Noble v. Collias, SUCV14-3547-BLS 2

George Noble et al. v. Christian Collias et al

No. 135609

No. SUCV14-3547-BLS 2

Superior Court of Massachusetts, Suffolk, Business Litigation Session

November 10, 2016

MEMORANDUM OF DECISION AND ORDER ON DEFENDANTS' MOTIONS FOR PARTIAL SUMMARY JUDGMENT

Janet L. Sanders, Justice

The motions before this Court are yet another example of misguided attempts by some members of the business bar to use summary judgment as the vehicle to decide issues which by their nature almost always require resolution at trial. Faced with claims that include elements regarding the defendant's knowledge and the reasonableness of plaintiff's reliance--all questions of fact--each of the three individual defendants ask this Court to rule that they are nevertheless entitled to judgment in their favor as a matter of law as to certain counts asserted against them. They do so under the mistaken impression that, if the summary judgment record contains testimony supporting their position the facts that such testimony concerns are therefore undisputed even though there is circumstantial evidence which would support the contrary position. " The question of whose interpretation of the evidence is more believable 'is not for the court to decide on the basis of [briefs and transcripts] but is for the fact finder after weighing the circumstantial evidence and assessing the credibility of the witnesses.'" Bulwer v. Mt. Auburn Hospital, 473 Mass. 672, 689, 46 N.E.3d 24 (2016) quoting Lipchitz v. Raytheon Co., 434 Mass. 493 499, 751 N.E.2d 360 (2001). With this in mind, this Court concludes that the summary judgment motions must be DENIED as to all counts to which they pertain, except for two counts which add nothing to plaintiff's case and are without any legal basis.^[1]

This case arises from plaintiffs' purchase of common stock in the defendant Progressive Gourmet, Inc. (Progressive), a close corporation, and plaintiff George Noble's loan to Progressive of $300, 000. Progressive is not moving for summary judgment. The moving parties are Progressive CEO Richard Foster and two individuals, Christopher Collias (Chris) and his wife Julie Collias (Julie), who hold the majority of shares in the company and together owned one block of stock that was sold to the plaintiffs. Julie is also Progressive's treasurer and Chris a former CEO in the company.

The motions before the Court do not concern the promissory note (Count VI) and are only partially dispositive as to both Chris and Foster.^[2] Although the three motions are not identical as to the counts that each of them targets, together they concern the following claims: violation of the Blue Sky Statute, G.L.c. 110A, § 410 (Section 410) (Count I); fraud (Count II); negligent misrepresentation (Count III); violations of Chapter 93A (Counts IV and V); and unjust enrichment (Count VII).

Section 410 prohibits the sale of securities by means of any untrue statement of material fact or material omission. The statute offers strong protections to buyers at the same time that it creates a strong incentive for sellers of securities to make full disclosure. To achieve those purposes, described as both " redressive" and " preventive, " the statute imposes a burden of proof on the plaintiff which is considerably lighter than that which applies to common-law misrepresentation cases. Marram v. Kobrick Offshore Fund, Ltd., 442 Mass. 43, 52, 809 N.E.2d 1017 (2004). Although it does not impose strict liability, it does shift the burden of proof with regard to what the defendant knew or should have known at the time that the sale was made, placing that burden on the defendant.

Section 410(a)(2) assigns primary liability to the " seller" of the security as that term has been construed by the case law. See e.g., Hays v. Ellrich, 471 Mass. 592, 598-601, 31 N.E.3d 1064 (2015) (investment adviser who solicited sale is " seller" under 410(a)(2)). Section 410(b) assigns secondary liability to: 1) every officer or director of the seller; 2) every person who " directly or indirectly controls a seller, " and every " agent who materially aided in the sale . . ." Each of the defendants, for reasons specific to him or her, argues that Section 410 does not apply to them. The defendants' arguments notwithstanding, there is evidence in the summary judgment record to support the conclusion that all three defendants are covered by the statute. As to Foster in particular (whose summary judgment motion as to this Count focuses solely on this issue) this Court concludes that there are sufficient facts from which a jury could conclude that he acted as an " agent" for the Colliases as to that block of stock that the Colliases sold to the plaintiffs.

Section 410 does permit an affirmative defense to liability: if the defendant can prove by a preponderance of the evidence that she did not know and " in the exercise of reasonable care, " could not have known that the statement was false when made, then the defendant is not liable. Julie Collias ask this Court to rule that, as a matter of law, she has sustained that burden of proof. The plaintiffs' memorandum submitted in opposition to her motion sets forth in detail all the evidence in the summary judgment record from which a rational trier of fact could reach a different conclusion. Defendant's argument is all the more surprising, given that the Supreme Judicial Court has described this burden as a " heavy" one which is " difficult to sustain." Marram v. Kobrick Offshore Fund, Ltd., 442 Mass. at 52. Certainly, it is a fact intensive inquiry almost always left to the factfinder. Mass. Mut. Life Ins. Co. v. DB Structured Prods. 110 F.Supp.3d 288, 297 (D.Mass. 2015) and cases cited therein. Admittedly, the plaintiffs' case against Julie appears to be weak, given her...