Massachusetts Asset v. Harter, Secrest & Emery

• Decision Date: 29 August 2002
• Docket Number: No. CIV.A. 01-11612-REK.,CIV.A. 01-11612-REK.
• Citation: 220 F.Supp.2d 20
• Parties: MASSACHUSETTS ASSET FINANCING CORPORATION, Plaintiff v. HARTER, SECREST & EMERY, LLP, Sardone, Robinson & Schnell, MB Valuation Services, Inc., and Wanda Kinney-Canary, d/b/a Tri Tech Appraisal Services, Defendants
• Court: U.S. District Court — District of Massachusetts

220 F.Supp.2d 20

MASSACHUSETTS ASSET FINANCING CORPORATION, Plaintiff v. HARTER, SECREST & EMERY, LLP, Sardone, Robinson & Schnell, MB Valuation Services, Inc., and Wanda Kinney-Canary, d/b/a Tri Tech Appraisal Services, Defendants

No. CIV.A. 01-11612-REK.

United States District Court, D. Massachusetts.

August 29, 2002.

Michael C. Gilleran, Pepe & Hazard, LLP, Boston, MA, for Plaintiff.

Mary M. Born, Richard W. Renehan, Timothy E. Moran, Hill & Barlow, Warren D. Hutchinson, Donovan Hatem LLP, Robert T. Gill, Dale A. Coggins, Patrick J. Dolan, Peabody & Arnold LLP, Timothy O. Egan, Peabody & Arnold, Boston, MA, for Defendants.

Opinion and Order

KEETON, District Judge.

I. Pending Matters

Pending for decision are the following motions:

(1) MB Valuation Services Inc.'s Motion for Summary Judgment (Docket No. 57, filed April 4, 2002) with Statement of Undisputed Facts (Docket No. 58, filed April 4, 2002), Memorandum in Support (Docket No. 59, filed April 4, 2002), and Affidavit of Scott Creel (Docket No. 60, filed April 4, 2002). Massachusetts Asset Finance Corporation has filed an Opposition (Docket No. 68, filed April 24, 2002) with Materials in Support of Opposition (Docket No. 69, filed April 24, 2002), and Statement of Disputed Facts (Docket No. 70, filed April 24, 2002).

In response to the court's invitation, MAFCO has filed a Further Memorandum in Opposition to MB Valuation's Motion for Summary Judgment (Docket No. 82, filed May 10, 2002) and MB Valuation has filed a Memorandum of Law in Further Support of MB Valuation Services, Inc.'s Motion for Summary Judgment of Plaintiff's Negligence Claim (Docket No. 86, filed May 17, 2002);

(2) Harter Secrest's Motion to Strike Portions of the Affidavits of Richard Gordon, John Nadel, and Robert Boerman (Docket No. 71, filed May 1, 2002). MAFCO has filed an Opposition (Docket No. 78, filed May 2, 2002);

(3) MAFCO's Motion for Brief Delay in Hearing on Motion for Summary Judgment of Sardone Robinson (Docket No. 77, filed May 2, 2002);

(4) Stipulation to Extend the Time to Respond to the Complaint (Docket No. 83, filed May 13, 2002).

II. Background

Plaintiff Massachusetts Asset Finance Corporation ("MAFCO") initially filed its Complaint (Docket No. 1) on September 20, 2001. MAFCO filed an Amended Complaint (Docket No. 2) on September 21, 2001. In the Memorandum and Order of February 12, 2002, the court informed MAFCO that its allegations of misrepresentations in phone conversations must comply with the particularity requirements of Federal Rule of Civil Procedure 9(b). See Docket No. 34 at 5. The court allowed MAFCO's motion to amend the amended complaint. See Endorsed Order on Margin of Docket No. 40.

MAFCO's cause of action is summarized in the first section of the Second Amended Complaint entitled "Introduction," which states as follows:

The plaintiff, Massachusetts Asset Financing Corp. ("MAFCO") hereby complains of the defendant law firm Harter Secrest & Emery LLP in that while MAFCO made a loan to the law firm's client, American Mold Corporation of Rochester ("American Mold"), Harter Secrest, while having express knowledge that a substantial amount of the receivables of the client which MAFCO was financing and purchasing were in fact fraudulent, failed to disclose the fraud even when expressly asked about the validity of the receivables, and gave an unqualified opinion letter to MAFCO stating or implying that American Mold had good title to the receivables. MAFCO also complains of the defendant accounting firm Sardone Robinson & Schnell, American Mold's accountants, who represented to MAFCO in writing that the receivables were not misstated or misrepresented while it knew or should have known that a substantial amount of the receivables of American Mold which [sic] were in fact fraudulent. MAFCO further complains of defendant appraisers MB Valuation Services, Inc. in that MB, MAFCO's long-time appraisers, performed appraisal services on which MB knew MAFCO was relying which appraisal services were negligent and which caused MAFCO to make a loan to American Mold backed by grossly inadequate collateral. MAFCO finally complains of defendant appraiser Wanda Kinney-Canary, d/b/a Tri Tech, in that Tri Tech, which was directly engaged by MAFCO to perform appraisal services, also engaged in the negligent performance of appraisal services.

Docket No. 43 at 1-2.

Motions for Summary Judgment (Docket Nos. 47 and 57) have been filed by Harter, Secrest & Emery, LLP ("Harter Secrest"), and MB Valuation Services Inc. ("MB"). Sardone, Robinson & Schnell ("Sardone") has filed a Motion to Dismiss or, in the Alternative, for Summary Judgment (Docket No. 53).

MAFCO seeks to recover damages against defendants on eight counts. Count VIII is against Kinney-Canary, a defendant who has not filed one of the pending motions. The other seven counts are relevant to the pending motions and are as follows:

Count I:

MAFCO v. Harter Secrest for misrepresentation

Count II:

MAFCO v. Harter Secrest for failure to disclose known fraud

Count III:

MAFCO v. Harter Secrest for violation of G.L. c. 93A

Count IV:

MAFCO v. Sardone Robinson for misrepresentation

Count V:

MAFCO v. Sardone Robinson for failure to disclose known fraud

Count VI:

MAFCO v. Sardone Robinson for violation of G.L. c. 93A

Count VII:

MAFCO v. MB Valuations for professional negligence

Docket No. 43 at 11-20.

The pending motion for summary judgment (Docket No. 57) was filed by MB Valuation Services on April 4, 2002. Dispositive motions were also filed by Harter Secrest (Docket No. 47) and Sardone Robinson (Docket No. 53). The court heard arguments on these motions at the Case Management Conference of May 2, 2002. At that conference, the court denied the dispositive motions filed by Harter Secrest and Sardone Robinson. See Docket No. 81. The court did not rule on MB Valuation's motion, however, instead allowing the parties to file additional submissions addressing MB Valuation's contention that its actions must be assessed under a gross negligence standard. The parties have filed the allowed submissions. See Docket Nos. 82 and 86. The court will now consider the motion for summary judgment on the merits.

III. Standard Applied by Court to Motions for Summary Judgment

Summary judgment is appropriate only when there are no genuine disputes as to material facts and the movant is entitled to judgment as a matter of law. See Fed. R.Civ.P. 56. The movant has the "initial responsibility of informing the district court of the basis for its motion, and identifying those portions" of the record showing the absence of a genuine dispute of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Once the movant satisfies this burden, the nonmovant must "demonstrate, through specific facts, that a trial-worthy issue remains." Cadle Co. v. Hayes, 116 F.3d 957, 960 (1st Cir.1997).

Issues of fact are in "genuine" dispute if they may reasonably be resolved in favor of either party. Id. Facts are material if they possess "the capacity to sway the outcome of the litigation under the applicable law." Id. The facts in dispute must be significantly probative in order for the court to deny summary judgment; "conclusory allegations, improbable inferences, and unsupported speculation will not suffice." Id. If the undisputed material facts demonstrate that the nonmovant could not prevail on any legal issue, summary judgment is appropriate. IV. Material Dispute of Fact

A material dispute of fact exists regarding MB Valuation Service's involvement in the allegedly incorrect appraisal at the heart of this lawsuit.

Certain underlying facts are undisputed. First, it is undisputed that MAFCO had a business relationship with MB Valuation. See Docket No. 68 at 2-3 and Docket No. 58 at ¶ 1. Second, it is undisputed that MAFCO asked Scott Creel from MB Valuation to conduct an appraisal in connection to the American Mold loan. See Docket No. 68 at 3 and Docket No. 58 at ¶ 2.

The parties also agree that Creel rejected the appraisal work. See Docket No. 68 at 3 and Docket No. 58 at ¶ 3. A very fierce dispute arises, however, regarding the nature of Creel's response to MAFCO..

According to MB Valuation, after rejecting the offer, Creel suggested another appraisal firm, and had no other involvement in the American Mold appraisal. See Docket No. 58 at ¶¶ 3-8.

According to MAFCO, after rejecting the offer, Creel helped find a different appraiser, and also supervised and reviewed that appraiser's work. See Docket No. 68 at 3-4.

Each side offers one or more affidavits in support of its version of the facts. This dispute of fact goes directly to whether MB Valuation was involved in the allegedly faulty appraisal.

V. Negligence Standard

The court did not rule in favor of MAFCO at the Case Management Conference of May 2, 2002, however, because of a separate legal issue that may make the above dispute of fact immaterial. MAFCO has alleged that MB Valuation acted negligently in connection with the appraisal. See Docket No. 2 at 16-17. MB Valuation argues that, under Massachusetts law, MAFCO must show that MB Valuation committed a tort under the higher standard of gross negligence.

The court allowed further submissions from the parties as to this legal issue. Each side filed a further submission. See Docket Nos. 82 and 86.

At this stage of the proceedings the court will look to Massachusetts law to determine the appropriate standard: MAFCO is incorporated and has its principal place of business in Massachusetts. The defendants are citizens of New York, Texas, and Kentucky. MAFCO alleges that the defendants, in written and verbal communications with MAFCO representatives in Massachusetts, made various misrepresentations and non-disclosures. The allegedly tortious conduct occurred, at least partially, in Massachusetts in view of these representations made to persons located in Massachusetts. Also, MAFCO's harm was...