Opinion
PLCV201500553B
06-26-2018
James DEVER v. David L. WARD et al.[1]
MEMORANDUM OF DECISION AND ORDER ON SPECIAL MOTION TO DISMISS
Raffi N. Yessayan, Justice of the Superior Court
James Dever filed numerous tort claims against his former employer, Moors & Cabot ("M & C"), its counsel, Michaels, Ward & Rabinovitz, and several individuals associated with those two entities. This matter is before the court on the defendants’ Renewed Motion to Dismiss pursuant to G.L.c. 231, § 59H following a remand by the Appeals Court.
BACKGROUND
Moors & Cabot ("M & C") is a licensed securities broker-dealer in Massachusetts. Daniel Joyce ("Joyce") is the President of M & C. Dever is a manager in the securities brokerage industry and was hired by M & C on November 16, 2009. In November of 2011, Dever became the manager of M & C’s Norwell office. Joyce and M & C disputed the amount of compensation Dever was due under his employment agreement. Dever believed he was owed $2,000,000 in revenue, commission, and salary. In the midst of this salary dispute, Devers learned that M & C broker Aaron Foley ("Foley") had compliance issues and suggested to Joyce that he conduct an investigation into Foley’s activities. Dever told Joyce that Foley had violated M & C’s policies and procedures by introducing a penny stock, Protext Mobility, to M & C client Paul Chen through a private placement without M & C’s approval. Dever believed this conduct violated NASD and FINRA rules. Dever sent an email to M & C’s Board of Directors explaining his position. On November 6, 2011, Dever complained to the Duxbury Police Department that Foley had threatened to come to his house in Duxbury and confronted his wife. Instead of investigating Foley, Joyce terminated Dever’s employment on November 9, 2011. M & C offered Dever a separation agreement, which he refused.
On December 16, 2011, Dever filed a statement of claim against M & C for wrongful termination and breach of contract. M & C filed a statement of answer and counterclaim, in which it denied owing Devers further compensation and claimed that Dever lied to Joyce about Foley’s conduct. At some point, Foley signed an affidavit admitting that he had solicited the purchase of the stock to Chen, and regulators began investigating M & C.
The parties proceeded to arbitration before the Financial Industry Regulatory Authority ("FINRA"). Michaels, Ward & Rabinovitz represented Joyce and M & C in the arbitration. Dever alleges that Attorney Daniel Rabinovitz informed him before the final arbitration hearing that if he withdrew his claim for arbitration, M & C would not prosecute him criminally. On July 11, 2012, Attorney David Ward emailed Devers’ attorney, Eric Karp, and several others stating that Dever made threatening phone calls to Joyce and Foley at M & C’s office. The same day, M & C executive Michael Braun called the Boston Police Department and reported that Dever threatened Joyce by stating he was "going to get him" and "my family is not the only family going to be hurt." Foley reported to the Boston Police Department that Dever threatened him, "I am going to kill you, mother fucker" and "I am going to kill you, you think you can come to me, you’re dead."
On July 13, the Boston Police advised Foley that if the threats were made in Hanover, the Hanover Police had jurisdiction. Foley then reported the threats to the Hanover Police. On July 13, Foley sought a "No Harassment Order" against Dever from the Hingham District Court On July 18, Attorney Karp informed M & C and Joyce’s attorney that he intended to add Foley as a respondent in the pending arbitration proceeding. The same day, Foley filed an application for a criminal complaint against Dever in the Hingham District Court.
In July, Joyce and M & C branch office manager Vernon Gibson obtained "Harassment Prevention Orders" against Dever in the Boston Municipal Court. On August 2, 2012, Attorney Rabinovitz prosecuted a criminal complaint on Foley’s behalf at a Clerk’s hearing in Hingham District. Court. However, the court declined to issue a criminal complaint. Attorney Rabinovitz took a boxing stance and told Dever if he dropped the arbitration, his clients would drop the criminal complaints in the BMC. Soon thereafter, the BMC issued a criminal complaint for harassment against Dever at a probable cause hearing that was continued on multiple occasions for arraignment. In August, Joyce and Gibson moved to voluntarily withdraw the harassment protection orders issued in the BMC on jurisdictional grounds because they did not reside in Suffolk County.
The arbitration proceeding lasted three years. During that proceeding, Joyce and M & C placed into evidence the police reports, no harassment orders, and criminal complaints against Dever. Dever alleges that Joyce and M & C willfully presented this false evidence to the arbitration panel to defeat his claims for compensation. He moved to strike the evidence of his alleged criminal conduct from the record, which the panel denied. However, the arbitrators issued an order that no further references to the criminal matters would be allowed into evidence. On July 1, 2014, FINRA entered an arbitration award denying Dever’s claims and awarding Foley $75,000 on his counterclaim for defamation. The arbitration award was confirmed in Superior Court on March 13, 2015 in SUCV2014-02129. Dever filed an appeal of that decision on April 8, 2015. Dever did not pay the $75,000 judgment against Foley, claiming a financial inability to do so. This resulted in a FINRA enforcement proceeding against Dever to determine his ability to pay.
Dever filed this action against Ward; Rabinovitz; Michaels, Ward & Rabinovitz, LLP; Joyce; M & C; and Foley on June 9, 2015. On July 2, Foley sent an email to Dever and the FINRA enforcement officer calling Dever an "unfit man," accusing him of "disingenuous and disgusting behavior" and threatening to garnish his wages and escrow his earnings to pay the arbitration award. On July 20, Dever amended the complaint in this action to add claims against Foley based on this email.
Count I of the Amended Complaint alleges civil conspiracy, Count II alleges fraud, Count III alleges abuse of process in the Hingham. District Court, Count IV alleges abuse of process in the BMC, Count V alleges malicious prosecution in the Hingham District Court, Count VI alleges malicious prosecution in the BMC, Count VII alleges defamation, Count VIII alleges intentional infliction of emotional distress, and Count IX alleges negligent infliction of emotional distress against all defendants. Count X alleges libel against Foley, Count XI alleges intentional infliction of emotional distress against Foley, and Count XII alleges negligent infliction of emotional distress against Foley. Dever’s appeal of the Superior Court decision confirming the FINRA arbitration award was dismissed for failure to prosecute on March 20, 2016.
In a Memorandum of Decision and Order dated November 23, 2016, this Court allowed the defendants’ special motion to dismiss Dever’s Amended Complaint pursuant to G.L.c. 231, § 59H. The Appeals Court affirmed this Court’s determination that Dever’s claims were based solely on the defendants’ petitioning activity in the FINRA arbitration and in the District Court and BMC and that said activity was not devoid of reasonable factual support or an arguable legal basis. See Dever v. Ward, 92 Mass.App.Ct. 175, 180-81 (2017). However, the Appeals Court remanded the case to this Court for a determination of a second basis on which Dever might avoid dismissal of this action by making an alternative showing under Blanchard v. Steward Carney Hosp., 477 Mass. 141 (2017). See Dever v. Ward, 92 Mass.App.Ct. at 184.
DISCUSSION
Whether FINRA Arbitration is Government Proceeding
In its decision, the Appeals Court stated:
The record before us is insufficient to determine whether FINRA arbitration qualifies as a "governmental proceeding" within the meaning of § 59H. However, Dever has never argued, either in opposing the special motion in the trial court or on appeal, that FINRA arbitration is not a governmental proceeding. Accordingly, the issue is not before us ... For the purpose of this appeal, we have no basis to disturb the motion judge’s determination that the defendants’ conduct in the FINRA arbitration was petitioning activity.Dever v. Ward, 92 Mass.App.Ct. at 180. The defendants view this as a statement that Dever waived the issue, noting that the Appeals Court stated: "the order allowing the special motion is vacated and remanded solely for consideration under the augmented Duracraft framework." Id. at 184 (emphasis added). However, at the oral argument on this matter, this Court expressed a willingness to reconsider the issue in the interests of justice.
Arbitration before a state commission such as the Department of Telecommunications and Energy involves a "governmental proceeding" for purposes of G.L.c. 231, § 59H. Global NAPs, Inc. v. Verizon New England, Inc., 63 Mass.App.Ct. 600, 606-07 (2005). However, Dever argues that FINRA’s certificate of incorporation shows that it is not a governmental body but rather, a private non-profit company incorporated in Delaware that provides an arbitration venue for securities disputes. See Century 21 Chamberlain & Assoc. v. Haberman, 173 Cal.App.4th 1, 8, cert. den., 558 U.S. 1097 (2009) (submission of dispute between real estate broker and client to private arbitration forum does not involve protected activity under California’s anti-SLAPP statute).
Dever emphasizes that FINRA’s website address contains the suffix ".org" instead of ".gov," indicating it is not a government entity. FINRA’s website states: "FINRA is not part of the government. We’re a not-for-profit organization authorized by Congress to protect America’s investors by making sure the broker-dealer industry operates fairly and honestly." The website further states: "In 2016, through our aggressive vigilance, we brought 1, 434 disciplinary actions against registered brokers and firms. We levied $176.3 million in fines. And we ordered $27.9 million in restitution to harmed investors. We also referred more than 785 fraud and insider trading cases to the SEC and other agencies for litigation and/or prosecution."
An entity that is created by the Legislature to serve a public purpose may be a governmental body for purposes of G.L.c. 231, § 59H even though it has no ability to make law or issue regulations, does not formulate public policy, and does not have any administrative duties. See North Amer. Expositions Co. Ltd. P’ship v. Corcoran, 452 Mass. 852, 860 (2009) (South Boston Community Development Foundation was governmental body where it was created by statute to administer public trust funds). FINRA, the successor entity to the National Association of Securities Dealers ("NASD"), is registered with the Securities and Exchange Commission and regulates the over-the-counter securities market "as an integral part of a comprehensive system of federal regulation of the securities market." Desiderio v. National Ass’n of Securities Dealers, Inc., 191 F.3d 198, 201 (2nd Cir. 1999), cert. den., 531 U.S. 1069 (2001). See also Sparta Surgical v. National Ass’n of Securities Dealers, 159 F.3d 1209, 1213-14 (9th Cir. 1998) (noting that Securities Exchange Act, 15 U.S.C. § 78a et seq., adopted a system of industry self-regulation under strong SEC oversight). FINRA’s authority is exercised under the close supervision of the SEC, which must approve all of FINRA’s rules and regulations. See Desiderio v. National Ass’n of Securities Dealers, Inc., 191 F.3d at 201. FINRA does not receive any federal or state funding, its creation was not mandated by statute, and the government does not appoint its members. Id. at 206 (concluding that FINRA’s predecessor, NASD, was not a state actor for purposes of constitutional claims).
Numerous courts have concluded that because FINRA performs vital government functions, it is entitled to absolute immunity from suit, akin to governmental immunity, when carrying out its delegated regulatory duties under the Securities Exchange Act. See Lobalto v. Financial Industry Regulatory Auth., Inc., 599 Fed.Appx. 400, 401 (2d Cir. 2015), cert. den., 136 S.Ct. 570 (2015); Central Registration Depository, No. 1346377 v. Financial Industry, Regulatory Auth., Inc., 459 Fed.Appx. 662, 663 (9th Cir. 2011); Turbeville v. Financial Industry Regulatory Auth., Inc., 2016 WL 501982 at *4 (M.D.Fla.), aff’d, 874 F.3d 1268 (11th Cir. 2017); Conover v. Financial Industry Regulatory Auth., Inc., 2014 WL 4273305 at *4 (N.D.Cal.); Bancorp Int’l Group v. Financial Industry Regulatory Auth., Inc., 2014 WL 134282 at *3 (D.Nev.); Shimoda-Atlantic, Inc. v. Financial Industry Regulatory Auth., Inc., 2008 WL 2003160 at *4 (W.D.Ark.). FINRA in effect acts as a quasi-governmental entity when conducting arbitrations pursuant to its delegated authority. See Sparta Surgical v. National Ass’n of Securities Dealers, 159 F.3d at 1213-14 (concluding that NASD exercised quasi-governmental powers in discharging its disciplinary and arbitration duties under the Securities Exchange Act). Accordingly, although FINRA is a private entity and not a government agency, this Court concludes that a FINRA arbitration qualifies as a "governmental proceeding" for purposes of G.L.c. 231, § 59H. Cf. Bluestem Advisors, LLC v. Eventure Interactive, Inc., 2017 WL 3047895 at *5 (C.D.Cal.) (concluding that FINRA likely is "official body" under California’s anti-SLAPP statute when it conducts investigation).
Attorneys as Petitioners Under Statute
Dever argues that M & C, Michaels Ward & Rabinovitz, Attorney Ward, and Attorney Rabinovitz are not entitled to seek dismissal under G.L.c. 231, § 59H because they did not engage in their own petitioning activity. See Fustolo v. Hollander, 455 Mass. 861, 869 (2010) (author of newspaper articles did not engage in petitioning activities on her own behalf and therefore, was not entitled to dismissal). Although a special movant must be exercising his own constitutional right of petition, he need not be the beneficiary of the particular cause advanced. Cardno ChemRisk, LLC v. Foytlin, 476 Mass. 479, 487 (2017). An attorney who is sued for voicing the positions of a petitioning client may bring a special motion to dismiss under G.L.c. 231, § 59H. Hanover v. New England Reg’l Council of Carpenters, 467 Mass. 587, 592 (2014); The Cadle Co. v. Schlichtmann, 448 Mass. 242, 252 (2007); Plante v. Wylie, 63 Mass.App.Ct. 151, 157, rev. den., 444 Mass. 1103 (2005). Here, Michaels Ward & Rabinovitz, Attorney Ward, and Attorney Rabinovitz were acting on behalf of their clients in the FINRA arbitration and in the court proceedings. M & C was acting on its own behalf in the arbitration proceeding and to assist its employees in the court proceedings. See Hanover v. New England Reg’l Council of Carpenters, 467 Mass. at 592. Accordingly, they are proper movants under the statute.
Blanchard Analysis
A plaintiff who cannot show that the defendant’s petitioning activity was devoid of reasonable factual support or an arguable legal basis may alternatively avoid dismissal under G.L.c. 231, § 59H by demonstrating that under the totality of the evidence, each challenged claim was not primarily brought to chill the defendants’ legitimate petitioning activities. Blanchard v. Steward Carney Hosp., 477 Mass. 141, 159 (2017); Dever v. Ward, 92 Mass.App.Ct. at 183. The non-moving party must establish, such that the motion judge may conclude with fair assurance, that its primary motivating goal in bringing its claim, viewed in its entirety, was not to interfere with or burden the defendant’s petitioning rights but rather, to seek damages for the personal harm caused by the defendant’s acts. 477 Harrison Ave., LLC v. Jace Boston, LLC, 477 Mass. 162, 176 (2017); Blanchard v. Steward Carney Hosp., 477 Mass. at 160. The motion judge must assess the totality of the circumstances, including the course and manner of the proceedings, the pleadings filed, and affidavits stating the facts upon which the liability or defense is based. Blanchard v. Steward Carney Hosp., 477 Mass. at 160. A necessary but not sufficient factor is whether each of the plaintiff’s claims is colorable or worthy of being presented to and considered by the court. Id. at 161.
Count I of Dever’s Amended Complaint alleges that the defendants engaged in a civil conspiracy to obtain "bogus" criminal complaints for the sole purpose of introducing them in the FINRA arbitration to influence the outcome. Count II alleges that the defendants engaged in fraud in eliciting false testimony in the BMC and Hingham District Court to obtain harassment orders and criminal complaints that later were dismissed. Count III alleges abuse of process by filing a meritless criminal case in the Hingham District Court in order to affect the arbitration outcome. Count IV alleges that the defendants obtained a meritless complaint in BMC to affect the arbitration outcome. Count V alleges that the defendants abused process by maliciously and without probable cause instituting criminal proceedings in Hingham District Court to affect the arbitration outcome. Count VI alleges that the defendants maliciously and without probable cause instituted criminal proceedings in the BMC to affect the arbitration outcome. Count VII alleges that the defendants defamed Devers through statements made to his clients after he was fired and on the statement to FINRA. Counts VIII and IX allege intentional and negligent infliction of emotional distress based on all these events. Count X alleges libel by Foley for post-arbitration statements he made about Dever in an email to the FINRA enforcement officer, and Counts XI and XII allege intentional and negligent infliction of emotional distress by Foley.
Notably, Dever does not undertake a claim by claim analysis to show, as is his burden, that each count of the complaint is colorable and worthy of judicial inquiry. See Blanchard v. Steward Carney Hosp., 477 Mass. at 161. This is a necessary but not sufficient showing under the alternative Blanchard analysis. See Blanchard v. Steward Carney Hosp., 477 Mass. at 161. See also id. at 144 (noting concern that G.L.c. 231, § 59H might result in dismissal of meritorious claims). Thus, Dever has failed to demonstrate that the Amended Complaint should not be dismissed because his claims are not really SLAPP claims brought primarily to chill the defendants’ legitimate petitioning activities. Cf. Blanchard v. Steward Carney Hosp., 2017 WL 7361049 at *3 (Mass.Super.Ct.) (Leighton, J.) (concluding, on remand, that nurses showed they had colorable defamation claim against former employer).
Dever argues that his claims could not have been motivated by the desire to chill the defendants’ petitioning rights because the court and FINRA proceedings were concluded when he filed this lawsuit. The criminal matters had been resolved in 2012 and the arbitration award issued on July 1, 2014. Although the arbitration before FINRA was over when Dever filed this suit, the Superior Court had recently confirmed the award and Dever’s appeal was pending. Thus, the defendants were engaged in ongoing petitioning activity when Dever filed this lawsuit. Cf. Chin v. Garda CL New England, Inc., 2017 WL 5771464 at *8 (D.Mass.) (declining to dismiss claims under Blanchard where plaintiff filed suit one month after indictments were dismissed, leaving no basis for inferring that he was motivated to deter witnesses from participating in prosecution). Moreover, the anti-SLAPP statute is intended as redress for lawsuits brought not only to chill or deter petitioning activity but also to punish those who have engaged in such activity. See The Cadle Co. v. Schlichtmann, 448 Mass. at 249. Accordingly, the timing of the filing of Dever’s lawsuit does not allow the court to conclude with fair assurance that his primary motivation was not to interfere with or burden the defendant’s petitioning rights but rather, to seek damages for personal harm.
Finally, Dever argues that his legitimate motive to recover damages for the defendants’ wrongful conduct is demonstrated by evidence that the defendants violated FINRA rules and FINRA eventually ruled that they could not further raise the facts of the criminal cases in the arbitration proceeding. Dever repeatedly emphasizes in his briefs that his claims are not SLAPP claims because the defendants’ petitioning was a "SHAM." However, this Court already has ruled that the defendants’ petitioning in the FINRA arbitration, the Hingham District Court and the BMC were not shams, and the Appeals Court has upheld that determination. See Dever v. Ward, 92 Mass.App.Ct. at 181-82 (Dever did not show that criminal allegations lacked factual support and dismissal of complaints for lack of venue did not mean they were devoid of legal merit).
In contrast to Blanchard, where the SJC described the plaintiffs’ complaint as lacking the classic indicia of a SLAPP suit, see Blanchard, 477 Mass. at 156-57, Dever’s claims are based solely on the quintessential petitioning activities G.L.c. 231, § 59H was intended to protect. Moreover, Dever does not seek to recover for damages collateral to defendants’ petitioning activity; rather, he seeks to recover the same money he unsuccessfully sought in arbitration as well as the amount of the judgment entered against him in that proceeding. Dever has failed to meet his burden of demonstrating that his claims were motivated by a legitimate desire to recover on colorable legal grounds rather than a desire to chill or punish the defendants’ petitioning activities. Cf. Blanchard v. Steward Carney Hosp., 2017 WL 7361049 at *3 (concluding on remand that nurses’ defamation claim was not primarily intended to chill hospital’s petitioning activity where nurses cooperated in investigation into hospital, filed suit based on both petitioning and non-petitioning activity, and were plausibly motivated by well-established right to sue for economic damage to reputation and emotional distress). This case does not represent one of the rare instances in which the operation of G.L.c. 231, § 59H deviates from legislative intent and raises constitutional concerns by dismissing meritorious claims not intended primarily to chill petitioning. See Blanchard v. Steward Carney Hosp., 477 Mass. at 143-44.
The plaintiffs were nurses who brought a defamation claim against their former employer for both petitioning activity (statements to the press) and non-petitioning activity (emails to other employees), alleging that although they supported the goal of the hospital’s petitioning activity, to preserve the hospital’s license to operate an adolescent psychiatric unit, they suffered collateral damage to their reputation from that activity. Blanchard v. Steward Carney Hosp., 477 Mass. at 142, 150-52, 156-57.
ORDER
For the foregoing reasons, it is hereby ORDERED that the Defendants’ Special Motion to Dismiss Pursuant to M.G.L.c. 231, § 59H be ALLOWED.
JUDGMENT
This action came before the Court, Hon. Raffi N. Yessayan, presiding, and upon consideration thereof,
It is ORDERED and ADJUDGED: that the Special Motion to Dismiss pursuant to G.L.c. 231, § 59H is Allowed and that the complaint of the plaintiff James Dever be and hereby is DISMISSED, and that the defendants shall have their costs of action.