Quinn v. Mar-Lees Seafood, LLC

• Decision Date: 07 August 2007
• Docket Number: No. 06-P-588.,06-P-588.
• Citation: Quinn v. Mar-Lees Seafood, LLC, 871 N.E.2d 511, 69 Mass. App. Ct. 688 (Mass. App. 2007)
• Court: Appeals Court of Massachusetts
• Parties: John QUINN v. MAR-LEES SEAFOOD, LLC<SMALL><SUP>1</SUP></SMALL>; Northern Harvest, Inc., third-party defendant.

871 N.E.2d 511

69 Mass. App. Ct. 688

John QUINN v.MAR-LEES SEAFOOD, LLC¹; Northern Harvest, Inc., third-party defendant.

No. 06-P-588.

Appeals Court of Massachusetts, Middlesex.

Argued January 11, 2007.

Decided August 7, 2007.

Robert M. Duffy for the defendant.

Lawrence G. Green, Boston (Susan E. Stenger with him) for the plaintiff.

Present: LENK, COWIN, & GRAHAM, JJ.

COWIN, J.

The plaintiff, John Quinn, obtained a favorable jury verdict on his complaint in the Superior Court that the defendant, Mar-Lees Seafood, LLC(Mar-Lees), had committed a breach of a written agreement to pay him royalties based on profits derived from certain of the defendant's sales.The jury awarded the plaintiff damages in the amount of $389,310.56, and rejected Mar-Lees's counterclaims for breach of an alleged oral agreement and breach of fiduciary duty.The jury rejected as well Mar-Lees's claim against the third-party defendant, Northern Harvest, Inc.(Northern Harvest), of which the plaintiff was a principal shareholder, for breach of an alleged obligation to transfer its trade name to the defendant.Final judgment, subsequently amended, entered in accordance with the jury verdicts.The judge denied the plaintiff's posttrial motion for specific performance of the royalty agreement in the future, and denied as well Mar-Lees's motion for judgment notwithstanding the verdict or for a new trial, thereby precipitating these cross appeals.We affirm the amended judgment in favor of the plaintiff for damages to the time of trial and against Mar-Lees on its counterclaim and third-party complaint, and the order denying Mar-Lees's motion for judgment notwithstanding the verdict or for new trial.We affirm as well the order denying specific performance of the agreement in the future, but for a reason other than that advanced by the judge.

1.Background.The plaintiff having obtained a verdict in his favor, we recite the facts in the light most favorable to him.SeeSituation Mgmt. Sys., Inc. v. Malouf, Inc.,430 Mass. 875, 876, 724 N.E.2d 699(2000).The plaintiff and a business partner, Joseph O'Donnell, were at all material times the shareholders of Northern Harvest, a company that manufactured and sold packaged fish.In late 1999, the plaintiff and representatives of Mar-Lees, a scallop distributor, entered into discussions regarding a possible merger of the two companies.By December, 1999, there had been sufficient movement to that end that the parties decided to take immediate, albeit preliminary, steps to make the companies "one."Mar-Lees assumed control of the operational and administrative affairs of Northern Harvest; agreed to expedite the purchase of equipment necessary to make use of a "modified atmospheric packaging" technology for the preservation of fish that was then the property of Northern Harvest; and employed the plaintiff, on a salaried basis, as Mar-Lees's nominal president, effective January 1, 2000.The plaintiff was charged both with persuading Northern Harvest's current customers to do business with Mar-Lees, and with developing new customers for what was expected to become the reorganized enterprise.The parties also agreed to continue their work toward memorializing the integration of the two companies.This resulted in the acquisition by Mar-Lees of business (and related sales) that would otherwise have been enjoyed by Northern Harvest.

In the course of discharging his new responsibilities, the plaintiff brought together Phillip Walsh, manager of seafood sales of Stop & Shop Supermarkets, Inc.(Stop & Shop), and Jack Morris, vice president for procurement and sales of Mar-Lees.Following subsequent meetings between Walsh and Morris, an agreement was reached that, effective in March, 2000, Stop & Shop would offer Mar-Lees's fresh sea scallops in its stores on an exclusive basis.

On April 5, 2000, Northern Harvest and Mar-Lees, as well as the plaintiff, O'Donnell, and John Lees² individually, signed a letter of intent (agreement) setting forth the possible terms of an asset acquisition by Mar-Lees.With the exception of certain provisions applicable to the plaintiff individually (seeinfra), which provisions were intended to take effect immediately, the terms of the agreement were not binding, and the parties contemplated the subsequent preparation and execution of "a definitive written acquisition agreement."

By means of the agreement, the parties decided provisionally that Mar-Lees would acquire, for a nominal sum, certain assets presently owned by Northern Harvest.Assets to be transferred included so-called "modified atmospheric packaging" technology for the preservation of fish that was then controlled by Northern Harvest; Northern Harvest's customer list; and the good will of Northern Harvest as a going concern.At the same time, the plaintiff and O'Donnell, or an entity or entities designated by them, would commence a sequence of acquisitions of Mar-Lees's stock then owned by John Lees that would result ultimately in their ownership of fifty percent of that company's stock for a purchase price of $2.5 million.The tentative agreement included a three-year covenant on the part of the plaintiff"not to solicit business from any customer or account acquired from [Northern Harvest], except in [his] capacity as an employee of Mar-Lees."

Those provisions of the agreement that were intended to be binding forthwith without further negotiation or agreement included section 4.1, entitled "Contingent Profits Interest"(Section 4.1)Section 4.1 acknowledged that the plaintiff was currently employed by Mar-Lees, and that Northern Harvest sales were presently being "booked through Mar-Lees," presumably in contemplation of the consummation of the asset and stock purchases described elsewhere in the agreement.However, recognizing the possibility that the asset and stock transactions might not take place, section 4.1 provides that

"[i]n the event the Closing³ fails to occur for any reason, Mar-Lees shall pay John Quinn, commencing on the date John Quinn ceases to be employed by Mar-Lees, continuing royalties equal to 45% of the [Northern Harvest] Profits (as hereinafter defined) on items sold which are not manufactured at a facility owned or leased by Mar-Lees, and 42% of the [Northern Harvest] Profits on items sold which are manufactured at a Mar-Lees facility.For purposes of this letter of intent, the term "[Northern Harvest] Profits" means the net profits on revenues from (i) former customers of [Northern Harvest], and (ii) business developed by John Quinn."

These provisions are the source of the present dispute.

On April 18, 2000, the parties amended and revised the agreement in various respects (amendment).Of relevance to this appeal is paragraph 2 of the amendment, in which the parties

"hereby acknowledge and agree that for purposes of paragraph 4.1[of the agreement] . . ., `former customers' are identified as follows:

"a.Demoulas Market Basket, its parent and/or affiliates;

"b.Royal Ahold's affiliates Stop & Shop (excepting `Bay Scallops'),<sup>4</sup> Bi-Lo, Giant-Landover, Giant-Carlisle (excepting `Bay Scallops'), and Tops Markets;

"c.Streamline, its parent and/or affiliates;

"d.The Hynes Convention Center and its concessionaire Aramark;

"e.Fenway Park concession operators and/or owners."

The parties further agreed that additional customers could be added in the future, either as "former customers" of Northern Harvest or as "business developed by John Quinn," thus making the plaintiff eligible for royalties on sales by Mar-Lees to such additional customers as well.⁵

By September, 2000, the parties had abandoned their plans to merge the respective companies' operations and to share ownership, and the plaintiff resigned as an employee of Mar-Lees.Efforts by the parties to renegotiate the agreement regarding payment of commissions to the plaintiff or Northern Harvest failed to generate a new written agreement (although Mar-Lees maintains that the parties arrived at an oral contract that replaced the agreement of April 5, 2000).See note 5, supra.On October 27, 2000, Mar-Lees terminated its arrangement with the plaintiff, effective October 31, 2000.On November 1, 2000, the plaintiff began working for Channel Fish Processing Company, a competitor of Mar-Lees.Mar-Lees continued to supply fresh sea scallops to Stop & Shop, realizing revenues from such sales that totaled $23,843,010 from the time of the plaintiff's departure to the time of trial.

The plaintiff's demand for continuing royalties on all sales of seafood products to Stop & Shop⁶ was rejected by Mar-Lees, which interpreted the agreement to entitle the plaintiff to royalties only on Mar-Lees's sales of packaged fish to Stop & Shop (meaning that royalties would be payable with respect to sales of what had been Northern Harvest products previously sold to Northern Harvest customers, but not payable on sales of other products, even though such sales were made to former Northern Harvest customers).This resulted in a refusal by Mar-Lees to pay royalties on its sales of sea scallops (not a former Northern Harvest product) to Stop & Shop, and this litigation followed.

In its appeal, Mar-Lees asserts that the judge erred in instructing the jury regarding the identification of former customers of Northern Harvest, asserting that the term was ambiguous and that it was for the jury to decide who "former customers" were for purposes of the payment of royalties.In support of the proposition, Mar-Lees points to testimony of the plaintiff that it contends constitutes binding admissions that rendered the challenged instruction erroneous.In addition, Mar-Lees argues that the judge erred in describing to the jury the nature of Mar-Lees's defenses and counterclaims, and that it was error to deny its motion for judgment notwithstanding the verdict or for a new trial.In his cross appeal, the plaintiff asserts that the judge abused his...