468 Consulting Grp., LLC v. Agritech, Inc.

• Decision Date: 17 June 2021
• Docket Number: No. 20-P-387,20-P-387
• Citation: 173 N.E.3d 757,99 Mass. App. Ct. 758
• Parties: 468 CONSULTING GROUP, LLC v. AGRITECH, INC., & others.
• Court: Appeals Court of Massachusetts

99 Mass.App.Ct. 758

173 N.E.3d 757

468 CONSULTING GROUP, LLC

v.AGRITECH, INC., & others.¹

No. 20-P-387

Appeals Court of Massachusetts, Middlesex.

Argued March 10, 2021.

Decided June 17, 2021.

Joshua A. McGuire, for the defendants.

Michael J. Heineman, for the plaintiff.

Present: Milkey, Kinder, & Sacks, JJ.

KINDER, J.

This dispute arises from a business arrangement in which Patrick J. Hannon and his company, Agritech, Inc.(Agritech), agreed to pay 468 Consulting Group, LLC(468 Group), a percentage of the revenue received from a soil reclamation project.468 Group was formed by Hannon's longtime attorney, Paul Dee, for the purpose of this arrangement.After the relationship between Hannon and Dee soured, 468 Group brought this action against the defendants -- Hannon, Agritech, and RHR, LLC(RHR), an entity formed by Hannon's son (PJ² ) -- to enforce the terms of the parties' agreement.A jury found that the defendants were engaged in a joint venture, committed breaches of contract, defrauded 468 Group, and transferred property fraudulently.The jury awarded $276,000 in damages.Separately, the judge found that the defendants engaged in unfair or deceptive acts or practices in violation of G. L. c. 93A and awarded double damages, costs, and attorney's fees, resulting in a total judgment of $774,084.³The judge denied the defendants' motion for judgment notwithstanding the verdict, a new trial, or remittitur.

On appeal, the defendants claim error in the jury instructions on breach of contract because (1) the judge declined to instruct that Dee, as Hannon's attorney, had to prove that the transaction was fairly and equitably conducted, and (2) the instructions permitted the jury to hold RHR liable for breach of contract as a joint venturer.The defendants also argue that they are not liable, as a matter of law, on the remaining claims and that, alternatively, the amount of damages should be reduced.Finally, the defendants argue that they were prejudiced by improprieties in 468 Group's closing argument.We affirm the amended judgment as to liability on the breach of contract, fraudulent transfer, and G. L. c. 93A claims, and we reverse the amended judgment as to liability on the fraud claims.In addition, we reverse the order on the defendants' motion for judgment notwithstanding the verdict, a new trial, or remittitur insofar as the order denied the request for a remittitur or a new trial on damages.

Background.The jury could have found the following facts.In or around 2013, Hannon devised a business plan to operate a soil reclamation project called Rolling Hills.The plan was for Rolling Hills to receive soil from large urban construction sites and to use that soil to fill an old quarry, so that the quarry could later be used for another purpose.To that end, Hannon formed Agritech on August 27, 2013, to engage in "mineral, environmental and waste activities" and began negotiating with Immanuel Corporation(Immanuel) to purchase a quarry in Uxbridge.Around the same time, on November 7, 2013, Hannon offered Dee five percent of Rolling Hills's revenue.Hannon made this offer in recognition of an outstanding debt owed to Dee and to reward Dee for his loyalty.⁴Dee accepted Hannon's offer and, the next day, formed 468 Group for purposes of this business arrangement.

A problem soon developed with the sale of the quarry.Agritech was required to obtain environmental insurance as a condition of the purchase, but Agritech could not secure insurance to protect against the possibility that it would contaminate its own property.On November 27, 2013, Hannon proposed restructuring the deal so that (1) Immanuel would sell its stock to another entity, to be named by Hannon, and (2) Agritech would operate Rolling Hills as a contractor, which would allow Agritech to obtain the insurance.On December 20, 2013, Immanuel asked Hannon to provide the name of the other entity, and Hannon responded that the other entity was RHR.PJ formed RHR three days later.

On May 5, 2014, RHR and Immanuel entered into a written licensing agreement (licensing agreement), which permitted RHR to "[d]eposit [a]cceptable [m]aterials at the [p]remises" and also granted RHR the option to purchase Immanuel's stock.⁵RHR, in turn, hired Agritech "to essentially run the day-to-day operations of the site," although there was no written agreement between Agritech and RHR.Regardless, Agritech was supposed to bill customers for dumping soil, and those customers were supposed to remit their payments directly to Immanuel.Immanuel was then supposed to pay RHR, which would in turn pay Agritech.

On April 17, 2014, two weeks before the licensing agreement was signed, Hannon and Dee memorialized their November 7, 2013, oral agreement by signing a written consulting agreement between Agritech and 468 Group (consulting agreement).Hannon executed the consulting agreement as president of Agritech and personally guaranteed Agritech's obligations.The consulting agreement specifically stated as follows:

"The overriding purpose and intent of this [a]greement is that [468 Group] be paid five percent (5%) of the total [r]evenues received in connection with the reclamation, or any other permissible usage, of the real property situated ... [in] Uxbridge ... until the [p]roject thereon has been legally and properly completed, regardless of which entity or entities (and their nominees, designees, agents, successors, transferees, or assignees)bills and/or collects such revenues, and regardless of which entity or entities comes into actual or constructive possession of monies paid which are related to the development."

To accomplish the stated intent of the consulting agreement, Hannon and Agritech agreed that if they"acquire[d] either a [l]icensing [a]greement to operate the [p]roperty, or acquire[d] title to the [p]roperty itself, ... [they would] pay to [468 Group], from and after the date of commencement of the [p]roject, an amount equal to five percent (5%) of the [g]ross [m]onthly [r]evenues."⁶The consulting agreement defined gross monthly revenues, in pertinent part, as "the total amount of revenues received by [Hannon or Agritech], or any of its agents, designees, nominees, assignees, transferees or successors."While 468 Group agreed, in exchange, to provide legal advice and consulting services, 468 Group was entitled "to full payment ... regardless of whether it render[ed] any ... advice or services."468 Group was also entitled to accountings.

The consulting agreement was the product of multiple drafts exchanged between Hannon and Dee.Dee created the first draft, which referred to RHR as a named party to the agreement.However, at some point during Hannon's review of Dee's first draft, the references to RHR as a named party were removed.As Hannon explained to Dee, "it wasn't necessary" to name RHR as a party, but RHR was "understood" to be a party.In response, Dee inserted the paragraph about the overriding purpose and intent of the consulting agreement, the definition of gross monthly revenues, and section 7, see note 6, supra.

Rolling Hills was in operation from around 2015 to 2017.RHR did not maintain corporate books, but $5,537,283.11 passed into Agritech's bank accounts during the operation of the project.Agritech paid 468 Group $53,805 between April and August of 2015 but made no payments to 468 Group after August 22, 2015.While Dee made requests for payments and accountings, Hannon testified that he stopped paying Dee because "the more money that [Hannon] gave to ... Dee the pushier he got."At trial, Hannon and Agritech took the position that they did not owe anything under the consulting agreement because Dee did not provide any consulting services.⁷RHR argued that it did not owe anything under the consulting agreement because RHR "had nothing to do with [the consulting agreement]."

Discussion.1.Breach of contract. a. Business transaction with an attorney.The defendants argue that the judge erred in declining to instruct the jury, consistent with Pollock v. Marshall, 391 Mass. 543, 556-557, 462 N.E.2d 312(1984), that in a business transaction between a lawyer and a client, "the burden is upon the attorney to prove that any influence over the client which might be presumed to have arisen out of the relationship was neutralized by independent advice given to the client or by some other means so that there was no overreaching of the client and no abuse of confidence"(citation omitted).⁸The defendants contend that this instruction was necessary because Dee was Hannon's longtime attorney.

"We review objections to jury instructions to determine if there was any error, and, if so, whether the error affected the substantial rights of the objecting party"(citation omitted).Beverly v. Bass River Golf Mgt., Inc., 92 Mass. App. Ct. 595, 603, 93 N.E.3d 852(2018).We will not set aside a verdict due to an error in the jury instructions "unless the error was prejudicial -- that is, unless the result might have differed absent the error"(citation omitted).Id.

As to whether there was error, a "judge need not instruct the jury on every spin that a party can put on the facts."Boothby v. Texon, Inc., 414 Mass. 468, 484, 608 N.E.2d 1028(1993)."But if an instruction bears on a material issue, it is error for a judge to refuse to give the substance of the requested instruction."Antoniadis v. Basnight, 99 Mass. App. Ct. 172, 178-179, 164 N.E.3d 206(2021).Here, one of the main grounds of defense was that Dee was Hannon's longtime attorney.At the same time, there was little evidentiary support for the defendants' argument that Dee exerted undue influence over Hannon.It was undisputed that Hannon had the expertise in the soil reclamation business, not Dee.SeeRubin v. Murray, 79 Mass. App. Ct. 64, 70, 943 N.E.2d 949(2011)(considering client's "knowledge and sophistication").And it was Hannon, not Dee, who proposed the consulting agreement.Although Dee...