McGinnes v. Town of New Shoreham
| Decision Date | 04 April 2017 |
| Docket Number | C.A. No. WC-2016-0616 |
| Parties | SARA MCGINNES AND CLIFFORD MCGINNES Plaintiffs, v. TOWN OF NEW SHOREHAM, ALBERT CASAZZA, JOHN PEZZIMENTI, NANCY DODGE, BARBARA MACMULLAN, BILL PENN, EVERETT SHOREY, KEVIN HOYT, NORRIS PIKE AND JACK SAVOIE Defendants. |
| Court | Rhode Island Superior Court |
DECISION
Before this Court are cross-motions for partial summary judgment. Plaintiffs, Sara McGinnes and Clifford McGinnes (Mrs. and Mr. McGinnes, respectively; collectively, Plaintiffs) ask this Court to grant summary judgment on Counts I and II of their First Amended Complaint. Defendants, Albert Casazza (Casazza) and John Pezzimenti (Pezzimenti) (collectively, Defendants), object to Plaintiffs' motion and ask this Court to summarily dispose of Counts I and II of the First Amended Complaint. Plaintiffs likewise object to Defendants' motion. Jurisdiction is pursuant to Super. R. Civ. P. 56.
Block Island Power Company (BIPCO) is an electric utility company that serves the Town of New Shoreham (the Town) and has been privately owned and operated since 1925. Am. Compl. ¶ 16. Prior to June 14, 2012, Mr. McGinnes, Casazza, Jerome Edwards (Edwards), and Pezzimenti were equal shareholders of BIPCO, together owning the entirety of BIPCO's shares. Id. at ¶ 17. On June 14, 2012, Mr. McGinnes, Casazza, Edwards, and Pezzimenti executed an agreement titled "BIPCo Shareholders' Agreement" (Shareholders' Agreement). Id. at ¶ 18. The Shareholders' Agreement provided:
In November 2013, Edwards unfortunately passed away, and his BIPCO shares were converted to treasury stock, which resulted in Mr. McGinnes, Casazza, and Pezzimenti each owning one-third of the outstanding shares of BIPCO. Am. Compl. ¶ 20.
Thereafter, on or about March 7, 2016, Mr. McGinnes conveyed his one-third ownership in BIPCO to Mrs. McGinnes as a marital gift. Id. at ¶ 22. The conveyance was accomplished by delivery of an endorsed certificate in accordance with BIPCO bylaws Article X, Section 21 and resulted in Mr. McGinnes transferring his ownership interest in BIPCO to his wife. Id. Neither Casazza nor Pezzimenti objected to the transfer; rather, the transfer was accepted and ratified. Id. at ¶ 23. Plaintiffs assert that the right of first refusal belonging to Mr. McGinnes as delineated in the Shareholders' Agreement was assigned to Mrs. McGinnes at the time of the transfer. Alternatively, Plaintiffs aver that Mr. McGinnes retained his right of first refusal as set forth in the Shareholders' Agreement. See id. at ¶ 24.
In early 2016, Mr. and Mrs. McGinnes, Casazza, and Pezzimenti engaged in discussions with the Town and with Northern Transmission, LLC (Northern Transmission) about the possibility of selling BIPCO shares to either entity. Id. at ¶ 25. As a result of these discussions, the Town enlisted the Electric Utilities Task Group (EUTG) to aid in developing a plan for the future operation of BIPCO should the Town purchase ownership of BIPCO. Id. at ¶ 26. Several current members of BIPCO's Board of Directors—Barbara MacMullan, Bill Penn, and Everett Shorey—were part of the Town Council which formed the EUTG. Id. Thereafter, on May 18, 2016, the Town Council voted to support a potential purchase of BIPCO and directed Nancy Dodge (Dodge), the Town Manager at the time, to "submit a resolution advocating for the passage of a state law that would allow the Town to create a non-profit successor organization to which the Town would transfer the Shares and assets of BIPCO." Id. at ¶ 27. In addition, by spring 2016, negotiations for the Town and Northern Transmission's purchase of BIPCO had progressed to such a point where material and specific transactional terms were exchanged between the parties. Id. at ¶ 28.
When Mrs. McGinnes had learned that Casazza and Pezzimenti intended to sell their BIPCO shares to the Town, she provided notice to Casazza, Pezzimenti, and the Town that she did not intend to divest her ownership in BIPCO and indicated that she would exercise her right of first refusal "on terms equal to those offered by the Town." Id. at ¶ 29. Dodge acknowledged Mrs. McGinnes's notice, but indicated that the Town intended to proceed with its purchase of Casazza and Pezzimenti's BIPCO shares nevertheless. Id. at ¶ 30; see also Am. Compl., Ex. B. Thereafter, Casazza and Pezzimenti entered into a Stock Purchase Agreement with the Town on July 11, 2016. Am. Compl. ¶ 31; see also Am. Compl., Ex. C. The Stock Purchase Agreement acknowledged Mrs. McGinnes's right of first refusal and set a closing date within 120 days of its execution. See Am. Compl. ¶ 31. Plaintiffs allege that, subsequently, the Town planned to assume full control of BIPCO by, among other things, forming a non-profit utility district or co-op and retire Mrs. McGinnes's stock upon transfer of BIPCO stock to the new entity. See id. at ¶ 32.
On October 3, 2016, the Town formed a "BIPCO Transition Team" at a Town Council meeting, which was composed of the members now composing the BIPCO's Board of Directors. See id. at ¶ 35. Thereafter, the Town closed on its purchase of Casazza and Pezzimenti's stock on November 7, 2016 and, that same evening, appointed the members of the BIPCO Transition Team to the Board of Directors. Id. at ¶¶ 37-40.
Plaintiffs have pleaded claims for rescission of the Stock Purchase Agreement, breach of contract seeking specific performance of right of first refusal, breach of contract for damages, tortious interference with prospective business relationships, and breach of fiduciary duty against Casazza and Pezzimenti. The original Complaint also asserted a claim for breach of fiduciary duty against the current members of BIPCO's Board of Directors. On February 1, 2017, however, Plaintiffs voluntarily dismissed their claim against the board members. Subsequently, BIPCO was permitted to intervene in the action pursuant to Super. R. Civ. P. 24.
"Summary judgment is an extreme remedy and should be granted only when 'the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as [a] matter of law.'" Rose v. Brusini, 149 A.3d 135, 139 (R.I. 2016) (quoting Plunkett v. State, 869 A.2d 1185, 1187 (R.I. 2005)). "'Only when a review of the admissible evidence viewed in the light most favorable to the nonmoving party reveals no genuine issues of material fact, and the moving party is entitled to judgment as a matter of law, will this Court . . . grant . . . summary judgment.'" Id. at 139-40 (quoting Nat'l Refrigeration, Inc. v. Standen Contracting Co., 942 A.2d 968, 971 (R.I. 2008)). "The party opposing 'a motion for summary judgment carries the burden of proving by competent evidence the existence of a disputed material issue of fact and cannot rest on allegations or denials in the pleadings or on conclusions or legal opinions.'" Id. at 140 (quoting Nat'l Refrigeration, Inc., 942 A.2d at 971).
The parties ask this Court to grant summary judgment on both Counts I and II of the Amended Complaint in their respective favors. This Court will consider each Count through the scope of summary judgment in seriatim.
Plaintiffs' motion requests summary judgment on Counts I and II of its First Amended Complaint. Count I seeks rescission of the Stock Purchase Agreement and is dependent upon whether the Stock Purchase Agreement was entered into in violation of a right of first refusal purportedly belonging to Mrs. or Mr. McGinnes. Count II requests that this Court order specific performance of the right of first refusal and is thus dependent upon a right of first refusal being validly granted. Defendants argue that the Shareholders' Agreement is vague and indefinite, and thus the right of first refusal is void and unenforceable under Rhode Island law.2 In response, Plaintiffs contend that use of the term of art "right of first refusal" leaves no question as to what was granted under the Shareholders' Agreement as well as the material terms of the covenant.
In Rhode Island, a right of first refusal is distinguishable from an option. "An option can be defined as 'a unilateral contract in which the optionor agrees with the optionee that he has a right to buy the optionor's property according to the precise terms and conditions of the contract.'" Hood v. Hawkins, 478 A.2d 181, 185 (R.I. 1984) (quoting Butler v. Richardson, 74 R.I. 344, 350, 60 A.2d 718, 722 (1948)). The Rhode Island Supreme Court has quoted approvingly Corbin's description that an option arises in situations where the purchaser has a "legal power of acceptance—a power by tendering money to create in himself a right to an immediate conveyance of the property and in the owner a duty of such conveyance." Id. (quoting 1A Corbin on Contracts § 259 at 460 (1963)).
In contrast, our Supreme Court has on multiple occasions described a right of first refusal as an "independent privilege." See Kenyon v. Andersen, 656 A.2d 963, 965 (R.I. 1995); Doyle v. McNulty, 478 A.2d 577, 579 (R.I. 1984); Hood, 478 A.2d at 185; Butler, 74 R.I. at 349, 60 A.2d at 721. Unlike an option, the right of first refusal Hood, 478 A.2d at 185. Therefore, the...
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