CHAD CROWTHER v. JOEL ASADOORIAN & Another.

• Court: Massachusetts Appeals Court
• Decided: October 8, 2024
• Docket: 23-P-0207
• Status: Unpublished

Opinion

NOTICE: Summary decisions issued by the Appeals Court pursuant to M.A.C. Rule 23.0, as appearing in 97 Mass. App. Ct. 1017 (2020) (formerly known as rule 1:28, as amended by 73 Mass. App. Ct. 1001 [2009]), are primarily directed to the parties and, therefore, may not fully address the facts of the case or the panel's decisional rationale. Moreover, such decisions are not circulated to the entire court and, therefore, represent only the views of the panel that decided the case. A summary decision pursuant to rule 23.0 or rule 1:28 issued after February 25, 2008, may be cited for its persuasive value but, because of the limitations noted above, not as binding precedent. See Chace v. Curran, 71 Mass. App. Ct. 258, 260 n.4 (2008).

COMMONWEALTH OF MASSACHUSETTS

APPEALS COURT

23-P-207

CHAD CROWTHER

vs.

JOEL ASADOORIAN & another.1

MEMORANDUM AND ORDER PURSUANT TO RULE 23.0

The plaintiff was a patron at Finn's Pub (the pub) in

Lowell on March 18, 2015, when he sustained injuries in an

altercation with a "patron or . . . employee" of the pub. Three

years later, he initiated this lawsuit against, among others,

defendants Joel Asadoorian and Mill City Suds (collectively,

defendants), who had acquired and managed the pub ten months

after the incident, asserting various theories of liability. A

Superior Court judge granted the defendants' summary judgment

motion and judgment entered on December 20, 2022. On appeal,

1Mill City Suds, Inc. Defendants Hayhurst Group, Inc., Finn's Pub, Kevin V. Hayhurst, Eric Finn, LD Holdings LLC, and Lauren DiSalvo did not participate in this appeal. the plaintiff makes four arguments: (1) the defendants are

directly liable for negligence, (2) Asadoorian is liable because

he had formed a partnership with the previous owners, (3) the

defendants are subject to successor liability, and (4) the

defendants should be sanctioned for failure to preserve

evidence. We affirm.

Background. We briefly summarize the facts from the

summary judgment record in the light most favorable to the

plaintiff, reserving certain facts for later discussion. See

Milliken & Co. v. Duro Textiles, LLC, 451 Mass. 547, 550 n.6

(2008). The Hayhurst Group owned and operated the pub, a bar in

Lowell, Massachusetts. At some point in 2014, Asadoorian sought

to purchase the pub and approached Kevin Hayhurst (Hayhurst),

the Hayhurst Group's principal. On November 23, 2014,

Asadoorian and Hayhurst entered into a management agreement

whereby Asadoorian agreed to "take over management of finns pub

[sic] with full authority to operate the businesses [sic] normal

day to day operations. . . . This agreement will end upon

completion of the sale of the business to mill city suds [sic]

Inc."

While managing the pub, Asadoorian and Hayhurst experienced

disagreements about the "allocation of funds" of the pub. As a

result, on March 8, 2015, Asadoorian stepped away from his

2 management position, and signed a "Release of Management"

agreement.

Negotiations for the purchase of the pub resumed in late

July 2015. On September 29, 2015, Hayhurst executed a bill of

sale of the property and the liquor license associated with the

property to Mill City Suds, a company owned by Asadoorian. Mill

City Suds was not approved for a license transfer by the

Massachusetts Alcoholic Beverages Control Commission until

December 8, 2015. After several months of the company not

returning a profit, Asadoorian sold the pub to Lauren DiSalvo

and LD Holdings on October 4, 2016, and executed an "Asset

Purchase and Sale Agreement."

On March 18, 2015, before the defendants had executed their

bill of sale with Hayhurst and ten days after Asadoorian signed

the Release of Management agreement, the plaintiff sustained

injuries while attempting to assist another patron during an

altercation at the pub. The plaintiff asserts that the person

who carried out the assault was "another patron or a Finn's

[Pub] employee." The plaintiff brought suit against the

Hayhurst Group, Kevin Hayhurst, and Eric Finn, the pub's

manager. He also asserted claims against Mill City Suds,

Asadoorian, LD Holdings, and Lauren DiSalvo. In December 2019,

the plaintiff voluntarily dismissed his claims against LD

Holdings and DiSalvo. On November 16, 2020, a Superior Court

3 judge allowed Mill City Suds' and Asadoorian's motion for

summary judgment. In December 2022, the plaintiff entered into

a settlement with the Hayhurst Group, Kevin Hayhurst, and Finn.

This appeal followed.

Discussion. We apply the familiar standards of summary

judgment review:

"[A] party moving for summary judgment in a case in which the opposing party will have the burden of proof at trial is entitled to summary judgment if he demonstrates, by reference to material described in Mass. R. Civ. P. 56 (c), [as amended, 436 Mass. 1404 (2002),] unmet by countervailing materials, that the party opposing the motion has no reasonable expectation of proving an essential element of that party's case. To be successful, a moving party need not submit affirmative evidence to negate one or more elements of the other party's claim."

Kourouvacilis v. General Motors Corp., 410 Mass. 706, 716

(1991).

The plaintiff makes three arguments regarding the

defendant's liability: (1) that the defendants are directly

liable in tort, (2) that the defendants formed a partnership or

joint venture with the pub's former owners/operators and

therefore are liable, and (3) that the defendants are liable as

successors to the pub's former owners/operators. Additionally,

the plaintiff asserts that the defendants should be sanctioned

for not preserving certain evidence.

Direct liability. The plaintiff first asserts that the

defendants are directly liable for his injuries because

4 Asadoorian negligently failed to improve the pub's security,

failed to adequately capitalize Mill City Suds, and destroyed or

failed to preserve the pub's business records and security

camera footage. "To prevail on a negligence claim, a plaintiff

must prove that the defendant owed the plaintiff a duty of

reasonable care, that the defendant [committed a breach of] this

duty, that damage resulted, and that there was a causal relation

between the breach of the duty and the damage." Kennedy v.

Abramson, 100 Mass. App. Ct. 775, 777 (2022), quoting Halbach v.

Normandy Real Estate Partners, 90 Mass. App. Ct. 669, 671

(2016). "If a defendant does not owe a legal duty to a

plaintiff, then there can be no actionable negligence." Lev v.

Beverly Enters.-Mass., Inc., 457 Mass. 234, 240 (2010), citing

Remy v. MacDonald, 440 Mass. 675, 677 (2004).

Here, Mill City Suds did not own the pub at the time of the

incident, and thus owed no direct duty to the plaintiff.

Furthermore, while it is true that Asadoorian was a manager at

the pub, he left this position ten days before the incident took

place. Additionally, while Asadoorian claimed that one of the

reasons that he left his management position was due to the fact

that he believed additional security should have been hired and

this request was refused, the security guard that allegedly may

have been involved in the incident was hired before Asadoorian

5 became a manager. Furthermore, Asadoorian did not have the

power to fire anyone under the management agreement.

Partnership or joint venture. The plaintiff next argues

that Asadoorian should be held liable because he and Hayhurst

had formed a partnership or joint venture at the time of the

incident. We disagree.

"'To determine whether or not a partnership exists, the Legislature has enacted a set of rules that may be applied to the circumstances. G. L. c. 108A, § 7. In addition, other factors may be considered on the issue of the existence or nonexistence of a partnership. See Shain Inv. Co. v. Cohen, 15 Mass. App. Ct. 4, 9 (1982). Those factors include, among others, (1) an agreement by the parties manifesting their intention to associate in a partnership (2) a sharing by the parties of profits and losses, and (3) participation by the parties in the control or management of the enterprise.' Fenton v. Bryan, 33 Mass. App. Ct. 688, 690-691 (1992)."

Sullivan v. Lawlis, 93 Mass. App. Ct. 409, 413 (2018).

Here, there is no language in the management agreement that

shows that the parties intended to form a partnership, and in

fact that instrument explicitly provides that, "The manager will

not be an employee but instead be considered a sub contractor

[sic] in fact." See Shain Inv. Co., 15 Mass. App. Ct. at 7.

Moreover, while the parties did share profits, they did not

share the losses. See Sullivan, 93 Mass. App. Ct. at 413. As

such, the plaintiff's claim is without merit.

Successor liability. The plaintiff next argues that the

defendants assumed Hayhurst's and Hayhurst Group's liabilities

6 as their successors. We are not persuaded. "As a general rule

of corporate law, the liabilities of a corporation are not

imposed upon its successor." Smith v. Kelley, 484 Mass. 111,

120 (2020). See Milliken, 451 Mass. at 556. However, there are

four exceptions to this rule:

"(1) the successor expressly or impliedly assumes liability of the predecessor, (2) the transaction is a de facto merger or consolidation, (3) the successor is a mere continuation of the predecessor, or (4) the transaction is a fraudulent effort to avoid liabilities of the predecessor."

Cargill, Inc. v. Beaver Coal & Oil Co., 424 Mass. 356, 359

(1997), citing Guzman v. MRM/Elgin, 409 Mass. 563, 566 (1991).

Here, the plaintiff argues that all four exceptions apply to the

defendants' purchase of the pub. We review this question of law

de novo. See Goddard v. Goucher, 89 Mass. App. Ct. 41, 44

(2016).

a. Assumption of liability. The plaintiff argues that the

defendants explicitly or impliedly assumed their predecessors'

liabilities by (1) purchasing "substantially all of the assets"

of the pub, including its goodwill, (2) assuming all of Hayhurst

Group's debts and liabilities when they assumed some of the

debts owed Hayhurst, and (3) retaining liability insurance in

early 2015 before they purchased the pub. The claim is

meritless.

7 Hayhurst and the defendants signed an indemnification and

release agreement whereby the defendants were released from any

claims that could be brought against Hayhurst.2 See Atlas Tack

Corp. v. Crosby, 41 Mass. App. Ct. 429, 433-434 (1996). The

existence of the release and indemnity clause clearly shows that

the parties did not intend for the defendants to assume the

liabilities of the pub.3 See Leblanc v. Friedman, 438 Mass. 592,

597-598 (2003).

b. De facto merger.

"In determining whether to characterize an asset sale as a de facto merger, [courts consider] whether (1) there is a continuation of the enterprise of the seller corporation so that there is continuity of management, personnel, physical location, assets, and general business operations; whether (2) there is a continuity of shareholders which results from the purchasing corporation paying for the acquired assets with shares of its own stock, this stock ultimately coming to be held by the shareholders of the seller corporation so that they become a constituent part of the purchasing corporation; whether (3) the seller corporation

2 The agreement was signed on the same day as the sale agreement and stated that Hayhurst, signing on behalf of Hayhurst Group, agreed to "release and indemnify" the defendants "from all liability resulting from any guarantee of any corporate loans, debts or contracts, with respect to the business Hayhurst Group, Inc. d/b/a Finn's Pub, and hereby [to] indemnify and hold them harmless from the claims and demands of all persons or entities."

3 In his brief, the plaintiff argues that since the sale agreement "expressly states that Hayhurst would indemnify Mill City for the Pub’s liabilities," this implies that "Mill City and Asadoorian had accepted the Pub's liabilities." The plaintiff's argument misconstrues the purpose of the release and indemnity agreement, which was to relieve the defendants from liability that the pub incurred before they purchased it.

8 ceases its ordinary business operations, liquidates, and dissolves as soon as legally and practically possible; and whether (4) the purchasing corporation assumes those obligations of the seller ordinarily necessary for the uninterrupted continuation of normal business operations of the seller corporation."

Milliken, 451 Mass. at 557 (quotation omitted). The focus of

the de facto merger analysis is "whether one company has become

another for the purpose of eliminating its corporate debt." Id.

at 556.

While it is true that the physical location of the pub

stayed the same, and the business generally continued in the

same form, the management was indisputably

different -- Asadoorian was not the manager of the pub at the

time of its sale in December 2015. See Milliken, 451 Mass. at

556. Moreover, while the management agreement forbade

Asadoorian from firing employees without the consent of

Hayhurst, once Mill City Suds purchased the pub, the defendants

were not required to retain the previous employees and were free

to hire and fire as they saw fit. Additionally, there is no

indication that the defendants purchased the pub to eliminate

its debt. See Smith, 484 Mass. at 121, quoting Milliken, 451

Mass. at 558.

c. Mere continuation. "To determine whether the [mere

continuation] exception applies, we examine the continuity or

discontinuity of the ownership, officers, directors,

9 stockholders, management, personnel, assets, and operations of

the two entities." Smith, 484 Mass. at 120-121. Like the de

facto merger analysis, our focus is on "whether one company has

become another for the purpose of eliminating its corporate debt

[quotation omitted]." Id. at 121.

Here, while a substantial amount of the assets was retained

at the same location after the sale to Mill City Suds, and the

location continued to operate as a bar, Asadoorian was not the

manager of the establishment immediately prior to the sale. See

Smith, 484 Mass. at 120-121. More importantly, the record does

not support a conclusion that the defendants purchased the pub

in an effort to eliminate its own debt. See Milliken, 451 Mass.

at 557-558.

d. Fraudulent transaction. The plaintiff argues that the

sale of the pub was fraudulent as it was part of a scheme "to

destroy or fail to preserve the Pub's business and security

camera records."

Here, even assuming that a videotape existed that captured

the incident, the video camera was not included in the equipment

list provided to the defendants when they purchased the pub.

See Keene v. Brigham & Women's Hosp., Inc., 439 Mass. 223, 234

(2003). The defendants also did not know about the assault

until three years after the incident when served with the

lawsuit, and thus would not have known about the "threat of a

10 lawsuit." Scott v. Garfield, 454 Mass. 790, 798 (2009), quoting

Kippenhan v. Chaulk Servs., Inc., 428 Mass. 124, 127 (1998).

There is no indication from the record that the sale was a

fraudulent effort to avoid liability.

Sanctions. Finally, the plaintiff argues that the

defendants should be sanctioned for failure to maintain copies

of the videotape that they believe existed at the time of the

assault. We review the judge's sanctions order for abuse of

discretion or other error of law. See Wiedmann v. The Bradford

Group, Inc., 444 Mass. 698, 705-706 (2005). "[T]he doctrine of

spoliation . . . permits the imposition of sanctions and

remedies for the destruction of evidence in civil litigation.

The doctrine is based on the premise that a party who has

negligently or intentionally lost or destroyed evidence known to

be relevant for an upcoming legal proceeding should be held

accountable for any unfair prejudice that results." Keene, 439

11 Mass. at 234, citing Fletcher v. Dorchester Mut. Ins. Co., 437

Mass. 544, 549-550 (2002).

As mentioned above, the defendants did not know about the

existence of the videotape, and thus the Superior Court judge

correctly rejected the imposition of sanctions.

Judgment affirmed.

By the Court (Meade, Blake & Desmond, JJ.4),

Clerk

Entered: October 8, 2024.

4 The panelists are listed in order of seniority.