341 F.Supp.2d 51 (2004) | Cited 3 times | D. Massachusetts | October 27, 2004


This action arises from an Agreement of Guaranty executed bydefendant Affirmative Equities Company, L.P. (AEC) in favor ofthe plaintiff, Charles Lawson, as the Trustee of threeMassachusetts Trusts that guaranteed a Letter of Credit extendedto AEC by the Republic National Bank of New York, later known asHSBC Bank USA (HSBC). The Letter of Credit was intended tofinance the renovation of The Patrick Henry Hotel (the Hotel), aproperty in Roanoke, Virginia, owned by AEC and its affiliates .Lawson's Second Amended Complaint alleges breach of contract,fraud and deceit, breach of the covenant of good faith and fairdealing, unjust enrichment, negligent misrepresentation,promissory and equitable estoppel, violations of theMassachusetts Consumer Protection Act, and breach of fiduciary duty (as against defendant Lawrence Bishop).1 The issuesare complicated by the bewildering web of legal relationshipsthat connect the Patrick Henry Hotel defendants. Thesedefendants, Affirmative Equities, Inc. (AEI), Patrick Henry HotelAssociates, L.P. (PHHA), Patrick Henry Hotel InvestmentAssociates (PHHIA), and Andrew D. Jubelt, joined by Bishop, moveto dismiss the Second Amended Complaint, principally on theground that the court lacks personal jurisdiction. The PatrickHenry Hotel defendants also claim that AEC (which is insolvent)is the only entity liable on the Agreement of Guaranty.2


The following facts, viewed in the light most favorable to theplaintiff, are drawn for the most part from the Second AmendedComplaint, supplemented by those facts that either appear not tobe in dispute, or are among the facts that were developed duringthe jurisdictional discovery authorized by the court. AEC is aDelaware limited partnership.3 AEC is the general partnerof PHHIA, a New York general partnership, which in turn is thegeneral partner of PHHA, a Delaware limited partnership. PHHA isthe record owner of The Patrick Henry Hotel. AEI, a New Yorkcorporation, is the general partner of AEC. Jubelt is the soleofficer and shareholder of AEI. Jubelt owns and manages PatrickHenry Hotel Investors, Inc. (PHHI), which has a 99 percentownership interest in PHHIA. Jubelt also owns 75 percent of AEC'sone percent general partner's interest in PHHIA. Jubelt and Bishop constitute the board of directors of AEI, while Bishopalso serves as a director of AEC. Until the summer of 2001,Bishop was a part owner and an investment advisor at GraySeifert, a New York capital management firm. Lawson and theTrusts had become clients of Bishop in 1988.

According to the Complaint, Bishop regularly financed theactivities of AEC and Jubelt with client funds in the custody ofGray Seifert.

When Jubelt asked Bishop for money, defendant Bishop would cause those Gray Seifert clients' funds to be transferred to AEC, purportedly as an investment in, or loan to, AEC or one of its projects or affiliates. . . . AEC, with Bishop's knowledge, used those funds, in whole or in part, to pay for AEC operating expenses, including the payment of substantial salaries and benefits to, inter alia, defendant Jubelt.Second Amended Complaint ¶ 12. In 1993, defendants AEI, AEC,PHHA, PHHIA and Jubelt sought a $2,500,000 Letter of Credit fromHSBC. The requested funds were to be advanced to PHHIA and PHHA,ostensibly to pay for the remodeling of the Hotel. HSBC refusedto issue the Letter of Credit without a guaranty from a thirdparty unaffiliated with the defendants. As a result, the PatrickHenry Hotel defendants, through Bishop, contacted Lawson tosolicit a guaranty from the Trusts. Jubelt and Bishop proposedthat Lawson pledge Trust assets to secure the Letter of Credit,in exchange for the payment by PHHA and PHHIA of commissions andmonthly service fees (interest) to the Trusts.

As alleged in the Complaint, the proposal was embellished by anumber of representations that later proved false. Jubelt andBishop told Lawson that: (1) the Letter of Credit and the Trusts'guarantees would be in force for only a few months; (2) that theLetter of Credit would be secured by The Patrick Henry Hotel andthe assets of AEC and its affiliates; (3) that AEC and AEI hadsufficient assets to pay off the Letter of Credit when it came due; (4) that PHHA would maintain an escrow account witha balance sufficient at all times to pay three months of theinterest owing to HSBC; and (5) that AEC would provide Lawson(and the Trusts) with an enforceable Agreement of Guaranty thatwould ensure the payment of all sums drawn against the Letter ofCredit. On July 13, 1993, PHHA executed a Letter Agreement, whichwas forwarded to Lawson in Massachusetts. See Second AmendedComplaint, Ex. A. In the Letter Agreement, PHHA promised: (1) topay each of the Trusts the sum of $6,000 upon the issuance of theLetter of Credit; (2) to use its best efforts to find substitutefinancing within six weeks (thereby discharging the Trusts fromthe guarantees); (3) to pay each Trust the sum of $25,000 uponthe receipt of refinancing; and (4) in the event that refinancingwas not in place by August 31, 1993, to pay each Trust, on thefirst day of each succeeding month in which refinancing had notbeen obtained, the sum of $2,000. The Letter Agreement was signedon behalf of PHHA by an officer of its general partner, PHHIA.

Immediately after HSBC issued the Letter of Credit, the full$2,500,000 was drawn down by the defendants. In mid-1994, aftermaking sporadic interest payments to the Trusts with checkssigned by the Chief Financial Officer (CFO) of AEC and PHHA, thePatrick Henry Hotel defendants ceased making payments. Thedefendants persuaded HSBC to grant a series of extensions on therepayment of the Letter of Credit, and in 1997, agreed with HSBCto convert the Letter of Credit into a Demand Note. Thedefendants also sought funding from third party sources,including Titan Management, L.P. (Titan), to pay off a Departmentof Housing and Urban Development (HUD) mortgage on the Hotel.(Lawson had not been told of the prior mortgage nor that HUD hadtwice threatened to foreclose on the Hotel because the mortgagewas in arrears). AEC from time to time revised the Agreement of Guaranty toreflect the accrued interest owed to the Trusts. The last suchrevision occurred in July of 1998.4 Lawson alleges thatwhen Jubelt signed the revised Agreement of Guaranty on July 10,1998, he knew, but fraudulently concealed the fact that AEC, AEI,PHHA, and PHHIA were insolvent. Bishop, for his part, told Lawsonthat he "should not be concerned with the payments owed to thetrusts since the hotel will probably be sold by the end of thisyear. At that time, accrued interest would be paid to thetrusts." Third Pauly Aff., Ex. 5.

In August of 2001, Lawson received a letter from Gray Seifertannouncing Bishop's resignation from the firm. The followingmonth, Lawson was told by Gray Seifert that it was no longeroffering "private investment deals," and that it was in theprocess of reviewing its underperforming private equity holdings.(Lawson believes that Gray Seifert's sudden retrenchment wasprompted by the faltering investments Bishop had placed in AECand its affiliates). In early October of 2001, Jubelt and Bishopseparately assured Lawson that AEC had sufficient assets to coverthe Agreement of Guaranty and to repay the Demand Note upon theimpending sale of The Patrick Henry Hotel. Lawson asked Jubelt toforward copies of the closing documents to verify that theinterest and fees owed to the Trusts would be paid from theproceeds. Lawson never received the requested documents.

On November 30, 2001, HSBC sent defendants AEI, AEC, PHHA,PHHIA, and Jubelt a letter demanding payment in full of theprincipal and interest due under the Demand Note. Lawsonimmediately wrote to Jubelt and AEC invoking the Trusts' rightsunder the Agreement of Guaranty. Defendants responded byinsisting that the Trusts assume the interest payments on the Demand Note. Lawson in turn sought awritten acknowledgment from the defendants that the Demand Note,and the accrued interest and fees, would be paid in full on thesale of The Patrick Henry Hotel (ostensibly to occur on February28, 2002). The Patrick Henry Hotel defendants refused to sign theacknowledgment. However, as late as December of 2001, Bishopreassured Lawson that the February date for the sale of the Hotelwas firm, and that the Demand Note and the interest and fees owedto the Trusts would be paid in full.5

On January 3, 2002, Jubelt and John Hrvatin, the CFO of AEC andPHHA, met with Lawson in Boston. During the meeting, Jubelt andHrvatin informed Lawson that AEC was having difficulty meetingits day-to-day financial obligations, and that The Patrick HenryHotel had been operating at a loss for almost ten years. Theyprovided Lawson with a document entitled "Projected Sources andUses of Funds," which showed that of the $11,775,000 expectedupon the sale of the Hotel, only $1,203,918 had been allocatedtoward the repayment of the $2,500,000 due under the Demand Note.Moreover, of that $1,203,918, only a sum of between $156,633 and$470,411 was to be paid in cash, while the remainder was to bepaid in "residual" unsecured bonds, which Jubelt and Hrvatinacknowledged HSBC would not accept. Jubelt and Hrvatin toldLawson that they fully expected (and were counting upon) HSBC tomove against the assets of the Trusts to satisfy any deficiency.Jubelt also told Lawson that the previously undisclosed HUD mortgage had prohibited the placement of a second mortgage on ThePatrick Henry Hotel, and that, consequently, the defendants hadtaken no steps to secure the HSBC loan.

Following the January 2002 meeting, Jubelt and Hrvatin toldLawson "that AEC [could not] honor the AEC Guaranty, and providedLawson with an updated `Projected Sources and Uses of Funds'chart showing that, as of September 30, 2002, the amount of anyproceeds from a sale of The Patrick Henry Hotel that thedefendants conceivably might allocate toward repaying the debtevidenced by the Note ha[d] decreased dramatically from theamount shown in the chart presented at the January 3, 2002meeting." Second Amended Complaint ¶ 36. Jubelt later threatenedthat the Patrick Henry Hotel defendants would stop interestpayments on the Demand Note, thereby causing HSBC to foreclose onthe assets of the Trusts, if Lawson persisted in attempting toenforce the Trusts' rights under the Agreement ofGuaranty.6

In November of 2002, after defendants removed the Complaintfrom the Middlesex Superior Court, Lawson sought an injunctionprohibiting the defendants from selling, conveying, or furtherencumbering The Patrick Henry Hotel without the prior approval ofthe court. On November 22, 2002, the court granted the requestedrelief. Lawson maintains that in direct contravention of thecourt's Order, defendants have placed an additional $374,201 insecured debt and more than $1,115,030 in unsecured debt on theHotel (increasing the debt burden with interest by some$3,606,131) since the injunction entered.7 On June 16, 2004, the court heard argument on the defendants'motions to dismiss. At the conclusion of the hearing, the courtmade tentative rulings on the motions, but gave Lawson anopportunity to amend the Complaint to include allegations basedon information learned at a post-pleadings deposition of Bishop.On July 6, 2004, Lawson filed the Second Amended Complaint. OnAugust 18, 2004, Bishop filed a renewed motion to dismiss. Theremaining defendants rely on their prior briefing of theircompanion motion.


Personal Jurisdiction

Each of the defendants asserts that this court lacks personaljurisdiction. As a rule, a court should determine whether ArticleIII jurisdiction exists before reaching the merits of aplaintiff's claim. Steel Co. v. Citizens for a Better Env't.,523 U.S. 83, 88-89 (1998). If challenged, the burden is on theplaintiff to show a prima facie case authorizing personaljurisdiction. U.S.S. Yachts, Inc. v. Ocean Yachts, Inc.,894 F.2d 9, 11 (1st Cir. 1990). Mere reliance on the allegations ofthe pleadings is not enough. Chlebda v. H.E. Fortna & Brother,Inc., 609 F.2d 1022, 1024 (1st Cir. 1979). But, "[i]f theplaintiff makes a prima facie showing of jurisdiction supportedby specific facts alleged in the pleadings, affidavits, andexhibits, its burden is met."8 Ealing Corp. v. HarrodsLtd, 790 F.2d 978, 979 (1st Cir. 1986). Under the prima facietest "a district court does not act as a factfinder; to thecontrary, it ascertains only whether the facts duly proffered,fully credited, support the exercise of personal jurisdiction."Rodriguez v. Fullerton Tires Corp., 115 F.3d 81, 84 (1st Cir.1997). "In its simplest formulation, in personam jurisdictionrelates to the power of a court over a defendant. It is of twovarieties, general and specific. General personal jurisdiction . . .is the power of a forum-based court . . . `which may beasserted in connection with suits not directly founded on [thatdefendant's] forum-based conduct. . . .'" Pritzker v. Yari,42 F.3d 53, 60 (1st Cir. 1994), quoting Donatelli v. NationalHockey League, 893 F.2d 459, 462-463 (1st Cir. 1990). Theassertion of general jurisdiction comports with due process when(1) there are "continuous and systematic general businesscontacts" between the foreign defendant and the forum, and (2)the exercise of jurisdiction is reasonable under the so-calledGestalt factors. United States v. Swiss American Bank, Ltd.,274 F.3d 610, 618 (1st Cir. 2001). "Specific personaljurisdiction, by contrast, is narrower in scope and may only berelied upon `where the cause of action arises directly out of, orrelates to, the defendant's forum-based contacts.'" Pritzker,42 F.3d at 60. "The proper exercise of specific in personamjurisdiction hinges on satisfaction of two requirements: first,that the forum in which the federal district court sits has along-arm statute that purports to grant jurisdiction over thedefendant; and second, that the exercise of jurisdiction pursuantto that statute comports with the strictures of the [Due ProcessClause of the] Constitution."9 Id.

The Fourteenth Amendment's concern for fundamental fairness isreflected in the requirement that there be certain "minimumcontacts" between the defendant and the forum state in order for specific jurisdiction to exist.10 The"minimum contacts" test is in three parts. "First, the claimunderlying the litigation must directly arise out of, or relateto, the defendant's forum-state activities. Second, thedefendant's in-state contacts must represent a purposefulavailment of the privilege of conducting activities in the forumstate, thereby invoking the benefits and protections of thatstate's laws and making the defendant's involuntary presencebefore the state's courts foreseeable. Third, the exercise ofjurisdiction must, in light of the Gestalt factors, bereasonable." United Elec. Workers v. 163 Pleasant St. Corp.,960 F.2d 1080, 1088 (1st Cir. 1992).

"[T]he relatedness test is, relatively speaking, a flexible,relaxed standard." Pritzker, 42 F.3d at 61. See CambridgeLiterary Properties, 295 F.3d at 63 ("relatedness" is a broaderconcept than "arising from"). However, "[t]he relatednessrequirement is not met merely because a plaintiff's cause ofaction arose out of the general relationship between the parties;rather, the action must directly arise out of the specificcontacts between the defendant and the forum state." Sawtelle v.Farrell, 70 F.3d 1381, 1389 (1st Cir. 1995) (the mere existenceof an agency relationship, without more, does not conferjurisdiction). Moreover, contract and tort claims are subject todiffering analyses. "[I]f a contract claim, our stereotypicalinquiry tends to ask whether the defendant's forum-basedactivities are `instrumental in the formation of the contract,' . . . if a tortclaim, we customarily look to whether the plaintiff hasestablished `cause in fact' (i.e., the injury would not haveoccurred `but for' the defendant's forum-state activity) andlegal cause (i.e., the defendant's in-state conduct gave birth tothe cause of action.)." Massachusetts Sch. of Law at Andover,Inc. v. American Bar Ass'n, 142 F.3d 26, 35 (1st Cir. 1998).See also Phillips Exeter Academy v. Howard Phillips Fund,Inc., 196 F.3d 284, 289 (1st Cir. 1999) (commending the districtcourt's decision to analyze jurisdiction over the contract andtort claims separately).

In determining whether a defendant has "purposefully availed"itself of the privilege of conducting activity in the forumstate, a court is to focus on the nature of the contact with theforum and avoid playing a "numbers game" — a single, meaningfulcontact with the forum, even by means of a virtual presence, "canfill the bill." Pritzker, 42 F.3d at 61 (citing McGee v.International Life Ins. Co., 355 U.S. 220 (1957), for theproposition that a contractual relationship may be sufficient toconfer jurisdiction even where the defendant does not physicallyenter the forum). See also Daynard v. Ness, Motley,Loadholt, Richardson & Poole, P.A., 290 F.3d 42, 62 (1st Cir.2002) (telephone, e-mail, and fax communications directed to theforum state in contemplation of contractual services being inpart performed in that forum are evidence of jurisdictionalcontact).

The third and final prong of the test requires consideration ofthe Gestalt factors. These test the comportment of an assertionof jurisdiction with traditional notions of fair play andsubstantial justice. The factors include "(1) the defendant'sburden of appearing, (2) the forum state's interest inadjudicating the dispute, (3) the plaintiff's interest inobtaining convenient and effective relief, (4) the judicialsystem's interest in obtaining the most effective resolution of the controversy, and (5) the commoninterests of all sovereigns in promoting substantive socialpolicies." 163 Pleasant St. Corp., 960 F.2d at 1088.

Bishop acknowledges that his initial contacts with Lawsonregarding The Patrick Henry Hotel took place in Massachusetts,but maintains that "all subsequent substantive negotiationsconcerning the guarantees by the Trusts of the Letter of Creditand the guaranty of the Trusts' obligations pursuant to theTrusts' Guarantees were conducted between [Lawson] and AndrewJubelt or other employees or agents of AEC, AEI, PHHIA or PHHA."Second Bishop Aff. ¶ 4. But see Cambridge LiteraryProperties, 295 F.3d at 66 ("[F]or purposes of specificjurisdiction, contacts should be judged when the cause of actionarose, regardless of a later lessening or withdrawal."). Lawsonvigorously disputes Bishop's attempts to minimize his contactswith Massachusetts. According to Lawson, Bishop "solicited theguarantees from the Trusts in Massachusetts, [and] remaineddirectly in the middle of the negotiation and post-transactioncommunications with [Lawson]." Opposition to Bishop's Motion toDismiss, at 4.

By Lawson's account, beginning in 1994 and continuing through2001, Bishop repeatedly told him (in Massachusetts) that "theHSBC Guarantees were `a great deal for the Trusts,' and that theTrusts were not at any risk, that he (Bishop) was on the Board ofDirectors of AEC and AEI and had personal knowledge that thosedefendants had sufficient financial assets to satisfy allobligations under the AEC Guaranty." Id. at 5. On numerousoccasions between 1999 and 2001, Bishop assured Lawson (inMassachusetts) that the sale of The Patrick Henry Hotel wasimminent, and that the Demand Note would be paid off in full atthe closing. Id. Jubelt, for his part, admits meeting withLawson in Massachusetts in late 2001 and the beginning of 2002 todiscuss the status of The Patrick Henry Hotel, the Agreement of Guaranty, and the Demand Note, although he claimsthat the meetings were convened at Lawson's insistence to allayhis "expressed concerns about PHHA."11

The existence of personal jurisdiction insofar as it involvesLawson's contractual claims requires little by way of extendeddiscussion. Bishop's solicitation of Lawson in Massachusetts onbehalf of the Patrick Henry Hotel defendants was theprecipitating event that led to the parties' contractualentanglements.12 The contract involving the Letter ofCredit was formed in Massachusetts on the execution of theguarantees, while the Letter Agreement promising the payment ofinterest and fees, and the documents and other communicationsrelated to the Patrick Henry Hotel defendants' performance (suchas it was), were directed to Lawson in Massachusetts. Finally,notice of the defendants' intention to breach their contractualobligations to the Trusts was delivered to Lawson by Jubelt andHrvatin at a meeting held in Boston.13 The contractualcontacts with the Massachusetts forum by Bishop and the Patrick Henry Hotel defendants farexceeded those found sufficient to establish personaljurisdiction in Daynard, 290 F.3d at 61-63.14

The tort-based fraud claims present a more complex issue. Theallegations of fraud fall into two clusters. The first involvesthe false representations that were made to induce the Trusts toenter into the guarantee arrangement. These include therepresentations that the guarantees would be of limited duration,that the Letter of Credit would be fully secured, that there wasno appreciable risk of loss in the transaction, and that thePatrick Henry Hotel defendants had sufficient assets to meet theobligations of the Agreement of Guaranty. The second clusterinvolves both affirmative misrepresentations and acts ofconcealment undertaken after the contract was formed in order toinduce Lawson to forgo any attempt to enforce the Trusts'contractual rights. These include the defendants' positiveassurances that the Trusts were fully secured by the assets ofthe Patrick Henry Hotel defendants (when in fact most of theseentities were insolvent), and the concealment of the fact thatthe Hotel was encumbered by prior mortgages.

While a number of the alleged fraudulent acts and omissionsoccurred outside the Commonwealth, Massachusetts applies anexpansive "but for" train-of-events test to the assertion ofjurisdiction over tort claims that arise out of a contractualrelationship. See Tatro, 416 Mass. at 770-771.15 "Logically, there is noreason why a tort cannot grow out of a contractual contact. . . .[T]he contractual contact is a `but for' causative factor for thetort since it [brings] the parties within tortious `strikingdistance' of each other." Id. at 770, quoting Prejean v.Sonatrach, Inc., 652 F.2d 1260, 1270 n. 21 (5th Cir. 1981). Asthe court's personal jurisdiction in this diversity action isgoverned by the Supreme Judicial Court's interpretation of theMassachusetts long-arm statute, under the "but for" test,jurisdiction attaches to both the contract and the related tortclaims.16

The first two prongs of the personal jurisdiction test(relatedness and purposeful availment) having been satisfied, theGestalt factors come into play. Defendants, who are for the mostpart sophisticated business entities with real estate investmentsin a number of states, point to no "special" or "unusual" burdenin defending the case in Massachusetts, nor is there any evidence that the suit was brought for purposesof harassment. Pritzker, 42 F.3d at 64; Ticketmaster-New York,Inc. v. Alioto, 26 F.3d 201, 211 (1st Cir. 1994). With respectto the second factor, Massachusetts has a significant interest inobtaining jurisdiction over non-resident defendants whose conductcauses injury to its citizens, an interest at least as compellingas that of a sovereign concerned with the rights of its citizenscalled to defend a lawsuit in a foreign forum. Cf.Foster-Miller, Inc. v. Babcock & Wilcox Canada, 46 F.3d 138,151 (1st Cir. 1995) ("The purpose of the inquiry is not tocompare the forum's interest to that of some otherjurisdiction, but to determine the extent to which the forumhas an interest."). Lawson's interest in obtaining effectiverelief is obvious, and his choice of Massachusetts as the forumin which to seek relief deserves deference. Id. The fourthfactor, the judicial system's interest in obtaining the mostefficacious resolution of the controversy, counsels against thepiecemeal litigation that would result if the contract and tortclaims were to be severed. Pritzker, 42 F.3d at 63-64. Andfinally, with respect to substantive social polices,Massachusetts has a substantial interest in redressing harmsinflicted on its citizens by out-of-state defendants as well asin providing a convenient forum in which its citizens may seekrelief. See Nowack, 94 F.3d at 719. On balance, the Gestaltfactors favor a Massachusetts forum for the trial and resolutionof all claims.

Breach of Contract

A motion to dismiss under Rule 12(b)(6) must be denied "unlessit appears to a certainty that the plaintiff would be unable torecover under any set of facts." Roma Construction Co. v.aRusso, 96 F.3d 566, 569 (1st Cir. 1996). Count I of the SecondAmended Complaint asserts a claim for breach of contract,alleging that the Patrick Henry Hotel defendants have "failed tomake the agreed upon payments of interest or fees . . . and have breached the AEC Guaranty." Defendants' motion to dismissthis count is premised on the argument that because AEC was theonly signatory to the Agreement of Guaranty, it is the onlyentity properly named in the breach of contract claim. Moreover,defendants maintain that because the 1998 revised Agreement ofGuaranty refers only to the "accrual" of interest, it "does notprovide any deadline for the payment of accrued interest andreflects that interest was not currently due, but instead wouldcontinue to accrue." Patrick Henry Hotel Defendant's Memorandum,at 5. Although the thought is not further developed, the apparentsuggestion is that the Agreement of Guaranty does not require theactual payment of interest so long as AEC is willing toacknowledge the amount that (at any given time) is due and owing.

There are two significant defects in defendants' argument.Putting aside the reluctance of a court to construe a contract soas to deprive a party of its share of the expected benefits,defendants ignore the July 13, 1993 Letter Agreement, whichspecifically undertook to pay interest, beginning on September 1,1993, "and on the first day of each month thereafter," to theTrusts. The second and related flaw stems from defendants'failure to recognize that the interlocking nature of the variousPatrick Henry partnerships subjects each of the Patrick HenryHotel defendants to liability for the acts and omissions of theothers.17 Under the law of New York and Delaware, the states in which thePatrick Henry partnerships are registered, as well as under thelaw of Massachusetts, a partnership is liable for, and bound by,the acts and omissions of its partners. See Del. Code Ann. Tit.6, § 15-305(a) ("A partnership is liable for loss or injurycaused to a person, or for a penalty incurred, as a result of awrongful act or omission, or other actionable conduct, of apartner acting in the ordinary course of business of thepartnership or with authority of the partnership."); id. §15-306(a) ("[P]artners are liable jointly and severally for allobligations of the partnership."). See also Great LakesChem. Corp. v. Monsanto Co., 96 F. Supp. 2d 376, 391 (D. Del.2000) ("General partners . . . are liable jointly and severallyfor the partnership."). Similarly, New York law states that theliability of partners for partnership contracts is joint andseveral; each partner is liable for the whole amount of the debtof the partnership, and not merely his or her proportionateshare.18 See McKinney's Partnership Law § 25; Midwood Dev. Corp. v. K 12th Assocs.,537 N.Y.S.2d 237, 239 (1989). The law is similar with respect to tortliability.

Where, by any wrongful act or omission of any partner acting in the ordinary course of the business of the partnership, or with the authority of his copartners, loss or injury is caused to any person, not being a partner in the partnership, or any penalty is incurred, the partnership is liable therefor to the same extent as the partner so acting or omitting to act.McKinney's Partnership Law § 24. See also McKinney'sBusiness Corp. Law § 1505(a) ("Each shareholder, employee oragent of a professional service corporation shall be personallyand fully liable and accountable for any negligent or wrongfulact or misconduct committed by him or by any person under hisdirect supervision and control while rendering professionalservices on behalf of such corporation."). Where there areallegations of insolvency, the New York courts have held thatindividual partners and stockholders are proper parties to thelitigation. See St. James Plaza v. Notey, 560 N.Y.S.2d 672,673 (1990).19

There is a reciprocal lapse in the plaintiff's theory of thecase, which assumes that the Patrick Henry Hotel defendants arepresently liable for breaches of both the Letter Agreement andthe Agreement of Guaranty. With respect to the Agreement ofGuaranty, plaintiff can point to no damages accruing from thedefendants' threat to walk away from AEC's obligations. Hence,there is (as yet) no actual case or controversy involving the Agreement of Guaranty, only the anticipation of a breach (if andwhen HSBC moves against the assets of the Trusts). Massachusettsdoes not recognize (outside of a UCC context) a cause of actionfor a renunciation or repudiation of a contract before a party'sperformance comes due. See Thermo Electron Corp. v. SchiavoneConstruction Co., 958 F.2d 1158, 1164 (1st Cir. 1992). Seealso Cavanagh v. Cavanagh, 33 Mass. App. Ct. 240, 243-244 &n. 6 (1992) (noting a few exceptions, mostly equitable, that arenot applicable here). While New York law is less rigid in thisregard, New York does not recognize an action for theanticipatory breach of an executory contract for the payment ofmoney. See Scherer v. Equitable Life Assurance Society ofU.S., 190 F. Supp. 2d 629, 632-633 (S.D.N.Y. 2002), rev'd onother grounds, 347 F.3d 394 (2nd Cir. 2003). See alsoStuart Leventhal, Fzus, Inc. v. Franzus Company, Inc., 1988 WL132868 (S.D.N.Y.).20

Covenant of Good Faith and Fair Dealing

Count III of the Second Amended Complaint alleges a breach ofthe covenant of good faith and fair dealing. "Every contractimplies good faith and fair dealing between the parties to it."Warner Ins. Co. v. Commissioner of Ins., 406 Mass. 354, 362 n.9 (1990), quoting Kerrigan v. Boston, 361 Mass. 24, 33 (1972).Under the covenant "neither party shall do anything that willhave the effect of destroying or injuring the right of the otherparty to receive the fruits of the contract." Anthony's PierFour, Inc. v. HBC Associates, 411 Mass. 451, 471-472 (1991).Want of good faith "carries an implication of a dishonestpurpose, conscious doing of wrong, or breach of a duty throughmotive of self-interest or ill will." Hartford Acc. & IndemnityCo. v. Millis Roofing & Sheet Metal, Inc.,11 Mass. App. Ct. 998, 999-1000 (1981); Schwanbeck v. Federal Mogul Corp.,31 Mass. App. Ct. 390, 404 (1991) (same), rev'd on other grounds,412 Mass. 703 (1992). While a simple breach of contract is unlikelyto be found to violate the covenant, Nagel v. Provident Mut.Life Ins. Co., 51 Mass. App. Ct. 763, 768-769 (2001), Jubelt'sthreat that the Patrick Henry Hotel defendants would cause HSBCto move against the Trusts' assets if Lawson persisted in hisattempts to assert the contractual rights of the Trusts under theLetter Agreement, is as fitting an example as one could imagineof the type of conduct that the covenant of good faith and fairdealing is intended to deter.

Unjust Enrichment

Lawson's alternative theory of unjust enrichment (Count IV)deserves but passing mention. To satisfy the five elements ofunjust enrichment, a plaintiff must show "(1) an enrichment, (2)an impoverishment, (3) a relation between the enrichment and theimpoverishment, (4) the absence of justification and (5) theabsence of a remedy provided by law." LaSalle Nat'l Bank v.Perelman, 82 F. Supp. 2d 279, 294-295 (D. Del. 2000), citingJackson Nat'l Life Ins. Co. v. Kennedy, 741 A.2d 377, 393 (Del.Ch. 1999). While the doctrine does not require a contractual orfiduciary relationship between the parties as a prerequisite ofsuit, Greenwald v. Chase Manhattan Mortg. Corp., 241 F.3d 76,78 n. 1 (1st Cir. 2001), where a contract governs the parties'relationship, it provides the measure of the plaintiff's rights.McKesson HBOC, Inc. v. New York State Common Retirement Fund,Inc., 339 F.3d 1087, 1091 (9th Cir. 2003). As Lawson has anadequate remedy at law (money damages) against the Patrick Henry Hotel defendants for anyalleged breach of the Letter Agreement, the claim of unjustenrichment is superfluous.21

Fraud and Deceit

In Count II of the Second Amended Complaint, Lawson allegesthat the defendants made knowing false representations,22and that he justifiably relied on these representations to thedetriment of the Trusts. Second Amended Complaint ¶ 42. Toestablish a claim of fraud, a plaintiff must show "that thedefendant made a false representation of a material fact withknowledge of its falsity for the purpose of inducing theplaintiff to act thereon, and that the plaintiff relied upon therepresentation as true and acted upon it to his damage." Dancav. Taunton Sav. Bank, 385 Mass. 1, 8 (1982), quoting BarrettAssocs. v. Aronson, 346 Mass. 150, 152 (1963). A statement of apromissory or predictive nature is actionable if it can be shownthat the maker never intended to carry out the promise or knewthat the prediction was false when it was made. People v.Ashley, 42 Cal.2d 246, 262-264 (1954) (Traynor, J.); McEvoyTravel Bureau, Inc. v. Norton Co., 408 Mass. 704, 709-710(1990); Commonwealth v. Lepper, 60 Mass. App. Ct. 36, 44(2003). A statement of opinion may also be actionable where the maker's knowledge of the subjectmatter is so superior that a reasonable recipient wouldunderstand the opinion as an assertion of fact. Stolzoff v.Waste Systems International, Inc., 58 Mass. App. Ct. 747, 759(2003). The statements, among others, that the Patrick HenryHotel defendants intended to secure the Letter of Credit with amortgage on the Hotel and with their own assets, that theseentities had sufficient funds to satisfy the obligations of theAgreement of Guaranty, and that the sale of the Hotel wouldgenerate a sufficient surplus to pay off the Demand Note, couldbe found by a trier of fact to have been false and to have beenknown as such by the defendants when the statements were made.

Fraud is a concept which by "universal recognition . . . is tobe construed very broadly." 2 Sand Siffert, Loughlin & Reiss,Modern Federal Jury Instructions ¶ 44.01, at 44-11 (2003). "Theterm `false or fraudulent pretenses' means any false statementsor assertions that concern a material aspect of the matter inquestion, that were either known to be untrue when made or madewith reckless indifference to their truth and that were made withthe intent to defraud. They include actual, direct falsestatements as well as half-truths and the knowing concealment offacts." First Circuit Pattern Jury Instructions: Criminal §4.12 (1998). See also Beck v. Prupis, 162 F.3d 1090, 1096(11th Cir. 1998) ("[M]aterial omissions can be the basis for aclaim of fraud if they are intended to create a fraudulentrepresentation."). In this vein, the failure of the Patrick HenryHotel defendants to disclose the existence of the priorencumbrances on the Hotel (which made it impossible for them tokeep their promise to secure the Letter of Credit by pledging theHotel as collateral) could be found by a trier of fact to constitute awillful deceit. See Commonwealth v. Bannon, 254 Mass. 320,323 (1926).23

Promissory and Equitable Estoppel

Counts VI and Count VII of the Second Amended Complaint pleadpromissory and equitable estoppel. These are two differenttheories of law. Equitable estoppel involves reliance onmisrepresentations of past or present facts; promissory estoppelentails detrimental reliance on statements of future intent.See Boylston Development Group, Inc. v. 22 Boylston StreetCorp., 412 Mass. 531, 543 n. 17 (1992). The inclusion of thesetheories in the Second Amended Complaint is a redundancy. Theestoppel doctrine is based on legal concepts antedating themodern doctrine of consideration. These concepts permit theequitable enforcement of a "contract" where, despite the absenceof consideration, a plaintiff is able to show detrimentalreliance on another's promises or representations, LorangerConstr. Corp. v. E.F. Hauserman Co., 376 Mass. 757, 760 — 761 (1978), or where a non-signatory to a contract who has enjoyedthe contract's rights and benefits seeks to repudiate hisreciprocal obligations. See Intergen N.V. v. Grina,344 F.3d 134, 145-146 (1st Cir. 2003). Where, as here, there is noallegation of the absence of a binding agreement, the estoppeldoctrine is superfluous, and Counts VI and VII will be dismissedfor that reason.24

Fiduciary Duty

Count VIII of the Second Amended Complaint alleges a breach offiduciary duty on the part of Bishop, stemming from his allegedlyconflicted roles as an investment advisor to Lawson and as adirector and funds seeker for AEC and AEI. Bishop's motion todismiss this count is based principally on the jurisdictionalarguments that have been rejected earlier in this opinion.Bishop's ancillary argument that the allegation of breach offiduciary duty is too lightly plead to conform to the heightenedpleading standard of Rule 9(b) is misdirected. Rule 9(b) appliesonly to "averments of fraud or mistake." If a cause of action isnot enumerated in Rule 9(b), a complaint need "satisfy only thesimple [notice pleading] requirements of Rule 8(a)."Swierkiewicz v. Sorema N.A., 534 U.S. 506, 513 (2002) (noheightened pleading standards for employment discriminationcases). See also Educadores Puertorriqueños en Acción v.Hernández, 367 F.3d 61, 66-67 (1st Cir. 2004) (same, civilrights cases).

Massachusetts Chapter 93A

It is true, as defendants argue, that in Count IX (theChapter 93A claim) Lawson fails to allege facts supporting the "business"or "commerce" element of G.L. c. 93A, § 11. See First Enterprises, Ltd. v. Cooper, 425 Mass. 344, 347-348(1997) (a violation of section 11 requires proof that the actscomplained of were perpetrated in a business context). It isapparent, however, from the reference in the count to a demandletter that the claim is being brought pursuant to section 9 ofChapter 93A and not section 11. A demand letter is a conditionprecedent of a section 9 action. Spilios v. Cohen,38 Mass. App. Ct. 338, 342 (1995). It is, however, irrelevant to an actionunder section 11. Kerlinsky v. Fidelity & Deposit Co. ofMaryland, 690 F. Supp. 1112, 1117 (D. Mass. 1987), aff'd,843 F.2d 1382 (1st Cir. 1988). A section 9 action is appropriate inthis case, as Lawson's testimony that his job as Trustee is to"carry out the orders" of the beneficiaries (Lawson is quoted inthe Patrick Henry Hotel defendants' Supplemental Submission),makes clear that the Trusts are nominee trusts, and that anyinjuries inflicted by the defendants have been suffered by theindividual beneficiaries, and not by the Trusts as legalentities. See Roberts v. Roberts, 419 Mass. 685, 687-688 n. 2(1995) (identifying the characteristic features of a typicalnominee trust). Defendants' remaining argument that a ConsumerProtection Act count must conform to Rule 9(b)'s heightenedpleading standard, while it has some support in older case law,is foreclosed by Swierkiewicz.25 Statute of Limitations

Defendants finally maintain that Lawson's claims must bedismissed on statute of limitations grounds because of his lackof diligence. They argue that where Lawson was told (in 1993)that "the guarantees would be in force for only a few months,"that the Letter of Credit would be refinanced within "a fewmonths," and that the Trusts were fully secured by the Hotel andthe assets of the Patrick Henry Hotel defendants, Lawson shouldhave been alerted to the fact that none of these things were truewhen the interest payments stopped in 1994. (The underlyingComplaint was not filed until October of 2002).

Under Massachusetts law, a breach of contract claim mustordinarily be brought within six years of the act constitutingthe breach. G.L. c. 260, § 2.26 Tort claims are generallysubject to a three-year statute of limitations, while ConsumerProtection Act claims must be brought within four years. G.L. c.260, §§ 2A and 5A. "Where summary judgment is sought on the basisof a statute of limitations, once the defendant establishes thatthe time period between the plaintiff's injury and theplaintiff's complaint exceeds the limitations period set forth inthe applicable statute, the plaintiff bears the burden ofalleging facts which would take his or her claim outside thestatute." McGuinness v. Cotter, 412 Mass. 617, 620 (1992).

"[A] cause of action accrues on the happening of an eventlikely to put the plaintiff on notice." Hendrickson v. Sears,365 Mass. 83, 89-90 (1974). See also Rotella v. Wood,528 U.S. 549, 553-554 (2000) (same). Statutes of limitations,however, are tolled under G.L. c. 260, § 12 (as they are underthe federal fraudulent concealment doctrine), "if the wrongdoer, either through actual fraud or in breach of a fiduciary duty offull disclosure, keeps from the person injured knowledge of thefacts giving rise to a cause of action and the means foracquiring knowledge of such facts." Frank Cooke, Inc. v.Hurwitz, 10 Mass. App. Ct. 99, 106 (1980). The statute oflimitations under the federal common-law doctrine of fraudulentconcealment is tolled "where a plaintiff has been injured byfraud and `remains in ignorance of it without any fault or wantof diligence or care on his part.'"27 Salois v. The DimeSavings Bank of N.Y., 128 F.3d 20, 25 (1st Cir. 1997), quotingHolmberg v. Armbrecht, 327 U.S. 392, 397 (1946).

Whether a plaintiff knew or should have known of an injury soas to trigger the running of a statute of limitations is, withrare exception, a jury issue. See Santiago Hodge v. ParkeDavis & Co., 909 F.2d 628, 633 (1st Cir. 1990) ("Thedetermination of when appellees had knowledge of `both the injuryand its connection with the act of defendant,' is a question offact."); Riley v. Presnell, 409 Mass. 239, 240 (1991) ("[T]hequestion when a plaintiff knew or should have known of his causeof action is one of fact which in most instances will be decidedby the trier of fact."). Cf. Young v. Lepone, 305 F.3d 1, 8-9(1st Cir. 2002) (whether "storm warnings" were sufficient toplace an investor on inquiry notice should be determined as amatter of law only when the underlying facts are either admittedor undisputed). According to Lawson, he was misled by the repeated assurancesoffered by Bishop and Jubelt that the Trusts were fully securedand would be paid all sums owing once the Hotel was sold orrefinanced, and that therefore the "wrong" was not "over and donewith" until the January 3, 2002 meeting in Boston when he wasinformed by Jubelt that the Patrick Henry Hotel defendants had nointention (or ability) of honoring their obligations under theAgreement of Guaranty or the Letter Agreement. See Blanchettev. Cataldo, 734 F.2d 869, 876-877 (1st Cir. 1984) (a statute oflimitations will be tolled where a "continuous course offraudulent conduct" conceals prior wrongful acts). A jury mightwell determine that Lawson should have had his guard up from themoment the interest payments under the Letter Agreement ceased,or it might well find that Lawson, however naively, reasonablyrelied on the blandishments served up by Bishop and Jubelt. Buton this record, it is a jury, and not a court of law, that willmake that determination.


For the foregoing reasons, defendants' motions to dismiss forlack of personal jurisdiction are DENIED. The motion to dismissCount I (breach of contract) is DENIED as to the LetterAgreement and ALLOWED without prejudice as to the Agreement ofGuaranty. The motions to dismiss Count II (fraud and deceit) andCount III (good faith and fair dealing) are DENIED. The motionsto dismiss Count IV (unjust enrichment), Count V (negligentmisrepresentation), Count VI (promissory estoppel), and Count VII(equitable estoppel) are ALLOWED. Bishop's motion to dismiss Count VIII (breach offiduciary duty) is DENIED. The motions to dismiss Count IX(Chapter 93A) are also DENIED.


1. Bishop is not named in the breach of contract count(although he is somewhat inconsistently named as a defendant inthe contractually-related estoppel and unjust enrichmentcounts).

2. AEC is not a moving party in the motion to dismiss.

3. The reader is advised to take pen to paper at this pointand chart the relationships among the various defendants to avoidotherwise certain confusion.

4. The revised Agreement of Guaranty is attached to the SecondAmended Complaint as Exhibit D.

5. At the June 16, 2004 hearing on the motion to dismiss, inresponse to a question by the court, defendants' attorneys statedthat the sale of the Hotel has yet to take place.

6. At the June 16, 2004 hearing on the motion to dismiss,counsel informed the court that HSBC has yet to take any actionwith respect to the Trusts' assets, nor has the court beeninformed that any action has been taken as of the date of thisopinion.

7. Lawson has made no effort to involve the court in anyredress of the alleged defiance of its injunctive orders.

8. Where, as here, a court has authorized jurisdictionaldiscovery, the plaintiff's prima facie showing will often be asfully developed in its facts as would be expected on summaryjudgment.

9. Under the Massachusetts long-arm statute, "[a] court mayexercise personal jurisdiction over a person, who acts directlyor by an agent, as to a cause of action in law or equity arisingfrom the person's (a) transacting any business in thiscommonwealth; . . . [or] (c) causing tortious injury by an act oromission in this commonwealth." G.L. c. 223A, §§ 3 (a) and (c).Massachusetts courts construe section 3(a)'s "transactingbusiness" test as extending jurisdiction to the outermost limitpermitted by the Due Process Clause. See Cambridge LiteraryProperties, Ltd. v. W. Goebel Porzellanfabrik, 295 F.3d 59, 63(1st Cir. 2002).

10. Lawson asserts that Bishop repeatedly participated in theeconomic life of the Commonwealth by soliciting clients inMassachusetts for more than a decade, thereby satisfying section3(d) and the fairness requirements for "general jurisdiction." Asthis court (as will be seen) has personal jurisdiction overBishop under sections 3(a) and 3(c) of the Massachusetts long-armstatute, there is no reason to explore this more demanding (anddoubtfully applying) doctrine. See Noonan v. Winston Co.,135 F.3d 85, 93 (1st Cir. 1998) (the standard for evaluating theconstitutional sufficiency of a defendant's contacts with theforum is significantly more stringent under the doctrine ofgeneral jurisdiction than in the case of specific jurisdiction).

11. Jubelt maintains that a previous encounter inMassachusetts cited by Lawson (in the early 1990's) involved anunrelated investment.

12. For purposes of personal jurisdiction, "the agent'sactions may be attributed to the principal if the principal laterratifies the agent's conduct." Daynard, 290 F.3d at 55. ThePatrick Henry Hotel defendants argue that in soliciting Lawson,Bishop was acting on behalf of Gray Seifert. However, given thefacts that Bishop was a director of AEC and AEI, and that AEC andAEI and the other Patrick Henry Hotel defendants (as opposed toGray Seifert) were the beneficiaries of the solicitation of theTrusts, for purposes of the prima facie jurisdiction test,Bishop's conduct is attributable to these defendants.

13. The Patrick Henry Hotel defendants' argument thatjurisdiction lies in New York because the assets of the Trustswere in the custody of a New York bank is somewhat puzzling. TheTrusts are legal entities created under Massachusetts law anddomiciled in Massachusetts. Where the Trust assets happened to beinvested has no bearing on the jurisdictional analysis.

14. Massachusetts, in applying the "transacting any business"test, places special emphasis on solicitation by a defendant.See Tatro v. Manor Care, Inc., 416 Mass. 763, 767 (1994)("[G]enerally the purposeful and successful solicitation ofbusiness from residents of the Commonwealth, by a defendant orits agent, will suffice to satisfy [the transacting]requirement."). See also Intech, Inc. v. Triple "C" MarineSalvage, Inc., 61 Mass. App. Ct. 537, 540-541 (2004).

15. In Tatro, the Supreme Judicial Court rejected "therestrictive proximate cause approach" taken by the First Circuitin interpreting the transacting business requirement of G.L. c.223A, § 3(a). See Nowak v. Tak How Investments, Ltd.,94 F.3d 708, 713 (1st Cir. 1996) ("At least for purposes of construingthe Massachusetts long-arm statute, the Supreme Judicial Court ofMassachusetts dealt our restrictive interpretation a fatalblow. . . .").

16. The argument that the "but for" test is so overinclusiveas to infringe the "fair warning" (foreseeability) requirement ofthe Due Process Clause was considered, but ultimately rejected bythe First Circuit in Nowak. When a foreign corporation directly targets residents in an ongoing effort to further a business relationship, and achieves its purpose, it may not necessarily be unreasonable to subject that corporation to forum jurisdiction when the efforts lead to a tortious result. The corporation's own conduct increases the likelihood that a specific resident will respond favorably. If the resident is harmed while engaged in activities integral to the relationship the corporation sought to establish, we think the nexus between the contacts and the cause of action is sufficiently strong to survive the due process inquiry at least at the relatedness stage.Id., 94 F.3d at 715-716.

17. The parties argue at some length over whether the courtshould apply the law of Massachusetts or that of New York. Lawsonargues that the court should apply Massachusetts choice-of-lawprinciples as it is the forum state. See Klaxon Co. v. StentorElec. Mfg. Co., 313 U.S. 487 (1941). Massachusetts follows the"interest analysis" or "most significant relationship" test ofRestatement (Second) of Conflict of Laws. See Choate, Hall &Stewart v. SCA Servs., Inc., 378 Mass. 535, 541 (1979).Defendants argue that New York law governs all claims as New Yorkis the jurisdiction where most of the parties reside and dobusiness. It is true that the AEC Guaranty provides that: "[t]hisAgreement of Guaranty shall be construed in accordance with thelaws of the State of [New York]." On the other hand, the July 13,1993 Letter Agreement, which has no choice-of-law clause, has thegreatest immediate impact on the Trusts' claims. The LetterAgreement was signed in New York by the defendants and thenratified by Lawson in Massachusetts. Under the "significantrelationship" test, the Letter Agreement is governed byMassachusetts law. See Hendricks & Associates, Inc. v. DaewooCorp., 923 F.2d 209, 213 n. 3 (1st Cir. 1991) (parties'agreement had a more significant relationship to Massachusettsthan to New York where plaintiff was a Massachusetts corporation,negotiation of the contract took place mostly in Massachusetts,subsequent communications between the parties were directed toMassachusetts, and plaintiff received payment through aMassachusetts bank). Except where noted, I have abstained fromthe fray as I perceive no appreciable difference in resultwhichever state's law is applied.

18. "Every partner is an agent of the partnership for thepurpose of its business, and the act of every partner, includingthe execution in the partnership name of any instrument, forapparently carrying on in the usual way the business of thepartnership of which he is a member binds the partnership, unlessthe partner so acting has in fact no authority to act for thepartnership in the particular matter, and the person with whom heis dealing has knowledge of the fact that he has no suchauthority." McKinney's Partnership Law § 20.

19. Massachusetts law is of similar effect. Under the UniformPartnership Act, as under previous common-law, partners aresubject to joint and several liability for debts of thepartnership, including both contractual obligations and damagesfor torts committed by individual members in conducting thepartnership business. See G.L. c. 108A, §§ 13, 15; Bachand v.Vidal, 328 Mass. 97, 100 (1951); First Nat'l Bank of NewBedford v. Chartier, 305 Mass. 316, 322 (1940); Fennell v.Peterson, 225 Mass. 598, 599 (1917); Kirkland Construction Co.v. James, 39 Mass.App.Ct. 559, 560 n. 3 (1995).

20. The Trusts had completed performance by extending theguarantees and were simply waiting to be paid; this is a classicexample of an executory contract.

21. The Second Amended Complaint articulates no theory underwhich Bishop could be said to have been unjustly enriched asthere is no allegation that he received any of the proceeds ofthe Letter of Credit.

22. Defendants make the argument that the fraud allegations ofthe Second Amended Complaint do not satisfy the heightenedpleading standard of Fed.R. Civ. P. 9(b). Rule 9(b) requiresthat "[i]n all averments of fraud or mistake, the circumstancesconstituting fraud shall be stated with particularity." The FirstCircuit has interpreted the Rule to require "specification of thetime, place, and content of an alleged false representation."McGinty v. Beranger Volkswagen, Inc., 633 F.2d 226, 228 (1stCir. 1980). I am satisfied that the Second Amended Complaintremedies any deficiencies of its predecessors and pleads thedetails of the alleged fraud with enough "who, what, when, andwhere" to survive scrutiny under Rule 9(b).

23. Count V of the Second Amended Complaint alleges negligentmisrepresentation. A defendant is liable for negligentmisrepresentation "if in the course of his business, he suppliesfalse information for the guidance of others in their businesstransactions, causing and resulting in pecuniary loss to othersby their justifiable reliance on the information, with failure toexercise reasonable care or competence in obtaining orcommunicating the information." Marram v. Kobrick Offshore Fund,Ltd., 442 Mass. 43, 60 n. 25 (2004), quoting Restatement(Second) of Torts § 552(1) (1977). "Negligent misrepresentationdiffers from an action for fraud because `liability formisrepresentation does not require a showing that the defendanteven knew that the statements made were false or that thedefendant actually intended to deceive the plaintiff.'" Id.,quoting Kitner v. CTW Transp., Inc., 53 Mass. App. Ct. 741, 749(2002). Under New York law, proof of a negligentmisrepresentation claim requires a showing of a "specialrelationship" between the plaintiff and defendant. SeeAmerican Protein Corp. v. AB Volvo, 844 F.2d 56, 64 (2d Cir.1988); Fleet Bank v. Pine Knoll Corp., 736 N.Y.S.2d 737, 741(2002). While the fiduciary relationship that is alleged to haveexisted between Lawson and Bishop would seem sufficient tosatisfy New York law, the allegations in the Second AmendedComplaint refer exclusively to intentional acts and omissions.

24. Plaintiff's prayer for equitable relief has beenpreviously allowed in part and remains part of his potentialrelief should he prevail on his claims at law.

25. While a Chapter 93A claim sounds in fraud ("unfair ordeceptive acts"), Swierkiewicz "sounded the death knell for theimposition of a heightened pleading standard except in cases inwhich either a federal statute or specific Civil Rule requiresthat result." Hernández, 367 F.3d at 66. While G.L. c. 93A, §9(3), requires specificity, it does so in the demand letter andnot (necessarily) in the pleadings. See Halper v. Demeter,34 Mass. App. Ct. 299, 302 n. 5 (1993). In any event, I have foundthe underlying allegations of fraud to be sufficiently plead inthe Second Amended Complaint. See n. 22, supra.

26. In New York, "an action upon a contractual obligation orliability, express or implied," must also be commenced within sixyears. See McKinney's NY CPLR § 213(2).

27. Insofar as Bishop is concerned, Massachusetts law goesfurther than federal law in relieving a plaintiff of any duty toinvestigate where the facts upon which a cause of action is basedare concealed from the plaintiff by a breach of the fiduciaryduty of full disclosure. Demoulas v. Demoulas Super Markets,Inc., 424 Mass. 501, 519-520 (1997). See also Latucca v.Robsham, 442 Mass. 205, 213 (2004) ("[A] cause of action forbreach of fiduciary duty does not accrue until the beneficiaryhas actual knowledge of the fiduciary's breach.").

Back to top