RFF Family P'ship, LP v. Ross

• Citation: 814 F.3d 520
• Decision Date: 18 February 2016
• Docket Number: 15–1510.,Nos. 15–1224,s. 15–1224
• Parties: RFF FAMILY PARTNERSHIP, LP, Plaintiff, Appellant, v. Steven A. ROSS, individually and in his capacity as Trustee of BD Lending Trust; Link Development, LLC, Defendants, Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (1st Circuit)

814 F.3d 520

RFF FAMILY PARTNERSHIP, LP, Plaintiff, Appellant,

v.Steven A. ROSS, individually and in his capacity as Trustee of BD Lending Trust; Link Development, LLC, Defendants, Appellees.

Nos. 15–1224

15–1510.

United States Court of Appeals, First Circuit.

Feb. 18, 2016.

Richard E. Briansky, with whom Amy B. Hackett and McCarter English, LLP were on brief, for RFF Family Partnership, LP.

Arnold E. Cohen, with whom Law Offices of Arnold E. Cohen was on brief, for Steven A. Ross.

Michael S. Bonner, with whom Gregory J. Aceto, Michael B. Cole, and Aceto, Bonner & Prager, P.C. were on brief, for Link Development, LLC.

Before LYNCH, Circuit Judge, SOUTER,^* Associate Justice, and SELYA, Circuit Judge.

LYNCH

, Circuit Judge.

These appeals are the latest stage of a series of lawsuits involving Link Development, LLC ("Link"), BD Lending Trust ("BD"),¹ and RFF Family Partnership, LP ("RFF"). The three-way dispute has emanated from an unauthorized conveyance of a mortgage to BD ("BD Mortgage") by an attorney later disbarred, on a twenty-two acre commercial property in Saugus, Massachusetts ("the Property"), then owned by Link and now owned by RFF. Previous related litigation has resulted in two settlement agreements: a June 2012 settlement between Link and BD and a November 2012 settlement between RFF and BD.

In this diversity action, RFF appeals: (1) the district court's entry of summary judgment for Link and against RFF on RFF's claims on the validity of the BD Mortgage, on the basis that RFF was judicially estopped from challenging the validity of the BD Mortgage; (2) the district court's decision to exclude attorneys' fees from damages that BD owed RFF for breach of the settlement agreement between RFF and BD, and the district court's refusal to enter judgment as a matter of law in favor of RFF on contract damages; and (3) the district court's award of attorneys' fees to RFF under Chapter 93A of the Massachusetts General Laws for an amount that was lower than what RFF had requested. In this opinion, we address Massachusetts law on many of these topics—topics of general interest in Massachusetts commercial litigation.

We vacate the district court's entry of summary judgment against RFF on its claims pertaining to the validity of the BD Mortgage, and we remand for further proceedings. We affirm the district court's decisions related to contract damages and affirm the district court's award of attorneys' fees under Chapter 93A of the Massachusetts General Laws.

I.

In 2005, Link was formed by now-disbarred lawyer Stuart Sojcher on behalf of an investor to hold and develop the Property. In September 2006, Sojcher, without the authorization of Link, executed a $600,000 promissory note payable to BD, secured by the BD Mortgage. The loan was increased to $700,000 shortly thereafter. In October 2006, the BD Mortgage was recorded. In November 2006, after Sojcher absconded with most of the proceeds of the loan, Link defaulted on the loan and BD commenced foreclosure proceedings on the Property.

In December 2006, Link filed a complaint against Sojcher and BD in Massachusetts Superior Court seeking, inter alia, a declaration that the BD Mortgage was invalid because Sojcher had lacked Link's authorization to execute the mortgage.

In October 2007, while the Superior Court action was still pending, Link executed a $1.4 million note payable to RFF, secured by a mortgage on the Property ("RFF Mortgage"). As part of the loan agreement, Link represented that the RFF Mortgage would be a "good first mortgage and not ... subject to any liens or encumbrances, whether inferior or superior." In March 2008, Link defaulted on the RFF loan. In March 2010, RFF foreclosed on the Property. RFF subsequently purchased the Property for itself at a public auction. RFF has continued to own the Property since that point.

In June 2011, RFF filed a complaint in the District of Massachusetts against BD and Link, alleging that Link had defaulted on its loan; that Link had falsely represented that it had conveyed a "good first mortgage"; and that the BD Mortgage was invalid. Complaint, RFF Family P'ship, LP v. Link Dev., LLC, No. 11–cv–10968, 2011 WL 7943945 (D.Mass. June 1, 2011)

.

In June 2012, Link and BD agreed to a settlement of the 2006 Superior Court action ("Link/BD Settlement"). Link agreed to dismiss its claims against BD and waive its right to contest the BD Mortgage. In return, BD agreed to pay Link $450,000 up front and an additional sum of $750,000 with interest (or slightly less, depending on how long the debt remained outstanding) on a later date. To secure BD's payment obligation, BD provided Link with an assignment of the BD Mortgage to be held in escrow and recorded in the event of BD's default.

In November 2012, RFF and BD agreed to a settlement of the 2011 federal action ("RFF/BD Settlement"). The parties declined to put the terms of the agreement on the record at the time, although it was later disclosed to the court that BD had agreed to discharge the BD Mortgage in exchange for a payment of $140,000 from RFF. Because the RFF/BD Settlement disposed of all of the claims against BD in the 2011 federal action, the district court dismissed BD and conducted a bench trial on RFF's claims against Link. The district court found in favor of RFF on several of its claims against Link, but it expressly declined to resolve the question of the validity of the BD Mortgage because that issue had been withdrawn pursuant to the RFF/BD Settlement.

In December 2012, BD notified Link that it intended to execute a discharge of the BD Mortgage in fulfillment of its obligation under the RFF/BD Settlement. Link, believing that such an action would be a breach of the Link/BD Settlement, recorded the assignment of the BD Mortgage it had held in escrow. BD has since claimed that it cannot discharge the BD Mortgage in fulfillment of its obligation under the RFF/BD Settlement because Link holds the assignment of the BD Mortgage. RFF successfully moved for an order to enforce the RFF/BD Settlement against BD and later moved for contempt against BD for its continued refusal to discharge the BD Mortgage.

On January 10, 2014, RFF filed the complaint in this diversity action in the District of Massachusetts against Link, Ross, and BD. The complaint alleged the following five counts: (1) declaratory judgment on the invalidity of the BD Mortgage, against Link and BD; (2) breach of contract by BD on the RFF/BD Settlement; (3) negligent and/or intentional misrepresentation by BD and Ross for representations made at the time the RFF/BD Settlement was entered; (4) slander of title by Link and BD for BD's recording of the BD Mortgage, for Link's recording of the assignment of the BD Mortgage, and for Link's and BD's refusals to discharge the BD Mortgage; and (5) violation of Chapter 93A of the Massachusetts General Laws by BD and Ross. Various cross-claims were filed between Link and BD.

The interests at play are as follows. RFF, as owner of the Property, is seeking unencumbered title to the Property. RFF is taking two parallel approaches in that pursuit: it seeks to enforce BD's obligation under the RFF/BD Settlement to discharge the BD Mortgage while it also seeks a declaration that the BD Mortgage is invalid. Link holds the assignment of the BD Mortgage and is awaiting payment by BD of the remainder of the Link/BD Settlement. BD is in a bind because it is obligated by the RFF/BD Settlement to discharge the BD Mortgage but it cannot do so until it makes its payment to Link, which is now holding the BD Mortgage. The $140,000 that RFF would pay BD to discharge the BD Mortgage is not enough to cover the amount that BD owes Link, and BD has no assets.

On September 30, 2014, the district court entered a memorandum and order on a number of pending evidentiary and dispositive motions. RFF Family P'ship, LP v. Link Dev., LLC, 53 F.Supp.3d 267 (D.Mass.2014)

. As relevant here, the district court denied Link's motion to dismiss RFF's claims on the invalidity of the BD Mortgage (Counts I and IV) on the bases of statute of limitations and res judicata. Id. at 274–76. However, the district court entered summary judgment for Link on those claims on the basis that RFF was judicially estopped from contesting the validity of the BD Mortgage. Id. at 278

. The district court also ruled on partial summary judgment that BD had breached the RFF/BD Settlement. Id. at 277.

In January 2015, the district court held a jury trial on the remaining claims which, as relevant here, included damages suffered by RFF from BD's breach of the RFF/BD Settlement (since liability had been established as a matter of law) and the Chapter 93A claims against BD. On January 21, 2015, the jury returned its verdict. As relevant here, the jury awarded RFF $1 in damage for BD's breach of the RFF/BD Settlement and awarded $1 in damage for BD's violation of Chapter 93A.

These appeals followed.²

II.

RFF first challenges the district court's entry of summary judgment for Link on Counts I and IV on the basis that RFF is judicially estopped from challenging the validity of the BD Mortgage. We hold that the district court abused its discretion in applying judicial estoppel, and that the outcome is not supported by either of Link's proposed alternative bases of res judicata or statute of limitations.³ We vacate.

A. Judicial Estoppel

We review the district court's application of judicial estoppel for abuse of discretion.⁴ Alt. Sys. Concepts, Inc. v. Synopsys, Inc., 374 F.3d 23, 30 (1st Cir.2004)

.

Judicial estoppel is an equitable doctrine that "prevent[s] a litigant from taking a litigation position that is inconsistent with a litigation position successfully asserted by him in an earlier phase of the same case or in an earlier court proceeding." Perry v. Blum, 629 F.3d 1, 8 (1st Cir.2010)

; see also New Hampshire v. Maine, 532 U.S. 742, 749, 121 S.Ct. 1808, 149 L.Ed.2d 968 (2001). The purpose of the doctrine is "to protect the integrity of the judicial...