David A. Conti Credited with Two of the Most Important Legal Decisions in MA for 2022
This year, DSG Law’s David A. Conti, has been acknowledged by Massachusetts Lawyers Weekly for two opinions issued in cases he has handled on behalf of the firm’s clients – Weiss v. Fautz and Bookspan v. DiRoberto.
Weiss v. Fautz
The Bankruptcy Court ruled that a judgment issued out of New York was exempted from the debtor’s discharge in a Chapter 7 bankruptcy due to false representations.
What is a “Discharge Action”?
When a person, or entity, declares bankruptcy, they receive a discharge of their debts if they comply with the provisions of the Bankruptcy Code. Thereafter, creditors are no longer permitted to pursue the debt. Pursuant to 11 U.S.C. Sec. 523, however, creditors are able to seek an exemption to prevent their claim from being discharged in certain circumstances. If successful, the debt remains valid and a creditor is permitted to pursue it post-bankruptcy.
In 2006, DSG’s client made an investment to run a bar in New York City that would come to be named Revolver. After initially agreeing to invest $100,000 in return for a 10-percent stake in Revolver, the investment was eventually increased to $150,000. The other owner, however, failed to make his capital contribution, later claiming that his investment was made up of “sweat equity” and through other investors.
The company never turned a profit, and the bar soon ceased operations. In September 2007, DSG’s client sued in New York state court for breach of contract, fraud in the inducement, and unjust enrichment and secured a default judgment for $150,000 plus interest and fees.
The other party eventually declared bankruptcy pursuant to chapter 7 of the Bankruptcy Code. DSG’s Attorney David Conti filed a timely discharge action seeking to bar the discharge of the debt under the provisions set forth in Section 523.
The Judge’s Decision
Attorney Conti’s case set forth two theories as to why the debt should not be discharged in bankruptcy. First, pursuant to section 523(a)(2)(A), a debt is exempt if is obtained under false pretenses, a false representation, or actual fraud, other than a statement respecting the debtor’s or an insider’s financial condition. The second theory, pursuant to section 523(a)(4), alleged that the debt was exempt from discharge as a result of fraud or defalcation while acting in a fiduciary capacity, embezzlement, or larceny.
After a three-day trial, Judge Bailey, who presided over the case, found that the debt indeed was exempt from discharge due to the debtor’s false pretenses. Specifically, the judge found that Fautz induced DSG’s client to invest $150,000 in the venture by falsely representing that he planned to invest at least $450,000 himself, that he actually relied on his representations, and that such reliance was justifiable. The judge concluded that the plaintiff, “having thus satisfied each of the … requirements” met the standard necessary to establish that the investment was made in reliance “on a false representation within the meaning of section 523(a)(2)(A).”
As a result, DSG’s client maintains a judgment that, with interest, currently exceeds $400,000.
Bookspan v. DiRoberto
A judge ruled that references to settlement negotiations made by a landlord in his answer to a lawsuit brought by his tenants was grounds to strike his pleading. The judge further deemed the counter claim related to injunctive relief made by the landlord an Illegal SLAPP suit.
What is a “SLAPP Suit”?
A SLAPP suit is a lawsuit that is filed against an individual or organization with the main purpose of preventing them from engaging in their first amendment rights that allows them to “petition the government for a redress of grievances.” SLAPP suits are mainly intended to silence public criticism. They are prohibited pursuant to Massachusetts statute (G.L. c. 231, Sec. 59H)
The complaint filed by Attorney Conti alleged that the plaintiffs leased a South Boston condominium, which suffered water damage from a burst pipe, which resulted in them having to find temporary living accommodations. Thereafter, the landlord terminated the lease.
After serving a demand pursuant to M.G.L. c. 93A (the Massachusetts consumer protection act), they filed suit in the Eastern Housing Court, located in Boston. The landlord subsequently filed a counterclaim seeking various types of relief, including injunctive relief. The counterclaim attached a series of documents as exhibits, which were described in the counterclaim.
The tenants thereafter filed a Motion to Strike the Counterclaim due to the factual allegations and exhibits, which they claimed constituted confidential settlement communications. They also sought to have the injunctive relief count dismissed under the procedures provided for in the Anti-SLAPP Statute.
The Judge’s Decision
Judge Kelleher, who presided over the case, found that the injunctive relief counterclaim constituted an unlawful SLAPP suit. He also struck the counterclaim for the improper disclosure of settlement communications.
As to the injunctive relief, the judge stated that the defendant complained of no conduct beyond the use of litigation. Therefore, the court found that the tenant “satisfied the first tier [of the anti-SLAPP analysis] by showing that [protected petitioning activity] was the sole basis for” the Counterclaim. The judge then found that the landlord could not satisfy his burden of showing that there was no credible legal basis for the claim or that there was any purpose other than to stop legitimate petitioning activities. Therefore, he dismissed the claim.
Judge Kelleher next found that the disclosure of the settlement communications was improper. The fact that the communications “were labeled ‘FOR SETTLEMENT PURPOSES ONLY’ suggest that … the email communications were understood to be said without prejudice to either [party],” Kelleher wrote. He went on to find that while a “trial judge is free to admit settlement evidence if said evidence serves ‘another purpose’ apart from proving liability or the amount of a disputed claim” that the landlord had “offered no alternative reason for his inclusion of settlement negotiation evidence.” Therefore, he allowed the Motion to Strike.