Barnes v. Johnston-Neeser
| Decision Date | 12 August 2022 |
| Docket Number | 21-P-1088 |
| Court | Appeals Court of Massachusetts |
| Parties | KELLY BARNES v. JOYCE JOHNSTON-NEESER & others.[1] |
NOTICE: Summary decisions issued by the Appeals Court pursuant to M.A.C. Rule 23.0, as appearing in 97 Mass.App.Ct 1017 (2020) (), are primarily directed to the parties and, therefore, may not fully address the facts of the case or the panel's decisional rationale. Moreover such decisions are not circulated to the entire court and therefore, represent only the views of the panel that decided the case. A summary decision pursuant to rule 23.0 or rule 1:28 issued after February 25, 2008, may be cited for its persuasive value but, because of the limitations noted above not as binding precedent. See Chace v. Curran, 71 Mass.App.Ct. 258, 260 n.4 (2008).
MEMORANDUM AND ORDER PURSUANT TO RULE 2 3.0
This interlocutory appeal[2] addresses whether the so-called litigation privilege applies to claims brought by the plaintiff against the defendants' lawyers, based upon the lawyers' statements and actions while involved in prelitigation commercial negotiations. The underlying dispute is between two long-time, fifty percent shareholders of a dental practice, formed as a professional corporation and known as Sudbury Endodontics, P.C. (the corporation, or SE). The gist of the dispute is that the plaintiff, Dr. Kelly Barnes, wished to cease practicing and demanded that the corporation buy back her shares -- claiming that such a buyout was required under the corporation's Articles of Organization. The defendant, Dr. Joyce Johnston-Neeser, disagreed, and communicated same through her counsel. The corporation never purchased Barnes's shares. Rather, Barnes ceased practicing and Johnston-Neeser eventually set up a practice on her own, leaving the corporation in existence, but with no ongoing operations.
Barnes's twelve count amended complaint alleges breach of contract, breach of fiduciary duty, and conversion claims () against Johnston-Neeser and the corporation; however, for the present appeal we will address only two of the twelve counts -- Barnes's claims against Johnston-Neeser's lawyers (Charles Waters and Sheehan Phinney Bass & Green PA, hereafter the lawyer defendants), which allege that the lawyer defendants aided and abetted and conspired with Johnston-Neeser in her breaches of fiduciary duty and conversion of corporate assets. The lawyer defendants argue that the counts against them allege no more than they made statements to opposing counsel -- that is, an exchange of positions between lawyers for the parties, in contemplation of litigation -- and that such actions are subject to the litigation privilege and cannot be the basis for suit. The plaintiff counters that her claims against the lawyers are based upon their conduct, of which the statements are only evidence, and upon the lawyers' business advice, which is not protected. Under the circumstances alleged here we agree with the defendants, and accordingly remand with instructions to dismiss the counts against the lawyer defendants.
Background.
Distilled to their essence,[3] the facts alleged are as follows.
In 2005, Barnes and Johnston-Neeser set up a dental practice, SE, specializing in endodontics. They established SE as a professional corporation, and Barnes and Johnston-Neeser each held fifty percent of the shares.
The practice operated until 2020, when Barnes became concerned about her elderly father's health during the COVID-19 pandemic. In June of 2020, Barnes informed Johnston-Neeser that she intended to stop treating patients, and proposed to Johnston-Neeser that they should consider selling the corporation. When Johnston-Neeser did not agree to sell, Barnes demanded that the corporation buy back Barnes's shares.
By this point Barnes was represented by counsel, John Morrissey, who was also her husband. In a June 25, 2020 email to Johnston-Neeser, Morrissey stated, among other things, that if the parties followed the corporation's Articles of Organization (the Articles), this "[i]n [his] opinion . . . would require SE to buy back [Barnes's] shares, at the fair market value determined by the arbitrators." In July 2020, Barnes delivered a notice to the corporation, offering her shares for $400,000.[4]
Johnston-Neeser eventually retained her own counsel --Charles Waters of Sheehan Phinney -- in late July of 2020. Negotiations ensued between Morrissey, on behalf of Barnes, and Waters, on behalf of Johnston-Neeser. The negotiations occurred over several months and involved many written communications, which are quoted or summarized in the amended complaint.
In pertinent part, the negotiations proceeded as follows. After Morrissey advanced the position that the corporation would be required to purchase Barnes's shares, defendant Waters disagreed. In a July 2020 letter to Morrissey, Waters contended that the corporate documents provided the corporation with a right of first refusal over a proposed transfer, but did not require a buyout. Waters instead proposed that the parties divide the corporation's assets, and then sell or dissolve the corporation.[5] When Morrissey rejected that offer, Waters then stated that Johnston-Neeser intended to terminate her employment with the corporation. Morrissey responded that Johnston-Neeser could not quit the corporation, because doing so and "taking with her the patient and referral base that she and Dr. Barnes have cultivated" would constitute a breach of fiduciary duty. Waters then announced that Johnston-Neeser would begin the steps to dissolve the corporation. He also sent an email that offered $275,000 for Barnes's shares, to which Barnes did not reply. At one point or another, both parties threatened to sue and to pursue sanctions.
The parties never reached agreement. Barnes formally resigned as a director and corporate officer in September of 2020. Johnston-Neeser stopped seeing patients as of October 2020, and in December 2020 established a new dental practice, Johnston Endodontics, LLC (JE).
Barnes sued Johnston-Neeser and the corporation in October of 2020. At that time, Barnes served a request to inspect SE's premises. Waters responded with a motion for a protective order, which was denied in an order dated February 10, 2021. According to the amended complaint, however, "Neeser and SE continued to refuse and delay the request for inspection." Eventually, Barnes inspected the corporation's office space in April 2021, and discovered that "dental equipment, office equipment, electronic databases, and medical and office supplies had been removed."
After discovering that the corporation's equipment was no longer in its office space, Barnes amended her complaint to add several more claims, including a conversion claim against Johnston-Neeser and JE. Most importantly for present purposes, the amended complaint for the first time made claims against the lawyer defendants -- counts 9 and 10 -- alleging that they aided and abetted and conspired with Johnston-Neeser to breach her fiduciary duties and to convert corporate assets. The complaint alleged that:
"Neeser with the advice and participation of [the lawyer defendants], devised a scheme by which they misrepresented law and fact, made threats of legal action, threats of unilateral dissolution and liquidation of SE and . . . without authority or right, dissolved and liquidated SE and misappropriated its assets."
The defendants moved to dismiss all counts of the amended complaint. Their motion argued, among other things, that the claims against the lawyer defendants were barred by the litigation privilege. The judge granted the motion in part, but denied the motion to dismiss as to counts 9 and 10, the only remaining counts against the lawyer defendants. The judge did not address the defendants' arguments regarding the litigation privilege. The defendants appealed, arguing (among other things) that their appeal is proper pursuant to the doctrine of present execution.
Discussion.
We first address the scope of our appellate jurisdiction. Ordinarily, of course, a denial of a Rule 12 (b) (6) motion to dismiss is a non-appealable interlocutory order. Mooney v. Warren, 87 Mass.App.Ct. 137, 138 (2015). The doctrine of present execution provides an exception to this rule where "the [interlocutory] order will interfere with rights in a way that cannot be remedied on appeal from the final judgment." Fabre v. Walton, 436 Mass. 517, 521 (2002). And, we have held that orders denying motions to dismiss based upon the litigation privilege fall within the doctrine of present execution. Gillette Co. v. Provost, 91 Mass.App.Ct. 133, 140 (2017). Accordingly, the portion of the judge's order that refused to dismiss the two counts against the lawyer defendants was immediately appealable, and is properly before us.
Before this court the defendants have sought to expand this appeal asking us to address additional issues raised by their motion to dismiss. The defendants urge in particular that the claims against the lawyer defendants are dependent upon the viability of the breach of fiduciary duty claims against Johnston-Neeser, and accordingly that we should address whether the claims for breach of fiduciary duty (and contract) are legally deficient. We decline to do so. Whereas the claims subject to the litigation privilege defense are properly before us, we generally will not address the denial of ordinary Rule 12 (b) (6) arguments on an interlocutory basis, even where the doctrine of present execution provides us with jurisdiction over certain of the arguments advanced in the motion to dismiss. See Slavin v. American Med. Response of Mass., Inc., 99...
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