O'Connor v. Redstone

452 Mass. 537
CourtMassachusetts Supreme Judicial Court
DecidedNovember 7, 2008
StatusPublished
Cited by33 cases

This text of 452 Mass. 537 (O'Connor v. Redstone) 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
O'Connor v. Redstone, 452 Mass. 537 (Mass. 2008).

Opinion

Marshall, C.J.

At the center of this case are claims that Sumner M. Redstone and his brother, Edward, breached their fiduciary duties to their children in connection with the redemption of shares in a family business, National Amusements, Inc. (NAI), that Sumner and Edward at various times held in trust for their children. Sumner’s children are Brent and Shari; Edward’s children are Ruth Ann and Michael David (Michael). The plaintiffs are Michael and the current trustees of three trusts that once held shares in NAI for the benefit of Sumner’s and Edward’s children.

The plaintiffs commenced their action in the Superior Court in 2006, complaining about redemptions of NAI stock that occurred decades earlier, in 1972 and 1984. They claim that in 1972, Edward wrongfully converted shares of NAI that he allegedly had been holding in trust for Ruth Ann and Michael, and sold those shares to NAI pursuant to a redemption agreement authorized by Sumner personally and on NAI’s behalf (the plaintiffs claim that Sumner aided and abetted Edward’s wrongdoing). The plaintiffs also claim that, in 1984, Sumner orchestrated the redemption of additional shares of NAI held in trust for Ruth Ann and Michael, as well as shares held in trust for Brent and Shari, for inadequate consideration. Through the two redemptions, Edward (as to the first) and Sumner (as to both) allegedly breached their fiduciary duties and duties of loyalty, engaged in self-dealing, and became unjustly enriched. See G. L. c. 203, § 14A (personal liability of trustee for breach of trust). The plaintiffs seek rescission of the redemptions and re-conveyance of the redeemed shares, or money damages representing the current value of those shares; they also seek disgorgement of all profits realized by Sumner and Edward pursuant to the redemptions.

As for the plaintiffs’ delay in commencing their action, they [539]*539claim that they did not become aware of their claims until 2004, when, in connection with unrelated family litigation, documents and other information concerning the 1972 and 1984 redemp-tions were discovered. The defendants — Sumner, Edward, and NAI — moved to dismiss the action, principally on statute of limitations grounds (each brother filed his own motion; NAI joined Sumner’s).5 They argued that the three-year statute of limitations applicable to claims for breaches of fiduciary duty, G. L. c. 260, § 2A, expired in 1987 because the operative facts underlying the plaintiffs’ claims were known in 1984 to a successor trustee, James R. DeGiacomo. They also claimed that, in 1984, Michael (who was then approximately twenty-seven years old) had the requisite knowledge, at least of the 1984 redemption, for the statute of limitations to commence on his claim regarding that redemption. In support of their motions, the defendants filed numerous exhibits relating to the redemptions.

A judge in the Superior Court, noting that the statute of limitations claims were “strongly presented,” but “rest ... in significant part on facts outside the four comers of the complaint,” denied the motions to dismiss without prejudice to the defendants’ raising the same claims at a later juncture. The judge stayed discovery except for that which he deemed relevant to the statute of limitations issue: the deposition of DeGiacomo and the production of NAI’s financial statements from 1983 and 1984.6

Following discovery as limited by the judge, the defendants jointly moved for summary judgment solely on statute of limitations grounds. The judge allowed the defendants’ motion. The [540]*540judge concluded that, as of 1984, DeGiacomo had the requisite knowledge of both the 1972 and 1984 redemptions “to have brought suit against Sumner and Edward for any breaches of their fiduciary duties.” Relying on Demoulas v. Demoulas Super Mkts., Inc., 424 Mass. 501, 523 (1997), the judge opined that the three-year statute of limitations “would seem to begin to run against a trust and its beneficiaries when knowledge is gained by a prior trustee not involved in a predecessor’s malfeasance.” The judge also concluded that, in 1984, Michael had the requisite knowledge of the 1984 redemption to start the running of the limitations clock on his claims concerning that redemption.7 According to the judge, none of the plaintiffs “demonstrated facts that take this case outside the impact of the three-year statute of limitations.”

The plaintiffs appealed. We granted their application for direct appellate review. For the reasons that follow, we affirm in part and vacate in part the judge’s allowance of the defendants’ joint motion for summary judgment.

1. Background. In 1959, Michael “Mickey” Redstone (Mickey), the father of Sumner and Edward, formed NAI as a closely held corporation to own and operate open-air movie theaters. Mickey caused 300 shares to issue, one hundred registered in his name and one hundred registered in the names of each of his two sons. See generally 12 W.M. Fletcher, Private Corporations § 5489 (rev. ed. 2004) (discussing purposes of registering stock transfers on corporate books, including identifying shareholders). No copies of any stock certificates appear in the record.

[541]*541In 1968, Mickey created the Michael Redstone Trust (Grandchildren’s Trust) for the benefit of Sumner’s and Edward’s children, and their heirs. At the time, Sumner’s children, Brent and Shari, were approximately eighteen and fourteen years old; Edward’s children, Ruth Ann and Michael, were approximately fourteen and eleven years old. Mickey funded the trust with his remaining fifty shares in NAI (sometime earlier, NAI had redeemed Mickey’s other fifty shares). The Grandchildren’s Trust specified that the fifty shares were to be divided in equal parts among the four grandchildren — i.e., that twelve and one-half shares would be held in trust for each grandchild. The trustees of the trust were Mickey’s wife, Bella; Sumner; and Edward. The trust included no specific provision addressing the procedure to be followed in case the shares were redeemed by NAI. The principal of the trust was to be distributed to each beneficiary when he or she reached thirty-five years of age.

a. The 1972 redemption. In the late 1960’s, disagreements arose between Mickey and Sumner on the one hand and Edward on the other, resulting in Edward’s leaving NAI in 1971. At the time, Edward was an employee of NAI; Mickey was withdrawing from NAI but was still involved with decisions that affected the company; and Sumner was president, chief executive officer, and chairman of the board of directors. Edward demanded but did not receive the one hundred shares registered in his name.

Edward then retained attorney James R. DeGiacomo to help him obtain the shares. Toward that end, DeGiacomo commenced two actions in the Superior Court against Mickey, Sumner, NAI, and Northeast Theater Corporation (an affiliate of NAI). Thereafter, DeGiacomo, on behalf of Edward, engaged in settlement negotiations with Sumner and Mickey. At an early point in the negotiations, DeGiacomo explored whether Edward could remain associated with the family business in some capacity. When it became clear that such a resolution was impossible, the negotiations focused on the redemption of Edward’s shares of NAI.

During the negotiations, there was disagreement about Edward’s entitlement to all one hundred shares registered in his name.

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Bluebook (online)
452 Mass. 537, Counsel Stack Legal Research, https://law.counselstack.com/opinion/oconnor-v-redstone-mass-2008.