Chang v. Winklevoss , 95 Mass. App. Ct. 202 ( 2019 )

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18-P-329 Appeals Court
WAYNE CHANG & another1 vs. CAMERON WINKLEVOSS & others.2
No. 18-P-329.
Suffolk. December 13, 2018. - April 24, 2019.
Present: Kinder, Neyman, & Desmond, JJ.
Practice, Civil, Motion to dismiss, Motion to amend, Summary
judgment, Costs. Damages, Quantum meruit. Unjust
Enrichment. Contract, Unjust enrichment, Termination,
Joint venture, Rescission, Attorney. Partnership,
Agreement, Dissolution. Uniform Partnership Act. Attorney
at Law, Malpractice, Negligence, Conflict of interest,
Representation of differing interests.
Civil action commenced in the Superior Court Department on
December 21, 2009.
Motions to dismiss, filed on May 7 and 18, 2010, were heard
by Peter M. Lauriat, J., and a motion for reconsideration, filed
on May 26, 2011, was considered by him; a motion for summary
judgment, filed on April 28, 2014, was heard by Thomas P.
1 The i2hub Organization, Inc.
2 Tyler Winklevoss, Divya Narendra, Howard Winklevoss,
ConnectU, Inc. (formerly known as ConnectU LLC), Scott R. Mosko,
and Finnegan, Henderson, Farabow, Garrett & Dunner LLP. While
originally named as a defendant, ConnectU was dismissed from the
case on March 22, 2013. The company no longer exists and is not
a party to this appeal.
2
Billings, J.; the entry of judgment was ordered by Edward P.
Leibensperger, J., and a motion for costs was heard by him.
Alan D. Rose, Jr. (Meredith W. Doty also present) for the
plaintiffs.
Matthew Murray, of California (Michael Rubin, of
California, & Max D. Stern also present) for Cameron Winklevoss
& others.
Erin K. Higgins (Christopher K. Sweeney also present) for
Finnegan, Henderson, Farabow, Garrett & Dunner LLP, & another.
KINDER, J. In this case we examine the dismissal of
contract and tort-based claims brought by software developer
Wayne Chang against brothers Cameron and Tyler Winklevoss, the
creators of ConnectU, Inc. (ConnectU), a social networking
website that was a competitor to The Facebook, Inc. (Facebook).
This action was filed following the settlement of protracted
multistate litigation between Mark Zuckerberg, the founder of
Facebook, and the Winklevoss brothers, Zuckerberg's pre-Facebook
collaborators. Chang's complaint alleged that he was entitled
to a share of the proceeds of the settlement between the
Winklevoss brothers and Zuckerberg -- $65 million in cash and
stock tendered by Facebook in exchange for ConnectU.
Chang's suit arises from the failed business relationship
between Chang and his company, The i2hub Organization, Inc.
(i2hub), the Winklevoss brothers, Divya Narendra, and Howard
3
Winklevoss (collectively, the Winklevoss defendants),3 and
ConnectU. Chang's complaint also included malpractice claims
against Scott R. Mosko (Mosko), an attorney who previously
represented Chang, and Mosko's law firm4 (collectively, the Mosko
defendants).
Chang asserted contract and tort claims against the
Winklevoss defendants, claiming that they had breached at least
one of two agreements entitling him to a portion of the Facebook
settlement proceeds. Alternatively, Chang claimed that, in the
absence of an enforceable agreement, he was entitled to recover
damages through equitable claims, including quantum meruit and
unjust enrichment. Chang's equitable claims were dismissed for
failure to state a claim, and his remaining contract and tort
claims were subsequently dismissed on summary judgment. The
professional negligence claims against the Mosko defendants were
also dismissed on a motion pursuant to Mass. R. Civ. P. 12 (b),
365 Mass. 754 (1974), and final judgment entered for all
defendants.5 On appeal, Chang claims error in the orders of
3 For clarity, we use first names when referencing the
individual Winklevosses.
4 Finnegan, Henderson, Farabow, Garrett & Dunner LLP.
5 After entry of the judgment and Chang's notice of appeal,
a judgment for costs entered, awarding the Winklevoss defendants
$30,305.53 for deposition costs. Chang filed an amended appeal,
to include the costs award, but makes no argument in his brief
regarding the award. The argument is therefore waived. See
4
dismissal and the decision on the defendants' motion for summary
judgment. We affirm, principally because we agree that the
business relationship between Chang and the Winklevoss
defendants ended long before the commencement of the settlement
negotiations between the Winklevoss brothers and Facebook.
Background. 1. Formation of the business relationship.
We summarize the facts alleged in Chang's complaint, accepting
them as true for the purpose of our review of the rule 12 (b)
dismissal of the quantum meruit and unjust enrichment claims.
Harrington v. Costello, 467 Mass. 720, 724 (2014).
Chang launched i2hub, a peer-to-peer, file-sharing
"platform," in March 2004. ConnectU, a social networking site
in competition with Facebook, was founded by Cameron and Tyler
Winklevoss. At some point, Divya Narendra and Howard Winklevoss
(Cameron and Tyler's father) also became coowners of ConnectU.
Seeking to increase ConnectU's user base, Cameron and Tyler
contacted Chang in October of 2004, to explore forming a
business relationship. The parties agreed to integrate i2hub
software into ConnectU's social networking website, and
discussed forming a jointly owned holding company, later
referred to as the Winklevoss Chang Group (WCG), which would own
both companies as well as other Internet-based entities that
Mass. R. A. P. 16 (a) (9) (A), as appearing in 481 Mass. 1628(2019).
5
they would jointly develop. The parties further agreed that,
upon completion of the integration, Chang would be given the
option to acquire a fifteen percent ownership interest in
ConnectU. On November 23, 2004, Cameron sent Chang a memorandum
of understanding (MOU) via e-mail,6 and Chang accepted the terms
the next day by e-mail.
Over the next several months, the parties worked
collaboratively, holding themselves out as partners in the
development of ConnectU, i2hub, and other Internet entities.
Chang and the Winklevoss defendants opened an office in Amherst
run by Chang, with a small staff paid for by Cameron and Tyler.
Revenue generated by i2hub and other Internet entities Chang
worked on was redirected to ConnectU. Chang also began working
to integrate the i2hub software into ConnectU, and claimed he
completed the integration in February, 2005. The complaint did
not indicate what, if any, compensation Chang received.
6 The MOU stated, in pertinent part:
"Upon completion of the integration, CU [ConnectU] will
give Wayne Chang the option to exercise a 15% stake in CU.
"This option can be exercised if and only if one of the
following conditions occurs:
"1. CU terminates its relationship with i2hub after
integration
"2. CU does not enter into a holding company with
i2hub."
6
Beginning in April 2005, the business relationship quickly
deteriorated as the parties became entangled in various
financial and ownership disputes (further described infra).
2. Termination of the business relationship. We summarize
the undisputed facts which relate to the Winklevoss defendants'
motion for summary judgment. The business collaboration between
Chang and the Winklevoss defendants was short-lived. The
parties do not dispute that they never executed a written
agreement to form WCG; nor is there any evidence of any
agreement on the specific terms of a working partnership or
holding company. Several months after the relationship
commenced in the fall of 2004, it became antagonistic due to
intensifying financial and ownership disputes. In April of
2005, Cameron and Tyler informed Chang that they had ceased
funding him and the Amherst office. They also claimed that
Chang was in debt to them for expenses in the amount of
approximately $18,000 and demanded repayment or equity in i2hub.
The record contains substantial documentation in the form
of e-mail messages and online discussions (instant messaging)
exchanged during April and May of 2005 between Chang and the
Winklevoss brothers, as well as between Chang and John Taves, a
principal of a company hired to work on the integration of
ConnectU and i2hub. These communications indicate that both
parties sought to end their business relationship. On April 23,
7
2005, Chang told Taves that he had "no desire to continue to
work with them" and that he was "figur[ing] out how to get
funding, wash myself of the Winklevosses, and move onto the next
venture." The next day, Chang further stated to Taves, "[A]ll I
want is i2hub . . . [I'm] willing to take just i2hub, rather
than keeping my hands in connectu." Chang reiterated this
position in an e-mail to Taves on April 25, stating that his
"end goal" was to retain ownership of i2hub and, on April 28, he
again told Taves that he had "no wish to continue to work with
them," adding that he had "already begun disintegration."
In a lengthy instant message exchange on May 25, 2005,
Chang and Tyler discussed the status of their working
relationship and Chang's alleged debt. Focusing on an upcoming
press release concerning i2hub, Tyler told Chang to "make sure
you take our names off of anything to do with i2hub." Chang
responded, "[M]ake sure you remove i2hub from connectu." The
conversation continued with Tyler asking, "[W]hy would you want
our names on the press release if we are no longer working
together?" Chang responded, "[I] don't," adding that he also
did not "want i2hub associated with connectu anymore," and ended
by stating that i2hub and ConnectU were "no longer working
together."
Chang also expressed doubts as to whether WCG or any other
holding company or partnership was ever formed. In an e-mail to
8
Tyler on April 23, 2005, Chang stated that WCG "was never
fleshed out," that he was "sent a draft of the agreement, but
nothing was done on that . . . [and that it was] something that
hasn't been created." In an instant message exchange with Taves
on April 24, Chang referred to WCG as "a non-existent holding
company," claiming he "never agreed to [a] holding company," and
that no "merger" had occurred because he "didn't agree to the
terms [Cameron and Tyler] set out." In an e-mail to Taves on
the same day, he further asserted that "the parent company was
never formed." In another e-mail to Taves in late May, he
stated: "The umbrella corporation never materialized. So both
companies have been separate, but working jointly." In the same
May 25 instant message exchange noted above, in response to
Tyler's admonishing him to fulfill his agreements, Chang
countered by saying, "[S]how me the agreement." Chang further
stated that until the dispute over the debt was resolved, "there
is no deal in place." He went on to explain that "there is no
agreement" and, therefore, when the funding stopped, he "stopped
working with connectu's interest in mind," and that there was
"no reason for [him] to continue when connectu has no desire
to." Chang continued to reiterate that "theres [sic] no
agreement in place." Chang ended the exchange by stating that
the financial dispute needed to be resolved before he would go
9
forward: "[Y]ou decide what you want to do. [I]f you want the
integration to go ahead, make an offer."
Finally, while Chang claimed in his complaint that he had
completed the integration, he indicated to Tyler in the May 25
instant message exchange that the integration was "never
completed." He explained that he had stopped working on
integration because Cameron and Tyler ceased funding him, and
would continue to withhold his services until the dispute over
the debt was resolved.
After May 25, 2005, there was little contact between the
parties. The parties do not dispute that the Winklevoss
defendants continued operating ConnectU without Chang.
Likewise, Chang continued to operate i2hub until he shut it down
six months later on November 14, 2005.
3. The Facebook litigation. On September 2, 2004, prior
to Chang's involvement with the Winklevoss defendants, ConnectU
filed an action in the United States District Court for the
District of Massachusetts against Zuckerberg, Facebook, and
others, asserting, inter alia, misappropriation of trade
secrets. See ConnectU LLC vs. Mark Zuckerberg, No. 04-CV-11923
(D. Mass.) (Massachusetts action). Chang was not a party to the
action. Almost a year later, in August 2005 (after Chang and
the Winklevoss defendants had ended their business
collaboration), Facebook brought an action in the California
10
Superior Court against ConnectU and the Winklevoss defendants
alleging that one of the websites Chang had helped develop
misappropriated Facebook's proprietary information and user
data. The case was later removed to the United States District
Court for the Northern District of California (District Court).
See Facebook Inc. vs. Connect U, Inc., No. 5:07-CV-01389 (N.D.
Cal.) (California action). (We refer to the Massachusetts and
California actions collectively as the Facebook litigation.)
Chang was eventually named as a defendant in the California
action.
Facebook and ConnectU agreed to a global settlement of all
pending litigation at a February 22, 2008 mediation. Pursuant
to the terms of the settlement, Facebook received one hundred
percent of ConnectU's stock in exchange for $20 million in cash
and over one million shares of Facebook stock for a total value
of approximately $65 million. Subsequent disagreement over the
terms of the settlement led to further litigation. The
settlement was eventually deemed enforceable, and the California
and Massachusetts actions were dismissed with prejudice,
including all claims against Chang in the California action.
See Facebook, Inc. v. Pacific Northwest Software, Inc., 640 F.3d
1034 (9th Cir. 2011); ConnectU, Inc. vs. Facebook, Inc., No. 07-
11
CV-10593 (D. Mass. July 22, 2011) (order of dismissal);7 Facebook
Inc. vs. Connect U, Inc., No. 5:07-CV-01389 (N.D. Cal. Dec. 15,
2008) (order of dismissal).
Chang filed the present action on December 21, 2009,
claiming that, by virtue of his fifty percent interest in WCG,
he was entitled to a fifty percent share of the settlement
proceeds.8
4. The Mosko defendants' representation of Chang. For the
purpose of our review of the Mosko defendants' motion to
dismiss, we again accept the facts alleged in the complaint as
true. Harrington, 467 Mass. at 724. We include facts derived
from documents, e-mails, and other materials referenced or
relied upon in the complaint. See Harhen v. Brown, 431 Mass.
838, 839-840 (2000). We also take judicial notice of court
orders pertaining to the Facebook litigation settlement. See
Reliance Ins. Co. v. Boston, 71 Mass. App. Ct. 550, 555 (2008).
The Winklevoss defendants and ConnectU retained the Mosko
defendants to defend them in the California action. When Chang
was named as a defendant in that action, the Winklevoss brothers
7 This case was a sequel to the earlier Massachusetts
filing; the two cases were consolidated.
8 Chang alleged in the alternative that, pursuant to the
MOU, he was entitled to a fifteen percent share of the
settlement. On appeal, he pursues only his theory as to his
alleged fifty percent ownership of WCG.
12
and their father, Howard, arranged and paid for Mosko to also
represent Chang. Chang claimed that, while the Mosko defendants
were aware of the MOU between Chang and ConnectU, as well as
Chang's partnership in WCG, he and the Mosko defendants never
discussed any potential claims he might have against ConnectU or
the Winklevoss defendants.
The Mosko defendants' representation of Chang was
memorialized in an engagement agreement, signed by Chang on
March 1, 2007. The agreement stated in detail that Mosko was
concurrently representing the Winklevoss defendants; that the
Winklevoss defendants were his "primary client[s]"; and that he
agreed to additionally represent Chang "[a]s an accommodation"
to the Winklevoss defendants. The agreement further provided
that Chang would "waive any current or future conflicts that
. . . may exist in the future by [virtue of the Mosko
defendants'] representation [of both Chang and the Winklevoss
defendants]."
The complaint alleged that while Mosko had informed Chang
by e-mail on January 29, 2008, about an upcoming mediation
(which Mosko attended), Mosko never provided Chang with any
specific information about the date, time, or place of the
mediation, or, after the mediation, the terms of the settlement
agreement. In the January 29 e-mail, Mosko stated that
"[u]nless I hear objection, I will move forward with this
13
mediation." On February 25, 2008, Mosko sent Chang a second e-
mail informing him that, as a result of the mediation, the
parties had reached a global settlement of the Facebook
litigation, and stated, "The effect [of the settlement] on you
will be a dismissal of the [California action] with prejudice."
No other details concerning the terms of the settlement were
included. The terms of the settlement agreement did not specify
any particular apportionment of the proceeds among those with an
ownership interest in ConnectU.
On April 28, 2008, Mosko sent Chang a third e-mail, which
summarized their telephone conversation earlier that day
regarding the continuing acrimony between Facebook and the
Winklevoss defendants over the settlement. Mosko's e-mail
stated, "We also discussed at least the possibility that . . .
you may be in a position to disagree with ConnectU's decision to
dispute the enforceability of the settlement agreement. To the
extent there may be a conflict between you and ConnectU, I
advised that it might be a good idea for you to get a separate
attorney to look at this. . . . For now, you have told me that
you are willing to sit on the side lines without raising a
conflict, while ConnectU and Facebook fight this recent battle."
By November of 2008, pursuant to an order of the District
Court enforcing the settlement agreement, the proceeds of the
settlement were transferred to a special master. Soon
14
thereafter, pursuant to an amended judgment ordering specific
performance of the settlement agreement, the special master was
ordered to transfer Facebook's payment of cash and stock to
Boies, Schiller & Flexner LLP (BSF), a law firm representing the
Winklevoss defendants and designated to act as trustee of the
proceeds. The court ordered that, upon transfer to BSF, the
proceeds were to be held "in trust for [BSF's] clients and any
lawful claimant." A year later, in 2009, Chang filed the
complaint in this action. The settlement proceeds continued to
be held in trust until the litigation (including the appeal)
over the enforceability of the settlement agreement was resolved
in December 2011. Chang did not file any pleading seeking
consideration as a "lawful claimant."9
Discussion. 1. The equitable claims. a. The Winklevoss
defendants' motion to dismiss and Chang's motion for
9 We note that additional facts not before the judge, but
included in the record, confirm that Chang failed to take any
action to assert that he was a lawful claimant. On November 1,
2011, the District Court ordered all "parties seeking
disbursement of funds" to file motions and appear before the
court at a hearing to be held on November 28, 2011. BSF
forwarded the order to Chang's then-attorneys (he was no longer
represented by the Mosko defendants) and advised them of Chang's
options. On December 5, 2011, the District Court ordered
disbursement of the settlement proceeds to the claimants,
including the Winklevoss defendants and others. Chang never
filed a claim and therefore was not included in that court's
order of disbursement.
15
reconsideration. We review the allowance of a motion to dismiss
pursuant to Mass. R. Civ. P. 12 (b) (6) de novo, accepting the
allegations in the complaint as true and drawing all reasonable
inferences in the nonmoving party's favor. Curtis v. Herb
Chambers I-95, Inc., 458 Mass. 674, 676 (2011). "The ultimate
inquiry is whether [Chang] alleged . . . facts . . . so as to
plausibly suggest an entitlement to relief" (citation omitted).
Baker v. Wilmer Cutler Pickering Hale & Dorr LLP, 91 Mass. App.
Ct. 835, 842 (2017).
Relying on MCI WorldCom Communications, Inc. v. Department
of Telecommunications & Energy, 442 Mass. 103, 116 (2004), and
Fox v. F & J Gattozzi Corp., 41 Mass. App. Ct. 581, 589 (1996),
a Superior Court judge (first judge) issued a consolidated order
on April 28, 2011, dismissing the quantum meruit and unjust
enrichment claims, and stating simply, "Chang has asserted both
tort and breach of contract claims which, if the Winklevoss
defendants are held liable, will adequately compensate him for
any losses." Upon reconsideration, the judge revised his
grounds for dismissal, stating that "[t]he court has already
determined that the complaint alleges sufficient facts as to the
existence of a contract to withstand a motion to dismiss." We
interpret the judge's succinct rulings as an application of the
well-settled principle that a claim of unjust enrichment or
quantum meruit will not lie "where there is a valid contract
16
that defines the obligations of the parties" (citation omitted).
Metropolitan Life Ins. Co. v. Cotter, 464 Mass. 623, 641 (2013)
(unjust enrichment). Boston Med. Ctr. Corp. v. Secretary of the
Executive Office of Health & Human Servs., 463 Mass. 447, 467
(2012) (quantum meruit).
However, the existence of a contract is a question of fact.
LeMaitre v. Massachusetts Turnpike Auth., 70 Mass. App. Ct. 634,
637 (2007). At the pleading stage, that factual question had
not been resolved. Although damages for breach of contract and
unjust enrichment are mutually exclusive, "it is accepted
practice to pursue both theories at the pleading stage." Zelby
Holdings, Inc. v. Videogenix, Inc., 92 Mass. App. Ct. 86, 93
(2017), quoting Lass v. Bank of Am., N.A., 695 F.3d 129, 140-141
(1st Cir. 2012).10 Thus, dismissal of Chang's equitable claims
on these grounds at the pleading stage, where the claims were
properly pleaded in the alternative, was error, "as it
presuppose[d] the existence of a valid underlying contract."
10Chang properly pleaded an alternative basis for relief
pursuant to Mass. R. Civ. P. 8 (e) (2), 365 Mass. 749 (1974),
which "permits a party to state as many separate claims or
defenses as may be properly available, 'regardless of
consistency and whether based on legal or equitable grounds.'"
Zelby Holdings, 92 Mass. App. Ct. at 92.
17
Zelby Holdings, supra.11 Upon our de novo review, however, we
affirm the dismissal on different grounds.12
To prove claims for quantum meruit and unjust enrichment,
Chang would be required to demonstrate that he had conferred a
measurable benefit on the Winklevoss defendants through the
services he rendered and that he had a reasonable expectation of
receiving compensation for those services. See Finard & Co.,
LLC v. Sitt Asset Mgt., 79 Mass. App. Ct. 226, 229 (2011). Such
compensation is the "fair and reasonable value" of the services
provided. J. A. Sullivan Corp. v. Commonwealth, 397 Mass. 789,
797 (1986). Here, instead of seeking the fair and reasonable
value of the services he provided to the Winklevoss defendants
during their short collaboration, Chang sought the value of his
alleged ownership interest in either ConnectU or WCG, ConnectU's
parent company.13 Thus, Chang's asserted entitlement to a
11We need not analyze Chang's quantum meruit and unjust
enrichment claims separately as, in this context, these quasi-
contract claims are indistinguishable. See Liss v. Studeny, 450
Mass. 473, 479 (2008).
12"We may affirm the judgment on any ground apparent on the
record that supports the result reached in the [trial] court"
(quotation and citation omitted). Lopes v. Commonwealth, 442
Mass. 170, 181 (2004).
13Chang did not set forth any facts in his complaint
regarding the fair and reasonable value of his services beyond a
general reliance on his ownership stake in ConnectU and in the
partnership, although in an affidavit subsequently submitted he
stated that the Winklevoss defendants had paid him a stipend and
reimbursed him for certain expenses.
18
portion of the Facebook litigation settlement proceeds was
premised entirely on ownership interest(s) that were
contractually created and defined. As a matter of law, "a party
does not recover on the contract itself under quantum meruit [or
unjust enrichment]." Finard, 79 Mass. App. Ct. at 229, quoting
Liss v. Studeny, 450 Mass. 473, 480 (2008). Accordingly,
Chang's equitable claims did not provide a legally plausible
basis for relief.
b. Chang's motion to amend the complaint. After the first
judge dismissed the equitable claims, Chang moved to amend his
complaint. The motion was denied by the same judge. We review
the denial of a motion to amend a complaint for abuse of
discretion, Nguyen v. Massachusetts Inst. of Tech., 479 Mass.
436, 461 (2018), and Chang has the burden to show that the judge
exceeded the bounds of his discretion. Mancuso v. Kinchla, 60
Mass. App. Ct. 558, 572 (2004). Although leave to amend should
be "freely given when justice so requires," Mass. R. Civ. P. 15
(a), 365 Mass. 761 (1974), such leave may be denied where
amending the complaint would be futile. Nguyen, supra. An
amended complaint is futile if the amended claims would not
survive a motion to dismiss for failure to state a claim.
Mancuso, supra.
19
In his motion to amend, Chang sought to add facts showing
that, as a result of his work, ConnectU gained more than 20,000
users and was able to obtain and import additional user
information. Chang argued that these facts supported his
contention that his services provided a benefit to ConnectU.
However, the proposed amendments did not set forth any facts
relating to the fair and reasonable value of the services Chang
rendered, and they did not alter his theory of recovery, which
remained grounded in his contract-based ownership interests.
For these reasons, we cannot say that the judge "made a clear
error of judgment in weighing the factors relevant to the
decision . . . such that the decision [that the amended
complaint was futile] falls outside the range of reasonable
alternatives." L.L. v. Commonwealth, 470 Mass. 169, 185 n.27
(2014).
2. Chang's partnership claim against the Winklevoss
defendants. The Winklevoss defendants subsequently moved for
summary judgment on Chang's contract claims. The motion was
allowed by a second Superior Court judge. We review the
allowance of a motion for summary judgment de novo. Targus
Group Int'l, Inc. v. Sherman, 76 Mass. App. Ct. 421, 428 (2010).
In doing so, we look to the "same record as the motion judge"
and determine "whether the evidence, viewed in the light most
favorable to the losing party, establishes all material facts
20
and entitles the successful party to a judgment as a matter of
law." Id.
While Chang's contract claims encompassed a number of
related causes of action, on appeal he argues only that it was
error to dismiss his claim that the Winklevoss defendants
breached a partnership or joint venture agreement to create WCG,
the holding company that was intended to own ConnectU, i2hub,
and other ventures, and in which he claims to have had a fifty
percent ownership stake (partnership claim). Pursuant to the
partnership claim, Chang asserted an entitlement to fifty
percent of the Facebook litigation settlement proceeds.
The second judge concluded that the undisputed material
facts established that, while the parties may have entered into
some semblance of an oral agreement to form a partnership,
"whatever partnership there may have been (if any) was at an end
by the mutual agreement of both sides" as of May 25, 2005. The
judge concluded that the undisputed material facts showed that
the parting was mutual, as both sides sought to "extract
themselves from one another and their shared business venture."
We discern no error in the judge's reasoning.
Chang contends that the judge erred by failing to apply the
Massachusetts Uniform Partnership Act, G. L. c. 108A (MUPA),
governing dissolution of at-will partnerships. Under MUPA, a
partnership will continue to exist until the winding up of its
21
affairs is concluded. See G. L. c. 108A, § 30; Loan
Modification Group, Inc. v. Reed, 694 F.3d 145, 151 (1st Cir.
2012) (applying Massachusetts law). "Winding up" is defined as
a process occurring between dissolution and termination wherein
"work in process is completed, partnership assets are sold,
creditors are paid, and the business of the partnership is
brought to an orderly close." Reed, supra, quoting Anastos v.
Sable, 443 Mass. 146, 151-152 (2004). Here, the summary
judgment record established that whatever winding up was
necessary for this short-lived partnership, the process was
complete as of December 2005.
By the end of May 2005, the parties had mutually agreed to
dissolve whatever partnership they may have had. Chang's claim
that "[t]here remained ongoing disputes about the finances of
the partnership, including the Winklevoss [d]efendants' claim
that Chang owed them $18,000, and Chang's claim that the
Winklevoss [d]efendants had an ongoing duty to fund his work for
the business," is not supported by the summary judgment record.
There was no evidence of any effort to follow up on these
"disputes" after May 25, 2005. While there was some suggestion
during an online discussion on May 25 of a further conference
call, there was no evidence that such a call occurred. When
Chang suggested to Tyler, "Decide what you want to do [and] if
you want the integration to go ahead, make an offer," no offer
22
was forthcoming. In fact, after May 25, 2005, the parties had
almost no contact.14 In short, the summary judgment record did
not raise a triable issue of fact on these issues. The winding-
up process was complete and the partnership was terminated well
before the Winklevoss defendants entered into settlement
negotiations with Facebook in February of 2008.
The parties' undisputed words and conduct demonstrate that
by at least the end of 2005 they had mutually agreed to rescind
any partnership, and that their relationship going forward would
be as if no partnership had ever existed, with Chang retaining
full control over i2hub and the Winklevoss defendants retaining
full control over ConnectU. "An agreement to rescind a contract
need not be made in any formal, express terms. Rather, mutual
assent to a rescission may be inferred from the attendant
circumstances and conduct of the parties." Puma v. Gordon, 9
Mass. App. Ct. 489, 495 (1980). See Flaherty v. Goldinger, 249
Mass. 564, 567 (1924). Here, even when the facts are viewed in
the light most favorable to Chang, the undisputed evidence
established that the parties agreed to take their respective
companies and "simply to walk away." For these reasons, we
14The record shows only a single e-mail from Cameron to
Chang dated December 21, 2005, in which Cameron informed Chang
of an outstanding bill of $3,820 owed to the Pioneer Valley
Transit Authority for advertisements. Chang paid the bill.
23
discern no error in the allowance of the Winklevoss defendants'
motion for summary judgment.15
3. Legal malpractice claim against the Mosko defendants.
To prevail on a claim for legal malpractice, a plaintiff must
establish the existence of an attorney-client relationship, a
breach of the duty of care, actual damages, and that the breach
proximately caused such damages. See Williams v. Ely, 423 Mass.
467, 475-476 (1996). Chang's allegations, taken as true, "must
be enough to raise a right to relief above the speculative
level." Iannacchino v. Ford Motor Co., 451 Mass. 623, 636
(2008), quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555
(2007). "A complaint is insufficient if it rests on 'naked
assertions' devoid of 'further factual enhancement.'" Doe v.
American Guar. & Liab. Co., 91 Mass. App. Ct. 99, 105 (2017),
quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).
In allowing the motion to dismiss the claims against the
Mosko defendants for lack of subject matter jurisdiction
pursuant to rule 12 (b) (1), the first judge focused on Chang's
failure to demonstrate any cognizable harm he sustained as a
result of the Mosko defendants' representation, reasoning that
"any injury as a result of missed settlement opportunities is
15Given the result we reach, we need not address the
defenses of repudiation and equitable estoppel raised by the
Winklevoss defendants.
24
far too speculative, and any causal connection to the
defendants' conduct far too attenuated, to confer standing."
The judge further concluded that "[a]ny claim to the proceeds
rests, of necessity, on Chang's claim of ownership rights in
ConnectU." The judge added that dismissal was also appropriate
under rule 12 (b) (6) for Chang's failure to state a claim.
While we agree that Chang failed to set forth any
cognizable harm resulting from professional negligence, we rest
our determination on Chang's failure to state a claim under rule
12 (b) (6). On appeal, Chang argues that he was injured by the
Mosko defendants' negligence in both failing to adequately
protect his interests and in subordinating his interests to
those of the Winklevoss defendants during the Facebook
litigation mediation. In support thereof, he points to a number
of alleged negligent acts, including failing to sufficiently
inform him of, or include him in, the Facebook litigation
settlement discussions in which he had a direct and substantial
interest, thus depriving him of the opportunity to participate
so as to obtain a more favorable outcome. Chang further claims
that the Mosko defendants agreed to a release of his claims
without his authorization, and failed to advise him of both
potential conflicts of interest arising from the Mosko
defendants' dual representation of him and the Winklevoss
25
defendants, as well as his right to independent counsel or
possible claims against the Winklevoss defendants.
These allegations are either insufficiently supported or
contradicted by the evidence relied on or referenced in the
complaint. For example, Chang's engagement agreement with the
Mosko defendants is contrary to Chang's claim that he was not
made aware of any potential conflicts of interest. The
agreement expressly stated that Mosko was concurrently
representing the Winklevoss defendants, that they were his
"primary client[s]," and that Chang was agreeing to "waive any
current or future conflicts" stemming from the representation.16
Chang agreed to the representation on these terms. Pursuant to
Mass. R. Prof. C. 1.7 (b), as appearing in 471 Mass. 1335(2015), a lawyer may represent a client in the face of a
possible risk of a conflict of interest as long as the lawyer
reasonably believes that the representation will not adversely
affect the client and the client gives informed, written
consent. Moreover, Chang's complaint noted that he never
discussed his ownership interests in ConnectU or WCG with the
16The engagement agreement was drafted to reflect the
original purpose of the representation, which was "solely in
connection with a deposition and document subpoena" Chang had
received in the California action. The representation continued
once Chang was named as a defendant in that action.
26
Mosko defendants.17 Even if the Mosko defendants were aware of
Chang's ownership interests in ConnectU and WCG, the
representation was limited to defending him against claims of
misappropriation of proprietary information and user data
brought by Facebook in the California action. Pursuant to Mass.
R. Prof. C. 1.2 (c), as appearing in 471 Mass. 1313 (2015), "[a]
lawyer may limit the scope of the representation if the
limitation is reasonable under the circumstances and the client
gives informed consent."
The e-mails Mosko sent to Chang show that Mosko kept Chang
reasonably updated on the negotiations and informed him of
relevant details of the settlement -- for example, that the
settlement procured a dismissal of Facebook's claims against
Chang in the California action. The e-mails also show that
Chang was given ample opportunity to request additional
information. In one e-mail, Mosko advised Chang of potential
conflicts of interest arising from the dual representation, as
well as Chang's right to independent counsel.
Finally, the terms of the settlement agreement, which are
set forth in the District Court's order enforcing the agreement,
17The complaint alleged only that the Mosko defendants were
"aware of" the MOU, "aware of the existence" of WCG, and aware
that Chang and the Winklevoss defendants had operated as
partners.
27
did not apportion the proceeds among any of the ConnectU
stakeholders. Nor did Chang allege that the Mosko defendants
should or could have altered the terms of the agreement to
explicitly apportion to Chang any such share. The assertion
that the Mosko defendants' negligence caused Chang not to
receive his fair portion of the settlement proceeds is further
belied by the fact that, at the time Chang filed his complaint
and for almost two years thereafter, the settlement proceeds
were held in trust as ordered by the court in the California
action for "any lawful claimant." Accordingly, Chang's right to
a portion of the settlement proceeds, if any, remained intact
and was not impaired by any conduct of the Mosko defendants.18
Chang does not explain his failure to submit a claim to the
settlement proceeds.
Simply put, Chang failed to allege facts to plausibly
suggest that he "probably would have obtained a better result
had the attorney exercised adequate skill and care," as he must
to prevail on a professional negligence claim. Fishman v.
Brooks, 396 Mass. 643, 647 (1986).19
18Chang claimed that the "any lawful claimant" language was
inserted for the specific purpose of allowing the Winklevoss
defendants' former counsel to submit a claim for payment of
their fees. However, court orders and correspondence between
the trustee and Chang's then-attorneys (no longer the Mosko
defendants) show that Chang could have, in fact, submitted a
claim of entitlement.
28
Judgment affirmed.
Judgment for costs
affirmed.
19 "Other points, relied on by [Chang], but not discussed in
this opinion, have not been overlooked. We find nothing in them
that requires discussion." Commonwealth v. Domanski, 332 Mass.
66, 78 (1954).