Opinion
WOCV2014-00483-D
05-31-2015
Shepherd & Goldstein, LLP v. Christos Kyriakis Opinion No. 130570
DENNIS J. CURRAN, Associate Justice.
MEMORANDUM OF DECISION AND ORDER ON DEFENDANT'S MOTION FOR SUMMARY JUDGMENT AND PLAINTIFF'S CROSS MOTION FOR SUMMARY JUDGMENT ON DEFENDANT'S COUNTERCLAIM
DENNIS J. CURRAN, Associate Justice.
This case arises out of a dispute over the terms of a Non-Solicitation Agreement signed by the defendant, Christos Kyriakis, a former employee of the plaintiff Shepherd & Goldstein, LLP. The plaintiff contends that under an oral modification to the Agreement, it is entitled to compensation for former clients who left to join Mr. Kyriakis's new accounting practice. Shepherd & Goldstein has sued Mr. Kyriakis because it claims he breached the Non-Solicitation Agreement. It also claims detrimental reliance, fraud, and unjust enrichment. Mr. Kyriakis has counterclaimed seeking severance pay. Mr. Kyriakis now moves for summary judgment and for leave to file a petition for an award of attorneys fees under the Agreement. Shepherd & Goldstein opposes Mr. Kyriakis's motion and cross moves for summary judgment on the counterclaim.
FACTUAL BACKGROUND
In 2006, Mr. Kyriakis placed an advertisement in the Massachusetts Society of CPA's Newsletter to sell his accounting practice, Kyriakis & Carney, LLP. On August 23, 2006, Terence Shepherd, a partner at Shepherd & Goldstein, LLP sent Mr. Kyriakis an offer memorandum which, inter alia, stated: " Finally, we also need to address the potential situation of things not working out. If that should occur and some of the clients we purchased from you wish to retain you, then you will pay us back the higher of what we paid to you or some agreed to (based on what option you choose above) multiple of the then prior twelve months fee." On December 18, 2006, Shepherd & Goldstein entered into an Asset Purchase Agreement in which it bought the assets of Kyriakis & Carney. It also sent Mr. Kyriakis an employment offer letter, which stated, in part, that if Mr. Kyriakis was terminated without cause within nine months, he would be entitled to three months' severance pay. As part of the Asset Purchase Agreement, Mr. Kyriakis became an employee of Shepherd & Goldstein, LLP and signed the Non-Compete, Confidentiality, and Non-Solicitation provisions.
Significant and relevant portions of the Non-Solicitation Agreement include the following.
Paragraph 4(c) of the Agreement provides:
If Kyriakis's employment terminates more than five (5) years after the [e]ffective [d]ate hereof, then for a period of one (1) year from the date of such termination, Kyriakis shall not . . . solicit, induce or attempt to induce any clients of the Buyer, or its successors, existing as the date Kyriakis ceases to be an employee of Buyer, to cease doing business in whole or in part, or alter in any way, terminate or breach his, her or its relationship or agreement with the Buyer, or it [sic] successors to become clients of Kyriakis . . . Kyriakis agrees that because it is impossible to ascertain or estimate the entire or exact cost, damage or injury which Buyer might sustain by reason of Kyriakis breaching the foregoing non-solicitation agreement, in addition to the injunctive relief available to Buyer set forth in paragraph 6 below; which shall apply to any client of Buyer however acquired, Kyriakis agrees that he shall pay to Buyer for any such departing client an amount equal to . . . 150% of the billings for such client for the twelve-month period prior to termination. If said departing client shall have used the Buyer's services for less than a twelve-month period, the gross receipt from said client during the time it has used Buyer's services shall be placed on an annualized basis for purposes of computing Kyriakis' payment hereunder. For the avoidance of doubt, this provision shall only apply in the event that both (i) the client terminates its relationship with Buyer and (ii) begins work with the firm affiliated with Kyriakis.
Paragraph 6, entitled " Injunctive Relief, " states that if Mr. Kyriakis breached or threatened to breach the Agreement, Shepherd & Goldstein is entitled to an injunction " restraining Kyriakis from (a) soliciting or interfering with employees, consultants, independent contractors, customers or suppliers of the Business or their respective successors, (b) disclosing, in whole or in part, the private, secret and confidential information described herein, or from rendering any services to any person, firm, corporation, association or other entity to whom such information has been disclosed, or is threatened to be disclosed, (c) otherwise violating the provisions of this Agreement."
Paragraph 10, entitled " Amendments and Waivers, " states:
This Agreement may be modified only by a written instrument duly executed by each party hereto. No breach of any covenant, agreement, warranty or representation shall be deemed waived unless expressly waived in writing by the party who might assert such breach. No waiver of any right hereunder shall operate as a waiver of any right, or of the same or similar right on another occasion.
Paragraph 12, entitled " Entire Agreement, " provides:
This Agreement, together with the Purchase Agreement, contains the entire understanding of the parties with respect to the subject matter hereof, supersedes all prior agreements and understandings relating to the subject matter hereof, and shall not be amended except by a written instrument hereafter signed by all of the parties hereto.
On December 6, 2013, Shepherd & Goldstein partners Carl Goldstein and Curtis Feldman met with Mr. Kyriakis and terminated his employment. Sometime before the meeting, Mr. Goldstein reviewed the termination provision of the Non-Solicitation Agreement. During the meeting, both Mr. Goldstein and Mr. Feldman understood that Mr. Kyriakis would be required to compensate Shepherd & Goldstein for any accounts that went with Mr. Kyriakis after his termination, regardless of whether he solicited those accounts. This was their understanding based on their conversation with Mr. Shepherd. Neither Mr. Goldstein nor Mr. Feldman brought a copy of the Non-Solicitation Agreement to the meeting.
Mr. Goldstein stated that Shepherd & Goldstein had decided to terminate Mr. Kyriakis because it was not a positive working relationship. Mr. Kyriakis agreed. Mr. Goldstein told Mr. Kyriakis that Shepherd & Goldstein wanted to pay him four weeks' severance. Mr. Goldstein asked Mr. Kyriakis if he wanted to take his clients, and Mr. Kyriakis responded that he did. Mr. Goldstein told Mr. Kyriakis that the firm would hold the severance and apply it against the buyout of the client accounts.
Mr. Goldstein discussed the Non-Solicitation Agreement with Mr. Kyriakis and its calculation of 150% of the prior year revenues, but they could not determine what the price would be because they did not know which accounts Mr. Kyriakis would be taking. When asked at his deposition if there was any discussion of modifying the Non-Solicitation Agreement at that time, Mr. Goldstein stated: " There was not. I'm sorry, that's not true. I did discuss the fact that we thought the agreement as it was read was onerous, and that Terry and I were talking about making it a little less hard for him to pay."
Mr. Goldstein stated that because the end of the year was approaching and tax season would soon be upon them, their firm wanted to facilitate the transition of clients so that no service disruption occurred. Mr. Feldman discussed the tax software that Mr. Kyriakis was going to use, and said that if Mr. Kyriakis used the same software as Shepherd & Goldstein, the firm would give Mr. Kyriakis the electronic files directly to save him the time of re-entering client data into the program.
On December 16, 2013, Shepherd & Goldstein, LLP sent letters to all of Mr. Kyriakis's clients at the firm, informing them that Mr. Kyriakis was no longer employed there, and had opened his own practice. The letters provided Mr. Kyriakis's phone number and asked any clients who wished to move to Mr. Kyriakis's new practice to execute release forms to allow Shepherd & Goldstein to release their information to Mr. Kyriakis. It received release forms for ninety accounts, from which it had collected $137,147.50 in 2013. Mr. Kyriakis did contact some clients to ask them to execute the release forms, but only those who had already informed him that they wished to leave Shepherd & Goldstein.
From early December 2013 through February 2014, Mr. Kyriakis exchanged a number of emails with Amanda Santos, a Shepherd & Goldstein employee. In those emails, Mr. Kyriakis requested information and files for clients that had followed him from the firm. Ms. Santos would then email him the information or place the requested files on a server accessible to Mr. Kyriakis.
On February 6, 2014, Mr. Goldstein emailed Mr. Kyriakis and indicated that if all of Mr. Kyriakis's clients left Shepherd & Goldstein, then Mr. Kyriakis would owe about $325,000 to be paid over two years under the terms of the Non-Solicitation Agreement. Mr. Goldstein then proposed that the percentage of previous revenue be reduced to 125% and paid over six years. Mr. Goldstein's email also stated that if Mr. Kyriakis could make a $50,000 down payment, then the percentage would be reduced to 110%. On February 7, 2014, Mr. Goldstein sent Mr. Kyriakis another email asking, " Have you had a chance to review this? I am anxious to get this resolved." Later that day, Mr. Kyriakis replied " I have not reviewed yet. I will shortly."
DISCUSSION
Summary judgment shall be granted where there are no genuine issues as to any material fact and where the moving party is entitled to a judgment as a matter of law. Mass.R.Civ.P. 56(c); Cassesso v. Commissioner of Corr., 390 Mass. 419, 422, 456 N.E.2d 1123 (1983); Community Nat'l Bank v. Dawes, 369 Mass. 550, 553, 340 N.E.2d 877 (1976). The moving party assumes the burden of affirmatively demonstrating the absence of a triable issue and that the summary judgment record entitles the moving party to a judgment as a matter of law. Pederson v. Time, Inc., 404 Mass. 14, 17, 532 N.E.2d 1211 (1989). The moving party may satisfy this burden either by submitting affirmative evidence that negates an essential element of the opposing party's case or by demonstrating that the opposing party has no reasonable expectation of proving an essential element of his case at trial. Flesner v. Technical Commc'n Corp., 410 Mass. 805, 809, 575 N.E.2d 1107 (1991); Kourouvacilis v. General Motors Corp., 410 Mass. 706, 716, 575 N.E.2d 734 (1991). If this burden is met, the nonmoving party must respond by setting forth specific facts showing that there is a genuine issue for trial. O'Brion, Russell & Co. v. LeMay, 370 Mass. 243, 245, 346 N.E.2d 861 (1976). To defeat the motion, the nonmoving party cannot rest on his or her pleadings and mere assertions of disputed facts. LaLonde v. Eissner, 405 Mass. 207, 209, 539 N.E.2d 538 (1989).
A. The Breach of Written Terms of the Non-Solicitation Agreement
Mr. Kyriakis contends that he is entitled to summary judgment because the terms of the Non-Solicitation Agreement only require him to compensate Shepherd & Goldstein if he breached the Agreement by soliciting his former clients. The summary judgment record contains no facts to support any allegation that Mr. Kyriakis solicited or contacted any former clients who did not first contact him and indicate they wished to move from Shepherd & Goldstein. The firm argues that Mr. Kyriakis never had to solicit clients because it provided his clients with his contact information as part of an oral modification of the Agreement, but that does not change the fact that Mr. Kyriakis did not solicit clients in violation of the Agreement.
" An enforceable agreement requires (1) terms sufficiently complete and definite, and (2) a present intent of the parties at the time of formation to be bound by those terms." Targus Group, Int'l, Inc. v. Sherman, 76 Mass.App.Ct. 421, 428, 922 N.E.2d 841 (2010). The interpretation of an unambiguous contract is a question of law. Allstate Ins. Co. v. Bearce, 412 Mass. 442, 446-47, 589 N.E.2d 1235 (1992). Courts look to the plain meaning of the language chosen, and consider the " contract as a whole, in a reasonable and practical way." NStar Elec. Co. v. Department of Pub. Utils., 462 Mass. 381, 394, 968 N.E.2d 895 (2012), quoting MCI WorldCom Communs., Inc. v. Dep't of Telcoms. & Energy, 442 Mass. 103, 113, 810 N.E.2d 802 (2004). " The rule of parol evidence does not permit the admission of any extrinsic evidence to vary the terms of an unambiguous contract." Siebe, Inc. v. Louis M. Gerson Co., Inc., 74 Mass.App.Ct. 544, 550 n.11, 908 N.E.2d 819 (2009).
Here, the unambiguous language of the Non-Solicitation Agreement provides that Mr. Kyriakis may not solicit former clients of Shepherd & Goldstein for a year and that " Kyriakis agrees that because it is impossible to ascertain or estimate the entire or exact cost, damage or injury which Buyer might sustain by reason of Kyriakis breaching the foregoing non-solicitation agreement " (emphasis added) that Mr. Kyriakis will pay the set compensation for " any [departing] client of [b]uyer however acquired." Thus, the Agreement only provides for damages in the event that Mr. Kyriakis breached the non-solicitation clause. Any evidence of the parties' intentions during negotiations is inadmissible because the Agreement is an integrated contract under its paragraph 12. See Bright Horizons Children's Ctrs., Inc. v. Sturtevant, Inc., 82 Mass.App.Ct. 482, 485, 975 N.E.2d 885 (2012). Mr. Kyriakis did not breach the non-solicitation clause; therefore, he is not obligated to pay for departing clients under the Agreement.
B. The Breach of the Oral Modification
Shepherd & Goldstein argues that the parties verbally agreed to modify the terms of the Non-Solicitation Agreement at the meeting on December 6, 2013. It alleges that Mr. Kyriakis agreed to the modification at the December 6, 2013 meeting with Mr. Goldstein and Mr. Feldman. Under the terms of the alleged oral modification, Mr. Kyriakis agreed that he would pay for departing clients, and Shepherd & Goldstein would waive the non-solicitation provision and injunctive relief provisions of the Agreement. Shepherd & Goldstein would also assist Mr. Kyriakis by directly informing his clients and asking them if they would like to continue with them or follow Mr. Kyriakis.
A modification is the result of bilateral action and both parties to a contract must agree to the modification. Dynamic Mach. Works, Inc. v. Machine & Elec. Consultants, Inc., 444 Mass. 768, 771-72, 831 N.E.2d 875 (2005); see also Brown v. OneWest Bank, FSB, 86 Mass.App.Ct. 1107, at *6, 13 N.E.3d 1027 (2014) (Unpublished Rule 1:28 opinion) (finding proposed modification unenforceable where party did not intend to be bound). A contract modification must be supported by valid consideration. Tri City Concrete Co. v. A.L.A. Constr. Co., 343 Mass. 425, 427, 179 N.E.2d 319 (1962). " [A] provision that an agreement may not be amended orally but only by a written instrument does not necessarily bar oral modification of the contract." Cambridgeport Sav. Bank v. Boersner, 413 Mass. 432, 439, 597 N.E.2d 1017 (1992). " Mutual agreement on modification of the requirement of a writing may . . . be inferred from the conduct of the parties and from the attendant circumstances of the instant case." Id., quoting First Pa. Mortgage Trust v. Dorchester Savs. Bank, 395 Mass. 614, 625, 481 N.E.2d 1132 (1985) (internal quotations omitted; alternation in original). " The evidence of a subsequent oral modification must be of sufficient force to overcome the presumption that the integrated and complete agreement, which requires written consent to modification, expresses the intent of the parties." Id. at 439 n.10 (noting that other jurisdictions require oral modification to be proven by more than preponderance of evidence). " [I]n order to support the existence of an oral modification, the parol evidence must be sufficiently weighted and of competent probity to present a material issue for trial; that is, the parol evidence must be of sufficient strength to present an ambiguity between the actual conduct of the parties and the contract." Wells Fargo Bus. Credit v. Environamics Corp., 77 Mass.App.Ct. 812, 817, 934 N.E.2d 283 (2010) (holding that speculative assertions in affidavits were insufficient to create genuine dispute of material fact); D'Attanasio v. Marini, 84 Mass.App.Ct. 1101 at *3-4, 989 N.E.2d 934 (2013) (Unpublished Rule 1:28 opinion) (finding conclusory affidavit insufficient to show oral modification of contract).
Here, the evidence in the summary judgment record is insufficient to support Shepherd & Goldstein's claim that the Non-Solicitation Agreement was orally modified. Mr. Goldstein and Mr. Feldman indicated that they believed that Mr. Kyriakis was already required to pay them for departing clients, which makes it doubtful that they simultaneously intended to modify the Agreement. Mr. Kyriakis could hardly have consented to the purported terms of the modification when neither Mr. Goldstein nor Mr. Feldman believed they were proposing such modifications. See Dynamic Mach. Works, Inc., 444 Mass. at 771-72. Their deposition testimony only shows that Mr. Kyriakis said that he wanted to keep his customers. The record does not indicate any affirmative agreement by Mr. Kyriakis to any contract modification or an agreement to pay for departing clients. Even if Messrs. Goldstein and Feldman had clearly testified that Mr. Kyriakis agreed to pay, such self-serving statements would still be insufficient. See D'Attanasio, 84 Mass.App.Ct. 1101 at *3-4, 2013 Mass.App. Unpub. LEXIS 733. Shepherd & Goldstein claims it agreed to waive the non-solicitation provision and its right to injunctive relief as part of the modification. However, neither Mr. Feldman, nor Mr. Goldstein, nor Mr. Kyriakis mentioned the issue of injunctive relief during the meeting. Similarly, although the parties did discuss transferring files and making the transition as smooth as possible for clients, it was not discussed in the context of being consideration for modification of the Agreement.
Furthermore, nothing in the subsequent interactions between Shepherd & Goldstein employees and Mr. Kyriakis indicates that the parties actually reached an agreement at the December 6, 2013 meeting. While Shepherd & Goldstein did send letters to the clients and provide files to Mr. Kyriakis, Mr. Goldstein and Mr. Feldman testified that that was intended to help ensure the transition was smooth for clients, and those actions are, at best, very weak evidence of modification. None of the emails between Mr. Kyriakis and Ms. Santos indicate that Shepherd & Goldstein's cooperation was contingent on payment from Mr. Kyriakis or mention any modification. In the emails between Mr. Kyriakis and Mr. Goldstein on February 6 and 7, 2014, Mr. Goldstein indicated the amount he believed due under the Non-Solicitation Agreement, and then made a proposal for modifying the terms, which suggests that the parties had not agreed to any specific terms in the December 6, 2013 meeting, and outweighs any weak inference of a modification from the transfer of client files. See A.R.S. Servs., Inc. v. Morse, 31 Mass. L. Rptr. 227, at *39-41 (Mass.Super. 2013) (finding that phrasing in email did not permit inference of oral modification sufficient to overcome requirement that modification must be in writing).
The summary judgment record is insufficient to overcome the Non-Solicitation Agreement's requirement that modifications be made in writing and does not show that parties orally agreed to a modification. Compare First Pa. Mortgage Trust, 395 Mass. at 625 (finding sufficient evidence of oral modification where plaintiff unequivocally indicated his approval of details and existence of modification was supported by written memoranda). Therefore, Mr. Kyriakis is entitled to summary judgment on this claim.
C. The Detrimental Reliance, Fraud, and Unjust Enrichment Claims
Shepherd & Goldstein also brings claims for detrimental reliance, fraud, and unjust enrichment. These claims are all based on the premise that Mr. Kyriakis and Shepherd & Goldstein agreed to an oral modification of the Non-Solicitation Agreement in which Mr. Kyriakis would pay for departing clients, and Shepherd & Goldstein relied on that representation to its detriment when it provided client files and refrained from seeking injunctive relief. As previously noted, the summary judgment record is insufficient to permit an inference of such a modification. Therefore, Mr. Kyriakis is entitled to summary judgment on these claims.
D. The Breach of Contract and Breach of the Covenant of Good Faith and Fair Dealing Counterclaims
Mr. Kyriakis alleges that Shepherd & Goldstein failed to provide him severance pay in violation of their employment agreement. He further alleges that Shepherd & Goldstein used paragraph 4(c) of the Agreement as a pretext to refuse to pay severance, which constitutes a breach of the covenant of good faith and fair dealing of the Agreement.
The severance pay offer was part of the purported oral modification of the Agreement, and Mr. Kyriakis admits that the severance counterclaim should only stand as a set-off if the court denies his motion for summary judgment. Because the court is allowing Mr. Kyriakis's motion for summary judgment on that issue, no oral modification existed. Therefore, Shepherd & Goldstein's motion for summary judgment on the counterclaim will be allowed.
ORDER
For these reasons, Mr. Kyriakis's motion for summary judgment is ALLOWED, and Shepherd & Goldstein's cross motion for summary judgment on the counterclaim is ALLOWED.
Mr. Kyriakis's motion for leave to file a petition for an award of attorneys fees is ALLOWED. However, Mr. Kyriakis's request shall be sharply limited to only those legal services directly provided for by the Agreement, and not on other issues. Mr. Kyriakis must submit contemporaneously-created billing records in one-tenth of an hour increments, and affidavits from counsel attesting to the accuracy and contemporaneous record-keeping of those records. Such submissions shall be served upon the defendant's attorney within twenty-one days of the date of this Memorandum. If Shepherd & Goldstein, LLP wishes to oppose Mr. Kyriakis's request because it believes the amount sought is unreasonable, the Court shall require Shepherd & Goldstein LLP, as an express condition of any opposition, and in an effort to determine whether the request is indeed reasonable, to submit for in camera review, a copy of its firm's own legal bills, properly redacted. Such opposition papers shall be served upon the defendant Mr. Kyriakis's counsel within twenty-one days after it has received Mr. Kyriakis's pleading.