Rubin v. Murray

25 Mass. L. Rptr. 429
CourtMassachusetts Superior Court
DecidedDecember 4, 2008
DocketNo. 081714BLS2
StatusPublished

This text of 25 Mass. L. Rptr. 429 (Rubin v. Murray) is published on Counsel Stack Legal Research, covering Massachusetts Superior Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Rubin v. Murray, 25 Mass. L. Rptr. 429 (Mass. Ct. App. 2008).

Opinion

Fabricant, Judith, J.

INTRODUCTION

This action arises from a conflict among shareholders in a close corporation. The matter is before the Court on plaintiffs special motion to dismiss the [430]*430defendants’ counterclaims pursuant to G.L.c. 231, §59H, the anti-SLAPP act,3 and, as to count III of the counterclaim, for failure to state a claim on which relief can be granted, pursuant to Mass.R.Civ.P. 12(b)(6). For reasons that will be explained, plaintiffs special motion to dismiss will be allowed as to count I of the counterclaim, and the 12(b)(6) motion will be allowed as to count III.

BACKGROUND

The pleadings provide the following factual background. In March 1975, the individual defendants, John E. Murray (Murray), Stephen P. Hopkins (Hopkins) and Paul C. Ryan (Ryan) formed Olympic Adhesives, Inc., a manufacturer of industrial adhesives. Each of the three defendants was issued class A common stock, with voting rights; their shares amounted to ninety percent of ownership. The plaintiff, Merek Rubin, an attorney, advised the defendants regarding the formation of the company and the resolution of a previous dispute. As partial compensation for those services, he received non-voting class B common stock equivalent to ten percent of ownership. His share later increased to 10.6%.4 At all relevant times the three individual defendants have been officers, directors, and employees of the company. Rubin served as corporate counsel until 1981, but ceased involvement except as a shareholder thereafter, although he performed certain legal services for Hopkins and Ryan in the 1990s.

In 2000, Rubin filed suit against the defendants in Norfolk Superior Court, Rubin v. Murray, C.A. 2000-0433 (Rubin I). His complaint in that action alleged that the defendants had paid themselves excessive compensation, while declining to make any dividend distributions to shareholders, thus effectively depriving him of any economic benefit of his stock ownership. After a bench trial in the summer of 2005, Judge Patrick Brady ruled that the defendants were entitled to compensation in an amount no more than ten percent of Olympic’s net sales per year; he ordered them to repay to the company all monies received in excess of that amount, with interest, as well as attorneys fees expended by the company. Judgment entered on September 30, 2005, in the amount of $9,753,992, including pre-judgment interest.5 Defendants’ appeal from that judgment remains pending.

In this action, filed on April 16, 2008, Rubin alleges that in the years since entry of the judgment in the prior action, the defendants have continued to overpay themselves; have paid personal legal expenses with corporate funds; and have unlawfully amended the company’s articles and by-laws to authorize issuance of stock options so as to dilute Rubin’s interest. He sues on behalf of himself and derivatively on behalf of Olympic, claiming breach of fiduciary duty (counts I and II), misappropriation of corporate assets (count III), waste of corporate assets (count VI), and unjust enrichment (count VII); and seeking an accounting (count IV), imposition of a constructive trust (count V), and declaratory judgment with respect to the amendments (count VIII).

The defendants’ counterclaim asserts three counts: abuse of process (count I); breach of fiduciary duty (count II); and violation of 18 U.S.C. §1962(c), the Racketeer Influenced and Corrupt Organizations statute (RICO) (count III). All three counts are based on these alleged facts: Rubin’s share of the 2005 judgment, if distributed as dividends after payment of corporate taxes, would have been approximately $569,000 at the time of its entry. Since then, Rubin has demanded $3,800,000 for settlement of his claims and purchase of his stock. He has also demanded corporate financial and other records, by two letters from his attorney in June 2006; objected to amendments to the company’s articles and by-laws and accused the defendants and their counsel of violations of law; and, by a letter from his counsel dated December 20, 2007, falsely accused defendants of paying themselves excessive compensation, and demanded their personal financial and tax information. He took these actions, the counterclaim alleges, “for the purpose of pressuring [defendants] to pay him monies well in excess of any amount to which he would be entitled under either the 2005 judgment, for the years subsequent, ... or as a 10.6% shareholder.” He then filed this action “for the improper and ulterior purpose of further pressuring” defendants to the same end. Rubin moves to dismiss all three counts pursuant to the anti-SLAPP act. With respect to the RICO count, he seeks dismissal alternatively for failure to state a claim.6

DISCUSSION

1. The Special Motion to Dismiss Pursuant to the Anti-SLAPP Statute

SLAPP suits “are . . . meritless suits that use litigation to intimidate opponents’ exercise of rights of petitioning and speech." Vittands v. Sudduth, 49 Mass.App.Ct. 401, 413 (2000). The statute “walks an uneasy line between protecting the right of citizens to petition government for redress of grievances and preserving the longstanding common-law right of individuals to seek redress in court for defamation and other civil wrongs.” Kalter v. Wood, 67 Mass.App.Ct. 584, 591 (2006).

Section 59H of G.L.c. 231 states in pertinent part that “[i]n any case in which a party asserts that the civil claims, counterclaims, or cross claims against said party are based on said party’s exercise of its right of petition under the constitution of the United States or of the commonwealth, said party may bring a special motion to dismiss.” The Legislature thereby “provided a means through which persons who have been made the subject of civil litigation in retaliation for the exercise of their right to petition may be spared [431]*431the expense and the burden of defense of the action.” Fisher v. Lint, 69 Mass.App.Ct. 360, 362 (2007).

A special motion to dismiss requires the Court to conduct a two-pronged inquiry. The moving party, in this case Rubin, must first make “a threshold showing through the pleadings and affidavits that the claims against [him] are based on the petitioning activity alone and have no substantial basis other than or in addition to the petitioning activities.” Vittands, 49 Mass.App.Ct. at 414, citing Duracrqft Corp. v. Holmes Prods. Corp., 427 Mass. 156, 167-68 (1998). Should the Court conclude that the claims are based solely on petitioning activity, the burden then shifts to the non-moving pariy, in this case the defendants, to show by a preponderance of the evidence, based on the pleadings and affidavits, both that the petitioning activity was without any reasonable factual support or basis in law, and that it caused them actual harm. McLarnon v. Jokish, 431 Mass. 343, 348-49 (2000); Duracraft, 427 Mass. at 167-68.

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Bluebook (online)
25 Mass. L. Rptr. 429, Counsel Stack Legal Research, https://law.counselstack.com/opinion/rubin-v-murray-masssuperct-2008.