USCA1 Opinion
June 28, 1995 [NOT FOR PUBLICATION]
UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
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No. 94-2284
BRINKLEY & CO., INC.,
Plaintiff, Appellant,
v.
VINCENT T. MATTEUCCI, ET AL.,
Defendants, Appellees.
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APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Edward F. Harrington, U.S. District Judge]
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Selya, Cyr and Stahl,
Circuit Judges.
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Valeriano Diviacchi, with whom Diviacchi Law Office was on brief
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for appellant.
Harvey Weiner, with whom Michael P. Duffy and Peabody & Arnold
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were on brief for appellees Barber, Looney, Grahn, Synder, Levin,
Pisegna, Kelly, Farrell and Grossman.
Maria R. Durant, with whom Michael A. Collora and Dwyer & Collora
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were on brief for appellee Matteucci.
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Per Curiam. Plaintiff Brinkley & Co., Inc. ("Brinkley
Per Curiam.
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Co.") appeals from a district court judgment summarily dismissing
its complaint against Vincent Matteucci ("Matteucci"), former CEO
of Athena Management Co., Inc. ("Athena"), and various members of
the law firm of Looney & Grossman. As summary judgment was
proper, we affirm.
I
I
BACKGROUND1
BACKGROUND
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Athena was incorporated on August 28, 1984, for the
purpose of providing investment management services. Matteucci
served as its first president. Peter Brinkley, Brinkley Co.'s
principal shareholder, was hired by Athena in April 1987 and
eventually became president and CEO, although he was never a
shareholder.
Athena lacked financial strength from its inception.
By June 30, 1987, it had accumulated a $648,848 deficit and a
negative net worth. In September of 1988, Brinkley Co. extended
Athena an unsecured loan and obtained a $100,000 demand note in
return. At the end of the following fiscal year, Athena's net
worth was minus $799,588 and its financial position continued to
erode throughout the following year as well.
By September of 1989, Athena had lost seven of its nine
clients. Hanson Industries ("Hanson") and Nazareth Family Center
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1We relate the evidence in the light most favorable to
Brinkley Co., the party resisting summary judgment. Simon v.
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FDIC, 48 F.3d 53, 56 (1st Cir. 1995).
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2
("Nazareth") were its only remaining clients. On October 3,
1989, Peter Brinkley resigned and Matteucci resumed the role of
president. On October 12, Brinkley Co. demanded payment on its
$100,000 note. As payment was not forthcoming, Brinkley Co.
brought the instant action against Athena in the United States
District Court for the District of Massachusetts. Shortly
thereafter, Peter Brinkley resigned as a director of Athena.
On December 9, 1989, one Frank Griswold, a business
acquaintance of Matteucci, executed Articles of Incorporation
establishing Charles River Management Company, Inc. ("Charles
River"), a new investment management services company. At the
time, Griswold and Matteucci understood that Matteucci would not
be listed as a Charles River stockholder or incorporator, but
that he would become its majority shareholder on May 1, 1990.2
In November of 1989, Looney & Grossman undertook
Athena's representation in the Brinkley Co. action.3 After
extensive consultation, Matteucci instructed Looney & Grossman
not to defend the Brinkley Co. action against Athena on the
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$100,000 demand note. As a result, in due course default judg-
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2Matteucci's brief incorrectly asserts that there is no
evidence that he planned to join Charles River. See Matteucci
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Brief at n.13. In a letter dated May 30, 1991, Matteucci in-
formed Nazareth that "[d]ue to a prearranged agreement in place
with Frank [Griswold] at the time of incorporation, I became the
majority shareholder of Charles River Management on May 1, 1990."
3Brinkley Co. contends that Looney & Grossman became in-
volved during the fall of 1988. But though the record reflects
that Looney & Grossman billed Matteucci personally for legal
services during that time period, Brinkley Co. points to no
evidence that this representation had anything to do with Athena.
3
ment was entered against Athena.
On November 15, 1989, Matteucci presented two alterna-
tive proposals to Athena's board of directors. Under the first
proposal, Athena would be dissolved; the second called for its
complete recapitalization. Neither proposal was adopted and
Athena's financial position continued to worsen, so that by
November 30, 1989, it had a $969,176 negative net worth. By the
end of calendar year 1989, it had lost an additional $142,036.
On December 12, Athena was informed that Hanson, by far
the larger of Athena's two remaining clients, would reduce its
fee payments to Athena by 60% as of January 1, 1990, and that no
additional funds would be invested in Hanson's short-term pension
fund account with Athena. These actions by Hanson would reduce
Athena's projected gross income for the ensuing year by thirty-
seven percent.
Matteucci promptly called a stockholders' meeting for
January 3, 1990, to consider Athena's dissolution. The notice
discussed Athena's unmanageable debt and concluded as follows:
even if all the liabilities were forgiven, it
would still be impossible to continue since
Hanson Industries (our only major account),
which has been extremely generous to Athena,
has reduced our fees by 60% on the larger of
the two accounts that we manage for it. As a
result, we are unable, even on a minimum
basis, to meet the obligations of rent, tele-
phone, and salaries which are necessary to
keep Athena's doors open.
With seven-eighths of Athena's outstanding shares
represented, shareholders unanimously voted to liquidate. On
learning of the liquidation, the two remaining Athena clients
4
Hanson and Nazareth immediately terminated their investment
contracts. Matteucci arranged a sale of Athena's fixtures to
Charles River, and resigned from all offices with Athena.
On February 1, 1990, as previously arranged, Matteucci
joined Charles River. Shortly thereafter, and on their own
initiative, Hanson and Nazareth transferred their accounts to
Charles River. In May, as planned, Matteucci became the majority
stockholder in Charles River. Approximately one year later,
Looney & Grossman was retained to represent Charles River.
II
II
ANALYSIS
ANALYSIS
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A. The Looney & Grossman Defendants4
A. The Looney & Grossman Defendants4
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As a judgment creditor, Brinkley Co. seeks to reach and
apply Athena's putative cause of action for legal malpractice
against the Looney & Grossman defendants. See Mass. Gen. L. ch.
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214, 3(7) (permitting certain causes of action to be reached
and applied); Bethlehem Fabricators, Inc. v. H.D. Watts Co., 190
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N.E. 828, 833 (Mass. 1934) ("a cause of action which is not
assignable cannot be reached and applied under [Mass. Gen. L. ch.
214, 3(7)]"). There is no clear statement of Massachusetts law
on whether such a cause of action may be reached and applied, and
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4We review the summary judgment ruling de novo to determine
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whether 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.'" Simon, 48 F.3d at 56 (citations omitted). The parties
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agree that the substantive law of Massachusetts governs all
claims.
5
the decisions in other jurisdictions are mixed. The majority
view is that a legal malpractice claim cannot be assigned. See
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Continental Cas. Co. v. Pullman, Comley, Bradley & Reeves, 709 F.
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Supp. 44, 50 n.7 (D. Conn. 1989) (collecting cases), aff'd, 929
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F.2d 103 (2d Cir. 1991). We bypass this unsettled question of
Massachusetts law, because, as the district court correctly
noted, Athena would have had no viable malpractice claim against
the Looney & Grossman defendants in any event.
Brinkley Co. asserts that Athena had three bases for
asserting a malpractice claim. First, the Looney & Grossman
defendants failed to contest the action Brinkley Co. brought
against Athena. Second, during 1990 certain Looney & Grossman
defendants allegedly engaged in dual representation of Charles
River and Athena. Third, the Looney & Grossman defendants
allegedly failed to provide Athena's creditors with the required
bulk transfer notice under Mass. Gen. L. ch. 106, 6-102, in
connection with the sale of Athena's tangible assets. We briefly
address each contention in turn.
First, it is undisputed that Looney & Grossman was
instructed by Athena not to answer the Brinkley Co. complaint.
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See Fleet Nat'l Bank v. Anchor Media Television, Inc., 45 F.3d
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546, 558 (1st Cir. 1995) (party may not resort to intentional
self-contradiction to obtain unfair advantage). Second, there is
no record evidence whatsoever that any Looney & Grossman defen-
dant simultaneously represented Athena and Charles River. Third,
the Massachusetts bulk transfer law expressly applies only to
6
"those whose principal business is the sale of merchandise from
stock." Mass. Gen. L. ch. 106, 6-102(3). Athena sold no
merchandise from stock, hence was not subject to the bulk trans-
fer notice requirement.5
Summary judgment on Brinkley Co.'s civil conspiracy
claim was appropriate as well. It is essential to a civil
conspiracy claim under Massachusetts law that the alleged con-
spirators have intended harm to the plaintiff. Robitaille v.
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Morse, 186 N.E. 78, 80 (Mass. 1933). Brinkley Co. proffered no
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such evidence.
B. Matteucci
B. Matteucci
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Brinkley Co. alleges a breach of the fiduciary duty
Matteucci owed as an officer of Athena. The district court ruled
that Matteucci owed no fiduciary duty, since the corporate exis-
tence of Athena had been terminated before Matteucci first dis-
cussed with Griswold his plans to move over to Charles River with
Athena's last two clients, Hanson and Nazareth.6
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5Since the chapter 93A claim brought by Brinkley Co., see
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Mass. Gen. L. ch. 93A, 2 (unfair business practices), is based
on the same allegations as the Brinkley Co. malpractice claim, it
too fails.
6The corporate opportunity doctrine, on which the district
court rested its ruling, allows a fiduciary to take advantage of
a business opportunity of which the principal cannot avail
itself. However, "the corporate opportunity doctrine is a rule
of disclosure," Wartski v. Bedford, 926 F.2d 11, 19 (1st Cir.
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1991) (quoting In re Tufts Elecs., Inc., 746 F.2d 915, 917 (1st
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Cir. 1984)), which requires "a full and honest disclosure of all
relevant circumstances to permit a disinterested decision maker
to exercise its informed judgment." Id. (quoting Dynan v. Fritz,
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508 N.E.2d 1371, 1378 (Mass. 1987)). There is strong record
evidence that Matteucci failed to comply with this duty. Conse-
quently, we do not rely on the corporate opportunity doctrine.
7
Brinkley Co. contends on appeal that the district court
disregarded evidence that Matteucci breached his fiduciary duty
to Athena by arranging for the incorporation of Charles River
prior to the dissolution vote on Athena. It points to an affida-
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vit by an Athena shareholder, stating that he would have opposed
dissolution had he known of Matteucci's plans.
A corporate officer owes a fiduciary duty, Wartski v.
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Bedford, 926 F.2d 11, 13 (1st Cir. 1991) (applying Massachusetts
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law), to accord "the utmost good faith and loyalty" to the
corporation. Meehan v. Shaughnessy, 535 N.E.2d 1255, 1263 (Mass.
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1989) (citations omitted). Yet this fiduciary duty is not
breached simply by "secretly setting up a new firm during [the
fiduciary's] tenure . . . 'provided that in the course of such
arrangements [the fiduciary] do[es] not otherwise act in viola-
tion of [his] fiduciary duties.'" Id. at 1264 (quoting Chelsea
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Indus. v. Gaffney, 449 N.E.2d 320, 326 (Mass. 1983)). Rather,
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the corporate officer's duty is to refrain from "actively compet-
ing with his employer during the tenure of his employment."
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Chelsea Indus., 449 N.E.2d at 326.
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The scope of a corporate officer's duty not to compete
was outlined in Meehan, where law partners in Parker, Coulter,
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Dailey & White ("Parker Coulter") planned and structured a
competing law firm while still partners in Parker Coulter.
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See Simon, 48 F.3d at 57 n.1 (court of appeals may affirm "on any
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ground supported in the record even if the issue was not pleaded,
tried or otherwise referred to in the proceeding below.") (cita-
tions omitted).
8
Meehan, 535 N.E.2d at 1257-59. The SJC nonetheless held that
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there had been no breach of their fiduciary duty. Id. at 1264.
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The SJC further held that the fact that the defendant partners
had induced Parker Coulter employees to join the breakaway firm
did not suffice to establish liability in the absence of "specif-
ic losses resulting from this claimed breach." Id. at 1264 n.4.
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At the same time, the SJC held that the defendant partners'
secret solicitation of Parker Coulter's clients was an actionable
breach of their fiduciary duty. Id. at 1265. The latter showing
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was not made in the instant case. There is no record
evidence that Matteucci informed either Hanson or Nazareth of the
impending move to Charles River until after Athena had been
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dissolved and Matteucci was no longer in its employ. Moreover,
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there is not a scintilla of evidence supporting Brinkley Co.'s
allegation that Athena might yet have been transformed into a
viable concern. On the contrary, Athena's debt exceeded its
assets by almost a million dollars and it had sustained serious
operating losses during its last three fiscal years. Due to the
projected decline in gross income resulting from Hanson's an-
nounced cutbacks, Athena's future prospects were grim to say the
least. Thus, Athena's vote of dissolution and Matteucci's
resignation were anything but the untoward developments posited
by Brinkley Co.
Accordingly, the district court judgment is affirmed.
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Double costs are awarded to the Looney & Grossman defendants
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only, pursuant to Fed. R. App. P. 38.
9
