First Enterprises, Ltd. v. Cooper

425 Mass. 344
CourtMassachusetts Supreme Judicial Court
DecidedJuly 1, 1997
StatusPublished
Cited by47 cases

This text of 425 Mass. 344 (First Enterprises, Ltd. v. Cooper) is published on Counsel Stack Legal Research, covering Massachusetts Supreme Judicial Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
First Enterprises, Ltd. v. Cooper, 425 Mass. 344 (Mass. 1997).

Opinion

Abrams, J.

At issue is whether an attorney may be held liable under G. L. c. 93A, §§ 2 and 11, to his client’s adversaries for engaging in “trade or commerce” in a fraudulent manner by submitting a false legal claim against those adversaries. The defendant challenges the trial judge’s denial of his motion to dismiss a claim brought against him for violating G. L. c. 93A, §§ 2 and 11. The defendant filed a request for an interlocutory appeal which was heard by a single justice of the Appeals Court. The single justice reported the case to a [345]*345panel of that court.2 We transferred the matter on our own motion. We conclude that the defendant’s motion to dismiss should have been allowed.

We set forth the facts alleged in the plaintiffs’ verified complaint and assume the facts alleged are true.3 On December 5, 1989, Gregory Menezes and two others entered into a franchise agreement with Dunkin’ Donuts, Inc. (Dunkin’ Donuts), to operate a doughnut shop in Mechanicsville, Virginia. On March 14, 1990, these three men formed First Enterprises, Ltd. (First Enterprises), and assigned the Dunkin’ Donuts franchise to it. The same day, the three men and a fourth man executed stock subscription letters. Menezes contributed $25,500 capital to the corporation and was designated as treasurer and as a director.

Also on March 14, 1990, First Enterprises, Menezes, and the three other men entered into a shareholders’ agreement to protect their franchise. The shareholders’ agreement established an exclusive process for redeeming shares and transferring proceeds from shares held by anyone in First Enterprises. Share redemption would take place in accordance with an instalment payment plan which provided for a down payment of 20% and the balance to be paid in equal instalments over three years.

On March 27, 1990, the Dunkin’ Donuts franchise began operations. On May 9, 1990, Menezes left the business and moved to Massachusetts. Shortly thereafter, Menezes retained the defendant, Mark D. Cooper, to provide legal services regarding termination of his relationship with First Enterprises and Dunkin’ Donuts. Specifically, Menezes hired Cooper to assist in Menezes’s stock redemption and resignation from First Enterprises, and to obtain Menezes’s release from liability and obligation to the Dunkin’ Donuts franchise.

[346]*346On May 17, 1990, First Enterprises sent Menezes and Cooper a letter outlining the process for stock redemption and transferring proceeds, in accordance with the shareholders’ agreement. Pursuant to that letter, on May 22, 1990, Menezes signed a resignation and tender offer letter prepared by Cooper, who sent it to First Enterprises.

On June 25, 1990, First Enterprises’s attorney sent Cooper a letter confirming the requirements of the shareholders’ agreement. That same day, Cooper informed First Enterprises by telephone that Menezes accepted the shareholders’ agreement terms for the redemption and transfer of proceeds, and demanded that First Enterprises accept Menezes’s resignation.

After notification by First Enterprises of its acceptance of Menezes’s resignation, Cooper demanded that it pay for Menezes’s shares in a lump sum rather than under the terms of the shareholders’ agreement, and threatened to sue it if it did not agree to do so.

On June 29, 1990, Cooper sent to the corporate plaintiff a rescission notice in which Cooper claimed that Menezes agreed to resign in consideration of the plaintiffs’ oral promise, allegedly made to Cooper, to pay for Menezes’s shares with a lump sum. The plaintiffs denied making such an agreement. On July 6, 1990, the plaintiffs sent Menezes a corporate check and promissory note in accordance with the shareholders’ agreement terms. Cooper returned the check to First Enterprises.

On September 26, 1990, Cooper, on behalf of Menezes, filed a verified complaint in the Superior Court against First Enterprises, alleging that First Enterprises breached its promise to pay Menezes a lump sum of $25,500 for his stock in exchange for Menezes’s tender of shares, and that Menezes was informed that he had to resign from the corporation as a condition precedent to receiving the lump sum. Along with the verified complaint, Menezes filed an affidavit, prepared by Cooper, essentially repeating these allegations.

Menezes decided to proceed pro se. Cooper withdrew as counsel. On November 27, 1993, Menezes and First Enterprises entered a stipulation that the action be dismissed with prejudice. That day, Menezes also filed a second affidavit, in which he stated that the prior suit was baseless, that Cooper had prepared the verified complaint, and that Menezes signed [347]*347it in reliance on Cooper for its accuracy and truth. According to Menezes’s affidavit, Cooper induced him to sign the verified complaint and affidavit by assuring him that the statements were true. The result was that the plaintiffs had to defend a baseless suit, sustaining significant financial damage.

On September 16, 1994, First Enterprises filed suit against Cooper, and he moved for a dismissal of all claims.4 All counts were dismissed except the count alleging a violation of G. L. c. 93A, §§ 2 and 11. Cooper moved for a reconsideration of the decision not to dismiss the G. L. c. 93A claim.

Cooper contends that a lawyer may not be liable to his client’s adversary under G. L. c. 93A, §§ 2 and 11, for acts performed on the client’s behalf. Cooper asserts that the mere filing of litigation does not of itself constitute “trade or commerce.” Arthur D. Little, Inc. v. East Cambridge Sav. Bank, 35 Mass. App. Ct. 734, 743 (1994). We agree.

A violation of G. L. c. 93A, §§ 2 and 11, requires that “the acts or practices complained of must be ‘perpetrated in a business context.’ ” Little, supra at 743, quoting Lanter v. Carson, 374 Mass. 606, 611 (1978). In the Little case, the Appeals Court concluded that a G. L. c. 93A claim could not be maintained if “[n]o commercial relationship ever existed between the parties; their only contact occurred in the context of this litigation.” Id. Thus, to survive the defendant’s motion to dismiss, the plaintiffs must show that the defendant had a commercial relationship with the plaintiffs or that the defendant’s actions interfered with “trade or commerce.” The facts alleged in the verified complaint do not meet either requirement.

“It is well established that disputes between parties in the same venture do not fall within the scope G. L. c. 93A, § 11.” Szalla v. Locke, 421 Mass. 448, 451 (1995). The statements made by this defendant relate to a dispute within a business. The dispute was not a commercial marketplace transaction [348]*348but an internal business dispute. Therefore, the plaintiffs may not rely on the substance of these statements as a basis for claiming a commercial relationship.

The plaintiffs also claim that the defendant engaged in “trade or commerce” by making the allegation that the corporate plaintiff had breached its agreement to pay Menezes a lump sum for his stock. The plaintiffs rely on Kirkland Constr. Co. v. James, 39 Mass. App. Ct. 559 (1995). In the Kirkland case, there was a sale of goods between two distinct businesses.

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425 Mass. 344, Counsel Stack Legal Research, https://law.counselstack.com/opinion/first-enterprises-ltd-v-cooper-mass-1997.