Beninati v. Borghi

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revision and are superseded by the advance sheets and bound
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15-P-953 Appeals Court
ELIZABETH BENINATI & another1 vs. STEVEN BORGHI & others2 (and
a consolidated case3).
No. 15-P-953.
Suffolk. May 16, 2016. - October 24, 2016.
Present: Agnes, Massing, & Kinder, JJ.
Contract, Construction of contract, Modification. Consumer
Protection Act, Availability of remedy. Practice, Civil,
Attorney's fees. Damages, Attorney's fees.
1
Joseph Masotta. Both plaintiffs sued individually and
derivatively on behalf of Cardio Fitness Group, LLC; One Fitness
Group, LLC; Too Fitness Group, LLC; Tree Fitness Group, LLC;
Fore Fitness Group, LLC; V Fitness Group, LLC; SVN Fitness, LLC;
Snowman Fitness Group, LLC; Nine Fitness Group, LLC; X Fitness
Group, LLC; WOW Massachusetts Fitness Group, LLC; SJBB Fitness,
LLC; Uno Dos Fitness, LLC; WAMP Fitness, LLC; FTN Fitness, LLC;
and Fitness Capital, LLC.
2
Linda Borghi; Harold Dixon; Blast Fitness Group, LLC;
Blast Fitness Cambridge, LLC; Blast Fitness Lawrence, LLC; Blast
Fitness Saugus, LLC; Blast Fitness North Providence, LLC; Blast
Fitness Group Personal Training, LLC; Auburndale Fitness Group
Investment, LLC; 311 Fitness, Inc.; JDM Fitness, Inc.;
CapeCapital, LLC; Work Out World Foxborough, LLC; BFit
Bellingham LLC; KL BFitness LLC; and TL BFitness LLC.
3
Joseph Masotta & others vs. Steven Borghi & another.
2
Civil actions commenced in the Superior Court Department on
May 24, 2012, and May 14, 2013.
After consolidation, the case was heard by Janet L.
Sanders, J.; a motion for attorney's fees and costs was heard by
her; and entry of final judgment was ordered by her.
John W. Moran (Michael T. Grant with him) for Elizabeth
Beninati.
Charles R. Bennett, Jr., for Steven Borghi.
Max D. Stern for Harold Dixon & others.
Michael S. Marino, for Joseph Masotta & others, was present
but did not argue.
MASSING, J. The plaintiffs, Elizabeth Beninati and Joseph
Masotta, together with defendants Steven Borghi and Linda
Borghi, owned and operated a chain of fitness clubs licensing
the "Work Out World" (WOW) trade name (collectively, WOW New
England).4 While actively involved in the management of WOW New
England, Steven, working with an outside partner, defendant
Harold Dixon, and using WOW New England's inside information and
resources, formed Blast Fitness Group, LLC (Blast), and opened a
chain of similar clubs in the same geographic area, some using
the WOW name, others using the name "Blast Fitness." (We refer
to the defendant clubs that Dixon and Steven controlled as the
Blast clubs or, together with Blast, as the Blast defendants).
4
To avoid confusion with Elizabeth's late husband Anthony
Beninati, we refer to the Beninatis by their first names,
Elizabeth and Tony. We likewise refer to the Borghis by their
first names, Steven and Linda.
3
After a jury-waived trial on two consolidated complaints,5 a
Superior Court judge found the Borghis and Dixon liable to
Elizabeth, Masotta, and the other WOW New England owners for
breach of fiduciary duty on the plaintiffs' derivative claims
and awarded approximately $4 million in damages. The judge held
as a matter of law, however, that Dixon and the Blast defendants
could not be liable for unfair competition under G. L. c. 93A
because their misconduct involved only aiding and abetting
Steven in the breach of his fiduciary duties. The judge also
upheld corporate votes of the WOW New England companies removing
the Borghis from management, and awarded attorney's fees to
Elizabeth under G. L. c. 156C, § 57, but not Masotta.
On Elizabeth and Masotta's appeal from the judge's ruling
in favor of Dixon and the Blast defendants on the c. 93A claim,
we vacate and remand for further proceedings. On Masotta's
appeal from the denial of his request for reimbursement of
attorney's fees and expenses, and on the Borghis' cross appeal
from the enforcement of their removal, we affirm.
5
Elizabeth filed a suit in the Superior Court on behalf of
herself and derivatively on behalf of the WOW New England
corporations, alleging numerous counts including breach of
fiduciary duty, breach of contract, and violation of G. L.
c. 93A, § 11. By the time of trial, Masotta, who had originally
been named as a defendant, had realigned as a plaintiff with
Elizabeth. Elizabeth and Masotta also filed a second complaint
to enforce corporate votes removing the Borghis as managers of
WOW New England, and the cases were consolidated for trial.
4
Background. We state the uncontested facts as set forth in
the judge's thoughtful and comprehensive memorandum of decision,
based on the testimony she heard and the nearly one thousand
exhibits she reviewed during a twenty-day bench trial. We
reserve some disputed factual issues for later discussion.
WOW New England began as a single club in Randolph in 1999.
Elizabeth's husband, Anthony Beninati (Tony), and Steven opened
the first club, with Masotta receiving an ownership interest in
exchange for doing the build-out work. A year later, the trio
opened a second club in Norwood. Early on, they decided to
license the WOW name from WOW Licensing LLC (WOW Licensing).
The licensing agreement, with a stated term of five years,
specified that WOW Licensing would not grant the rights to the
WOW name to any other entity within five miles of the WOW New
England clubs.
Between 1999 and Tony's untimely death from a rare and
apparently incurable disease in 2005, Tony, Steven, and Masotta
opened ten more health clubs in New England, eight of which were
still in operation at the time of trial. Each club entered into
the same licensing agreement with WOW Licensing. Steven was
responsible for scouting new locations, Masotta oversaw
construction of the new clubs, and Tony ran the day-to-day
business. Steven's wife Linda took an active role in running
the clubs as a salaried employee. While Tony was alive,
5
Elizabeth did not actively participate in the management of the
clubs.
Each club was owned and operated through a separate limited
liability company, with discrete operating agreements and
varying ownership percentages allocated among the three majority
owners, as well as assorted minority investors. However,
attention to corporate niceties was lax, and eight of the clubs
were opened without written operating agreements. In December,
2004, just a month before Tony's death, WOW New England's
accountant drew up written operating agreements for the eight
LLCs, and an updated agreement for one of the other clubs. The
eight new agreements referred to "Anthony (Elizabeth) Beninati"
as one of the members. For the first time, the agreements
included noncompetition clauses -- Tony, Steven, and Masotta
would open new clubs either together or not at all.
After Tony's death in 2005, Elizabeth began to play an
active role in the management of WOW New England. By 2006, she
was signing equipment finance agreements, advertising contracts,
and leases; handling personnel matters such as schedules and
pay, employment policies, and approval of employees'
expenditures; and helping to develop the clubs' Web site. For
all major decisions, Elizabeth and Steven were equals, with
Masotta casting the deciding vote on upper management decisions
when the two disagreed.
6
For three years following Tony's death, no new clubs were
opened. Then, between 2008 and 2010, four new health clubs were
launched. Following the template of the original clubs, each
was owned by a separate corporation and each paid an annual fee
to WOW Licensing, though neither the operating nor licensing
agreements were ever committed to writing. During this time,
the five-year licensing agreements between the original clubs
and WOW Licensing began to expire. Although the licensing
agreements were never renewed in writing, both WOW Licensing and
WOW New England operated as if they were still in effect -- the
annual fee was paid, the name was used, and the five-mile
geographic limitation was respected.
However, starting in 2010, Elizabeth, Steven, and Masotta
increasingly disagreed about the direction of WOW New England.
Steven, who had already opened a series of WOW-licensed clubs in
Minnesota by himself, wanted greater expansion than his
partners. In the fall of 2010, Steven met defendant Dixon, a
businessman interested in the health club industry. In January,
2011, Steven and Dixon formed Blast Fitness Group, LLC, which,
along with another Dixon-controlled entity, would ultimately
come to own and operate thirteen health clubs in Massachusetts
and Rhode Island, in direct competition with WOW New England.
Dixon first became involved with WOW New England as a
"consultant," hired and paid personally by Steven, not by WOW
7
New England. Steven arranged, at Dixon's request, for Dixon to
have direct access to proprietary and confidential WOW New
England information such as membership data, revenue
spreadsheets and projections, profit and loss statements, and
performance reports, as well as employee training manuals,
payroll data, vendor information, and the expertise and
experience of WOW New England employees. Steven and Dixon
ultimately used this information in running the Blast clubs, and
many of the WOW New England staff would come to work for Blast,
even while still on the WOW New England payroll.
Significantly, Linda was one of the employees who worked
for both WOW New England and Blast. Although Linda was
originally a salaried employee of WOW New England, the 2004 WOW
operating agreements named Linda as manager. Nonetheless, she
played no role in the business between 2006 and late 2010.
However, after the creation of Blast she began attending
meetings with Steven, Dixon, and other investors regarding the
Blast clubs, and Dixon recruited her to be Blast's director of
club operations. While employed at Blast, Linda remained in
close contact with WOW New England employees, and upon Steven's
or Dixon's request, she would obtain access to WOW New England's
confidential information and provide it to Blast
representatives. She returned to WOW New England after being
named its chief operating officer in the fall of 2011, but
8
continued her relationship with Blast, funneling information
from WOW New England to Blast.
When Blast was formed, neither Elizabeth nor Masotta was
aware of its existence. Nor were they aware that in 2011,
Steven, with Dixon's knowledge and active encouragement,
negotiated and executed a separate licensing agreement between
WOW Licensing and Blast, granting Blast the exclusive right to
use the WOW name in New England. Although the agreement
included a provision providing for payment to WOW Licensing of
WOW New England's licensing fee for 2011, it superseded any
agreements WOW New England had with WOW Licensing. Steven --
again with Dixon's knowledge, active encouragement, and
assistance6 -- also signed a lease for a property in Foxborough
that would later become the site of a Blast club, using one of
the WOW New England clubs as a guarantor. Blast continued to
expand, first with a management agreement for three Gold's Gyms
-- an opportunity that had first been presented to WOW New
England, but that Elizabeth and Masotta had rejected. Steven
and Dixon eventually changed the name of the three former Gold's
Gyms to WOW, informing Elizabeth and Masotta that profits for
those clubs would not be shared with WOW New England and that
any agreements regarding those clubs (which copied those of WOW
6
Dixon was aware, as early as 2011, that Steven had agreed
not to compete with the other principals of WOW New England.
9
New England) were confidential and separate from WOW New
England. Nonetheless, Steven arranged for the three clubs to be
advertised on WOW New England's Web site.
In 2011, the parties hired attorneys to look into the
brewing disputes. The parties and their attorneys began meeting
in May, 2011, in an attempt to forge an agreement allowing for
the continued expansion by Steven and Dixon, with Elizabeth and
Masotta participating in some fashion. In addition, they worked
to revise the operating agreements for the existing WOW New
England clubs. After extensive negotiations, as well as a side
agreement among Masotta, Dixon, and Steven, the agreements were
signed by Masotta, Steven, and some of the other WOW New England
minority owners -- but not Elizabeth. However, the parties made
no efforts to comply with some of the more significant terms of
the 2011 agreements, such as gross revenue payouts, which had
been offered in exchange for abolishing the territorial
restriction on competition.
In the summer of 2011, as litigation became more likely,
Dixon began to take various steps to distance himself from
Steven. Starting in August, 2011, Dixon decreased Steven's
ownership percentage in the Blast clubs. By 2013, Steven was
limited to an ownership interest in only six clubs in New
England out of sixty that Blast operated nationwide. Dixon also
negotiated an agreement between WOW Licensing and a Dixon-
10
controlled entity for exclusive use of, and sublicensing rights
to, the WOW name in New England. Dixon then increased the
licensing fee of the WOW New England clubs from $4,000 yearly to
$4,000 monthly; Linda signed the new licensing agreement on
behalf of WOW New England. Although Dixon backed off within a
month, reinstating the old fee, in a new agreement Dixon gave
WOW New England permission to use the WOW name, terminable with
thirty days' notice.
Elizabeth filed the first of the two consolidated actions
in May, 2012. The Borghis and Masotta successfully filed a
motion to have their legal fees paid by one of the WOW New
England entities, as provided by the operating agreements,
conditioned on repayment if they were found to have breached
their fiduciary duties. The cost of the litigation, and the
significant, though ultimately temporary, licensing fee
increase, prompted Elizabeth and Masotta to send out notices to
the members of the fourteen WOW New England companies of a
meeting of the corporations. At the meeting, which convened on
April 2, 2013, thirteen of the fourteen companies voted to
remove the Borghis as managers of WOW New England. (Steven held
a majority interest in the fourteenth club.) Still, Steven
maintained an ownership interest in WOW New England. The
Borghis refused to acknowledge their removal, arguing that
Elizabeth did not hold a voting interest in the companies.
11
Elizabeth and Masotta filed a second action seeking to enforce
the vote.
After trial, the judge ruled that Elizabeth was a full
voting member of the WOW New England companies, that the 2011
amended and restated operating agreements were void, and, on the
derivative claims, that the Borghis, aided and abetted by Dixon,
breached their fiduciary duties. However, the judge found no
violation of G. L. c. 93A, reasoning that the statute does not
apply to internal corporate disputes. The judge awarded WOW New
England damages totaling approximately $4 million and required
Dixon to pay to WOW New England until December 31, 2017, five
percent of the revenue of any health club he had opened in the
New England area between April 30, 2013, and July 9, 2014. In
addition, the judge enjoined the defendants from using the WOW
trade name anywhere in New England or receiving any benefit of
the agreement with WOW Licensing, enjoined Steven from opening
or operating competing health clubs within fifty miles of any
WOW New England club as long as he remains a member of WOW New
England and for one year thereafter, and enjoined Dixon from
opening any new health clubs in New England until January 1,
2016. The judge also ordered WOW New England to reimburse
Elizabeth for attorney's fees and litigation expenses under
G. L. c. 156C, § 57, denied Masotta's request for the same,
ordered the Borghis to reimburse WOW New England for attorney's
12
fees that were paid on their behalf during the litigation, and
ordered Masotta to reimburse WOW New England for the attorney's
fees he incurred while aligned as a defendant in the case.
Discussion. 1. Removal of the Borghis from management of
WOW New England. The Borghis challenge the judge's
determination that the members of WOW New England validly voted
to remove them from their management positions. Their removal
hinged on Elizabeth's status as a voting member of the
corporations. The judge concluded that Elizabeth possessed a
voting membership interest in ten of the WOW New England
entities even though eight of the operating agreements refer to
her only once, and two of the operating agreements refer only to
Tony.7
As a threshold matter, we agree with the judge's
determination that the eight operating agreements referring to
"Anthony (Elizabeth) Beninati" as a member are facially
ambiguous, a question of law subject to de novo review on
appeal. Browning-Ferris Indus., Inc. v. Casella Waste Mgmt. of
Mass., Inc., 79 Mass. App. Ct. 300, 307 (2011). "An ambiguity
arises from language susceptible of different meanings in the
eyes of reasonably intelligent persons." Ibid. The fact that
the agreements begin by listing "Anthony (Elizabeth) Beninati"
7
The Borghis did not contest Elizabeth's status as a full
voting member of the four WOW New England companies that had no
written operating agreement.
13
as a member, but then apportion a percentage share to "Anthony
Beninati" and are signed only by Anthony Beninati, creates an
ambiguity regarding the meaning of the insertion of
"(Elizabeth)" in the beginning. While we must construe the
agreements based on "a fair construction of the contract as a
whole and not by special emphasis upon any one part," Kingstown
Corp. v. Black Cat Cranberry Corp., 65 Mass. App. Ct. 154, 158
(2005) (quotation omitted), by the same token "every word is to
be given force so far as practicable." MacDonald v. Hawker, 11
Mass. App. Ct. 869, 872-873 (1981) (quotation omitted). We do
not view the insertion of "(Elizabeth)" into the list of members
as meaningless.
"Once a contract is determined to be ambiguous, the court
is free to look to extrinsic evidence . . . in order to give a
reasonable construction in light of the intentions of the
parties at the time of formation of the contract." President &
Fellows of Harvard College v. PECO Energy Co., 57 Mass. App. Ct.
888, 896 (2003). "Any findings by the trial judge, especially
upon matters of credibility, will receive usual deferential
review under the 'clearly erroneous' standard of Mass.R.Civ.P.
52(a), as amended, 423 Mass. 1402 (1996)." Browning-Ferris, 79
Mass. App. Ct. at 307-308. "It is the appellant's burden to
show that a finding of fact is clearly erroneous." Demoulas v.
Demoulas Super Mkts., Inc., 424 Mass. 501, 509 (1997).
14
We discern no clear error in the judge's factual
determination that the parties meant for Elizabeth to possess a
voting membership, upon Tony's death, in the eight clubs
governed by these operating agreements. Ample evidence was
presented to establish that in anticipation of his death from a
terminal illness, Tony instructed WOW New England's accountant
to draft operating agreements to reflect that he held his
interests jointly with Elizabeth. Steven and Masotta
considered, but rejected, holding their interests jointly with
their spouses. Moreover, after Tony's death, the others treated
Elizabeth as a full voting member, never questioning her status
until litigation appeared imminent. The judge considered
conflicting evidence, such as estate tax returns treating Tony's
WOW New England ownership interests as being held individually
rather than jointly with Elizabeth. The judge determined, on
balance, that the parties intended these agreements to reflect
that Elizabeth would assume Tony's place after his death. Where
differing inferences can be drawn from the evidence, and a
reasonable view of the evidence supports her findings, we defer
to the trial judge. Buster v. George W. Moore, Inc., 438 Mass.
635, 642-643 (2003).
The judge did not abuse her discretion in considering the
hearsay statements attributed to Tony. In any civil case, "a
declaration of a deceased person shall not be inadmissible in
15
evidence as hearsay or as private conversation between husband
and wife, as the case may be, if the court finds that it was
made in good faith and upon the personal knowledge of the
declarant." G. L. c. 233, § 65, as appearing in St. 1943,
c. 232, § 1. See Eastern Paper & Box Co. v. Herz Mfg. Corp.,
323 Mass. 138, 144 (1948) (declarations of deceased person
regarding terms of oral contract within scope of statute). See
also Mass. G. Evid. § 804(b)(5)(A) (2016). We review the
admission of such statements under the abuse of discretion
standard, see Tufankjian v. Rockland Trust Co., 57 Mass. App.
Ct. 173, 179 (2003), and we find no such abuse here. The
evidence was sufficient to indicate that Tony made the
statements based on personal knowledge and in good faith at a
time when he and his partners were memorializing the nature of
their ownership interests in anticipation of Tony's death.
Indeed, Tony's statements came years before litigation was even
a possibility, and he had no reason to fabricate the statements.
See ibid.
Likewise, the judge did not err in concluding that the two
operating agreements that did not refer to Elizabeth were
amended by the conduct of the parties to substitute Elizabeth
for Tony. Modification or waiver of the terms of a contract may
be inferred from the conduct of the parties. See Porter v.
Harrington, 262 Mass. 203, 207 (1928); Cambridgeport Sav. Bank
16
v. Boersner, 413 Mass. 432, 439 (1992). The judge found ample
evidence in the witnesses' testimony and documentary evidence
regarding these two companies that the parties treated Elizabeth
as a full partner and never adhered to the provisions
differentiating between voting and nonvoting membership. See
Samia v. Central Oil Co. of Worcester, 339 Mass. 101, 109 (1959)
(accepting master's finding that stockholder acquired shares in
partnership, in the absence of formal instrument, where the
parties' business activities were "characterized by the utmost
informality," and "where, to do equity among the parties, undue
emphasis cannot fairly be placed upon strict compliance with
corporate formalities"); Trager v. Schwartz, 345 Mass. 653, 659
(1963) (finding waiver of restrictions on stock transfer by
conduct in small family corporation "conducted without
overemphasis on corporate formalities").
Nor did the judge err in setting aside the amended
operating agreements finalized in June, 2011, without
Elizabeth's consent, stripping her of her voting membership.
The judge determined that "[m]anifest justice and fairness
require that this Court not recognize [the June 2011 operating
agreements] as binding." The agreements were entered into after
Dixon and Steven had, among other things, formed their
partnership to launch a competing business, usurped the WOW
trade name, and traded on access to proprietary and other
17
confidential WOW New England information. At the time the
agreements were signed, Masotta was unaware of the full extent
of Dixon and Steven's actions, and as the judge found, Masotta's
consent to the operating agreements "was essentially paid for"
by a side agreement in which he was to receive a $10,182.07
payoff. The judge determined Steven and Masotta to have
conflicts of interest disqualifying them from voting to amend
the operating agreements and found that the June, 2011, amended
agreements could not stand. See JRY Corp. v. LeRoux, 18 Mass.
App. Ct. 153, 167-168 (1984) (disqualifying general partner's
self-serving vote as violative of fiduciary duty owed other
general partners). We discern no clear error of fact or abuse
of discretion.
Accordingly, Elizabeth had the status of a full voting
member when she and Masotta called the April 2, 2013, meeting of
the WOW New England membership and voted to remove the Borghis
as managers. The judge did not err in enforcing the vote to
remove the Borghis.8
8
The Borghis also dispute the judge's determination of
Steven's ownership interest in two of the entities, FTN Fitness
(forty percent) and WAMP Fitness (forty-five percent). The
Borghis point to the companies' 2012 tax returns, prepared by
Steven's accountant, showing Steven's interests as 41.25 percent
and 50.25 percent, respectively. As these two clubs did not
have written operating agreements, the determination of
ownership interests rested on the testimony and evidence
presented at trial. The judge's findings were consistent with
the Borghis' answer to the verified complaint and Elizabeth's
18
2. Dixon and the Blast defendants' liability under G. L.
c. 93A. "[Section] 11 of G. L. c. 93A was intended to refer to
individuals acting in a business context in their dealings with
other business persons and not to every commercial transaction
whatsoever." Manning v. Zuckerman, 388 Mass. 8, 10 (1983), and
cases cited. It provides a cause of action for those "engaged
in the conduct of any trade or commerce" who suffer damages "as
a result of the use or employment by another person who engages
in any trade or commerce of an unfair method of competition or
an unfair or deceptive act or practice." G. L. c. 93A, § 11, as
amended by St. 1986, c. 363, § 1. Although the protections
provided by G. L. c. 93A, § 11, are broad, the statute is not
intended "to cover employment contract disputes between
employers and the employees who work in the employer's
organization, []or to disputes between members of that
organization arising out of the employment relationship."
Manning, 388 Mass. at 12.
The plaintiffs do not challenge the judge's ruling that the
Borghis could not be liable under G. L. c. 93A because the
statute does not apply to intracorporate disputes. However, the
plaintiffs contend that the judge erred in finding that Dixon
testimony; the Borghis have not shown the judge's findings to be
clearly erroneous. See New England Canteen Serv., Inc. v.
Ashley, 372 Mass. 671, 675 (1977); Williams v. B & K Med. Sys.,
Inc., 49 Mass. App. Ct. 563, 567 (2000).
19
and the Blast defendants9 could not be liable under G. L. c. 93A,
§ 11, for the same reason, "[b]ecause any wrongdoing by Dixon is
only as a result of his aiding and assisting the Borghis in
breaching their fiduciary and contractual obligations that they
owed WOW New England." We agree with the plaintiffs. While
c. 93A is inapplicable to employee-employer disputes, Dixon and
the Blast defendants were never employees of WOW New England.10
See Peggy Lawton Kitchens, Inc. v. Hogan, 18 Mass. App. Ct. 937,
940 (1984). Moreover, our cases have explicitly rejected the
suggestion that, because an employee cannot be held liable to
the company under G. L. c. 93A, outsiders who participate with
the employee "in a violation of his duty of loyalty" may not be
liable under G. L. c. 93A. See Augat, Inc. v. Aegis, Inc., 409
Mass. 165, 172 (1991).
In Hanover Ins. Co. v. Sutton, 46 Mass. App. Ct. 153
(1999), defendant Sutton, an officer of the plaintiff
corporation, helped form a competing corporation, codefendant
IPI, during the course of his employment, and diverted a
9
The judge's finding on this issue was brief, and mentioned
only defendant Dixon. However, she specifically referenced
count XXV of the complaint, which named, among other defendants,
both Dixon and the Blast defendants.
10
The trial judge found that "[a]lthough Steven Borghi did
hire [Dixon] as a consultant, the evidence showed that Borghi
paid him personally for any services he rendered and that
whatever services he did perform were not for the benefit of WOW
New England but to advance his and Borghi's own separate
business interests."
20
corporate opportunity from his employer to IPI. The trial judge
"explicitly based his conclusion that IPI had violated c. 93A on
his finding that IPI had 'aided and abetted' Sutton in breaching
his fiduciary duty" to the plaintiff corporation. Id. at 173.
Affirming the judge's ruling on the c. 93A claim, "[w]e
reject[ed] IPI's suggestion that because Sutton, as an employee
of [the plaintiff], could not be liable to [the plaintiff] under
G. L. c. 93A, . . . IPI, too, could not be liable under G. L.
c. 93A." Id. at 174. Similarly, the Borghis' status within WOW
New England does not bar the plaintiffs' c. 93A claims against
Dixon and the Blast defendants. See Manning, 388 Mass. at 10
("Section 11 provides a private cause of action to a person who
is engaged in business and who suffers a loss as a result of an
unfair or deceptive act or practice by another person also
engaged in business") (quotation omitted).
Because the judge believed that c. 93A was inapplicable,
she did not attempt to assess Dixon or the Blast defendants'
culpability under the statute. Whether the defendants violated
c. 93A, and whether they did so "in a wilful or knowing manner
[is] a matter for the [trial] judge. . . . Ultimately, c. 93A
ties liability for multiple damages to the degree of the
defendant's culpability." Kattar v. Demoulas, 433 Mass. 1, 15-
16 (2000). We therefore remand the matter to the judge for a
determination whether Dixon and the Blast defendants violated
21
c. 93A and, if so, whether single or multiple damages are
warranted.11 See Augat, Inc. v. Aegis, Inc., 417 Mass. 484, 486-
487 (1994); Kattar v. Demoulas, supra.
3. Reimbursement of Masotta's attorney's fees under G. L.
c. 156C, § 57. "Attorneys' fees may be awarded, in the judge's
discretion, to a party who has successfully brought a derivative
action on behalf of a corporation." Coggins v. New England
Patriots Football Club, Inc., 406 Mass. 666, 669 (1990). "Such
'an allowance is discretionary and not a matter of strict
right.'" Ibid., quoting from Commissioner of Ins. v.
Massachusetts Acc. Co., 318 Mass. 238, 243 (1945). A party may
recover such fees only for those claims benefitting the
corporation and not for direct claims benefitting the party
personally. Coggins, supra at 669. We review decisions on
requests for attorney's fees for abuse of discretion, see id. at
672, and a "judge's decision will be reversed only if it is
clearly erroneous." WHTR Real Estate Ltd. Partnership v.
Venture Distrib., Inc., 63 Mass. App. Ct. 229, 235 (2005).
The judge ordered reimbursement of Elizabeth's attorney's
fees and expenses but not Masotta's. In denying Masotta's
11
We recognize the irony that Steven, as a shareholder of
WOW New England, may stand to benefit from any additional
damages that Dixon and the Blast defendants are required to pay.
Any such inequity is a matter between erstwhile partners Steven
and Dixon, and the trial judge is free to take the equities into
account in fashioning any remedy under c. 93A.
22
request for fees, the judge found that his fees were "incurred
only to prosecute direct claims or, to the extent that Masotta's
counsel participated in the prosecution of the derivative
claims, his participation was unnecessary." "The amount of a
reasonable attorney's fee, awarded on the basis of statutory
authority, . . . is largely discretionary with the judge, who is
in the best position to determine how much time was reasonably
spent on a case, and the fair value of the attorney's services."
Fontaine v. Ebtec Corp., 415 Mass. 309, 324 (1993).
"[I]mportant considerations are the necessity of the services,
the extent to which duplicate or redundant effort was involved,
and the conduct of the party seeking the award of fees." Matter
of the Estate of King, 455 Mass. 796, 807 (2010).
Unlike Elizabeth's application, which specifically
differentiated between the fees attributable to the derivative
suit and discounted for the fees attributable to Elizabeth's
direct claims, Masotta did not identify services performed
solely in pursuit of the derivative suit and did not separate
them from those performed on his personal behalf. "The party
seeking attorney's fees bears the burden of showing that the
amount sought is reasonable." WHTR Real Estate Ltd.
Partnership, 63 Mass. App. Ct. at 235. The judge did not abuse
her discretion in finding that Masotta failed to carry that
burden.
23
Conclusion. So much of the judgment that ruled in favor of
Dixon and the Blast defendants on the derivative claims under
G. L. c. 93A is vacated, and the matter is remanded for further
proceedings consistent with this opinion. The judgment is
affirmed in all other respects.
The plaintiffs' request for appellate attorney's fees is
denied.
So ordered.