Brinkley v. Matteucci

Opinion

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June 28, 1995         [NOT FOR PUBLICATION]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



                              
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               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
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                    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

                              
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               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