Shepherd Kaplan Krochuk, LLC v. John R. Borzilleri. ( 2023 )


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  • 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-312
    SHEPHERD KAPLAN KROCHUK, LLC
    vs.
    JOHN R. BORZILLERI.
    MEMORANDUM AND ORDER PURSUANT TO RULE 23.0
    The defendant and plaintiff in counterclaim in this case,
    John R. Borzilleri, was employed by the plaintiff and defendant
    in counterclaim, Shepherd Kaplan Krochuck, LLC (SKK), a
    registered investment adviser, as a portfolio manager for a
    private fund affiliated with SKK.         In 2014 and 2015, Borzilleri
    filed two lawsuits under the False Claims Act against nearly
    twenty major pharmaceutical companies (qui tam lawsuits or qui
    tam actions).    These lawsuits alleged among other things that
    these pharmaceutical companies conspired to defraud Medicare by
    colluding to inflate prescription drug prices, causing losses of
    approximately $200 billion.
    After the United States Department of Justice decided not
    to intervene in the qui tam lawsuits, and with knowledge about
    when the lawsuits would be unsealed, see 
    31 U.S.C. § 3730
    ,
    Borzilleri, who had long been selling short the stock of these
    pharmaceutical companies, escalated that selling.    He also
    crafted a press release that included information that the qui
    tam lawsuits had been unsealed and sent it to recipients in the
    financial and media industries.    The complete factual details
    are well known to the parties and will not be repeated here, but
    it suffices to say that shortly thereafter he was fired by SKK.
    Litigation ensued.      SKK filed suit against Borzilleri,
    seeking a declaration that its termination decision was lawful
    and the recovery of damages stemming from Borzilleri's alleged
    breach of contract and breach of the duty of loyalty.
    Borzilleri asserted ten counterclaims in response.     Five were
    dismissed for failure to state a claim.    Two of Borzilleri's
    remaining counterclaims alleged that SKK had breached various
    contractual obligations (Counts VI and VII).    The other three
    alleged that his firing was in retaliation for his filing of the
    qui tam actions (Counts I, III, and IV).     Such a retaliatory
    firing would be unlawful.    See 
    31 U.S.C. § 3730
    (h)(1).   SKK
    argues strenuously that Borzilleri engaged in unlawful insider
    trading, and that that was why he was fired.     Borzilleri argues
    equally strongly that his views about the behavior of the
    pharmaceutical companies, and the factual information that
    underlay the qui tam actions were well known, that he had
    2
    publicized them extensively prior to the press release and the
    unsealing of the qui tam actions, and that he did not engage in
    insider trading, which is to say trading stock "on the basis of
    material, nonpublic information."    United States v. O'Hagan, 
    521 U.S. 642
    , 651-652 (1997).
    SKK moved for summary judgment on Borzilleri's five
    remaining counterclaims and that motion was allowed as to
    Borzilleri's retaliation-based claims due to a failure to show
    pretext and retaliatory animus on the part of SKK but denied as
    to Borzilleri's contract-based claims.   The parties subsequently
    stipulated and agreed to the voluntary dismissal of Borzilleri's
    counterclaims except the retaliation-based claims (Counts I,
    III, and IV), and all of SKK's claims.   The judge "approved and
    so ordered" the stipulation, which included the provision that
    the "Stipulation shall constitute the final judgment of the
    Court."
    In this appeal, Borzilleri challenges the order allowing
    summary judgment on his retaliation-based claims.   The only
    question properly before us is whether there is a genuine issue
    of material fact as to whether the assertion by SKK that
    Borzilleri was fired for alleged insider trading was a pretext
    designed to cover up Borzilleri's firing in retaliation for his
    filing of the qui tam actions.   We view the summary judgment
    record in the light most favorable to the nonmoving party,
    3
    Borzilleri, drawing every reasonable inference in his favor.
    See Bulwer v. Mount Auburn Hosp., 
    473 Mass. 672
    , 680 (2016).
    Before us Borzilleri points to evidence he says raises a
    genuine issue of material fact with respect to pretext:     the
    weakness of the allegation of insider trading, which, he
    asserts, shows that SKK could not have thought he had engaged in
    insider trading; SKK's shifting explanations of its concerns and
    the reasons for the firing; SKK's unwillingness to put the
    reason for the termination in writing; and contemporaneous notes
    he made regarding his phone call on April 20, 2018, with Tim
    Krochuck, the managing member of SKK.
    Those contemporaneous notes were memorialized in an e-mail
    that Borzilleri sent to himself (e-mail or notes).   The summary
    judgment record contains that e-mail, which was attached to
    Borzilleri's affidavit in support of his opposition to SKK's
    motion for summary judgment.   Borzilleri's notes indicate that
    during the April 20 phone call, in which Krochuck first
    indicated that SKK desired "to sever its relationship with"
    Borzilleri, Krochuck stated "that SKK was 'no longer concerned
    about insider trading, after reviewing the Qui Tam documents,'"
    but that SKK's "major concern was some kind of 'defamation' suit
    by the Qui Tam defendants against SKK, myself [i.e., Borzilleri]
    and my fund investors."   There is also evidence in the summary
    judgment record of a refusal by SKK to put any reason for
    4
    dismissal in writing and evidence that could support a finding
    that the contents of the press release were not and could not
    have been considered by SKK to be material nonpublic
    information, including evidence that the press release went out
    after the qui tam lawsuits were unsealed, and that the
    information in the press release was consistent with monthly
    reports that Borzilleri had been issuing to the public for
    years.
    We think that the evidence pointed to by Borzilleri is
    sufficient to raise a genuine issue of material fact with
    respect to whether the claim of firing for insider trading was
    merely a pretext and whether his firing was in fact in
    retaliation for filing the qui tam actions.1
    SKK argues that some of the evidence on which Borzilleri
    now relies was not pointed to by Borzilleri in his pro se
    1 SKK argues that the description of the phone call in
    Borzilleri's affidavit in support of his opposition to SKK's
    motion for summary judgment, is inconsistent with his sworn
    statements in his deposition that he was never told the reason
    he was terminated. Borzilleri's contemporaneous notes say only
    that Krochuck spoke to him about severing the relationship
    between SKK and Borzilleri during the April 20, 2018 phone call.
    Since, as Borzilleri asserts in the joint statement of
    undisputed material facts, that Borzilleri might not have
    understood this to refer to termination, there is no necessary
    contradiction between these two pieces of evidence. Cf. Ng
    Bros. Constr., Inc. v. Cranney, 
    436 Mass. 638
    , 648 (2002) ("the
    nonmoving party cannot create a material issue of fact and
    defeat summary judgment simply by submitting affidavits that
    contradict its previously sworn statements").
    5
    opposition to the motion for summary judgment.   The failure to
    provide a written explanation, and the evidence that SKK could
    not have thought the press release contained material nonpublic
    information, were explicitly addressed in Borzilleri's
    opposition.    The e-mail and SKK's shifting explanations,
    however, were not.   Nonetheless, Borzilleri's responses in the
    joint statement of undisputed material facts include a citation
    to the e-mail in a response in which Borzilleri states that he
    disputes whether the April 20 phone call informed him that he
    was terminated as a result of "short-trading in the securities
    of the qui tam defendants while potentially in possession of
    material nonpublic information about them."   He asserts that
    "Mr. Krochuck made no mention of Dr. Borzilleri having violated
    any corporate policies or trading laws.   Dr. Borzilleri knew
    immediately that the true reason for the separation was SKK'[s]
    desire to quickly dissociate from Dr. Borzilleri's qui tam
    activities."    We think that this evidence was sufficiently put
    before the judge to preserve the argument that a genuine issue
    of material fact existed, and that the summary judgment motion
    should not have been allowed as to counts I, III, and IV of the
    counterclaim.
    Accordingly, so much of the judgment that relates to counts
    6
    I, III, and IV of the counterclaim is reversed.       In all other
    respects, the judgment is affirmed.
    So ordered.
    By the Court (Meade, Rubin &
    Blake, JJ.2),
    Clerk
    Entered:    May 3, 2023.
    2   The panelists are listed in order of seniority.
    7
    

Document Info

Docket Number: 22-P-0312

Filed Date: 5/3/2023

Precedential Status: Non-Precedential

Modified Date: 5/3/2023