Holland v. Jachmann

85 Mass. App. Ct. 292
CourtMassachusetts Appeals Court
DecidedMay 14, 2014
DocketNo. 1; No. 13-P-280
StatusPublished
Cited by2 cases

This text of 85 Mass. App. Ct. 292 (Holland v. Jachmann) is published on Counsel Stack Legal Research, covering Massachusetts Appeals Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Holland v. Jachmann, 85 Mass. App. Ct. 292 (Mass. Ct. App. 2014).

Opinion

Kantrowitz, J.

Of significance, we are asked whether attorney’s fees for legal work performed by in-house counsel may be awarded under G. L. c. 93A. We hold that, in the discretion of the trial judge, such fees may be awarded.

The plaintiffs (sometimes referred to collectively as Omniglow) brought the present action against Cyalume Technologies, Inc. (Cyalume), and Emil Jachmann, its chief executive officer (collectively, defendants), seeking to remedy the defendants’ efforts to undermine the plaintiffs’ business. After a seventeen-day, jury-waived trial, the judge found the defendants liable for numerous breaches of contract, conversion, and violations of G. L. c. 93A. Several posttrial proceedings ensued, concluding in a final judgment entered on August 1, 2011, largely in favor of the plaintiffs. Following the disposition of the postjudgment motions, an amended final judgment was entered on July 12, 2012.

On appeal, the defendants raise many issues. While involved and complicated, ultimately they are of a garden variety, albeit weed-infested, and best resolved via an unpublished memorandum and order pursuant to our rule 1:28 that is also being issued today. Holland v. Jachmann (No. 2), post 1120 (2014). As such, we concern ourselves here only with the c. 93A issues.

Background. This business dispute arose out of a complicated transaction through which the Omniglow Corporation, a manufacturer of light sticks and other luminescent products, was effectively split into two companies.

In late 2005, the company now known as Cyalume purchased the profitable segments of the Omniglow Corporation consisting principally of sales in the government, military, and safety (GMS) markets. As a condition of the closing of the stock purchase agreement, Omniglow Corporation was required to divest itself of all the assets and liabilities related to the unprofitable “rest of glow” (ROG) segments.

On January 23, 2006, the day the sale closed, the plaintiffs purchased, pursuant to the terms of the ROG purchase agreement, the ROG segments and the right to the Omniglow name. The plaintiffs, the judge found, planned to turn the ROG segments around by manufacturing all products at a lower cost at [294]*294their facility in Mexico as soon as possible. On the same day, Omniglow and Cyalume also entered into a series of contracts defining their rights and obligations to each other going forward, including as herein relevant, a lease agreement, a manufacturing agreement, an information technology (IT) sharing agreement, and a noncompetition agreement prohibiting Cyalume from competing in the ROG business and from soliciting or taking away ROG customers and business.

Although a mutually supportive working relationship was anticipated, the relationship between Omniglow and Cyalume quickly soured. Cyalume missed a deadline for submitting an audited income statement that was required for the distribution of escrow funds sorely needed by Omniglow. It also withheld two pieces of equipment •— a six-inch mold and a “mini-wrapper” used to wrap Speculite and Vizilite light sticks in foil — essential for Omniglow’s business. Cyalume was obligated to provide these pieces of equipment pursuant to the ROG purchase agreement, yet refused to do so. Without the mold and the mini-wrapper, Omniglow was compelled to purchase products from Cyalume that Omniglow could have otherwise manufactured itself for less money. Cyalume, the judge found, also blocked Omniglow from resolving title disputes through the special procedure called for in the ROG purchase agreement.4

This pattern continued with the extrusion system integral to the manufacture of necklaces, bracelets, and other smaller tubular devices, “which are a major part of the Omniglow, LLC product line.” In light of the unambiguous designations in the schedules to the ROG purchase agreement, the judge found that Cyalume’s [295]*295ownership claims to Omniglow’s equipment were not made in good faith.

Cyalume also converted other assets dedicated for use in the ROG business that belonged to Omniglow. First, Cyalume withheld 1.63 million adhesive strips from Omniglow used exclusively by Omniglow to manufacture its Speculite product. Cyalume not only denied the request of Watson Pharmaceuticals (Watson), one of Omniglow’s major customers, to replace 45,000 defective strips, but also required Watson to purchase more than five times the amount needed at three times the cost.5 On two occasions, because Cyalume had not released the adhesive strips that rightfully belonged to Omniglow, Omniglow was forced to buy those strips back from Cyalume at an inflated price.

The judge found other breaches by Cyalume. Based on credibility determinations, the judge found that Michael Bielonko, Cyalume’s chief financial officer, instructed Michelle Ruby, Cyalume’s IT chief, to prevent Omniglow employees from accessing important documents and information stored in the computer system. The judge also found that Bielonko and Jachmann personally instructed Ruby to delay resolution of Omniglow’s computer glitches, needlessly prolonging the problems. The judge found that these wilful and intentional breaches of the IT sharing agreement disrupted and jeopardized the business of Omniglow and that this “disconcerting” conduct of Cyalume’s top executives was intended to further the scheme to debilitate Omniglow.

Cyalume intercepted and filled a purchase order intended for Omniglow and sold novelty light sticks that it was forbidden to sell under the noncompetition agreement to two customers, Trevco and Coghlan’s. As the judge found, the light sticks sold to Coghlan’s “were unmistakably novelty items due to their packaging.” While there may have been some confusion about Cyalume’s right to sell to Trevco, the judge concluded that the sales to Coghlan’s were, in contrast, wilful and knowing violations of c. 93A.

As time passed, Cyalume’s conduct toward Omniglow became [296]*296even more threatening and damaging. After wrongfully evicting Omniglow from a shared West Springfield facility, Cyalume refused to turn over two telephone numbers dedicated for use by ROG customers that rightfully belonged to Omniglow. These telephone numbers were of significant financial value to Omniglow, as customers often used them to reorder products. Cyalume subsequently failed to refer some novelty customers to Omniglow.6 Moreover, using one of Omniglow’s telephone numbers, Cyalume advertised itself as a novelty manufacturer in the Yellow Pages telephone directory, actively soliciting ROG business in “flagrant” breach of both the ROG purchase and noncompetition agreements. Because there could not have been any confusion about Omniglow’s right to these telephone numbers, the judge concluded that their withholding was done in bad faith and was intended to derail the business of Omniglow.

Jachmann threatened one of the principals of ONTI, the only legitimate supplier of chemicals to Omniglow (other than Cyalume), with a baseless lawsuit unless he stopped selling to Omniglow. The intent of the threat, the judge found, was to coerce Omniglow into buying chemicals from Cyalume on terms that were not favorable to Omniglow.

On the c. 93A count, the judge found that the actions undertaken by Cyalume and Jachmann were part of an effort to undermine Omniglow’s business interests, and that this pattern of conduct rose to the level of a c. 93A violation. The defendants appealed.

G. L. c. 93A.

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Bluebook (online)
85 Mass. App. Ct. 292, Counsel Stack Legal Research, https://law.counselstack.com/opinion/holland-v-jachmann-massappct-2014.