Demoulas v. Demoulas

• Decision Date: 03 April 2000
• Citation: Demoulas v. Demoulas, 732 N.E.2d 875, 432 Mass. 43 (Mass. 2000)
• Court: Supreme Judicial Court of Massachusetts
• Parties: RAFAELE L. DEMOULAS, administratrix, & others v. TELEMACHUS A. DEMOULAS & others. ARTHUR S. DEMOULAS v. DEMOULAS SUPER MARKETS, INC., & others.

432 Mass. 43

732 NE 2d 875

RAFAELE L. DEMOULAS, administratrix,¹ & others² v. TELEMACHUS A. DEMOULAS & others.³

ARTHUR S. DEMOULAS v. DEMOULAS SUPER MARKETS, INC., & others.⁴

Supreme Judicial Court of Massachusetts, Middlesex.

April 3, 2000.

June 30, 2000.

Present: MARSHALL, C.J., ABRAMS, GREANEY, IRELAND, & SPINA, JJ.

Robert C. Gerrard (Carol R. Cohen & Thomas S. Fitzpatrick with him) for Rafaele L. Demoulas & others.

Andrea Saunders Barisano (Richard K. Donahue with her) for Telemachus A. Demoulas & others.

Judith Gail Dein (Samuel Adams & James J. Arguin with her) for Glorianne D. Farnham & another.

Rudolph F. Pierce (Jonathan I. Blackman, of New York, with him) for Arthur T. Demoulas.

GREANEY, J.

These appeals, the latest, and hopefully the last, chapter in the Demoulas family litigation, result from proceedings called for in our prior decisions. Those decisions involved (in chronological order) the appeal from the judgments in the shareholder derivative action, Demoulas v. Demoulas Super Mkts., Inc., 424 Mass. 501 (1997) (Demoulas I); the appeal from an order denying the judge's recusal and a judgment in the same action, Demoulas v. Demoulas Super Mkts., Inc., 428 Mass. 543 (1998) (Demoulas II); and the appeal from a judgment in the stock transfer action, Demoulas v. Demoulas, 428 Mass. 555 (1998) (Demoulas III). The additional proceedings were decided by the same judge who has been involved in the cases from the outset. The nature of the various disputes are set forth in each decision, which may be consulted for a more thorough history of this considerable litigation. We granted both applications for direct appellate review and consolidated the appeals.

We consider the appeal by the defendants Arthur T. Demoulas (Arthur T.), Glorianne D. Farnham (Glorianne), Caren D. Pasquale (Caren), and Frances D. Kettenbach (Frances) (defendant children), from the judge's orders denying their motions for recusal. We conclude that the motions were properly denied. We consider also the issues arising from the further proceedings ordered in Demoulas III, the stock transfer action. Here, we have cross appeals. Specifically, the plaintiffs appeal from a provision of the amended judgment following rescript (judgment), that allows Telemachus A. Demoulas (Telemachus), and the defendant children, an offset or reimbursement, for taxes they paid (with interest) on shares of the treasury stock of Demoulas Super Markets, Inc. (DSM). The defendant children appeal from determinations that they were not bona fide purchasers either of their initial interests in a real estate trust, Delta & Delta Realty Trust (Delta & Delta), or of certain shares of DSM stock. Telemachus and DSM appeal from (1) that part of the order allowing the plaintiffs' costs for daily trial transcripts; (2) the order denying their motion to revise that portion of the judgment concerning selection of the independent search firm that would name candidates for officer positions at DSM; and (3) the order denying correction of calculation errors in parts of the judgment. We uphold most of the judge's orders, but we conclude that she should not have awarded costs for daily trial transcripts, and that she should have corrected some calculation errors in the judgment.

We first take up the recusal matter. We thereafter decide the cross appeals.

I. APPEAL OF THE ORDERS DENYING RECUSAL.

There are two recusal motions in issue, substantively identical and filed on the same day by the defendant children, one motion in each action (the stock transfer action and the shareholder derivative action). The motions sought the judge's recusal, or, at the least, examination of the recusal request at an evidentiary hearing before another judge. The relevant background is as follows.

The present recusal motions are not the first such motions filed in the litigation. Almost six years ago, in 1994, approximately one month before the start of trial in the shareholder derivative action, the defendant children moved, on an "emergency" basis, to recuse the judge. The judge denied their motion. After a lengthy trial, the judge concluded that the defendants were responsible for massive wrongdoing in diverting corporate opportunities. On appeal, the defendants argued that a new trial was necessary on the ground that the judge was biased because she had presided over the jury trial of the stock transfer action, and had, during the shareholder derivative action, made rulings that manifested bias. Demoulas I, supra at 524-526. We rejected these arguments.

In June, 1997, new "emergency" motions were filed, in both the shareholder derivative and the stock transfer actions, to recuse the judge. See Demoulas II, supra at 544. The motion in the shareholder derivative action was filed almost two years after the entry of judgment in the case, and just days before a transfer of certain assets was scheduled to occur as required by the judgment. Id. In the stock transfer action, the motion to recuse was filed approximately four months after judgment had entered. The motions were substantively identical. Essentially, the defendants alleged that the judge had engaged in improper social contact with lead counsel for the plaintiff in a restaurant owned by the judge's husband. Id. at 544-555. They argued that this contact violated Canon 3 of the Code of Judicial Conduct which provides that "[a] judge should disqualify himself in a proceeding in which his impartiality might reasonably be questioned...." Id. at 545, quoting S.J.C. Rule 3:09, Canon 3 (C) (1), as appearing in 382 Mass. 811 (1981). The defendants also argued that the allegations warranted a hearing before another judge. Demoulas II, supra at 551. We affirmed the judge's denial of the attempt to recuse her. Id. at 546-547, 554. See Demoulas III, supra at 557 n.4. We stated that, "the denial of the recusal motion was not erroneous considering that it was the second recusal motion coming at the end of complex litigation decided against the moving party, with no substantial justification for its lack of timeliness, where the defendants had some of the information at their disposal for as much as fifteen months, and where the defendants' affidavits taken at face value were insufficient to establish a reasonable basis for questioning the judge's impartiality. In sum the defendants' motion offers too little, too late." Demoulas II, supra at 552. We also affirmed the judgment against Telemachus and DSM in the stock transfer action. Demoulas III, supra at 591-592. We remanded both the stock transfer and shareholder derivative actions for certain limited proceedings. See Demoulas II, supra at 554; Demoulas III, supra at 591-592.

During the remand proceedings, the defendant children filed the present motions to recuse. In their memorandum in support of recusal, the defendant children argued that (1) the appearance of impropriety and potential bias of the judge required her recusal; (2) the facts required the judge to refer the matter to another judge for an evidentiary hearing; (3) recusal was required because the judge was directly adverse to Arthur T.; and (4) their motions were timely. The defendant children urged the judge to consider the cumulative effect of the entire record, including the factual allegations that supported their first and second motions to recuse. The defendant children also presented three allegedly new categories of factual assertions in their third effort to have the judge recused. These categories are as follows.

The first category concerns statements purportedly made by Attorney Paul Walsh, the judge's law clerk during the trial of the shareholder derivative action, to Richard E. LaBonte, a private investigator, and to Attorney Kevin P. Curry. The affidavits of LaBonte and Curry make the following recitals. Curry states that he "was engaged ... to investigate among other matters, the authorship of the [the judge's decision in the shareholder derivative action]." Curry and LaBonte state that a meeting was held "to determine the role that... Walsh played in the drafting of [the decision]." The meeting took place on June 5, 1997, at the Citadel Hotel in Halifax, Nova Scotia. There, Curry and LaBonte interviewed Walsh under the pretext of being potential employers. Curry and LaBonte state that Walsh told them that the judge "was predisposed to find for the [p]laintiff"; that the judge told him (Walsh), before the trial of the shareholder derivative action commenced, that "she knew who `the bad and the good guys were' and who the winners were going to be before the case beg[a]n"; that "he [Walsh] will easily tell who was lying and that the [p]laintiff's physical evidence will be overwhelming"; and that Walsh "wrote the entire decision, word for word and that [the judge] had simply read it and signed it without any changes." The LaBonte affidavit was signed on June 11, 1997, and the Curry affidavit was signed sometime in June, 1997.

The defendant children also submitted two unsigned statements of Walsh, which describe the circumstances of the Nova Scotia meeting, and the circumstances of two other job "interviews," one in New York, and the other in Boston. According to the statements, Walsh was initially contacted in April, 1997, by one Ernest Reid, who identified himself as a headhunter whose client, a large unidentified Boston law firm with offices in Bermuda, London, and Boston, had seen Walsh's resume and wanted to hire him. After meeting with Walsh twice at Walsh's home and speaking with Walsh over the telephone, Reid arranged to have Walsh interview with his client at the Citadel Hotel in Halifax, Nova Scotia, for an alleged job that was the "chance of a lifetime," and also have a later interview at the Four Seasons Hotel in New York City. During the interview in Nova Scotia, on June 5, 1997, Walsh met with two men who identified themselves as "Lawrence" and "Concave" (inferably Curry and LaBonte). The men...