Beretta v. Dequattro

Full title: JOSEPH R. BERETTA, Plaintiff, v. DAVID L. DEQUATTRO; and THE ROBINSON…

Court: Superior Court of Rhode Island, Providence

Date published: Mar 23, 2023

C. A. PC-2020-03404 (R.I. Super. Mar. 23, 2023)

Opinion

C. A. PC-2020-03404

03-23-2023

JOSEPH R. BERETTA, Plaintiff, v. DAVID L. DEQUATTRO; and THE ROBINSON GREEN BERETTA CORPORATION, Defendants.

For Plaintiff: William M. Russo, Esq. Samantha C. Ferrucci, Esq. For Defendant: Barry J. Kusinitz, Esq. Blake J. Godbout, Esq.

STERN, J.

For Plaintiff: William M. Russo, Esq. Samantha C. Ferrucci, Esq.

For Defendant: Barry J. Kusinitz, Esq. Blake J. Godbout, Esq.

DECISION

STERN, J.

Plaintiff Joseph R. Beretta (Beretta) and Defendant David L. DeQuattro (DeQuattro) were shareholders in the Robinson Green Beretta Corporation (RGB). The parties executed two separate agreements in 2009 and 2016. Under both agreements, Beretta agreed, inter alia, to transfer his shares of RGB, and consequently his ownership interest, to DeQuattro and other potential new investors. However, the parties dispute over which agreement controls the parties' transition of ownership. A bench trial was conducted from October 17 to October 21, 2022 and was then suspended until November 9, 2022. The parties waived closing argument and submitted post-trial briefs for the Court's consideration. The Court's decision follows. Jurisdiction is pursuant to Rule 52 of the Superior Court Rules of Civil Procedure.

I Facts and Travel

By way of background, RGB is an architectural firm with its principal place of business located in Providence, Rhode Island. See generally Compl. ¶ 3. It was founded as a partnership in or around 1946. (Trial Tr. (Tr.) 5:9-11.) Beretta's father, Joseph A. Beretta (Beretta, Sr.), joined the partnership soon after it was founded. See id. at 5:11-12. The firm was incorporated in or around 1969. Id. at 5:18-20. Beretta, Sr. was an engineer, architect, and majority shareholder of RGB until his passing in 2001. Id. at 93:25-94:2; 5:24-6:1.

Beretta joined RGB in July of 1973. Id. at 6:24-25. Unlike his father, Beretta is not an architect.¹ Id. at 8:1-2. After his father's passing, Beretta became RGB's President and majority shareholder and sat on the company's board of directors. See id. at 7:1-10. Rhode Island initially required that all members of an architectural firm's board of directors must be registered architects. See id. at 278:10-25. However, Beretta, Sr., while on the registration board, facilitated a change to Rhode Island's rules so that Beretta could serve on the board as a non-architect. Id. at 279:4-8. RGB took on different corporate structures, which excluded Beretta, in states that required all members of the firm's board to be architects. See id. at 278:12-14, 460:7-14.

1 Beretta received a Bachelor of Business Administration degree from Norwich University in 1973. (Trial Tr. (Tr.) 95:11-18.) He began working at RGB after graduation. Id. at 95:19-21.

In addition to President, Beretta also served as Chief Executive Officer (CEO), Treasurer, and Chief Financial Officer (CFO) of RGB. Id. at 162:19-163:2. Beretta was primarily responsible for maintaining RGB's financial health, including invoicing, tracking accounts payable and receivable, and budgeting. Id. at 7:13-15. Importantly, Beretta prepared RGB's internal financial statements and reconciled the company's bank statements.² Id. at 96:20-23. He also assumed responsibility over RGB's business development³ and served on RGB's Executive Committee. Id. at 7:18-19. RGB's Executive Committee consisted of Beretta, DeQuattro, and another RGB architect named Jeffrey Hatcher (Hatcher). Id. at 116:1-3.

2 Beretta is not an educated, trained, or certified accountant. Id. at 95:22-96:1; see also Pl.'s Ex. 50 (DeQuattro Aff.) ¶ 4.

3 Beretta testified that his business development role included going "to various charitable events, political events trying to keep RGB's name out in the public so [RGB] would be considered when various projects came up for bid." (Tr. 8:6-9.)

DeQuattro is an educated and trained architect who joined RGB as an intern architect on or about October 5, 1993.⁴ Id. at 275:9-11. He became a registered architect within the State of Rhode Island in 1994, at which point he worked as a project architect for RGB. Id. at 276:8-12, 277:4-7. As a project architect, DeQuattro assumed greater architectural duties as well as marketing responsibilities. See id. at 277:7-8.

4 DeQuattro received a Bachelor of Architecture degree from Roger Williams University in 1989. (Tr. 274:11-14.) He then worked for David Presbrey Architects from 1989 until October 5, 1993, at which time he joined RGB as an intern architect. Id. at 275:9-11.

Beginning in the late 1990s, Beretta, Sr. met with RGB's principal architects to discuss a transition of ownership. Id. at 112:4-8; Pl.'s Ex. 49 (Hatcher Aff.) ¶ 6. However, talks fizzled because concrete financial information was never shared. (Hatcher Aff. ¶ 6.) After Beretta, Sr.'s passing, the principal architects became "restless" and "undertook a significant program of both management and transition-designed activities to strengthen and train new management, and to coordinate the transition of ownership." Id. ¶ 7. However, these efforts did not result in a transition of ownership either. Id. Beginning in or around late 2004 or early 2005, Beretta, DeQuattro, and Hatcher discussed a transition of ownership. (Pl.'s Ex. 50 (DeQuattro Aff.) ¶ 6.) This time, the discussions led to the 2009 Letter Agreement, under which Beretta agreed to transition ownership of RGB. See generally Pl.'s Ex. 1 (2009 Letter Agreement).

A

The 2009 Letter Agreement

After reviewing the parties' papers and observing the trial, the Court finds that there was a distinct lack of trust and confidence within RGB leading up to the 2009 Letter Agreement.

When Beretta assumed control over RGB, he purportedly made questionable leadership decisions. Beretta allegedly denied employees' ability to join RGB's Executive Committee or board of directors. See Tr. 280:10-14, 281:11-20. DeQuattro testified that Beretta viewed RGB as "the family architectural firm" and did not want to cede control over the company. Id. at 281:1317; DeQuattro Aff. ¶ 10. Beretta's decisions caused architects at the firm to leave or retire, which in turn caused the firm to shrink dramatically. See Tr. 280:14-16. Moreover, Beretta's station as President prevented RGB from operating in several states, which limited RGB's business opportunities and earning potential. Id. at 278:10-17, 381:18-22.

DeQuattro and other RGB architects also "questioned Beretta's suitability for the position of President for several reasons ...." (DeQuattro Aff. ¶ 7.) First, Beretta was not an architect. He was also not a "skilled chief financial officer for . . . a multimillion dollar architectural firm ...." Id. Allegedly, Beretta did not provide access to the company's books and records. Id. Further, DeQuattro believed that Beretta's compensation was undeserved because Beretta did not bring in clients and, by extension, revenue to RGB. Id. RGB did not reward architects for developing and generating business, which meant that RGB struggled to attract quality architects to the firm. Id.; see also Tr. 329:15-19.

To see "if the business was viable to grow and if it was viable to transition," DeQuattro and other RGB architects hired Bill Hash and Mike Cunningham to compile a financial report of RGB. (Tr. 282:3-19.) DeQuattro testified that in or around 2005, a decision was made to formally begin negotiating a transition of ownership. Id. at 282:25-283:2. In or around 2006, DeQuattro proffered a first draft membership agreement. Id. at 282:25-283:12. The prospective buyers under the draft agreement were DeQuattro, Hatcher, and another architect named Chris McMahon. Id. at 283:22-24. "[L]engthy and at times contentious negotiations" continued for several years and culminated in the 2009 Letter Agreement between Beretta, DeQuattro, and Hatcher.⁵ (Hatcher Aff. ¶¶ 8-9.) Beretta and RGB were represented by Sarah Dowling, an attorney for Adler, Pollock, and Sheehan P.C.; DeQuattro and Hatcher were represented by Patrick Rogers, an attorney for Edwards Angell Palmer &Dodge. Id. ¶ 8.

5 Chris McMahon left RGB on June 22, 2007. (DeQuattro Aff. 3 n.1.)

Beretta, DeQuattro, and Hatcher signed the 2009 Letter Agreement on January 9, 2009. Id. ¶ 9. The 2009 Letter Agreement memorialized the parties' "plan for the transition of ownership of a majority of the issued and outstanding capital stock in RGB" to DeQuattro, Hatcher, and other new potential investors. (2009 Letter Agreement 1.) At the time, Beretta owned all RGB's preferred stock and 88.5 percent (269 shares) of its common stock. Id. Hatcher owned 4.6 percent (14 shares) of RGB common stock, and DeQuattro did not own any shares. Id. The 2009 Letter Agreement contained several pertinent provisions that both Beretta and DeQuattro were aware of:

1. An incentive compensation plan (ICP) was established, whereby architects were awarded 0.3 percent of the cost of "Eligible Projects"⁶ generated through business development. Id. § II. DeQuattro and Hatcher received ICP funds for business that they generated for the years 2006, 2007, and 2008. (DeQuattro Aff. ¶ 12.) DeQuattro and Hatcher used their ICP funds to purchase forty-one and fourteen shares of Beretta's common stock, respectively.⁷ Id.

2. RGB purchased all preferred stock from Beretta. (2009 Letter Agreement § VI.)

3. RGB agreed to declare a dividend on its common stock. Id. § V. Beretta's dividend would consist of two John Hancock Life Insurance Policies and Manulife stock, collectively valued at $250,000. Id. Other RGB shareholders would receive a cash dividend. Id. RGB was required to transfer the life insurance policies and Manulife stock to Beretta on or before December 31, 2010. Id.

4. An Executive Committee was established consisting of Beretta, DeQuattro, and Hatcher. Id. § II. Under the 2009 Letter Agreement, "New Investors"-i.e., DeQuattro, Hatcher, and those identified as "Other Investors"-had the opportunity to purchase Beretta's remaining shares of common stock within thirty-six months.⁸ Compare id. § VII with DeQuattro Aff. ¶ 12. The Executive Committee could extend the purchase period for Beretta's shares by an additional twelve months if the New Investors collectively failed to purchase said shares by the end of the thirty-six-month period. (2009 Letter Agreement § VII.) If the twelve-month extension period was granted, any shares still owned by Beretta at the end of the extension period would be redeemed by RGB on terms to be determined by the Executive Committee. Id.

5. In the event that Beretta retained shares of RGB common stock on his sixty-fifth birthday (May 5, 2016), RGB agreed to redeem those remaining shares "for fair market value as determined by PMSJ Company or another valuation organization specified by RGB's Executive Committee." Id. § VIII.

6 At trial, there was a disagreement over what projects were "Eligible Projects" for ICP purposes. Beretta testified that "Eligible Projects" included projects for private developers, but not public Requests for Proposal (RFPs). (Tr. 18:15-22.) Beretta averred that an RFP would not be eligible under the ICP because "the firm would have responded to that RFP anyway." See id. at 19:2-5. DeQuattro testified that all projects procured through business development were considered "Eligible Projects," so long as a contract was signed. See id. at 289:1-19. DeQuattro further testified that RFPs were never precluded from "Eligible Projects." Id. at 290:17-21.

7 Thus, after the 2009 Letter Agreement was executed, DeQuattro owned forty-one shares of RGB common stock, Hatcher owned twenty-eight shares of RGB common stock, and Beretta owned two hundred fourteen shares of RGB common stock. (DeQuattro Aff. ¶ 12.)

8 The Court notes that the 2009 Letter Agreement states that Beretta had two hundred fifteen shares of common stock available for purchase, but other evidence suggests that Beretta only had two hundred fourteen shares of common stock remaining. Compare 2009 Letter Agreement § VII with DeQuattro Aff. ¶ 12.

B

The Inter-Agreement Period

Despite signing the 2009 Letter Agreement, the parties acknowledged at trial that very little transpired with respect to transitioning ownership. The Court takes judicial notice of the fact that at or around the time that the 2009 Letter Agreement was executed, the country was thrust into a severe economic downturn now known as the "Great Recession." See R.I. R. Evid. 201.

RGB purportedly lost a considerable amount of revenue during the recession. See Tr. 20:16-18; Pl.'s Ex. 2; Pl.'s Ex. 15 Bates No. RGB 697. Several of RGB's anticipated projects were put on hold. (Tr. 20:18-20.) RGB also laid off employees. Id. at 20:20-21. RGB did not issue Beretta's dividend containing the life insurance policies and Manulife stock; instead, Beretta took a loan out on those assets. See id. at 313:22-314:1.

Beretta testified at trial that during the recession, RGB did not have enough funds to award incentive compensation or bonuses.⁹ Id. at 19:23-20:8, 134:7-9; see also id. at 320:16-19. He also admitted that he never recorded unpaid incentive compensation as company liability. Id. at 120:24-121:9, 162:5-9. Beretta stated that it was DeQuattro and others' responsibility to inform Beretta about projects that qualified for incentive compensation. Id. at 122:22-24, 123:9-20.

9 The Court notes that evidence proffered at trial suggests that Beretta wrote checks to himself in 2013 and 2014. RGB's payroll check register reveals that on December 27, 2013, a check was made from RGB to Beretta in the amount of $22,000. (Defs.' Ex. ZZZZZ, at 12.) The same document reveals that on December 29, 2014, a check was made from RGB to Beretta in the amount of $45,000. Id. at 10. DeQuattro and Hatcher only received a $3,500 bonus in 2014. (Tr. 320:11-12.) DeQuattro testified that he was not aware of the checks made out to Beretta. Id. at 320:13-15, 321:5-9. The 2009 Letter Agreement provides that any check over $10,000 must be signed by at least two members of the Executive Committee. (2009 Letter Agreement § XII(e).)

The Court finds that incentive compensation was not awarded, and, as a result, DeQuattro, Hatcher, and others did not have funds to purchase additional shares of RGB. See Hatcher Aff. ¶ 15; DeQuattro Aff. ¶ 15; cf. Tr. 285:8-11. The Court also finds that Beretta did not receive a notice of intent to purchase additional shares of RGB from January 9, 2009 to January 9, 2012. (Tr. 15:2-11.) Nevertheless, DeQuattro pursued other avenues for a transition of ownership.

1 The Proposed 2013 Merger Plan

In 2013, DeQuattro approached Beretta to discuss a potential merger with another architectural firm. See id. at 28:19-29:1. Through his work, DeQuattro became acquainted with Mehdi Khosrovani (Khosrovani), who worked for New England Medical Design, Inc. (NEMD).¹⁰ See id. at 314:23-315:2. The two discussed a "strategic alliance," meaning that the firms would "go after the projects together" so that they "would be capable of offsetting some of the larger firms in Boston ...." Id. at 315:2-7. In or around August of 2013, DeQuattro proposed a merger between RGB and NEMD. Id. at 29:12-20, 315:19-21; Pl.'s Ex. 3 (2013 Merger Plan).

10 The Court takes judicial notice of the spelling of Mr. Khosrovani's name as well as the full name of his company after reviewing New England Medical Design, Inc.'s public filings in the Rhode Island Department of State's Corporation Database, ID No. 000074651. R.I. R. Evid. 201.

DeQuattro's merger plan had various stated objectives, including "[m]ov[ing] [the] direction of [the] firm from [a] small family business to [a] regional firm" and "[c]reat[ing] [a] [f]irm with 100% architects being shareholders." (2013 Merger Plan Bates No. RGB 882.) The merger plan listed DeQuattro, Hatcher, Khosrovani, and other individuals as shareholders. Id.; Tr. 29:21-30:7. Because the merger plan gave ownership entirely to architects, Beretta was not included as an owner. (Tr. 30:8-11; 2013 Merger Plan Bates No. RGB 882.) The merger did not progress beyond initial discussions because Beretta did not believe that Khosrovani's offering was sufficient. (Tr. 30:21-24, 316:16-20.)

2 The 2015 Veteran Owned Business Plan

In or around 2015, DeQuattro approached Beretta with another plan to transition ownership of RGB. See id. at 31:19-25. DeQuattro testified that even though he signed the 2009 Letter Agreement, he believed that it had lapsed.¹¹ See id. at 324:1-6. See generally Pl.'s Ex. 4. It was this belief that spurred DeQuattro to make a third attempt to take control of the company.¹² (Tr. 323:18-324:6.) DeQuattro suggested that if he were a majority shareholder, RGB would become a veteran-owned business and would qualify for certain projects not previously available to the company. See id. at 323:8-12. On February 17, 2015, DeQuattro formally proposed his plan in an e-mail sent to Beretta. See Pl.'s Ex. 4 Nos. 1-2. The proposal was markedly different from the terms of the 2009 Letter Agreement. Compare id. with 2009 Letter Agreement. DeQuattro suggested that he should become 51 percent owner and President of RGB in or around April of 2015. Id. The parties discussed the terms in greater detail, but Beretta testified that he was uncomfortable during negotiations because he "was concerned that the value of [his] stock would go down and [he] wouldn't have control over it." (Tr. 34:22-24.)

11 Further, DeQuattro said "many times" that it was his belief that the 2009 Agreement had lapsed. (Tr. 323:18-24.)

12 Additionally, Hatcher was also under the impression that the 2009 Agreement had lapsed at all times prior to July of 2021, when his attorney informed him that the 2009 Agreement required Beretta to have his shares redeemed on his sixty-fifth birthday. (Tr. 455:2-9.)

Beretta called Sarah Dowling, the attorney who represented him during negotiations for the 2009 Letter Agreement, to discuss his concern over controlling the value of his shares. Id. at 35:19-24. On March 16, 2015, Attorney Dowling informed Beretta that under the 2009 Letter Agreement, RGB would redeem Beretta's remaining shares on May 5, 2016-his sixty-fifth birthday. Id. at 36:13-16; Pl.'s Ex. 5; DeQuattro Aff. ¶ 32; see 2009 Letter Agreement § XII. Beretta ultimately agreed to DeQuattro's proposed transition plan. (Tr. 37:19-23.) Beretta testified that he does not recall informing DeQuattro about his conversation with Attorney Dowling. Id. at 155:20-156:5.

DeQuattro suggested that RGB undergo an independent valuation, to which Beretta agreed. Id. at 37:24-38:11. DeQuattro recommended Matheson Financial Advisors, Inc. (MFA) to conduct the valuation. See id. On or around May 11, 2015, DeQuattro prepared a Memorandum of Understanding setting a timeline by which DeQuattro hoped to transition ownership of RGB. See generally Pl.'s Ex. 8. DeQuattro testified that the Memorandum of Understanding was intended to crystallize the deal because he was concerned that Beretta might waver, forcing the two to begin negotiations anew. See Tr. 353:1-9. However, the Memorandum of Understanding was never signed. Id. at 353:10-11.

a

Valuation and Transition Options by Matheson Financial Advisors, Inc.

In April of 2015, Beretta and DeQuattro held a "breakfast meeting" with MFA principal David Cohen (Cohen) to discuss retaining MFA to perform a valuation of RGB. See id. at 38:13-14, 39:4-7. The parties ultimately decided to retain MFA following the meeting. Id. at 39:8-12. MFA's engagement letter states that MFA was retained to determine the value of RGB and consult on transition planning options. Id. at 39:19-40:15; Pl.'s Ex. 7.

To conduct the valuation, MFA requested that RGB supply certain documents and complete a business valuation questionnaire. See Pl.'s Ex. 7. Beretta supplied the requested documents and questionnaire answers, which were made available to both DeQuattro and MFA. (Tr. 40:18-41:11, 48:18-49:7.) Beretta provided MFA with RGB's financial statements, which did not record unpaid incentive compensation as a liability. Id. at 715:21-25, 717:25-718:2. Cohen testified that if Beretta had referenced unpaid incentive compensation, MFA would have made an adjustment to RGB's financial statements to account for it. Id. at 716:5-16.

Question 10 of the questionnaire asked whether there were "any offers to purchase the stock of the Business in either a management buy-out or third party offer[.]" (Pl.'s Ex. 7.) Beretta's answer to Question 10 referenced the 2009 Letter Agreement. See Pl.'s Ex. 9. Beretta also testified that he supplied the 2009 Letter Agreement for MFA to consider in the valuation. (Tr. 47:11-16, 48:15-17.) DeQuattro purportedly delivered the May 11, 2015 Memorandum of Understanding to Cohen on July 7, 2015. (Pl.'s Ex. 8.)

MFA also interviewed RGB's management (including Beretta and DeQuattro) on July 8, 2015 "to discuss the operations, financial condition, future prospects, and projected operations and performance of [RGB][.]" (Pl.'s Ex. 15 (MFA 2015 Draft Valuation Report) Bates No. RGB 691.) Cohen transcribed his conversations with each interviewee. According to Cohen's notes, Beretta stated that RGB was "not using the incentive compensation agreement that guarantees a percentage of construction costs." (Defs.' Ex. CC, at 7.) Cohen also noted that Beretta wanted to ensure that his and Beretta Sr.'s estates "get paid." Id.

On August 28, 2015, MFA supplied Beretta and DeQuattro with a draft valuation report for RGB as of December 31, 2014. See generally MFA 2015 Draft Valuation Report. The valuation report was based on, in part, MFA's review of RGB's corporate by-laws and shareholders' agreement. Id. Bates No. RGB 692. Under the heading "Company Ownership &Management," MFA's report states that:

"A Transition of Ownership Interests Agreement was established on January 9, 2009, in order to facilitate the transition of ownership from [Beretta] to [DeQuattro], [Hatcher], and other potential new shareholders .... Additionally, it is established that [RGB] will redeem all outstanding shares of common stock held by [Beretta] on his 65th birthday." Id. Bates No. RGB 699.

On September 3, 2015, DeQuattro e-mailed Cohen and requested a conference call to discuss DeQuattro's concerns regarding the draft valuation report. (Pl.'s Ex. 16.) DeQuattro testified that he was concerned about MFA's revenue projections for RGB. (Tr. 229:10-15.) However, he was unsure if the conference call took place. Id. at 238:14-24.

In or around January of 2016, Cohen met with Beretta and DeQuattro to present options for a transition of ownership. Id. at 238:25-239:11; see Pl.'s Ex. 17 Bates Nos. RGB 745-46. The options contemplated different ways to fund DeQuattro's purchase of seventy-six shares of Beretta's stock. (Tr. 56:10-11; Pl.'s Ex. 17 Bates No. RGB 746.) Cohen sent a follow-up e-mail that showed the three options and included an attachment containing the 2009 Letter Agreement. (Pl.'s Ex. 17 Bates Nos. RGB 747-48.) Beretta and DeQuattro selected the third option, under which DeQuattro would receive a bonus equaling $254,041 and Beretta would receive additional compensation equaling $203,233. (Tr. 56:10-17; Pl.'s Ex. 17 Bates No. RGB 746.) Beretta testified that RGB did not have sufficient funds to disburse the bonus in January of 2016. (Tr. 57:15-24.) Beretta testified that the parties waited until RGB was in a stronger financial position to fund the transaction, which purportedly occurred in June of 2016. (Tr. 57:15-24.)

b

DeQuattro Purchases Hatcher's Twenty-Eight Shares

In April of 2016, Hatcher left RGB to return to Arkansas. (Tr. 58:3-10, 388:16-17.) Before Hatcher left, RGB gave an additional bonus to DeQuattro so that he could purchase Hatcher's twenty-eight shares in RGB. Id. at 58:9-13. On April 1, 2016, Beretta, DeQuattro, and Hatcher signed the document entitled "Written Consent of the Stockholders of the Robinson Green Beretta Corporation" to memorialize DeQuattro's purchase of the twenty-eight shares "notwithstanding the terms and conditions of that certain Letter Agreement dated January 9, 2009." (Pl.'s Ex. 18 Bates No. RGB 517) (emphasis added). DeQuattro purchased the twenty-eight shares for $41,389. Id. Bates No. RGB 520. On April 7, 2016, DeQuattro informed Cohen that Hatcher's stock was transferred and that Beretta and DeQuattro were "on track" to transfer some of Beretta's shares in RGB. (Pl.'s Ex. 19, at 1.)

C

DeQuattro Purchases Beretta's Shares &the 2016 Operating Agreement

On or about April 18, 2016, DeQuattro prepared and delivered a draft operating agreement for RGB. (Tr. 63:4-18; Pl.'s Ex. 4 Nos. 6-15.) Beretta testified that he reviewed the document, marked it with comments, and returned it to DeQuattro. (Tr. 63:19-21.) A finalized operating agreement was prepared in or around July of 2016, when RGB purportedly had sufficient monies to fund the transfer of shares from Beretta to DeQuattro. Id. at 63:22-64:5.

On or about June 30, 2016, Beretta and DeQuattro executed the document entitled "Written Consent of the Stockholders of the Robinson Green Beretta Corporation," pursuant to which Beretta transferred seventy-six shares of RGB stock to DeQuattro "notwithstanding the terms and conditions of that certain Letter Agreement dated January 9, 2009." (Pl.'s Ex. 21) (emphasis added). DeQuattro paid $157,506 in cash, with a remaining $203,233 due to Beretta. (Pl.'s Ex. 20; see Pl.'s Ex. 17 Bates No. RGB 746.) Thereafter, on July 14, 2016, Beretta and DeQuattro executed the 2016 Operating Agreement. See Pl.'s Ex. 23 (2016 Operating Agreement).

DeQuattro drafted the 2016 Operating Agreement himself. (Tr. 390:12-14, 391:7-12.) While Beretta and DeQuattro may possess substantial knowledge of the architectural industry, they are not at all qualified to draft a complex contract. The testimony at trial shows this conclusively. Rather than rehiring Attorneys Dowling or Rogers, the parties negotiated, drafted, and edited the 2016 Operating Agreement themselves. DeQuattro testified that he relied on legal resources available to him on the internet. Id. at 391:17-392:3. The agreement uses incorrect terms to identify corporate directors and officers and includes provisions that are more appropriate for partnerships or limited liability companies. See 2016 Operating Agreement. However, DeQuattro's largest mistake was including a merger clause that had the legal effect of subsuming the 2009 Letter Agreement:

"56. This Agreement contains the entire agreement between the Members. All negotiations and understandings have been included in this Agreement. Statements or representations that may have been made by any Member during the negotiation stages of this Agreement, may in some way be inconsistent with this final written Agreement. All such statements have no force or effect in respect to this Agreement. Only the written terms of this Agreement will bind the Members." Id. ¶ 56.

Substantively, the 2016 Operating Agreement provided for a transition of ownership through two stock purchases on or about May 1, 2017 and May 1, 2018. Id. ¶ 6. Under the 2016 Operating Agreement, Beretta would remain employed at RGB until December 31, 2019. See id. ¶ 4. The agreement also provided that Beretta and DeQuattro would receive equal compensation and equal shares of RGB's profits. (Id. ¶¶ 7-10, 13; Tr. 66:19-25.) The 2016 Operating Agreement's term ended on May 5, 2019. (2016 Operating Agreement ¶ 4.)

Beretta testified that the proposed May 1, 2017 stock purchase did not occur as scheduled because RGB did not have sufficient monies to fund the transaction. (Tr. 67:20-68:4.) On June 15, 2017, DeQuattro e-mailed Cohen for an updated valuation of RGB pursuant to the terms of the 2016 Operating Agreement. (Pl.'s Ex. 26.) On or about September 29, 2017, MFA produced a Draft Valuation Report for RGB as of December 31, 2016. (Pl.'s Ex. 29 (MFA 2016 Draft Valuation Report).) On or about March 16, 2018, DeQuattro purchased sixty-nine shares of Beretta's RGB stock for $631,240.29. (Pl.'s Ex. 24.)

Beretta's final sixty-nine shares were purchased on or about May 13, 2019 for $1,064,018.64. Id. The share price was adjusted pursuant to MFA's Draft Valuation Report for RGB as of December 31, 2017, which MFA produced on November 14, 2018. See Pl.'s Ex. 41 (MFA 2018 Draft Valuation Report). After the May 13, 2019 stock purchase, Beretta was no longer a shareholder in RGB. (Tr. 80:9-11, 168:4-9.) However, Beretta remained under RGB's employ until December 31, 2019. (Tr. 80:12-20.)

D

Beretta's Exit from RGB and the Instant Litigation

Pursuant to the 2016 Operating Agreement, Beretta remained in his role as President of RGB up until December 31, 2019. (2016 Operating Agreement ¶ 4; see also Tr. 80:12-20.) Before leaving RGB, Beretta met with DeQuattro to discuss what he was still owed under the 2016 Operating Agreement. (Tr. 80:21-81:8.) On or about December 26, 2019, DeQuattro sent Beretta a letter tabulating the compensation owed to Beretta, including profits, life insurance, and tax credits. (Pl.'s Ex. 45.) DeQuattro indicated that Beretta was "only entitled to a percentage of RGB's profit[s] proportional with Beretta's common stock ownership during the first quarter of 2019." (Compl. ¶ 43; Pl.'s Ex. 45.) However, Beretta contends that he is owed more; he believes he is owed "50 percent of the profits for 2018, and . . . 50 percent of the profits from 2019[.]"¹³(Tr. 81:12-16.) Beretta testified that he was also owed

13 Beretta testified that he did not receive any of the 2018 profits because "we had to wait until I was compensated for the redemption of my shares. And, again, not to put any undue burden on the company, and I figured we would be discussing the 2018 resolution because we received a lot of the moneys in, that I would be able to take my 50 percent out and he could leave his 50 percent in the company, it was his company, or he could take it out." (Tr. 83:2-8.)

"the difference between what Dave got in gross compensation, plus the three percent 401k that he would also get, plus that year in 2019 he did a profit distribution in the 401k and I would get the difference between what he got and I got." Id. 86:16-20.

DeQuattro offered to issue a check to Beretta for $199,090.14. (Pl.'s Ex. 46.) Beretta refused to accept this check, but he continued to work at RGB up until December 31, 2019. (Tr. 85:7-21.) Before leaving, Beretta testified that he cleaned out his office, erased e-mails from his computer, and shredded documents.¹⁴ Id. at 85:17-21. DeQuattro testified that Beretta had shredded so many documents that the industrial shredder on RGB's premises had broken down. (Tr. 402:20-403:7.) After the shredder broke down, Beretta hired a third-party contractor to shred additional documents. Id. at 172:6-8. Beretta also removed documents from RGB's premises to his personal residence for shredding. Id. at 172:6-8. DeQuattro purportedly did not authorize Beretta to shred the documents. Id. at 403:8-10. Beretta averred that the documents were personal, not business-related. Id. at 172:14-15.

14 The Court finds that Beretta's actions here are highly objectionable, but they do not affect Defendants' substantive claims. Defendants do not allege spoliation in their Answer and Counterclaim, nor do they request damages relating to destruction of physical and electronic files. See generally Answer and Countercl. While the Court notes its disapproval of such conduct, the potential legal ramifications stemming therefrom is not before the Court for decision.

Beretta further testified that he erased approximately 45,000 e-mails, some of which were business-related. Id. at 171:9-12. Beretta testified that he spent day, night, and possibly weekends erasing information from his work computer. Id. at 171:17-23. Apparently, the only e-mails that remained on Beretta's computer were e-mail communications between Beretta and DeQuattro. (Tr. 347:10-13.) When DeQuattro discovered that Beretta had erased information on his computer, he hired a computer technician to recover the data. Id. at 403:18-404:10. The technician was able to recover approximately 80 percent of the e-mails from RGB's server. Id. at 405:4-13. Beretta did not seek DeQuattro's permission to delete the e-mails. Id. at 171:13-19.

On April 22, 2020, Beretta filed a Complaint against DeQuattro and RGB (collectively, Defendants) sounding in (1) breach of contract; (2) breach of the implied covenant of good faith and fair dealing; (3) breach of fiduciary duty; and (4) indemnification.¹⁵ (Compl. ¶¶ 49-67.) On January 20, 2021, DeQuattro and RGB filed an Answer and Counterclaim, and an Amended Answer and Counterclaim was filed on August 9, 2021, sounding in (1) declaratory judgment; (2) breach of contract; (3) misappropriation and conversion; and (4) breach of fiduciary duty.¹⁶ (Am. Answer and Countercl. ¶¶ 30-42.) A bench trial was conducted from October 17 to October 21, 2022 and was suspended until November 9, 2022.¹⁷ See Docket, PC-2020-03404. The parties waived closing argument and instead submitted post-trial briefs for the Court's consideration. Id.

15 The Court notes that Count V in the Complaint is for "Appointment of a Special Master." (Compl. 10.) However, this is not a cognizable cause of action, merely a form of relief.

16 The Court notes that Count V in the Answer and Counterclaim is for "Lack of Consideration." (Answer and Countercl. 18.) However, this is at best an affirmative defense, not a cause of action. The Court further notes that on January 6, 2023, DeQuattro and RGB filed a post-trial motion to amend their Answer and Counterclaim to include a claim for lost wages and benefits pursuant to G.L. 1956 chapter 14 of title 28. See Defs.' Mot. to Amend. However, the Court declines to grant Defendants' Motion to Amend for three reasons. First, Defendants seek to add this claim to recover incentive compensation allegedly due and payable under the 2009 Letter Agreement from December 31, 2008 to December 21, 2016, which is a bonus and not covered by the statute. Second, the statute affords a three-year limitation on claims, which has since run. See G.L. 1956 § 28-14-19.2(g). Third, allowing Defendants to amend so far beyond the end of trial would unduly prejudice Beretta in this matter. Accordingly, the Court denies Defendants' Motion to Amend.

17 The trial was suspended because one of the witnesses, David Cohen, contracted Covid-19.

II

Standard of Review

Rule 52(a) of the Superior Court Rules of Civil Procedure provides that "[i]n all actions tried upon the facts without a jury . . . the court shall find the facts specially and state separately its conclusions of law thereon[.]" Super. R. Civ. P. 52(a). In a non-jury trial, '"[t]he trial justice sits as a trier of fact as well as of law.'" Parella v. Montalbano, 899 A.2d 1226, 1239 (R.I. 2006) (quoting Hood v. Hawkins, 478 A.2d 181, 184 (R.I. 1984)). This means that the trial justice "weighs and considers the evidence, passes upon the credibility of the witnesses, and draws proper inferences." Id. (internal quotations omitted).

"When a case is tried without a jury, 'the task of determining credibility of witnesses is peculiarly the function of the trial justice[.]'" Jotorok Group, Inc. v. Computer Enterprises, Inc., No. PC01-3237, 2005 WL 2981658, at *4 (R.I. Super. Nov. 4, 2005) (quoting State v. Sparks, 667 A.2d 1250, 1251 (R.I. 1995) (further citation omitted)). The factual determinations and credibility assessments of a trial justice traditionally are accorded a great deference because it is "the judicial officer who . . . actually observe[s] the human drama that is part and parcel of every trial and who has had an opportunity to appraise witness demeanor and to take into account other realities that cannot be grasped from a reading of a cold record." In re Dissolution of Anderson, Zangari &Bossian, 888 A.2d 973, 975 (R.I. 2006).

Our Supreme Court has recognized that a trial justice's analysis of the evidence and findings in the bench trial setting "'need not be exhaustive,"' stating that, '"if the decision reasonably indicates that [the trial justice] exercised [his or her] independent judgment in passing on the weight of the testimony and the credibility of the witnesses[,] it will not be disturbed on appeal unless it is clearly wrong or otherwise incorrect as a matter of law.'" Notarantonio v. Notarantonio, 941 A.2d 138, 144-45 (R.I. 2008) (quoting McBurney v. Roszkowski, 875 A.2d 428, 436 (R.I. 2005)). '"Even brief findings and conclusions are sufficient if they address and resolve the controlling and essential factual issues in the case.'" Hilley v. Lawrence, 972 A.2d 643, 651 (R.I. 2009) (quoting Donnelly v. Cowsill, 716 A.2d 742, 747 (R.I. 1998) (internal citation omitted)).

III

Analysis

A

DeQuattro and RGB's Counterclaims Against Beretta

The Court begins by reviewing Defendants' counterclaims against Beretta. First, Defendants ask the Court to declare (1) that the 2009 Letter Agreement and the 2016 Operating Agreement are enforceable; (2) that the 2009 Letter Agreement is superior to the 2016 Operating Agreement and that amounts paid to Beretta for RGB stock are excessive and inconsistent with either agreement; and (3) that Beretta owed and breached a fiduciary duty. (Answer and Countercl. 17, ¶¶ 32-34, 18, ¶¶ 40-43.) Second, Defendants allege that Beretta breached the terms of the 2009 Letter Agreement. See id. at 17, ¶ 36. Third, Defendants allege that Beretta misappropriated or wrongfully converted funds belonging to RGB. Id. at 18, ¶ 38.

On November 18, 2021, the Court issued a Decision (the November 2021 Decision) in response to Beretta's June 21, 2021 Motion for Partial Summary Judgment, in which Beretta argued that the 2016 Operating Agreement is a fully integrated agreement that discharged the terms of the 2009 Letter Agreement. See generally Beretta v. DeQuattro, No. PC-2020-03404, Nov. 18, 2021, Stern, J. (November 2021 Decision). The Court found that the 2016 Operating Agreement contained a merger clause that "clearly and unequivocally states that the agreement 'contains the entire agreement between the Members' and '[a]ll negotiations and understandings have been included in [the 2016 Operating Agreement].'" Id. at 11 (emphasis in original). Thus, the 2016 Operating Agreement completely integrated the 2009 Letter Agreement as a matter of law. Id.

However, the Court found that there were genuine issues of fact precluding summary judgment on whether Beretta breached fiduciary duties owed to Defendants. See id. at 20. The Court determined that there was a dispute as to whether Beretta breached a duty to disclose by failing to inform DeQuattro that the 2009 Letter Agreement was still in force and effect and whether "this information regarding the lapse of the 2009 Letter Agreement was in fact unknown to DeQuattro." Id. at 15 (emphasis in original). The Court further found that there was a dispute "as to whether redemption of Beretta's stock was an opportunity realistically available to RGB, such that Beretta's taking the opportunity for himself was a usurpation of a corporate opportunity and, thus, a breach of his loyalty to RGB." Id. at 19. Thus, the Court denied Beretta's Motion for Partial Summary Judgment. Id. at 20.

In accordance with the November 2021 Decision, the 2016 Operating Agreement constitutes the entire agreement between the parties with respect to transitioning ownership of RGB. Notwithstanding that conclusion, the Court recognizes that an individual who allegedly entered into a contract through fraud "may elect to rescind the contract and receive what he has paid pursuant to its terms or affirm the contract and sue in an action for deceit." Majewski v. Porter, 121 R.I. 757, 763, 403 A.2d 248, 251 (1979) (citing Halpert v. Rosenthal, 107 R.I. 406, 412, 267 A.2d 730, 733 (1970); Goodwin v. Silverman, 71 R.I. 163, 164, 43 A.2d 50, 50 (1945)). The Court will first examine whether Beretta breached a fiduciary duty when entering the 2016 Operating Agreement such that it should be rescinded. Cf. Cahill v. Antonelli, 120 R.I. 879, 883, 390 A.2d 936, 938 (1978) (holding that "[t]he actual existence of any fraudulent intent need not be shown because the breach of the fiduciary duty itself amounts to constructive fraud").

1 Beretta Owed Fiduciary Duties to DeQuattro and RGB

It is well settled that corporate officers and directors "stand in a fiduciary capacity[.]" A. Teixeira &Co., Inc. v. Teixeira, 699 A.2d 1383, 1386 (R.I. 1997) (citing Boss v. Boss, 98 R.I. 146, 200 A.2d 231 (1964)). However, the question of who is a corporate fiduciary is not "subject to such a facile analysis." Id. at 1386-87. Fiduciary duties arise from one's relation to the corporation and shareholders, "not simply because of [one's] titles." Id. at 1387. Shareholders in a close corporation may owe fiduciary duties to one another. Id. (collecting cases).

Whether shareholders in a close corporation owe fiduciary duties is a fact-intensive inquiry. Id. Our Supreme Court looks to whether the shareholders acted "as if they were partners," based on a small number of shareholders, active participation in management decisions, and intimate working relations. Id. If such conditions are found, our Supreme Court has stated that "the law ought to treat [the shareholders] as fiduciaries." Id. Shareholders may prevent the imposition of fiduciary duties by showing "evidence that none of them intended such a partnership relationship, as evidenced by a stockholders' agreement or other relevant evidence." Id.

Defendants contend that Beretta owed fiduciary duties based on his numerous titles, including President, Treasurer, Controller, CEO, and CFO. (Defs.' Post-Trial Mem. (Defs.' Mem.) 4.) As stated above, titles alone do not give rise to fiduciary duties. Teixeira, 699 A.2d at 1387. However, the Court finds that RGB's corporate structure and governance was so close and intimate that the company was operated as if it were a partnership for the following reasons.

Under the 2009 Letter Agreement, Beretta, DeQuattro, and Hatcher comprised RGB's Executive Committee and senior management. (2009 Letter Agreement § II.) They were also the only shareholders in the firm. (DeQuattro Aff. ¶ 12.) Beretta testified that the Executive Committee met almost weekly from 2009 to 2013. (Tr. 21:17-22.) During the Great Recession, the Executive Committee made corporate decisions including not paying incentive compensation, laying off employees, and borrowing money. (Tr. 19:23-21:16.)

DeQuattro testified that the Executive Committee trusted each member's ability to fulfill their independent roles in the firm. Id. at 225:21-226:2. DeQuattro also testified that the three had a "pact" concerning their responsibilities. Id. at 388:23-25. For instance, Beretta was the President, CEO, CFO, and Treasurer of RGB, and was primarily responsible for managing company books and records. Id. at 7:13-15. DeQuattro was RGB's Vice President and primarily brought new business into the firm. See id. at 277:4-12, 331:6-8. Hatcher reviewed projects to reduce liabilities in design, mentored new architects, maintained RGB's high standard of work product, and was generally the company's "inhouse" architect. Id. at 331:5, 388:25-389:4.

Based on evidence in the record, the Court finds that RGB was intimately and closely managed by a small group of shareholders. The Court also finds that each RGB shareholder actively participated in management decisions resulting from weekly Executive Committee meetings. Thus, the Court is satisfied that RGB was operated, in essence, like a partnership. Consequently, Beretta and DeQuattro owed fiduciary duties toward one another and to RGB as shareholders of a close corporation. See Teixeira, 699 A.2d at 1387; Defs.' Mem. 56, ¶ 2.

a

There is a Fiduciary Duty to Disclose Under Rhode Island Law

Having found that Beretta and DeQuattro were corporate fiduciaries, the Court must next determine whether Rhode Island recognizes a fiduciary duty to disclose. In the context of closely held corporations, our Supreme Court has held that "[i]f a fiduciary duty is found, such duty 'is one of trust and confidence and imposes the duty on the fiduciary to act with the utmost good faith.'" Notarantonio, 941 A.2d at 145 (quoting Hendrick v. Hendrick, 755 A.2d 784, 789 (R.I. 2000)). However, there is a lack of binding Rhode Island precedent addressing whether the mandate to "act with the utmost good faith" includes a duty to disclose.

A survey of Rhode Island precedent reveals two cases that discuss the fiduciary duty to disclose. See generally Stebbins v. Wells, 818 A.2d 711 (R.I. 2003); In re Estate of Ross, 131 A.3d 158 (R.I. 2016). Neither case is squarely on point with the factual circumstances here.

In Stebbins, our Supreme Court held that real estate agents owe a statutory duty to disclose material defects in real property "when such disclosable defects are within the agent's personal knowledge, and the agents know or should know that the buyer is acting under a misapprehension concerning facts 'which would be important to the buyer and could probably affect its decision.'" Stebbins, 818 A.2d at 718-19 (quoting Stebbins v. Wells, 766 A.2d 369, 373 (R.I. 2001)).

In Estate of Ross, the plaintiffs argued that a guardian breached her fiduciary duty by failing to disclose a conflict of interest. Estate of Ross, 131 A.3d at 159, 168. However, mindful of the findings of fact made by the trial justice, our Supreme Court held the defendant-guardian did not breach any fiduciary duties because she did not misappropriate funds of the trust in question, properly attended to her duties as guardian, and did not act against the interests of the estate at issue or its beneficiaries. Id. at 169-70.

The Court nevertheless determines that the duty of disclosure falls within the ambit of the duty to act in utmost good faith. The Court is persuaded by the First Circuit Court of Appeals' reasoning in Lawton v. Nyman, 327 F.3d 30 (1st Cir. 2003), which interpreted and applied Rhode Island law. Lawton concerned a dispute between shareholders of Nyman Manufacturing Company, a family-owned close corporation in Rhode Island. See Lawton, 327 F.3d at 33. In the 1990s, the majority shareholders hired two consultants to reverse the company's financial woes and seek opportunities to sell the company. Id. at 33-34. The company then sent a letter to the minority shareholders, offering to redeem their shares for $200 per share.¹⁸ Id. at 34-35. Evidence in the record demonstrated that the shares at issue had a book value of $527.50 per share and a fair market value of approximately $303 per share. Id. at 36. The majority shareholders did not disclose that they were attempting to sell the company. See id. at 34.

18 The First Circuit Court of Appeals noted that there were several inaccuracies in the letter. The letter represented that the company made this offer "in response to several inquiries from other minority shareholders concerning their desire to sell their stock[,]" but in actuality the stock redemption was unsolicited. Lawton v. Nyman, 327 F.3d 30, 35 (1st Cir. 2003). The letter also imposed a deadline of May 22 for minority shareholders to respond, which meant that the minority shareholders had to decide before the company published its audited financial statements. Id.

The First Circuit also recognized the fact that Rhode Island has not expressly defined the fiduciary obligations of shareholders in close corporations. Id. at 38. However, the Lawton Court opined that, considering Rhode Island law attributes fiduciary duties generally, "Rhode Island is likely to adopt at least those duties required by the common law 'special facts' rule[.]" Id. at 39; see also id. (quoting Jordan v. Duff &Phelps, Inc., 815 F.2d 429, 435 (7th Cir. 1987); Van Schaack Holdings, Ltd. v. Van Schaack, 867 P.2d 892, 899 (Colo. 1994)).

The "special facts" rule provides that close corporations buying their own stock and majority shareholders are "insiders" who "may not buy stock from outsiders in person-to-person transactions without informing them of new events that substantially affect the value of the stock." See Jordan, 815 F.2d at 435. The First Circuit opined that Rhode Island would likely recognize "a heightened duty of disclosure in a close corporation setting by officers who are majority shareholders with undisclosed information, who are purchasing minority shares or causing the corporation to do so." Lawton, 327 F.3d at 40.

The Court is persuaded by the reasoning in Lawton and holds that, in closely held corporations that operate like a partnership, the shareholders of such an entity owe a duty to disclose material information in relation to stock purchases. Thus, the Court examines whether Beretta failed to disclose material information to DeQuattro that would have affected the value of RGB's stock. For the following reasons, Beretta did not breach a fiduciary duty to disclose.

2

Beretta Did Not Breach a Duty to Disclose Because DeQuattro Knew or Reasonably Should Have Known That the 2009 Letter Agreement Was Still in Force and Effect

DeQuattro argues that Beretta breached a fiduciary duty to disclose because Beretta did not disclose his communications with Attorney Dowling or that the 2009 Letter Agreement was still in force and effect, thereby causing extensive damages to DeQuattro and RGB. (Defs.' Mem. 2529.) Defendants submit that "[b]ut for [Beretta's] breach . . . there never would have been a need for the 2016 Operating Agreement." Id. at 42. Thus, they ask the Court to vitiate the 2016 Operating Agreement and apply the terms of the 2009 Letter Agreement. Id. at 56, ¶ 3. Specifically, DeQuattro asks for unpaid incentive compensation under Section II of the 2009 Letter Agreement. See id. at 43-46. Additionally, RGB seeks restitution for alleged overpayment for Beretta's shares under the terms of the 2016 Operating Agreement. See id. at 44-45. RGB argues that it should have paid significantly less for Beretta's shares because the 2009 Letter Agreement assigned a value of $4,144.88 per share, whereas the 2016 Operating Agreement assigned higher per-share values pursuant to yearly valuations by MFA. Id. at 45. DeQuattro seeks total damages of $752,142.36, and RGB seeks total damages of $1,588,869.90. Id. at 56, ¶¶ 4-5.

In response, Beretta avers that he was not obligated to disclose information contained in his conversations with Attorney Dowling because DeQuattro already knew or should have known the information conveyed in those conversations. (Pl.'s Post-Trial Mem. (Pl.'s Mem.) 14.)

After hearing testimony at trial, determining the credibility of witnesses, and reviewing documentary evidence in the record, the Court arrives at the following conclusions:

1. Beretta and DeQuattro entered into the 2009 Letter Agreement on January 9, 2009. The parties were represented by separate counsel during negotiations and execution of the agreement. Nothing in the record indicates that the parties did not fully understand or appreciate the terms of the 2009 Letter Agreement at the time it was signed.

2. The Great Recession severely hampered RGB's business and earning capacity. RGB did not pay incentive compensation because it did not have sufficient funds, which meant that DeQuattro could not purchase Beretta's shares. RGB was in breach of the 2009 Letter Agreement but DeQuattro declined to take legal action so that the firm could recover from the economic downturn. RGB's Executive Committee did not extend the thirty-six-month period to purchase Beretta's shares under Section VII of the 2009 Letter Agreement.

3. After 2012, the parties believed that the 2009 Letter Agreement had lapsed and did not recall that on May 5, 2016, Beretta's shares would be redeemed pursuant to Section VIII of the 2009 Letter Agreement.

4. Thereafter, DeQuattro made additional proposals to transition RGB's ownership.

a. In 2013, he proposed merging with another architectural firm, which was unsuccessful.

b. In 2015, DeQuattro proposed another transition of ownership, under which DeQuattro would become 51 percent owner and RGB would be classified as a veteran-owned business.

5. DeQuattro made these subsequent proposals because he believed that the 2009 Letter Agreement had lapsed.

6. DeQuattro was put on notice that the 2009 Letter Agreement was still in force and effect on several occasions before the 2016 Operating Agreement was executed.

a. Beretta referenced the 2009 Letter Agreement on Question 10 of MFA's business valuation questionnaire, which DeQuattro could access and review.

b. Beretta supplied the 2009 Letter Agreement to MFA through Dropbox,¹⁹ which DeQuattro could access and review.

c. MFA's 2015 Draft Valuation Report references Section VIII of the 2009 Letter Agreement relating to redemption of Beretta's shares to occur on May 5, 2016, pursuant to the 2009 Letter Agreement.

d. Subsequent e-mails from MFA principal Cohen include the 2009 Letter Agreement as an attachment.

e. The April 1, 2016 Written Consent of the Shareholders memorialized DeQuattro's purchase of Hatcher's twenty-eight shares "notwithstanding the terms and conditions of that certain Letter Agreement dated January 9, 2009."

f. The June 30, 2016 Written Consent of the Shareholders memorialized DeQuattro's purchase of Beretta's seventy-six shares "notwithstanding the terms and conditions of that certain Letter Agreement dated January 9, 2009."

19 "Dropbox" is a cloud-storage system that allows individuals to share access to files.

7. Even though DeQuattro was put on notice that the 2009 Letter Agreement was in force and effect, he proposed a new transition of ownership plan to Beretta. DeQuattro did not consult an attorney prior to making this proposal, nor did he retain counsel to negotiate or draft the 2016 Operating Agreement. DeQuattro "Googled" sample operating agreements and inserted them into his own draft. Fatally, he included a merger clause that had the legal effect of subsuming the 2009 Letter Agreement.

8. Beretta contacted Attorney Dowling because he was concerned that if he signed the 2016 Operating Agreement, he would no longer have control over the business or the value of RGB stock. Attorney Dowling stated that he had already agreed to give up control of RGB by May 5, 2016. Beretta did not inform DeQuattro of this conversation.

9. Beretta and DeQuattro executed the 2016 Operating Agreement. DeQuattro discovered sometime in 2019 that the automatic redemption portion of the 2009 Letter Agreement was still in force and effect at the time that the 2016 Operating Agreement was signed.

Based on the foregoing, the Court distinguishes this case from Lawton and determines that Beretta did not breach a fiduciary duty to disclose. The "special facts" rule stands for the proposition that a close corporation or majority shareholder may not purchase a minority shareholder's interest without disclosing new facts or events affecting the value of the stock. Lawton, 327 F.3d at 40; see also Jordan, 815 F.2d at 435. This rule prevents a corporate insider from shortchanging other shareholders who are not privy to intimate financial or business information. See Lawton, 327 F.3d at 40; Jordan, 815 F.2d at 435. That is not the case here. The information that Defendants believe should have been disclosed was not financial or business information, but rather whether a preexisting transition of ownership agreement was still in force and effect. (Defs.' Mem. 25-29.)

Moreover, the Court does not agree with Defendants' claim that they overpaid for Beretta's shares of RGB. The Defendants paid the precise amount agreed to under the 2016 Operating Agreement. (2016 Operating Agreement ¶ 31.) Unlike in Lawton, the majority shareholder-i.e., Beretta-did not present the idea to enter into a new agreement. Instead, the evidence in the record demonstrates that it was DeQuattro's initiative as a minority shareholder. See Tr. 31:19-25, 63:4-18, 323:8-12, 390:12-14, 391:7-12, Pl.'s Ex. 4 Nos. 1-2, 6-15; Pl.'s Ex. 8; 2016 Operating Agreement. DeQuattro proposed the new agreement, prepared an initial Memorandum of Understanding, and drafted the final 2016 Operating Agreement. See id. DeQuattro also proposed a business valuation in 2015 and actively participated in MFA's valuation process. (Tr. 37:2438:11, 38:13-14, 39:4-7, 40:18-41:11, 48:18-49:7, 229:10-15, 238:25-239:11; Pl.'s Exs. 7, 8, 16; Pl.'s Ex. 17 Bates Nos. RGB 745-46.) Even if MFA's valuations constitute financial or business information, they were made available to Beretta and DeQuattro simultaneously. See, e.g., MFA 2015 Draft Valuation Report. MFA and Cohen also publicized the fact that on May 5, 2016, RGB would redeem Beretta's remaining shares pursuant to Section VIII of the 2009 Letter Agreement. See id. Bates No. RGB 699; Pl.'s Ex. 17 Bates Nos. RGB 747-48.) Ultimately, the evidence and testimony before the Court does not support a finding that Beretta concealed or failed to disclose information relating to new facts or events that would affect RGB's share price. Therefore, the Court determines that Beretta did not breach a fiduciary duty to disclose.

The Court further determines that Beretta did not act in bad faith. Here, the terms of the 2009 Letter Agreement were disregarded to ensure RGB's survival through the Great Recession. When DeQuattro proposed new plans for a transition of ownership in 2013 and 2015, all relevant parties presumed that the 2009 Letter Agreement had lapsed. Nevertheless, DeQuattro and RGB argue that Beretta knew that the 2009 Letter Agreement remained in force and effect. (Defs.' Mem. 27-28.) The Court disagrees and declines to read new meaning into the record.

In particular, Defendants reference page 32 of the transcript, which in pertinent part states:

"Q: So, just to be clear, under this proposal Mr. DeQuattro would buy enough of your shares so that he would become a 51-percent owner?

"A: Yes.

"Q: And you would be a 49-percent owner?

"A: Yes.

"Q: Did you understand that to differ from the 2009 [L]etter [A]greement?

"A: Yes.

"Q: And how?

"A: Under the 2009 agreement my shares were going to be bought as one lump sum on my 65th birthday and with this I was giving up control of the company." (Tr. 32:1-13.)

Defendants point to this passage as evidence that Beretta was "savvy enough . . . to say that he knew all along that he was supposed to divest himself on his 65th birthday." (Defs.' Mem. 27.) The Court does not see how Defendants reach that conclusion. The question posed was what differences existed, if any, between the 2009 Letter Agreement and later transition plans forwarded by DeQuattro. (Tr. 32:1-13.) Beretta testified as to the differences between the plans. Testifying as to how later transition plans differed from the 2009 Letter Agreement does not mean that Beretta always knew that the 2009 Letter Agreement was in force and effect. Id.

Defendants pose the rhetorical question of why Beretta would ask Attorney Dowling about Beretta's divestment upon turning sixty-five if he already knew that the 2009 Letter Agreement was still in force and effect. (Defs.' Mem. 28.) However, Attorney Dowling's notes and correspondence show that Beretta was not thinking about the 2009 Letter Agreement at all; instead, Beretta was concerned about giving up control over the company. (Pl.'s Ex. 5 Bates No. RGB 480.) Only after Attorney Dowling told Beretta that his shares would be redeemed on his sixtyfifth birthday could it be even remotely surmised that Beretta knew the 2009 Letter Agreement was still in force and effect. See id. Bates No. RGB 479. The Court doubts that Beretta was aware that the 2009 Letter Agreement was in force and effect after speaking to Attorney Dowling, and assuming arguendo he did, DeQuattro knew or reasonably should have known the same fact.

As a matter of law, DeQuattro executed the 2009 Letter Agreement and "is presumed to know its contents[.]" Dante State Bank v. Calenda, 56 R.I. 68, 75, 183 A. 873, 877 (1936). It is well settled that "'a party who signs an instrument manifests his assent to it and cannot later complain that he did not read the instrument or that he did not understand its contents.'" Manchester v. Pereira, 926 A.2d 1005, 1012 (R.I. 2007) (quoting F.D. McKendall Lumber Co. v. Kalian, 425 A.2d 515, 518 (R.I. 1981)). Absent undue influence, duress, or fraud, a party is bound to the terms of an agreement. See Dante State Bank, 56 R.I. at 79, 183 A. at 878. The Court addressed this issue in the November 2021 Decision, determining that "knowledge of the contents of the 2009 Letter Agreement may be imputed to DeQuattro .... [h]e had access to that agreement and failed to do his own due diligence and review its contents." November 2021 Decision 16.

DeQuattro failed to conduct due diligence by not reviewing the 2009 Letter Agreement. See id.; Manchester, 926 A.2d at 1012. Moreover, DeQuattro was made aware on multiple occasions that the 2009 Letter Agreement was in full force and effect. The terms of the 2009 Letter Agreement, in particular Section VIII relating to automatic redemption of Beretta's shares, were brought to DeQuattro's attention during the MFA valuation process. E.g., MFA 2015 Draft Valuation Report Bates No. RGB 699; Pl.'s Ex. 17 Bates Nos. RGB 747-48. The Court does not support the notion that DeQuattro can simply close his eyes and complain that it is dark.

In sum, the evidence and testimony regarding Beretta's conduct do not demonstrate Beretta breached a fiduciary duty to disclose. While a fiduciary duty to disclose exists as a matter of law, the Court declines to extend that duty to require one to remind another of already-known information. If the Court were to entertain such a notion, there is a significant risk of giving credence to fiduciary duty claims arising because one party "forgot" previously known material information. The Court does not believe that a "duty to remind" could conceivably be within our Supreme Court's intention in Teixeira and Notarantonio. Based on the foregoing, the Court holds that DeQuattro and RGB's counterclaim for breach of fiduciary duty is meritless. Accordingly, the 2016 Operating Agreement remains the complete agreement between the parties and its terms govern the parties' obligations. See generally Dante State Bank, 56 R.I. 68, 183 A. 873.

3

Because the 2009 Letter Agreement Merged into the 2016 Operating Agreement, Defendants' Claims for Declaratory Judgment and Breach of Contract Must Fail

Having found that Beretta did not breach a fiduciary duty to disclose, there is no legally sufficient reason to unwind the 2016 Operating Agreement. As such, the 2016 Operating Agreement remains valid. As previously noted, the 2016 Operating Agreement contains a merger clause that completely integrated the 2009 Letter Agreement. See 2016 Operating Agreement ¶ 56; November 2021 Decision 11; Filippi v. Filippi, 818 A.2d 608, 619 (R.I. 2003) (quoting Fram Corp. v. Davis, 121 R.I. 583, 587, 401 A.2d 1269, 1272 (1979)) ("[a] document is integrated when the parties adopt the writing as 'a final and complete expression of the agreement'"). Because the 2009 Letter Agreement was subsumed into the 2016 Operating Agreement, the Court cannot declare that the 2009 Letter Agreement is superior in any way to the 2016 Operating Agreement. The Court therefore holds that Defendants' claim for declaratory relief that the 2009 Letter Agreement constitutes the operative agreement fails as a matter of law. See Defs.' Mem. 56, ¶ 3; Filippi, 818 A.2d at 619.

The Court further determines that Defendants' claims for unpaid incentive compensation and alleged misappropriation of funds also fail. When a contract is integrated, "other expressions, oral or written, that occurred prior to or concurrent with the integrated agreement are not viable terms of the agreement." Filippi, 818 A.2d at 619 (citing Fram Corp., 121 R.I. at 587-88, 401 A.2d at 1272) (emphasis added).

Defendants argue that DeQuattro sustained damages because he did not receive incentive compensation over the lifespan of the 2009 Letter Agreement. See Defs.' Mem. 43-44. Defendants aver that had DeQuattro received incentive compensation, he would have purchased Beretta's shares at the then-agreed upon price of $4,144.88 per share, rather than higher share prices consummate with the MFA appraisals. See id. Thus, DeQuattro purportedly overpaid for Beretta's shares and should be refunded in the amount of $79,927.36. Id. at 44. In addition, Defendants claim that DeQuattro is owed $672,215 in unpaid incentive compensation. Id. In total, DeQuattro seeks $752,142.36 in damages. Id. at 56, ¶ 4.

Defendants similarly claim that RGB overpaid for Beretta's shares because it paid more than $4,144.88 per share. Id. at 45. Specifically, RGB claims that it overpaid by $1,123,265.40. Id. RGB also argues that it is entitled to "claw back" bonuses and perks paid to Beretta from 2016 to 2018. Id. Defendants maintain that under the 2009 Letter Agreement, Beretta would have retired from RGB on or about May 5, 2016. See id. Thus, Defendants submit that Beretta would not have been entitled to compensation above and beyond a normal employee's salary. See id. RGB further argues that Beretta should return $384,000 in bonus payments and $81,604.56 in "perks," inclusive of his car allowance and country club dues. Id. at 45-46. Altogether, RGB seeks $1,588,869.90 in damages. Id. at 56, ¶ 5.

The Court finds Defendants' arguments unavailing because the terms of the 2009 Letter Agreement are irrelevant at this juncture. As previously noted, both in the November 2021 Decision and the instant Decision, the 2016 Operating Agreement completely integrated the 2009 Letter Agreement. See November 2021 Decision; supra, Part III.A.2. Thus, only the terms of the 2016 Operating Agreement bind the parties. Notably, the 2016 Operating Agreement does not contain a provision regarding incentive compensation. See generally 2016 Operating Agreement. Assuming arguendo that the Court were to find that Beretta was in breach of the 2009 Letter Agreement, DeQuattro barred himself from any claim thereunder by drafting the 2016 Operating Agreement with a merger clause and executing the same. In addition, no evidence was proffered at trial suggesting that Beretta was not entitled to bonuses or perks under the 2016 Operating Agreement, only under the 2009 Letter Agreement. See Defs.' Mem. 44-45.

Because the 2016 Operating Agreement completely integrated the 2009 Letter Agreement, and because Beretta did not breach a duty to disclose, the Court finds that Defendants' counterclaims are without merit. The Court determines that the 2016 Operating Agreement is the operable agreement between the parties, and that any claims arising from alleged breaches of the 2009 Letter Agreement are barred as a matter of law.²⁰

20 The Court also notes that it would be appropriate to dispense with Defendants' claim that Beretta failed to issue a dividend on the same grounds. See Defs.' Mem. 22-23; 2009 Letter Agreement § V. In addition, because the Court finds that the 2009 Letter Agreement and its terms were subsumed into the 2016 Operating Agreement, the Court does not give credit to the testimony of Defendants' expert witness Ralph Greico, who, inter alia, opined that DeQuattro was owed incentive compensation under the 2009 Letter Agreement.

B

Beretta's Claims Against DeQuattro and RGB

Having dispensed with Defendants' counterclaims, Beretta's claims against DeQuattro and RGB will now be addressed in turn. Beretta argues that under the 2016 Operating Agreement he was owed compensation equal to DeQuattro, as well as an equal share of RGB's profits for 2018 and 2019. See 2016 Operating Agreement ¶¶ 7, 13. Beretta alleges that he did not receive equal compensation for 2019 or an equal share of RGB's profits for 2018 or 2019. (Pl.'s Mem. 57-58; Pl.'s Ex. 45.) Beretta's substantive claims include (1) breach of contract against DeQuattro; (2) breach of the implied covenant of good faith and fair dealing against DeQuattro; (3) breach of fiduciary duty against DeQuattro; and (4) indemnification against RGB.²¹ (Compl. ¶¶ 49-67.) Based on these claims, Beretta seeks $404,797.50 in accrued profit for calendar year 2018; $735,852 in accrued profit for calendar year 2019; $197,818 for compensation due for calendar year 2019; $5,934.54 in 401(k) contribution for calendar year 2019; and $7,216.02 in profit sharing distributions for calendar year 2019. (Pl.'s Mem. 57-58, ¶¶ 1-4.)

21 Beretta also asserts a claim for appointment of a special master. See Compl. 68-72. However, that is not a cognizable cause of action, but a form of relief.

1 DeQuattro Did Not Breach a Fiduciary Duty

As analyzed above, Beretta and DeQuattro owed fiduciary duties as shareholders in a close corporation. See supra, Part III.A.1. Beretta claims that DeQuattro owed and subsequently breached his fiduciary duty of good faith and loyalty. (Compl. ¶¶ 61-62.) The Court disagrees. A fiduciary duty "is one of trust and confidence and imposes the duty on the fiduciary to act with the utmost good faith." Notarantonio, 941 A.2d at 145 (internal quotation omitted). The Court does not find sufficiently problematic conduct on DeQuattro's part. DeQuattro was open and honest about his belief that the 2009 Letter Agreement had lapsed, prompting his drafting of the 2016 Operating Agreement. DeQuattro was also transparent in his dealing with Beretta, as evidenced by his decision to share the draft agreement with Beretta for input and comments. Additionally, the evidence on this record supports a finding that DeQuattro unwittingly drafted the 2016 Operating Agreement to his own detriment. See supra, Part III.A.3. Moreover, the record is devoid of evidence showing DeQuattro engaged in duplicitous or dishonest conduct. At worst, DeQuattro disputed the amounts due and owed to Beretta under the 2016 Operating Agreement. This Court is all too aware that contractual disputes are a regular occurrence. The Court holds that DeQuattro's actions in connection with the contractual dispute at bar do not constitute a breach of the duties of good faith or loyalty.

2 DeQuattro Breached the 2016 Operating Agreement

Beretta argues that DeQuattro breached the terms of the 2016 Operating Agreement by failing to provide equal compensation and an equal share of RGB's profits for 2018 and 2019. The Court agrees that DeQuattro deviated from the terms of the 2016 Operating Agreement.

When interpreting a contract, our Supreme Court has stated that a court's "'primary task . . . is to attempt to ascertain the intent of the parties.'" Morgan v. Bicknell, 268 A.3d 1180, 1183 (R.I. 2022) (quoting Woonsocket Teachers' Guild, Local 951 v. School Committee of the City of Woonsocket, 117 R.I. 373, 376, 367 A.2d 203, 205 (1976)). The parties' intent "'must govern if that intention can be clearly inferred from [the] terms and, . . . express . . . language [of the] contract." Woonsocket Teachers' Guild, 117 R.I. at 376, 367 A.2d at 205 (quoting Hill v. M. S. Alper &Son, Inc., 106 R.I. 38, 47, 256 A.2d 10, 15 (1969)). "In the absence of ambiguity, the interpretation of a contract is a question of law[.]" Andrukiewicz v. Andrukiewicz, 860 A.2d 235, 238 (R.I. 2004). "'In determining whether an agreement is clear and unambiguous, the document must be viewed in its entirety and its language be given its plain, ordinary and usual meaning.'" Arnold v. Arnold, 187 A.3d 299, 311 (R.I. 2018) (quoting W.P. Associates v. Forcier, Inc., 637 A.2d 353, 356 (R.I. 1994)). A contract provision is ambiguous only if it is "'reasonably susceptible of different constructions.'" Carney v. Carney, 89 A.3d 772, 776 (R.I. 2014) (quoting Paul v. Paul, 986 A.2d 989, 993 (R.I. 2010)).

The 2016 Operating Agreement is unambiguous in that Beretta and DeQuattro are entitled to equal compensation for the life of the 2016 Operating Agreement. See 2016 Operating Agreement ¶¶ 4, 13. Furthermore, the 2016 Operating Agreement is unambiguous in that for the contract period of the 2016 Operating Agreement, Beretta and DeQuattro are entitled to equal shares of RGB's net profits. See 2016 Operating Agreement ¶¶ 4, 6-7.²² Thus, the Court must interpret these provisions to mean that the parties intended for Beretta to receive equal compensation and an equal share of profits for the life of the 2016 Operating Agreement.

22 Paragraph Six of the 2016 Operating Agreement contains a chart depicting the ownership interest of Beretta, DeQuattro, and other shareholders who are classified as "[m]embers." See 2016 Operating Agreement ¶ 6. However, the 2016 Operating Agreement expressly excludes individuals other than Beretta and DeQuattro from any profit-sharing because Paragraph Six expressly provides that "[t]he illustration . . . is shown for stock division and distribution and names above are not included as members unless mutually agreed upon from both [Beretta] and [DeQuattro]." Id. (emphasis added).

The Court credits evidence on the record showing that rather than giving equal compensation and an equal share of RGB's profits, DeQuattro offered a sum proportional to Beretta's ownership in the company. E.g., Pl.'s Ex. 45. That does not comport with the express terms of the 2016 Operating Agreement. Therefore, the Court determines that DeQuattro is in breach by failing to adhere to the terms of the 2016 Operating Agreement.

3 DeQuattro Did Not Breach the Implied Covenant of Good Faith and Fair Dealing

Beretta next argues that DeQuattro breached the implied covenant of good faith and fair dealing. The Court disagrees. Our Supreme Court recognizes that "'virtually every contract contains an implied covenant of good faith and fair dealing between the parties.'" EDC Investment, LLC v. UTGR, Inc., 275 A.3d 537, 545 (R.I. 2022) (quoting Premier Home Restoration, LLC v. Federal National Mortgage Association, 245 A.3d 745, 749 (R.I. 2021). This implied covenant "ensures that 'contractual objectives may be achieved,' and that 'neither party shall do anything which will have the effect of destroying or injuring the right of the other party to receive the fruits of the contract.'" McNulty v. Chip, 116 A.3d 173, 185 (R.I. 2015) (quoting Ide Farm &Stable, Inc. v. Cardi, 110 R.I. 735, 739, 297 A.2d 643, 645 (1972); 17A Am. Jur. 2d Contracts § 370 at 356 (2004)). A claim for breach of the implied covenant of good faith and fair dealing must be connected to a breach of contract claim. Premier Home Restoration, LLC, 245 A.3d at 750.

While DeQuattro's interpretation of the 2016 Operating Agreement was inaccurate, that does not amount to a breach of the implied covenant of good faith and fair dealing. See McNulty, 116 A.3d at 185. The Court finds that DeQuattro offered substantial monetary compensation to Beretta in December of 2019, just not equal compensation. See Pl.'s Ex. 45. Although our Supreme Court has yet to expressly define what constitutes a breach of the implied covenant of good faith and fair dealing, such a breach typically arises where a party acts in bad faith or "acts in a commercially unreasonable manner while exercising some discretionary power under the contract." 23 Williston on Contracts § 63.22 at 555. The evidence on this record does not support a finding that DeQuattro acted in bad faith by misinterpreting the 2016 Operating Agreement. Moreover, the Court rejects the contention that a mere contract dispute equates to "evasion of the spirit of the bargain, lack of diligence and slacking off, willful rendering of imperfect performance, abuse of a power to specify terms, and interference with or failure to cooperate in the other party's performance." Restatement (Second) Contracts § 205 cmt. d. Thus, the Court holds that DeQuattro did not breach the implied covenant of good faith and fair dealing.

4 RGB May Not Indemnify Beretta for Costs and Expenses

Beretta finally claims that RGB must indemnify him for his costs and expenses stemming from litigation of the present action. He argues that the 2016 Operating Agreement expressly indemnifies members from all claims relating to their participation in RGB's affairs. (Compl. ¶ 65; 2016 Operating Agreement ¶ 48.) Thus, Beretta seeks reimbursement for attorney's fees, costs, and expenses. (Compl. ¶ 67.) The Court disagrees that RGB must indemnify Beretta.

It is well settled that "indemnity provisions are valid if sufficiently specific, but are to be 'strictly construed against the party alleging a contractual right of indemnification.'" Sansone v. Morton Machine Works, Inc., 957 A.2d 386, 393 (R.I. 2008) (collecting cases). The indemnification provision in the 2016 Operating Agreement states as follows:

"48. All Members will be indemnified and held harmless by the Company from and against any and all claims of any nature, whatsoever, arising out of a Member's participation in Company affairs. A Member will not be entitled to indemnification under this section for liability arising out of gross negligence or willful misconduct of the Member or the breach by the Member of any provisions of this Agreement." (2016 Operating Agreement ¶ 48.)

The Court strictly construes RGB's indemnity provision and finds that it comes to Beretta's aid if he were sued in connection with his station at RGB. See id. Here, Beretta instituted the present action and thus he bears the burden-financial or otherwise-of litigating his claims. Therefore, the Court denies Beretta's request for indemnification.

C.

Beretta's Claims for Damages

Here, Beretta successfully proved by a preponderance of the evidence that DeQuattro breached the 2016 Operating Agreement as it relates to equal compensation and equal profit sharing. See supra, Part III.B.2. Because DeQuattro is in breach, Beretta is entitled to damages. However, for the reasons stated below, the Court determines that he may only partially recover because his alleged damages arising in calendar year 2019 were not proved with reasonable certainty at trial. Management Capital, LLC v. F.A.F., Inc., 209 A.3d 1162, 1179 (R.I. 2019).

"It is well settled that a court may award damages for breach of contract to place the injured party in as good a position as if the parties fully performed the contract." Guzman v. Jan-Pro Cleaning Systems, Inc., 839 A.2d 504, 508 (R.I. 2003) (internal citations omitted). The Rhode Island Supreme Court has held that "in order to recover future lost profits in an action for breach of contract, a plaintiff must establish the loss with 'reasonable certainty.'" Sweet v. Pace Membership Warehouse, Inc., 795 A.2d 524, 529 (R.I. 2002) (quoting UST Corp. v. General Road Trucking Corp., 783 A.2d 931, 941 (R.I. 2001)). The party must establish those damages with "reasonably precise figures and cannot rely upon speculation." See Marketing Design Source, Inc. v. Pranda North America, Inc., 799 A.2d 267, 273 (R.I. 2002) (internal quotation omitted).

1 Beretta is Entitled to an Equal Share of RGB's Profits for Calendar Year 2018

Beretta first claims that he is owed $404,797.50 based on his 50-percent share of RGB's profits in calendar year 2018. (Pl.'s Mem. 58, ¶ 3.) The credible evidence adduced at trial demonstrates to a reasonable degree of certainty that Beretta is owed this amount.

At trial, Beretta relied on his expert witness, Jimmy Pappas (Pappas), to calculate his damages for DeQuattro's breach of contract of the 2016 Operating Agreement.²³ Pappas began his professional career with Deloitte in 1994. (Tr. 508:5-8.) He has been working as an accountant for twenty-eight years. Id. at 508:9-11. He has multiple professional accreditations certifying his expertise in business valuations. Id. at 508:17-24. Pappas testified that, during his professional career, he has performed approximately ten to fifteen business valuations. Id. at 508:25-509:2. According to Pappas's Curriculum Vitae, he has been an expert witness in over twenty cases. See Pl.'s Ex. 61 (Pappas Expert Report) App. A (Pappas CV). In addition, he has three publications, with one dedicated as a comprehensive guide to economic damages. See id.

23 The parties to this matter stipulated as to Pappas's qualifications as an expert in accounting and application of generally accepted accounting principles. See Tr. 491:2-11. Therefore, the Court ruled that Pappas had "the necessary education, experience, and training to qualify as an expert in the areas of accounting and the application of generally accepted accounting principles that will allow [Pappas] to provide opinion testimony." Id. at 491:22-492:1.

In this matter, Pappas was engaged to evaluate Beretta's claims for damages against RGB and DeQuattro. (Tr. 493:1-4.) Among other calculations, Pappas calculated what Beretta's share of profits would be if Beretta were entitled to 50 percent of said profits through 2019. Id. at 494:2-8. Specifically, in evaluating Beretta's profit-sharing claim for 2018, Pappas reviewed the 2016 Agreement "as it related to the determination of profits and how it should be distributed and to whom." Id. at 497:14-16. Based on his evaluation, Pappas determined that Beretta and DeQuattro were supposed to receive equal distributions in both 2018 and 2019. Id. at 497:16-19. For 2018, Pappas identified the amount of accrued profit from RGB's financial records and then calculated a 50 percent share of that profit and utilized that calculation to determine the net profit due and owed to Beretta. Id. at 499:10-16. Based on the process articulated under GAAP-which was the stipulated standard for calculating profits under the 2016 Operating Agreement-Pappas determined that Beretta's 50 percent share of accrued profit for 2018 amounted to $404,797.50. See id. at 497:22-498:6; 500:9-16; Pappas Expert Report 12.

As an initial matter, the Court concludes that Pappas was a credible expert witness. He cogently explained his Expert Report and the approach he used in determining each of Beretta's damages allegations. The Court also accepts Pappas's determinations as credible and persuasive. As it relates to Beretta's claim for a 50 percent share in RGB's profits for calendar year 2018, Beretta has established his damages to a reasonable degree of certainty. The Court believes that the evidence in the record shows that, pursuant to the 2016 Operating Agreement, Beretta was owed 50 percent of the accrued profits for the year 2018. See 2016 Operating Agreement ¶ 7. Pappas was able to calculate Beretta's purported equal share of profits for 2018 to a reasonable degree of certainty and without speculation. As a result, the Court awards Beretta $404,797.50, representing a 50 percent share of RGB's accrued net income for calendar year 2018.

2

The Court Cannot Award Equal Compensation, 401(k) Contributions, Profit-Sharing Distributions, or an Equal Share in RGB's Profits for Calendar Year 2019 Because Those Amounts Were Not Proved with Reasonable Certainty

Beretta next claims that he is owed $197,818 in additional compensation for calendar year 2019, a 401(k) contribution of $5,934.54 for calendar year 2019, $7,216.02 in profit-sharing distributions for calendar year 2019, and $735,852 as his 50-percent share of RGB's profits in calendar year 2018. (Pl.'s Mem. 57-58, ¶¶ 1-2, 4.) In total, Beretta submits he is entitled to $946,820.56 in damages arising in calendar year 2019.²⁴ Yet, Beretta did not prove that he is owed those amounts to a reasonable degree of certainty, and thus the Court does not award any damages.

24 $197,818 + $5,934.54 + $7,216.02 + $735,852 = $946,820.56.

The Court again credits Pappas's clear, reasoned, and well-supported report and testimony, but disagrees with his ultimate findings. First, he testified that "the plain English of the relevant provisions within the [2016 Operating Agreement] stipulated that [Beretta and DeQuattro] were supposed to receive equal compensation." (Tr. 496:24-497:2; see also Tr. 495:7-10.) Pappas reviewed RGB's financial records and calculated that DeQuattro received $197,818 more than Beretta for calendar year 2019. Id. at 495:10-16; Pappas Expert Report 5. Thus, Pappas concluded that Beretta is owed $197,818 so that he and DeQuattro would be equally compensated for calendar year 2019. (Pappas Expert Report 5.) Pappas's calculations would be persuasive if the 2016 Operating Agreement guaranteed equal compensation for all of calendar year 2019. It does not.

Paragraph 4 of the 2016 Operating Agreement states that "[t]he term of this agreement shall be valid until May 5, 2019, with Joseph Beretta's employment ending December 31, 2019." (2016 Operating Agreement ¶ 4.) This language clearly and unambiguously provides that the 2016 Operating Agreement and its terms expire on May 5, 2019. See id. The Court is bound by our Supreme Court's precedent that "clear and unambiguous language set out in a contract is controlling in regard to the intent of the parties to such contract and governs the legal consequences of its provisions." Dovenmuehle Mortgage, Inc. v. Antonelli, 790 A.2d 1113, 1115 (R.I. 2002) (quoting Burke v. Potter, 771 A.2d 895, 895 (R.I. 2001)) (internal citations omitted). Thus, well-settled contract law dictates that Beretta was to remain employed at RGB until December 31, 2019 but was only guaranteed equal compensation until May 5, 2019-i.e., the date of expiration for the 2016 Operating Agreement. See 2016 Operating Agreement ¶¶ 4, 13.

Here, there is no basis to conclude that Beretta was guaranteed equal compensation after May 5, 2019. There is simply no documentary evidence in the record to support such a conclusion. On the contrary, the terms of the 2016 Operating Agreement necessarily suggest that Beretta could have been compensated differently after May 5, 2019. See 2016 Operating Agreement ¶ 4. The Court holds that Beretta failed to establish damages with reasonable certainty and therefore does not award additional compensation for calendar year 2019. See Management Capital, LLC, 209 A.3d at 1179. Also, because Beretta's claims for additional 401(k) contributions and profit-sharing distributions are contingent on additional compensation for calendar year 2019, the Court must decline to award damages for those claims as well. See Pl.'s Mem. 57-58, ¶ 2.

Pappas next offered his opinion that Beretta was entitled to a 50 percent share of RGB's profits. See Pappas Expert Report 11-13. Pappas provided two figures based on two different hypotheticals. In one scenario, Pappas calculated what Beretta should receive if he were entitled to RGB's profits for the entire calendar year 2019. (Tr. 493:24-494:4.) Under this assumption, Pappas opined that Beretta was entitled to $735,852. (Pappas Expert Report 13.) In the other scenario, Pappas calculated what Beretta should receive if he were entitled to RGB's profits up until May 13, 2019, when Beretta was fully divested of his shares. (Tr. 494:4-8.) Under that assumption, Pappas opined that Beretta was entitled to $268,632. (Pappas Expert Report 13.)

The Court cannot credit Pappas's findings as to Beretta's purported 50 percent share of RGB's profits for calendar year 2019 because, as the Court noted, the terms of the 2016 Operating Agreement expired on May 5, 2019. (2016 Operating Agreement ¶ 4.) Thus, Beretta is only guaranteed an equal share of RGB's profits up until May 5, 2019. See id. ¶¶ 4, 7. Pappas's opinions overshoot RGB's profits by a minimum of eight days, amounting to a failure to establish the amount of damages requested with reasonable certainty. See Tr. 494:4-8; Pappas Expert Report 13. The Court acknowledges that it was presented with RGB's income statements. See generally Pl.'s Ex. 57. However, the income statement that comes closest to May 5, 2019 is an income statement as of April 30, 2019, which undershoots RGB's profits by five days. Id. Thus, RGB's income statements do not prove Beretta's damages with reasonable certainty.

The Court anticipates Beretta's argument that a single-digit-day difference is inconsequential in calculating damages. The Court categorically disagrees. One need only look at recent headlines to see that a single day can make a significant difference in a company's financial health. For example, FTX appeared to be a multi-billion-dollar cryptocurrency exchange when, almost overnight, the company proved to be totally insolvent and filed for bankruptcy. See Hon. Brian P. Stern &Jordan Z. Sasa, Esq., If It's Not Football, Don't Bet on the GOAT: What Lawyers Should Expect Following the Crypto Crash, 71 R.I. Bar J., Jan.-Feb. 2023, at 7, 11 &n.62. Surely, like any business, RGB generates revenue and incurs expenses on a daily basis. Thus, the Court cannot reasonably rely on days-old financial statements and calculations and assume that they are still accurate or precise. In addition, the Court was not provided with RGB's general ledger so that the Court could confirm whether Pappas's calculations or RGB's April 30, 2019 income statement accurately reflected the company's financial position as of May 5, 2019. The Court holds that Beretta failed to prove damages with reasonable certainty and does not award damages for his claim to 50 percent of RGB's profits for calendar year 2019.

IV

Conclusion

Based on the foregoing, the Court finds for Beretta and awards $404,797.50 with prejudgment interest in accordance with statute. Counsel for Plaintiff shall prepare and file an order and separate judgment consistent with this Decision.