COLLATOS FAMILY PARTNERSHIP, L.P. v. ATHENA CAPITAL ADVISORS LLC, & Others.

• Court: Massachusetts Appeals Court
• Decided: April 27, 2023
• Docket: 22-P-0655
• Status: Unpublished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

22-P-655

COLLATOS FAMILY PARTNERSHIP, L.P.

vs.

ATHENA CAPITAL ADVISORS LLC, & others.1

MEMORANDUM AND ORDER PURSUANT TO RULE 23.0

The plaintiff, Collatos Family Partnership, LP (CFP), filed

a four-count complaint in the Superior Court against defendants

Athena Capital Advisors LLC (Athena), Fiduciary Trust

International, LLC (Fiduciary), and Athena's former manager,

Lisette Cooper, alleging breach of fiduciary duty, breach of

contract, and breach of the implied covenant of good faith, and

seeking an equitable accounting. The first motion judge allowed

the defendants' motion to dismiss under Mass. R. Civ. P.

12 (b) (6), 365 Mass. 754 (1974), as to all counts except those

for breach of contract and an equitable accounting (counts II

and IV), on the narrow claim for failing to provide CFP with

books and records as CFP had requested in June and July 2020.

1 Fiduciary Trust International, LLC, and Lisette Cooper. Subsequently, a second motion judge denied CFP's motion under

Mass. R. Civ. P. 56 (f), 365 Mass. 824 (1974), to delay ruling

on the defendants' motion for summary judgment until discovery

could be undertaken, and then granted the defendants' motion for

summary judgment under Mass. R. Civ. P. 56 (c) on the two

remaining counts. Judgment then entered in favor of the

defendants. CFP appeals, claiming that the first motion judge

erred in dismissing its claim of breach of fiduciary duty and

the second motion judge abused his discretion in not allowing

further time for discovery and also erred in allowing the

defendants' motion for summary judgment. Because we discern no

error, we affirm.

Background. We summarize the facts as well as any

reasonable inferences alleged in the complaint and the attached

exhibits, which we accept as true in reviewing a motion to

dismiss. See A.L. Prime Energy Consultant, Inc. v.

Massachusetts Bay Transp. Auth., 479 Mass. 419, 421 (2018);

Ginther v. Commissioner of Ins., 427 Mass. 319, 322 (1998). We

reserve recitation of the summary judgment record for our

discussion below.

In 2007, CFP, a Delaware limited partnership, contributed

$500,000 to become a roughly one percent member of Athena, a

Delaware limited liability company and investment advisory firm.

Athena is governed by the second amended and restated limited

2 liability company agreement (second agreement), of which the

relevant sections can be summarized as follows: the board of

managers (board) had exclusive control over the management of

Athena2; a majority vote of the three-member board was required

to merge or consolidate Athena3; and on request by any member,

the board was required to provide members with copies of

Athena's budgets, financial statements, and books and records.4

CFP's management became concerned that Athena's other

members may have received distributions or other benefits that

CFP did not receive. CFP repeatedly shared its concerns about

the management of Athena with defendant Lisette Cooper and

counsel for Athena, but never received a satisfactory response.

In 2020, Athena informed CFP of an anticipated merger and

that, after thirteen years of being a member, CFP would receive

its original investment back. In February of 2020, while the

merger was being finalized, counsel for Athena provided CFP with

tax documents and releases for the review and signature of CFP's

general partner. CFP's general partner immediately asked for an

accounting or explanation of the amounts that Athena's other

members would receive as a result of the merger, but Athena's

counsel refused to provide it.

2 Second agreement § 7.2. 3 Second agreement § 6.6 (as amended). 4 Second agreement § 12.2.

3 Athena eventually notified CFP that Athena merged into

Fiduciary on March 2, 2020, and as a result, CFP was no longer a

member of Athena.5 In April of 2020, Athena's counsel sent to

CFP an e-mail message listing, without any documentary support,

the amounts that each member of Athena received as a result of

the merger. In June of 2020, counsel for CFP requested that CFP

be permitted to review Athena's books and records. In July, CFP

made the same request to Fiduciary, which denied the request as

CFP was no longer a member since the merger.6 This lawsuit then

followed.

Discussion. 1. Motion to dismiss CFP's breach of

fiduciary duty claim. CFP appeals the dismissal of its claim

alleging breach of fiduciary duty. We review the allowance of a

motion to dismiss under Mass. R. Civ. P. 12 (b) (6) de novo.

See A.L. Prime Energy Consultant, Inc., 479 Mass. at 424.

"While a complaint attacked by a . . . motion to dismiss does not need detailed factual allegations . . . a plaintiff's obligation to provide the 'grounds' of his 'entitlement to relief' requires more than labels and conclusions. . . . Factual allegations must be enough to raise a right to relief above the speculative level . . . [based] on the assumption that all the allegations in the complaint are true (even if doubtful in fact)."

5 As discussed further below, the defendants produced, among other things, the merger agreement and the new LLC agreement that replaced the second agreement after the merger, as part of the summary judgment record. 6 In June, Athena also changed its name to Fiduciary Trust

International, a subsidiary of Fiduciary Trust Company International.

4 Iannacchino v. Ford Motor Co., 451 Mass. 623, 636 (2008),

quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555-556

(2007).

Under Delaware law,7 "[a] claim for breach of fiduciary duty

requires proof of two elements: (1) that a fiduciary duty

existed and (2) that the defendant breached that duty." Beard

Research, Inc. v. Kates, 8 A.3d 573, 601 (Del. Ch. 2010), aff'd

sub. nom. ASDI, Inc. v. Beard Research, Inc., 11 A.3d 749 (Del.

2010). A breach occurs when a fiduciary commits "an unfair,

fraudulent, or wrongful act." Id. at 602. CFP claimed below

that Athena breached its fiduciary duty by refusing to provide

the requested financial documents, failing to provide CFP with

the terms of the merger, pressuring or attempting to trick CFP's

general partner to sign broad releases which absolved Athena of

any wrongdoing, and refusing to release funds when CFP's general

partner refused to sign the releases.

CFP's first claim alleging that Athena breached its

fiduciary duty by failing to provide it with financial documents

and other requested information is identical to CFP's claim that

Athena violated the terms of the second agreement. The law of

Delaware, which we apply here, makes clear that dismissal is the

appropriate remedy where the same set of facts that underlie the

7 Both parties agree that the Delaware law applies.

5 breach of contract claim also form the basis of the claim for

breach of fiduciary duty. See Nemec v. Shrader, 991 A.2d 1120,

1129 (Del. 2010). When a dispute involves obligations set forth

in a contract, it will be treated as a breach of contract claim.

See id. The claim of breach of fiduciary duty is subsumed into

the breach of contract claim and dismissal is the appropriate

remedy.

Second, other than conclusory statements and suspicions,

CFP failed to allege any facts that Athena breached its

fiduciary duty by attempting to pressure CFP's general partner

into signing the broad release forms.8 CFP was provided copies

of all the releases and was not prohibited from consulting with

an attorney to obtain independent legal advice. Cf. Coveney v.

President & Trustees of College of Holy Cross, 388 Mass. 16, 22

(1983) ("To avoid a contract on the basis of duress, a party

must show that conduct by the other party caused him to enter

into the contract under the influence of such fear as precludes

him from exercising free will and judgment" [quotation and

citation omitted]). CFP does not allege, and the facts do not

support, that Athena's counsel mispresented the substance of the

releases to CFP; rather, CFP management believed that Athena

8 CFP claims that Athena, by providing a short period of time for CFP to review the documents and releases, which CFP claims are overly broad in favor of Athena, breached its fiduciary duty. We disagree.

6 attempted to pressure CFP's general partner to sign the releases

before Athena would return CFP's original investment. Even if

we were to accept CFP's allegation that Athena was trying to

pressure CFP's general partner into signing the release

documents, and that somehow this would support a claim of a

breach of a fiduciary duty, CFP's general partner never did sign

the releases. Because CFP did not sign the releases, any

pressure to sign the documents is irrelevant to the claims

before us.

Additionally, the claim that Athena failed to provide CFP

with all of the details of the merger and the effect of the

merger on CFP cannot support a claim of breach of fiduciary duty

as the second agreement did not require each member's consent to

go forward with a merger. Moreover, CFP fails to allege any

facts that suggest or link the defendants' failure to provide it

with merger documents to any alleged wrongdoing by the

defendants aimed at CFP that would support a claim for breach of

fiduciary duty.

2. Motion for summary judgment and request for

continuance. While the motion to dismiss was pending, the

defendants were granted a protective order from CFP's numerous

discovery requests. After the order allowing the motion to

dismiss was rendered, Athena then filed a motion for summary

judgment on the remaining claims under Mass. R. Civ. P. 56 (c),

7 this time providing CFP with a redacted copy of the merger

agreement. CFP opposed the motion for summary judgment and

filed a motion to delay ruling on the summary judgment motion

under Mass. R. Civ. P. 56 (f), so that discovery could be

obtained.

We review the denial of a motion under rule 56 (f) for an

abuse of discretion. Commonwealth v. Fall River Motor Sales,

Inc., 409 Mass. 302, 307 (1991); Alphas Co. v. Kilduff, 72 Mass.

App. Ct. 104, 107 (2008). If a motion for summary judgment is

filed prior to meaningful discovery occurring, a party may

request a continuance under rule 56 (f). The rule provides:

"Should it appear from the affidavits of a party opposing the motion [for summary judgment] that he cannot for reasons stated present by affidavit facts essential to justify his opposition, the court may refuse the application for judgment or may order a continuance to permit affidavits to be obtained or depositions to be taken or discovery to be had or may make such order as is just."

Mass. R. Civ. P. 56 (f). When considering a motion pursuant to

rule 56 (f), a judge has broad discretion to consider the

relevance of the discovery request, whether the requested

documents are protected by attorney work-product privilege, and

whether the items being sought are already in possession of the

party asking for a continuance and thus of "marginal

significance" (citation omitted). Fall River Motor Sales, Inc.,

supra at 309. "One common reason for the denial of a

continuance in this context is the irrelevance of further

8 discovery to the issue being adjudicated in summary judgment."

Id. at 308. In Alphas Co., 72 Mass. App. Ct. at 110, our court

acknowledged five factors to be considered when ruling upon a

motion under rule 56 (f). They are: "authoritativeness,

timeliness, good cause, utility, and materiality" (citation

omitted). Id.

In support of its motion, CFP provided an affidavit from

its counsel claiming that CFP was unable to respond to the

motion for summary judgment unless CFP was provided with certain

unredacted documents pertaining to the merger. This claim is

not sufficient to establish a threshold showing that specific

documents related to the merger would be relevant to CFP's

claims regarding its requests to Athena and Fiduciary in June

and July 2020, after the merger, to review Athena's books and

records. Rule 56 (f) does not give CFP a license to "'fish' for

evidence on which to base [its] complaint 'in hopes of somehow

finding something helpful to [its] case in the course of the

discovery procedure'" (citation omitted). Alphas Co., 72 Mass.

App. Ct. at 114. The second motion judge carefully considered

all five factors enunciated in Alphas Co., supra at 110, and

there was no abuse of discretion.

We next turn to the granting of the defendants' motion for

summary judgment. We review the allowance of a motion for

summary judgment de novo and from the same record as the motion

9 judge. Meyer v. Veolia Energy N. Am., 482 Mass. 208, 211

(2019). In order to prevail on a motion for summary judgment,

the moving party must establish that there are no genuine issues

of material fact. Mass. R. Civ. P. 56 (c). If the moving party

establishes that the opposing party cannot "prov[e] an essential

element of that party's case," then summary judgment is

appropriate. Tetrault v. Mahoney, Hawkes & Goldings, 425 Mass.

456, 459 (1997), quoting Symmons v. O'Keeffe, 419 Mass. 288, 293

(1995). We note at the outset that CFP did not offer any

substantive arguments in opposition to the defendants' motion

for summary judgment.

Under § 12.2 of the second agreement and Delaware law, a

member of a limited liability company has the right to examine

its books and records. Del. Code Ann. tit. 6, § 18-305, as

amended through 81 Del. Laws c. 357, § 26 (2018).

"To inspect books and records, a member of a Delaware LLC, like a stockholder of a Delaware corporation, must first establish by a preponderance of the evidence the existence of a proper purpose for inspection. A proper purpose is one that is reasonably related to such person's interest as a member" (quotation and citation omitted).

Sanders v. Ohmite Holding, LLC, 17 A.3d 1186, 1193 (Del. Ch.

2011). The second motion judge granted summary judgment in

favor of the defendants on CFP's remaining claims, reasoning

that the undisputed facts established that, at the time of the

inspection request, CFP was not a member of Athena, and the

10 plain language of the statute provided inspection rights only to

current members and there was no support in the case law to

suggest that former members had residual rights to inspect.

Contrast id. at 1193-1194 (current member's request to inspect

books and records, some predating membership, permissible on

showing of proper purpose).

Here, it is undisputed that as of March 2, 2020, CFP was no

longer a member of Athena due to the merger. Neither the case

law nor the second agreement supports CFP's position that, once

the merger resulted in the extinguishment of its membership, CFP

continued to have a right to inspect Athena's books and

corporate records. The language in the second agreement is

unequivocal when it comes to the request for the inspection of

books and records. The right to inspect is limited to members

and nowhere in the forty-two page second agreement does it

extend for former members. It is undisputed that as of March 2,

2020, CFP did not own any interest in Athena. Therefore CFP's

demand to inspect Athena's books and records in June and July

11 was without any teeth. CFP had no right to this information.

Judgment affirmed.

By the Court (Vuono, Grant & Walsh, JJ.9),

Clerk

Entered: April 27, 2023.

9 The panelists are listed in order of seniority.