Baystate Fin. Servs., LLC v. Pinto
| Decision Date | 18 February 2021 |
| Docket Number | Docket: 2084CV02507 |
| Parties | BAYSTATE FINANCIAL SERVICES, LLC & ANOTHER v. GREGORY PINTO & OTHERS |
| Court | Massachusetts Superior Court |
Dates: February 18, 2021
Present: Robert B. Gordon, Justice of the Superior Court
County: SUFFOLK, ss.
Baystate Financial Services, LLC (“Baystate”) and Baystate Wealth Management, LLC (“BWM”) (collectively, the “Plaintiffs”) filed this action seeking equitable relief and monetary damages on account of the Defendants’ alleged breaches of certain contractual and fiduciary obligations. Presented for decision is the Defendants’ Motion to Dismiss the First Amended Complaint (the “Complaint”) pursuant to Mass. R. Civ. P. 12(b)(6), or, in the Alternative, to Compel Arbitration. For the reasons which follow, the Defendants’ motion shall be ALLOWED in part and DENIED in part.
The following facts, assumed to be true, are taken from the Plaintiffs’ Complaint.3 Some facts are reserved for later discussion of the Plaintiffs’ legal claims.
Baystate is a general agency4 of MassMutual, through which insurance and other financial products and services are sold to the public. Prior to July 24, 2020, the Defendants worked full-time as financial advisors from Baystate’s office in Wellesley.5 While they were working at Baystate, the Defendants executed contracts with MassMutual, pursuant to which MassMutual authorized each Defendant to solicit and service business on behalf of MassMutual as a Financial Service Representative or Broker (the “MassMutual Contracts”).6 The Defendants’ MassMutual Contracts contained virtually identical restrictive covenants, including a paragraph entitled “Non-Solicit Obligations” (the “Non-Solicitation Provision”), which states, in relevant part, that:
“Upon termination of this Contract and unless Advisor7 executes another contract with [MassMutual]8 and/or another general agent, general manager or managing partner of [MassMutual] authorizing Advisor to solicit business for [MassMutual], Advisor will cease soliciting Products for, and holding himself or herself out as, an agent or representative of [MassMutual]. In addition, to the extent permitted by law, Advisor agrees not to directly or indirectly, during the term of this Contract and for a period of two years following such termination, solicit, induce or do anything to cause, persuade, encourage or assist, either directly or indirectly, any:
a. person employed by or under a contract with a general agent of [MassMutual], any person employed or under a contract with [MassMutual] or any person employed by or under contract with both [MassMutual] and the general agent, to terminate such contract or employment and/or to affiliate with a competitor of [MassMutual] . . .
b. policyholder, insured, or contract holder of [MassMutual] whom Advisor serviced or otherwise had contact with to surrender (either partially or fully), make withdrawals from, substantially modify, cancel, lapse, or fail to renew such policies, or to obtain policy loans on such policies for the purpose of paying premiums on policies not issued by [MassMutual] . . . .
. . .
Advisor acknowledges that information related to policyholders, insured, and contract holders of [MassMutual] (i) is not readily ascertainable through public sources, (ii) is costly to maintain, protect and safeguard, (iii) could be discovered only through the expenditure of great effort and resources, and (iv) has independent economic value to [MassMutual] and, consequently, constitutes a trade secret of [MassMutual].”
Immediately following the Non-Solicitation Provision, the MassMutual Contracts set forth a provision entitled “Remedies” (the “Remedies Provision”), which states that if an Advisor breaches any of the covenants or obligations of the Non-Solicitation Provision:
Sometime in early to mid-2020, the Defendants began to induce other individuals who worked at Baystate and were under contract with MassMutual to terminate their MassMutual Contracts and affiliate with a competitor, Commonwealth Financial Network (“Commonwealth”). The Defendants purportedly concealed these efforts so that they could all resign from Baystate at the same time, and thereby move clients and business from Baystate to Commonwealth.
On July 24, 2020, the Defendants, together with another person who worked at Baystate and was under contract with MassMutual, submitted a joint letter of resignation to Baystate, which letter indicated that they were leaving Baystate to join Commonwealth. In October, 2020, the Defendants persuaded a second person who worked at Baystate and was under contract with MassMutual to leave Baystate and join Commonwealth.
In or around 2012, Defendant Gregory Pinto (“Pinto”) became a member and owner of BWM. The Complaint alleges that, in exchange for his ownership interest, Pinto “assumed the highest fiduciary duties” to BWM, and agreed to transfer his book of business to BWM, act as an in-house wholesaler of BWM to other Baystate advisors, and promote BWM to Baystate advisors and others outside the firm.
In or around 2014, Pinto decided that he would no longer act as BWM’s internal wholesaler, promote BWM to advisors at Baystate, or transfer his book of business to BWM. From 2013 until his resignation from BWM on December 31, 2019, Pinto managed assets for outside clients in a manner contrary to how assets were managed by BWM, and disparaged BWM to other Baystate advisors and people outside of Baystate. All the while, Pinto continued to demand and accept payments as a BWM member and profit participant.
The Defendants have moved to dismiss the Plaintiffs’ claims pursuant to Mass. R. Civ. P. 12(b)(6). To survive a motion to dismiss under Rule 12(b)(6), a complaint must contain “factual ‘allegations plausibly suggesting (not merely consistent with)’ an entitlement to relief. . . . .” Iannacchino v. Ford Motor Co., 451 Mass. 623, 636 (2008) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 557 (2007)). “The allegations must be more than ‘mere labels and conclusions,’ and must ‘raise a right to relief above the speculative level.’” Buffalo-Water 1, LLC v. Fidelity Real Estate Co., LLC, 481 Mass. 13, 17 (2018) (quoting Galiastro v. Mortgage Elec. Registration Sys., Inc., 467 Mass. 160, 165 (2014)). The Court’s review is limited to the factual allegations of the complaint and facts contained within any attached exhibits, see Eigerman v. Putnam Invs., Inc., 450 Mass. 281, 285 n.6 (2007), as well as any matters of public record and documents relied upon in the complaint. See Marram v. Kobrick Offshore Fund, Ltd., 442 Mass. 43, 45 n.4 (2004); Schaer v. Brandeis Univ., 432 Mass. 474, 477 (2000). The Court must “accept as true the factual allegations in the complaint and the attached exhibits, [and] draw all reasonable inferences in the plaintiff’s favor. . . .” Buffalo-Water 1, LLC, 481 Mass. at 17.
Baystate has asserted claims against the Defendants for breach of contract and tortious interference with contractual and advantageous relations.9 Both claims are premised on the Defendants’ alleged solicitation of the individuals who left Baystate to affiliate with Commonwealth. The Court will address Baystate’s claims in turn.
Baystate brings a breach of contract claim against the Defendants, premised on the allegation that the Defendants’ conduct violated the Non-Solicitation Provision. Inasmuch as Baystate was not a party to the MassMutual Contracts, however, its standing to maintain a breach of contract claim turns on whether Baystate was an intended (rather than incidental) beneficiary of the Non-Solicitation Provision. See Harvard Law School Coalition for Civil Rights v. President and Fellows of Harvard College, 413 Mass. 66, 71 (1992); see also James Family Charitable Found. v. State Street Bank and Trust Co., 80 Mass. App. Ct. 720, 725 (2011) (). To establish it was an intended third-party beneficiary of the Non- Solicitation Provision, Baystate must point to “clear and definite” evidence that the contracting parties intended Baystate both to benefit from the provision and have the right to enforce it. See Landry v. Transworld Systems Inc., 485 Mass. 334, 342 (2020); Lakew v. Massachusetts Bay Transp. Auth., 65 Mass. App. Ct. 794, 799 n.10 (2006). Baystate argues that the Non-Solicitation Provision’s express references to general agents, together with the overall circumstances surrounding the Defendants’ relationship with Baystate, provide the requisite clear and definite evidence of intent to confer a benefit upon Baystate and grant it a right of enforcement. The Court does not agree.
After reviewing the unambiguous language of the MassMutual Contracts, and the Non- Solicitation and Remedies Provisions in particular, the Court concludes that the only entity the contracting parties clearly and...
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