Mullins v. Corcoran
| Citation | 488 Mass. 275,172 N.E.3d 759 |
| Decision Date | 26 August 2021 |
| Docket Number | SJC-13049 |
| Parties | Joseph R. MULLINS v. Joseph E. CORCORAN & another. |
| Court | United States State Supreme Judicial Court of Massachusetts |
Jonathan M. Albano, Boston, for the plaintiff.
Andrew R. Levin, Boston, for Gary A. Jennison.
Bruce E. Falby, Boston, for Joseph E. Corcoran.
Present: Budd, C.J., Lowy, Cypher, Wendlandt, & Georges, JJ.
"If at first you don't succeed, try, try again."3 Not so in litigation. In this case, we apply the doctrine of issue preclusion to affirm a Superior Court judge's allowance of the defendants’ motion for judgment on the pleadings on the ground that the claims were based on issues that had been litigated and decided in previous litigation between the same three parties. We also address the question whether the plaintiff, an owner of the closely held corporation at the center of the parties’ long-standing dispute, is precluded from asserting these claims by means of a derivative action. We conclude that where, as here, the interests of the parties fully coincide with that of the closely held corporation, such a derivative action is precluded.
1. Background. We recite the facts "drawn from the parties’ pleadings and the exhibits attached thereto." See Merriam v. Demoulas Super Mkts., Inc., 464 Mass. 721, 723, 985 N.E.2d 388 (2013).
a. Parties’ course of dealings. The plaintiff, Joseph Mullins, and the defendants, Joseph Corcoran and Gary Jennison, share ownership of Corcoran, Mullins, Jennison, Inc. (CMJ), an entity engaged in real estate development. The parties have been in business together since the early 1970s, and by the mid-1980s had developed and owned approximately twenty-five residential apartment projects. Corcoran owns a sixty percent interest in CMJ, while Jennison and the plaintiff each own a twenty percent share of the company.
In 1987, the plaintiff sought to create his own company, and the parties entered into a written contract (1987 agreement) governing the plaintiff's separation from certain businesses of CMJ, as well as the conduct of ongoing and future business between the three owners.4 The agreement stated that business dealings among the group would be "conducted in scrupulous good faith."
One of the projects governed by the 1987 agreement involved a parcel of land in Somerville that contained a 224-unit apartment building and a one-story building with retail space. In 2003, CMJ began to explore possibilities for redeveloping the property. CMJ decided to divide the property, with one portion containing the apartment building and another including the retail building (Cobble Hill Center site). A new entity, Cobble Hill Center LLC, was formed as a closely held corporation5 to manage the Cobble Hill Center site.6
In 2009, CMJ began to explore the feasibility of developing the Cobble Hill Center site, and, by January 2012, CMJ was working on plans to develop a 160- to 170-unit apartment building on the site; CMJ estimated that the development would cost approximately $36.7 million. In July 2012, the plaintiff consented to the planned development. By October 2013, CMJ obtained the requisite approvals from the city of Somerville (city). In December 2013, the plaintiff received a package of documents explaining that the zoning approvals were in place, and the project was moving forward to the construction planning phase (December 2013 proposal). Thereafter, in January 2014, the plaintiff sent a letter to the defendants stating that he did not consent to the development. Over the next several months, CMJ moved forward with evicting the tenants from the retail building so that construction could begin.
b. 2014 action. In July 2014, the plaintiff filed a complaint against the defendants, alleging breach of the 1987 agreement and breach of their fiduciary duties stemming from, inter alia, the defendants’ pursuit of the December 2013 proposal notwithstanding the plaintiff's withdrawal of his consent in January 2014 (2014 action). See Mullins v. Corcoran, 95 Mass. App. Ct. 1107, 124 N.E.3d 706 (2019), cert. denied, ––– U.S. ––––, 140 S. Ct. 905, 205 L.Ed.2d 462 (2020) ; Mullins v. Corcoran, Mass. Super. Ct., No. 1484CV02302 (Suffolk County June 19, 2018).7 The complaint sought injunctive relief and damages for the plaintiff's share of the expenses incurred in 2014 relative to the development effort, as well as his share of the lost rental income from the retail center that was closed in anticipation of development. The defendants counterclaimed that the plaintiff had committed a breach of the 1987 agreement, and his fiduciary duties, by withdrawing his consent more than a year after he had approved the development, and after CMJ had received the necessary zoning approvals, and by interfering with the development efforts.
Discovery in the 2014 action ended in November 2015. Sixteen months later, in March 2017, the plaintiff sought to amend the complaint to add additional asserted breaches of the 1987 agreement and of the defendants’ fiduciary duties, occurring after the complaint was filed, as well as to add derivative claims on behalf of Cobble Hill Center LLC. The defendants argued that the motion to amend should be denied as untimely, and a Superior Court judge agreed. Nonetheless, the parties were permitted to supplement their expert reports on damages to account for any changes due to the passage of time.
A jury-waived trial took place in May and June of 2018. Consistent with their earlier opposition to the plaintiff's motion to amend the complaint, the defendants filed several motions in limine seeking to exclude evidence regarding alternative development proposals by the plaintiff in 2016 and 2017.8 The judge denied the defendants’ motion to exclude evidence of any proposals for the development and disposition of the property that the plaintiff had presented to the defendants during the pendency of the 2014 action, including in 2016 and 2017. Accordingly, at trial, the plaintiff presented evidence regarding these alternative proposals for the development and disposition of the parcel as evidence of the defendants’ failure to mitigate their losses.
Following the close of the evidence, the parties submitted proposed findings of fact and conclusions of law for the judge's consideration. The plaintiff specifically asked the judge to find that these alternative development proposals were feasible, that the defendants either ignored or inadequately considered them, and that, as a result, the defendants could not recover on their counterclaims.
The judge concluded that the plaintiff had failed to prove his claims and found in favor of the defendants on their counterclaims. The judge determined that the plaintiff had committed a breach of the 1987 agreement, as well as his fiduciary duties, by "trying to withdraw [his] consent [to the development detailed in the December 2013 proposal] in 2014 and by deliberately interfering with the efforts of CMJ to finance and construct the project," by "failing to promote the best interests of CMJ," and by "not acting in good faith."
The judge also found that the defendants did not commit breaches of their contractual or fiduciary duties by proceeding with the December 2013 proposal.9
Of the alternative proposals for the development or disposal of the parcel that the plaintiff presented to the defendants following the commencement of litigation, the judge determined that the plaintiff had shown only one to have been feasible; specifically, he concluded that the defendants could have mitigated their damages by pursuing a sale of the property in 2015 for $15 million.10 Subtracting from the profits lost as a result of the plaintiff's breach both the costs that would have been incurred in the development and the mitigation value of the parcel itself, the judge awarded $9 million to Corcoran (calculated based on his sixty percent interest) and $3 million to Jennison (calculated based on his twenty percent interest) for their counterclaims.
The plaintiff appealed, and the defendants cross-appealed with respect to the amount of damages. The Appeals Court affirmed the judgment, see Mullins, 95 Mass. App. Ct. 1107, 124 N.E.3d 706, and this court denied the plaintiff's application for further appellate review, see Mullins v. Corcoran, 482 Mass. 1106, 127 N.E.3d 266 (2019).
The Cobble Hill Center site lay undeveloped, fenced, and vacant during the pendency of these proceedings. The resulting deterioration and urban blight led the Somerville Redevelopment Authority (SRA) to effect a taking of the property in March 2019.11
c. 2017 complaint. The plaintiff filed the complaint in the present case in July 2017, after his motion to amend the complaint in the 2014 action had been denied, but before the trial in that action. The complaint alleged that the defendants had engaged in "further misconduct beyond that alleged in [the 2014 action]." The complaint included claims for breaches of fiduciary duty and breaches of the 1987 agreement that occurred after the 2014 action had commenced, and also asserted derivative claims on behalf of Cobble Hill Center LLC.
In August 2018, the defendants moved for judgment on the pleadings, pursuant to Mass. R. Civ. P. 12 (c), 365 Mass. 754 (1974). Decision on the motion was stayed pending resolution of the 2014 action. In September 2019, a Superior Court judge, who was not the trial judge in the 2014 action, allowed the defendants’ motion. The plaintiff appealed, and we transferred the matter to this court on our own motion.
2. Discussion. The plaintiff contends that the motion judge's allowance of the motion for judgment on the pleadings was error because the conduct at issue in this subsequent complaint occurred after the date in July of 2014 when the 2014 complaint was filed, his motion to amend the 2014 complaint to add these claims was denied, and the evidence of subsequent conduct that ultimately was introduced did not result in the issue being adequately...
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