COLLATOS FAMILY PARTNERSHIP, L.P. v. ATHENA CAPITAL ADVISORS LLC, & Others. ( 2023 )

NOTICE: Summary decisions issued by the Appeals Court pursuant to M.A.C. Rule
23.0, as appearing in 97 Mass. App. Ct. 1017 (2020) (formerly known as rule 1:28,
as amended by 73 Mass. App. Ct. 1001 [2009]), are primarily directed to the parties
and, therefore, may not fully address the facts of the case or the panel's
decisional rationale. Moreover, such decisions are not circulated to the entire
court and, therefore, represent only the views of the panel that decided the case.
A summary decision pursuant to rule 23.0 or rule 1:28 issued after February 25,
2008, may be cited for its persuasive value but, because of the limitations noted
above, not as binding precedent. See Chace v. Curran, 71 Mass. App. Ct. 258, 260
n.4 (2008).
COMMONWEALTH OF MASSACHUSETTS
APPEALS COURT
22-P-655
COLLATOS FAMILY PARTNERSHIP, L.P.
vs.
ATHENA CAPITAL ADVISORS LLC, & others.1
MEMORANDUM AND ORDER PURSUANT TO RULE 23.0
The plaintiff, Collatos Family Partnership, LP (CFP), filed
a four-count complaint in the Superior Court against defendants
Athena Capital Advisors LLC (Athena), Fiduciary Trust
International, LLC (Fiduciary), and Athena's former manager,
Lisette Cooper, alleging breach of fiduciary duty, breach of
contract, and breach of the implied covenant of good faith, and
seeking an equitable accounting. The first motion judge allowed
the defendants' motion to dismiss under Mass. R. Civ. P.
12 (b) (6), 365 Mass. 754 (1974), as to all counts except those
for breach of contract and an equitable accounting (counts II
and IV), on the narrow claim for failing to provide CFP with
books and records as CFP had requested in June and July 2020.
1 Fiduciary Trust International, LLC, and Lisette Cooper.
Subsequently, a second motion judge denied CFP's motion under
Mass. R. Civ. P. 56 (f), 365 Mass. 824 (1974), to delay ruling
on the defendants' motion for summary judgment until discovery
could be undertaken, and then granted the defendants' motion for
summary judgment under Mass. R. Civ. P. 56 (c) on the two
remaining counts. Judgment then entered in favor of the
defendants. CFP appeals, claiming that the first motion judge
erred in dismissing its claim of breach of fiduciary duty and
the second motion judge abused his discretion in not allowing
further time for discovery and also erred in allowing the
defendants' motion for summary judgment. Because we discern no
error, we affirm.
Background. We summarize the facts as well as any
reasonable inferences alleged in the complaint and the attached
exhibits, which we accept as true in reviewing a motion to
dismiss. See A.L. Prime Energy Consultant, Inc. v.
Massachusetts Bay Transp. Auth., 479 Mass. 419, 421 (2018);
Ginther v. Commissioner of Ins., 427 Mass. 319, 322 (1998). We
reserve recitation of the summary judgment record for our
discussion below.
In 2007, CFP, a Delaware limited partnership, contributed
$500,000 to become a roughly one percent member of Athena, a
Delaware limited liability company and investment advisory firm.
Athena is governed by the second amended and restated limited
2
liability company agreement (second agreement), of which the
relevant sections can be summarized as follows: the board of
managers (board) had exclusive control over the management of
Athena2; a majority vote of the three-member board was required
to merge or consolidate Athena3; and on request by any member,
the board was required to provide members with copies of
Athena's budgets, financial statements, and books and records.4
CFP's management became concerned that Athena's other
members may have received distributions or other benefits that
CFP did not receive. CFP repeatedly shared its concerns about
the management of Athena with defendant Lisette Cooper and
counsel for Athena, but never received a satisfactory response.
In 2020, Athena informed CFP of an anticipated merger and
that, after thirteen years of being a member, CFP would receive
its original investment back. In February of 2020, while the
merger was being finalized, counsel for Athena provided CFP with
tax documents and releases for the review and signature of CFP's
general partner. CFP's general partner immediately asked for an
accounting or explanation of the amounts that Athena's other
members would receive as a result of the merger, but Athena's
counsel refused to provide it.
2 Second agreement § 7.2.
3 Second agreement § 6.6 (as amended).
4 Second agreement § 12.2.
3
Athena eventually notified CFP that Athena merged into
Fiduciary on March 2, 2020, and as a result, CFP was no longer a
member of Athena.5 In April of 2020, Athena's counsel sent to
CFP an e-mail message listing, without any documentary support,
the amounts that each member of Athena received as a result of
the merger. In June of 2020, counsel for CFP requested that CFP
be permitted to review Athena's books and records. In July, CFP
made the same request to Fiduciary, which denied the request as
CFP was no longer a member since the merger.6 This lawsuit then
followed.
Discussion. 1. Motion to dismiss CFP's breach of
fiduciary duty claim. CFP appeals the dismissal of its claim
alleging breach of fiduciary duty. We review the allowance of a
motion to dismiss under Mass. R. Civ. P. 12 (b) (6) de novo.
See A.L. Prime Energy Consultant, Inc., 479 Mass. at 424.
"While a complaint attacked by a . . . motion to dismiss
does not need detailed factual allegations . . . a
plaintiff's obligation to provide the 'grounds' of his
'entitlement to relief' requires more than labels and
conclusions. . . . Factual allegations must be enough to
raise a right to relief above the speculative level . . .
[based] on the assumption that all the allegations in the
complaint are true (even if doubtful in fact)."
5 As discussed further below, the defendants produced, among
other things, the merger agreement and the new LLC agreement
that replaced the second agreement after the merger, as part of
the summary judgment record.
6 In June, Athena also changed its name to Fiduciary Trust
International, a subsidiary of Fiduciary Trust Company
International.
4
Iannacchino v. Ford Motor Co., 451 Mass. 623, 636 (2008),
quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555-556
(2007).
Under Delaware law,7 "[a] claim for breach of fiduciary duty
requires proof of two elements: (1) that a fiduciary duty
existed and (2) that the defendant breached that duty." Beard
Research, Inc. v. Kates, 8 A.3d 573, 601 (Del. Ch. 2010), aff'd
sub. nom. ASDI, Inc. v. Beard Research, Inc., 11 A.3d 749 (Del.
2010). A breach occurs when a fiduciary commits "an unfair,
fraudulent, or wrongful act." Id. at 602. CFP claimed below
that Athena breached its fiduciary duty by refusing to provide
the requested financial documents, failing to provide CFP with
the terms of the merger, pressuring or attempting to trick CFP's
general partner to sign broad releases which absolved Athena of
any wrongdoing, and refusing to release funds when CFP's general
partner refused to sign the releases.
CFP's first claim alleging that Athena breached its
fiduciary duty by failing to provide it with financial documents
and other requested information is identical to CFP's claim that
Athena violated the terms of the second agreement. The law of
Delaware, which we apply here, makes clear that dismissal is the
appropriate remedy where the same set of facts that underlie the
7 Both parties agree that the Delaware law applies.
5
breach of contract claim also form the basis of the claim for
breach of fiduciary duty. See Nemec v. Shrader, 991 A.2d 1120,
1129 (Del. 2010). When a dispute involves obligations set forth
in a contract, it will be treated as a breach of contract claim.
See id. The claim of breach of fiduciary duty is subsumed into
the breach of contract claim and dismissal is the appropriate
remedy.
Second, other than conclusory statements and suspicions,
CFP failed to allege any facts that Athena breached its
fiduciary duty by attempting to pressure CFP's general partner
into signing the broad release forms.8 CFP was provided copies
of all the releases and was not prohibited from consulting with
an attorney to obtain independent legal advice. Cf. Coveney v.
President & Trustees of College of Holy Cross, 388 Mass. 16, 22
(1983) ("To avoid a contract on the basis of duress, a party
must show that conduct by the other party caused him to enter
into the contract under the influence of such fear as precludes
him from exercising free will and judgment" [quotation and
citation omitted]). CFP does not allege, and the facts do not
support, that Athena's counsel mispresented the substance of the
releases to CFP; rather, CFP management believed that Athena
8 CFP claims that Athena, by providing a short period of time for
CFP to review the documents and releases, which CFP claims are
overly broad in favor of Athena, breached its fiduciary duty.
We disagree.
6
attempted to pressure CFP's general partner to sign the releases
before Athena would return CFP's original investment. Even if
we were to accept CFP's allegation that Athena was trying to
pressure CFP's general partner into signing the release
documents, and that somehow this would support a claim of a
breach of a fiduciary duty, CFP's general partner never did sign
the releases. Because CFP did not sign the releases, any
pressure to sign the documents is irrelevant to the claims
before us.
Additionally, the claim that Athena failed to provide CFP
with all of the details of the merger and the effect of the
merger on CFP cannot support a claim of breach of fiduciary duty
as the second agreement did not require each member's consent to
go forward with a merger. Moreover, CFP fails to allege any
facts that suggest or link the defendants' failure to provide it
with merger documents to any alleged wrongdoing by the
defendants aimed at CFP that would support a claim for breach of
fiduciary duty.
2. Motion for summary judgment and request for
continuance. While the motion to dismiss was pending, the
defendants were granted a protective order from CFP's numerous
discovery requests. After the order allowing the motion to
dismiss was rendered, Athena then filed a motion for summary
judgment on the remaining claims under Mass. R. Civ. P. 56 (c),
7
this time providing CFP with a redacted copy of the merger
agreement. CFP opposed the motion for summary judgment and
filed a motion to delay ruling on the summary judgment motion
under Mass. R. Civ. P. 56 (f), so that discovery could be
obtained.
We review the denial of a motion under rule 56 (f) for an
abuse of discretion. Commonwealth v. Fall River Motor Sales,
Inc., 409 Mass. 302, 307 (1991); Alphas Co. v. Kilduff, 72 Mass.
App. Ct. 104, 107 (2008). If a motion for summary judgment is
filed prior to meaningful discovery occurring, a party may
request a continuance under rule 56 (f). The rule provides:
"Should it appear from the affidavits of a party opposing
the motion [for summary judgment] that he cannot for
reasons stated present by affidavit facts essential to
justify his opposition, the court may refuse the
application for judgment or may order a continuance to
permit affidavits to be obtained or depositions to be taken
or discovery to be had or may make such order as is just."
Mass. R. Civ. P. 56 (f). When considering a motion pursuant to
rule 56 (f), a judge has broad discretion to consider the
relevance of the discovery request, whether the requested
documents are protected by attorney work-product privilege, and
whether the items being sought are already in possession of the
party asking for a continuance and thus of "marginal
significance" (citation omitted). Fall River Motor Sales, Inc.,
supra at 309. "One common reason for the denial of a
continuance in this context is the irrelevance of further
8
discovery to the issue being adjudicated in summary judgment."
Id. at 308. In Alphas Co., 72 Mass. App. Ct. at 110, our court
acknowledged five factors to be considered when ruling upon a
motion under rule 56 (f). They are: "authoritativeness,
timeliness, good cause, utility, and materiality" (citation
omitted). Id.
In support of its motion, CFP provided an affidavit from
its counsel claiming that CFP was unable to respond to the
motion for summary judgment unless CFP was provided with certain
unredacted documents pertaining to the merger. This claim is
not sufficient to establish a threshold showing that specific
documents related to the merger would be relevant to CFP's
claims regarding its requests to Athena and Fiduciary in June
and July 2020, after the merger, to review Athena's books and
records. Rule 56 (f) does not give CFP a license to "'fish' for
evidence on which to base [its] complaint 'in hopes of somehow
finding something helpful to [its] case in the course of the
discovery procedure'" (citation omitted). Alphas Co., 72 Mass.
App. Ct. at 114. The second motion judge carefully considered
all five factors enunciated in Alphas Co., supra at 110, and
there was no abuse of discretion.
We next turn to the granting of the defendants' motion for
summary judgment. We review the allowance of a motion for
summary judgment de novo and from the same record as the motion
9
judge. Meyer v. Veolia Energy N. Am., 482 Mass. 208, 211
(2019). In order to prevail on a motion for summary judgment,
the moving party must establish that there are no genuine issues
of material fact. Mass. R. Civ. P. 56 (c). If the moving party
establishes that the opposing party cannot "prov[e] an essential
element of that party's case," then summary judgment is
appropriate. Tetrault v. Mahoney, Hawkes & Goldings, 425 Mass.
456, 459 (1997), quoting Symmons v. O'Keeffe, 419 Mass. 288, 293
(1995). We note at the outset that CFP did not offer any
substantive arguments in opposition to the defendants' motion
for summary judgment.
Under § 12.2 of the second agreement and Delaware law, a
member of a limited liability company has the right to examine
its books and records. Del. Code Ann. tit. 6, § 18-305, as
amended through 81 Del. Laws c. 357, § 26 (2018).
"To inspect books and records, a member of a Delaware LLC,
like a stockholder of a Delaware corporation, must first
establish by a preponderance of the evidence the existence
of a proper purpose for inspection. A proper purpose is
one that is reasonably related to such person's interest as
a member" (quotation and citation omitted).
Sanders v. Ohmite Holding, LLC, 17 A.3d 1186, 1193 (Del. Ch.
2011). The second motion judge granted summary judgment in
favor of the defendants on CFP's remaining claims, reasoning
that the undisputed facts established that, at the time of the
inspection request, CFP was not a member of Athena, and the
10
plain language of the statute provided inspection rights only to
current members and there was no support in the case law to
suggest that former members had residual rights to inspect.
Contrast id. at 1193-1194 (current member's request to inspect
books and records, some predating membership, permissible on
showing of proper purpose).
Here, it is undisputed that as of March 2, 2020, CFP was no
longer a member of Athena due to the merger. Neither the case
law nor the second agreement supports CFP's position that, once
the merger resulted in the extinguishment of its membership, CFP
continued to have a right to inspect Athena's books and
corporate records. The language in the second agreement is
unequivocal when it comes to the request for the inspection of
books and records. The right to inspect is limited to members
and nowhere in the forty-two page second agreement does it
extend for former members. It is undisputed that as of March 2,
2020, CFP did not own any interest in Athena. Therefore CFP's
demand to inspect Athena's books and records in June and July
11
was without any teeth. CFP had no right to this information.
Judgment affirmed.
By the Court (Vuono, Grant &
Walsh, JJ.9),
Clerk
Entered: April 27, 2023.
9 The panelists are listed in order of seniority.
12