Kurker v. Hill

• Decision Date: 22 January 1998
• Docket Number: No. 96-P-409,96-P-409
• Parties: George K. KURKER v. Edwin J. HILL and others. 1
• Court: Appeals Court of Massachusetts

Page 833

689 N.E.2d 833

44 Mass.App.Ct. 184

George K. KURKER v. Edwin J. HILL and others. ¹

No. 96-P-409.

Appeals Court of Massachusetts Barnstable.

Argued June 10, 1997.

Decided Jan. 22, 1998.

George K. Kurker, pro se.

Stephen J. Duggan, South Easton, for William L. Eaton.

Daniel J. Finn, Boston, for Stanley Cygelman & another.

Daniel S. Tarlow, Boston, for Edward N. Perry.

Before WARNER, C.J., and SMITH and JACOBS, JJ.

SMITH, Justice.

The plaintiff, George Kurker, filed a ten-count complaint in the Superior Court against numerous defendants, including four attorneys, alleging various causes of action, all arising out of the purchase of the assets of Everhot All-Copper, Inc. (Everhot), a manufacturer of water heaters, by Therma-Flow, Inc. (Therma-Flow), a competitor. Seven of the ten counts asserted claims against the attorneys. ² The essence of the complaint against the attorneys is that the assets sale was at a grossly inadequate price and that the four attorneys, with the other defendants, colluded and conspired to deflate the fair market value of Everhot's assets, including its good will, and to bring about the sale of the assets of Everhot to Therma-Flow for far less than fair market value, thereby depriving the plaintiff of his equity and his livelihood.

The other defendants include the plaintiff's brother, James Kurker (James), his two sisters, Donna Suffredini and Corrine Hill (sisters), and the sisters' husbands, Robert Suffredini and Edwin Hill (husbands).

According to the complaint, the defendants William Eaton and Edward Perry represented James during the asset purchase, with Perry also defending James in a related preliminary injunction proceeding filed by Everhot in Superior Court. Defendants Stanley Cygelman and Daniel Finn represented the sisters, who were Everhot directors and shareholders, and also represented Therma-Flow and the husbands, who were Therma-Flow directors and shareholders.

All of the defendants, including the four attorneys, filed motions to dismiss the plaintiff's complaint pursuant to Mass.R.Civ.P. 12(b)(6), 365 Mass. 755 (1974). A Superior Court judge dismissed all the counts directed at the four attorneys including count two (breach of fiduciary duty), count three (civil conspiracy), count four (unfair and deceptive practices), count six (negligence), count seven (wrongful appropriation of business opportunities), count eight (interference with advantageous business relations), and count nine (intentional infliction of emotional distress). The plaintiff has appealed from the allowance of the attorneys' dismissal motions.

1. Background. Since 1981, Everhot's shareholders consisted of the plaintiff, his brother James, and his sisters. The sisters' husbands were involved in Everhot's management but were not shareholders. In 1986, a rift developed, the husbands resigned, and the plaintiff and James took over Everhot's management. Shortly after their departure, the husbands formed a competing hot water heater company, Therma-Flow. In 1988, the plaintiff and James obtained court approval to have the sisters removed from Everhot's board of directors. After the sisters' removal, Everhot's board of directors consisted of the plaintiff, James, and Everhot's new general manager, Richard Washak.

In 1989, the plaintiff and James began to disagree about Everhot's management; subsequently, James sent notices to Everhot's stockholders calling for two special stockholders' meetings. The purpose of the first meeting was to remove Washak from Everhot's board of directors and reinstate the sisters as members of the board of directors; the purpose of the second meeting was to obtain approval of an agreement to sell Everhot's assets to Therma-Flow. At the first meeting, Washak was removed from the board of directors, and the sisters were elected to the board. At the second meeting, over the plaintiff's objections, the majority of Everhot's shareholders approved the sale of Everhot's assets to Therma-Flow.

2. Scope of review. Under Mass.R.Civ.P. 12(b)(6), "a complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Nader v. Citron, 372 Mass. 96, 98, 360 N.E.2d 870 (1977), quoting from Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101-102, 2 L.Ed.2d 80 (1957). Also, "the allegations of the complaint, as well as such inferences as may be drawn therefrom in the plaintiff's favor, are to be taken as true." Nader v. Citron, supra at 98, 360 N.E.2d 870.

We now address each of the plaintiff's claims against the attorneys.

3. Imputed breach of fiduciary duty (count two). The plaintiff urges us to adopt a theory of recovery based on an imputed fiduciary duty that he contends should be owed by one shareholder's attorney to the other shareholders in a closely held corporation. Relying on the duty of utmost loyalty and good faith imposed among shareholders of a closely held corporation under Donahue v. Rodd Electrotype Co. of New England, 367 Mass. 578, 593, 328 N.E.2d 505 (1975), and the fiduciary duty that might arguably be owed by a corporation's counsel to its individual shareholders, as suggested in Schaeffer v. Cohen, Rosenthal, Price, Mirkin, Jennings & Berg, P.C., 405 Mass. 506, 513, 541 N.E.2d 997 (1989), the plaintiff argues that the duty owed among shareholders of closely held corporations should be imputed to the shareholders' individual attorneys. However, the policy expressed in Beecy v. Pucciarelli, 387 Mass. 589, 597, 441 N.E.2d 1035 (1982), and more recently in Lamare v. Basbanes, 418 Mass. 274, 276, 636 N.E.2d 218 (1994), dictates otherwise.

In Lamare, the court noted that it "will not impose a duty of reasonable care on an attorney if such an independent duty would potentially conflict with the duty the attorney owes to his or her client." Ibid. The court explained, "[t]he rule is founded on the realization that, if a duty was owed to the adversary of an attorney's client, an unacceptable conflict of interest would be created, and because it would be inimical to the adversary system for an adverse party to be allowed to rely on an opposing party's attorney." Ibid. Even if we assume that counsel to a closely held corporation owes a fiduciary duty to its individual shareholders, the plaintiff's complaint does not allege that any of the defendant attorneys acted as corporate counsel to Everhot. Nor does the plaintiff allege that he relied on the defendant attorneys as representing his interests. See, e.g., Page v. Frazier, 388 Mass. 55, 64, 445 N.E.2d 148 (1983). In these circumstances, the defendant attorneys owed a fiduciary duty to their individual clients only. Given the acrimonious relationship that had existed among Everhot's shareholders in the years leading up to the assets purchase, the plaintiff should have anticipated that the other shareholders' individual attorneys would not be representing his interests in the transaction.

Absent a sound basis in policy or a discernible trend in the decisional law, we decline to extend the fiduciary duty owed among shareholders of a closely held corporation to their individual attorneys. Accordingly, count two of the plaintiff's complaint against the four attorneys was properly dismissed.

4. Civil conspiracy (count three). In this count, the plaintiff alleged that all of the defendants conspired to accomplish an unlawful purpose, i.e., the sale of Everhot's assets to Therma-Flow at a grossly disproportionate price, by means of coercion. The Superior Court judge dismissed this count against the four attorneys but not the other defendants.

On appeal, the attorneys argue that the coercive element necessary to make out a claim for civil conspiracy lacks factual support in the complaint. We agree, but the absence of facts supporting the element of coercion is not fatal to the plaintiff's claim. ³

Two kinds of civil conspiracy have been delineated in the decisions. See Aetna Cas. Sur. Co. v. P & B Autobody, 43 F.3d 1546, 1563-1564 (1st Cir.1994). The element of coercion has been required only if there was no independent basis for imposing tort liability--where the wrong was in the particular combination of the defendants rather than in the tortious nature of the underlying conduct. See, e.g., Neustadt v. Employers' Liab. Assur. Corp., 303 Mass. 321, 325, 21 N.E.2d 538 (1939). However, another form of civil conspiracy, reflected in the Restatement (Second) of Torts § 876 (1979), derives from "concerted action," whereby liability is imposed on one individual for the tort of another. Aetna Cas. Sur. Co. v. P & B Autobody, 43 F.3d at 1564. See Gurney v. Tenney, 197 Mass. 457, 466, 84 N.E. 428 (1908); Kyte v. Philip Morris, Inc., 408 Mass. 162, 166, 556 N.E.2d 1025 (1990).

Under the broad sweep of rule 12(b)(6), see Nader v. Citron, 372 Mass. at 104, 360 N.E.2d 870, ⁴ this second kind of civil conspiracy, which does not require proof of coercion may also be considered as a basis for relief under count three of the plaintiff's complaint.

Particularly germane to the plaintiff's allegations in his complaint is the Restatement (Second) of Torts § 876(b) (1977), which states that a person may be liable in tort if he "knows that the ... conduct [of another person] constitutes a breach of duty and gives substantial assistance or encouragement to the other so to conduct himself." Though not explicitly adopted in Massachusetts, this section of the Restatement has been cited in appellate decisions and, in some instances, has provided the basis for recovery. See Nelson v. Nason, 343 Mass. 220, 222, 177 N.E.2d 887 (1961) (recovery allowed under concerted action theory of § 876(b) where the defendant's deliberate conduct caused another to engage in tortious activity). See also Pathe Computer Control Sys. Corp. v. Kinmont Indus., Inc., 955 F.2d 94, 98 (1st Cir.1992); Payton v. Abbott...