Opinion
1884CV00836BLS1
02-01-2019
SUGARMAN & SUGARMAN, P.C. v. Daniel B. SHAPIRO dba Shapiro & Associates
File Date: February 4, 2019
OPINION
Kenneth W. Salinger, Justice of the Superior Court
In 2016, Attorney Daniel Shapiro brought his federal workers’ compensation law practice to Sugarman & Sugarman, P.C., pursuant to an "Employment and Purchase of Practice Agreement" between the parties. By late 2017 the parties’ relationship had soured and Shapiro left with his law practice. Sugarman filed suit seeking quantum meruit compensation for its work on Shapiro’s cases, damages for alleged breach of contract and breach of Shapiro’s duty of loyalty to the firm, and an accounting for all monies received by Shapiro’s law practice. Shapiro inserts counterclaims for fraud in the inducement, breach of contract, breach of fiduciary duty, and violation of G.L. 93A.
Sugarman has now moved that a constructive trust be imposed on the proceeds from all matters on which Sugarman provided services while Shapiro worked there. Shapiro has filed a cross-motion to dismiss Sugarman’s quantum meruit claim. The Court will DENY both motions.
1. Constructive Trust
A constructive trust "is imposed ‘in order to avoid the unjust enrichment of one party at the expense of the other where the legal title to the property was obtained by fraud or in violation of a fiduciary relation or arose where information confidentially given or acquired was used to the advantage of the recipient at the expense of the one who disclosed the information.’" Meskell v. Meskell, 355 Mass. 148, 151 (1969), quoting Barry v. Covich, 332 Mass. 338, 342 (1955). In the absence of fraud, breach of fiduciary duty, or taking unfair advantage of a confidential relationship, no constructive trust may be implied. Meskell, supra, at 151-52 (1969); accord Nessralla v. Peck, 403 Mass. 757, 762 (1989).
Sugarman seeks a constructive trust on the theory that Shapiro breached his fiduciary duty of loyalty to the law firm.
It appears to be undisputed, while he was at Sugarman, Shapiro held a position of trust and confidence in which he was responsible for a substantial case practice and had access to those clients and their information.
As a result, it appears that Schapiro owed Sugarman a fiduciary duty of loyalty whether he was a joint venture with a partner-like status or an employee of the firm. See Meehan v. Shaughnessy, 404 Mass. 419, 433-34, 438 (1989) (law firm partners, non-equity junior partner, and associates all owed duty of loyalty to firm).
If Sugarman succeeds in proving that Shapiro breached his duty of loyalty, then Sugarman may well be entitled to an order requiring Shapiro to hold some part or all of his earnings from disputed client accounts in a constructive trust for the benefit of Sugarman. See Meehan, supra, at 445-48.
But Sugarman has not prevailed yet. Nor does it seek summary judgment in its favor on its claim for breach of fiduciary duty.
The Court will therefore treat this motion as a motion for a preliminary injunction barring Shapiro "from using or in any way alienating" any funds received as payment for work on the disputed client accounts. See Boston Athletic Ass’n v. International Marathons, Inc., 392 Mass. 356, 362 (1984) (affirming similar preliminary injunction tying up particular funds in which plaintiff claimed to have an equitable interest).
The Court will DENY this motion because Sugarman has not met its burden of proving that it is likely to succeed in proving its claim for breach of fiduciary duty. A plaintiff is not entitled to preliminary injunctive relief if it cannot prove that it is likely to succeed on the merits of its claim. See, e.g., Fordyce v. Town of Hanover, 457 Mass. 248, 265 (2010) (vacating preliminary injunction on this ground); Wilson v. Commissioner of Transitional Assistance, 441 Mass. 846, 858-59 (2004) (same). "The burden of showing a likelihood of success on the merits is on the party seeking the preliminary injunction." Berrios v. Dept. of Pub. Welfare, 411 Mass. 587, 598 (1992), quoting Robinson v. Secretary of Admin., 12 Mass.App.Ct. 441, 451 (1981).
The Court cannot tell from the current record which side, if any, is at fault. The mere fact that Shapiro left the firm and took clients with him does not mean that he breached any fiduciary duty. The factual basis for Sugarman’s claim that Shapiro breached his duty of loyalty are hotly contested. For the purposes of this motion Shapiro is not required to prove that his conduct was lawful. Instead, to obtain this preliminary injunction Sugarman must demonstrate it is likely to succeed in proving that Sugarman breached his duty of loyalty.
"A preliminary injunction is an extraordinary remedy never awarded as of right." Winter v. Natural Res. Def. Council, Inc., 555 U.S. 7, 24 (2008). To the contrary, "the significant remedy of a preliminary injunction should not be granted unless the plaintiffs had made a clear showing of entitlement thereto." Student No. 9 v. Board of Educ., 440 Mass. 752, 762 (2004). Sugarman has not met that burden.
2. Quantum Meruit Claim
Since Shapiro has already filed an answer to the complaint, the Court will treat Shapiro’s cross motion to dismiss Sugarman’s quantum meruit claim as seeking judgment on the pleadings.
Once a defendant has filed a substantive answer, any motion to dismiss is in substance a motion for judgment on the pleadings. See Pupecki v. James Madison Corp., 376 Mass. 212, 215 n.2 (1978) ("Although labeled a motion to dismiss, the defendants’ motion, since it was filed after they had answered, was a motion for judgment on the pleadings"); Jones v. Greninger, 188 F.3d 322, 324 (5th Cir. 1999) (per curiam) (though rule 12(b) motion dismiss is untimely if filed after defendant has answered, such a motion should be treated as a motion for judgment on the pleadings). It makes no difference what the defendant calls such a motion, since motions to dismiss this action under rule 12(b)(6) or for judgment on the pleadings in defendant’s favor under rule 12(c) are governed by the same legal standards. See Boston Med. Ctr. Corp. v. Secretary of the Exec. Office of Health and Human Svcs., 463 Mass. 447, 450 (2012); Welch v. Sudbury Youth Soccer Ass’n, Inc., 453 Mass. 352, 353-54 (2009).
Shapiro correctly notes that Sugarman cannot recover on a quantum meruit theory if "there is a valid contract that defines the obligations of the parties." Boston Med. Ctr. Corp. v. Secretary of Executive Office of Health & Human Servs., 463 Mass. 447, 467 (2012) (affirming dismissal on this ground). "A valid contract defines the obligations of the parties as to matters within its scope, displacing to that extent any inquiry into unjust enrichment." Id., quoting Restatement (Third) of Restitution and Unjust Enrichment § 2 (2011); see also Santagate v. Tower, 64 Mass.App.Ct. 324, 329 (2005) ("An equitable remedy for unjust enrichment is not available to a party with an adequate remedy at law").
But on the facts of this case Sugarman is entitled to assert claims for breach of the written contract and for compensation in quantum meruit in the alternative. See generally Mass.R.Civ.P. 8(a).
Sugarman has a plausible argument that the parties’ contract did not define the obligations of the parties if Shapiro were to leave the firm and take his practice with him. If that proves to be correct, then Sugarman may have a viable quantum meruit claim. See Malonis v. Harrington, 442 Mass. 692, 697, (2004) (where client lawfully terminates contingent fee agreement and then recovers, lawyer may recover fair and reasonable value of services on quantum meruit theory); Fay, Spofford & Thorndike, Inc. v. Massachusetts Port Auth., 7 Mass.App.Ct. 336, 341 (1979) (quantum meruit recovery may be available where there has not been full performance under contract because defendant committed material breach and as a result plaintiff did not continue to perform).
ORDER
Plaintiff’s motion for imposition of a constructive trust is DENIED. Defendant’s cross motion to dismiss Count I of Plaintiff’s complaint is also DENIED.