A quarterly summary and brief analysis of significant decisions issued by the Massachusetts Superior Court Business Litigation Session. A service of O’Connor, Carnathan and Mack LLC.		  

March
2008

Volume 4
Number 3
Page 4
 

Summarizing opinions from July 1, 2007 through
Sept. 30, 2007

 

 
 
 

 

 

 

 

 

 

 

 

 

 

 

 

 
     

O  T  H  E  R      D  E  C  I  S  I  O  N  S  :

Knapp v. Neptune Towers Associates, 2007 WL 2367743 (Mass. Super.)
(Aug. 2, 2007) (van Gestel, J.).
     

The plaintiff limited partners asserted that the general partners breached their fiduciary duties by failing to disclose that they had hired one of their own spouses to act as broker and legal counsel in connection with the sale of the partnership’s principal asset. The general partners responded by filing suit for abuse of process and defamation. All parties moved for summary judgment.

Taking up the limited partners’ claims first, the court focused its inquiry on whether the general partners had a duty to disclose the identity of the broker and the details of his commission. As a general rule, “[n]ondisclosure does not amount to fraud and is not a conventional tort of any kind.” Id. at *4. Exceptions to this general rule apply in cases involving fiduciary duties, and the general partners were in a fiduciary relationship with the limited partners in this case. But “[w]hen the rights of stockholders arise under a contract … the obligations of the parties are determined by reference to contract law, and not by the fiduciary principles that would otherwise govern.” Id. at *5. Here, the management of the partnership was governed wholly by the partnership

 


 

 

 

 

 

 

 

 


 

 
agreement – and that agreement gave the  general partners sole right to manage the partnership and to enter into agreements with affiliated persons. Thus, the general partners “had full and unfettered authority” to engage a real estate broker who was a member of one partner’s family. Id. at *6. Nondisclosure of the broker’s identity was not misleading, nor was the broker’s identity a fact “basic to the transaction” that would ordinarily mandate disclosure. The limited partners’ claims were dismissed accordingly.

The Court also rejected general partners’ claims. Even though the Court rejected the limited partners’ suit for breach of fiduciary duty, “the mere fact that summary judgment against such a suit has been found does not mean that the Complaint was an abuse of process.” Id. at *7. As for the general partners’ defamation claims, these were based entirely on the allegations in the limited partners’ complaint – and there is “an absolute privilege for statements made by a party or counsel during the course of government proceedings, including court proceedings.” Id. Hence, the defamation claims were also dismissed.

 
 

 

 

 


 

 

 

 

 

 

 


 

 
 
     
     
 

 

 
 

 

 

 

 

 

 

 

 

 


 


 

OneBeacon America Ins. Co. v. Narragansett Elec. Co., 2007 WL 2429724
(Mass. Super.) (Aug. 15, 2007) (van Gestel, J.).
     

In this case involving insurance coverage for environmental liabilities, the court decided whether to apply the substantive law of Massachusetts or of Rhode Island to a set of insurance policies. The policies were all issued in Massachusetts, by a Boston-based carrier, to the insureds through their Boston-based agent. On the other hand, all of the sites covered by the policies were primarily or entirely located in Rhode Island.

Each policy contained language excluding from coverage property damage caused by pollutants unless the “discharge, dispersal, release or escape is sudden and accidental.” Id. at *2. As framed by the court, the “rub comes, and the reason for the current cross motions battle, is that the high courts of Rhode Island and Massachusetts are not in agreement as to the interpretation of the ‘sudden and accidental’ exception to the pollution exclusion contained in the policies.” Id.

 
 

 

 

 

 



 

 

 

 

 
Both sides agreed that resolution of this issue was to be controlled by Massachusetts choice-of-law principles. Under these principles, the court was required to “assess which State has the most significant relationship to the issue by employing the factors indicated in sec. 188 and sec. 6” of the Restatement (Second) of Conflict of Laws. Id. at *4. This assessment led the court to conclude that Rhode Island’s relationship was clearly the stronger one. Although the policies were issued in Massachusetts, “the place of negotiating and the place of contracting are the least significant considerations in a choice-of-law analysis.” Id. at *5. By contrast, the fact that Rhode Island’s citizens would bear the brunt of any environmental consequences and therefore had an interest in broader coverage weighed heavily in the analysis. Id. Hence, the Rhode Island courts’ interpretation of “sudden and accidental” was to be the governing standard for the remainder of the dispute.
 

 

 

 

 

 

 


 

 

 

 


 
 
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