VALE v. VALCHUIS (2019)

MEMORANDUM AND ORDER PURSUANT TO RULE 1:28

After a ten-day Superior Court jury trial involving two brothers and a close corporation of which they were the founders, fifty percent shareholders, directors, and for which they served as officers, all parties appeal. The plaintiff, Michael A. Vale, appeals from the judgment for defendant New England Cleaning Services, Inc. (NECS), for $ 875,000 in damages (plus interest) on its counterclaim against Vale for breach of fiduciary duty, and from the trial judge's orders denying Vale's motions for judgment notwithstanding the verdict (judgment n.o.v.) and for a new trial on that counterclaim. NECS cross-appeals from the same judgment, to the extent that it incorporates a motion judge's order granting summary judgment in favor of Vale on NECS's counterclaim for deceit. Defendant David J. Valchuis cross-appeals from the amended judgment for Vale for $ 540,000 (plus interest) on Vale's claim against him for breach of fiduciary duty, and from the trial judge's orders denying Valchuis's motions for judgment n.o.v. and a new trial on that claim. Vale also appeals from the judge's denial of his motion for a new trial on damages on that claim. Finally, Valchuis appeals from the judge's order denying his motion for indemnification for his attorney's fees by NECS. Addressing the parties' arguments seriatim, we affirm in all respects, except that we vacate so much of the judgment for NECS as dismissed its counterclaim against Vale for deceit, and remand for further proceedings on that counterclaim.

Discussion. A. Vale's appeal. 1. Statute of limitations defense. Vale argues that the motion judge erred in denying his motion for summary judgment asserting that NECS's counterclaim against him for breach of fiduciary duty (on which NECS later succeeded at trial) was time-barred. The counterclaim alleged that Vale had “recklessly” signed a “statement of intent” under which NECS agreed to be bound by an agreement to be negotiated between a labor union and a trade association. Vale's motion argued that the signing had occurred more than three years before this action was filed in July of 2013, and therefore that NECS's counterclaim was barred by the three-year limitations period of G. L. c. 260, § 2A.³

In response, NECS argued that its counterclaim could be asserted under the provision of G. L. c. 260, § 36, that “a counterclaim arising out of the same transaction or occurrence that is the subject matter of the plaintiff's claim, to the extent of the plaintiff's claim, may be asserted without regard to the provisions of law relative to limitations of actions.” The motion judge agreed that NECS's counterclaim met this standard, i.e., was a compulsory counterclaim, and denied Vale's motion for summary judgment seeking dismissal of the counterclaim. Vale now challenges that ruling.

We first address whether the ruling remains appealable. “As a rule, a party cannot appeal from the denial of summary judgment on a claim or defense after a trial on the merits of that claim or defense.” Waxman v. Waxman, 84 Mass. App. Ct. 314, 321 (2013). But “a refinement of the general rule is that the earlier denial of summary judgment is eligible for review if the subsequent trial excludes the denied claim or defense from further consideration․ In that circumstance the earlier denial has become effectively a final disposition or order.” Id. at 322. That is the case here. The motion judge ruled as a matter of law that NECS's counterclaim was compulsory and thus could be asserted without regard to the otherwise applicable three-year limitations period. G. L. c. 260, § 36. That ruling was not predicated upon the existence of any dispute of material fact that could have been resolved at trial. It follows that Vale was not required to press the issue in his motions for a directed verdict and for judgment n.o.v. in order to preserve the issue for appeal.

On the merits of that issue, Vale argues that because he had asserted no claim against NECS, NECS's claim against him was not a “counterclaim,” and so G. L. c. 260, § 36, did not apply. But Vale's amended complaint, in asserting breach of fiduciary duty and other claims against Valchuis, named NECS as “a nominal defendant in this action to the extent that certain forms of relief requested by Vale, including a reinstitution of the shareholder distributions, require action by the corporation rather than Valchuis.” Vale's prayers for relief sought an injunction requiring “payment to Vale of all shareholder profit ․ distributions from NECS.” Because Vale sought payments from NECS, we see no reason why NECS's claim seeking payments from Vale (albeit in the form of damages) should not be considered a counterclaim for purposes of G. L. c. 260, § 36.⁴ See Bernstein v. Gramercy Mills, Inc., 16 Mass. App. Ct. 403, 409 (1983) (“as a § 36 counterclaim can go only ‘to the extent of the plaintiff's claim,’ it corresponds to ‘recoupment’ in the pre-Rules practice”).

As for whether NECS's counterclaim was “compulsory” in relation to Vale's claims, we observe that Vale's breach of fiduciary duty claim alleged, as relevant here, that Valchuis had caused NECS to suspend shareholder distributions as a means of pressuring Vale to sell his shares to Valchuis. NECS's counterclaim alleged that Vale's signing of the statement of intent led to increased union activity at NECS worksites, and corresponding financial pressure on NECS, so that “NECS's suspension of distributions was a direct result of Vale signing” the statement of intent. See generally Vale v. Valchuis, 471 Mass. 495, 497 (2015). Central to both the claim and the counterclaim was the question of why NECS had suspended the distributions. We thus agree with the motion judge's ruling that the counterclaim was compulsory.⁵

That conclusion did not resolve all questions about how G. L. c. 260, § 36, might apply to NECS's counterclaim. In particular, the motion judge's ruling did not determine when NECS's counterclaim actually accrued. If it accrued more than three years before this action was filed, then it could be asserted only by reason of G. L. c. 260, § 36, and thus only “to the extent of [Vale's] claim.” If, on the other hand, it accrued within the three years before this action was filed, NECS's recovery against Vale was not limited by the statute to whatever amount Vale might recover against NECS.

On appeal, Vale argues three theories of why NECS's counterclaim should be considered to have accrued more than three years before this action was filed.⁶ But, insofar as these theories raise issues of law, we find no indication that Vale raised those issues in the trial court. And insofar as they raise issues of fact, Vale did not ask that the issues be submitted to the jury. See Riley v. Presnell, 409 Mass. 239, 248 (1991) (“any disputed issues relative to the statute of limitations ought to be decided by the jury”). Moreover, when Vale moved after trial to alter or amend the judgment so as, among other things, to limit NECS's damages to an amount equivalent to Vale's recovery, the trial judge denied the motion in relevant part, ruling that “the counterclaims were brought within the three year statute of limitations because NECS did not begin to suffer damages until 2011.” Vale did not identify that ruling in his amended notice of appeal as one that he intended to challenge on appeal, see Mass. R. A. P. 3 (c), as appearing in 430 Mass. 1602 (1999), nor has Vale argued that NECS's recovery should be capped at an amount equal to his own. For all of these reasons, we need not resolve Vale's arguments as to why NECS's counterclaim accrued more than three years before this action was filed.

2. Admission of “expert” testimony on NECS's counterclaim. Vale argues that the trial judge committed prejudicial error in allowing two NECS witnesses, despite not having been designated as experts, to give what amounted to expert opinion testimony in support of NECS's counterclaim. We are not persuaded.

First, Vale argues that NECS's labor attorney, Robert Bucking, was improperly allowed to testify to his opinion of the “legal impact” of Vale's signing the statement of intent on behalf of NECS.⁷ Specifically, Vale challenges Bucking's testimony, over objection, that “by signing the [s]tatement of [i]ntent, the company subjected itself to complete unionization, which the company negotiated a partial compromise to in 2008 and again in 2013, 2014. But the end result of those compromises was full unionization as of today.” ⁸

But this answer was essentially cumulative of Bucking's prior testimony. Before giving the answer, Bucking had already testified twice, without any objection on opinion grounds, that “[i]n August of 2007, the company had signed a [s]tatement of [i]ntent which committed it to be fully unionized.” ⁹ He had also already testified, again without objection: (1) that his understanding of a 2008 agreement he had negotiated with the union was that at the next round of collective bargaining, “the company [was] required to bargain in good faith toward an agreement of 100 percent unionization”; (2) that as of 2012 or 2013, “the company knew that the next negotiation, one way or another, was going to end with ․ wall-to-wall union recognition”; and (3) that, based on the 2014 agreement with the union, “100 percent of [NECS] [became] subject to unionization” as of September 1, 2016. In light of this unobjected-to testimony, we cannot conclude that any error in admitting the challenged portion of Bucking's testimony “injuriously affected [Vale's] substantial rights.” G. L. c. 231, §§ 119, 132. Vale has not shown that “the jury might have reached a different result if the evidence had been excluded.” Coady v. Wellfleet Marine Corp., 62 Mass. App. Ct. 237, 244 (2004), citing Grant v. Lewis/Boyle, Inc., 408 Mass. 269, 275 (1990).

Second, Vale argues that NECS's controller, Anthony Tomaino, over objection, was improperly allowed to give “expert” testimony. The challenged testimony involved Tomaino's estimate of the profits NECS lost due to having raised its prices (and thus lost customers) in response to union activity. Vale asserts that “[c]alculation of lost profits is generally the subject of expert testimony,” a proposition for which he cites LightLab Imaging, Inc. v. Axsun Techs., Inc., 469 Mass. 181, 188 (2014).

We find nothing in LightLab standing for such a proposition. Moreover, under the Federal rules, “most courts have permitted the owner or officer of a business to testify to the value or projected profits of the business, without the necessity of qualifying the witness as an accountant, appraiser, or similar expert.” Advisory Committee Notes to 2000 Amendments to Fed. R. Evid. 701, 28 U.S.C.A. Rules of Evidence, at 609 (West 2012). The principles governing opinion testimony by lay witnesses in the Commonwealth are “taken nearly verbatim” from that Federal rule. Mass. G. Evid. § 701 & note, at 233 (2018). Vale offers no reason to depart from the interpretation given the Federal rule.¹⁰

3. Admission of hearsay testimony on NECS's counterclaim. Vale argues that the trial judge abused her discretion in allowing two NECS witnesses, Valchuis and Bucking, to give hearsay testimony. Again, we are not persuaded.

a. Valchuis's testimony. Vale first argues that Valchuis was improperly allowed to give hearsay testimony that the reason customers cancelled contracts with NECS was the increase in NECS's prices due to union activity. Our review of the transcript reveals no abuse of discretion in this regard. We conclude that Vale opened the door to such testimony.

Our analysis must begin with NECS's direct examination of Valchuis, during which the judge ruled that Valchuis could not testify about “why [customers] stopped” doing business with NECS, because his testimony would be “completely based on hearsay.” But NECS was able, with the judge's permission, to elicit testimony from Valchuis from which the jury could infer that the reason was the increase in NECS's prices.

Then, on cross-examination, Vale asked Valchuis to confirm that he had stated on direct examination “that [NECS] lost contracts ․ because of the pricing of jobs,” and Valchuis agreed (inaccurately) that he had done so. Vale proceeded to cross-examine Valchuis, over NECS's hearsay objections, regarding other reasons -- unrelated to price increases or union activity -- that some of those customers left NECS. In order to “refresh [Valchuis's] memory” about why customers had terminated their contracts, Vale asked Valchuis to read from and eventually to confirm the content of notices submitted by those customers -- notices that the judge had already ruled were hearsay and were not NECS business records. Because any memory Valchuis had of customers' reasons for termination was apparently based on those same notices, Vale's strategy of refreshing Valchuis's memory with the notices succeeded in introducing hearsay in evidence.

On redirect examination, NECS asked Valchuis whether he believed that customers had reasons for termination other than those stated in their notices. Upon Vale's objection, the judge agreed that Valchuis's answers would necessarily be “based on hearsay” but noted that Valchuis had already testified as to non-price reasons for termination. The judge stated, “He probably didn't know those things personally either,” and so the jury were entitled to hear his understanding of the customers' “real reasons” for termination. Valchuis then testified that he understood that numerous particular customers had cancelled due to NECS's prices.

Although Valchuis's testimony on redirect examination was apparently based on hearsay, we conclude that the judge properly exercised her discretion to admit it, under the doctrine of curative admissibility. See Mass. G. Evid. § 106 (b) (2018) (“When the erroneous admission of evidence causes a party to suffer significant prejudice, the court may permit incompetent evidence to be introduced to cure or minimize the prejudice”). See also Burke v. Memorial Hosp., 29 Mass. App. Ct. 948, 950 (1990) (recognizing that, under doctrine of curative admissibility, judge could properly allow defendants to introduce otherwise inadmissible hearsay to rebut prejudicial, inadmissible hearsay introduced by plaintiff).

b. Bucking's testimony. Vale next argues that Bucking, NECS's labor lawyer, was improperly allowed to give hearsay testimony regarding the union's negotiating positions. But during Bucking's testimony on this subject, Vale objected only once: to a question seeking Bucking's own understanding of a sentence in a May 2008 agreement with the union that Bucking himself had negotiated. The question did not ask or require Bucking to relate any out-of-court statements made by union representatives. In short, the question did not seek hearsay. The judge properly overruled Vale's objection.

4. Vale's posttrial motions regarding NECS's counterclaim. Vale argues that the judge erred or abused her discretion in denying his motions for judgment n.o.v. or a new trial on NECS's fiduciary duty counterclaim. He asserts that there was insufficient evidence of either causation or damages. But Vale's argument suffers from a threshold defect: his motions addressed only one of the two separate grounds on which the jury found he had breached his fiduciary duty to NECS. Even if either motion was meritorious as to the one finding Vale addressed -- his 2007 signing of the statement of intent -- neither motion challenged the jury's finding that Vale breached his fiduciary duty by failing to cooperate with NECS's labor lawyer in 2008.¹¹ The verdict and judgment against Vale would still stand, based on that unchallenged finding.¹²

In any event, we see no error or abuse of discretion in the denial of the motions. In reviewing the denial of a judgment n.o.v. motion, we apply the familiar standard that also applies in the directed verdict context,¹³ remaining mindful that “[b]ecause the jury are a pillar of our justice system, nullifying a jury verdict is a matter for the utmost judicial circumspection.” Cahaly v. Benistar Prop. Exch. Trust Co., 451 Mass. 343, 350, cert. denied, 555 U.S. 1047 (2008). On a new trial motion in a civil case, a trial judge must consider “whether the verdict is so markedly against the weight of the evidence as to suggest that the jurors allowed themselves to be misled, were swept away by bias or prejudice, or for a combination of reasons, including misunderstanding of applicable law, failed to come to a reasonable conclusion.” W. Oliver Tripp Co. v. American Hoechst Corp., 34 Mass. App. Ct. 744, 748 (1993). “We grant considerable deference to a judge's disposition of a motion for a new trial, especially where [she] was the trial judge, and we will reverse the ruling only for an abuse of discretion.” Gath v. M/A-Com, Inc., 440 Mass. 482, 492 (2003).

a. Causation. NECS's theories of causation were that Vale's signing of the statement of intent, and his subsequent refusal to cooperate with NECS's labor attorney, weakened NECS's bargaining position with the union, resulting in NECS's executing unfavorable agreements with the union in 2008 and 2014, which led to higher labor costs and ultimately to the loss of NECS customers. Our review of the record discloses ample evidence to support each of these propositions.¹⁴

The jury could find that Vale's two breaches of fiduciary duty foreseeably weakened NECS's bargaining position with the union, which foreseeably led to economic harm to NECS.¹⁵ The precise mechanism by which that harm was produced -- NECS's raising its prices in anticipation of increased unionization, and thus losing customers -- need not have been foreseen. “Proximate cause does not require the particular act which caused the injury to have been foreseen, only that the general character and probability of the injury be foreseeable.” Glick v. Prince Italian Foods of Saugus, Inc., 25 Mass. App. Ct. 901, 902 (1987). And “a plaintiff's loss need not have only one proximate cause; there can be multiple concurrent proximate causes.” Kiribati Seafood Co., LLC v. Dechert LLP, 478 Mass. 111, 120 (2017). It is sufficient, as the judge here instructed the jury without objection, that Vale's conduct was a “substantial contributing cause” (as well as a but-for cause) of NECS's damages. See id.

We cannot agree with Vale's argument that this is one of those “situations where it can be said, as matter of law, that a cause is remote rather than proximate.” Stamas v. Fanning, 345 Mass. 73, 76 (1962). This is not a case where “all the facts are established and there can be no reasonable difference as to the effect of them, [so that] causation becomes a question of law.” Id. Cf. Leavitt v. Brockton Hosp., Inc., 454 Mass. 37, 44-45 (2009). “[M]ore often causation is a question of fact.” Stamas, supra. Here, as in Stamas, the question of causation was properly for the jury, and the jury's verdict here was not “so markedly against the weight of the evidence” on causation as to render the judge's denial of the new trial motion an abuse of discretion.

b. Damages. Vale argues that the evidence was inadequate to prove NECS's lost profits with “sufficient certainty” to support the $ 875,000 damages award against him. Augat, Inc. v. Aegis, Inc., 417 Mass. 484, 488 (1994), quoting Jet Spray Cooler, Inc. v. Crampton, 377 Mass. 159, 181 (1979). “While it is true that a plaintiff need not prove damages with mathematical certainty, ‘damages cannot be recovered when they are remote, speculative, hypothetical, and not within the realm of reasonable certainty.’ ” Kitner v. CTW Transp., Inc., 53 Mass. App. Ct. 741, 748 (2002), quoting Lowrie v. Castle, 225 Mass. 37, 51 (1916).

Here, NECS's controller Tomaino testified that, based on his methodology, total lost gross profits due to union activity or a change in pricing policy were $ 1.7 million for the period from 2011 through 2015, and were projected to be an additional $ 2.2 million for 2016 through 2018. On cross-examination by Vale, however, Tomaino acknowledged that his lost gross profits figures did not take into consideration (1) profits received from customers NECS gained from 2011 onward, or (2) various substantially increased overhead costs NECS incurred from 2013 onward, such as Valchuis's increased annual salary and the legal fees NECS was incurring in this litigation. In his closing argument, Vale argued that the jury should consider those factors in determining lost profits.

The jury could reasonably have found, as Vale had argued, that Tomaino's lost gross profits figures should be reduced by some amount on account of either or both of those factors, to produce a better picture of any net losses attributable to Vale's breach of fiduciary duty. We are not persuaded by Vale's argument that those factors required the jury to find no losses in net profits whatsoever. The jury's award of $ 875,000 in damages to NECS was supported by the evidence and “within the realm of reasonable certainty.” Kitner, 53 Mass. App. Ct. at 748, quoting Lowrie, 225 Mass. at 51. Accordingly, we see no error or abuse of discretion in the judge's denial of Vale's motions for judgment n.o.v. and a new trial on NECS's counterclaim.

5. Vale's motion for a new trial on his claim against Valchuis. Asserting that the jury's award to him of $ 540,000 in damages was insufficient to restore him to the position he would have been in but for Valchuis's breach of fiduciary duty, see Zimmerman v. Bogoff, 402 Mass. 650, 661 (1988), Vale argues that the judge should have granted his motion for a new trial on damages on his claim against Valchuis. Vale essentially contends that but for Valchuis's breach, NECS would have continued to pay Vale, from 2013 to 2016, the same amount in distributions -- approximately $ 1 million annually -- that Vale had received in past years.¹⁶

But, as discussed supra, the jury were warranted in finding that NECS lost net profits ¹⁷ in those years due to Vale's own breach of fiduciary duty. The jury could also have found that NECS's net profits were down due to the substantial legal expenses NECS incurred in this litigation, and that NECS was not required to hold Vale harmless from the effect that those expenses had on distributions.

There was evidence that from 2007 through 2012, and again in 2015 and 2016, Vale received as distributions approximately fifty percent of NECS's annual net profits.¹⁸ The only years in which Vale received significantly less than that fifty percent amount were 2013 and 2014 -- the years in which distributions were largely suspended -- and his combined shortfall for those two years totaled approximately $ 542,410.¹⁹ The jury's award to him of $ 540,000 in damages was therefore not “markedly against the weight of the evidence,” W. Oliver Tripp Co., 34 Mass. App. Ct. at 748, and the judge did not abuse her discretion in denying his motion for a new trial on damages. See Gath, 440 Mass. at 492.

B. NECS's cross appeal. We agree with NECS that the motion judge erred in ordering summary judgment for Vale on NECS's counterclaim against Vale for deceit. The counterclaim alleged that (1) in 2011 Vale told NECS (through Valchuis) that any distributions NECS paid to Vale after October 1, 2011, would be credited toward the purchase of Vale's NECS shares; and (2) in October of 2012, Vale made further statements indicating his intention to consider an NECS proposal to purchase his shares. NECS alleged that in detrimental reliance on these statements, which Vale allegedly knew were false when he made them, it continued to make distributions to Vale.

The motion judge, in allowing Vale's summary judgment motion and dismissing this counterclaim, concluded that Vale's October 2012 statements could not have been reasonably relied upon outside the context of a fiduciary relationship. The judge did not, however, explain why Vale's alleged statements in 2011 could not serve as the basis for liability.²⁰ On appeal, NECS does not quarrel with the judge's conclusions as to the October 2012 statements; NECS instead faults the judge for “sidestepp[ing] the central question of whether Vale's 2011 statements were material misrepresentations.”

We are constrained to agree that, on this record, Vale was not entitled to summary judgment on the deceit counterclaim insofar as it was based on the 2011 statements. Vale did not demonstrate, as was his burden, that NECS had no reasonable expectation of proving some essential element of its counterclaim. See Kourouvacilis v. General Motors Corp., 410 Mass. 706, 716 (1991). This is not to say that, on remand, a judge could not properly allow a renewed motion for summary judgment. Even drawing all reasonable inferences in NECS's favor, see Sullivan v. Liberty Mut. Ins. Co., 444 Mass. 34, 38 (2005), we see little if any evidence that, for example, Vale's 2011 statements were knowingly false when made. See Galotti v. United States Trust Co., 335 Mass. 496, 501 (1957). Issues of intent and state of mind are not immune from resolution on summary judgment. Brunner v. Stone & Webster Eng'g Corp., 413 Mass. 698, 705 (1992). We do not resolve that issue, however, as the parties have not briefed it; it may be raised on remand.

C. Valchuis's cross appeal. 1. Judgment n.o.v. motion. Valchuis argues, on three separate grounds, that the trial judge erred in denying his motion for judgment n.o.v. on Vale's breach of fiduciary duty claim leading to the $ 540,000 damages award. We find none of the arguments persuasive.

Valchuis's first argument is based on the jury's finding that, in causing NECS to suspend distributions, he did not breach his contractual obligations to Vale under NECS's bylaws. Valchuis contends that this finding barred, as a matter of law, Vale's fiduciary duty claim challenging the same conduct, on which the jury found for Vale. Valchuis cites the principle that “when the challenged conduct at issue in a case is clearly contemplated by the terms of the parties' written agreements, [the courts] have declined to find liability for breach of fiduciary duty.” Selmark Assocs. v. Ehrlich, 467 Mass. 525, 537 (2014). But an important corollary to this principle is that “[w]hen the contract does not entirely govern the other shareholders' or directors' actions challenged by the plaintiff, a claim for breach of fiduciary duty may still lie.” Id. at 537-538. That is the case here.

NECS's bylaws stated in relevant part that “dividends may be declared by the board of directors at any regular or special meeting, pursuant to law.” ²¹ The directors were Vale and Valchuis.²² Vale testified, however, that prior to this litigation, he and Valchuis had never held any formal meeting to vote to make distributions. Rather, asked how distributions were determined, Vale testified that “[a]t some point along the way, we established a number. It was a fixed amount.” ²³ In the years 2000 to 2012, he and Valchuis each received distributions of $ 41,667 per month. Vale testified to his understanding that “for distributions to stop ․ [he and Valchuis] would have to agree to it.”

The bylaw's provision that distributions “may be declared by the board of directors at any regular or special meeting, pursuant to law” did not “clearly” or “entirely” govern the mechanism by which each individual distribution had to be authorized. Selmark, 467 Mass. at 537-538. The bylaw did not clearly preclude a standing arrangement to make monthly distributions, of a set amount, without an individualized vote of the directors. Nor did the bylaw either clearly authorize a single director such as Valchuis to cause NECS to suspend such regular distributions, or clearly prohibit him from doing so.²⁴ Accordingly, the jury could find that Valchuis's having done so did not violate his contractual obligations to Vale under the bylaw, but did violate his fiduciary duty to Vale, as it was motivated by an improper purpose such as pressuring Vale to sell his shares in NECS. The judge correctly ruled, in denying Valchuis's judgment n.o.v. motion, that Selmark did not bar the fiduciary duty claim.

Valchuis's second attack on the judgment n.o.v. ruling is based on the jury's findings that, in causing NECS to increase his salary and other compensation, he neither breached his fiduciary duty to NECS nor violated his contractual obligations to NECS under its bylaws.²⁵ Vale had argued that Valchuis's actions to increase his own compensation were linked to the reduction and suspension of NECS distributions. Although Valchuis's distributions were reduced to the same extent as Vale's, the theory Vale advanced was that -- as part of a “classic freezeout” ²⁶ -- Valchuis caused at least some of the NECS cash not paid out as distributions to be paid instead to himself (but not to Vale) in the form of increased salary or other compensation. Valchuis now argues that, because the jury found no violation of any duty to NECS in connection with increases in his own compensation, they were bound to reject Vale's entire theory and thus find no violation of Valchuis's fiduciary duty to Vale in connection with the reductions in NECS distributions.

The logic of this argument escapes us. We see nothing precluding the jury from accepting only part, rather than all, of Vale's theory. The jury could find that Valchuis breached his duty to Vale in causing distributions to be reduced, while at the same time finding that Valchuis breached no duty to NECS in causing his own compensation to be increased.²⁷ The two issues are not, as Valchuis claims, “inextricably entwined.” The judge correctly rejected Valchuis's argument on this point.

Valchuis's third attack on the judgment n.o.v. ruling asserts that the $ 540,000 judgment for Vale lacked support in the evidence. Valchuis's main argument on this issue was not raised in his judgment n.o.v. motion and therefore is waived.²⁸ Valchuis also argues that Vale failed to prove that NECS had undistributed profits. But, as discussed supra in part A.5., there was evidence that in 2013 and 2014, during which distributions were largely suspended, substantially less than fifty percent of NECS's net profits were distributed to Vale, with his shortfall for those two years totaling approximately $ 542,410. NECS's year-end balance sheets for those years showed assets, including considerable cash on hand and accounts receivable, as well as large liabilities to shareholders (i.e., Vale and Valchuis) for retained earnings.²⁹ The judge did not err in denying Valchuis's judgment n.o.v. motion.

2. New trial motion. Valchuis next asserts that the judge abused her discretion in denying his motion for a new trial on the $ 540,000 damages award against him. Valchuis first argues that the award was excessive and against the weight of the evidence. What we have already said about the evidence of Vale's damages disposes of that argument.

Valchuis further argues that a question on the special verdict form was confusing and improper because it allowed the jury to find that Valchuis breached his fiduciary duty on any one or more of three independent grounds.³⁰ Although the better practice may well be to confine each special verdict question to a single issue, see 9B C.A. Wright & A.R. Miller, Federal Practice and Procedure § 2508, at 143 (2008), Valchuis has not persuaded us that the phrasing of the question here “injuriously affected [his] substantial rights.” G. L. c. 231, §§ 119, 132. As we have discussed, there was evidence from which the jury reasonably could find that Valchuis breached his fiduciary duty to Vale by causing the suspension of distributions, and the jury's affirmative answer to the challenged question is not inconsistent with their other findings. Moreover, another special question allowed the jury to award breach-of-fiduciary-duty damages only if that breach were based on the suspension of distributions, and only for “damages [Vale] has sustained by reason of the suspension of [such] distributions.” ³¹ On that basis, the jury awarded Vale $ 540,000. Thus, Valchuis having shown no prejudice attributable to the phrasing of the challenged question, the judge did not abuse her discretion in denying Valchuis's new trial motion.

3. Indemnification for attorney's fees. Finally, Valchuis appeals from the judge's posttrial denial of his motion for indemnification of his attorney's fees by NECS under G. L. c. 156D, §§ 8.51, 8.54. Under the latter section, when a corporation's director “is a party to a proceeding because he is a director” and applies for such indemnification, the court conducting the proceeding is to order it if, among other things, “the court determines, in view of all the relevant circumstances, that it is fair and reasonable ․ to indemnify the director pursuant to section 8.51.” G. L. c. 156D, § 8.54 (a) (3) (i). In turn, § 8.51 permits a corporation to indemnify such a director if, as relevant here, “he conducted himself in good faith; and ․ he reasonably believed that his conduct was in the best interests of the corporation or that his conduct was at least not opposed to the best interests of the corporation.” G. L. c. 156D, § 8.51 (a) (1) (i), (ii).

In denying Valchuis's motion, the judge reasoned that any finding by her that Valchuis acted in good faith would be inconsistent with the jury verdict that Valchuis breached his fiduciary duty to Vale. She further ruled that, based on the evidence at trial, she could not “independently find that ․ Valchuis conducted himself in good faith.” She rejected Valchuis's argument that, because he had been found to have breached his fiduciary duty only in his capacity as a shareholder, he should still be indemnified in his capacity as a director.³² The judge recognized that a defining feature of a close corporation is “substantial majority stockholder participation in the management, direction and operations of the corporation.” Donahue v. Rodd Electrotype Co. of New England, Inc., 367 Mass. 578, 586 (1975). Implicit in her decision is that it was not merely Valchuis's status as a fifty percent shareholder, but also his role as a director and his active participation as NECS president in NECS's day-to-day management, that enabled him to cause NECS to suspend distributions at the time and in the manner that he did.

Valchuis has not identified any clearly erroneous finding of fact, error of law, or abuse of discretion in the judge's denial of his motion for indemnification. We decline to disturb that ruling.

Conclusion. Insofar as the judgment for NECS dismissed its counterclaim against Vale for deceit, the judgment is vacated, and the matter is remanded for further proceedings on that counterclaim. In all other respects, the judgment for NECS is affirmed, as are the amended judgment for Vale, the order denying Valchuis's motion for indemnification for attorney's fees, and the orders denying Vale's and Valchuis's motions for judgment n.o.v. or for a new trial.

So ordered.

vacated in part; affirmed in part

FOOTNOTES

3.   Under G. L. c. 260, § 36, NECS's counterclaim related back to the time that Vale filed this action.

4.   That the judgment Vale obtained after trial was against Valchuis rather than NECS does not affect our analysis.

5.   The judge correctly applied the following definition:“To be compulsory, a counterclaim need not rest on precisely identical facts or pose identical allegations․ In fact, for purposes of determining whether a counterclaim is compulsory or permissive, the word ‘transaction’ should not be construed narrowly or technically, but should be construed in a sense to effectuate the settlement in one proceeding of controversies so closely connected as appropriately to be combined in one trial in order to prevent duplication of testimony, to avoid unnecessary expense to the parties and to the public, and to expedite the adjudication of suits” (quotations and citations omitted).Keystone Freight Co. v. Bartlett Consol., Inc., 77 Mass. App. Ct. 304, 310 (2010).

6.   These are that (1) NECS's breach of fiduciary duty claim accrued when it became aware of the alleged breach in 2007-2008, without regard to the occurrence of a resulting injury; (2) NECS “ratified” Vale's alleged wrongdoing, precluding NECS from asserting that its claim accrued upon the occurrence of losses in 2011; and (3) NECS was aware in 2007-2008 of injuries caused by Vale's alleged wrongdoing.

7.   A witness may not give an opinion on a question of law. Mass. G. Evid. § 704 & note, at 259 (2018). See, e.g., Perry v. Medeiros, 369 Mass. 836, 842 (1976).

8.   Vale's reply brief challenges additional passages of Bucking's testimony as constituting impermissible legal opinion. We need not consider arguments raised for the first time in a reply brief. See Mass. R. A. P. 16 (a) (4), as amended, 367 Mass. 921 (1975); Travenol Labs., Inc. v. Zotal, Ltd., 394 Mass. 95, 97 (1985). We decline to consider them here, where NECS has had no fair opportunity to respond to them, and where a number of the challenged passages raise issues going beyond Vale's argument in his principal brief.

9.   Vale objected to the first instance of this testimony on the ground that the “[s]tatement of [i]ntent says nothing of what [Bucking] just testified to.” The judge overruled the objection, stating, “You can cross-examine him on that.” This objection was insufficient to place the judge on notice, nor was it apparent from the context, that Vale sought to exclude the testimony on opinion grounds. See Mass. G. Evid. § 103 (a) (1) (B) (2018). In notable contrast, three transcript pages later, when Vale objected to another of Bucking's answers, Vale's counsel sought a sidebar at which he expressly objected on opinion grounds and referred to the judge's ruling on a motion in limine that had allowed Bucking to testify as a fact witness but not as an expert.

10.   Vale's reply brief makes the further argument that Tomaino's lost-profits testimony was based on “double hearsay.” Because this objection was not raised at trial (or in Vale's principal brief), it is waived.

11.   We do not accept NECS's argument that Vale also waived the issue by failing to address it in his directed verdict motion. At oral argument on that motion, the judge, noting that the failure-to-cooperate theory had been raised in NECS's amended counterclaim, asked Vale to address whether he was entitled to a directed verdict on that theory as well, and Vale argued the point at some length.

12.   Vale responds that both findings concerned “the same course of conduct,” and so his judgment n.o.v. motion, although not addressing the failure-to-cooperate issue, was “specific enough to allow the [judge] to knowingly rule on Vale's causation argument.” But this ignores that Vale's signing of the statement of intent occurred earlier in the causal chain leading to damages than did Vale's failure to cooperate. Any weakness in the causation evidence based on the former event would not necessarily infect the causation evidence based on the latter. Indeed, in denying Vale's judgment n.o.v. motion, the judge deemed it “significant” that the motion did not address the jury's failure-to-cooperate finding.

13.   We examine “whether anywhere in the evidence, from whatever source derived, any combination of circumstances could be found from which a reasonable inference could be drawn in favor of the [nonmoving party]” (quotation and citation omitted). Abraham v. Woburn, 383 Mass. 724, 727 (1981). We view the evidence in the light most favorable to the nonmoving party, “to determine whether, without weighing the credibility of the witnesses or otherwise considering the weight of the evidence, the jury reasonably could return a verdict for the [nonmoving party]” (quotation and citations omitted). Phelan v. May Dep't Stores Co., 443 Mass. 52, 55 (2004). “The inferences to be drawn from the evidence must be based on probabilities rather than possibilities and cannot be the result of mere speculation and conjecture.” McNamara v. Honeyman, 406 Mass. 43, 46 (1989).

14.   Vale makes much of the judge's comment, during the argument on his directed verdict motion, that “nobody has heard from the union, and there's no evidence ․ whether it was the [s]tatement of [i]ntent that led the union to take further actions or whether they would have done it anyway.” But the judge recognized that the question before her was different: “whether there's sufficient evidence to go to the jury.” In denying Vale's directed verdict motion, she necessarily concluded that there was. Although the jury heard no direct evidence of the union's intentions, the jury could reasonably find, based on Bucking's testimony, that Vale's actions weakened NECS's bargaining position and that the union took advantage of that weakness to extract concessions from NECS.

15.   The jury's verdict did not depend on any evidence or finding that the statement of intent was legally binding on NECS. The jury could have found that NECS reasonably believed that Vale's signing of the statement of intent, particularly in conjunction with his failure to cooperate with NECS's labor attorney in contesting the resulting unfair labor practice charges filed by the union, left NECS no practical alternative but to subject itself, over time, to full unionization. Vale offers no argument as to why such a reasonable belief, and NECS's resulting actions, must be considered as a matter of law to break the chain of causation connecting the statement of intent to NECS's damages.

16.   Vale thus calculates that he would have received approximately $ 4 million for the years 2013 through 2016, rather than the $ 1,436,627 he actually received from 2013 through August 2016 (shortly before trial). This would mean that his damages were more than $ 2 million, as opposed to the $ 540,000 the jury awarded.

17.   Although the relevant exhibits use the term “net income,” Vale's brief uses the term “net profits.” For purposes of this discussion, we adopt Vale's terminology.

18.   The evidence at trial in October of 2016 was that in the first eight months of 2016, Vale had actually received distributions well in excess of NECS's net profits for that period.

19.   In 2013, net profit (or net income) was approximately $ 1,548,507, of which fifty percent was $ 774,254, and distributions to Vale totaled $ 422,010, a shortfall of $ 352,244. The corresponding figures for 2014 were $ 390,350, $ 195,175, $ 5,008, and $ 190,167, respectively.

20.   The judge's oversight is understandable. Vale's memorandum in support of his summary judgment motion gave minimal attention to the alleged 2011 statements as they related to the deceit counterclaim, and the memorandum mischaracterized what NECS actually alleged as to those statements.

21.   The parties used the terms “dividends” and “distributions” interchangeably.

22.   Vale testified that they were the sole directors in 2013; Valchuis testified that they were both directors, and he did not identify any others.

23.   In addition, “on a quarterly basis, we would receive an additional distribution to pay for the taxes.” Finally, “at the end of the year, if there were any additional profits left over that weren't distributed, we would divide those.”

24.   Valchuis has cited no authority suggesting that, as a matter of corporate or contract law, the provision governing distributions must be interpreted to either authorize or prohibit any of the mechanisms just discussed.

25.   The jury's findings disposed of Vale's shareholder derivative claims premised on these theories.

26.   See Donahue v. Rodd Electrotype Co. of New England, Inc., 367 Mass. 578, 588-589 (1975).

27.   The jury could also find, as the special verdict form permitted them to do, that Valchuis breached his fiduciary duty to Vale by causing his own compensation to be increased, even if that did not breach any duty Valchuis owed to NECS. Valchuis's duties to Vale and to NECS were not necessarily coextensive. As the judge observed in denying Valchuis's judgment n.o.v. motion, the increased compensation could be viewed as part of an attempt to “freeze out” Vale, while not improperly “excessive” vis-à-vis NECS, given that Valchuis was actively working for NECS and Vale was not. Valchuis identifies no legal flaw in this analysis.

28.   The argument is based on the principle that “[i]f a shareholder is able to demonstrate a ‘legitimate business purpose’ for a challenged action, ․ he or she will not be liable ‘unless the wronged shareholder succeeds in showing that the proffered legitimate objective could have been achieved through a less harmful, reasonably practicable, alternative mode of action.’ ” Koshy v. Sachdev, 477 Mass. 759, 772 (2017), quoting Zimmerman, 402 Mass. at 657. The jury were instructed on this principle. Valchuis contends that he offered evidence of a legitimate business purpose for the suspension of distributions but that Vale offered no evidence of a less harmful alternative means of achieving that purpose. Valchuis's judgment n.o.v. motion did not raise this point, however, and the judge's decision denying the motion did not mention it.

29.   At the end of 2013, NECS had approximately $ 922,860 in cash and $ 1,163,536 in accounts receivable; retained earnings totaled $ 2,458,340. The corresponding figures for 2014 were approximately $ 1,761,022, $ 724,584, and $ 2,088,005. Valchuis further claims, without citation to the record, that NECS “did not have sufficient cash to distribute at the time of trial.” He does not explain how this calls into question the verdict for Vale. In any event, the evidence showed that as of August 2016 (the most recent figures available at trial), NECS had approximately $ 701,136 in cash, $ 1,125,142 in accounts receivable, and a retained earnings liability to shareholders of $ 2,308,810.

30.   The special verdict question asked: “Did David Valchuis breach his fiduciary duty to Michael Vale by suspending corporate distributions, increasing his compensation and/or failing to provide Mr. Vale with financial information regarding New England Cleaning Services, Inc.?” (emphasis added).

31.   Therefore, although the jury could also have found that Valchuis breached his fiduciary duty to Vale by causing NECS to increase Valchuis's own compensation, the jury could not have awarded any damages on that basis. Similarly, even if the jury found that Valchuis breached his fiduciary duty by failing to provide Vale with financial information regarding NECS, the jury could not have awarded damages on that basis. We therefore need not consider whether the evidence allowed the jury to make such a finding.

32.   Valchuis also sought indemnification in his capacity as a corporate officer. See G. L. c. 156D, § 8.56 (a) (1) (authorizing indemnification of corporate officer to same extent as director). This request raised no issues beyond those raised by his request in his capacity as a director, and so we need not discuss it further.