O  T  H  E  R      D  E  C  I  S  I  O  N  S  :

Virgin Entertainment Group, Inc. v. MSKC Newbury, LLC 2006 Mass.
Super. LEXIS 53  (Jan. 30, 2006) (van Gestel, J.).

The Court expressed clear annoyance in ruling on Plaintiff’s motion to compel Defendants to comply with three prior Court Orders. Plaintiff Virgin Entertainment Group, Inc. (“Virgin”) leases retail space from the Defendants at 360 Newbury Street. Defendants are in the process of developing the property into, among other things, luxury condominiums.

First, the Court addressed its prior order compelling the Defendants to record a notice of the Virgin lease so that prospective condo purchasers can make an informed decision about how that lease might affect the building, especially the common areas. The parties were unable to agree on the form of the notice. Irritated by the parties’ “petty squabbling,” the Court drafted a notice of lease itself and ordered that it, or a form agreed upon by the parties, be executed and recorded immediately.

Second, the Court addressed its prior order compelling the Defendants to produce construction documents “that

assess or address the impact of any aspect of the construction on Virgin’s leasehold premises.” At the hearing, Defendants’ counsel informed the Court that the requested documents were still being drafted, but that the Defendants would produce them as soon as they were completed. The Court ordered the Defendants to turn the documents over as soon as they were finished.

Finally, the Court addressed Plaintiff’s assertion that the Defendants had violated a prior Confidentiality Order by using information obtained during a Court-ordered walkthrough of the leased premises to assist them with construction planning. The Court again expressed its annoyance with these “aggressively litigating parties” and their “petty complaining.” The Court suggested they find alter-native means of settling day-to-day problems other than running into Court. On the merits, the Court rejected Plaintiff’s position because Virgin is merely a lessee, and Defendants own the property.

First Taunton Financial Corp. v. Arlington Land Acquisition – 99, LLC,
20 Mass. L. Rep. 556; 2006 Mass. Super LEXIS 98 (Feb. 28, 2006) (van Gestel, J.)..

First Taunton and Arlington Land Acquisition (“ALA”) formed a limited liability company, Eight Arlington Street, LLC, for purposes of purchasing and redeveloping property in Arlington into upscale condominiums. The McGrath family financed much of the project through a family trust, BackBay Mortgage Trust (“BBMT”). Sean McGrath was the manager of ALA and a trustee of BBMT. JoAnn McGrath was an owner of the Trust but not a member of the LLC.

First Taunton filed suit against ALA, Sean and JoAnn McGrath individually and Sean and JoAnn (and other McGrath family members) as Trustees of BBMT. First Taunton alleged that ALA and the McGraths mismanaged the LLC by engaging in a number of transactions that benefited McGrath controlled entities. First Taunton also alleged that BBMT violated Chapter 93A by charging excessive interest on loans to the LLC and improperly charged a fee in connection with refinancing.

Defendants moved for summary judgment on all of Plaintiff’s claims and also sought summary judgment on counterclaims for indemnification of legal fees under the LLC operating agreement. The Court allowed Defendants’ motion with respect to each of Plaintiff’s monetary claims on the basis that all such claims were derivative claims that should have been brought in the name of the LLC. The Court noted that Mass. R. Civ. P. 23.1, which applies to derivative claims, references unincorporated associations, not just traditional corporations, and also references “Members” as well as

shareholders. The Court also noted that nothing in M.G.L. ch. 156C, the statute governing LLCs, prevents derivative actions by members on behalf of the Company.

As to the Chapter 93A claim, although it too was derivative in nature (and therefore required dismissal), the Court held that BBMT could not avail itself of the intra-company exception to c. 93A. BBMT was established to loan money to the LLC, not to make a capital contribution. Accordingly, it was not part of the same enterprise as First Taunton and could be sued under 93A.

The claims against JoAnn McGrath failed because an exculpatory clause in the operating agreement immunized members from claims other than for gross negligence or willful misconduct. No such allegations were made.

First Taunton’s petition to dissolve the LLC survived summary judgment, notwithstanding that the operating agreement expressly prohibited either member from dissolving the LLC. The Court held that such provision did not apply because the project had been completed and all the condominiums had been sold.

Finally, the Court denied Defendants’ motion for summary judgment on their counterclaim for indemnification. Although the Court noted that there is merit to the indemnity claim, the Court held that there was a material issue of fact concerning whether the McGraths (through ALA) had acted in good faith or in the reasonable belief that their actions were in the best interest of the LLC.