Opinion
19-P-565
07-17-2020
MANCHESTER PRIVATE EQUITY, LLC v. BRIAN A. LACROIX.
NOTICE: Summary decisions issued by the Appeals Court pursuant to M.A.C. Rule 23.0, as appearing in 97 Mass. App. Ct. 1017 (2020) (formerly known as rule 1:28, as amended by 73 Mass. App. Ct. 1001 [2009]), are primarily directed to the parties and, therefore, may not fully address the facts of the case or the panel's decisional rationale. Moreover, such decisions are not circulated to the entire court and, therefore, represent only the views of the panel that decided the case. A summary decision pursuant to rule 23.0 or rule 1:28 issued after February 25, 2008, may be cited for its persuasive value but, because of the limitations noted above, not as binding precedent. See Chace v. Curran, 71 Mass. App. Ct. 258, 260 n.4 (2008).
MEMORANDUM AND ORDER PURSUANT TO RULE 23.0
Brian A. LaCroix appeals from a preliminary injunction issued by a judge of the Superior Court, ordering him to reinstate the two designated representatives of Manchester Private Equity, LLC (Manchester), who LaCroix had removed from the board of directors of his company, Setronics Corp. (Setronics). The two directors had been serving on the board pursuant to a written agreement between the parties. We affirm.
Background. We summarize the facts as set forth by the motion judge in her order granting the preliminary injunction. In 2015, Setronics, at the time wholly owned by Kevin Picucci, sold its assets to LaCroix's wholly owned company, BAL Enterprises, Inc. (BAL). Following the sale, BAL assumed the Setronics name, while Picucci changed the name of his company (now without assets) to Manchester. The transaction was made through an asset purchase agreement (agreement). Part of the consideration for the purchase was to be paid by LaCroix over time. Pursuant to § 9.18 of the agreement, until those payment obligations were fully satisfied, LaCroix was to "vote his shares" of Setronics's stock to elect Picucci and Picucci's designee (collectively, the Manchester designees) as two of the three members of the Setronics board of directors. The provision further provided the board could not be enlarged or reduced in size, and the Manchester designees could not be removed without Picucci's consent. The purpose of this arrangement was to provide Manchester, through Picucci, with oversight over the business operations of Setronics during the payment period.
Three years later, in 2018, as a result of Picucci's and LaCroix's acrimonious disagreements about the business operations of Setronics, including a restructuring proposal by Picucci (that Manchester contends was intended to alleviate a negative cash flow), LaCroix voted to remove the Manchester designees as board members. In response, Manchester filed a verified complaint against LaCroix seeking a preliminary injunction requiring LaCroix to reinstate them -- as well as a permanent injunction enjoining LaCroix from removing them thereafter, and an assessment of damages. The preliminary injunction was granted, and LaCroix appealed.
LaCroix eventually filed a counterclaim, alleging, among other things, that Manchester violated the asset purchase agreement, and breached its fiduciary duties.
LaCroix later filed a motion in our court to stay the injunction pending appeal, which was denied.
Discussion. The preliminary injunction. We review the grant of a preliminary injunction for abuse of discretion, "that is, whether the judge applied proper legal standards and whether there was reasonable support for [her] evaluation of factual questions" (citation omitted). Doe v. Superintendent of Sch. of Weston, 461 Mass. 159, 164 (2011). LaCroix argues on appeal that the motion judge had no reasonable grounds for concluding (a) that Manchester was likely to succeed on the merits, (b) that Manchester would suffer irreparable harm in the absence of injunctive relief, and (c) that the risk of harm to Manchester, absent the injunction, outweighed any similar risk to LaCroix. See Packaging Indus. Group, Inc. v. Cheney, 380 Mass. 609, 617 (1980). We disagree.
The judge determined that LaCroix had acted "in clear violation" of § 9.18 of the agreement by removing the Manchester designees from the Setronics board of directors. LaCroix counters that Manchester is not entitled to seek enforcement of § 9.18 because Picucci had not acted in good faith and in the best interests of the company. More specifically, LaCroix claims that Picucci attempted to "take control" of Setronics by threatening to fire the company's chief financial officer and others, and by proposing a restructuring of the parties' arrangement which would have been advantageous to Picucci, and detrimental to LaCroix and Setronics. LaCroix further claims that when he refused to agree to the restructuring proposal, Picucci threatened to block Setronics from borrowing the money it needed to operate, and, among other things, replace LaCroix as its president. These threats, according to LaCroix, constituted a violation of fiduciary duties, empowering him to remove the Manchester designees pursuant to G. L. c. 156D.
However, as the judge noted, given that LaCroix refused to agree to Picucci's proposal, and that Picucci's attempted takeover and threats never materialized, LaCroix's justification for violating § 9.18 by removal of the Manchester designees was unsupported by the evidence. LaCroix makes no distinction between what he characterizes as Picucci's "failed takeover bid" and "unfulfilled" threats, and any actual injury caused by Picucci. The distinction is important. To the extent that LaCroix argues that his removal of the Manchester designees was justified because Picucci's threats, even if unfulfilled, constituted a breach of fiduciary duty, he offers no evidence of injury (at least not at this early juncture) to either Setronics or himself. See Estate of Moulton v. Puopolo, 467 Mass. 478, 492 (2014) (to establish breach of fiduciary duty, plaintiff must show duty owed to plaintiff by defendant, and injury to plaintiff proximately caused by breach).
Based on LaCroix's violation of § 9.18, the judge determined that Manchester had established a likelihood of success on the merits. As a result of this violation (and contrary to LaCroix's claim that the judge failed to make findings on irreparable harm), the judge also found that Manchester suffered harm by the loss of its ability to oversee the operation of Setronics during the payment period as the parties' originally agreed. This right of Manchester was unambiguous and freely entered into, and Manchester's interest in oversight was readily evident where, at the time of the events at issue, Setronics had developed a negative cash flow, and its chief financial officer had reported an unsettled renewal status of certain long-standing service contracts between Setronics and one of its largest customers. In sum, Manchester established that it would be irreparably harmed by LaCroix's removal of the Manchester designees from the board, in breach of the terms in § 9.18. While "[s]pecific performance is not a matter of absolute right . . . agreements are made to be performed, and relief should be given in the absence of special circumstances showing that it would be inequitable to do so." Freedman v. Walsh, 331 Mass. 401, 406 (1954). LaCroix failed to demonstrate any such special circumstances here.
LaCroix additionally argues that Manchester does not need Picucci on the board in order to oversee Setronics, nor did Picucci's removal interfere with LaCroix's making the payments due under the agreement. As discussed above, LaCroix's view of Manchester's oversight needs is not only at odds with the contract, but also ignores the company's circumstances at the time.
Finally, LaCroix has not shown that he will suffer any injury if he is required to comply with his express obligations under the agreement to maintain the Manchester designees as members of the Setronics board. Thus, LaCroix will not be irreparably harmed by issuance of the injunction. And, as noted by the judge, the reinstatement of the Manchester designees does not preclude subsequent action by LaCroix should Picucci not act in good faith, or engage in conduct harmful to Setronics, in the future.
Accordingly, we conclude that granting the preliminary injunction ordering reinstatement of the board members LaCroix removed was not an abuse of the judge's discretion. As a result of LaCroix committing a breach of the agreement, Manchester established a likelihood of success on the merits; that it may suffer irreparable harm if the injunction is not issued; and that Manchester's risk of harm outweighs any similar risk to LaCroix. "A preliminary injunction ordinarily is issued to preserve the status quo pending the outcome of litigation." Doe, 461 Mass. at 164, citing Packaging Indus. Group, Inc., 380 Mass. at 616. We find no abuse of discretion in the judge's decision to do so here.
LaCroix additionally appeals the judge's decision to issue the preliminary injunction without requiring a security bond from Manchester or making a specific finding of good cause for not doing so, as required under Mass. R. Civ. P. 65 (c), 365 Mass. 832 (1974). While the judge did not address this obligation, it does not appear that this issue was brought to the judge's attention, either before or after the preliminary injunction issued. Under the circumstances, we find no abuse of discretion. See Petricca Constr. Co. v. Commonwealth, 37 Mass. App. Ct. 392, 400-401 (1994).
Order granting preliminary injunction affirmed.
By the Court (Maldonado, Singh & Englander, JJ.),
The panelists are listed in order of seniority.
/s/
Clerk Entered: July 17, 2020.