Suominen v. Goodman Industrial Equities Management Group, LLC

941 N.E.2d 694, 78 Mass. App. Ct. 723, 32 I.E.R. Cas. (BNA) 120, 2011 Mass. App. LEXIS 167
CourtMassachusetts Appeals Court
DecidedFebruary 11, 2011
DocketNo. 09-P-1896
StatusPublished
Cited by21 cases

This text of 941 N.E.2d 694 (Suominen v. Goodman Industrial Equities Management Group, LLC) is published on Counsel Stack Legal Research, covering Massachusetts Appeals Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Suominen v. Goodman Industrial Equities Management Group, LLC, 941 N.E.2d 694, 78 Mass. App. Ct. 723, 32 I.E.R. Cas. (BNA) 120, 2011 Mass. App. LEXIS 167 (Mass. Ct. App. 2011).

Opinion

Milkey, J.

The plaintiff, Henry C. Suominen, Jr., was employed as the construction manager of defendant Goodman Industrial Equities Management Group, LLC (GIE), a small real estate development firm.2 In that position, he enjoyed an annual salary of $225,000. After he was fired in 2004, Suominen filed an action against GIE and its principal, defendant Steven E. Goodman, alleging that Goodman had broken a promise to pay him certain compensation in addition to his salary. Following a seven-day trial in Superior Court, the jury ruled in Suominen’s favor on some of his claims, including one based on promissory estoppel. The trial judge entered judgment awarding him a total of $1,729,243.01 in damages, the overwhelming bulk of which rested on the promissory estoppel claim. On appeal, the defendants argue that the trial judge should not have allowed that claim to go to the jury, and that, in any event, the judge’s instructions on the claim were erroneous. Defendant Goodman also argues that there was insufficient basis for his being held personally liable. By way of cross appeal, Suominen claims that the trial judge erred in granting a directed verdict as to one of his other claims. He also argues that the defendants’ appeal is not properly before us because of their failure — without sufficient excuse — to make timely payment of a docketing fee. We affirm in part and reverse in part. Specifically, we conclude that the judge correctly ruled on the directed verdict (and other) motions, but that a material omission in the jury instructions entitles the defendants to a new trial.

[725]*725Background. 1. The defendants’ business. Goodman is a real estate developer who focused on the redevelopment of existing, run-down industrial properties. Each targeted property was acquired by a deal-specific limited liability company that Goodman created solely for that purpose (referred to at trial as a “deal company” or “deal entity”).3 Although the deal entity purchased the property, the actual redevelopment work there was done by GIE, the limited liability company that Goodman had set up as his over-all real estate management company. That work included rehabilitating the buildings for a new use, securing permits for that use, and the like. Some of the projects were sold after they were redeveloped, while others were retained.

2. Suominen’s hiring. Suominen began working for Goodman as a consultant in February of 1999, and he became GIE’s “construction manager” in June of that year. In that position, Suominen oversaw the day-to-day redevelopment work of many, but not all, of Goodman’s projects. His initial starting salary at GIE was $100,000, which was $35,000 less than his most recent prior job. He was willing to accept the reduced salary because of the potential that he could share in the “upside” of the projects on which he worked. Before Suominen had been hired, Goodman had committed to working out some kind of profit-sharing plan with him, although the details of such a scheme had not been resolved before Suominen started work.

3. The parties’ negotiations. By the end of 1999, the parties were well along toward working out such profit-sharing details, with the discussions having evolved in the context of the specific development projects on which Suominen was working at the time. In fact, by January of 2000, the discussions had progressed to the point that Goodman directed his lawyer to draft “equity sharing agreements” for these projects. Under those drafts, Suominen and David Heller, GIE’s chief financial officer, were to receive a percentage of the “promote” that each of the projects realized (if any). As the testimony at trial revealed, “promote” (also known as a “promoted interest”) is a term of art used in the real estate development field. It refers to a species of profit that developers can enjoy — in addition to the return on any [726]*726equity they invested — if their projects become extremely successful. What portion of profit, if any, is to go to the developer as a “promote” is determined by agreement between the developer and investors at the start of a development deal.4 Not every real estate development deal is structured so as to include a “promote”; in some cases, a developer’s potential profit comes only from return on equity or the payment of a separate “development fee.”

In the January, 2000, drafts, the precise percentage of the promote that was to go to Suominen was left blank. Shortly thereafter, however, Goodman informed Suominen that he was willing to part with thirty-five percent of his promote, and that he did not care how Suominen and Heller split it. Suominen and Heller quickly agreed between themselves that Suominen should take two-thirds of their joint share, or a resulting 23.33% of the over-all promote. Suominen reported this back to Goodman, and they had what Suominen variously characterized as a “nod of the head,” a “handshake round,” and a “semi-congratulatory type of thing.” At this point (early 2000), Suominen believed he had reached a full agreement under which he would receive a 23.33% share of the promote that otherwise would have gone to Goodman. He viewed his promised share of the promote, and not his salary, as his “primary expectation of compensation,” and he testified that he “would have left” his employment had he learned that his understanding of what he was to receive was incorrect.

At the end of 2000, Suominen had the 23.33% figure inserted into the draft documents for two then-current projects. He also modified the documents in a few other respects. For example, he added his own signature line, and he inserted a provision [727]*727clarifying that the agreement would survive his termination or death. Suominen in fact signed his modified drafts, and he presented them to Goodman for his signature in December of 2000. Goodman declined to sign the documents, claiming that his doing so would require him to amend certain financial disclosure documents he had just filed. He confirmed with Suom-inen, however, that their deal was still on.

In March of 2001, Goodman’s attorney forwarded to the parties a draft generic version of an equity sharing agreement that could be tailored for any specific deal (or at least those that were structured to include a promote). Moreover, the following month, Goodman acknowledged at a deposition in a separate action that Suominen and Heller had “an expectation when [Goodman did] a deal they’ll get a part of it,” and that they had an “interest” in thirty-five percent of the promote on particular projects.

Goodman never signed any equity sharing agreement with Suominen. In fact, his attorney testified that, at an unspecified time, Goodman informed him that he was no longer interested in pursuing such an agreement. According to the attorney, Goodman decided that such an arrangement was too constraining. However, Goodman never informed Suominen of his change in plan.

4. The Milford distributions. In April of 2001, Goodman refinanced property in Milford that one of his deal companies owned. This resulted in a large inflow of cash (presumably because the redevelopment work that had been done at the property added significant value). He had twenty-five percent of those proceeds invested in GIE, and in May of 2000, he had the remainder distributed to himself, Suominen, and Heller. Suominen was given 23.33% of the money distributed. On several later occasions, Goodman had operating profits from the Milford project distributed to himself, Suominen, and Heller.

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Bluebook (online)
941 N.E.2d 694, 78 Mass. App. Ct. 723, 32 I.E.R. Cas. (BNA) 120, 2011 Mass. App. LEXIS 167, Counsel Stack Legal Research, https://law.counselstack.com/opinion/suominen-v-goodman-industrial-equities-management-group-llc-massappct-2011.