mass.App.Ct. 394, 396, 922 N.E.2d 800 (2010) in support of their position, but the general principles articulated in that case do not establish a right to avoid paying attorneys fees simply by withdrawing a SLAPP suit.
The Defendants' reliance upon Connolly is not persuasive, because in that case, the Superior Court ruled that the special motion to dismiss became moot once the plaintiff dismissed his complaint in its entirety. Connolly v. Sullivan, 76 Mass.App.Ct. 316, 921 N.E.2d 1017 (2010). Unlike in this case, no court therefore ever " grant[ed a] special motion to dismiss" within the meaning of the statute.
Moreover, allowing a party to file a SLAPP suit and avoid liability if the other side incurs the expense of defending and filing a special motion to dismiss would perpetrate the harm that § 59H seeks to prevent: " [t]he object of a SLAPP [footnote omitted] suit is not necessarily to prevail, but rather, through the difficulty and expense of litigation, to discourage and intimidate individuals from exercising their constitutional right of petition." Chemrisk, 476 Mass. at 483. Indeed, in this very case, the Defendants initially used their abuse of process counterclaim as a bargaining chip, in an attempt to leverage concessions from Carr before unilaterally withdrawing that claim. While that strategy may reduce the amount of fees incurred by the moving party, the Court does not agree that an offending party can avoid § 59H liability entirely, through hit-and-run tactics.
Applying § 59H to abuse of process claims can be problematic, because the tort actually requires proof of petitioning activity, namely the use of judicial process. See Vittands v. Sudduth, 49 Mass.App.Ct. 401, 406, 730 N.E.2d 325 (2000). The Courts have interpreted and applied the anti-SLAPP statute to " continue to permit, where appropriate and consistent with the intent of § 59H, claims of abuse of process as delineated by the Massachusetts common law." Keystone Freight Corp. v. Bartlett Consolidated, Inc., 77 Mass.App.Ct. 304, 930 N.E.2d 744 (2010). Specifically addressing an abuse of process claim, the Appeals Court has stated the applicable test:
We are required to determine . . . whether Bartlett has established that there is no conduct on its part other than filing the claim . . . To hold that evidence of improper action, separate and distinct from the exercise of petitioning activity, is necessary as a threshold requirement simply means that attribution of a motive, alone is never sufficient . Considering the foregoing standard, properly understood, we believe that Bartlett failed to meet its threshold burden.Id., 77 Mass.App.Ct. at 314 (Emphasis added.) The Appeals Court found that the plaintiff alleged improper conduct by the defendant " before, after and separate from Bartlett's petitioning activity." Id., 77 Mass.App.Ct. at 315. The defendant filed a collection action " immediately after being notified of" plaintiff's growing concerns over billing practices it later mailed an offer for " almost twice [the] estimated fair market value of" the defendant's services, a tactic which was " arguably consistent with an attempt . . . to coerce payment of its inflated bill." Id. These and other facts showed that the " abuse of process claim [was] more than a bald and unfounded accusation and withstands the special motion to dismiss pursuant to § 59H." Id., 77 Mass.App.Ct. at 316.
This case stands on different footing. While the Defendants claim that Carr filed this case in order to gain the right to engage in harassing discovery, they provide no evidence to back up this allegation. It is actually Carr who seeks an early resolution of this case, which seems incompatible with any intention to drag out discovery. It is the Defendants who have resisted expediting this case. Moreover, the Defendants have cited other litigation pending between the parties. That litigation would apparently provide ample basis for discovery, making the allegation of a discovery-related motive in this case implausible, at least on the surface. And the Defendants offer nothing more than their conclusory claim on that point. In short, the defendant's evidence of ulterior motive is speculative and insubstantial; it does not provide " independent evidence of ulterior motive [that] was not solely based on the party's use of process"; nor is there a " substantial basis other than or in addition to the petitioning activities implicated." Keystone, 77 Mass.App.Ct. at 315, 316, quoting Fabre at 524, quoting Duracraft at 167.
Contract : Counterclaim Count I (" Contract Count") alleges breach of contract, including the breach of the covenant of fair dealing. The Defendants preserve their right to contest Carr's claims, but argue in the alternative that, if there was a contract, Carr owed them fees for legal services. The Defendants never asserted a contract claim until they filed their Answer. They actually deny that there was ever a contract between them and Carr. It seems clear that Carr's complaint " served as the genesis for the [Defendants'] decision to file" the Contract Count, but that, without more, is not enough to establish a SLAPP suit. Brice Estates v. Smith, 76 Mass.App.Ct. 394, 396, 922 N.E.2d 800 (2010).
The crux of the Contract Count appears in paragraph 53 of the Counterclaims, which reads:
If Carr's claims are determined to be true--although denied by Cesari--then he and Cesari entered into a valid and enforceable contract whereby Cesari agreed to perform legal services on Carr's personal and individual behalf and Carr agreed to pay Cesari for its legal fees. Cesari would not have agreed to provide pro bono services to Carr.
Also relevant are paragraphs 15 and 16, in which the Defendants allege that " Cesari billed MMS and never sent an invoice for legal services to Carr. MMS paid Cesari's legal bills. Carr never paid Cesari's invoices."
Unlike the typical SLAPP suit, these claims do not allege that the petitioning activity itself violated the applicable legal rule; in other words there is no claim that the petitioning activity breached a contract or violated the implied covenant of good faith and fair dealing. Rather, Carr asserts that the Contract Count is retaliatory--filed only to punish Carr for bringing this lawsuit. Under that theory, it appears that Carr can prevail if he proves not only that the Contract Count is a mere pretense for attacking Carr's petitioning activity, but also that the Contract Count is based on petitioning activities alone:
This indicium of pretense asserted by the defendants would have legal relevance had they demonstrated that the claims against them were based on petitioning activities alone, thereby requiring the plaintiffs to demonstrate actual injury.Brice, 76 Mass.App.Ct. at 396, n. 4.
Here, two aspects of the Contract Count, taken together, convince the Court that this claim is pretextual. First, as discussed above, the Counterclaims begin and end with entire sections devoted to the alleged bad faith filing of Carr's lawsuit. The substance of those sections is incorporated by reference into Count I. There is no need to look further to discern the Defendants' intent to hold Carr accountable for exercising his right to petition in this case.
Second, the Contract Count reflects no claim or evidence that there was ever any offer, let alone acceptance, of any arrangement that would require Carr to make any payments to Defendants. Obviously, offer and acceptance are among the most basic and indispensable elements of a contract claim. Chicopee Concrete Serv., Inc. v. Hart Eng'g Co., 20 Mass.App.Ct. 315, 318, 479 N.E.2d 748 (1985). See generally; McCarthy v. Tobin, 429 Mass. 84, 87, 706 N.E.2d 629 (1999). Strikingly missing from this case, including the Counterclaims, are any allegations to support the allegation of contract formation with respect to pay for Cesari's services by Carr. The only allegations of a contract depend upon " Carr's claims" themselves. But, although Carr claims that the Defendants represented him personally, nothing in his complaint or elsewhere includes any statement or allegation to support a contention that he offered or agreed to pay the Defendants.
The assertion in paragraph 53 of the Counterclaims that the Defendants have a contract claim " [i]f Carr's claims are determined to be true" therefore has no basis, because Carr's claims include nothing about Carr paying the Defendants. At oral argument the Defendants stressed the statement in paragraph 53 that " Cesari would not have agreed to provide pro bono services to Carr." That conditional statement does not obviate the need for pleading and proving an actual offer and acceptance. Cesari's unexpressed intentions or policies do not substitute for objective manifestations of an offer and acceptance. Nor does the last sentence of paragraph 53 necessarily imply an agreement to pay. Cesari's own allegations (¶ ¶ 15, 16) show that the Defendants looked to MMS for payment, which is consistent with Carr's claim--an attorney may represent multiple clients and look only to one source for payment, particularly if, as here, one client is an organization and the other client is a principal in the organization. In short, the Defendants neither plead, nor provide evidence to support, any facts that would plausibly show that any offer and acceptance included a term requiring Carr to pay them. Literally no one and nothing supports an alleged contractual obligation for Carr to pay Defendants anything.
Ordinarily, a contract claim would be based on something other than petitioning. See Duracraft, 427 Mass. at 165-66, 168. Here, however, the contract claim has no substantial basis at all. It therefore cannot have any " substantial basis other than or in addition to the petitioning activities." Fabre, 436 Mass. at 522. It is part of a document that--sometimes explicitly and sometimes implicitly--seeks to punish or pressure Carr for filing his complaint. Though unstated, that is the sole function of the Contract Count.
Accordingly, the Court finds the Contract Count to be pretextual and based on the petitioning activities alone. As such, it is a SLAPP suit claim.
Since the Court has found other explicit SLAPP claims, this does not affect the Defendants' overall liability under § 59H, but it does affect the Court's discretion, discussed in part C below. Thus, even if the Contract Count did not themselves qualify as SLAPP claims, the Court would not reduce attorneys fees for that reason, because those claims (SLAPP or not) are part of the same effort that explicitly constitutes a SLAPP suit.
Counts II and III (Breach of the Covenant of Good Faith; Quantum Meruit ): While Counts II and III assert different legal theories, they focus upon nearly the same allegation (¶ ¶ 59, 64):
If Carr's claims are determined to be true--although denied by Cesari--then Carr and Cesari entered into a valid and enforceable contract and Carr had a duty to perform its [sic] obligations fairly and in good faith. If Carr's claims are determined to be true--although denied by Cesari--then Carr, wrongfully and in violation of the fiduciary duties he owed to MMS, induced Cesari to bill MMS for legal work actually performed for Carr.
Like the Contract Count, these claims do not allege that filing this lawsuit violated any duty of good faith or created a right to recover in quantum meruit; rather, they are included within Counterclaims that do challenge Carr's right to petition and can only proceed if they have some substantial basis apart from challenging the right to petition.
These counts do have a basis in Carr's own allegations and evidence that the Defendants represented him individually. They also affirmatively allege that the parties agreed (Count II) or expected (Count III) that there would be an attorney-client relationship pursuant to which Cesari would be paid by MMS. Those allegations are also consistent with Carr's allegations and evidence. These agreements or expectations exist apart from the filing of this complaint.
Like any contract, the contract alleged in Count II has an implied covenant of good faith and fair dealing. Anthony's Pier Four, Inc. v. HBC Assocs., 411 Mass. 451, 471, 583 N.E.2d 806 (1991). This covenant provides that neither party " shall do anything that will have the effect of destroying or injuring the right of the other party to receive the fruits of the contract." Id. at 471-72, quoting Druker v. Roland Wm. Jutras Assocs., 370 Mass. 383, 385, 348 N.E.2d 763 (1976). The covenant does not create rights and duties not otherwise provided for in the existing contractual relationship. Uno Rests., Inc. v. Boston Kenmore Realty Corp., 441 Mass. 376, 385, 805 N.E.2d 957 (2004). If true, the allegation that Carr misled Cesari and wrongfully caused Cesari to bill MMS for Carr's alleged own legal work would indeed establish that he deprived Cesari of the fruits of the contract, namely payment for services rendered.
The usual incidents of an attorney-client relationship, combined with the parties' course of dealing, and Carr's acceptance of services for which he knew ABM expected compensation, would also permit a jury to find that (1) MMS had a contractual duty to pay Cesari directly, (2) Carr caused Cesari to deliver services for which he knew or should have known that MMS would not pay, and (3) Carr was unjustly enriched by receiving the benefit of Cesari's work, performed with expectation of payment, as Melcher knew. Without in any way relying upon the filing of this suit, these facts might support recovery in contract or in the alternative, in quantum meruit or unjust enrichment. See generally Santagate v. Tower, 64 Mass.App.Ct. 324, 329, 833 N.E.2d 171 (2005) (elements of an unjust enrichment claim). To be sure, this case is not the typical quantum meruit case, because on the allegations of the Counterclaims, the defendant received a benefit for which he expected someone else (MMS) to pay. It may be open for debate whether quantum meruit recovery is available in this type of case, but the argument does not appear to be foreclosed by controlling precedent.
It follows that Counts II and III have a substantial basis other than or in addition to the petitioning activities. Accordingly, the Court does not need to decide whether those counts were pretextual. Brice, 76 Mass.App.Ct. at 396, n.4. Counts II and III are not SLAPP claims.
Fraud and Negligent Misrepresentation : Count IV alleges fraud in language that appears almost verbatim in paragraph 75 of Count V (Negligent Misrepresentation):
68. As described above, Carr made material false statements to Cesari and material omissions. The misrepresentations and material omissions include, but are not limited to, telling Cesari that Carr would provide assurances in the form of a comfort letter that Carr agreed to Cesari's continued representation of MMS, telling Cesari that there was no conflict of interest in Cesari's representation of MMS even though Carr was in a dispute with his son and with MMS including about the ownership of the Cool Cable Patent Application, failing to respond to Cesari to object to Cesari's representation of MMS or to limit Cesari's representation of MMS to exclude any particular issues, patents, or patent applications, and failing to object to Cesari's representation of MMS at the USPTO in connection with the Cool Cable Patent Application when Carr's patent counsel knew or should have known Cesari was representing MMS.
Whether intentional or negligent, most of the alleged misrepresentations concern matters governed by the Massachusetts Rules of Professional Conduct, SJC Rule 3:07 (" R.Prof.Cond."). Under R.Prof.Cond. 1.7(b)(4), an attorney may not represent clients if a concurrent conflict of interest exists unless, among other things, " each affected client gives informed consent, confirmed in writing ." A client's representation that he would give a " comfort letter" cannot possibly induce reasonable reliance by a lawyer as a matter of law, because: (1) if there is a conflict of interest (as Carr claims), the consent must actually be " confirmed in writing" not just promised writings, and (2) if there is no conflict (as Defendants claim), then the " comfort letter" is unnecessary and inconsequential. Those conclusions flow from the basic rationale for R.Prof.Cond. 1.7(b)(4): " the writing is required in order to impress upon clients the seriousness of the decision the client is being asked to make and to avoid disputes or ambiguities that might later occur in the absence of a writing." R.Prof.Cond. 1.7, Comment 20 (" Consent Confirmed in Writing"). Similar rules apply to representation of parties adverse to Carr, as a former client. R.Prof.Cond. 1.9(a) (requiring " informed consent, confirmed in writing) and Comment 9. The present dispute, or ambiguity (depending upon one's perspective), cannot be attributed to Carr, simply because he did not provide a written consent. Under the Rules, that was a red flag that required the Defendants to follow their obligations as professionals.
Likewise, " telling [attorneys] that there was no conflict of interest in the [attorneys'] representation of a second client has no legal effect. R.Prof.Cond. 1.7 and 1.9 place the burden on the lawyer, not the client, to make the judgment whether a conflict exists and whether concurrent representation (or successive) may proceed without materially limiting the lawyer's responsibilities to both clients. The lawyer cannot delegate this responsibility to the client. If there was no conflict, then Carr's alleged statement was correct. If not, then Cesari had no business representing two clients without fully complying with R.Prof.Cond. 1.7 and 1.9. Either way, the Defendants cannot show that the client's statements were material or that their reliance on those statements was reasonable.
Count IV also alleges " failing to respond to Cesari to object to Cesari's representation of MMS" and " failing to object to Cesari's representation of MMS at the USPTO." A failure to object is not a representation, nor does Count IV allege otherwise. Because these assertions fail to allege any misrepresentation they do not state a claim for fraud.
" At a minimum, a plaintiff alleging fraud must particularize the identity of the person(s) making the representation, the contents of the misrepresentation, and where and when it took place. In addition, the plaintiff should specify the materiality of the misrepresentation, its reliance thereon and the resulting harm." Equipment & Systems for Industry, Inc. v. Northmeadows Construction Co., Inc., 59 Mass.App.Ct. 931, 931-32, 798 N.E.2d 571 (2003) (rescript). Count IV fails this test for the reasons just stated. Count V likewise fails to state a substantial basis for a negligent misrepresentation claim. " In order to recover for negligent misrepresentation a plaintiff must prove that the defendant (1) in the course of his business, (2) supplies false information for the guidance of others, (3) in their business transactions, (4) causing and resulting in pecuniary loss to those others, (5) by their justifiable reliance upon the information, and (6) with failure to exercise reasonable care or competence in obtaining or communicating the information." Nota Construction Corporation v. Keyes Associates, Inc., 45 Mass.App.Ct. 15, 19-20, 694 N.E.2d 401 (1998).
Since the Court has found no basis for any allegation that the Defendants reasonably relied upon alleged misrepresentations bearing upon their professional responsibilities, and alleged failures to object do not constitute representations. Counts IV and V lack any substantial basis at all. They therefore have no substantial basis other than Carr's petitioning activity. Like the other counts, they are part of the Counterclaims' assault on Carr's complaint itself. With that motivation, and lacking any substantial basis, they are SLAPP claims.
Finally, the repeated allegation of Carr's bad faith and improper motives in filing this suit do not defeat Carr's showing that the Counterclaims lack a substantial basis other than or in addition to the petitioning activity:
Notwithstanding his allegations concerning the motive behind Walton's conduct, the fact remains that the only conduct complained of is Walton's petitioning activity. There is no " substantial basis for the claim other than that petitioning activity."Fabre, 436 Mass. at 524. In other words, " the motive behind the petitioning activity is irrelevant at this initial stage [citation omitted]. The focus solely is on the conduct complained of, and, if the only conduct complained of is petitioning activity, then there can be no other 'substantial basis' for the claim." Office One, Inc. v. Lopez, 437 Mass. 113, 122, 769 N.E.2d 749 (2002), citing Fabre, 436 Mass. at 524.
Fabre does not claim that Walton made subsequent use of the 209A order to coerce or obtain a collateral advantage or for some other illegitimate purpose.
B.
Since Carr has met his initial burden, the Defendants must show that the plaintiff's claims lack reasonable support in the facts and law and that they have suffered actual injury as a result. The first requirement is " difficult to meet" and requires showing that " no reasonable person could conclude" that the Complaint is supported either in fact or law. Keegan v. Pellerin, 76 Mass.App.Ct. 186, 190, 920 N.E.2d 888 (2010), quoting North Am. Expositions Co., Ltd. Partnership v. Corcoran, 452 Mass. 852, 865, 866, 898 N.E.2d 831 (2009). See Baker v. Parsons, 434 Mass. 543, 553-54, 750 N.E.2d 953 (2001).
In its January Decision, the Court already ruled that the plaintiffs' complaint states a claim upon which relief can be granted. That does not necessarily mean that the complaint has reasonable support in the facts and law, because § 59H allows the Court to consider affidavits and materials beyond the pleadings. See The Cadle Co. v. Schlichtmann, 448 Mass. 242, 248, 859 N.E.2d 858 (2007).
Parts of Carr's claim are undisputed. The Defendants acknowledge that they submitted a patent application adding someone other than Dr. Carr as an inventor, followed by another application that removed Dr. Carr as an inventor and a petition to change the applicant from Dr. Carr to MMS. Cesari also issued an opinion letter, dated September 5, 2013, adverse to Carr, stating that " a well-informed court would find that an implied contract existed between Ken Carr and [MMS] obligating him to assign the patents [sic] rights in the Patent Application to MMS" and that Robert C. Allison should have been named as co-inventor at least in part. There is more than sufficient support for the allegations the Defendants acted adversely to Carr.
The Defendants vehemently contest the other key factual allegations of the complaint:
. . . Counterclaim Defendant knows that he was not an individual client of Cesari and that, in 2013, Cesari agreed to continue to represent MMS based on Counterclaim Defendant's false and fraudulent assurances, meant to induce Cesari to continue that representation, and on which Cesari specifically relied to its detriment. Counterclaim Defendant also knows that the invention disclosed in the patent application . . . was conceived and reduced to practice when Counterclaim Defendant shareholder of [MMS], that the invention was conceived and reduced to practice using the resources and facilities of MMS in the ordinary course or [sic] business of MMS and, in particular, while MMS was doing work for an existing MMS customer, and that the invention was of great importance to MMS's business and were squarely within the nature of MMS's business.
Counterclaims, " Introduction." To the extent that they contend that Carr " knew" any of this, the Defendants have failed to prove that the Complaint is devoid of reasonable factual and legal support.
As to the Defendants' claim that they never represented Carr individually, former partner John McKenna, Esq., has stated under oath that, while he was practicing at Cesari " Ken Carr, [MMS] were long time clients of our law firm." McKenna Aff, ¶ 2. This supports claims that Dr. Carr was one of Cesari's clients. Attorney McKenna's affidavit also supports Carr's position that Cesari was aware that Dr. Carr intended to keep the patent rights to himself personally.
. . . Ken Carr informed me that he purposely did not assign ownership of the Application to MMS because of a conflict with his son, Jeff Carr . . . C& M filed the Application on behalf of Ken Carr with the understanding that, under the circumstances, he would not assign the rights to the Application to MMS.
McKenna Aff, ¶ ¶ 6-7. The Defendants themselves plead (Counterclaims ¶ 22) that Carr wrote them in April 2013: " Not assigning the patent was intentional on my part. I had informed John McKenna at the time and he indicated that I could hold off on doing so. It has been my intent to assign the patent but I need another 6 weeks before I make that decision." The affidavits and other materials before the Court therefore demonstrate a sufficient basis for the allegations of the complaint, which the Court has already held state a claim.
In support of their position, the Defendants have submitted the Declaration of Michael Attaya, Esq. to support for their own claim that the firm never represented Carr individually. They have also submitted various pleadings and rulings from federal agencies or the U.S. District Court for the District of Maine. While those materials unquestionably support the Defendants' position, none of them conclusively proves that Carr lacks any basis for his claims. The Court cannot take notice of the truth of the statements in the Defendants' submissions, or resolve the question who could claim the patent if Carr had received the loyalty and representation he claims he should have received. The Defendants might be right, but, for now, it is their burden under § 59H to show that Carr's claims lack reasonable support in the facts and the law. They have not met that burden.
The Defendants' contention about the excessive nature of Carr's damage claim is puzzling. Opp. at 18-19. Even a small damage claim would still provide a legitimate basis for filing a complaint. Indeed, the Defendants' own claim for $85,000 appears to include payment for service rendered to MMS generally and therefore would likely overstate any alleged damages attributable to Carr. The Court treats the potential overstatement of damages by both sides as a non-issue for purposes of the Motion.
C.
When a Court grants a special motion to dismiss under § 59H, an award of attorneys fees and costs to the moving party is " mandatory." Polay v. McMahon, 468 Mass. 379, 388, 10 N.E.3d 1122 (2014), quoting North Am. Expositions Co., Ltd. Partnership v. Corcoran, 452 Mass. 852, 872, 898 N.E.2d 831 (2009). " The moving party need not prevail on all counts to qualify for an award, although a judge has discretion to reduce the award to account for such limited success." Polay, 468 Mass. at 388.
As prevailing party, the plaintiff is entitled to attorneys fees in connection with the Motion. To fix the amount, he shall file a motion pursuant to Superior Court Rule 9A.
ORDER
For the reasons discussed above, it is hereby ORDERED that:
1. Plaintiff's Emergency Special Motion to Dismiss under G.L.c. 231, § 59H is allowed as to Counts I, IV and V of the Counterclaim . Those claims are dismissed under G.L.c. 231, § 59H.
2. The Plaintiff is entitled to attorneys fees and costs relating to the Motion. He shall serve his Motion for Attorney Fees no later than April 14, 2017.
3. The Motion is otherwise DENIED.