Passatempo v. McMenimen

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13-P-1678 Appeals Court
RONALD P. PASSATEMPO, trustee,1 & others2 vs. FREDERICK V.
McMENIMEN, THIRD, & others.3
No. 13-P-1678.
Suffolk. September 16, 2014. - December 11, 2014.
Present: Kantrowitz, Grainger, & Hanlon, JJ.
Insurance, Agent, Life insurance, Fraud and concealment,
Misrepresentation. Fraud. Consumer Protection Act,
Insurance, Unfair or deceptive act, Attorney's fees.
Practice, Civil, Attorney's fees, Judgment notwithstanding
verdict, New trial. Damages, Attorney's fees.
Civil action commenced in the Superior Court Department on
July 1, 2004.
Following review by the Supreme Judicial Court, 461 Mass.
279 (2012), the case was tried before Thomas P. Billings, J.; a
motion for judgment notwithstanding the verdict or,
1
Of the Samuel Pietropaolo Irrevocable Trust.
2
Patricia D. Pietropaolo and Samuel Pietropaolo, Jr.,
executor of the estate of Samuel Pietropaolo, Sr. (also known as
Sabatino Pietropaolo).
3
Nationwide Life Insurance Company of America (successor in
interest to Provident Mutual Life Insurance Company); Nationwide
Securities, LLC (successor in interest to 1717 Capital
Management Company); and Nationwide Financial Services, Inc.
2
alternatively, for a new trial was heard by him; and a motion
for attorney's fees and costs was heard by him.
Douglas Hallward-Driemeier for Nationwide Life Insurance
Company of America & others.
Charles M. Waters for the plaintiffs.
GRAINGER, J. This case, boasting a lineage of more than a
decade in numerous courts,4 is now before us on appeal from a
judgment holding the Nationwide defendants (collectively,
Nationwide) liable to the plaintiffs on their G. L. c. 93A
(c. 93A) claim. Nationwide argues error in the denial of its
posttrial motion seeking to set aside the verdict or obtain a
new trial and in the judge's award of attorney's fees and costs
to the plaintiffs. G. L. c. 93A, § 9(4).5
Background. The underlying dispute involves
misrepresentations and fraud by which Frederick V. McMenimen,
III, induced Samuel Pietropaolo, Sr. (Pietropaolo), to
relinquish certain life insurance policies and purchase others,
4
As succinctly recapitulated by the trial judge: "This
. . . case was filed in the Middlesex Superior Court, removed to
federal court, remanded, transferred to the Business Litigation
Session, partially dismissed as to the Nationwide defendants
. . . on motion, tried against the other defendants in June-July
2009 to a jury on the common-law claims and to a judge on the
Chapter 93A claims, and thrice appealed to the [Supreme Judicial
Court] which, on the last such occasion, affirmed a $300,000
award of damages, trebled, against Frederick McMenimen; reversed
an award against Barry Armstrong; and reversed [the Superior]
Court's dismissal of the Nationwide defendants."
5
Although Nationwide raises two additional arguments, they
are not properly before us. See note 9, infra.
3
and is recounted in detail in Passatempo v. McMenimen, 461 Mass.
279, 281-285 (2012) (Passatempo I). At the beginning of the
narrative, McMenimen was employed by the insurance brokerage
firm New England Advisory Group, LLC, a business owned and
managed by Barry G. Armstrong. McMenimen thereafter worked as
an in-house broker for Provident Mutual Life Insurance Company
(Provident) and, after losing that position, became self-
employed. Provident was acquired by Nationwide after McMenimen
was discharged from his Provident in-house position. Past
trials and appellate decisions have resolved claims of liability
on the part of McMenimen, New England Advisory Group, LLC, and
Armstrong. We are now asked to consider an appeal from the
judgment finding Nationwide liable to the plaintiffs. We refer
to additional undisputed factual history insofar as it bears on
Nationwide's liability under theories of agency, corporate
succession,6 and tolling of the statute of limitations.
The motion for judgment notwithstanding the verdict (jnov).
We review the denial of the motion for jnov to determine
"whether, anywhere in the evidence, from whatever source
derived, any combination of circumstances could be found from
which a reasonable inference could be drawn in favor of the
plaintiff[s]." Raunela v. Hertz Corp., 361 Mass. 341, 343
6
Nationwide's liability is that of a successor to
Provident, a status uncontested below and on appeal.
4
(1972) (quotations and citation omitted). See Bank v. Thermo
Elemental Inc., 451 Mass. 638, 651 (2008), and cases cited.
The judgment against McMenimen, which was reviewed in
Passatempo I, includes a finding that he acted in a fiduciary
capacity when he misled Pietropaolo into believing he had
$500,000 in death benefits (in actuality McMenimen had purchased
only $200,000 from Provident on behalf of Pietropaolo).
Consequently the statute of limitations with respect to
McMenimen was tolled until the plaintiffs had actual knowledge
of the $300,000 shortfall comprising their damages, knowledge
they were found to have acquired within four years of the date
that they filed their complaint, but not earlier. See
Passatempo I, supra at 294-295. Complaints pursuant to G. L.
c. 93A are subject to a four-year statute of limitations, G. L.
c. 260 § 5A; suit against McMenimen was therefore timely filed.
The agency relationship between McMenimen, acting as a
fiduciary, and Nationwide as successor to Provident raises two
distinct issues. First, the Supreme Judicial Court has
instructed us that a principal can have vicarious liability for
the breach of a fiduciary duty by its agent. See Passatempo I,
supra at 296. That principle, in turn, requires a determination
whether the proper standard for tolling the statute of
limitations with respect to Nationwide is identical to that
applied to McMenimen; in other words, whether the plaintiffs
5
were entitled to wait until they had actual knowledge of
McMenimen's fraud before the statute began to run with respect
to their suit against Nationwide as well. This second question
was answered by the Supreme Judicial Court in the negative. Id.
at 296-297.
Accordingly, on remand the jury were presented with special
questions, including the following question:
"Should the plaintiffs have known before July 1, 2000 that
they did not have $500,000 in death benefits?"
The jury answered "No," thereby finding that the plaintiffs
neither knew nor, here pertinent, should have known of the fraud
more than four years before they filed suit. Recognizing the
deference accorded to findings of fact, see Bank v. Thermo
Elemental Inc., supra at 651-652, Nationwide asserts that no
reasonable jury could have made this finding. Nationwide
emphasizes the years before 2000 during which the plaintiffs
received statements explicitly reciting that the policy provides
$200,000 in death benefits. The judge acknowledged the force of
this argument, but also noted that the full narrative before the
jury was not restricted to documentary evidence. The record is
replete with repeated evasions and false explanations by
McMenimen to the effect that the $200,000 in death benefits set
forth on the statements issued by Provident, and then by
Nationwide, is merely a first level of coverage, that clerical
6
error is responsible for the statements, that everything was
"fine," and that the plaintiffs were "all set." In this context
Nationwide's argument is severely handicapped by the fact that
its own statements listed McMenimen as the agent on the account
long after he had been discharged, and at least as late as
December of 2000.7 As the judge noted, "The jurors were not
required to disbelieve the uncontroverted testimony [of the
plaintiffs] that they did not actually appreciate, until well
after July 1, 2000, that there was no 'additional component'
covering the difference between the nominal $200,000 death
benefit and the $500,000 in coverage [McMenimen] said he had
obtained for them."8
7
Each quarterly statement advised the policyholder: "If
you have any questions, feel free to contact your representative
at the address indicated below or our Customer Service Center at
[phone number]." The jury were entitled to find that contacting
McMenimen was a reasonable response when he was identified as
the "representative," had been the plaintiffs' agent from
inception, and was a trusted member of the family.
8
Nationwide points to phrases in the judge's memorandum and
order to assert that the judge erroneously applied an actual
knowledge standard to toll the statute with respect to
Nationwide notwithstanding the Supreme Judicial Court's
instruction to the contrary. We consider the language at issue
to be equally susceptible to an interpretation that it is
referring to tolling with respect to McMenimen himself. Even
were we to accept Nationwide's view, it would not be availing in
light of the jury's finding, supported by sufficient evidence,
that the plaintiffs were under no obligation to inquire
(triggering the "should have known" standard) until after July
1, 2000. See Hastings Assocs. v. Local 369 Bldg. Fund, Inc., 42
Mass. App. Ct. 162, 163 (1997) (upholding jnov for different
reason than motion judge).
7
We conclude that the judge correctly determined that the
totality of the evidence, construed against Nationwide,
justified the jury verdict. See D'Annolfo v. Stoneham Hous.
Authy., 375 Mass. 650, 657 (1978); Mancuso v. Massachusetts
Interscholastic Athletic Assn., 453 Mass. 116, 122 (2009). The
motion for jnov was properly denied.
The motion for a new trial. The standard for a new trial
favors the moving party more than that required for a jnov,
involving as it does the probative force of the evidence in
addition to whether it simply exists. See O'Brien v. Pearson,
449 Mass. 377, 384 (2007). Judges are not, however, permitted
simply to substitute their own view of the evidence for that of
the jury. Hartmann v. Boston Herald-Traveler Corp., 323 Mass.
56, 60 (1948). The test for a new trial is whether "the verdict
'is so greatly against the weight of the evidence as to induce
. . . the strong belief that it was not due to a careful
consideration of the evidence, but that it was the product of
bias, misapprehension, or prejudice.'" Turnpike Motors, Inc. v.
Newbury Group, Inc., 413 Mass 119, 127 (1992), quoting from
Scannell v. Boston Elev. Ry., 208 Mass. 513, 514 (1911). "We
grant considerable deference to a judge's disposition of a
motion for a new trial, especially where [as here] he was the
trial judge, and we will reverse the ruling only for an abuse of
discretion." Gath v. M/A-Com, Inc., 440 Mass. 482, 492 (2003).
8
Applying the above test, we conclude that the judge did not
abuse his discretion in denying the motion for a new trial. As
we have noted, Nationwide introduced evidence, especially
documentary evidence, from which the jury could draw an
inference of inattention on the part of the plaintiffs. But, as
stated, there was also evidence that the plaintiffs did react to
the statements they received by contacting the very person
listed as their agent on those statements. While they may have
done so only after hearing from Nationwide's representative in
2003, the jury were entitled to believe that they were
reasonably lulled into acquiescence by McMenimen's previous
longstanding assurances and deceptions, including ongoing
general assurances he provided as part of the family. As the
judge aptly observed, the judgment of liability was not
foreordained, but was also "not so greatly against the weight of
the evidence as to warrant a new trial."9
9
We find it unnecessary to address two additional issues
raised on appeal. Nationwide complains that instructions
pertaining to regulatory control required the jury to find
vicarious liability. Even were we to find error with the
judge's instructions on this topic, which we do not, the issue
was not preserved at trial and is not properly before us. See
Mass.R.Civ.P. 51(b), 365 Mass. 816 (1974). Nationwide also
complains that the judge committed error in allowing the jury to
find it not only vicariously, but also directly, liable to the
plaintiffs, asserting that the plaintiffs' c. 93A letter did not
provide notice of such a claim. This issue also was not
preserved. See Palmer v. Murphy, 42 Mass. App. Ct. 334, 338
(1997). Moreover, the judge's action on remittitur restricted
the compensatory award, and the c. 93A multiplier, to damages
9
Attorney's fees and costs. Nationwide claims error in the
judge's award of costs and fees to the plaintiffs. See G. L.
c. 93A, § 9(4). We review this claim in the context of the
judge's broad discretion. See Twin Fires Inv., LLC v. Morgan
Stanley Dean Witter & Co., 445 Mass. 411, 429-430 (2005).
The judge was required to consider a fee request that
spanned multiple trials and appellate proceedings in State and
Federal courts. Nationwide was not a party to all of these
proceedings; at the same time much of the effort expended by the
plaintiffs was necessary to obtain the eventual judgment against
Nationwide. Like the judge, we "know of no reported case on
like facts" and, like the judge, we consider "the fundamental
question" to be "how much of the fees claimed actually
contributed to the result obtained against Nationwide."
We need not repeat the careful analysis of each stage in
the proceedings, the relevance or lack thereof of each stage of
discovery, motion practice, trial, and appeal that led to the
eventual judgment against Nationwide, the quality and efficiency
of counsels' efforts, the appropriate level of hourly rates and
staffing ratios, or a consideration of the equities -- all of
these are set forth in the judge's memorandum. See Linthicum v.
Archambault, 379 Mass. 381, 388-390 (1979).
resulting from McMenimen's conduct. If we were to find error,
it would be nonprejudicial.
10
Further, the judge separated the periods during which
Nationwide was formally a party to the proceedings from those in
which it was not. He analyzed the relevance of efforts during
the latter period to the eventual judgment obtained against
Nationwide and applied a reduction of twenty-five percent to the
State court proceedings while deducting the costs incurred in
Federal court in their entirety. This resulted in a deduction
of more than $170,000 from a fee request totaling more than
$870,000. There was no abuse of discretion.10
Final judgment entered
April 5, 2013, affirmed.
10
We decline to award appellate attorney's fees and costs.
See Bonofiglio v. Commercial Union Ins. Co., 412 Mass. 612, 613
(1992).