Opinion
1884CV02097BLS1
08-28-2019
Hyperactive, Inc. v. D. Douglas Young et al.
File Date: August 29, 2019
Judge (with first initial, no space for Sullivan, Dorsey, and Walsh): Davis, Brian A., J.
DECISION AND ORDER REGARDING THIRD-PARTY DEFENDANT DOUGLAS BUCKLEY’S MOTION TO DISMISS DEFENDANT D. DOUGLAS YOUNG’S THIRD-PARTY COMPLAINT (DOCKET ENTRY NO. 34.0)
Brian A. Davis Associate Justice
Plaintiff Hyperactive, Inc. ("Hyperactive") is a business that creates multimedia presentations for various commercial clients. Hyperactive brought this action in July 2018 claiming that defendant D. Douglas Young ("Mr. Young"), a former company executive and one of two Hyperactive shareholders, conspired with one of Hyperactive’s competitors, defendant AVFX, LLC ("AVFX"), to steal Hyperactive’s confidential and proprietary trade secrets, customer relationships, and key employees for the joint benefit of Mr. Young and AVFX. Hyperactive further claims that another former employee, defendant Joseph Pannoni ("Mr. Pannoni"), wrongfully copied and has retained the source code to Hyperactive’s proprietary "HyperFrame" software, and wrongfully copied and has retained certain confidential digital project files associated with Hyperactive’s clients, possibly at the request or direction of Mr. Young and/or AVFX. The Court issued a preliminary injunction against Mr. Young and Mr. Pannoni on July 20, 2018, which prohibits them from, among other things, retaining or making use of Hyperactive’s proprietary software during the pendency of this action. That preliminary injunction remains in full force and effect in accordance with its terms.
The other current shareholder in Hyperactive is Douglas Buckley ("Mr. Buckley"). The relationship between Mr. Buckley and Mr. Young has, in recent years, been a stormy one. In April 2018, Mr. Young filed an action against Mr. Buckley and Hyperactive in Norfolk Superior Court, Civil Action No. 1882CV00539 (the "Norfolk Action"), seeking monetary damages from Hyperactive and Mr. Buckley based, in part, upon Mr. Buckley’s alleged unilateral decision to "cut in half" Mr. Young’s 2017 compensation "with retroactive application." Norfolk Action Complaint, ¶24. Mr. Young further claimed in the Norfolk Action that, beginning in or about 2017, Mr. Buckley had disparaged and defamed Mr. Young in front of other Hyperactive employees (id., ¶45); had improperly blocked Mr. Young’s efforts to acquire Mr. Buckley’s shares of Hyperactive’s stock (id., ¶44); and had wrongfully caused Hyperactive to retroactively reimburse Mr. Buckley for fourteen years of travel expenses (id., ¶¶27-28).
An undisputed copy of Mr. Young’s Complaint in the Norfolk Action is appended to the March 28, 2019 Affidavit of Stephen W. Rider ("Rider Aff.") in this case as Exhibit B . In deciding a motion to dismiss based upon the "defense of former adjudication," a court is permitted to consider "official records available to the judge ruling on the motion and not subject to dispute [which] can be read together with the complaint." Boyd v. Jamaica Plain Co-op. Bank, 7 Mass.App.Ct. 153, 157 n.7 (1979) ("Boyd ").
Mr. Buckley moved to dismiss all of the claims asserted against him by Mr. Young in the Norfolk Action in May 2018. See Rider Aff., Exhibit C . Mr. Buckley’s motion to dismiss was not opposed by Mr. Young and eventually was allowed by the Norfolk Superior Court on July 9, 2018. Id., Exhibit F . Separate and final judgment dismissing Mr. Young’s claims against Mr. Buckley with prejudice entered on September 17, 2018. Id., Exhibit G . No appeal of that order was ever taken by Mr. Young.
In February 2019, Mr. Young filed a third-party complaint against Mr. Buckley in this case. See Answer, Affirmative Defenses and Third-Party Complaint of Defendant D. Douglas Young with Demand for Jury Trial ("Third-Party Complaint," Docket Entry No. 26.0). Many of the allegations in Mr. Young’s Third-Party Complaint are similar, if not identical, to the allegations that Mr. Young made against Mr. Buckley in the Norfolk Action. For example, Mr. Young has asserted third-party claims against Mr. Buckley based, in part, upon Mr. Buckley’s alleged unilateral decision in December 2017 to "retroactively chang[e] [Mr. Young’s] profit sharing for all of 2017 by fifty percent (50%)" (id., ¶26). Mr. Young further alleges in his Third-Party Complaint that, beginning in or about 2017, Mr. Buckley unfairly "ridiculed Mr. Young in the presence of all of [Hyperactive’s] staff" (id., ¶37); improperly ignored or blocked Mr. Young’s efforts to "acquire [Mr.] Buckley’s interest in [Hyperactive]" (id., ¶¶47-49); and wrongfully "directed [Hyperactive] to pay [Mr. Buckley] personally for expenses he and his family ... incurred retroactively for fourteen (14) years" (id., ¶70). Mr. Young’s Third-Party Complaint also includes, however, new allegations that Mr. Young now has been "ousted" from Hyperactive’s affairs by Mr. Buckley, as well as a request for a judicial declaration that, among other things, the parties’ "partnership" in Hyperactive has been effectively and legally dissolved, and a request for the appointment of a "disinterested third party to wind up all partnership affairs." Id., ¶¶51, 60, and 61(B) and (E).
Mr. Buckley now has moved to dismiss Mr. Young’s Third-Party Complaint, in its entirety, on res judicata grounds pursuant to Mass.R.Civ.P. 12(b)(6). See, e.g., Heacock v. Heacock, 402 Mass. 21, 23 & n.2 (1988) ("Heacock ") (Res judicata is a generic term that includes claim preclusion, which "makes a valid, final judgment conclusive on the parties and their privies, and bars further litigation of all matters that were or should have been adjudicated in the action"). See also Boyd, 7 Mass.App.Ct. at 163, quoting Restatement (Second) of Judgments § 61(1) (Tent. Draft No. 5, 1978) ("[T]he entry of a ‘valid and final judgment extinguishes ... all rights of a plaintiff to remedies against the defendant with respect to all or any part of the transaction, or series of connected transactions, out of which the action arose’ "). Mr. Buckley argues that all of Mr. Young’s third-party claims were, or could have been, adjudicated in the Norfolk Action and, therefore, Mr. Young is precluded from litigating or relitigating the claims in this subsequent proceeding. Mr. Young opposes Mr. Buckley’s motion to dismiss, arguing that the claims asserted in his Third-Party Complaint "are not remotely related to the claims that were made part of the [Norfolk Action]." Memorandum of Law in Support of D. Douglas Young’s Opposition to Motion of Douglas Buckley to Dismiss the Third-Party Complaint ("Young Opp.") at 1.
The Court conducted a hearing on Mr. Buckley’s motion to dismiss on August 15, 2019. Both sides attended and argued. Upon consideration of the written submissions of the parties and the oral arguments of counsel, Mr. Buckley’s motion to dismiss Mr. Young’s Third-Party Complaint is ALLOWED as to Count I, to the extent that it seeks monetary damages from Mr. Buckley, and all of Count II, and DENIED as to all other claims for the reasons discussed, briefly, below.
In order to survive a motion to dismiss under Mass.R.Civ.P. 12(b)(6), a claim must include "[f]actual allegations [sufficient] ... to raise a right to relief above the speculative level ... [based] on the assumption that all the allegations in the [pleading] are true (even if doubtful in fact) ..." Iannacchino v. Ford Motor Co., 451 Mass. 623, 636 (2008) (internal quotation marks and citation omitted). The Court also is required to take as true "such inferences as may be drawn [from the allegations of the claim or counterclaim] in the [claimant’s] favor ..." Nader v. Citron, 372 Mass. 96, 98 (1977).
The first question to be resolved in deciding Mr. Buckley’s motion to dismiss is whether Mr. Young’s claims against Mr. Buckley in this action arise out of "all or any part of the transaction, or series of connected transactions, out of which the [Norfolk Action] arose." Boyd, 7 Mass.App.Ct. at 163. A comparison of the allegations of Mr. Young’s Third-Party Complaint with the allegations of his complaint in the Norfolk Action shows that they plainly do. As previously noted, there is considerable overlap between the alleged wrongdoings that form the basis for Mr. Young’s third-party claims against Mr. Buckley in this action and Mr. Buckley’s alleged wrongdoings as complained of by Mr. Young in the Norfolk Action. They include, but are not limited to Mr. Buckley’s purported retroactive change in Mr. Young’s compensation in December 2017; Mr. Buckley’s purported disparagement of Mr. Young in front of other Hyperactive employees; Mr. Buckley’s purported refusal to acknowledge or accept Mr. Young’s offer to acquire Mr. Buckley’s interest in Hyperactive; and Mr. Buckley’s purported instruction directing Hyperactive to retroactively reimburse him and his family for fourteen years of personal expenses. Mr. Young sought damages from Mr. Buckley personally in the Norfolk Action on account of these alleged misdeeds, just as he seeks damages from Mr. Buckley personally in this action on account of the same conduct.
Thus, there can be no doubt that all of Mr. Young’s third-party claims against Mr. Buckley for damages: (1) arise out of the same "transaction, or series of connected transactions" that formed the basis of his claims against Mr. Buckley in the Norfolk Action; (2) were, or could have been, adjudicated in the Norfolk Action; and (3) were extinguished, as a consequence, by the final judgment entered against Mr. Young in the Norfolk Action. See Heacock, 402 Mass. at 23 n.2; Boyd, 7 Mass.App.Ct. at 163.
The outcome is different, however, with respect to Mr. Young’s third-party claims that seek, among other things, to confirm the dissolution of Hyperactive and to obtain the appointment of a disinterested third party to wind up Hyperactive’s affairs. Mr. Young did not allege in the Norfolk Action that he had been "oust[ed]" from Hyperactive’s day-to-day operations by Mr. Buckley, nor did he seek any relief concerning Hyperactive’s ongoing legal existence. These claims simply were not litigated in the Norfolk Action and Mr. Young was under no obligation to do so given that the "ousting" he now complains of apparently became effective after the events that gave rise to his claims against Mr. Buckley in that earlier case. See, e.g., Third-Party Complaint, ¶60. Res judicata does not bar the litigation of claims between prior legal opponents based upon new wrongful conduct. See Moniz v. Department of Corr., 75 Mass.App.Ct. 1111, 2009 WL 3673061 at *1 (2009) (Rule 1:28) ("The plaintiff’s remaining claim pertains to alleged statements and conduct arising after the ... [events giving rise to the prior proceedings between the parties] and thus is not barred by res judicata"). For these reasons, Mr. Buckley’s motion to dismiss Mr. Young’s third-party claims that seek to confirm the dissolution of Hyperactive and obtain other associated equitable or statutory relief is denied.
In making this ruling, the Court is cognizant of the fact that Mr. Young’s Third-Party Complaint requests various forms of statutory relief under G.L.c. 108A, which governs partnerships, although Hyperactive is organized as a corporation . The difference in organizational form is not determinative of the relief that Mr. Young may obtain. The Massachusetts Supreme Judicial Court held in Silversmith v. Sydeman, 305 Mass. 65, 68 (1940), that, in appropriate circumstances, "it could be found that the plaintiff and the defendant were acting as partners in the conduct of the company’s business and in the liquidation of its property even though they had adopted a corporate form as the instrumentality by which they should associate in the furtherance of their joint venture." This Court therefore leaves to another day the question of whether Hyperactive is more appropriately treated as a partnership or a corporation for purposes of Mr. Young’s third-party claims.
SO ORDERED