Millennium Equity Holdings LLC v. Mahlowitz

• Decision Date: 03 May 2010
• Docket Number: SJC-10515
• Citation: 925 N.E.2d 513,456 Mass. 627
• Parties: MILLENNIUM EQUITY HOLDINGS, LLC, & others v.Edward M. MAHLOWITZ.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

456 Mass. 627
925 N.E.2d 513

MILLENNIUM EQUITY HOLDINGS, LLC, & others ¹
v.
Edward M. MAHLOWITZ.

SJC-10515

Supreme Judicial Court of Massachusetts,
Suffolk.

Argued Jan. 5, 2010.
Decided May 3, 2010.

925 N.E.2d 514

COPYRIGHT MATERIAL OMITTED

925 N.E.2d 515

COPYRIGHT MATERIAL OMITTED

925 N.E.2d 516

Edward M. Mahlowitz, Belmont (John L. Mason, Jr., with him), pro se.

Max D. Stern, Boston (Kenneth M. Resnik with him) for David Rabinovitz.

David L. Kelston for Millennium Equity Holdings, LLC, & another.

Robert S. Sinsheimer, pro se, was present but did not argue.

Isaac H. Peres, pro se, was present but did not argue.

Present: MARSHALL, C.J., SPINA, COWIN, CORDY, & GANTS, JJ.

MARSHALL, C.J.

The defendants-in-counterclaim, Millennium Equity Holdings, LLC (Millennium), and two of its partners, David Rabinovitz and Joseph P. Zoppo (collectively defendants), appeal from the decision of a Superior Court judge holding them liable for abuse of process and the malicious prosecution of Attorney Edward M. Mahlowitz.² The underlying dispute in this bitter litigation arose when Mahlowitz, representing Rabinovitz's wife in her divorce action against Rabinovitz, obtained an attachment on her behalf in the Probate and Family Court on Rabinovitz's interest in property owned by Millennium. The attachment was secured after the wife discovered by happenstance that Rabinovitz was concealing from her the imminent sale of the property.

The defendants made no attempt to dissolve or modify the attachment in the Probate and Family Court, despite ample opportunity and specific court rules permitting them to do so. Rather, eighteen months after the attachment had issued, and approximately one year after the attachment had been dissolved, Rabinovitz, Zoppo, and Millennium brought suit against Mahlowitz for abuse of process, malicious prosecution, and interference with contractual rights for obtaining the attachment. After failing to secure dismissal of the lawsuit, Mahlowitz counterclaimed against the defendants for abuse of process and malicious prosecution in connection with their suit against him.

925 N.E.2d 517

After an eight-day, jury-waived trial in the Superior Court on the defendants' abuse of process claim,³ and on Mahlowitz's counterclaims, the judge ruled in favor of Mahlowitz both on the claims of Millennium, Rabinovitz, and Zoppo against him, and on his counterclaims against them, awarding damages to Mahlowitz for the latter. She denied Mahlowitz's motion for sanctions pursuant to Mass. R. Civ. P. 11, 365 Mass. 753 (1974), against Robert S. Sinsheimer, the attorney representing Rabinovitz, and Isaac H. Peres, the attorney representing both Zoppo and Millennium at trial.

The Appeals Court reversed the judgment in favor of Mahlowitz on his counterclaims; it otherwise affirmed the trial judge in all respects. Millennium Equity Holdings, LLC v. Mahlowitz, 73 Mass.App.Ct. 29, 895 N.E.2d 495 (2008). None of the defendants sought further appellate review. We granted Mahlowitz's application for further appellate review on his counterclaims against the defendants, as well as the judge's order denying his request for sanctions.

Contrary to the defendants' assertion that the judge's findings were replete with error, we first conclude that the record supports Mahlowitz's claim of abuse of process against Rabinovitz.⁴ Specifically, the evidence, including the reasonable inferences therefrom, supports the judge's conclusion that the only motivation Rabinovitz had in bringing his lawsuit against Mahlowitz was to cause the removal of Mahlowitz as counsel for his wife in their divorce action. The judge also acted within proper bounds as a finder of fact in concluding that Zoppo and Millennium acted in concert with Rabinovitz to that same end. We thus affirm Mahlowitz's abuse of process claim against all of the defendants.

Mahlowitz's malicious prosecution claim is substantially similar to his abuse of process claim, and his damages under each are identical. Because we affirm the judgment on the abuse of process claim, we need not and do not reach Mahlowitz's malicious prosecution claim against the defendants.

As to damages, we conclude that the judge made errors in her evaluation of some aspects of the damages that require remand for recalculation of two discrete issues pertaining to damages alone. Last, we agree with the judge that Mahlowitz has not met his burden of proving that Peres and Sinsheimer acted in bad faith in representing the defendants in their claims against Mahlowitz, and that he is not entitled to sanctions against them.

We turn now to a summary of the facts salient to Mahlowitz's counterclaims against the defendants, the only issue before us.

1. Background. We draw our factual summary from the findings of the judge,

925 N.E.2d 518

sitting without a jury, and the uncontested facts of record, all of which are supported by the trial record.⁵ We reserve some details for later discussion where pertinent to our analysis.

a. Millennium. Millennium, a Delaware limited liability company, was formed in 2000 for the purpose of purchasing and developing a commercial property on Washington Street in the Brighton section of Boston (Washington Street property). Rabinovitz held at least a seventy-seven per cent ownership interest in the company. Zoppo was one of two additional shareholders, and Edward Stevenson was the other. The judge found that Rabinovitz “completely controlled” Millennium.

By February of 2002, Millennium was in financial difficulties. At the urging of its mortgagee, which declared Millennium's loan obligations in default, Millennium agreed to put the Washington Street property up for sale. Around September, 2002, the mortgagee directed Millennium to accept an offer by Fargo Street Associates, Inc. (Fargo), to purchase the property for $1.65 million. For tax reasons, Fargo needed to complete the sale by December 31, 2002.

b. Rabinovitz divorce proceedings. There was evidence at trial concerning Rabinovitz's conduct in the divorce proceedings against his wife. It was admitted as relevant to Rabinovitz's state of mind at the time he filed his abuse of process and other claims against Mahlowitz.⁶ We summarize that evidence.

In April, 2002, Rabinovitz's wife filed a divorce action against him in the Probate and Family Court. Mahlowitz represented her in that action. From its inception, and throughout its course, the divorce and postdivorce litigation was acrimonious. A major source of conflict was Rabinovitz's lack of good faith concerning the disclosure of marital assets and issues of child support. In her findings in this action, the Superior Court judge included a comprehensive but not an “exhaustive list” of all of Rabinovitz's misrepresentations concerning the marital estate. She found, for example, that Rabinovitz was “intentionally dishonest” and “deceitful” in the information he provided in his financial statements.⁷ Among other things, he

925 N.E.2d 519

understated his income, failed to divulge the actual value of certain real property even when that value was known or readily ascertainable by him, concealed assets, failed to comply with court orders, and otherwise attempted to deprive his wife of her fair share of the marital assets.⁸ As a consequence, the judge found, Mahlowitz was forced to bring multiple contempt actions against Rabinovitz, including for his failure to pay child support. Rabinovitz, she found, “did not like that his wife had a competent, zealous advocate,” and “especially did not like” the contempt complaints.

Of particular relevance to this appeal, the judge found that Rabinovitz did not inform his wife that Millennium had agreed to sell the Washington Street property to Fargo for $1.65 million. Even after Millennium signed the purchase and sale agreement in November, 2002, and the sale was set to close in early December, Rabinovitz did not do so. He concealed the impending sale and sales price of the Washington Street property on his financial statements and interrogatories in the divorce action.⁹ The judge found that, notwithstanding Rule 411 of the Supplemental Rules of the Probate Court (2010) (automatic restraining order),¹⁰ Rabinovitz had “no intention” of notifying his wife or even his own divorce attorney about the potential sale of the Washington Street property, in which he had a substantial ownership interest, nor did he have any intention of placing in escrow any profits he might gain from the sale. At his deposition

925 N.E.2d 520

on December 5, 2002, Rabinovitz refused to produce a copy of the purchase and sale agreement.

c. Attachment. In late November, or early December, 2002, as negotiations between Fargo and Millennium proceeded-negotiations about which Mahlowitz and Rabinovitz's wife knew nothing-Stevenson, the third Millennium shareholder, became embroiled in litigation with Rabinovitz and Zoppo over shareholder distribution of the expected proceeds from the sale to Fargo. On December 2, 2002, in the midst of his own litigation against Rabinovitz, Stevenson, in the judge's words, “dropped a dime” by informing the wife about the impending sale. ¹¹ She notified Mahlowitz, who, until that time, had been under the impression that Rabinovitz's financial situation was “bleak.” On December 3, 2002, on behalf of his client, Mahlowitz sought from the Probate and Family Court an ex parte attachment on Rabinovitz's interest in the Washington Street property. At the ex parte hearing, a transcript of which was entered in evidence, Mahlowitz represented to the probate judge that he sought to attach only Rabinovitz's interest in the Washington Street property and had no intention of interfering with Millennium's sale of the property.¹² The probate judge allowed the motion. In accordance with Mahlowitz's representations to the judge, the attachment placed a lien not on Millennium, but on the “right, title and interest to the amount of $500,000.00 of David I. Rabinovitz standing in the name...