United States Court of Appeals For the First Circuit
No. 20-1724
DEBRA KATZ,
Plaintiff, Appellant,
v.
BELVERON REAL ESTATE PARTNERS, LLC; MATTHEW ORNE; AHP HOLDINGS, LLC; GRANT SISLER,
Defendants, Appellees.
APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Mark G. Mastroianni, U.S. District Judge]
Before
Howard, Chief Judge, Thompson, Circuit Judge, and Arias-Marxuach, District Judge.
David B. Mack, with whom Stephanie R. Parker and O'Connor Carnathan & Mack LLC were on brief, for appellant. Erika L. Todd, with whom Patrick P. Dinardo and Sullivan & Worcester LLP were on brief, for appellees Belveron Real Estate Partners, LLC and Grant Sisler. John J. O'Connor, with whom Kristyn M. Kelley and Peabody & Arnold LLP were on brief, for appellees AHP Holdings, LLC and Matthew Orne.
March 8, 2022
Of the District of Puerto Rico, sitting by designation. Arias-Marxuach, District Judge. Appellant Debra Katz
is a sophisticated real estate investor currently suffering from
seller's remorse. In late 2014, Katz sold her 48% special limited
partnership interest in an affordable housing property ("the
Property") to AHP Holdings, LLC for $1.5 million. Katz maintains
she had no interest in selling her share, and only did so because
she was fraudulently led to believe that Belveron Real Estate
Partners, LLC had power over said Property and would block any
attempt to sell or refinance it. In 2016, due to a major uptick
in the market for analogous housing projects, the Property sold
for an unexpected $11.7 million.
Katz filed suit alleging claims for fraud, civil
conspiracy, breach of fiduciary duty, and unjust enrichment, among
others. The district court entered summary judgment dismissing
the suit. It found that Katz failed to amend her complaint to
incorporate an updated theory of fraud, after the one she initially
proffered was disproven during discovery. Moreover, the district
court held that Katz's unpled theories failed on the merits because
any misrepresentations were not material and, in any event, she
did not suffer any actionable damages because she received a fair
price for her interest.
Katz appeals this determination, contending the
defendants had adequate notice of her refined theory of fraud.
She also argues the lower court did not adequately consider that
- 2 - absent Appellees' alleged misrepresentations, she would not have
sold her interest at all. Therefore, regardless of the sales
price of her special interest, she is "worse off" than if she had
retained her interest and profited from the subsequent sale of the
Property. Applying the summary judgment motion standard, we find
that Katz has failed to make a sufficient showing on essential
elements of her case. Thus, we confirm the district court's
dismissal, albeit on partially different grounds.
I.
Appellant Debra Katz ("Katz") is a real estate investor
who founded her own property management company in 1997 and has
been the general partner of three housing projects. She has lived
in the Springfield, Massachusetts area nearly her entire life.
In 1983, her father, Alfred Katz, formed Falls View
Associates Limited Partnership ("Falls View" or the
"Partnership"). Falls View developed a 130-unit affordable
housing complex in Chicopee, Massachusetts ("the Property"). Upon
Alfred Katz's death in 2000, Katz inherited his Special Limited
Partnership Interest ("Special Interest") in Falls View, totaling
48%. This Special Interest did not give Katz any voting rights
or control over the Partnership. Instead, in the event of a
liquidity event, i.e. the sale or refinance of the Property, Katz
would be entitled to receive a proportionate share of the proceeds.
Pursuant to the Partnership Agreement ("Agreement"),
- 3 - when Katz became involved in the Partnership, Paul Oldenburg
("Oldenburg") was the General Partner of Falls View and Wilder
Richman Corporation 1983 Investor Limited Partnership ("WRC") was
the sole limited partner. Gina Dodge ("Dodge") was a WRC employee
and its point person for matters related to the Partnership.
Appellees Belveron Real Estate Partners LLC ("Belveron")
and AHP Holdings, LLC ("AHP"), which were separately owned,
invested in limited partnerships that held affordable or federally
subsidized housing projects. In August 2014, Belveron Partners
Fund III JV, LLC (the "Fund"), a Belveron affiliate, obtained
25.74% of limited partnership interest in WRC. At that time, AHP
already owned a 25.74% interest in WRC. Therefore, in the
aggregate, the Fund and AHP had obtained over 51% economic interest
in WRC. However, neither Belveron, the Fund, nor AHP were admitted
as substitute limited partners of WRC, nor did any of these
entities acquire voting rights in WRC.
In August 2014, the Property's thirty-year mortgage
matured, and the Property was poised to either be sold or
refinanced. Katz favored either option in lieu of selling her
Special Interest. Notably, a sale could not occur without the
approval of the Property's General Partner, Oldenburg.
In the fall of 2014, Grant Sisler ("Sisler"), Belveron's
Vice President of Operations, contacted Katz and inquired if she
would be willing to sell her Special Interest to Belveron for $1.1
- 4 - million. To justify this offer, Sisler provided Katz with
refinance estimates and concluded that: "the proceeds out to the
limited partners is just over $4M (best case scenario) and $3.24M
at the worst case scenario. . . At the higher refinance number
($4.038M) I estimate that you get back just over $1M and at the
lower refinance number, you would receive around $750k." On
November 5, 2014, Sisler notified Katz via e-mail that he could
not match her $1.8 million asking price and $1.2 million was the
highest amount he could offer for her Special Interest. Sisler
argued that Katz would receive less after a refinance and that
Belveron would "block attempts to sell the [P]roperty."
Ultimately, Sisler and Katz did not reach an agreement. Katz has
since testified that she would not have sold to Belveron because
Sisler "didn't have an incredibly good reputation" and was
aggressive.
Parallel to these negotiations, Oldenburg told Katz that
Sisler was making decisions regarding the Property. This gave her
the feeling that Sisler was "acting as a de facto general partner"
of the Property. Despite this belief, Katz did not ask Belveron
what kind of interest it had in the Property, whether it had a
voting interest in WRC, or whether it had a majority ownership of
WRC. Katz became concerned that she would be trapped indefinitely
in Falls View, holding an illiquid Special Interest with no say
regarding the Property. Upon being told by Oldenburg that there
- 5 - was no plan to sell or refinance the Property, she asked if he
would be interested in purchasing her interest for more than $2
million. Oldenburg declined.
In the same November 5, 2014, e-mail that Sisler sent
Katz, Sisler copied Matthew Orne ("Orne"), AHP's agent, in case
AHP was interested in purchasing Katz's Special Interest. Sisler
noted that Katz thought Belveron and AHP worked together and stated
that they were "very different" companies that both operate in the
secondary market. In early December 2014, Orne forwarded said
email to Katz, and inquired about purchasing her Special Interest.
On December 17, 2014, Katz agreed to sell her Special Interest to
AHP for $1.5 million and signed an Agreement with AHP to that end.
Under the terms of the Agreement, the transfer of Katz's Special
Interest to AHP required the General Partner's consent, therein
identified as Oldenburg. Furthermore, the Agreement did not
prohibit AHP from subsequently selling the Special Interest to
another party. Katz was represented by legal counsel during the
process of selling her Special Interest to AHP. Although she had
been provided information regarding the Partnership's finances for
2013, Katz did not have the Property nor her Special Interest
appraised prior to the sale of her Special Interest.
Unbeknownst to Katz, although Belveron and AHP were
unaffiliated companies, they had a "gentlemen's agreement" where
if both companies were involved in a partnership, and one of them
- 6 - bought an additional interest, they would offer the other company
an opportunity to purchase half the interest acquired. Pursuant
to this agreement, once AHP purchased Katz's Special Interest, it
opted to split it with Belveron, although not obligated to do so.
Accordingly, AHP transferred 50% of Katz's Special Interest to the
Belveron affiliated Fund on February 27, 2015. AHP and Belveron
made the transfer public on March 13, 2015.
After purchasing Katz's Special Interest, AHP and the
Fund worked to acquire the interests of other WRC investors.
Despite this, Belveron and AHP were not interested in selling the
Property given its substantial guaranteed cashflow. This changed
in late 2015 when Andrew Daitch ("Daitch"), a real estate
professional working in the Affordable Housing Advisors group at
Marcus & Millichap, informed them that the real estate market had
experienced significant growth that year and foreign buyers were
investing large sums of money in similar housing projects.
Accordingly, Daitch told Orne he believed he could sell the
Property for $11 million. Sisler and Orne were highly skeptical
of said sales price, assuming that the Property was worth closer
to $6.5 million. In 2016, to the investors' surprise, the Property
sold for $11.7 million.
II.
On September 29, 2017, Katz filed suit against eight
defendants: (a) Belveron and its employee Sisler; (b) AHP and its
- 7 - agent Orne; and (c) WRC, its agent Dodge, its General Partner, and
its investor service agent (the "WRC Defendants"). Promptly
thereafter, Katz amended the complaint, dismissing her claims
against the WRC Defendants. In the amended complaint, she alleged
that Belveron fraudulently misled her as to the value of her
Special Interest and its intention to hold the Property in lieu of
selling it. During discovery, Katz learned that, despite
allegedly being told the contrary, Belveron lacked control to
prevent the sale because it did not have voting rights in WRC.
Katz also came to believe that AHP and Belveron misrepresented
their relationship to induce her to sell her Special Interest to
AHP. Lastly, it became evident that the Fund, not the named
Belveron defendant, had acquired her Special Interest.
On November 6, 2018, Katz filed a motion for leave to
amend the complaint, accompanied by the proposed second amended
complaint. Therein, Katz articulated a modified theory of the
case, pursuant to the results of discovery. Namely, she argued
that Appellees engaged in fraud by misrepresenting and omitting
information regarding: (1) Belveron's ability to block a sale or
refinance of the Property; and (2) the relationship between AHP
and Belveron. Further, Katz sought to add Oldenburg as a defendant
and substitute the existing Belveron defendant for its affiliated
Fund. Upon filing the motion, Katz learned that adding the Fund
would destroy the court's diversity jurisdiction. To avoid a
- 8 - remand, Katz withdrew her motion to amend the complaint and instead
supplemented her discovery responses to incorporate her revised
theory of the case.
On April 1 and 19, 2019, Belveron and AHP filed
individual motions for summary judgment. Katz opposed said
motions on May 17, 2019. After conducting a hearing, the district
court granted the motions, holding that Katz could not amend her
complaint through a subsequent brief opposing summary judgment,
especially because the operative complaint did not allege the basic
framework of the fraudulent scheme. Moreover, the Court also
found that Katz did not properly support her unpled theories and
remaining causes of action. On July 21, 2020, Katz filed this
timely appeal.
III.
Summary judgment is proper under Fed. R. Civ. P. 56(a)
"when the record, construed in the light most congenial to the
nonmovant, presents no genuine issue as to any material fact and
reflects the movant's entitlement to judgment as a matter of law."
McKenney v. Mangino, 873 F.3d 75, 80 (1st Cir. 2017). If at this
stage, the nonmoving party fails "to make a sufficient showing on
an essential element of [their] case with respect to which [they
have] the burden of proof[,]" summary judgment should be granted
accordingly. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986).
We review an order granting summary judgment de novo.
- 9 - Lawless v. Steward Health Care Sys., LLC, 894 F.3d 9, 21 (1st Cir.
2018). When conducting such a review, we are not bound by the
district court's "rationale; rather, the court of appeals may
affirm on any independent ground made evident by the record."
González-Droz v. González-Colón, 660 F.3d 1, 9 (1st Cir. 2011)
(citation omitted). Likewise, the decision to grant a motion for
summary judgment may be reversed "if there are any factual issues
that need to be resolved before the legal issues can be addressed."
Petitti v. New England Tel. & Tel. Co., 909 F.2d 28, 31 (1st Cir.
1990).
In the case at bar, "federal law supplies the applicable
procedural rules and [Massachusetts] state law supplies the
substantive rules of decision." Lawless, 894 F.3d at 21.
A. Adequately pleading fraud
In the operative complaint, Katz claims that Sisler and
Belveron "misrepresented the value of Ms. Katz's interest in the
Company, the likelihood of the sale of the Property, and the
partners' interest in selling the Property." Prior to the
discovery deadline, Katz sought to amend the operative complaint
to include both refined and additional theories of fraud.
Specifically, she averred that Appellees fraudulently
misrepresented: (1) Belveron's ability to block the Property's
sale or refinance; and (2) AHP and Belveron's relationship. Katz
also attempted to incorporate Oldenburg and the Fund as additional
- 10 - defendants. She ultimately withdrew her motion to amend to avoid
destroying diversity jurisdiction. Thus, the operative complaint
remained untouched. In their motion for summary judgment,
Belveron and Sisler objected to Katz's attempt to include new
claims and categorized her efforts to do so as "legally irrelevant"
in the absence of a formal amendment to the complaint. After this
objection, Belveron and Sisler addressed Katz's refined claims on
the merits. On their part, AHP and Orne contend that they relied
on the fact that Katz withdrew her motion to amend the complaint
and thus, there are no causes of action for fraud against them on
record. The district court granted Defendants' motions for
summary judgment highlighting that Katz never amended the
complaint to revise her theory of fraud.
On appeal, Katz contends that the district court erred
in declining to consider her unpled theories of fraud as properly
before it. She maintains that by supplementing her interrogatory
responses to incorporate new facts learned through discovery, she
constructively amended her complaint and provided defendants with
adequate notice. We review the district court's refusal to
consider Katz's unpled theories of fraud for abuse of discretion.
See Antilles Cement Corp. v. Fortuno, 670 F.3d 310, 319 (1st Cir.
2012); United States ex rel. Donegan v. Anesthesia Assocs. of
Kansas City, PC, 833 F.3d 874, 880 (8th Cir. 2016); see also
Jenkins v. Hous. Ct. Dep't, 16 F.4th 8, 19 (1st Cir. 2021) ("We
- 11 - review a district court's denial of a motion seeking leave to amend
for an abuse of discretion, 'defer[ring] to the district court's
hands-on judgment so long as the record evinces an adequate reason
for the denial.'" (quoting Torres-Alamo v. Puerto Rico, 502 F.3d
20, 25 (1st Cir. 2007)); Rosario-Urdaz v. Rivera-Hernandez, 350
F.3d 219, 221 (1st Cir. 2003) ("An error of law is, of course, an
abuse of discretion.").
While Fed. R. Civ. P. 15 governs when and how pleadings
can be amended, it does not establish consequences for failing to
amend the pleadings. Case law interpreting the federal rules of
civil procedure demonstrates a "belief that when a party has a
valid claim, [they] should recover on it regardless of [their]
counsel's failure to perceive the true basis of the claim at the
pleading stage, provided always that a late shift in the thrust of
the case will not prejudice the other party[.]" 5 Wright and
Miller, Fed. Prac. & Proc. Civ., § 1219 (4th ed. 2021); see also
Conn. Gen. Life Ins. Co. v. Universal Ins. Co., 838 F.2d 612, 622
(1st Cir. 1988) (finding that plaintiff's failure to "plead [a]
particular legal theory, when it did plead two related theories"
would not bar relief, especially because defendant raised specific
defenses regarding the unpled theory); but see Miranda-Rivera v.
Toledo-Dávila, 813 F.3d 64, 76 (1st Cir. 2016) ("Allowing a
plaintiff to proceed on new, unpled theories after the close of
discovery would prejudice defendants, who would have focused their
- 12 - discovery efforts on the theories actually pled.").
However, Fed. R. Civ. P. 9(b) requires that allegations
of fraud "must state with particularity the circumstances
constituting fraud." Therefore, a claimant must specify "what the
underlying misrepresentation was, who made it, and when and where
it was made." Khelfaoui v. Lowell Sch. Comm., 496 F. Supp. 3d
683, 689 (D. Mass. 2020) (quotation omitted); see also Alternative
Sys. Concepts, Inc. v. Synopsys, Inc., 374 F.3d 23, 29 (1st Cir.
2004). The purpose of this rule is "to place the defendants on
notice and enable them to prepare meaningful responses, to preclude
the use of a groundless fraud claim as pretext for discovering a
wrong, and to safeguard defendants from frivolous charges [that]
might damage their reputation." Dumont v. Reily Foods Co., 934
F.3d 35, 39 (1st Cir. 2019) (internal quotations omitted,
modification in original). Notably, "Rule 9(b)'s heightened
pleading requirements apply not only to claims of fraud simpliciter
but also to related claims as long as the central allegations of
those claims 'effectively charge fraud.'" Foisie v. Worcester
Polytechnic Inst., 967 F.3d 27, 49 (1st Cir. 2020) (quoting Mulder
v. Kohl's Dep't Stores, Inc., 865 F.3d 17, 21-22 (1st Cir. 2017)).
Appellant was clearly aware of the need to amend her
fraud allegations and easily could have done so against the named
defendants, even at a belated stage of the proceedings. See,
e.g., Adorno v. Crowley Towing & Transp. Co., 443 F.3d 122, 126
- 13 - (1st Cir. 2006) (reaffirming that a plaintiff can tender an amended
complaint after a motion for summary judgment has been filed if
they show "that the proposed amendments were supported by
substantial and convincing evidence" (quotation omitted));
Asociación de Suscripción Conjunta del Seguro de Responsabilidad
Obligatorio v. Juarbe-Jiménez, 659 F.3d 42, 53 (1st Cir. 2011)
("At the summary judgment stage, the proper procedure for
plaintiffs to assert a new claim is to amend the complaint in
accordance with [Rule 15(a)]." (quoting Gilmour v. Gates, McDonald
& Co., 382 F.3d 1312, 1315 (11th Cir. 2004)). Instead, she opted
to amend her complaint through her opposition to defendants' motion
for summary judgment, a practice this Court has routinely rejected.
See, e.g., Montany v. Univ. of New England, 858 F.3d 34, 42 (1st
Cir. 2017); Asociación de Suscripción Conjunta del Seguro de
Responsabilidad Obligatorio, 659 F.3d at 53; see also Brooks v.
AIG SunAmerica Life Assur. Co., 480 F.3d 579, 590 (1st Cir. 2007).
While the Federal Rules of Civil Procedure allow for the
constructive amendment of a complaint in limited circumstances,
the requisite conditions are not present here. Fed. R. Civ. P.
15(b)(2) provides "[w]hen an issue not raised by the pleadings is
tried by the parties' express or implied consent, it must be
treated in all respects as if raised in the pleadings." We have
previously held that:
For purposes of Rule 15(b), implied consent to
- 14 - the litigation of an unpleaded claim may arise from one of two generic sets of circumstances. First, the claim may actually be introduced outside the complaint—say, by means of a sufficiently pointed interrogatory answer or in a pretrial memorandum—and then treated by the opposing party as having been pleaded, either through his effective engagement of the claim or through his silent acquiescence. . . Second, and more conventionally, "[c]onsent to the trial of an issue may be implied if, during the trial, a party acquiesces in the introduction of evidence which is relevant only to that issue."
Rodriguez v. Doral Mortg. Corp., 57 F.3d 1168, 1172 (1st Cir. 1995)
(emphases added) (quoting DCPB, Inc. v. City of Lebanon, 957 F.2d
913, 917 (1st Cir. 1992)); see also Scholz v. Goudreau, 901 F.3d
37, 45 (1st Cir. 2018); Antilles Cement Corp., 670 F.3d at 319
(quoting and applying Rodriguez); Lynch v. Dukakis, 719 F.2d 504,
508 (1st Cir. 1983) ("The test of consent by implication to the
trial of claims not set forth in the complaint is whether a party
did not object to the introduction of evidence or introduced
evidence himself that was relevant only to that issue." (citation
omitted)).
While this Court has not expressly done so, the Seventh
Circuit has held that, in the "spirit of Rule 15(b)," constructive
amendments to the complaint can be effected at the summary judgment
stage, rather than at trial, when the parties have provided express
or implied consent. Walton v. Jennings Comm. Hosp., Inc., 875
F.2d 1317, 1320 n.3 (7th Cir. 1989). The test for implied consent
- 15 - at summary judgment becomes "whether the opposing party had a fair
opportunity to defend and whether he could have presented
additional evidence had he known sooner the substance of the
amendment." Hutchins v. Clarke, 661 F.3d 947, 957 (7th Cir. 2011)
(quotation omitted). Even if we were to follow the Seventh
Circuit's lead and recognize a district court's discretionary
authority to allow "constructive amendments" to pleadings at the
summary judgment stage, as extrapolated from Rule 15(b), see, e.g.,
Torry v. Northrop Grumman Corp., 399 F.3d 876, 877-78 (7th Cir.
2005), here, the district court acted within its discretion in
determining that unpled claims were not properly before it.
Even though defendants acknowledged Katz's unpled claims
in their motions for summary judgment, they only did so after
explicitly objecting to their inclusion. Cf. Action Mfg., Inc.
v. Fairhaven Textile Corp., 790 F.2d 164, 167 (1st Cir. 1986) ("As
a general principle the presentation of claims beyond the complaint
without objection is considered an informal amendment of the
complaint." (emphasis added)). By arguing that Katz's decision
to withdraw her proposed amended complaint rendered her new
theories legally irrelevant and ineffective, defendants precluded
a finding that they "engaged or embraced," and thus implicitly
consented to, said claims becoming part of the proceedings.
Rodriguez, 57 F.3d at 1173; see also Kenda Corp., Inc. v. Pot
O'Gold Money Leagues, Inc., 329 F.3d 216, 232 (1st Cir. 2003) ("It
- 16 - is not enough that an issue may be 'inferentially suggested by
incidental evidence in the record;' the record must indicate that
the parties understood that the evidence was aimed at an unpleaded
issue.'" (quoting Galindo v. Stoody Co., 793 F.2d 1502, 1513 (9th
Cir. 1986)).
As noted earlier, although she withdrew her motion to
amend, Katz contends that defendants were on notice of her new
theories by way of her supplemental responses to their
interrogatories, which she served a few weeks before the close of
discovery and in advance of her second day of deposition testimony.
Specifically, this five-page document attached Katz's proposed
amended complaint -- withdrawn with her motion to amend, two months
prior -- and broadly purported to "incorporate [its] allegations
. . . insofar as they pertain to the conduct, misrepresentation
and omissions of the individuals with whom she communicated during
the relevant time period." She then vaguely "refer[red]" the
defendants to the withdrawn amended complaint as a supplemental
response to one interrogatory, without any further explanation or
citation. Whatever the potential legal significance of this
attempted end-around Rule 15, the supplemental response is not
sufficiently informative to satisfy Rule 9(b)'s particularity
requirement. See Rodriguez, 57 F.3d at 1171-72. Moreover, the
defendants' failure to immediately move to strike the response can
hardly be viewed as acquiescence sufficient to amount to implied
- 17 - consent that the new issues would be litigated. Given the absence
of defendants' consent, implied or otherwise, coupled with Katz's
failure to plead fraud pursuant to the heightened standard imposed
by Rule 9(b), the district court did not abuse its discretion in
determining that Katz's unpled theories were not properly before
it.
B. Fraud on the merits
Under Massachusetts law, the elements for common law
fraud and fraudulent inducement are the same. See United States
v. President & Fellows of Harvard Coll., 323 F. Supp. 2d 151, 199
(D. Mass. 2004). To prove either cause of action, the petitioner
must establish that: "(1) the statement was knowingly false, (2)
defendants made the statement with the intent to deceive, (3) the
statement was material, (4) plaintiff reasonably relied on the
statement, and (5) plaintiff was injured as a result of its
reliance." Id. (citing Turner v. Johnson & Johnson, 809 F.2d 90,
95 (1st Cir. 1986) (applying Massachusetts law)).
As discussed above, Katz alleges Belveron and Sisler
misrepresented the likelihood of a sale, as well as the value of
the Property and her Special Interest. She affirms that absent
these misrepresentations; she would not have sold her Special
Interest. Even when viewing the record in the light most favorable
to Katz, her claims of fraud fail on the merits.
The record reflects that statements made by Sisler and
- 18 - Belveron regarding the likelihood of a sale and the value of the
Property were not knowingly false. Katz has reiterated throughout
litigation that she believed her Special Interest and Property
were worth more than Appellees stated when trying to purchase her
interest. Yet, Sisler supported his initial $1.1 million offer
with two refinancing estimates. See Zimmerman v. Kent, 575 N.E.2d
70, 75 (Mass. App. Ct. 1991) ("A statement on which liability for
misrepresentation may be based must be one of fact, not of
expectation, estimate, opinion, or judgment."). Even after the
sale, internal communications show that Sisler believed that in
2016, the Property was worth approximately $6.5 million.
On her part, Katz only offers her personal
unsubstantiated assessment as proof that the Property was worth
more than what Appellees represented. This is insufficient to
controvert the evidence on the record or otherwise establish that
Belveron and Sisler intentionally misrepresented the value of the
Property and her Special Interest. Notably, she did not have the
Property nor her Special Interest appraised prior to accepting
AHP's $1.5 million offer. On one hand, Katz asserts that her
real-estate experience alone qualifies her to determine that
Belveron misrepresented the value of the Property. On the other
hand, Katz wants to maintain that she lacked the ability to
adequately assess Belveron and AHP's offers. She cannot have it
both ways.
- 19 - Similarly, Appellees have shown they were intent on
retaining the Property due to its substantial and guaranteed
cashflow. They allowed Daitch to pursue a potential sale solely
given a recent shift in the real estate market. However, Appellees
expressed surprise and shock when the Property fetched $11.7
million. Once again, Katz has not been able to controvert that,
when they were made, the pertinent representations regarding
keeping the Property were not knowingly false or reckless.
C. Katz's remaining claims
Beyond fraud, Katz asserts several causes of action, all
of which are equally unsuccessful in the absence of wrongdoing or
foreseeable damages.
i. Civil conspiracy
There are two types of civil conspiracy under
Massachusetts law:
One, based on section 876 of the Restatement [(Second) of Torts], is a form of vicarious liability for the tortious conduct of others . . . The other, drawn from the common law, amounts to a very limited cause of action in Massachusetts for civil conspiracy based on the defendants' allegedly unique ability to exert a "peculiar power of coercion" when acting in unison.
Snyder v. Collura, 812 F.3d 46, 52 (1st Cir. 2016) (emphasis added)
(quotations and citations omitted). The record reflects that Katz
- 20 - is asserting the former, which "requires an underlying tort."1
Taylor v. Am. Chemistry Council, 576 F.3d 16, 35 (1st Cir. 2009).
Having already rejected Appellant's theory of fraud, her civil
conspiracy claim necessarily faces the same fate.
ii. Breach of fiduciary duty
It is uncontested that neither Belveron nor Sisler had
a fiduciary duty towards Katz under the law or the Partnership
Agreement. Instead, Appellant alleges that through their conduct,
i.e. by acting as the de facto general partner and assuming an
authoritative role over the future of the Property, they imposed
a fiduciary duty upon themselves.
Massachusetts courts have recognized that "though
business transactions conducted at arm's length generally do not
give rise to fiduciary relationships, such a relationship can
develop where one party reposes its confidence in another."
Indus. Gen. Corp. v. Sequoia Pac. Sys. Corp., 44 F.3d 40, 44 (1st
Cir. 1995) (citation omitted). To determine if this
transformation has occurred, "courts look to the defendant's
knowledge of the plaintiff's reliance and consider the relation of
the parties, the plaintiff's business capacity contrasted with
that of the defendant, and the readiness of the plaintiff to follow
The district court's order granting summary judgment notes 1
that "Plaintiff correctly disclaimed a 'coercion' conspiracy claim at the hearing[.]" Katz's Brief on appeal is consistent with this.
- 21 - the defendant's guidance in complicated transactions wherein the
defendant has specialized knowledge." Smith v. Jenkins, 732 F.3d
51, 63 (1st Cir. 2013) (quoting Indus. Gen. Corp., 44 F.3d at 44)
(internal quotation marks omitted).
Katz's testimony reflects a lack of trust in Sisler and,
by extension, Belveron. Therefore, it is contradictory to claim
that she relied on their statements. Even more so considering she
opted not to enter a business transaction or agreement with them.
See Indus. Gen. Corp., 44 F.3d at 45 (finding no fiduciary duty
between product developer and parts' supplier, despite developer's
"overall 'management' role" in supplier's transaction with
contract manufacturer, where developer did not direct the terms of
the transaction, but merely "directed [supplier] to deal directly
with [manufacturer]"). Lastly, all parties involved were
sophisticated and experienced with analogous real estate ventures.
There is no evidence that Katz had such a disparate capacity or
knowledge that a fiduciary duty could be imposed on Sisler or
Belveron.
iii. Unjust enrichment
Katz's request for equitable relief also lacks merit.
An unjust enrichment claim "cannot stand where there is an
existing, express contract, unless the contract is not valid."
Philibotte v. Nisource Corp. Servs. Co., 793 F.3d 159, 167 (1st
Cir. 2015) (emphasis added); see also Shaulis v. Nordstrom, Inc.,
- 22 - 865 F.3d 1, 16 (1st Cir. 2017) ("Massachusetts law does not permit
litigants to override an express contract by arguing unjust
enrichment.") (internal quotation omitted); Skyview Fin. Co., LLC
v. Kearsarge Trading, LLC, Civil Action No. 20-11666-PBS, 2021 WL
1930609, at *4 (D. Mass. Feb. 24, 2021) ("Because the relationship
between the parties is governed by contract, unjust enrichment is
not an available remedy.").
Katz sold her Special Interest to AHP for $1.5 million
via a written Agreement. We have already rejected Appellant's
contention that she was fraudulently induced into this sale.
Furthermore, Katz has not proffered any other grounds that could
render the existing Agreement invalid. See Monus v. Colo.
Baseball 1993, Inc., 103 F.3d 145, at *15 (10th Cir. 1996)
(unpublished) ("Having received the benefit of the bargain he
agreed to, plaintiff has made no showing that there are inequitable
circumstances justifying his claim of unjust enrichment.").
Therefore, the Agreement precludes her unjust enrichment claim as
to AHP.
We recognize that neither Sisler, Orne, nor Belveron
were parties to this Agreement. However, "[t]o recover
for unjust enrichment, the plaintiff must establish not only that
the defendant received a benefit, but also that such a benefit was
unjust." Baker v. Equity Residential Mgmt., L.L.C., 390 F. Supp.
3d 246, 258 (D. Mass. 2019) (internal quotation omitted). Katz
- 23 - has not evinced that Sisler or Orne personally benefited from the
sale of her Special Interest. Rather, she merely posits that such
personal gain can be inferred. Yet, it was not Belveron but the
affiliated Fund, who is not a party in this lawsuit, that obtained
a portion of Katz's Special Interest from AHP. Thus, there are
no grounds on which to find that Belveron received a benefit.
iv. Tortious interference
To prevail on a claim for tortious interference with a
contract or business relations, a plaintiff must prove that: "1)
he or she has a contractual or advantageous relationship with
another, 2) the defendant knowingly induced a breach of
that contract or relationship, 3) the defendant's interference, in
addition to being intentional, was improper in 'motive' or 'means'
and 4) the plaintiff was harmed by the defendant's actions." Carp
v. XL Ins., 754 F. Supp. 2d 230, 233–34 (D. Mass. 2010) (citing
Cancellieri v. Northeast Hosp. Corp., No. CIVA 07-01659C, 2009
WL 765060, at *5 (Mass. Super. March 20, 2009).2 Even supposing
Katz had a contractual or advantageous business relationship with
the Falls View Partnership, we agree with the district court's
reasoning that no improper motive was at work. Here, Appellant
2 In the operative complaint, Katz labels her claim for tortious interference as one with contract. However, she discusses both types in her opposition to AHP's motion for summary judgment. Ultimately, the District Court dismissed her claims for tortious interference both with contract and with an advantageous business relationship.
- 24 - avers that misrepresentations are a quintessential form of
improper means. However, given that fraud has not been
established, Katz has not shown that the Appellees employed
improper means or otherwise "acted out of any purpose beyond
the 'legitimate advancement of [their] own economic interest[.]'"
FAMM Steel, Inc. v. Sovereign Bank, 571 F.3d 93, 107 (1st Cir.
2009) (emphasis added) (quoting Pembroke Country Club, Inc. v.
Regency Sav. Bank, F.S.B., 815 N.E.2d 241, 245-46 (Mass. App. Ct.
2004)). Katz entered into a valid agreement to sell her Special
Interest, for which she was well compensated. The fact that she
could have eventually profited more had she foregone the sale and
retained her interest "does not render the defendant[s'] effort[s]
tortious." Pembroke Country Club, Inc., 815 N.E.2d at 246.
v. Chapter 93A
Chapter 93A, known as the Massachusetts Consumer
Protection Act, creates a cause of action for any person who, when
engaging in trade or commerce, suffers a loss of money or property
"as a result of the use or employment by another person who engages
in any trade or commerce of an unfair method of competition or an
unfair or deceptive act." Mass. Gen. Laws Ann. ch. 93A, § 11. In
this context, an act is deemed unfair or deceptive if it is "(1)
within the penumbra of a common law, statutory, or other
established concept of unfairness; (2) immoral, unethical,
oppressive, or unscrupulous; or (3) causes substantial injury to
- 25 - competitors or other business people." Morrison v. Toys "R" Us,
Inc., 806 N.E.2d 388, 392 (Mass. 2004). Evident from this
definition is that what constitutes "an actionable 'unfair or
deceptive act or practice' [under Chapter 93A] goes far beyond the
scope of the common law action for fraud[.]" Cardiaq Valve Techs.,
Inc. v. Neovasc Inc., No. 14-cv-12405-ADB, 2016 WL 1642573, at *5
(D. Mass. Apr. 25, 2016) (internal quotation omitted).
Conceding arguendo that unfair or deceptive practices
were at play, Katz still cannot establish the requisite loss. To
recover damages under Chapter 93A, a party must show "a causal
connection between the deception and the loss and that the loss
was foreseeable as a result of the deception." Int'l Fid. Ins.
Co. v. Wilson, 443 N.E.2d 1308, 1314 (Mass. 1983) (citing Kohl v.
Silver Lake Motors, Inc., 343 N.E.2d 375, 379 (Mass. 1976)). The
only loss Katz has alleged is that she was not able to participate
in the unexpected 2016 sale of the Property. However, none of the
alleged misrepresentations have a causal link with the subsequent
sale or increase in value of the Property. The record reflects
that the changes in the real estate market, the sale of the
Property, and the ultimate sales price of the same were all
unforeseeable. Thus, Katz cannot recover damages under Chapter
93A.
IV.
After reviewing the record in the light most favorable
- 26 - to Katz, we affirm the district court's order granting summary
judgment. Each side to bear its own costs.
- 27 -