Old Town Utility & Technology Park, LLC v. MFGR, LLC

• Court: Superior Court of Maine
• Decided: May 25, 2018
• Docket: CUMbcd-re-17-11
• Status: Unpublished

Opinion

STATE OF MAINE SUPERfOR COURT CUMBERLAND, ss, BUSINESS AND CONSUMER COURT LOCATION: PORTLAND ;/ DOCKET NO. BCD-RE-17-11

OLD TOWN UfILITY & ) TECHNOLOGY PARK, LLC, et al. ) ) Plaintiffs, ) ORDER ON DEFENDANTS OLD ) TOWN HOLDINGS II, LLC AND v. ) JOSEPH DESCHENES' MOTION TO ) DISMISS SECOND AMENDED MFGR, LLC, et al. ) VERIFIED COMPLAINT ) Dcfenda nts,

Before the Court is Defendants Old Town Holdings II, LLC (hereafter "OTB") and Joseph

Deschenes' Motion to Dismiss Counts VU,• VIII, and IX of the Second Amended Verified

Complaint (the "Complaint"). Plaintiffs are represented by Attorney Clifford Ginn and Defendants

listed above are represented by Attorney Julia Pitney an.d Attorney Emily Howe. The Court has

considered the parties' written filings along with their oral arguments made on May 7, 2018 and

for the reasons set out below grants in part and denies in part the Motion.

PROCEDURAL POSTURE

Plaintiffs Old Town Utility and Technology Park, LLC (hereafter "OTU"), Relentless

Capital Company, LLC, and Samuel Eakin, filed the Complaint on February 9, 2018 in response

to this Co\lli's January 31, 2018 Combined Order on Defendants' Motions to Dismiss (the "Prior

Order"), requiring Plaintiffs to file a more definite statem<'mt pursuant to M.R. Civ. P. I2(e) to

•ln thclr Opposition to this Molion, Plaintiffs clarified and/or conceded that the original Count VII hos already been dismissed by the Court in its January 31, 20 [8 Combined Order on Defendants' Motions to Dismiss, and that Count VII in the Second Amended Vel'ifled Complaint was so numbered to prevent a gap in numeration in the later pleading. Therefore, what is actually before the Court is a Motion to Dismiss Co11nts VIJI and IX of the' Second Amended Verified Complaint. and the Court will not address any arguments regarding anti-trust claims.

1 address flaws in the Plaintiffs' former pleading identified by the Court in its order. (See Prior Orde1·

18-21.) The request for a inore definite statement impUcated only those causes of action alleged

against these Defendants. In the motion now before the Comt, Defendants have again moved to

dismiss Plaintiffs' Complaint on the grounds that Plaintiffs have failed to remedy the flaws the

Court identified in its prlor order, (Def's Mot. Dismiss 6, 9.)

STANDARD OF REVIEW

In reviewing a motion to dismiss under Rule 12(b)(6), courts "consider the facts in the

complaint as if they were admitted." Bonney v. Stephens Mem. Hosp., 2011 ME 46, ~ 16, 17 A.3d

123. The complaint is viewed "in the light most favorable to the plaintiff to determine whether it

sets forth elements of a cause of action or alleges facts that would entitle the plaintiff to rellef

pursuant to some Legal theory/' Id. (quoting Saunders v. Tisher, 2006 ME 94, ~ 8, 902 A .2d 830).

"Dismissal is warranted when it appears beyond a doubt that the plaintiff is not entitled to relief

under any set of facts that he might prove in support of his claim." Id. "The legal sufficiency of a

complaint challenged pursuant to M.R. Civ. P. 12(b)(6) is a question of law" and thus subject to

de n.ovo appellate review, Marshall v. Town ofDexter, 2015 ME 135,, 2, 125 A.3d 1141.

ANALYSIS

Count VIII of Plaintiffs' Complaint alleges breach of contract and Count IX alleges breach

of fiduciary duty. As noted in the previous order, there is factual and Iegal overlap in the allegations

made in these two counts. With respect to Count VJII, Plairrtiffs allege that Defendants are liable

for breach of contract based on the allegation that they breached several duties imposed by OTU's

Operating Agreement (hereinafter "OA"), specifically tl1e duty of loyalty, the duty not to exploit

a business opportunity without disclosure and offer, and the duty of confidentiality, (Pl's Compl.

~~ 155-156.) These allegations are the same as those that form the basis of their claim ln Count IX

2 for breach of fiduciary duty. (Pl's Campi.~ 164.)

Plaintiffs allege that the OA imposes fiduciary obligations on managers and members

involved in management, and the parties agree that the OA is a binding contract.' (PJ's Comp!.!~

153-155; Def's Mot. Dismiss 7.) See 31 M.R.S. §§ 1521(1), 1523(2) . They do not agree, however,

as to whether the certificate of formation (hereinafter "COF") is a contract. The Court has

considered the parties' arguments on that issue and concludes that the COP is not a contract. It is

instead an "agreement to agree." See, e.g. Muther v. Broad Cove Shore Ass'n., 2009 ME 37, j 6,

968 A.2d 539, The Court therefore concludes that the COP did not impose contractual obligations

on the Defendants. See 31 M.R.S.A § 1531(1)(B). Thus, Count VIII states a claim for breach of

contract only with respect to the OA, This means that Defendants had no contractual duties before

the OA was entered into.

Viewing the Complaint ln the light most favorable to the Plaintiffs, the Court concludes

that Count VIII alleges facts supporting the allegation that both Defendants' had contractual duties

under the OA sufficient to survive this motion to dismiss. To be clear, however, no conduct on the

part of Defendants prior to the form11tion of the OA can in and of itself constitute a breach of

contract.

Count IX alleges breach of fiduciary duty. As noted above, Defendants do not contest the

proposition that the OA imposes this duty as a matter of contract. However, Plaintiffs seem to

argue that even if no contract was formed before the OA Was executed, Defendants stiU owed a

, Plaintiffs attached a documenl titled "Limited Liability Company Agreement of Old Town Utility & Technology Park, LLC" as Exhibit E to the Complaint, Al the oral argument, Defendants' counsel pointed out that the document is 11nsigncd, but was nmbivnlcnl about whether she was questioning the document's a\lthenticlty. See Moody v. State Liquor & Lof/e,y Comm'n, 2004 ME 20, i 10, 843 A .2d 43 ("narrow exception" allows a cou11 to consider certain extdnsic documents "when the authenticity of such documents is not challenged"). Regardle~s. the asse1tion that the OA imposes fiducia1·y duties on mflnagers and members involved ln management seems to be uncontested. (Def's Mot. Dismiss 7,) The CoUl't declines to consider Exhibit B directly, but accepts as true the Plaintiffs' allegation that the OA imposes fiduciary duties on members and managers of OTU. , Wl1ile 0TH is alleged to have been a member of OTU, Mr. Deschenes personally is alleged to have been a manager.

3 common law fiduciary duty to Plaintiffs during this period, (See Pl's Comp]. 1f1f 159-164.) Because

Count IX alleges breach of the duty of loyalty (as a component of the fiduciary duty) by

misrepresentation and omission of material facts, Count IX sounds in fraud. (Pl's Compl. f 163.)

The allegations contained in Count VIII likewise allege breaches of the OA through

misrepresentation and omission. (Pl' s Compl. 1f 156.) Therefore, the Court must review those

restated allegations supporting both Counts VIII and IX under a heightened standard of

particularity. See M.R. Civ. P. 9(b).

There is no q11estio11 that the Complaint contains more information than its predecessor.

However, with respect to their theory of common Jaw breach of fiduciary duty, Plaintiffs fail to

provide partlculari.zed allegations of "great disparity of position and influence between the parties"

and therefore the Court will grnnt the motion with respect to the common law breach of fiduciary

duty cl Aim. Ramsay v. Baxter Title Co., 2012 ME 113, j ' 7-8, 54 A.3d 710 ("bare allegations" that

plaintiff 1'had inferior knowledge" and "relied upon" defendants are insufficient for breach of

fiduciary duty claim to survive motion to dismiss). The Defendants clearly owed fiduciary duties

under the OA, but can only be held liable for those breaches pursuant to that agreement.

With respect to the allegations of misrepresentation of facts, the Cou1t concludes that the

Complaint, in pArticular paragraphs 31 through 106, provides the particularity called for under the

heightened pleading standard. They lay out the chronology of the relationship between the parties 1

explain what various parties knew and when they knew certain critical facts, and the actions Mr,

Deschenes in particular took at various stages of tbe negotiations, They allege that he hid the true

nature of his relationship with CVG as well as his knowledge of CVG's role in the Con Ed hid.

Wbile specific dates are sometimes missing from the allegations, the chronology is sufficiently

4 clear.' The Plaintiffs' theory on how Mr. Deschenes allegedly misled his partners, behaved in ways

suggesting that he was not acting the interest of OTU and its members but rather Lo the benefit of

their competitor, along wit!J never mentioning these efforts to OTU's other members and

managers, has now been sufficiently clarified relative to the prior pleading that the Court is

satisfied the standard has been met. See M.R . Civ, P, 9(b). (See Pl' s Comp!.~~ 31-156 .) It remains

to be seen whether Plaintiffs will be able to establish prnof by clear and convincing evidence with

respect to the fraud allegations, but they will be allowed to develop a factual record to attempt to

meet that standard. See Harrts Mgmt. v. Coulombe, 2016 ME 166, ~ 26 n.7, 151 A.3d 7,

CONCLUSION

Based on the foregoing, the entry will be:

Defendants' Motion to Dismiss is granted in pa;t and denied in part.

Defendants' Motion to Dismiss is DENIED as to Count VIII.

Defendants' Motion to Dismiss is GRANTED as to Count IX. Plaintiffs may pursue their

claims for breach of fiduciary duty only under their claim for breach of contract, and to the extent

that duty is imposed by the OA.

DATE SUPERIOR COURT JUSTICE BUSINESS AND CONSUMER COURT

Entered on the Docket: .:;/2s/1B Cop[es sent via Mail_Electronically~

, Defendants foult Plainllffs l'epetitive L1se of the phrase "upon int'ormalion and belief' but the Coun concludes this language is not pmblematic given Plaintiffs' decision to file a ''verified" complaint.

5 STATE OF MAINE SUPERIOR COURT CUMBERLAND, ss. BUSINESS AND CONSUMER COURT LOCATION: PORTLAND DOCKET NO . BCD-RE-17-11 ,/

OLD TOWN UTILITY & ) TECHNOLOGY PARK, LLC, et al. ) ) Plaintiffs, ) ) OIIDER ON PLAINTIFFS' v. ) MOTION ) '\ FOR PRELIMINARY INJUNCTION MFGR, LLC, et al. ) ) . Defendants.

This matter is before the Cou1t on Plaintiffs Old Town Utility and Technology Park, LLC's

("OTU"); Relentless Capital Company, LLC's (''Relentless"); and Samuel Eakin's ("Eakin")

motion for preliminary injunction brought pursuant to M.R. Civ. P. 65(b). Plaintiffs seek to enjoin

Defendants MFGR, LLC ("MFGR") and William Firestone ("Firestone") from directly or

indirectly affecting transfer of any real prope1ty, improvements, fixtures, or equipment, or other

property and rights associated with the Expera Mill Facility (the "Facility"). Defendants oppose

the motion. 1 The Court heard oral argument on January 5, 2018 at the Capital Judicial Center in

Augusta, Maine. Clifford Ginn, Esq., appeared for Plaintiffs and Daniel Mitchell, Esq. appeared

on behalf of Defendants.

FACTUAL BACKGROUND

The Court incorporates by reference the Factual Background section on pages 1-5 of its

Combined Order on Defendants' Motions to Dismiss (the "Combined Order") filed this same

1 Plaintiffs do not seek to enjoin Defendants Old Town Holdings II, LLC, and Joseph Everett Deschenes

(th e "OTH Defendants") from affecting transfer of the Facility. The 0TH Defendants nonetheless filed an opposition to Plaintiffs' motion for the purpose ofj oining the objection filed by MFGR and Firestone. Julia Pitney, Esq., appeared for the 0TH Defendants at the oral argu_ment. day, January 31, 2018, in this action.

In order to prevail on a motion for a preliminary injunction, the plaintiff has the burden of

proving:

(1) that plaintiff will suffer irreparable injury if the injunction is not granted, (2) that such injury outweighs any harm which granting the injunctive relief would inflict on the defendant, (3) that plaintiff has exhibited a likelihood of success on the merits (at most, a probability; at least, a substantial possibility), ( 4) that the public interest will not be adversely affected by granting the injunction.

Ingraham v. Univ. of Me., 441 A.2d 691, 693 (Me. 1982). These criteria "are not to be applied

woodenly or in isolation from each other; rather, the court of equity should weigh all of these

factors together in determining whether injunctive relief is proper." Dep 't of Envt 'l Prof. v.

Emerson, 563 A.2d 762, 768 (Me. I 989). Because injunctive relief is an equitable remedy, this

Court's grant of injunctive relief is reviewed on appeal for an abuse of discretion. Bangor Historic

Track, Inc. v. Dep't ofAgric., Food & Rural Res., 2003 ME 140, ,i 11,837 A.2d 129.

DISCUSSION

I. PLAINTIFFS HA VE f' AILED TO DEMONSTRATE A LIKELIHOOD OF SUCCE ON THE MERlTS

A. Only Count I is Relevant to the Analysis of Plaintiffs' Likelihood of Success on the Merits.

Plaintiffs seek injunctive relief in Count I, Count II, and Count VII. The remaining counts

seek only damages, and not injrn1ctive relief. Defendants posit that only those counts which

explicitly seek injunctive relief inay serve as the basis for a preliminary injunction. Bar Harbor

Bank 'g & Trust Co. v. Alexander, 411 A.2d 74, 79 (Me. 1980); (Def s Opp'n 5.) This

presupposition goes unchallenged in Plaintiffs' reply. The Court thus narrows its focus on

Plaintiffs' likelihood of success on the merits -to only those counts -which seek an injunction in

2 their prayer for relief for purposes of deciding this motion.

Count I states a claim for breach of contract, alleging that MFGR breached a binding

agreement between OTU and MFGR whereby MFGR would transfer the Facility, or ce1iain

Facility assets, to some combination of OTU and the City of Old Town. (Pl's Comp!. 1122, 96­

101.) Count II seeks specific performance of that agreement. (Id. 11 102-109.) Specific

performance is an equitable remedy, not a cause of action. The Court therefore treats Count II as

a prayer for relief for MFGR's breach of contract pied in Count I. No independent analysis of

this count is required, as Plaintiffs' entitlement to specific performance is entirely dependent on ·

their success in Count I.

Count VII likewise is irrelevant to Plaintiffs' instant motion. Although Plaintiffs seek

injunctive r~lief for the violation of Maine's antitrust statutes 2 alleged in Count VII (Id. 11 127­

13 9), only the attorney general of the State of Maine may seek injunctive relief pursuant to those

statutes. State v. MaineHealth, 2011 ME 115, 18, 31 A.3d 911.

B. Plaintiffs Have Failed to Demonstrate A Likelihood of Success on the Merits on Count I

As noted above, Count I alleges that MFGR breached a purported agreement to sell the

Facility to OTU and the City. Because Count I is brought only by Plaintiff OTU against solely

Defendant MFGR, in the interest of clarity, the Court will refer to these parties by name for the

balance of this Order. In its motion to dismiss and again here in opposition, MFGR argues that

OTU's breach of contract claim cannot succeed, because the pmported contract fails to satisfy

Maine's statute of frauds, which requires that any contract for the sale of land be in writing and

signed by the party to be charged therewith. 33 M.R. S.A. § 51(4 ). OTU counters that an offer letter

2 10 M.R.S.A. §§ 1101-1108.

3 dated April 28, 2016 from the City to MFGR, which was countersigned by Firestone, is an

enforceable contract for the sale of the Facility which satisfies the statute of frauds. 3 OTU thus

stylizes this letter the "4/28/16 Agreement," and the Court will refer to it as such in this Order. In

the alternative, OTU argues that the doctrine of part performance applies here as an exception to

the statute of frauds. 4

As discussed in the Combined Order,5 the 4/28/16 Agreement does not expressly include

OTU. OTU has nonetheless claimed that it has standing to enforce the 4/28/16 Agreement as the

City's "assign;" or, in the alternative, as the third party beneficiary of the contract. Although these

theories were sufficient to survive a motion to dismiss, the Court finds that OTU has failed to

demonstrate there is a substantial possibility that it will prevail under either theory.

At the outset, MFGR has challenged the enforceability of the 4/28/16 Agreement. (Def's

Reply Mot. Dismiss at 1 n. 1.) On its face, the letter in "general terms" outlines a transaction

structure "with the intent to convert [the letter] into a mutually agreeable binding contract .... "

MFGR' s principal argument for purposes of its motion to dismiss and in opposition to the instant

motion has been that OTU Jacks standing to enforce the 4/28/16 Agreement to the extent that it is

a binding instrument between MFGR and the City. However, it has not waived the argument that

the 4/28/16 Agreement is a mere proposal that is not enforceable by any party.

3 Plaintiffs attached as "Appendix l" to their motion a 23-page unexec4ted agreement for the sale of

ce1tai11 land and assets associated with the Facility that is dated "_ day of July 2016." In the Factual Background section of Plaintiffs' motion, it is described as a "draft" resulting from negotiations between OTU, MFGR, and the City; and Plaintiffs allege that MFGR "verbally agreed to all [its] material terms." (Mot. 11.) Appendix 1 goes unmentioned in the Argument section of the motion, whereas the 4/28/16 Agreement is discussed extensively there and in Plaintiffs' opposition to the MFGR Defendants' motion to dismiss. See note 4 infra. 4 These arguments were not raised by Plaintiffs in their motion for preliminary injunction. However·, in their

reply brief, Plaintiffs incorporate by reference the material in their opposition to the MFGR Defendants' motion to dismiss. (Pt's Reply 1.) , 5 The Cou,t incorporates by reference Pait LA., pp. 5-8, of the Combined Order.

4 OTU claims that "the City in fact assigned its rights [under the 4/28/16 Agreement) to

OTU" and that there was "clear mutual acknowledgement of the validity of the assignment"

amongst OTU, MFGR, and the City. (Pl's Opp'n to Defs Mot. Dismiss 4.) "For an assignment to

be enforceable there must be an act or manifestation by the assignor indicating the intent to transfer

the right to the assignee." Sturtevant v. Town of Winthrop, 1999 ME 84, ,r 11, 732 A.2d 264. Our

Law Court has suggested that circumstantial evidence is insufficient to satisfy this requirement of

an "act or manifestation." Id. ("no evidence of a manifestation of ... intent to transfer the contract

rights" in the absence of direct evidence of such an assignment). Beyond a course of dealing

between OTU, MFGR, and the City, OTU has not alleged any "act or manifestation" on the part

of the City which indicates its intent to transfer its rights under the 4/28/16 Agreement to OTU.

In F. 0. Bailey Co. v. Ledgewood, Inc., 603 A.2d 466, 468 (Me. 1992), Maine adopted the

Restatement (Second) of Contracts § 302 test for whether a third party beneficiary is an intended

beneficiary with a right to enforce the agr~ement: "A beneficiary of a promise is an intended

beneficiary if recognition of a right to perf01mance in the beneficiary is appropriate to effectuate

the intention of the parties and ... the circumstances indicate that the promisee intends to give the

beneficiary the benefit of the promised performance." The F. 0. Bailey Comt cautioned that an

intent to create an enforceable benefit in a third party must be "clear and definite." Id. In F. 0.

Bailey, a commercial condominium tenant purported to be a third-party beneficiary of a

construction contract between the condominium and a contractor. Id. at 467. Despite evidence that

the tenant had negotiated with the contractor's architect for the completion of certain work, that

the contract required that the contractor complete the work in such a way as to allow the tenant's

business to remafn open, that some of the work benefitted the tenant exclusively, and that the tenant

showed great interest in the work and spent time following its progress, the Law Court held that

5 these circumstances could not generate a factual issue as to whether the tenant was an intended

third-party beneficiary with a right to enforce the contract. Id. at 467-68.

Subsequent Law Court authority has en'lphasized the high bar OTU must clear in order to

prevail as a third-party beneficiary. See Denman v. Peoples Heritage Bank, 1998 ME 12, ~~ 8-9,

704 A.2d 411; Devine v. Roche Biomedical Labs., 659 A.2d 868, 870 (Me. 1995) ("In the absence

of contract language, there must be circumstances that indicate with clarity and definiteness that

[the promisee] intended to give [the putative third-party beneficiary] art enforceable benefit under

the contract."). See also Thompson v. Miles, 741 F. Supp. 2d 296, 307 (D. Me. 2010).

Finally, it is unlikely that the doctrine of part perfo1mance will operate here as an exception

to the statute of frauds. "After having induced or knowingly permitted another to perform in part

an agreement, on the faith of its full perfo1mance by both parties and for which he could not well

be compensated except by specific performance, the other shall not insist that the agreement is

void." Landry v. Landry, 641 A.2d 182, 183 (Me. 1994). OTU has alleged that it and the other

Plaintiffs undertook a significant amount of work on various projects related to getting the Facility

sold and operational, but has not explained why an award of money damages is an inadequate

remedy. As discussed in Part II.A. infra, this was a business venture for profit. Money damages

should be adequate. Furthermore, OTU is suggesting a novel application of the doctrine of part

performance. The prototypical application of the doctrine would be partial payment. See id. Under

a promissory estoppel theory, substantial physical improvements to land have also been held

adequate to except a contract for the sale of land from the dictates of the statute of frauds. See

Harvey v. Dow, 2008 ME 192, ~ 13, 962 A.2d 322 (purchaser built house on lot); Tozier v. Tozier,

437 A.2d 645, 648-49 (Me. 1981) (donee built house and outbuildings on lot). OTU analogizes

"the web of future tenants, public financing, and business modeling" acquired and developed by

6 Plaintiffs to partial payment for, or physical improvement to, the Facility. (Pl's Opp'n to Def s

Mot. Dismiss 3.). The Court is not convinced that there is a substantial possibility that this novel

application could be adopted under Maine law.

Because OTU has failed to demonstrate a substantial possibility that it will prevail on

Count I, the Court thus finds that this factor weighs against granting Plaintiffs' motion.

II. PLAINTIFFS HAVE FAILED TO MAKE A SUFFICIENT SHOWING AS TO THE REMAINING FACTORS

A. lrreparable Harm

Plaintiffs claim that they wi 11 be irreparably harmed if the Facility is sold to another buyer

because their business model could only be executed there, and that "there is not a single other site

in the world" where it could be. (Mot. 18.). Defendants counter that whatever harm Plaintiffs have

suffered can be quantified and remedied through an award of damages. Defendants also attach

affidavits from Mr. Firestone, Mr. Mayo (City Manager of Old Town), and Mr. Deschenes

(principal of 0TH) suggesting that OTU's claim of ineparable harm lacks merit because OTU

lacks the resources to purchase the Facility.

In their reply brief, Plaintiffs urge the Court to disregard Defendants' affidavits as not

credible and counter the attack on Plaintiff's capacity to purchase the Facility, but have no retort

for the Defendants' argument that Plaintiffs' harm is strictly economical. The Court is thus

satisfied that Plaintiffs' harm, if any, is financial in nature and can be remedied by an awru.'d of

money damages. In sum, the Court finds that this factor weighs against granting Plaintiffs' motion,

as Plaintiffs have not demonstrated that the sale of the Facility to another buyer will result in

irreparable harm to Plaintiffs.

B. Balance of Harms and the Public Interest

The Court has carefully considered the arguments presented by both sides as to these

7 factors, but decides that they weigh neither for nor against granting Plaintiffs' motion. The balance

of hanns essentially boils down to a credibility determination: OTU claims they remain willing to

buy the Facility; MFGR claims that OTU lacks the resources, and that CVG is ready to purchase

the Facility. Based on the record now before it, the Cou1t is unable to determine whose position is

more credible, The Court is convinced that an operational Facility will serve the public interest­

a point rnfaed by both sides-but determines that the public interest would be well~served by an

operational Facility regardless of who owns or operates it.

By reason of the foregoing it is hereby ORDERED:

That Plaintiffs' motion for preliminary injunction is DENIED.

Pursuant to M.R. Civ. P. 79(a), the Clerk is hereby directed to incorpornte this Order by

rderenc!;l in the docket.

DATE SUP~J~ BUSINESS AND CONSUMER COURT

Entered on the Docket: /" 31 ~I$ Copies sent vi;i Mail_Electronically.::::__

8 BCD-RE-2017-11

Old Town Utility & Technology Park, LLC Relentless Capital Company, LLC., and Samuel Eakin

v.

MFGR, LLC., William Firestone, Old Town Holdings, II., LLC., & Joseph Everett Deschenes

Old Town Utility & Technology Park, LLC Relentless Capital Company, LLC., and Samuel Eakin

Counsel: Gin Clifford, Esq. 62 Marion Jordan Rd Scarborough, ME 04074

Old Town Holdings, II., LLC.

Counsel: Julia Pitney, Esq. Emily Howe, Esq. 84 Marginal Way Suite 600 Portland, ME 04101-2480

MFGR, LLC., and William Firestone

Counsel: Meredith Eilers, Esq. Daniel Mitchell, Esq. PO Box 9729 100 Middle Street Portland, ME 04104-5029· · 1,

STATE OF MAINE SUPERIOR COURT CUMBERLAND, ss. BUSINESS AND CONSUMER COURT LOCATION; PORTLAND DOCKETNO. BCD-RE~l 7-11 ./

OLD TOWN UTILITY & ) TECHNOLOGY PARK, LLC, et al. ) ) Plaintiffs, ) ) COMBINED ORDER ON v. ) DEFENDANTS' MOTIONS ) TO DISMISS MFGR, LLC, et al. ) ) Defendants.

This matter is before the Court on Defendants f'v1FGR, LLC's (11 MFGR») and William

Firestone's ("Firestone") (collectively the "MFGR Defendants") motion to dismiss all counts

against them and Defendants Old Town Holdings II, LLC's ("OTI-I") and Joseph Everett

Deschenes's ("Deschenes") (collectively the "OTH Defendants") motion to dismiss all counts

against them. Plaintiffs Old Town Utility and Technology Park, LLC ("OTU"); Relentless Capital

Company, LLC ('

was heard on January 5, 2018 at the Capitnl Judicial Center in Augusta, Maine. Clifford Ginn, Esq.

appeared on behalf of Plaintiffs. Daniel Mitchell, Esq. appeared on behalf of the MFGR

Defendants and Julia Pitney, Esq. appeared for the 0TH Defendants.

FACTUAL BACKGROUND'

This case arises out of a disputed transaction for the sale and purchase of the former Exp era

Mill Facility (the "Facility") in the City of Old Town, Maine, C'Old Town,'' or the "City") which

includes approximately 300 acres of land, roughly 400,000 square feet of warehouse building, a

1 The information In this section is taken in large part from Plaintiffs' First Amended Verified Complaint (the !(Complaint"). wastewater treatment plant, a l 6MW biomass boiler, and other miscellaneous industrial assets.

(Compl. ~ 4.) MFGR pmchased the FacHity from its formet owner on or about January 27, 2016.

(Compl. , 5.) Firestone is the principal of MFGR. (Comp!. , 3.)

Relentless, acting through Eakin, and James W. Sewall Company ("SewaW'), acting

through its president and CEO David Edso.n ("Edson"), formed OTU on or about December 15,

2015, for the pu!'pose of acquidng or leasing and redeveloping the Facility. (Compl. 16.) 0TH

later joined OTU through its pdncipal, Deschenes, the former manugel' of fiber and logistics at the

Facility. (Comp!., 7.) When and to wh~t extent 0TH and Deschenes began working with or joined

OTU is dispi1ted, but by July 15, 2016, the three members executed an operating agreement for

OTU giving each member equal one-third ownership of OTU and naming Edson, Eakin, and

Deschenes its managers. (Id.)

Eakin's work on acquiring or leasing and redeveloping the Facility went three directions

in 2016. One project involved seclll'ing contracts for the prnvision of steam and power from the

Facility's power and boiler assets with the University of Maine (the "University"). (Compl. ,r,r 14­

17.) Eakin undertook this work through Relentless and partnered with another entity, Consolidated

Edison Solutions ("ConEd"), (Id.) This «conEd Team" was ultimately invit.ed to pa1ticipate in

"Phase JI" of the University's bidding process, (Campi.,~ 19, 68.) Sometime the1·eafter Relentless

was removed from the team. (Comp!. ,r 68.)

Meanwhile, OTU was negotiating wlth MFGR (the Facility's owner) and Old Town to

facilitate the sale of the Facility's wastewater treatment plant and warehouses. (Comp!. ir 9-10,

20.) In March 2016, MFGR and OTU executed an agreement whereby OTU would provide

services for compensation (the "Advisory Agreement") to that end. (Campi. ,r~ 20-21.) Pursuant

2 to the Advisory Agreement, OTU secmed 2 financing and developed a transactional framework

agreeable to all parties. (Comp!.~~ 22-29, 32.) The terms of this proposed transaction were reduced

to writing in an offer letter dated April 28, 2016 from the City to MFGR which was countersigned

by Firestone. (Comp!.~ 32.) This letter was a binding 3 letter of intent and is thus styled the "4/28/16

Agreement" by Plaintiffs, and will be so referenced in this Order. The letter proposes purchase of

the Facility by the City "and/or its assigns;" Plaintiffs allege that MFGR, the City, and OTU

understood the City's "assigns" to mean OTU. (Compl. ~ 33.)

Through Relentless, Eakin was simultaneously developing a business model for the

Facility. (Campi.~ 35.) As part of this process, OTU's managers met with representatives of the

Carrier, Varney, and Gardner families (the "CVG families") regarding securing timber assets to

fuel the facility because these three families owned substantial timbel'land in the State of Maine.

(Comp!.~ 37-38.) The CVGfamilies formed CVG, Inc. ("CVG") in January 2015 to piirsue their

joint interests. (Comp!. ~ 38.) CVG allegedly came to view Relentless's proposal as a threat and

recognized that acquiring the Facility would better serve its interests. (Comp!. ~ 43.) CVG also

became part of the ConEd team, as Relentless was removed from the ConEd team and i·eplaced

with Penobscot Energy and Fiber, LLC, which was formed by CVG and its partners to redevelop

the Facility. (Compl., 68.)

Meanwhile, in J\lne through October 2016, OTU continued to work with the City and

MFGR to close the sale of the Facility in accordance with the 4/28/16 Agreement. (Comp!.~ 51.)

2 The Cou1t appreciates that whethel' l\nd to what extent OTU was successful in securing financing for the sale of the Facility is a central issue in this litigation and disputed by the parties. The Couit uses "secured" here because Plaintiffs allege they were able to secure adequate financing for the transaction and for pu1·poses of a motion to dismiss, the Cou1t must accept all well-pleaded allegations as true. Bonney v. Stephens lviem. Hosp., 2011 ME 46, ii 16, 17 A.Jd 123. 3 The MFGR Defendants challenge whether they are bound by the terms of this letter. (Defs Reply Mot. Dismiss at J n. l .) See note 2 supra.

3 Problems arnse. Changes to the State of Maine's i-egulatory approach to regulation of stormwater

treatment necessitated changes to the ptoposed ownership structure. (Comp/. ~1 52-54). On or

about July 5, 2016, OTU's closing attorney circulated a draft buy-sell instrument to the parties;

MFGR raised certain concems, which OTU's closing attorney addressed. (Comp!. ~iI 54-56.) In

early August 2016, OTU and the City discovered that the Facility's tissue building warehouse roof

required substantial repairs and they began working with MFGR to address the issue. (Compl. ~

62.) By September 1, 2016, emails had been circulated among various representatives of the three

parties indicating that the City was waiting only on closing documents discussed in a prior

conference call. (Compl. ,I 70). The City's mayor had subsequently requested those documents

from Firestone and the September I emails charged MFGR with produci11g these "exhibits." (Id.)

By early October 2016, no closing had occurred. Firestone informed OTU that a competing

buyer had emerged, and on October 10, 2016, gave OTU two weeks to respond with a counter­

offer, (Compl. ~~ 77-78.) On October 24, 2016, Firestone raised issues with the proposed closing

that OTU claims dealt with well-settled matters. (Comp!. ,riJ 84-86.) Shortly thereafter MFGR

elected to sell the Facility to CVG. (Comp!. ,r 87,)

Plaintiffs filed their nine-count Complaint on September 5, 2017; although much has

transpired since then regarding the sale of the Faci!Jty, as of that date and up until the entry of this

Order, MFGR has not clo;ed a sale of the Facility. (Comp!. ,r 95.) Supplemental briefing and letters

to th~ Court, as well as assertions made at oral at'gument, suggest that in the time since the

Complaint was filed: (1) The deal with CVG failed; (2) e4research.org, a non-profit corporation

with a relationship with Sewall emerged as a potential new buyer; (3) that agreement expired by

its terms at the end of2017; and (4) CVG has emerged resurgent in the new year as the prospective

buyer. OTU maintains that it is still willing and able to purchase the Facility from MFGR; MFGR

4 has indicated that it is ready to move toward a closing with CVG.

OTU alone brings six counts against only MFGR in this lawsuit: Count I (Breach of

Contract: 4/28/16 Agreement), Count II (Specific Performance: Sale of the Facility from MFGR

to OTU), Count III (Breach of Contrnct: Advisory Agreement), Count IV (Promissory Estoppel:

SRle of the Facility), Count V (Promissory Bstoppel: Advisory Fees), and Count VI (Unjust

Enrlchment). All Plaintiffs bring two cow1ts against 0TH and Deschenes: Count VIII (Breach of

Contract: OTU Operating Agreement) and Count IX (Breach of Fiduciary Duty). One Count is

brought by all Plaintiffs against all Defendants: Count VII (Restraint of Trade/ Monopoly).

In reviewing a motion to dismiss 1inder M.R. Civ. P. 12(b)(6), cou1ts 1'consider the facts in .

the complaint as if they were admitted." Bonney v. Stephens Mem. Hosp., 2011 ME 46, ,r 16, 17

A.3d 123. The complaint is viewed "in the light most favorable to the plaintiff to determine

whether it sets forth elements of a cause of action or alleges facts that wou[d entitle the plaintiff to

relief pursuant to some legal theory." lei. (quoting Saunders v. Tisher, 2006 ME 94, ,r 8, 902 A.2d

830). "Dismissal is warranted when it appears beyond a doubt that the plaintiff is not entitled to

relief under any set of facts that he might prove in support of his claim." Id.

I. MFGR DEFENDANTS ' MOTION TO DISMISS : COUNTS I ~IV

The MFGR Defendants have moved this Court to dismiss all counts against them on the

grnunds that Plaintiffs have failed to state a claim upon which relief can be granted. M.R. Civ. P.

12(b)(6). Plaintiffs counter that they have adequately pled sufficient facts to state a cause of

action as to each count. The Comt considers each count in turn.

A. Count I: Breach of Contract (4/28/16 Agreement) and Cot1nl II: Specific Performance (Sale of the Facility by MFGR to OTU)

5 MFGR urges this Court to dismiss Counts I and II4 on the grounds that OTU's breach of

contract claim alleged in Count I is barred by Maine's statute of frauds, which states that no action

can be maintained for the sale of land unless the promise, contract, or agreement is in writing and

signed by the party to be charged therewith. 33 M.R.S.A. § 51(4). OTU responds that the 4/28/16

Agreement satisfies the statute of frauds, and that because OTU has standing to enforce that

agreement, the statute of frauds is satisfied. In the alternative, OTU argues that the doctrine of prut

performance applies, and operates as an exception to the statute of frauds.

The 4/28/16 Agreement is a letter of intent from Old Town to Firestone (and countersigned

by same) regarding the City's prnposed purchase of the Facility (or the "Old Town Mill Site," as

it ls refened to in the letter). 5 The 4/28/16 Agreement does not mention OTU by name. OTU

alleges that where the letter refers to the "[City of Old Town] and/or its assigns,» it is referring to

OTU as the City's <1sslgnee in the proposed transaction. MFGR argues that even if the 4/28/16

Agreement is an enforceable written contract for the sale of the Facility, OTU lacks standing to

enforce the agreement, because it is between MFGR and the City.

OTU claims it has standing to enforce the agreement under two theories. First, OTU claims

an independent right to enforce the agreement as the City's "assign." OTU alleges that all paities

to the agreement understood that OTUwas the City's assign under the 4/2816 Agreement. (Campi.

~ 33.) OTU further alleges that from the time the 4/28/16 Agreement was entered into, OTU acted

on behalf of both OTU and the City, with the City and OTU determining which assets the City

4 As the .MFGR Defendants point out in their motion, specific performance is an equitable remedy, not a cause of action. (Mot. Dismiss at 3 n. 2.) The Cm1rt therefore treats Count II as n prayer for relief for MFGR's breach of the 4/28/16 Agreement plead in Count I. 5 Plaintiffs attached a copy of the 4/28/16 Agreement to the Complaint as Exhibit D, and it is central to OTU's breach of contract claim. The Court thus may consider the document without conve1ting the MFGR Defendnnts' motion to one for summary judgment. Moody v, Srate Liquor & Lotte,y Comm'n, 2004 ME 20, i I0, 843 A.2d 43 .

6 would purchase and lease to OTU and which assets OTU would pul'chase outfight. (Id) The

Complaint alleges f-urther facts tending to establish that the City in fact assigned its rights under

the 4/28/16 Agreement to OTU. (See Compl. ~~ 51-58, 62-66)

OTU also argues that even if these facts are insufficient to establish an independent right

to enforce the 4/28/16 Agreement as the referenced "assign," they at least establish a course of

dealing among OTU, MFGR, and the City sufficient to establish that OTU is an intended third­

party beneficiary of the 4/28/16 Agt'eernent. In F. 0. Bailey Co. v. Ledgewood, Inc., 603 A.2d 466,

468 (Me, 1992), Maine adopted the Restatement (Second) of Contracts § 302 test for whether a

third party beneficiary is an intended beneficiary with a right to enforce the agreement: "A

beneficiary of a promise is an intended beneficiary ihecognition of a right to performance in the

beneficiary is appropriate to effectuate the intention of the parties and ... the circumstances

indicate that the promlsee intends to give the beneficiary the benefit of the promised performance.''

The F 0. Bailey Court cautioned that while an intent to create an enforceable benefit in third party

must be "clear and definite/' lt is nonetheless a factual determination and such intent may be

"expressed in the circumstances surrounding" the contract's execution. Id.

This Court rules that OTU has alleged sufficient facts to establish its standing to enforce

the 4/28/16 Agl'eement, whether as a party to the contract or as a third pruiy beneficiary thereto. 6

OTU has alleged that it is the "assign" referenced in the 4/28/16 Agreement, and corroborated that

allegation with ful'ther fac_tual assertions indicating that OTU, MFGR, and the City all tmderstood

OTU to be the City's "assign'' under the 4/28/16 Agreement. The Comitberefore denies Defendant

6 Because the Court rnles that OTU has alleged sufficient facts to establish standing to enforce the signed 4/28/16 Agreement, the Colllt declines to consider whether the doctrine of pa1t performance would otherwise operate to except the purported agreement to sell the Facility from the requirements of 33 M.R.S,A. § 51(4), The Court further expresses no opinion on whether the 4/28/16 Agreement is binding on any party, an argument that MFGR reserved but did not raise in its motion to dismiss, See note 3 of this Order supra.

7 MFGR's motion to dismiss as to Count I and Count TI.

B. Count IlI: (Breach of Contrnct- Advisory Agreement)

MFGR claims that OTU has inadequately pled a breach of the advisory agreement. It

argues that the Advisory Agreement expired by its terms prior to OTU's performance, triggering

MFGR's right to terminate the Advisory Agreement. OTU counters that it performed 1111der the

agreement prior to the contract deadlines, or, in the alternative, that any deficiency in meeting

those deadlines was waived by MFGR.

The Advisory Agreement provides that MFGR will pay fees to OTU if OTU "facilitate[s]

the sale" of two Facility assets (the wastewater treatment plant and the warehouse) to the City or

"another buyer acceptable to MFGR but not previously known to MFGR. "7 The Advisory

Agreement gives both parties the right to "terminate [the agreement] with respect to any (p]roperty

for which there is no executed purchase agreement by the applicable Conh'act Deadline or no sale

as described herein prior to the applicable Closing Deadline." Firestone signed the Advisory

Agreement on behalf of MFGR.

The Contract Deadline and Closing Deadlines for both assets are disputed by the patties.

The Contn1ct Deadline for the wastewater treatment plant is defined as "within 60 calendar days

of the Effective Date;" the Closing Dead] ine is defined as "within 90 days of the Effective Date.'i

The Contract Deadline for the warehouse is defined as "within 30 days of the Effective Date" and

the Closing Deadline is defined as "April 30, 2016." The Effective Date of the Advisory

Agreement is defined as "March _, 2016." Both Closing Deadlines are followed by the

parenthetical "(or such later closing date, if any, to which MFGR and the applicable buyer have

7 Plaintiffs attached a copy of the Advisory Agreement to the Complaint as Exhibit A, 11nd it is central to OTU's breach of contract claim. The Comt thus may consider the document without converting the MFGR Defendants' motion to one for s\1111mary judgment. Moody v. State Liquor & ioue,y Comm'n, 2004 ME 20, ~ 10, 843 A.2d 43.

8 agreed)."

This parenthetical language renders the Closing Deadlines ambiguous on the face of the

Advisory Agreement, and OTU has pled facts that suggest that MFGR and the applicable buyer

(that is, the City and OTU) agreed to a later closing date. (Compl. ~122-29, 32-34, 51-58, 63-64,

70.) Although MFGR points out that the Advisory Agreement includes an integration clause that

states the agreement "cannot be amended, modified, or varied except by the written agreement of

MFGR and [OTU)," the parenthetical language allowing for a later closing date is already a part

of the integrated document.

The Contract Deadline, however, is a date certain, albeit fixed in relation to the undefined

Effective Date. While the Effective Date is clearly ambiguous, the plain language of the contract

indicates that the parties intended that date to be some day in March of 2016. Even assuming the

Effective Date was March 31, 2016, OTU does not all'ege that it succeeded in obtaining an executed

purchase agreement with the City or any other buyer within the Contract Deadline for either patty.

OTU first argues that its success in "securing the City as a purchaser" within the Contract

Deadline was sufficient performance under the terms of the Advisory Agreement such that MFGR

did not have a right to tel'minate. This is inconsistent with the plain language of the applicable

provision, which expressly gives either party the right to terminate the agreement in the event that

no purchase agreement is executed by the Contract Deadline, and is silent about the effect of

"securing" a purcl1ser. OTU next argues that it has nonetheless stated a claim for breach of contract

under the theory "that any deficiency in meeting those deadlines was waived by MFGR's conduct,"

Maine has long recognized the principle that one who "by his own act, deprived himself of

the power of fulfilment," cannot then escape his obligations under a contract. Richards v. Allen,

17 Me. 296, 299 ( 1840). The modern doctrine of waiver maintains this principle, Waiver is the

9 voluntary or intentional relinquishment of a known l'ight. Indus. Unif. Rental Svc., Inc. v. Court

Pontiac, Inc., 355 A.2d 913, 919 (Me. 1976). If a party entitled to a contractual right acts

inconsistent with that right, the party "is estopped form asse1ting that right if renunciation of the

waiver would prejudice the party who has relied on it." Id. To baJ' enforcement of a contractual

right, the waiver "must have induced a belief in the party who is claiming reliance on that waiver

that the waiving party intended voluntarily to relinquish his rights." Id. Waiver may be inferred

from the conduct of the waiving party. Id

Read in the light most favorable to OTU, OTU has plead sufficient facts to give rise to the

inference tliat MFOR waived its right to terminate the Advisory Agreement for OTU's failure to

perform by the Contract Deadline. OTU has alleged tliat MFGR continued to work with OTU and

the City toward the execution of a pmchase contmct well afte1· the Contract Deadline had run.

(Com pl. ~122-29, 32-34, 51-58, 63-64, 70.) OTU's reliance on this pmported waiver is reflected

in these same allegations.

OTU has stated a claim for breach of contract for MFGR's failure to peifonn imder the

Advisory Agreement. The Court therefore denies the MFGR Defendants' motion to dismiss as to

Count III.

C. Count IV: (Promissory Esto1wel: Sale of the Facillty)

Plaintiffs plead this claim as an alternative avenue ofrnlief if the Cou1t determines that the

purported contract between MFGR and OTU for the sale of the Facility is otherwise unenforceable,

See Part LA. of this Order, supra. "The doctrine of promissory estoppel applies to promises that

are otherwise unenforceable, and is invoked to enforce such promises so as to avoid injustice.''

Harvey v. Dow, 2008 ME 192, ~ 11, 962 A.2d 322. Maine has adopted the definition of promissory

estoppel set out in Section 90(1) of the Restatement (Second) of Contracts:

10 A promise which the promisor should reaso11ably expect to induce action or forbearance on the part of the promisee 01· a third person and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise. The remedy- granted for breach may be limited as justice requires.

Id. Maine allows prom1ssory estoppel to enforce promises to convey land that lack a signed writing

as required by the statute of fnnids. See Chapman v. Bomann, 381 A.2d 1123, 1127 (Me. 1978).

However, our Law Comt has since allowed the exception only where the "action induced" involves

substantial, physical improvement to the real estate by the promisee. See Harvey v. Dow, 2008 ME

192, ~ 13, 962 A.2d 322 (purchaser built house on lot); Tozier v. Tozier, 437 A.2d 645, 648-49

(Me. 1981) (donee bnllt house and outbuildings on lot). See also Nappi v. Nappi Distrtb., 1997

ME 54, ~ 9, 691 A.2d 1198 ("In the context of the transfer of land, when the donee has made

substantial improvements to the land in 'reliance upon the promise to convey the land, courts wlll

enforce the promise to convey,"') (quoting Tozier, 437 A.2d at 648) (emphasis added).

OTU does not allege that it has made any physical improvements to the land. Instead 1 OTU

argues that it expended substantial time and resources enhancing the value of the Facility in

intangible ways (I.e. by finding tenants, developing a business plan, and securing financing), and

that this induced action is sufficient to enforce the alleged pl'omise to sell the Facility to OTU.

Howeve1\ based on the holdings of Harvey and Tozter, as well as the dictum from Nappi cited

above, this Co1..ll't holds that under Maine law, pl'omissory estoppel operates as an exception to the

statute of frauds only where the party seeking to enforce the promise to convey has made

substantial, physical improvements to the land in reasonable reliance on the promise.

While the purchasers in Chapman did not make substantial improvements to land in

reliance on a seller's promise to convey, that case is distinguishable from this one. There, one of

the sellers made a specific promise to sign and return the written contract for the sale of property

11 in direct 1·esponse to an inquiry being specially made because the purchasers were about to

undertake a substantial financial commitment in furtherance of the deal. Chapman, 381 A.2d at

1127. The Chapman Court was explicit that 1'the doctrine of promissory estoppe.l [applied] to raise

issues of material fact concerning ... whether [this] separate ancillary promise became a contract

binding on [the sellers.]" Id. at 1126 (emphasis in original). Here, OTU has not alleged that MFGR

promised to sign a pmchase and sale agreement for the transfer of the Facility. There is thus no

separate, ancillary promise by which MFGR can be bound, and the rule since propounded in

Harvey, Tozier, and Nappi-that substantial improvement to the land by the promisee is a

necessary element for promissory estoppel to except a contract for the sale ofland from the statute

of frauds' writing Jequirement-applies in this case.

Because OTU has failed to allege that it made substantial, physical improvements to the

Facility or the land on which it sits, OTU has failed to state a claim for promissory estoppel

regarding the sale of the Facility by MFGR to OTU. The Court thus grants MFGR Defendants'

motion to dismiss as to Count IV.

D. Count V: (Promissory Estoppel-Advisory Fees)

The elements of promissory estoppel are recited in Part LC, of this Order, supra. In their·

Complaint, Plaintiffs allege that MFGR promised to pay OTU fees and costs in return for advisory

services pursuant to the Advisory Agreement, that MFGR should have reasonably expected that

promise to induce action on the part of OTU, Relentless, and Eakin, and that MFGR;s promise in

fact did induce action on the part of Plaintiffs. (Comp!. ~ 120-121.) MFGR argues that this count

should be dismissed for failure to state a claim because MFGR could not have reasonably expected

that OTU would perform outside the terms of the Advisory Agreement (/. e. by failing to perform

by the contract deadline) and still expect compensation. MFGR fmther argues that no injustice

12 would result if the purported promise to pay fees was not enforced because Plaintiffs have not

performed under the Advisory Agreement, as there has not yet been a closing on the sale of the

F8cility.

Plaintiffs counter that MFGR should have reasonably expected its promise to induce action

on their part because MFGR breached its promise of good faith and fair dealing pursuant to the

Advisory Agreement. In other words, Plaintiffs argue that they were induced to c·ontinue

performance under the Advisory Agreement in bad faith, and that as such expectation of payment

was reasonable given the lo11g course of dealing that is alleged in some detail in the Complaint.

(See Compl. n 22-29, 32-34, 51-58, 63-64, 70.) Viewing these facts in the light most favorable to the Plaintiffs, the inference can be drawn

that it was not unreasonable for Plaintiffs to continue to perform under the Advisory Agreement

in hopes of future payment based on MFGR's cond11ct during and after the period for perfo1mance

recited in the written contract. OTU has u11eged that they were induced to continue performing

,inder the Advisory Agreement by MFGR's promise to pay. That is enough to survive MFGR's

motion to dismiss. The Court therefore denies the MFGR Defendan{s' motion to dismiss CO\mt

V. . E. Count VI: (Uni.ust Enrichment)

OTU pleads unjust enrichment as an alternative avenue to recovery if the Court finds the

Advisory Agreement unenforceable. See June Roberts Agency, Inc. v. Venture Properties, Inc.,

676 A.2d 46, 49 n. 1 (Me. 1996) (stating that the existence of a contractual agreement "precludes

recovery on a theory of unjust enrichment"). ''Unjust enrichment describes recovery for the value

of the benefit retained when there is no contractual relationship, but when, on the grounds of

fairness and jiistice the law compels performance of a legal i.ind moral duty to pay., .." Pajjhausen

13 v. Balano, 1998 ME 47, ~ 6, 708 A.2d 269. The elements that a plaintiff must prove to recover for

unjust enrichment are (1) that the plaintiff confened a benefit on the other pa1iy (2) the defendant

had appreciation of the benefit und (3) the acceptance or retention of the henefit was m1der such

circumstances as to make it inequitable for the defendant to retain the benefit without payment of

its value. Forrest Assocs. v. Passamaquoddy Tl'ibe, 2000 ME 195, i/ 14, 760 A2d 1041.

MFGR moves to dismiss Count VI on the grounds that there has been no benefit conferred

on them because Plaintiffs' work related to the sale and development of the Facility amotmted to

"an elaborate marketing proposal ... that was ultimately rejected." Id. 1 15. Plaintiffs allege that

their labor has enhanced the va!ue of the Facility by millions of dollars above the auction price

MFGR would have received absent the Plaintiffs' effo1ts, thereby confen'ing a significant benefit

on MFGR.

MFGR claims that Forrest Assocs. compels dismissal of Count VI. Although this case

resembles Forrest Assocs. in some respects, the plaintiffs in that case had an opportunity to fully

develop the record at a bench trial. Plaintiffs here have alleged facts which, if true, would

distinguish Plaintiffs' claim from that brought by the plaintiffs in Forrest Assocs. Specifically, the

Forrest Assocs. Court held that the plaintiffs could not recover under an unjust emichment theory

because "[a]lthough [the plaintiff] created a ~omp1·ehensive plan and presented it to the

[defendants], there [was] no evidence that the [defendants] benefitted from either the presentation

or the information contained in the plan" and the evidence demonstrated that the plan was

ultimately rejected. Id. Under those facts, the evidence failed to establish that the plaintiff had

conferred a benefit on the defendant.

In contrast, Plaintiffs here have alleged with some particularity how MFGR benefitted from

Plaintiff's plans and proposals. Specifically, Plaintiffs allege that they "laid the fmmdation for

14 financing from the City and others, recruited and negotiated te1ms with future tenants that

increased the Facility's value and creditworthiness, and played an instrumental role in the winning

ConEd [bid)." (Compl. ~ 124.) Plaintiffs further allege that MFGR knew of and appreciated the

value of that benefit, and that the ci1·cumstances render the retention of that benefit unjust without

compensation paid to Plaintiffs. (Comp!. 1~1125-126.)

Plaintiffs have thus stated a claim for unjust emichment. The Court therefore denies

MFGR's motion to dismiss as to Count V1.

II. COUNT VII: RESTRAINT OF TRADE/MONOPOLY

In Count VII, Plaintiffs allege that MFGR's plan to sell the Facility to CVG is a contract

in restraint of trade or commerce in Maine and that a consummated transaction would be a

combination in restraint of trade or commerce in Maine, both in violation of 10 M.R.S.A. § 11 Ot .8

Plaintiffs allege Defendants are aU liable as co-conspirators for attempting to facilitate CVG's

purchase of the Facility. Id.

Defendants move to dismiss on the grnunds that (1) Plaintiffs have not alleged an antitrust

injury and (2) Plaintiffs have 11ot alleged that Defendants entered into a contrnct, combinatlon, or

conspiracy which restrained trade or commerce in Maine, The Court considers each argim1ent in

turn.

A. Plnintiffs Have Not Alleged An Antitrust Injury

"Maine's antitrust act provides that a plaintiff must prove injury or damage before the

ph1intiff can recover." McKinnon v. Honeywell Int 'l, Inc., 2009 ME 69, 119, 977 A.2d 420. Maine

comts may consider federal antitrnst law as persi1asive authority when construing Maine 1s antitrust

statute. Id. In the federal context, the U.S. District Court for the District of Maine has clarified that

8 Plain tiffs are not entitled to the injunctive relief they seek under this count. That remedy is available only to the Attorney General. State v. lvlaineHeafth, 20 l I ME 115, ~ 8, 31 A.3d 911.

15 a plaintiff "must prove an antitrust inju,y, which is to say an injury of the type the antitn1st laws

were intended to prevent, , .. " In re Compact Disc Min. Advertised Price Antitrust Litlg., 456 F.

Supp. 2d 131, 148 (D. Me. 2006) (quoting Se1pa Corp. v. Mc Wane, Inc., 199 F.3d 6, 10 (1st Cir,

1999)) (emphasis added). See also Int'! Ass 'n ofMachn 's & Aerospace Workers, AFL-CIO, Local.

L. No, 1821 v. Verso Perper Co., 80 F. Supp. 3d 247,272 (D, Me, 2015) (citing Brunswick Corp.

v. Pueblo Bowl-o-.Mat, Inc., 429 U.S. 477 (1977)), This Court has previously imposed the same

requirement on plaintiffs bringing an antitrust action. See Central Distrtbs., Inc. v. Labatt USA

Opn 'g Co., No. BCD~CV~12-33, at 10 (Bus. & Consumer Ct. Oct. 15, 2012, Horton, J.). The

"presumptive proper" plaintiff to a.liege an antitrust foJury His a customer who obtains services in

the tlU"eatened market or a competitor who seeks to serve that market." In re Compact Disc, 456

F. Supp, 2d at 146 (citing SAS ofP.R. v. P.R. Tel. Co., 48 F.3d 39, 44 (1st Cir. 1995)).

Plaintiffs' antitrust claim stems from the allegation that CVG' s acquisition of the Facility

would allow it to charge elevated prices for its forest products and prevent the rest of Maine's

forest products industry from selling forestry products to another operator of the Facility. (Com pl.

~ 129.) Plaintiffs do not allege that they are consumers of forest products or competitors in the

forest products industi:y who would be ha1med from this anticipated anticompetitive behavior.

Plaintiffs' alleged damages resulting from CVG's proposed purchase of the Facility are rather

\(deprivation of the value of purchasing the Facility, exclusion from the team implementing the

[ConEd team] bid, and expenditure of time, money, and resources in pursuing the trnnsaction . , .

," (Comp], ~ 139.) Significantly, these are identical to the damages attributed to the breach· of

contract count. (Campi. i 101.) The U.S. District Court for the District of Maine-as well as this

Court-have held that breach of contract damages are insufficient to establish an antitrnst injul'y.

In re Compact Disc, 456 F. Supp, 2d at 147-48 ("[Plaintiff's] injuries flow from an alleged breach

16 of contract, unlawful trnnsfer of proprietary info1mation, and breach of fiduciary duty. These are

not the type[s.J of inj lll'Y that the antitrust laws were meant to protect [againstJ. "); Central Distribs.,

BCD-CV-12-3 3, at IO ("The gist of this claim is really a restatement of a breach of contract action

. , . the complaint fails to state a claim for antitrust statute violations,"),

This Court thus rules that Plaintiffs lack standing to bring the antitrust claim alleged in

Cou~t VII, Regardless of whether CVG's purchase of the Facility could amount to a violation of

Maine,s antitrust statute, as alleged, Plaintiffs have failed to allege how they have been injured by

this purported anticompetitive activity.

B. Pl ai nti ffs Have Not Alleged Necessary Action On The Prut Of The Alleged Co-C0nspirntors

To establish a prima facie case pursuant to 10 M.R.S.A. § 1101, a plaintiff must show: "(l)

that the defendants entered into a contract, combination, or conspiracy; (2) which 1;estrained trade

or commerce in Maine; and (3) that they were injured thereby for each allegation." Pease v, Jasper

Wyma11 & Son 1 No, KNOSC-CV-00-015, at 18 (Me. Super. Ct., Knox Cty., July 31, 2002). The

third element is discussed above, in Part II.B. of this Order, supra. Defendants in this case further

argue that Plaintiffs have failed to allege facts satisfying the first two elements, and have thus

failed to state a claim for antitrnst violation on that ground.

The "contract, combination, or conspiracy" alleged by Plaintiffs is the acquisition of the

Facility by CVG. (Comp!. ~ 131,) All parties agree that that has not happened, although CVG has

appare~tly resurfaced as the proposed purchaser of the Facility. (Comp!. ~ 95.) Plaintiffs

nonetheless argue that MFG R's contract to· sell the Facility to CVG is itself u contract in restraint

of trade or commerce in Maine. (Compl. ~ 132.) However, beyond this conclusory allegation,

Plaintiffs.plead no further facts to show how the purported contract for the sale of the Facility to

CVG, standing alone, restrains trade in Maine. Instead, the Plaintiffs suggest that, once

17 consummated, the transaction would "substantially lessen competition or tend to create a

monopoly oflines of commerce in Maine .. ,'' (Id.)

The Court rules that Plaintiffs have falled to adequately allege the existence of a «contract,

combination, or conspiracy .. , which restrained trade 01· commerce in Maine." Pease, No.

KNOSC~CV.QQ-015, at 18. On its face, the Complaint alleges that a "consummated transaction . ,

. would" result in a violation 10 M.R.S.A. § 1101-conceding that the Defendants have not yet

entered into a contract that has restrained trade in Maine. Factual allegations that some future

contract, once consummated, would eventuate an anticompetitive result does not state a claim for

a violation of Mc1ine' s antitn1st statute. 9

By reason of the foregoing, the Court hereby grants the Defendants' motions to dismiss

Count VII. 10 Plaintiffs have failed to state a claim for violation of Maine's antitrust laws, 10

M.R.S.A. §§ 1101-1108.

III. 0TH DEFENDANTS' M0110N TO DISMISS: COUNTS VIII AND IX

Although Count VIII and Count IX recite two separate causes of action-breach of contract

and breach of fiduciary duty, respectively-there is factual and legal overlap between the two

claims. Count VIII alleges that the 0TH Defendants breached OTU's operating agreement ' 1as

well as their duty of loyalty, their duty not to exploit a business opportunity without first disclosing

it to OTU, and their duty of confidentiality" by "facilitat[ing] CV G's oppo1iunity to purclrnse the

9 Notwithstanding the issues of stirnding and ripeness on which the Cou1t decides to dismiss Cot111t VII, Plaintiffs have not alleged how this transaction would reslilt in an antitrust violation in any event. In essence, Plaintiffs allege that CVG's acquisition of the Facility would give CVG an advantage ove1· its competitot's by substantially lessening competition, That alone is insufficient to allege an antitrust violation. Tri-Stale Rubbish, Inc. v. Waste Mgmt., Inc., 875 F. Supp. 8, 13 (D. Me. 1994) ("(G]aining an advantage over your competitors is not, in itself, a violation ofantin·ust laws."). , 10 Beca11se the Comt rules that Plaintiffs have failed to state a claim against any defendant for violating Mnine's antitrust stE1tute, the issue of whether Firestone or Deschenes could be individually liable for the alleged violation is moot. The 0TH Defendants also argued gro\inds for dismissal that were unique to them. This argument is also moot, for the same reason.

18 \

Facility from MFGR." (Comp!. ~ 143 (emphasis added).) C01.int IX alleges that the 0TH

Defendants '1brnached their fiduciary dt1ty and duty of loyalty to OTU through self-deali.ng,

usurpation of corporate opportunity, misrepresentation and omission of material facts, inducement,

disclosure and misuse of confidential inf?rmation, misuse of superior knowledge, failure to

disclose, and rendering inappropriate advice," (Compl. 1 147 (emphasis added).) As in Count VIII,

Plaintiffs allege this breach was committed through the 0TH Defendants Hfacilitation" of CVG's

opportunity to purchase the Facility from MFGR. (Id.)

It is unclear whether Plaintiffs are pleading a breach of OTU's opernting agreement apart

from OTH's alleged breach of its fiduciary ciuties in Count VIII. It is also unclear whether Plaintiffs

allege that the 0TH Defendants' breached only their duty of loyalty to OTU in Count IX or

whether Plaintiffs are alleging a breach of fiduciary duty beyond the expressly stated breach of the

fiduciary duty of loyalty. See Sargent v. Buckley, 1997 ME 159, ~ 1, 697 A.2d 1272 (defining duty

of loyalty as a fiduciary duty). As grounds for the alleged breach of duty of loyalty, Count IX

alleges "misrepresentation and omission of material facts,') which sounds in fraud. See Letellier v,

Small, 400 A.2d 371, 376 (Me. 1979). Allegations of fraud are subject to a heightened pleading

standard: "In all averments of fraud , , , the cil:cumstances cons ti tuting the fraud . , . shall be stateq

with particularity , . , ,"M.R. Civ. P, 9(b). The facts which could give rise to a fiduciary relationship

must likewise be pied with particularity. Ramsey v. Baxter Title Co., 2012 ME 113, 16, 54 A.3d

710.

Plaintlffs have alleged that Deschenes sought to terminate OTH's membership in OTU in

August 2016, falsely promised not to act in competition with OTU, and used that false promise to

prncure Eakin's waiver of OTU's nondisclosure/ noncompete provisions, (Comp!.~ 59.) This js

the only affinnative fraud pled with any particularity in the Complaint. Plaintiffs allege that

19 fiduciary duties were expressly provided for in OTU's operating agreement, 1' and cited to Maine

statutory law that suggests Deschenes as manager (and, apparently, 0TH as a "member active in

management," see Pl's Opp, Mot. D. at 5) may have owed fiduclary duties to OTU as a matter of

law. See 31 M.R.S.A. §§ I521(3)(A), 1559(3). Plaintiffs allege that Deschenes sought a report on

the Facility's tissue building warehouse roof on CVG's behalf. (Comp!. ,r~ 66-67.) Plaintiffs

further allege that Deschenes «facilitated" CVG's letter of intent to purchase the Facility from

MFGR after Deschenes and 0TH had left OTU. (Comp!. ii 61.)· Beyond this, the Complaint

contains only general insinuations that the 0TH Deferidants were working against OTU's interest,

and in CVG's interest, while 0TH was still a member of OTU. (Compl. ,r,r 60.)

The Comt rules that Plaintiffs have not met the elevated pleading reql1irements for fraud

or the existence of a fiduciary relationship in their Complaint against the 0TH Defendants.

Particularly, Plaintiffs have alleged nothing to suggest that the 0TH Defendants owed Plaintiffs

any duty when Deschenes allegedly facilitated the letter of intent between CVG and MFGR.

Together with the lack of clarity regarding whether Count VIII alleges a breach of contract beyond

the breach of fiduciary duty alleged in Count IX, the Court finds that the 0TH Defendants cannot

reasonably be required to frame a responsive pleadjng to these Counts iri their current form.

Because the Court finds that the allegations supporting Counts VIII and IX lack sufficient

particularity under the heightened pleading standard required by M.R. Civ, P. 9(b) and Ramsey,

Plaintiffs ask the Court to treat the 0TH Defendants' motion to dismiss as a motion for a more

definite statement. M.R. Civ. P. 12(e). A motion for a more defin_ite statement is used to remedy

pleadings that are ·11so vague or ambiguous that a party cannot reasonably be required to frame a

responsive pleading" and must "point out the defects complained of and the details desiredt Id.

11 OTU's opernting agreement was not ottacbed to the Complaint and is not currently before the Court.

20 When such a motion is granted, the pleading party must file a more definite statement within 10

days to remedy the defects highlighted in the motion. Id.

Although the Court rules that the causes of action pied in Counts VIII and TX are too vague

or ambiguous to allow the 0TH Defendants a reasonable opportunity to respond, the Comt agrees

with Plaintiffs that allowing them an oppottunity to plead these counts with the requisite level of

particularity and sufficient factual support is appropriate here, Plaintiffs are thus ordered to file a

more definite statement pursuant to M.R. Civ. P. 12(e). Plaintiffs' more definite statement should

plead with sufficient pmiicularity the fact1.1al basis for the alleged fiduciary relationship, and to the

extent that Plaintiffs al1ege a breach of a fiduciary d1.ity tlu·ough fraud, the fraudulent acts of which

they accuse the 0TH Defendants. Plaintiffs should also clarify whether they are alleging a breach

of contract beyond the 0TH Defendant's alleged b!'each of the fiduciary duty of loyalty in Count

VIII.

Based on the foregoh1g the entry will be:

1, The MFGR Defendants' motion to dismiss is GRANTED IN PART and DENIED IN

PART as follows:

a. The MFGR Defendants' motion to dismiss is GRANTED as to Count JV and

Count VIT.

b. The MFGR Defendants) motion to dismiss is DENIED as to Count I, Co,mt II,

and Count III, Count V, and Count VI.

2, The 0TH Defendants' motlon to dismiss is GRANTED IN. PART and DENIED IN

a. The 0TH DC;,Jfendants' motion to dismiss is GRANTED as to Count VII.

21 b. The 0TH Defendants 1 motion to dismiss is DENIED as to Count VIII and

Count IX. As to those Counts, Plaintiffs are hereby ORDERED to file within

10 days of the entry of this Order a more definite statement pursuant M.R. Civ.

P. 12(e) as described in Part III, supra, of this Order,

DATE SUPERIOR COURT JUST! BUSINESS AND CONSUMER COURT

;:,nterecl on the Docket: / .. j ,., I~ :·:opi,1s sent viii ~M1il,____ Electronically_~.

22 BCD-RE-2017-11

Old Town Utility & Technology Park, LLC Relentless Capital Company, LLC., and Samuel Eakin

MFGR, LLC., William Firestone, Old Town Holdings, II., LLC., & Joseph Everett Deschenes

Old Town Utility & Technology Park, LLC Relentless Capital Company, LLC., and Samuel Eakin

Counsel : Gin Clifford, Esq. 62 Marion Jordan Rd Scarborough, ME 04074

Counsel: Julia Pitney, Esq. Emily Howe, Esq. 84 Marginal Way Suite 600 Portland, ME 04101-2480

Counsel : Meredith Eilers, Esq. Daniel Mitchell, Esq. PO Box 9729 100 Middle Street Portland, ME 04104-5029