SALEM FIVE INVESTMENT SERVICES LLC v. BERTUCCI (2020)

MEMORANDUM AND ORDER PURSUANT TO RULE 1:28

We have before us the consolidated appeals from an order of the Superior Court finding the defendants in contempt for violating a preliminary injunction that prohibited solicitation of the customers of the plaintiff, Salem Five Investment Services, LLC (Salem Five), and from so much of an order on a motion to compel arbitration as denied the defendants' motion to compel arbitration of the claims against defendants Gilbert Gallant, Mary Bertucci, and Ledgewood Financial, LLC (Ledgewood).

We turn first to the appeal from the contempt order. The relevant facts, taken from the facts alleged in Salem Five's first amended complaint, are as follows: Defendants Brian Doherty and Gilbert Gallant resigned from their positions as financial advisors at Salem Five on July 6, 2018. They subsequently began employment at defendant Ledgewood, which they had formed in May of 2018 for the purpose of doing business after they left Salem Five. Defendant Bertucci, an administrative assistant who worked directly for Gallant at Salem Five, also resigned and joined Ledgewood.

Prior to the commencement of this action on July 18, 2018, defendants Doherty and Gallant, having left Salem Five, solicited their clients in an attempt to get them to move their accounts from Salem Five to Ledgewood. On July 30, 2018, the Superior Court issued a preliminary injunction against the defendants restraining them from “us[ing] disseminat[ing], or reproduce[ing]” any confidential information of Salem Five, and ordering that the defendants “shall not directly or indirectly solicit, encourage, induce, persuade, or otherwise request any person or entity served by Brian E. Doherty and Gilbert A. Gallant, Jr., while employed by the plaintiff (other than members of the defendants' families) to open accounts at Ledgewood and or close their account(s) with the plaintiff.”

Eleven days after the preliminary injunction was issued, Salem Five filed a complaint for contempt alleging that defendants Gallant, Doherty, and Ledgewood had violated that order. After a two-day trial, the judge issued an order in the form of a handwritten indorsement holding “defendants” in contempt to the extent that they violated the preliminary injunction's prohibition on “soliciting” Salem Five's clients. It is from this order that the defendants first appeal.

To begin with there is a question of jurisdiction. However, to the extent the notice of appeal in this case was premature, something we need not and do not decide, we will exercise our discretion to hear the merits of the appeal. See Commercial Wharf East Condominium Ass'n v. Boston Boat Basin, LLC, 93 Mass. App. Ct. 523, 532 n.20 (2018) (“[N]o final contempt judgment has entered. We nevertheless exercise our discretion to reach [the] appeal of the contempt finding, because ‘[d]ismissal of the appeal would serve no purpose and might require the parties to return to reargue issues already briefed and argued’ ” [citation omitted] ); Arch Med. Assocs., Inc. v. Bartlett Health Enters., Inc., 32 Mass. App. Ct. 404, 405 n.3 (1992) (“There is doubt whether a civil contempt order in an ongoing action is a presently appealable order, at least in the absence of an order of commitment. See Cabral's Case, 18 Mass. App. Ct. 141, 143-144 [1984]. This court has discretion to entertain an appeal, however, even if it is not one that is here of right”).

On the merits, the defendants argue first that under Mass. R. Civ. P. 65.3 (h), as appearing in 386 Mass. 1244 (1982), the judge was required to issue written findings of fact and conclusions of law in allowing the motion to hold the defendants in contempt. The plaintiff does not contend otherwise. Although the judge was required to issue these findings, we agree with the defendants' further argument that the evidence before the judge was not sufficient to support the finding of contempt, which obviates the need for a remand in this matter for the entry of such findings and conclusions.

In order to be found in contempt, a party must violate a “clear and unequivocal” command of the trial court, and the contumacious conduct must be demonstrated by “clear and convincing evidence.” In re Birchall, 454 Mass. 837, 852-853 (2009).

In this case, the plaintiff's evidence consisted primarily of data concerning the number of Salem Five clients who sought to move their accounts to Ledgewood between the date of the preliminary injunction and the date of the motion seeking to hold the defendants in contempt. Salem Five introduced a call log for Gallant and Doherty listing meetings, calls, and e-mails on behalf of Ledgewood made after the preliminary injunction. In addition, Gallant's and Doherty's testimony revealed that they had each communicated with and provided information and assistance completing account transfer forms to specific Salem Five clients who had previously expressed an interest in transferring their accounts from Salem Five to Ledgewood or had reached out to Ledgewood to learn more about its services.⁴

The defendants' evidence was that they had answered phone calls from individuals who had been their clients at Salem Five, and, in at least one instance, socialized with one such individual. They argued that, in all of their conversations with these individuals following the entry of the preliminary injunction, they answered factual questions and assisted with paperwork in some instances for those who had already decided to move their accounts, but that they had not, following entry of the order, solicited or encouraged any such individuals to open accounts at Ledgewood or to close their accounts at Salem Five. Salem Five did not call or introduce additional statements from anyone who had a conversation with Doherty or Gallant following the entry of the preliminary injunction.

Viewing the evidence on the contempt motion and the reasonable inferences that might be drawn therefrom in the light most favorable to Salem Five, that evidence is insufficient to support a finding by clear and convincing evidence that the defendants violated the order not to “solicit” any of the individuals whose solicitation was prohibited by the preliminary injunction. These individuals had all already been solicited to move their business to Ledgewood prior to the entry of the preliminary injunction. The continued transfer of accounts from Salem Five to Ledgewood following the issuance of the preliminary injunction, and Doherty's and Gallant's continued telephone and in-person contact with Salem Five clients, even if said contact was initiated by the clients, may raise a suspicion that solicitation continued. Without speculating as to the content of these and other communications, however, we cannot say that this evidence alone supports an inference by clear and convincing evidence that solicitation did continue. Consequently, the contempt order must be reversed.

We turn next to the appeal from the order denying in part the motion to compel arbitration. At the outset there is again a question about the notice of appeal. Although the defendants noticed an interlocutory appeal to the single justice within thirty days of the order denying the motion to compel, their notice of appeal to the full court was filed one day later, and thus one day late. However, the single justice had noted, in an order denying relief, that under G. L. c. 251, § 18, the interlocutory order was appealable to the full court.

The judge allowed the defendants' motion to file that late notice of appeal on the ground that the late notice was a result of excusable delay. On cross appeal, the plaintiff argues that “excusable neglect” for the failure to file the notice of appeal within thirty days of the order was not shown. We disagree and conclude that, even if the reason for the one day of delay was a mistake about whether the appeal should be taken to the single justice instead of the full court, there was no abuse of discretion in the judge's finding excusable neglect. See Karen Constr. Co. v. Lizotte, 396 Mass. 143, 146 (1985).

Turning to the merits, we note that, in an unappealed-from portion of the order, the motion judge ordered the claims against Doherty to be arbitrated based on the arbitration clause in his registered representative agreement. We agree with the defendants that this is a circumstance in which Silverwood Partners, LLC v. Wellness Partners, LLC, 91 Mass. App. Ct. 856, 861-863 (2017), on which the defendants rely, but which the plaintiff does not even cite in its brief, controls. In that case, in reliance on Machado v. System4 LLC, 471 Mass. 204, 211-212 (2015), we held that when “a party to an arbitration agreement raises allegations by both a party and a non-party” to that agreement of “substantially interdependent and concerted misconduct[,]” that first party is equitably estopped from avoiding arbitration of all its related claims against both the party to the arbitration agreement and the non-party. In this case because the plaintiff raises allegations of “substantially interdependent and concerted misconduct” against Doherty, Gallant, Ledgewood, and Bertucci, and because Salem Five is, as it does not contest, party to an arbitration agreement with Doherty, all the claims against all defendants must be arbitrated together. Those aspects of the order on the motion to compel arbitration that have been appealed therefore must be reversed.

Conclusion. The order of contempt entered January 15, 2019, is reversed. So much of the order on the motion to compel arbitration as denied the defendants' motion to compel arbitration against Gallant, Bertucci, and Ledgewood is reversed, and all the claims against all defendants shall be arbitrated together.

So ordered.

Reversed

FOOTNOTES

4.   The log, coupled with Gallant's testimony, revealed that Gallant called Salem Five customer John F. on August 2, 2018, following up on John F.'s prior expressed intention to transfer his account to Ledgewood. Gallant testified, and a phone message from John F. to Gallant introduced by Salem Five indicated, that John F. had provided the account information necessary for that transfer on August 4, 2018. Gallant also testified that he had met with a Mr. Harwood at a restaurant to help him fill out the paperwork Harwood had requested in order to transfer his account to Ledgewood and then later created an account for Harwood. At trial, the plaintiff inquired into the nature of Gallant's conversations with a number of specific, former Salem Five clients after the court granted the preliminary injunction on July 30, 2018. Gallant indicated that he had contact with a number of clients who had been given transfer paperwork prior to July 30 but returned the forms to him after that date. Others he needed to contact in order to correct or supplement the transfer forms that they had already returned, such as the customer named in plaintiff's complaint for contempt: John F. Gallant testified that he spoke with or met with other clients after the order was in place because these clients had initiated contact; they reached out to Gallant with questions in response to Gallant's pre-injunction communications. When questioned about dinner meetings between Gallant and Salem Five clients, Gallant testified that he attended a social dinner with a client and the client had asked him questions about Ledgewood and requested that Gallant bring transfer paperwork to the client. Doherty testified to his similar contacts with clients who had reached out to him after the injunction either to learn about Ledgewood's services or to initiate account transfers. Both Gallant and Doherty testified repeatedly that they had only responded to clients' requests or direct questions. They had not initiated contact to solicit clients after the court entered the July 30 preliminary injunction order.