ZVI Construction Co., LLC v. Levy

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15-P-359 Appeals Court
ZVI CONSTRUCTION COMPANY, LLC vs. FRANKLIN LEVY & another.1
No. 15-P-359.
Suffolk. January 12, 2016. - October 6, 2016.
Present: Kafker, C.J., Cohen, & Blake, JJ.
Notice, Timeliness. Conversion. Evidence, Privileged
communication. Privileged Communication. Waiver.
Attorney at Law, Attorney-client relationship. Practice,
Civil, Notice of appeal, Appeal, Complaint, Waiver. Fraud.
Civil action commenced in the Superior Court Department on
January 28, 2013.
A motion to dismiss, a motion to strike, and a motion to
compel discovery were heard by Christine M. Roach, J.; the
remaining issues were heard by Janet L. Sanders, J., on motions
for summary judgment; and entry of separate and final judgment
was ordered by Kenneth W. Salinger, J.
Richard E. Briansky for the plaintiff.
Christopher R. O'Hara (Ian J. Pinta with him) for the
defendants.
COHEN, J. The plaintiff, ZVI Construction Company, LLC
(ZVI), brought suit against the defendants, Attorney Franklin
1
Lawson & Weitzen, LLP.
2
Levy and the law firm of Lawson & Weitzen, LLP (L & W), claiming
that they had engaged in misrepresentation and other wrongdoing
in connection with a mediated settlement between ZVI and the
defendants' clients: The Upper Crust, LLC, and its affiliated
entities (collectively, The Upper Crust), and two of its
principals, Brendan Higgins and Joshua Huggard. As a result of
orders entered by two different Superior Court judges, all of
ZVI's claims against the defendants were dismissed, and ZVI
filed a notice of appeal. Despite the fact that ZVI's notice of
appeal was filed before the entry of a separate and final
judgment and, hence, was premature, we exercise our discretion
to decide this matter. After consideration of the arguments
presented, we affirm.
1. Background.2 Except where indicated, the following
facts are not in dispute. Brendan Higgins, Joshua Huggard, and
Jordan Tobins were members and managers of numerous limited
liability companies operating a small chain of pizzerias known
as The Upper Crust. On April 5, 2012, Higgins, Huggard, and The
Upper Crust, all of whom were represented by Levy and his firm,
L & W, filed a civil lawsuit against Tobins. In or around July,
2
ZVI's brief and the record include many communications
that were ruled protected from disclosure by the attorney-client
privilege. Given our agreement with that ruling, we have not
taken these documents into account in reaching our decision.
Even if we had done so, however, they would not have changed the
conclusions reached herein.
3
2012, a settlement was reached in that action and documented in
a memorandum of understanding (Tobins MOU). The Tobins MOU
provided, inter alia, as follows:
"Tobins will pay or cause to be paid, by cash, bank check
or wired funds $250,000 to the Upper Crust, said payment to
be made no later than October 1, 2012 (the 'Closing
Payment') and shall be made to an account or payee as
designated by the Upper Crust in writing" (emphasis
supplied).
Meanwhile, on April 6, 2012, ZVI had filed its own lawsuit
against The Upper Crust, Higgins, Huggard, and Tobins, alleging
that they had failed to pay ZVI for construction work performed
on The Upper Crest restaurants (collection action). In the
collection action, Higgins, Huggard, and The Upper Crust again
were represented by Levy and L & W.
The parties to the collection action subsequently agreed to
mediate their dispute. The mediation took place on September 6,
2012, at which time all parties to the collection action, their
respective legal counsel, and the mediator executed a mediation
agreement that provided, in pertinent part:
"The parties further agree that the mediation, including
all communications, documents and other materials, used
during said mediation, including all communications between
and among the parties and their counsel, shall be
confidential and shall not be used for any purpose other
than for said mediation" (emphasis supplied).
Prior to the mediation, ZVI was aware that The Upper Crust
had limited assets and significant debt, was under government
4
investigation for unfair labor practices, and was dealing with
significant internal management issues. ZVI also had been
informed by The Upper Crust's legal counsel that The Upper Crust
might file for bankruptcy. At the mediation, the parties to the
collection action reached a settlement that was memorialized in
a written agreement (ZVI settlement), which provided, among
other things, that:
"On or before October 3, 2012, Upper Crust LLC shall pay to
the plaintiff [ZVI] the sum of $250,000, which funds are
being paid by Jordan S. Tobins to Upper Crust LLC in
satisfaction of his obligation under his separate
memorandum of understanding with Huggard, Higgins and the
Upper Crust LLC. In the event that said Tobins fails to
make the $250,000 payment, this agreement shall be null and
void." (Emphasis supplied.)
The ZVI settlement did not contain an escrow provision or
otherwise call for or obligate Levy or L & W to act as escrow
agents. Levy and L & W were never specifically asked, nor did
they expressly agree, to act as an escrow agent for ZVI's
benefit. They also were not parties or signatories to the ZVI
settlement.
In the present case, the central dispute concerns what
occurred at the mediation. ZVI alleges that prior to the
execution of the ZVI settlement, both Tobins and ZVI proposed
that the $250,000 due under the Tobins MOU be paid directly by
Tobins to ZVI; however, according to ZVI, Levy insisted that the
money be paid to The Upper Crust first and then delivered to
5
ZVI. ZVI further alleges that, in order to induce both Tobins
and ZVI to execute the settlement, Levy "represented that he
would pay the funds to ZVI." ZVI claims to have executed the
settlement in reliance upon this representation. Levy and L & W
deny all of the above allegations.
Approximately ten days after the mediation, on September
17, 2012, Tobins's legal counsel sent Levy an electronic mail
message (e-mail), in which he set forth "a list of issues that
we'll need to address," including the following regarding the
payment due under the Tobins MOU: "Payment ($250k on or before
October 1 -- to you to pay ZVI)." The following day, Levy
responded by e-mail and, regarding that specific issue, wrote,
"I will send you my firm's escrow wire info."
Subsequently, on Friday, September 28, 2012, an entity
named Ditmars, Ltd., acting on Tobins's behalf, wired the
$250,000 due under the Tobins MOU to the Interest on Lawyers'
Trust Account (IOLTA account) maintained by L & W. Upon receipt
of the funds, Levy, who was in Hong Kong at the time, sent his
associate at L & W, Joshua Segal, an e-mail, directing him to
"make sure the money is held and we do not release it to anyone
until I give directions. Especially note the money is not to be
released to ZVI or [ZVI's legal counsel Richard] Briansky or
anyone. Very important. Thanks." Both Levy and Segal
testified that Levy was concerned about having clear written
6
instructions from his client before the funds were released to
anyone.
The same day, September 28, 2012, Dan Hurley, The Upper
Crust's chief financial officer (CFO) and accountant, sent Levy
an e-mail directing as follows:
"[H]ere is how I would like the 250,000 distributed from
your IOLTA account.
"Murphy and King $64,644.00
"Lawson and Weitzen $21,447.28
"DiNicola, Seligson & Upton, LLP $9,246.26
"[T]hanks!!
"I will make sure your office has all the wire information
to make these transfers."
Later that day, Hurley sent Segal an e-mail directing him to
wire the balance of the $250,000, estimated to be $154,692.46,
to The Upper Crust's payroll account, entitled the JJB Hanson
Management Payroll Account. The next day, Saturday, September
29, 2012, Hurley forwarded yet another e-mail to Segal and Levy,
summarizing his instructions regarding disbursement of the
$250,000:
"Here is the . . . email I sent to Franklin [Levy] late
yesterday afternoon with the amounts that need to go out.
Please have John send these first thing Monday morning, if
he can. I think Franklin may have confirmed this with you
but if not, please verify with him. You will be leaving
the $21,447.28 in the Lawson and Weitzen account for the
August 31, 2012 invoice. On Monday John should send out 3
wires. Murphy and King, DiNicola, Seligson & Upton, LLP
and JJB Manag[e]ment Hanson, Inc. which should be the
remaining balance of the $250,000. [T]hat amount should be
$154,662.46. Let me know if you [have] any questions.
Thanks!!"
7
Two days later, on Monday, October 1, 2012, the $250,000 in
funds were disbursed from L & W's IOLTA account as follows:
$64,644.00 to Murphy and King
$21,417.28 to Lawson & Weitzen
$9,246.26 to DiNicola, Seligson & Upton, LLP
$154,692.46 to JJB Hanson Management Payroll Account
The $21,417.28 sent to L & W was in payment of a bill for legal
services, dated September 14, 2012, that had been sent to The
Upper Crust.
Meanwhile, on September 20, 2012, Higgins, Huggard, and The
Upper Crust had met with a bankruptcy attorney, Harold Murphy,
and retained him and his law firm, Murphy & King, P.C. (Murphy &
King). On October 4, 2012, The Upper Crust and affiliated
entities, represented by Murphy & King, filed a petition for
bankruptcy under Chapter 11 of the United States Bankruptcy
Code. ZVI was never paid the $250,000 due under the ZVI
settlement.
On January 28, 2013, with The Upper Crust entities in
bankruptcy, ZVI initiated the present action, filing a verified
complaint against Levy and L & W. Subsequently, on March 12,
2013, ZVI filed an unverified amended complaint, which, among
other things, added Higgins and Huggard as defendants. Levy and
L & W responded by filing two motions: (1) a motion to strike
all allegations in the amended complaint concerning a statement
allegedly made by Levy at mediation, see Mass.R.Civ.P. 12(f),
8
365 Mass. 754 (1974); and (2) a motion to dismiss all counts
against them in the amended complaint, see Mass.R.Civ.P.
12(b)(6), 365 Mass. 754 (1974). ZVI opposed both motions.
After a hearing, a judge of the Superior Court (first
judge) issued a memorandum and order (1) allowing the motion to
strike the alleged statement made at mediation, because its use
was prohibited by the confidentiality provision in the mediation
agreement, and (2) dismissing most, but not all, of the claims
against Levy and L & W. Then, based on the allowance of the
motion to strike and, to a large extent, on other, independent
grounds detailed in the memorandum and order, the judge
dismissed in their entirety the claims against Levy and L & W
for aiding and abetting fraud (count V), misrepresentation
(count VI), breach of an alleged escrow agreement (count VII),
breach of fiduciary duty (count VIII), and conspiracy (count X).
As for the remaining claims against Levy and L & W, the judge
allowed the claims for tortious interference with contractual
relations (count III), conversion (count IX), and violation of
G. L. c. 93A, § 11 (count XII), to proceed, but only as to the
$21,417.28 that was disbursed to L & W, and not as to the rest
of the $250,000 that was disbursed to third parties from the
IOLTA account.3
3
On appeal, ZVI does not challenge the partial dismissal of
counts III, IX, and XII.
9
Upon the completion of discovery, Levy and L & W filed a
motion for summary judgment as to what remained of those three
counts (III, IX, and XII). See Mass.R.Civ.P. 56(c), as amended,
436 Mass. 1404 (2002). ZVI opposed and filed a cross motion for
summary judgment on what remained of the claim for conversion
(count IX). After a hearing, another judge of the Superior
Court (second judge) issued a memorandum of decision and order
(1) allowing Levy and L & W's motion and dismissing all
remaining claims against them, and (2) denying ZVI's cross
motion. A judgment to that effect subsequently entered on
January 5, 2015, and, on January 26, 2015, ZVI filed a notice of
appeal.
2. Discussion. a. Premature notice of appeal. We first
confront a threshold procedural issue. Because there remained
unresolved claims against Higgins and Huggard, and there was no
final judgment, ZVI's notice of appeal was premature. At oral
argument, this procedural defect was called to the attention of
the parties, who then returned to the trial court where another
Superior Court judge (third judge) allowed their joint motion
for the entry of a separate and final judgment. See
Mass.R.Civ.P. 54(b), 365 Mass. 820 (1974). At that point,
however, in order to perfect its appeal, ZVI should have filed a
new notice of appeal. This it did not do.
10
We nevertheless exercise our discretion to treat the appeal
as properly before us. See, e.g., Lewis v. Emerson, 391 Mass.
517, 518-520 (1984); Lawrence v. Lawrence Patrolmen's Assn., 56
Mass. App. Ct. 704, 706 n.4 (2002); Scannell v. Attorney Gen.,
70 Mass. App. Ct. 46, 47 n.2 (2007). We do so because the
issues are of importance and have been fully briefed. In
addition, ZVI's claims against Higgins and Huggard have now been
resolved.4
b. Conversion. ZVI contends that the second judge erred
when, at the summary judgment stage, she dismissed what remained
of the claim for conversion, i.e., the transfer of $21,417.28
from the IOLTA account to L & W. Our review proceeds under
well-established summary judgment standards.5 We conclude that
4
We note that reaching the merits is consistent with
decisions under the cognate Federal rule, which consider the
subsequent entry of a separate and final judgment to cure a
premature notice of appeal. See Clausen v. Sea-3, Inc., 21 F.3d
1181, 1184 (1st Cir. 1994). See also National Assn. of Bds. of
Pharmacy v. Board of Regents of the Univ. Sys. of Ga., 633 F.3d
1297, 1306-1307 (11th Cir. 2011), and cases cited. However, we
express no opinion as to whether the Federal approach is
suitable for Massachusetts and should be adopted here.
5
"In considering a motion for summary judgment, we review
the evidence and draw all reasonable inferences in the light
most favorable to the nonmoving party. Because our review is de
novo, we accord no deference to the decision of the motion
judge. The defendants, as the moving parties, have the burden
of establishing that there is no genuine issue as to any
material fact and that they are entitled to judgment as a matter
of law. Once the moving party establishes the absence of a
triable issue, the party opposing the motion must respond and
allege specific facts establishing the existence of a material
11
Levy and L & W sustained their burden of establishing
entitlement to judgment as a matter of law.
"The elements of conversion require that a defendant be
proved to have 'intentionally or wrongfully exercise[d] acts of
ownership, control or dominion over personal property to which
he has no right of possession at the time.'" Grand Pac. Fin.
Corp. v. Brauer, 57 Mass. App. Ct. 407, 412 (2003), quoting from
Abington Natl. Bank v. Ashwood Homes, Inc., 19 Mass. App. Ct.
503, 507 (1985). Here, the premise of ZVI's argument is that
the $250,000 was its property. As the second judge reasoned,
however, even though the $250,000 was owed to ZVI under the ZVI
settlement, the money was not held by the defendants for the
benefit of ZVI; nor was it placed in an escrow account. Rather,
it was held as client funds in an IOLTA account, where it
belonged to and was under the exclusive dominion and control of
The Upper Crust. See Mass.R.Prof.C. 1.15, as appearing in 440
Mass. 1338 (2004); Matter of Sharif, 459 Mass. 558, 564 (2011).
See also Phillips v. Washington Legal Foundation, 524 U.S. 156,
164 (1998) ("[T]he principal held in IOLTA trust accounts is the
'private property' of the client"); Washington Legal Foundation
v. Legal Foundation of Wash., 236 F.3d 1097, 1106 (9th Cir.
2001) ("[T]he money [in IOLTA accounts] belongs to the
fact in order to defeat the motion." Drakopoulos v. U.S. Bank
Natl. Assn., 465 Mass. 775, 777-778 (2013) (quotations and
citations omitted).
12
clients"); Kimble Mixer Co. vs. Hall, No. 2003 AP 01 0003, at 34
(Ohio Ct. App. Feb. 22, 2005) ("[F]unds deposited in an IOLTA
account remain the property of the client"). That being the
case, where the funds were distributed in accordance with the
client's instructions,6 the defendants cannot be found to have
converted the funds, even insofar as they were used by the
client to pay L & W's invoice.
Nor can the defendants be faulted for having Tobins's
attorney transmit the funds to L & W's IOLTA account in the
first place. There was nothing in the ZVI settlement, or, for
that matter, in the Tobins settlement, that required the money
to be paid to The Upper Crust's attorneys for the benefit of ZVI
or to be held by them in an escrow account.7 The Tobins
settlement provided that the $250,000 was to be paid to The
Upper Crust, and that it would be transmitted to an account to
be designated by The Upper Crust. The ZVI settlement, in turn,
simply provided that The Upper Crust pay the $250,000 to ZVI.
While ZVI may have come to regret not having structured the
6
Despite ZVI's argument to the contrary, it is evident from
the record that there is no genuine dispute that The Upper
Crust's CFO, Hurley, had the authority to provide direction as
to the distribution of the $250,000.
7
As the first judge remarked, there is nothing that
"plausibly supports a meeting of the minds on an escrow
agreement, and a promise to send a 'firm's wire info[rmation]'
cannot reasonably be read otherwise."
13
mechanics of settlement differently, those were the terms to
which the parties had agreed.8
c. Motion to strike alleged mediation statement. ZVI next
argues that the first judge erred when, due to the provision in
the mediation agreement barring the use of mediation
communications for any purpose other than the mediation, she
struck any reference in the amended complaint to Levy's alleged
misrepresentation to the effect that he would pay the $250,000
to ZVI after it was received from Tobins. More particularly,
ZVI argues that the judge erred in failing to recognize a fraud
exception to the contractual provision.
Whether a fraud exception should be recognized in such
circumstances is an undecided question in Massachusetts. We
note, however, that our Legislature has recognized the
importance of preserving the confidentiality of communications
made during mediation, where those communications have been made
in the presence of a qualified mediator.9 See G. L. c. 233,
8
As we conclude that the judge did not err in dismissing
ZVI's claim for conversion, it follows that the judge did not
err in dismissing ZVI's G. L. c. 93A claim insofar as it rests
on the conversion claim.
9
General Laws c. 233, § 23C, inserted by St. 1985, c. 325,
provides in pertinent part: "Any communication made in the
course of and relating to the subject matter of any mediation
and which is made in the presence of such mediator by any
participant, mediator or other person shall be a confidential
communication and not subject to disclosure in any judicial or
administrative proceeding; provided, however, that the
14
§ 23C. While the first judge did not explicitly so state in her
decision on the motion to strike, it is implicit in her
discussion of § 23C that she believed the statute did not apply,
because, in addition to alleging that Levy's statement was made
at mediation, ZVI also alleged that the statement was not made
in the presence of the mediator.10 Given the plain language of
the statute, we are constrained to agree.
Nevertheless, the statute is instructive. It gives broad
confidentiality protection to mediation communications, barring
disclosure in any judicial or administrative proceeding, and
creating only one express exception for the mediation of labor
disputes. Significantly, the statute does not include an
exception for fraud.11 In light of that omission, we would be
hard pressed to find that such an exception exists in the
circumstances of this case, where there is a confidentiality
provisions of this section shall not apply to the mediation of
labor disputes."
10
As the first judge noted, "[t]his distinction is of more
than passing interest because of the pleadings in this case.
The original complaint . . . was verified, and did not identify
whether the alleged representation by Levy with respect to
handling the settlement funds was made within or without the
presence of the mediator. . . . The Amended Complaint, which is
not verified, adds the sentence . . . , 'Levy's representation
occurred outside the presence of the mediator.'"
11
It has been held, however, that, under some
circumstances, there can be an at-issue waiver. See Bobick v.
United States Fid. & Guar. Co., 439 Mass. 652, 658 n.11 (2003).
15
agreement,12 negotiated between sophisticated business people
with the assistance of legal counsel, that is even broader than
§ 23C. Indeed, were there to be a fraud exception to the
parties' mediation confidentiality agreement when no such
exception exists under the confidentiality provisions of § 23C,
it could lead to the incongruous situation where two identical
claims of fraud at mediation are alleged, but only one can go
forward because the mediator was not within earshot at the
moment when one of the communications was uttered.
We also note that, like § 23C, the most recent version of
the Uniform Mediation Act (UMA), which has been adopted by
eleven States and the District of Columbia,13 does not include
fraud among the recognized exceptions to the "privilege"
protecting against the disclosure of "mediation communications."
See Uniform Mediation Act (amended 2003), 7A (Part III) U.L.A.
§ 6 (2006). In fact, the comments accompanying the UMA reveal
that a fraud exception was specifically considered and rejected.
See id. at § 6 comment 5. Furthermore, while we have not been
12
The parties' agreement provides that "all communications
between and among the parties and their counsel, shall be
confidential and shall not be used for any purpose other than
for said mediation."
13
See S.D. Codified Laws §§ 19-13A-1 to 19-13A-15 (2016)
(UMA). See also Uniform Mediation Act (amended 2003), 7A (Part
III) U.L.A. 73 (Supp. 2016) (noting Hawaii, Idaho, Illinois,
Iowa, Nebraska, New Jersey, Ohio, Utah, Vermont, Washington, and
District of Columbia have adopted UMA).
16
asked to do so here, we are not aware of any case where a court
has created a fraud exception to a mediation confidentiality
statute. We also are not aware of any case where a court has
created such an exception to a mediation confidentiality
agreement.
The closest case we have located is Facebook, Inc. v.
Pacific N.W. Software, Inc., 640 F.3d 1034 (9th Cir. 2011),
involving the highly-publicized dispute between Facebook
founder, Mark Zuckerberg, and Cameron and Tyler Winklevoss. At
issue in that case was whether the Winklevosses could rescind a
mediated settlement on the ground that the plaintiffs had
committed securities fraud by overstating the value of Facebook
shares that would be transferred to the Winklevosses as part of
the settlement. See id. at 1038. Because the parties had
signed a mediation confidentiality agreement, providing that
"[n]o aspect of the mediation shall be relied upon or introduced
as evidence in any arbitral, judicial, or other proceeding," the
court refused to allow the Winklevosses to support their
securities fraud claims with evidence of what transpired at
mediation. Id. at 1041. Of significance to the court was that
the Winklevosses were sophisticated parties, who had been
represented by counsel, and who had acquired enough information
during the course of the litigation to know that the valuation
17
representations made by their opponents should be received with
caution. See id. at 1039.
The same factors are operative here. The parties to the
mediation agreement and the ZVI settlement were all business
people, represented by counsel. ZVI also had obtained
sufficient information to know that any assurances of payment
should be viewed cautiously. ZVI knew of The Upper Crust's
significant financial difficulties and that it was contemplating
bankruptcy. Moreover, in the collection action, ZVI had
asserted claims of fraud and unfair and deceptive acts against
The Upper Crust.
Furthermore, the mediation agreement merely precluded the
parties from disclosing mediation communications; it did not bar
the assertion of claims for fraud, based upon independent
support. There also is no suggestion that the mediation
agreement itself was procured by fraud. Under these
circumstances, we agree with the first judge that the mediation
agreement, and the confidentiality provision therein, are
enforceable. The judge did not abuse her discretion in striking
from the amended complaint the statement Levy allegedly made
during the mediation.
In any event, even if we were to assume that the first
judge should not have allowed the motion to strike, we agree
with her assessment that Levy's alleged statement, to the effect
18
that he would make sure that ZVI would be paid from the funds
received from Tobins, does not amount to actionable fraud. Even
if Levy had made such a statement, he was not personally
guaranteeing payment; nor does ZVI suggest he was. Indeed, Levy
cannot reasonably be understood as having taken on any personal
legal obligations to ZVI. As previously discussed, he was not
asked, and did not agree, to act as an escrow agent, and no such
obligation was included in the settlement agreement.
Furthermore, Levy was not a party to, and did not sign, the
settlement agreement.
Finally, in light of the plain language of the ZVI
settlement that The Upper Crust "shall pay to [ZVI] the sum of
$250,000," ZVI cannot reasonably suggest that it relied on any
assurance that it would be paid the Tobins funds.14 See
Masingill v. EMC Corp., 449 Mass. 532, 541 (2007). Thus, to the
extent that ZVI's claims based on that alleged statement remain
at issue,15 they would fail as a matter of law even if the
alleged statement should not have been struck.16
14
An action for fraud or deceit requires proof of a
"misrepresentation of a material fact, made to induce action,
and reasonable reliance on the false statement to the detriment
of the person relying." Hogan v. Riemer, 35 Mass. App. Ct. 360,
365 (1993).
15
Six counts rested, in whole or in part, on the alleged
mediation statement: aiding and abetting fraud (count V);
misrepresentation (count VI); breach of alleged escrow agreement
(count VII); breach of fiduciary duty (count VIII); conspiracy
19
d. Motion to compel. Lastly, ZVI challenges the first
judge's denial of a motion to compel the production of various
communications between the defendants and the clients they
represented in the collection action, i.e., The Upper Crust and
its principals. The judge found and ruled that the defendants
had established that the communications were privileged under
the "common interest/joint defense doctrine," see Hanover Ins.
Co. v. Rapo & Jepsen Ins. Servs., Inc., 449 Mass. 609, 612-617
(2007), and that ZVI had not demonstrated a waiver exception
within the scope recognized by Massachusetts law. Apparently,
Higgins and Huggard agreed to waive any arguable personal
privilege they had in the subject communications as part of the
settlement of their own disputes with ZVI. Citing those
waivers, as well as the alleged failure of The Upper Crust's
(count X); and violations of G. L. c. 93A, § 11 (count XII).
Four of those counts also were dismissed by the first judge for
reasons independent of the alleged mediation statement, and ZVI
has not challenged those reasons on appeal. As a result, the
only counts at issue on appeal are what remained of the counts
for misrepresentation (count VI) and violations of G. L. c. 93A,
§ 11 (count XII).
16
The defendants also argue summarily that all of ZVI's
claims fail because ZVI suffered no damages. Specifically, the
defendants contend that the transfer of funds to ZVI was barred
by an injunction in another Superior Court case. The defendants
further contend that any payment would have been a voidable
preference payment made within ninety days of The Upper Crust's
bankruptcy filing, in violation of 11 U.S.C. § 547(b) (2012).
We have been informed by the parties that these arguments are
the subject of a separate contempt action. Because they are not
factually developed in the record before us, we do not consider
them.
20
bankruptcy trustee to take affirmative steps to maintain the
confidentiality of the subject communications, ZVI claims that
the judge's denial of its motion was in error. We disagree.
As an initial matter, it is important to note what is not
at issue in this appeal. First, ZVI does not dispute that
Higgins, Huggard, and The Upper Crust had jointly engaged Levy
and L & W to represent them at the time of the subject
communications. Second, ZVI does not contest that, absent
waiver, the subject communications are protected by the
attorney-client privilege. Third, ZVI does not claim that,
again, absent waiver, The Upper Crust, acting through the
trustee, has no legitimate right to assert the attorney-client
privilege as to those communications. Finally, ZVI acknowledges
that the trustee has not expressly waived the attorney-client
privilege as to the subject communications. With these
limitations in mind, we address ZVI's arguments.
ZVI first argues that the waivers by Higgins and Huggard
preclude the application of the attorney-client privilege,
because waiver by one or more, but not all jointly represented
clients destroys the privilege for all of them. As our
appellate courts have yet to confront this issue, we must look
elsewhere for guidance. Notably, ZVI has not directed us to any
authority holding that one client in a co-client relationship
can waive the privilege for all clients as to third parties.
21
Meanwhile, there is a wealth of authority holding otherwise.
As ZVI acknowledges, there are many cases holding that, in
circumstances where multiple clients are jointly represented by
the same counsel, or in the analogous situation where multiple
clients represented by separate counsel join together pursuant
to a so-called "common interest" or "joint defense" agreement,
all of the clients must waive the attorney-client privilege for
a waiver to occur. See In re Teleglobe Communications Corp. v.
BCE Inc., 493 F.3d 345, 363 (3d Cir. 2007) ("[W]aiving the
joint-client privilege requires the consent of all joint
clients"); United States v. BDO Seidman, LLP, 492 F.3d 806, 817
(7th Cir. 2007) ("[T]he privileged status of communications
falling within the common interest doctrine cannot be waived
without the consent of all of the parties"); John Morrell & Co.
v. Local Union 304A of the United Food & Commercial Workers,
AFL-CIO, 913 F.2d 544, 556 (8th Cir. 1990), cert. denied, 500
U.S. 905 (1991), quoting from Ohio-Sealy Mattress Mfg. Co. v.
Kaplan, 90 F.R.D. 21, 29 (N.D. Ill. 1980) ("It is fundamental
that 'the joint defense privilege cannot be waived without the
consent of all parties to the defense'"); State v. Maxwell, Kan.
App. 2d 62, 65 (1984) ("[W]here several persons employ an
attorney and a third party seeks to have communications made
22
therein disclosed, none of the several persons -- not even a
majority -- can waive this privilege").17
ZVI claims that these cases ignore the fact that when a
client chooses to disclose a communication, the confidentiality
that forms the "foundation" of the attorney-client privilege is
destroyed, and, hence, the right to assert the privilege
thereafter is lost. However, while this argument may have merit
when there is only one client, it is not apt when a client who
has agreed to be jointly represented by the same attorney(s)
acts unilaterally and discloses a communication arising out of
the joint attorney-client relationship. To the contrary, the
concept of confidentiality would be undermined if such
unilateral acts were condoned. As one Federal court has
explained, requiring all clients to waive the privilege "is
necessary to assure joint defense efforts are not inhibited or
even precluded by the fear that a party to joint defense
17
See also the Restatement (Third) of the Law: The Law
Governing Lawyers § 75 (2000), which provides:
"(1) If two or more persons are jointly represented by
the same lawyer in a matter, a communication of either co-
client that otherwise qualifies as privileged under §§ 68-
72 and relates to matters of common interest is privileged
as against third persons, and any co-client may invoke the
privilege, unless it has been waived by the client who made
the communication.
"(2) Unless the co-clients have agreed otherwise, a
communication described in Subsection (1) is not privileged
as between the co-clients in a subsequent adverse
proceeding between them."
23
communications may subsequently unilaterally waive the
privileges of all participants, either purposefully in an effort
to exonerate himself, or inadvert[e]ntly." Western Fuels Assn.,
Inc. v. Burlington N. R.R. Co., 102 F.R.D. 201, 203 (D. Wyo.
1984).
We agree with the prevailing authority, and discern no
error in its application here by the first judge. Absent a
waiver by the trustee on behalf of The Upper Crust, it is
irrelevant whether Higgins and Huggard waived any personal
privilege they may have held.
While acknowledging that the trustee did not expressly
waive the attorney-client privilege, ZVI next argues that a
waiver can be implied from what it suggests was the trustee's
failure to react after ZVI induced Higgins and Huggard to
disclose the communications. Again, however, the argument lacks
merit. The record reflects that Levy and L & W acted repeatedly
and successfully to protect the privilege of the subject
communications throughout this action.18 According to the
trustee's affidavit submitted in support of those efforts, ZVI's
counsel contacted him on several occasions asking him to waive
the privilege on behalf of The Upper Curst, and he refused to do
18
Levy and L & W successfully opposed ZVI's motion to
compel production of the subject attorney-client communications.
Then, when ZVI, despite that ruling, attached the communications
to its summary judgment filing, Levy and L & W successfully
moved to strike them.
24
so every time. It is not clear what more the trustee reasonably
should have done. See Magnetar Technologies Corp. v. Six Flags
Theme Park Inc., 886 F. Supp. 2d 466, 486 (D. Del. 2012) ("[A]
waiver of a joint privilege is not accomplished by failing to
take precautions to prevent disclosing documents in the custody
of a former joint client or through delay in not immediately
requesting their return"). Furthermore, given that the waiver
of the privilege was not complete until the trustee consented,
ZVI should not be permitted to use the premature disclosure of
the communications by Higgins and Huggard -- a disclosure that
ZVI induced -- as grounds for arguing that the trustee had
impliedly waived the privilege. In sum, the first judge
correctly concluded that there was no implied waiver.
3. Conclusion. The orders allowing Levy and L & W's
motion to strike and denying ZVI's motion to compel are
affirmed. The judgment entered January 5, 2015, and the final
judgment as to the claims against Levy and L & W entered January
22, 2016, are affirmed.
So ordered.