Meunier v. Market Strategies, Inc.

34 Mass. L. Rptr. 146
CourtMassachusetts Superior Court, Suffolk County
DecidedFebruary 24, 2017
DocketNo. 1684CV01546BLS2
StatusPublished

This text of 34 Mass. L. Rptr. 146 (Meunier v. Market Strategies, Inc.) is published on Counsel Stack Legal Research, covering Massachusetts Superior Court, Suffolk County primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Meunier v. Market Strategies, Inc., 34 Mass. L. Rptr. 146 (Mass. Super. Ct. 2017).

Opinion

Salinger, Kenneth W., J.

Market Strategies, Inc. (“MSI”) claims that Cogent Research Holdings, LLC (which the parties refer to as “Holdco”) is liable for breaching a covenant not to sue not because Holdco itself filed a lawsuit, but instead because the three members of Holdco sued MSI in their individual capacities. The two lawsuits have been consolidated. The Court will ALLOW Holdco’s motion to dismiss the one claim against it because MSI has not alleged facts plausibly suggesting that Holdco can be held liable for breach of contract.

1. Factual Background

These consolidated actions arise from the May 2013 sale of Cogent Research, LLC to MSI. At the time of the transaction, John Meunier, Christy White, and the John J. Meunier 2012 Irrevocable Trust were the sole owners of Cogent Research. They agreed to sell Cogent Research to MSI in exchange for an “Initial Payment” of $8.0 million, a “Delayed Payment” of $2.0 million, and a “Contingent Payment” of roughly $3.14 million that was due after MSI received additional audited financial statements of Cogent Research. Meunier and White also agreed to work for MSI for three years and entered into a non-competition agreement.

Meunier, White, and the irrevocable trust created Holdco in connection with this transaction. They transferred ownership of Cogent Research to Holdco, which in turn was the entity that actually sold Cogent Research to MSI. The parties’ purchase agreement provides that MSI was required to pay the Initial Payment, Delayed Payment, and Contingent Payment to Holdco. MSI does not have any contractual obligation to make any of these payments to Meunier, White, or the irrevocable trust.

Although the parties’ purchase agreement provides that MSI was to make the Deferred Payment and Contingent Payment to Holdco no later than April 30, 2016, a separate subordination agreement executed at the same time modifies those terms. The parties to the subordination agreement were Holdco, MSI, and an administrative agent representing Senior Lenders of MSI. Meunier and White signed this contract on behalf of Holdco. The subordination agreement pro-

[147]*147vides that the obligations of MSI to make the Delayed and Contingent Payments “shall be subordinate and subject in right and time of payment ... to the prior Payment in Full of all Senior Debt” held by the Senior Lenders. It further provides that MSI shall not make and Holdco shall not accept payment of any part of the Deferred and Contingent Payments until the Senior Lenders are paid in full. It also provides that the subordination agreement trumps any conflicting provisions in the purchase agreement and any other agreements pertaining to the Deferred and Contingent Payments.

The subordination agreement also contained a covenant not to sue. It provides that Holdco “shall not... take any Enforcement Action with respect to” the Deferred Payment and Contingent Payment obligations of MSI “without the prior written consent” of the administrative agent representing the Senior Lenders. The phrase “Enforcement Action” is defined to include bringing a lawsuit, or initiating or participating with others in a lawsuit, to collect all or any part of the Deferred Payment or Contingent Payment amounts.

In May 2016 Meunier, White, and the irrevocable trust all sued MSI in their own names, purporting to assert their own rights under the purchase agreement rather than rights belonging to Holdco. In their complaint, Meunier, White, and the trust allege they are third-party beneficiaries under the purchase agreement governing the sale of Cogent Research to MSI. They claim, among other things, that MSI breached the purchase agreement by failing to make the Deferred Payment and Contingent Payment by April 1, 2016. Meunier, White, and the trust sought a preliminary injunction against MSI, but that motion was denied in October 2016.

MSI responded to the first lawsuit by suing Holdco for breaching the covenant not to sue that Holdco entered into as part of the subordination agreement. This is the claim that Holdco now moves to dismiss. The two actions were consolidated for all purposes in January 2017.

2. Legal Analysis

MSI’s complaint does not allege facts plausibly suggesting that Holdco is liable for breaching its covenant not to sue with respect to MSI’s Deferred Payment and Contingent Payment obligations. Cf. Lopez v. Commonwealth, 463 Mass. 696, 701 (2012) (to survive a motion to dismiss under Mass.R.Civ.P. 12(b)(6), a complaint or counterclaim must allege facts that, if true, would “plausibly suggest! ]... an entitlement to relief’) (quoting Iannacchino v. Ford Motor Co., 451 Mass. 623, 636 (2008), and Bell Atl. Corp. v. Twombly, 550 U.S. 544, 557 (2007)).

The Court must apply New York law in construing the covenant not to sue because another term in the subordination agreement says that the contract “shall be governed by and shall be construed and enforced in accordance with the internal laws of the State of New York[.]”

The lawsuit by Meunier, White, and the irrevocable trust does not violate the subordination agreement. The plain language of the covenant not to sue bars Holdco, not its individual members, from filing suit to compel MSI to make the Deferred and Contingent payments. MSI does not allege that Holdco itself has ever filed a lawsuit or taken any other enforcement action in violation of its covenant not to sue. Neither the subordination agreement nor the purchase agreement contain a covenant barring Meunier, White, and the irrevocable trust from bringing suit in an attempt to compel MSI to pay over the Deferred Payment and Contingent Payment amounts to Holdco. Presumably it never occurred to MSI that it needed such a covenant, since the purchase agreement specifies that those payments are owed to Holdco, and not to the individual owners and members of Holdco. Nonetheless, the only covenant not to sue binds Holdco but not Meunier, White, or the trust. The Court may not construe the parties’ written contract to “add or excise terms, nor distort the meaning of those used and thereby make a new contract for the parties under the guise of interpreting the writing.” Bailey v. Fish & Neave, 8 N.Y.3d 523, 528, 868 N.E.2d 956, 959 (N.Y. 2007), quoting Reiss v. Financial Performance Corp., 97 N.Y.2d 195, 199, 764 N.E.2d 958, 961 (N.Y. 2001).

MSI cannot create a viable claim for breach of contract merely by making the conclusoiy and incorrect assertion that Holdco breached the covenant not to sue. The interpretation of the parties’ unambiguous written contracts “is a question of law” that the court may resolve when deciding whether a party has asserted a viable contract claim. See, e.g., Eigerman v. Putnam Investments, Inc., 450 Mass. 281, 287 (2007) (affirming dismissal of complaint for failure to state a viable claim for breach of contract); accord, Bailey, 8 N.Y.3d at 528, 868 N.E.2d at 959 (applying New York law). Similarly, whether language used in a contract “is ambiguous is also a question of law for the court.” Berkowitz v. President & Fellows of Harvard College, 58 Mass.App.Ct. 262, 270, rev. denied, 440 Mass. 1101 (2003) (ordering dismissal of complaint for failure to state a viable claim for breach of contract); accord, Bailey, supra.

Free access — add to your briefcase to read the full text and ask questions with AI

Related

Bell Atlantic Corp. v. Twombly
550 U.S. 544 (Supreme Court, 2007)
Bailey v. Fish & Neave
868 N.E.2d 956 (New York Court of Appeals, 2007)
Reiss v. Financial Performance Corp.
764 N.E.2d 958 (New York Court of Appeals, 2001)
Morris v. New York State Department of Taxation & Finance
623 N.E.2d 1157 (New York Court of Appeals, 1993)
Skanska USA Building Inc. v. Atlantic Yards B2 Owner, LLC
2016 NY Slip Op 6903 (Appellate Division of the Supreme Court of New York, 2016)
Walkovszky v. Carlton
223 N.E.2d 6 (New York Court of Appeals, 1966)
Bonacasa Realty Co., LLC v. Salvatore
109 A.D.3d 946 (Appellate Division of the Supreme Court of New York, 2013)
State v. Easton
169 Misc. 2d 282 (New York Supreme Court, 1995)
Eigerman v. Putnam Investments, Inc.
877 N.E.2d 1258 (Massachusetts Supreme Judicial Court, 2007)
Iannacchino v. Ford Motor Co.
451 Mass. 623 (Massachusetts Supreme Judicial Court, 2008)
Flomenbaum v. Commonwealth
889 N.E.2d 423 (Massachusetts Supreme Judicial Court, 2008)
Lopez v. Commonwealth
463 Mass. 696 (Massachusetts Supreme Judicial Court, 2012)
Berkowitz v. President & Fellows of Harvard College
789 N.E.2d 575 (Massachusetts Appeals Court, 2003)

Cite This Page — Counsel Stack

Bluebook (online)
34 Mass. L. Rptr. 146, Counsel Stack Legal Research, https://law.counselstack.com/opinion/meunier-v-market-strategies-inc-masssuperctsuff-2017.