Clare v. Bank of New England

Michael J. Clare, Sr. v. Bank of New England et al.

NO. 218-2013-CV-00687

State of New Hampshire MERRIMACK, SS SUPERIOR COURT

Dated: November 26, 2013

ORDER

The Plaintiff, Michael J. Clare, Sr. ("Clare") has sued Stephen Lewis ("Lewis"), Braemoor, LLC ("Braemoor"), Gino Baroni ("Baroni"), Glenridge, LLC, ("Glenridge") and Bank of New England ("BNE"), alleging in substance that Lewis and Clare entered into an agreement to develop property in Salem, New Hampshire, and formed Braemoor to carry out the transaction. Clare alleges that Braemoor borrowed money from BNE, secured by a mortgage on the property, and Lewis breached his fiduciary duty to the Plaintiff by purchasing the property for a different development opportunity which he did not disclose to the other members of Braemoor. He further alleges that BNE aided and abetted in Lewis's alleged breach of fiduciary duty. BNE has moved to dismiss, alleging that New Hampshire does not recognize a cause of action for aiding and abetting a breach of fiduciary duty. For the reasons stated in this Order, the Motion is DENIED.

I

In considering a motion to dismiss, the Court must determine whether theallegations in the complaint are reasonably susceptible of a construction that would permit recovery. Lamprey v. Britton Constr., Inc., 163 N.H. 252, 256 (2012). The factual allegations of the complaint are assumed to be true, and all reasonable inferences from those allegations are construed in the light most favorable to the plaintiff. Gen. Insulation Co. v. Eckman Const. Co., 159 N.H. 601, 611 (2010). A court need not assume the truthfulness of allegations that are merely conclusions of law. Surprenant v. Mulcrone, 163 N.H. 529, 530 (2012).

Clare alleges that he entered into a development agreement with Lewis and a third party to develop real property located in Salem, New Hampshire. (Compl. ¶¶ 7-8.) Pursuant to the development agreement, the parties formed Braemoor, LLC. (Id. ¶ 9.) Braemoor obtained a promissory note, secured by a mortgage on the property from BNE. (Id. ¶ 62.) Clare alleges that Lewis failed to make the payments Braemoor owed BNE causing BNE to foreclose on the property, and that another Lewis-controlled entity subsequently purchased the property with financing from BNE. (Id. ¶¶ 37-40.) Clare alleges that Lewis breached his fiduciary duty to him and to Braemoor by purchasing the property for a different development opportunity which he did not disclose to the other members of Braemoor. (Id. ¶¶ 31-35, 48-58.) He alleges that BNE aided and abetted in Lewis's alleged breach of fiduciary duty because BNE provided substantial assistance or encouragement to Lewis's alleged breach. (Id. ¶¶ 66-68.)

BNE moves to dismiss the complaint against it on the ground that the tort of aiding and abetting a breach of fiduciary duty is not recognized in New Hampshire, or, in the alternative, that the complaint does not adequately set forth the elements of the tort.

II

The parties agree that the New Hampshire Supreme Court has never specifically decided whether or not the tort of aiding and abetting a breach of fiduciary duty is accepted in New Hampshire. However, in Invest Almaz v. Temple-Inland Forest Prods., 243 F.3d 57, 83 (1st Cir. 2001) the First Circuit, without extensive discussion, held that if the issue of whether the tort of aiding and abetting a fiduciary breach was presented to the New Hampshire Supreme Court, that court would adopt the majority rule and allow such an action to proceed. The court held that the New Hampshire Supreme Court would accept the formulation of the tort set forth in the Restatement (Second) of Torts § 876(b): "'for harm resulting to a third person from the tortious conduct of another, one is subject to liability if he. . . knows that the other's conduct constitutes a breach of duty and gives substantial assistance or encouragement to the other so to conduct himself. . . .'" Id. at 83; see also S &K Sales Co. v. Nike Inc., 816 F.2d 843, 847-48 (2d Cir. 1987) (applying New York law); Spinner v. Nutt, 417 Mass. 549, 556 (1994). The court rejected a narrower view, taken by the Second Circuit, which employs a constructive knowledge standard, holding that actual knowledge of the breach of fiduciary duty would be required to set forth the cause of action in New Hampshire. Id. (citing Diduck v. Kaszycki & Sons Contractors, 974 F.2d 270, 283 (2d Cir. 1992)). In the wake of Invest Almaz, two federal courts, also without much analysis, have adopted this same view. In re Felt Mfg. Co., 371 B.R. 589, 614-15 (Bankr. D.N.H. 2007); Tamposi v. Denby, No. 10-12283-RBC, 2013 U.S. Dist. LEXIS 144870, at *24 (D. Mass. Sept. 30, 2013).

Clare argues that this Court should recognize a new cause of action byconsidering the policies behind New Hampshire tort law and applying the analysis that the New Hampshire Supreme Court would apply in deciding whether to recognize a new cause of action. (Pl.'s Memo. in Supp. of Obj. to Mot. to Dismiss at 2-6.) BNE argues that acceptance of the Restatement rule is not universal, and, notes that only 18 jurisdictions have had occasion to explicitly recognized this precise cause of action. Def.'s Reply to Pl.'s Obj. to Mot. to Dismiss at 3.

The role of the Superior Court is, much like that of a federal court, to predict what the New Hampshire Supreme Court would do if the issue were squarely presented to it. The tort of aiding and abetting a fiduciary duty is, like most torts, a product of common law adjudication. In looking to the common law, the New Hampshire Supreme Court must, by necessity, frequently look outside the State because of the relatively small number of cases decided in New Hampshire.

The fact that the Restatement (Second) of Torts recognizes the tort is compelling. The Restatement is an expression of the common law as recognized in the majority of American jurisdictions. Moreover, as the United States Court of Appeals for the First Circuit recently noted, "[t]he New Hampshire Supreme Court has long followed the guidance of the Restatement of Torts concerning issues of tort law generally." Schaefer v. IndyMac Mortg. Servs., 731 F.3d 98, 104 (1st Cir. 2013) (citing Remsburg v. Docusearch, Inc., 149 N.H. 148, 157 (2003) (adopting § 652C); Valenti v. Net Props. Mgt., 142 N.H. 633, 636 (1998) (adopting § 425); Long v. Long, 136 N.H. 25, 29-30 (1992) (adopting § 682); Spherex Inc. v. Alexander Grant & Co., 122 N.H. 898, 904-905 (1982) (adopting § 552); Buttrick v. Arthur Lessard & Sons, Inc., 110 N.H. 36, 38 (1969) (adopting § 402A).

More importantly, the policies expressed in the New Hampshire Supreme Court's tort jurisprudence strongly suggest that this tort would be recognized. The Plaintiff seeks economic damages as the result of intentional conduct. Damages for economic loss may be recovered for more recently recognized intentional torts such as intentional interference with advantageous contractual relations, Tessier v. Rockefeller, 162 N.H. 324, 336-37 (2011), and traditional common law torts such as defamation. Harris v, Burley, 8 N.H. 216 (1836). Moreover, the New Hampshire Supreme Court has traditionally held that one may be found liable for damages on a conspiracy theory for combining with another to commit a civil wrong. Daniels v. Barker, 89 N.H. 416, 421-422 (1938).

In Plante v. Engle, 124 N.H. 213, 217 (1984), the Court held that where a parent is awarded custody of a child by court decree and the non-custodial parent deducts the child, an action will lie in favor of the custodial parent upon an allegation of damages. The Court stated that "likewise, we see no reason not to hold liable one who intentionally aids and abets another in interfering with the custody of rights of a parent". Id. BNE argues that Plante is sui generis, because the interest protected, the union of parent and child "transcends economics and deserves the utmost respect". Plante v. Engle, 124 N.H. at 216-217. While it is no doubt true that the law protects the relationship of parent and child to a greater extent than the relationship between persons in a business relationship, even if there is a fiduciary business relationship, it is also true that the New Hampshire Supreme Court has afforded enhanced protection to relationships between parties which involve duties greater than ordinary care. That this is so is illustrated by application of the economic loss doctrine.

Like most American jurisdictions New Hampshire recognizes the economic loss doctrine: the principle that parties bound by the contract may not pursue a tort recovery for purely economic or commercial losses associated with the contractual relationship. Plourde Sand & Gravel v. JGI E, Inc., 154 N.H. 791, 795 (2007). The purpose of this rule is to...