Gleichman v. Scarcelli

STATE OF MAINE BUSINESS AND CONSUMER COURT

CUMBERLAND, ss. DOCKET NO. BCD-CV-17-11 V

PAMELA W. GLEICHMAN, et al., )

)

Plaintiffs, ) ORDER ON DEFENDANTS ROSA

) SCARCELLI AND PRESERVATION

v. ) HOLDINGS, LLC'S SECOND

) MOTION FOR SUMMARY

ROSA SCARCELLI, et al., ) JUDGMENT

)

Defendants. )

Pending before the Court is Defendants Rosa Scarcelli and Preservation Holdings, LLC's

(the "Scarcelli Defendants") and Stanford Management, LLC ("Stanford") and Acadia

Maintenance, LLC's ("Acadia") (collectively the "Companies") second motions for summary

judgment, seeking summary judgment in their favor on all remaining counts in Plaintiff's Second

Verified Amended Complaint (the "Complaint"). Plaintiffs oppose the motion. The Court heard

oral argument on the motion on January 9, 2019. The Scarcelli Defendants were represented by G.

Toby Dillworth, Esq., the Entity Defendants were represented by James Wagner, Esq., and

Plaintiffs were represented by John Campbell, Esq.

BACKGROUND

Plaintiffs are husband and wife; Ms. Scarcelli is Ms. Gleichman's daughter and Mr.

Norberg's stepdaughter. (Def's Supp'g S.M.F. ! 3.) Ms. Gleichman founded Stanford and Acadia.

(PJ's Add'I S.M.F. j 1.) Ms. Scarcelli is now the majority member and manager of both Companies.

(Def's Supp'g S.M.F. !j 4, 10.) Ms. Gleichman and Mr. Norberg allege that Ms. Scarcelli has

committed many torts against them and has failed to manage the Companies consistent with the

.

operating agreements for those entities or the Maine Limited Liability Company Act. See 31

M.R.S. § 1501.

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It is undisputed that Mr. Norberg holds a minority membership interest in Stanford in his

capacity as Trustee of the SNH Trust (SNH Trust being the actual minority member of Stanford).

(Def's Supp'g S.M.F. n 5, 8.) The Comt has previously ruled that there is a genuine factual issue

as to whether Ms. Gleichman holds a minority membership interest in Acadia. (See Court's

Combined Order on Motions for Partial Summary Judgment (the "Prior Order"), Nov. 2, 2017, at

20.) Defendants do not ask the Court to revisit that ruling in the instant motion. (Scarcelli Def's

Mot. Summ. J. 12 n. 8.) Plaintiffs have no interest in Defendant Preservation Holdings, but allege

that Ms. Scarcelli has used this entity to harm them. (PJ's Comp!.~~ 138-140.)

The Complaint pleads twenty-three counts against the Defendants over the course of 290

paragraphs of allegations. Two counts were dismissed or adjudged on the pleadings prior to

transfer to the Business and Consumer Court, and the Prior Order entered summary judgment in

Defendants' favor on several more counts. The remaining counts have not been the subject of

dispositive motions. For the sake of convenience and ease of analysis, the Court divides the

remaining counts into two categories: the "Individual Claims" and the "Entity Claims." These are

not terms of art and there is in fact substantial overlap between what is alleged against Ms. Scarcelli

with respect to her management of the Companies and what is alleged to be her general wrongful

behavior toward the Plaintiffs.

Plaintiffs' remaining Individual Claims seek a declaration as to illegality and/or

commercially unreasonable nature of auction .and takeover of General Holdings, Inc. (f/k/a

Gleichman & Co.) (Count I) and conversion of Gleichman & .Co. stock (Count VIII), negligent

infliction of emotional distress (Count II), intentional infliction of emotional distress (Count III),

negligent misrepresentation (Count XII), intentional misrepresentation (Count XIII), accounting

as to Preservation Holdings (Count XXI), and breach of fiduciary duties, champerty, and

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interference in connection with purchasing and coJJecting JMB Capital debt (Count XXII), and

declaratory judgment as to termination of contracts (Count XXIIl). Only Counts I, XXI, and XXII

state claims against Preservation Holdings.

Plaintiffs remaining Entity Claims claim a breach of fiduciary duties (derivative action)

(Count IV), oppression and breach of fiduciary duties (owed to Ms. Gleichman, Mr. Norberg, and

SNH Trust) (Count V), injunction and/or dissolution of Stanford (Count VI), tortious interference

(Count XIV), breach of contract (Count XV), and accounting as to Stanford and Acadia (Count

XX). The Prior Order granted partial summary judgment in favor of Defendants on Counts IV-VI:

Mr. Norberg's direct and derivative claims against Ms. Scarcelli with respect to her management

of Stanford, in his capacity as Trustee of the SNH Trust, were limited to those causes of action and

allegations that arose after October 30, 2013' and Ms. Gleichman was adjudicated to lack standing

to pursue claims relating to Ms. Scarcelli 's management of Stanford. Ms. Gleichman's direct and

derivative claims against Ms. Scarcelli with respect to her management of Acadia survived

summary judgment unscathed, subject to her proving that she indeed is a member of that LLC.

DISCUSSION

I. Individual Claims

a. Emotional Distress Claims

Plaintiffs have pleaded both negligent infliction of emotional distress ("NIED") and

intentional infliction of emotional distress ("IIED") against Ms. Scarcelli. A claim for NIED

requires proof of the following elements:

(1) the defendant intentional1y or recklessly inflicted severe

emotional distress or was certain or substantially certain that such

distress would result from her conduct; (2) the conduct was so

extreme and outrageous as to exceed all possible bounds of decency

and must be regarded as atrocious, utterly intolerable in a civilized

• As amended by the Court's Order on Plaintiffs' Motion for Partial Reconsideration entered March 2, 2018 .

3

community; (3) the actions of the defendant caused the plaintiff's

emotional distress; and (4) the emotional distress suffered by the

plaintiff was so severe that no reasonable [person] could be expected

to endure it.

Curtis v. Porter, 2001 ME 158,, 10,748 A.2d 18.

The elements of a claim of negligent infliction of emotional distress

are similar to most negligence torts; a plaintiff must set forth facts

from which it could be concluded that (1) the defendant owed a

duty to the plaintiff; (2) the defendant breached that duty; (3) the

plaintiff was harmed; and (4) the breach caused the plaintiff's harm.

Id. , 18. However, the determination of duty in a NIED claim is not generated by traditional

concepts of foreseeability because although a person has a duty to reasonably avoid causing

physical harm to others, there is no comparable duty to avoid negligently causing _emotional harm.

Id. The Law Court has thus recognized only two categories under which a person has a duty to

avoid causing emotional harm to others: (1) "bystander liability actions," not relevant here, and

(2) circumstances in which a "special relationship" exists between the plaintiff and the defendant.

Id., 19. NIED, liked IIED, also "requires proof of severe emotional distress," Id., 20.

Ms. Scarcelli argues that Plaintiffs have failed to adduce evidence of severe emotional

distress sufficient to recover for either IIED or NIED. Ms. Scarcelli further argues that the behavior

complained of by Plaintiffs is insufficiently extreme and outrageous to recover in IIED and that

the lack of a special relationship between Ms. Scarce!li and Plaintiffs forecloses a claim of NIED.

Plaintiffs respond that there is enough evidence of emotional distress, extreme and outrageous

conduct, and a "special relationship" to survive summary judgment and that the jury should be

allowed to decide whether they have proved IIED and NIED.

Ms. Scarcelli is entitled to summary judgment on both claims because neither Ms.

Gleichman nor Mr. Norberg have adduced sufficient evidence of severe emotional distress.

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"[EJstablishing that a plaintiff's emotional suffering qualifies as 'severe' normally requires proof

of manifestations of the emotional harm such as 'shock, illness or other bodily harm' unless the

defendant's conduct is found to have been so extreme and outrageous that proof of bodily harm is

not needed." Curtis, 2001 ME 158, ~ 21,748 A.2d 18 (quoting Restatement (Second) of Torts§

46 cmt. k). The exception to this general rule is where "the defendant's conduct was so extreme

'

and outrageous that it can be inferred that no reasonable person could endure the emotional

response the conduct would naturally generate." Id. ~ 22. The illustrations from Restatement

(Second) of Torts§ 46 cmt. k cited by the Law Court in Curtis show that to be able to infer severe

emotional ,injury, the conduct must be very extreme indeed: e:g., (1) a police officer telling an

arrestee that her child is dying in a hospital and the arrestee cannot be released to be with her child

at the hospital until she confesses to a crime or (2) the defendant organizes a mob to come to

plaintiff's home at night and tells plaintiff that if he does not leave town in ten days the mob will

return and lynch him. Curtis, 2001 ME 158, j 21 n.3, 748 A.2d 18 (quoting Restatement (Second)

of Torts § 46 cmt. k). Plaintiffs have not adduced evidence of anything approaching this level of

outrageousness. (See Pl's Add'I S.M.F. ~j 88-99.) As explained in more detail below, Plaintiffs'

evidence of extreme and outrageous behavior on the part of Ms. Scarcelli is essentially limited to

her refusal to pay them money they claim they are owed. Plaintiffs may ultimately prove that Ms.

Scarcelli has wrongfully withheld money to which they are entitled, but as a matter of law, this is

not sufficiently "extreme and outrageous" conduct from which the Court can infer resulting severe

emotional harm.

Turning to the evidence of emotional harm adduced by the Plaintiffs, the Court concludes

that there is no evidence of "objective symptoms demonstrating shock, illness, or other bodily

harm." Id.~ 23. "In most instances, proof of objective symptoms will require expert testimony to ·

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establish that the plaintiff's emotional injury qualifies for a diagnosis such as shock, post-traumatic

stress disorder, or some other recognized medical or psychological disease or disorder." Id. Here,

Plaintiffs rely exclusively on their own affidavits for evidence of severe emotional distress. (See

Pl's Add'! S.M.F. n 88-105.) The only evidence of a diagnosis is Mr. Norberg's depression, and

the evidence of that diagnosis is hearsay. (See, e.g., Def's Reply to Pl's Add'( S.M.F. ~! 102-1-5.)

"Recent Law Court decisions have endorsed the trial court's role as gatekeeper regarding

IIED claims, meaning to evaluate an IIED claim to determine whether the facts alleged could

reasonably justify a verdict for the plaintiff." Temm v. LPL Fin. UC, No. BCD-CV-16-14, 2016

Me. Super. LEXIS 68, at *7 (Bus. & Consumer Ct. Apr. 29, 2016). "[I]t is for the Court to

determine, in the first instance whether the Defendant's conduct may reasonably be regarded as so

extreme and outrageous to permit recovery ...." Champagne v. Mid-Maine Med. Ctr., 1998 ME

87, ~ 16,711 A .2d 842 (quoting Colford v. Chubb Life Ins. Co. of Am., 687 A.2d 609,616 (Me.

1996)). Plaintiffs' evidence• of atrocious behavior is essentially that Ms. Scarcelli wrongfully

withheld money she owed Plaintiffs under the operating agreements for Stanford and Acadia. (PJ's

Add'! S .M.F. j 92.) As explained below, Plaintiffs have raised a dispute of fact on this ultimate

issue, but regardless, failure to pay monies owed is simply not conduct "so extreme and outrageous

as to exceed all possible bounds of decency and must be regarded as atrocious, utterly intolerable

in a civilized community." Curtis, 2001 ME 158, j 10,748 A.2d 18. The cases cited by Plaintiffs

are factually distinguishable. Latremore v. Latremore, 584 A .2d 626, 630 (Me. 1990) affirmed a

•Throughout their statement of additional facts and memorandum opposing summary judgment, Plaintiffs allude to

Ms. Scarcelli's "innumerable" or "numerous" acts directed toward Plaintiffs with the intent to cause them emotional

harm. (Pl's Add'! S.M.F. yy 92-94; Pl's Opp'n Mot. Summ. J. 4, Y8.) To survive a defendant's motion for summary

judgment, a plaintiff must create a genuine dispute of fact by adducing prima facie evidence of the elements of her

claim in the summary judgment record. Savell v. Duddy, 2016 ME 139, ~ 18, 147 A.3d 1179. lf Plaintiffs indeed have

additional evidence of "extreme and outrageous" conduct by Ms. Scarcelli il was their burden to present that evidence

with record citations in their additional or opposing statements of material facts. They cannot create a factual dispute

by merely denying the facts adduced by Defendants and insinuating that additional evidence of outrageous behavior

will be presented in proof of their claim at trial.

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jury verdict on an IIED claim where there was evidence that the defendant, the plaintiffs' adult

child, "went far beyond a fair reading of the [lease] agreement by demanding that his parents pay

up to $ 3,000 per month in rent for the large apartment and by threatening to evict them[,]"

"continued with his demands and threats even though he knew that his parents were aged and ...

in poor health[,]" and ''made a number of vicious remarks to his father regarding his father's mental

condition, apparently without justification, and even attempted to elicit his sister's assistance in

having his father declared mentally incompetent." Rubin v. Matthews Int'l Corp., 503 A.2d 694,

696, 699-700 (Me. 1986) vacated a dismissal of an IIED claim where the plaintiff alieged that the

defendant was notified that a memorial stone for his deceased mother was to be provided for an

unveiling ceremony scheduled to occur on a particular date, was aware of the religious significance

of the event, agreed to have the memorial stone delivered prior to the time for the unveiling, and

made repeated misrepresentations of a timely delivery of the monument for the unveiling

ceremony. Rubin is thus both factually and procedurally distinguishable as it dealt with a very

different factual context and was decided on a different procedural posture. See id.

Plaintiffs also highlight a specific episode in which Ms. Scarcelli withheld funds from Ms.

Gleichman while she happened to be abroad such that she had to borrow money from her friends

to pay her hotel bill and other travel expenses. (Pl's Add'I S.M.F. ,, 93-98.) Again, this is not

"atrocious, utterly intolerable" behavior, even if Plaintiffs eventually prove that the funds were

wrongfully withheld. Finally, Plaintiffs also claim that Ms. Scarcelli has denied Plaintiffs access

to their three grandchildren. (PJ's Add') S.M.F., 92(h)). The Law Court has explicitly held that

dysfunctional family relationships are not sufficient to satisfy the extreme and outrageous conduct

element of an emotional distress claims. See Lyman v. Huber, 2010 ME 139,, 25, 10 A.3d 707.

7

Finally, as to Plaintiffs' claim for NIED, the Court concludes that there is no genuine

dispute that there was no "special relationship," i.e. fiduciary relationship, see Brawn v. Oral

Surgery Assocs., 2003 ME 11,122,819 A.2d 1014, between the parties sufficient to give rise to a

duty to reasonably prevent emotional harm. Plaintiffs' claim that Ms. Scarcelli stood in a fiduciary

capacity with respect to them is repeated throughout their opposition to the instant motion in

support of many of their causes of action, so the Court's ruling on this issue is relevant to not just

Plaintiff's NIED claim but multiple counts discussed below. The Court concludes that the

undisputed facts cannot support a finding that Ms. Scarcelli owed fiduciary duties to the Plaintiffs

at common law.' The elements of a fiduciary relationship are (1) the actual placing of trust and

confidence by one party in another and (2) great disparity of power and influence between the

parties at issue. Ramsey v, Baxter Title Co., 2012 ME 113, ~ 7, 54 AJd '/10. Plaintiffs continually

highlight the family relation between the parties, but family members do not stand in a fiduciary

relationship to one another without more. See Moulton v. Moulton, 1998 ME 31, ~ 5, 707 A.2d 74.

Although a "family tie" can "approximat[e]" a fiduciary relationship, it must nonetheless "induc[e]

the trusting party to relax the care and vigilance ordinarily exercised." Bryan R. v. Watchtower

Bible Soc ., 1999 ME 144, 1 18, 738 A.2d 839. The undisputed facts show that Plaintiffs have

mistrusted Ms. Scarcelli for many years. The mother-daughter relationship between these parties

was tragically, but hopefully not permanently, ruptured eleven years ago or around 2008. (Def's

Supp'g S.M .F. , 42; Pl's Opp'g S.M.F. j 42.) The parties were in litigation by 2012. (Def's Supp'g

•As discussed in more detail below, Ms. Scarcelli's status as the member-manager of Stanford and Acadia make her

a fidnciary to the LLCs (and arguably the members) in the contex~ of her management of the companies. See 31 M.R.S.

§ 1559(1),(3). However, the Court declines to rule that her fiduciary duties in that capacity are so expansive as to

impose a duty to reasonably avoid causing emotional harm to the Plai ntiffs based only on their status as members of

the companies. Furthermore, Ms. Scarcelli's position as member-manager of Stimford does not make her a fiduciary

for Mr. Norberg in his personal capacity: Mr. Norberg the person is not a member of Stanford, the SNHTrustofwhich

he is a trustee is a member. (Ders Supp'g S.M.F. ! 5.) Trusts cannot suffer emotional distress . Any emotional distress

Mr. Norberg has suffered personally is outside the scope of Ms. Scarcelli 's fiduciary duties to the LLC or its members .

8

S.M.F., 43.) Finally, Ms. Gleichman is a sophisticated businessperson in her own right. (See Pl's

Add'l S.M.F. ,, 1, 12-13, 15-16.) There is no "great disparity of power and influence" between

Ms. Scarcelli and Ms. Gleichman.Ramsey, 2012 ME 113,, 7, 54A.3d 710.Any power imbalance

is a product of Ms. Scarcelli 's status as majority member and manager of Stanford and Acadia, of

which Ms. Gleichman is the income beneficiary of the minority member and individually the

minority member, respectively. Plaintiffs implicitly concede as much. (See PJ's Add'l S.M.F. ~Y

111-112.) Her cause of action, if any, is pursuant to a breach of the operating agreement of those

entities or Ms. Scarcelli 's violation of her statutory obligations under Maine's Limited Liability

Company Act. No reasonable juror could determine that a fiduciary relationship arose between

Ms. Scarcelli and Plaintiffs at common law.

In sum, for the foregoing reasons, the Court grants Defendants' motion for partial summary

judgment as to Count II and Count III of the Complaint. Summary judgment will be entered in

favor of the Defendants on those counts.

b. Misrepresentation Claims

Plaintiffs bring counts for both negligent misrepresentation (Count XII) and intentional

misrepresentation (Count XIII) against Ms. Scarcelli based on statements she made prior to

October 2008 to induce Ms. Gleichman to give her a controlling membership interests in the

Companies. (Defis Supp 1g S.M.F. ~! 132-138.) Ms. Scarcelli responds that both counts are barred

as untimely under the relevant six-year statute of limitations. Plaintiffs respond that the statute of

limitations runs from when the fraud was discovered and therefore has not run because they have

generated a genuine dispute on that issue. (Def's Opp'g S.M.F. j 116.)

Pursuant to 14 M.R.S. § 752, "all civil actions shall be commenced within 6 years after the

cause of action accrues and not afterwards," subject to certain exceptions. Plaintiffs do not dispute

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that a six-year statute of limitations applies to these misrepresentation counts, but counter that

under Maine case law and by operation of 14 M.R.S. § 859, the statute is tolled until the fra~d is

discovered, i.e. that is when the "cause of action accrues" in the parlance of section 752. See

Kobritz v. Severance, 2007 ME 3, ~ 13,912 A.2d 1237 (citing 14 M.R.S. § 859).

As a threshold matter, "section 859 extends only to causes of action sounding in fraud or

fraudulent concealment." Drilling & Blasting Rock Specialists, Inc. v. Rheaume, 2016 ME 131,,

33, 147 A.3d 824. Because "a negligent misrepresentation claim does not require proof of

intentional or reckless fault and thus does not sound in fraud ... such a claim does not benefit from

the extended statute of limitations set forth in section 859." Id. The limitations period for actions

for negligent misrepresentation run from the time of the alleged misrepresentation, which in this

case is no later than 2008, placing the claim outside the six-year statute of limitations of section

752. Ms. Scarcelli is entitled to an entry of summary judgment in her favor on Count XII of the

Complaint because the action is barred by the relevant statute of limitations.

Turning to the claim of intentional misrepresentation, Plaintiffs are correct that section 859

and the ref evant case law toll the six-year statute of limitations until the fraud is discovered or

reasonably could have been discovered. However, this begs the question of whether there is a

genuine factual dispute with regards to when the alleged fraud was discovered. The fraudulent acts

in this case relate to certain promises that Ms. Gleichman cJaims Ms. Scarcelli made to her to

induce her to gift her daughter a controlling interest in Stanford and Acadia sometime prior to

October 2008. (Def's Supp'g S.M.F. ,, 132-138.) Although Plaintiffs now claim they were not

aware that Ms. Scarcelli was not living up to her supposed promises until much later, the sworn

statements in their Verified Complaint lead inexorably to the conclusion that this is a post hoc

attempt to salvage a stale claim. See Estate ofSmith v. Salvesen, 2016 ME 100,, 12, 143 A.3d 780

10

("In summary judgment motion practice, a party will not be permitted to create an issue of material

fact . .. simply by submitting an affidavit disputing his own prior sworn testimony, unless he

provides a satisfactoi:y explanation of why the testimony is changed.") (quotation omitted). (See

Def's Reply to Pl's Add'l S.M.F. !! 114-118 .) Thus, even if the Court applies the "discovery rule"

urged by Plaintiffs, there is no genuine factual dispute that the statute of limitations has already

run .

c. Counts Relating to Gleichman & Co./ General Holdings and Preservation

Holdin~

Count I seeks a declaration as to illegality and/or commercially unreasonable nature of

auction and takeover of General Holdings, Inc. (f/k/a Gleic~man & Co.). By way of background,

Gleichman & Co., Inc. was a real estate development company that owned general partnership

interests in forty-eight housing limited partnerships; Stanford and Acadia have property manager

and caretaker contracts for each prope1ty owned by those pa1tnersh1ps. (Def's Supp'g S.M.F. !! '

44, 46.) At some point, Ms. Gleichman pledged almost all her assets, including all of her interest

in the limited partnerships and Gleichman & Co ., in an attempt to secure debtor financing. (Def's

Supp'g S.M.F., 51.) Mr. Norberg and Ms. Gleichman procured a loan on December 30, 2010 from

JMB Capital Masters Fund, L.P. ("JMB") guaranteed by Gleichman & Co., GN Holdings, and

another entity not at issue in this litigation; Ms. Gleichman pledged her entire interest in Gleichman

& Co. as security for the loan. (Def's Supp'g S.M.F. ~! 52-56.) Sometime thereafter, Ms. Scarcelli

formed a LLC called Preservation Holdings, LLC, which subsequently acquired JMB's loan to

Ms. Gleichman and became the secured party under the loan. (Def's Supp'g S.M.F. n 64, 66, 68.)

By 2012, Ms, Gleichman had defaulted on the loan and Preservation Holdings filed suit to recover

its collateral. (Def's Supp'g S .M.F. ~! 71, 73.) Preservation Holdings prevailed on summary

11

judgment in that action; Preservation Holdings thereafter took ownership of Gleichman & Co. and

changed Gleichman & Co.'s name to General Holdings, Inc. (Def's Supp'g S.M.F. ff 74-78.)

Preservation Holdings proceeded to liquidate the stock interests in Gleichman & Co./

General Holdings through a public sale/ auction to be held on March 20, 2014. (Def's Supp'g

S.M.F. ~ 79.)' The auction was publicly noticed and Ms. Gleichman, as the debtor, received actual

notice of the sale. (Def's Supp'g S.M.F. ff 80-81, 83-86.) Preservation Holdings, the only bidder,

made a $10,000 credit bid thereby winning the auction and whatever remained of Gleichman &

Co.I General Holdings was transferred to Preservation Holdings. (Def's Supp'g S.M.F. f 89.) The

public sale was conducted by Mr. Daniel Cummings, Esq., Preservation Holding's attorney. (Def's

Supp'g S.M.F. 1J 87.)

Ms. Gleichman claims that if Ms. Scarcelli had not withheld the distributiOilS Ms.

Gleichman was entitled to under the operating agreements for Stanford and Acadia that Ms.

Gleichman would have had the money to make payments due under the JMB loan, both before and

after the loan was acquired by Preservation Holdings. (PJ's Add'I S.M.F. Y79; Pl's Opp'g S.M.F.

~, 71-72.) Ms. Gleichman also claims that she "was working things out with" JMB and had a plan

to pay off the debt before Ms. Scarcelli somehow "insinuated herself into that arrangement" so

that Ms. Scarce!li could instead buy the debt from JMB. (PJ's Add'[ S.M.F. ,, 78, 81-84.) The

specifics of how Ms. Scarcelli was able to interfere in Ms. Gleichman's negotiations with JMB are

not clear. (See Pl's Add'! S .M.F. n 81-84.) Ms. Scarcelli's motivations in purchasing the JMB debt

are genuinely disputed. (Def's Supp'g S.M.F., 63; Pl's Opp'g S.M.F. j 63; Pl's Add'! S.M.F." 84,

87; Def's Reply to Pl's Add') S.M.F. ~! 84, 87.) Regardless, Ms. Scarcelli's subjective intent with

•Defendants' statement of material facts is not clear with regards to when the name change was effected and what this

entity was called at the time of auction, and seems to use "Gleichman & Co." and "General Holdings" interchangeably

to describe the entity during this period. (Compare Def's Supp'g S.M.F. ! 78 with Ders Supp'g S.M.F. ~ 79, 85-86,

89, 90, 93.)

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regard to Preservation Holding's purchase of the JMB debt (and subsequent foreclosure and

purchase of General Holding's assets at auction) is immaterial to a determination of whether

Preservation Holding's subsequent sale of the assets of General Holdings/ Gleichman & Co. was

proper.

Defendants argue they are entitled to summary judgment on this count on its merits,

claiming that Plaintiffs have not presented any facts from which it can be determined that there is

a legal reason to invalidate the sale.' Plaintiffs do not raise any meaningful argument specific to

Count I in their opposition to the instant motion, with the exception of one sentence which impugns

Ms. Scarcelli's "reasons for buying the JMB claim and auctioning the valuable entity Gleichman

& Co." (Pl's Opp'n Scarcelli Mot. Summ. J. 4 ~ 6.) Even if Ms. Scarcelli's motivation in

purchasing the JMB debt and auctioning General Holdings had nothing to do with preserving

family assets and was exclusively for persona!' gain, this is not grounds for invalidating the

purchase and subsequent auction. Otherwise, Plaintiffs merely dispute the facts Defendants rely

upon in their motion for summary judgment as to Count I. A plaintiff must do to more to survive

a defendant's motion for summary judgment, she must come forward with prima facie evidence to

support each and every element of her claim.' Savell v. Duddy, 201.6 ME 139, ~ 18, 147 A.3d 1179.

Based on the undisputed facts before the Court at the summary judgment hearing, Defendants

would be entitled to a judgment as a matter of law on Count I. Summary judgment will be entered

in favor of Defendants on that count.

• Defendants seem to assume that Plaintiffs have standing to bring this claim and that it presents a justiciable

controversy sufficient to confer jurisdiction under Maine's declaratory judgment act.

• Although the Court concludes that Plaintiffs have failed to carry their burden on summary judgment under Savell, in

the alternative, Defendants would also prevail on the merits. Plaintiffs' legal theory for invalidating the auction has

already been rejected by the Law Court. See Oceanic Inn, Inc. v. Sloan's Cove, LLC, 2016 ME 34, ~, 33-34, 133 A.3d

!021 (citing 32 M.R.S. § 285) .

13

Count VIII states a claim for conversion of Gleichman & Co. stock arising out of

Preservation Holdings' purchase at public sale of all shares of stock in that company subsequent

to its purchase of the JMB debt, for which the stock of Gleichman & Co. was collateral. "The

necessary elements to establish a claim for conversion are a showing that (1) the person claiming

that his or her property was converted has a property interest in the property; (2) the person had

the right to possession at the time of the alleged conversion; and (3) the party with the right to

possession made a demand for its return that was denied by the holder." Estate ofBarron v. Shapiro

& Morley, LLC, 2017 ME 51, ~ 14, 157 A.3d 769 (citing Withers v. Hackett, 1998 ME 164, ~ 7,

714 A.2d 798). Defendants point out that it is undisputed that Ms. Gleichman did not have a right

to possess the stock of Gleichman & Co./ General Holdings because she had pledged the stock as

security for a debt, on which she subsequently defaulted. (Def's Supp'g .S.M.F. ~, !,"1-56, 71.) This

notion goes essentially unchallenged by Plaintiffs in opposition, except to the extent that they

suggest that their default under the loan agreement after Preservation Holdings purchased the debt

from JMB was a result of Ms. Scarcelli's wrongful withholding of funds due them under the

operating agreements of Stanford and Acadia. (Def's Opp'g S.M.F. ~ 71.) Plaintiffs adduce no

prima facie evidence of the elements of conversion. Defendants are entitled to summary judgment

on Count VIII of the Complaint.

Count XXI seeks an accounting as to Preservation Holdings. At the oral argument,

Plaintiffs clarified that they seek an equitable accounting, which is an "action for equitable relief

against a person in a fiduciary relationship to recover profits taken in breach of the relationship."

Oceanic Inn, Inc. v. Sloan's Cove, LLC, 2016 ME 34, ~ 38, 133 A.3d 1021. In other words, the

existence of a fiduciary relationship is an essential element to the cause of action. Id. However,

the Court has already concluded that Ms. Scarcelli had no fiduciary obligations to Plaintiffs arising

14

out of common law. Neither Ms. Gleichman nor Mr. Norberg have any interest in Preservation

Holdings. On the undisputed record before the Court, Plaintiffs cannot prove an essential

element-the existence of a fiduciary relationship-of their claim for equitable accounting of

Preservation Holdings. Summary judgment will be entered in favor of Defendants on this Count.

Count XXII states three causes of action against Defendants with regards to Ms . ScarcelJi' s

purchase and collection of the JMB debt: breach of fiduciary duties, champerty, and interference.

Again, the undisputed facts show Ms. Scarcelli never owed Ms. Gleichman or Mr. Norberg

fiduciary duties individually. Maine's criminal statute prohibiting champerty does not provide for

a private right of action. See 17-A M.R.S. § 516. In any event, Maine law has not considered

purchasing the assignment of a debt to be champerty since at least 1892. See, e.g., Burnham v.

Heselton, 84 Me. 578,588, 24 A. 955,956 (1892); New England Merchs. Nat'l Bank v. Herron,

243 A .2d 722, 724 (Me. 1968). The elements a plaintiff must prove to prevail on a claim for

tortious inte1ference are: "(1) that a valid contract or prospective economic advantage existed, (2)

that the defendant interfered with that contract or advantage through fraud or intimidation, and (3)

that such interference proximately caused damages." Rutland v. Mullen, 2002 ME 98, ~ 13, 798

A.2d 1104. Plaintiffs have not come forward with prima facie evidence of any element of this

claim and instead merely intimate vague allusions to Ms. Scarcelli's malicious intent. (PJ's Add']

S.M.F. ~ 84; PJ's Opp'g S.M.F., 63 .) Their evidence of a valid contract or prospective economic

advantage consists exclusively of Ms. Gleichman's claim that she was working things out with

JMB; this at best describes preliminary negotiations, not a valid contract or prospective economic

advantage. See McClare v. Rocha, 2014 ME 4, ~ 20, 86 A.3d 22 (''Preliminary negotiations as to

the terms of a future agreement do not constitute a contract.").

15

Count XXIII seeks a declaratory judgment as to the validity of Ms. Gleichman's

termination of all management contracts with Stanford for properties of which she is general

partner. This apparently happened on August 31, 2015. (Comp!.!! 167-168, 286-290.) There is

no evidence of how and whether the issue of the validity of Ms. Gleichman's termination of

management contracts with Stanford for these properties presents a genuine controversy. See

Patrons Oxford Mut. Ins. Co. v. Garcia, 1998 ME 38, ~ 4, 707 A.2d 384 (citing Wagner v.

Secretary of State, 663 A.2d 564, 567 (Me. 1995)) (The Declaratory Judgments Act "may be

invoked only where there is a genuine controversy.") . Plaintiffs have thus failed to effectively

invoke Maine's Declaratory Judgments Act. The Court thus enters summary judgment in favor of

the Defendants on Count XX.III .

II. Enti ty Claims

a. Direct and Deri vative Acti ons fo r Closely-Held LLCs Under Maine Law

As a threshold matter, Defendants argue that neither Mr. Norberg (in his capacity as

Trustee of the SNH Trust) nor Ms. Gleichman can bring derivative claims on behalf of Stanford

and Acadia, respectively, because they are both closely-held LLCs. Their authority for this position

is 31 M.R.S. § 1637 and Beaudry v. Harding, 2014 ME 126, ! 5, 104 A.3d 134. However, the

stated authority does not support this proposition. Section 1637(3) allows the Court to treat a

derivative action commenced by a member of a LLC as a direct action and order that recovery in

either a direct or derivative action brought by a member be paid directly to the plaintiff or the LLC

"to protect the interests of creditors or of other members." 31 M.R.S . § 1637(3)(A)-(B). Far from

prohibiting derivative actions, "in the case of a closely held LLC, § 1637(2) dispenses with all of

the prerequisites for a derivative action set forth in sections 1632-1636 unless specifically ordered

by the court. Moreover, under section 1637(3)(A) a derivative action may be treated as a direct

16

I,

I

I

action 'if justice requires."' Cianchette v. Cianchette, No. CV-16-249, 2018 Me. Super. LEXIS \.

13, at *34 (January 17, 2018). As noted by the Superior Court (Warren,].) in the Cianchette case,

Beaudry dealt with a plaintiff who was a former member of an administratively dissolved LLC

who was trying to sue a third party-the LLC's erstwhile attorney-derivatively on behalf of the

administratively dissolved LLC. Id. (citing Beaudry, 2014 ME 126, j 5, 104A.3d 134). Beaudry

is thus distinguishable, while Cianchette is analogous.

At the oral argument, Defendants conceded that section 1637 could allow the Court to treat

Plaintiffs' derivative actions as direct and order that any judgment be paid to Plaintiffs as opposed

to the LLCs, but argued that the condition precedent for such treatment- "[i]f justice requires" ­

has not been satisfied. See 31 M.R.S. § 1637(3). However, this argument hinges on the merits of

the Plaintiffs' claims, which are discussed below.

b. Fiduciary Duties of Member-Managers of LLCs Under Maine Law

Defendants' next threshold argument is that Ms. Scarcelli did not owe fiduciary duties to

Plaintiffs or either LLC pursuant to the operating agreement for each entity. Stanford's operating

agreement provides that "[tlhe business and affairs of the Company shall be managed under the

direction and control of the Manager." (Def1s Supp'g S.M.F. ! 18.) It further provides that the

Manager has the right "to conduct any other business or activity whatsoever," so long as she does

not compete with Stanford. (Def's Supp'g S.M.F. 11 20.) Defendants do not direct the Comt's

attention to any provision of the operating agreement that either waives or imposes fiduciary duties

on the manager with respect to either the LLC or its other member. Instead, Defendants point out

that Stanford's operating agreement provides the manager with authority to conduct the business

affairs of the company and further provides that the manager shall not be liable to any member for

any act pe1formed, unless she is adjudicated to have not taken such an act in good faith. See also

17

31 M.R.S. § 1559(2). Defendants argue that this provision insulates Ms. Scarcelli from liability

even if she did owe fiduciary duties to the LLC.

Under Maine's LLC Act, "a member not involved in the management of a limited liability

company does not have a fiduciary duty to the limited liability company, or to any other member

...." 31 M.R.S. § 1559(3). The Act allows the members of a LLC to expand, restrict, or eliminate

any duties, including fiduciary duties, in the operating agreement for the LLC. 31 M.R.S. §

1521(3)(A).' In Cianchette, the court concluded that section 1559(3) imposes fiduciary duties on

member-managers with respect to the company unless the duty is expressly waived in the LLC

operating agreement. Cianchette, 2018 Me. Super. LEXIS 13, at *39. (citing 31 M.R.S. § 1559(3)).

The court concluded that a very similar liability waiver was insufficient to waive the LLC­

manager's fiduciary duties under 31 M.R.S. § 1521 (3)(A). Id. at *40 ("Accordingly, while section

5.4.1 limits [the manager's] liability to instances of fraud, bad faith, or gross negligence, she is not

entirely immunized by the LLC Agreement.").

In the absence of authority to the contrary and consistent with the doctrine of stare decisis

the Court declines to deviate from the persuasive authority of its sister court in Cianchette. The

undisputed facts establish that Ms. Scarcelli is the member~manager of Stanford and Acadia and

that neither operating agreement for either entity expressly waives her fiduciary duties owed to

those organizations. As discussed above, by operation of 31 M.R.S. § 1637(3)(A)-(B), Plaintiffs

can pursue these claims against Ms. Scarcelli in the nature of direct claims even though they are

technically derivative actions given that Ms. Scarcelli owes fiduciary duties to the companies and

not necessarily the Plaintiffs. See Cianchette, 2018 Me. Super. LEXIS 13, at *34-40.

'With the exception of the implied contractual covenant of good faith and fair dealing, which cannot be eliminated by

the operating agreement.

18

I

1

The Cianchette court did not address whether 31 M.R.S. § 1559(3) also imposes fiduciary

duties on a member-manager with respect to the other members of the LLC, in addition to the LLC

itself. Plaintiffs here include only one conclusory sentence to the effect that Plaintiffs "also have

claims based upon fiduciary duties running directly to Pam Gleichman and Karl Norberg as

Trustee of the SNH Trust." (PJ's Opp'n Summ. J. 19.) Plaintiffs cite no authority for this position

but instead transition into a rehash of their argument that a fiduciary duty arose at common law,

owed by Ms. Scarcelli to Ms. Gleichman and Mr. Norberg. The Court concluded above that the

undisputed facts preclude this theory. The Court will thus enter summary judgment in favor of

Defendants on Count V of the Complaint because under the undisputed facts there is no evidence

that Ms. Scarcelli had a common law fiduciary relationship with either Ms. Gleichman or Mr.

Norberg. The sole basis for Plaintiffs' fiduciary duty claims is Ms. Scarcelli's statutorily-imposed

duties to the companies which, as explained above, Plaintiffs may pursue derivatively on behalf of

the companies and which the Court may treat as direct if justice requires. See 31 M.R.S. § 1637(3).

c. Genu ine fssues of Material Fact Preclude Enriy of Summary Judgment in

Defendants' Favor on Count JV

Having concluded that Plaintiffs are not precluded from pursuing a claim for breach of

fiduciary duty derivatively on behalf of the LLCs, the remaining issue is whether Plaintiffs have

adduced prima facie evidence of breach and damages. Defendants argue that the undisputed facts

demonstrate that Ms. Scarcelli could not breach her fiduciary duties by paying herself a high salary

and withholding distributions because she was allowed to do so under the operating agreements.

Both operating agreements are silent on the issue of executive salaries, although they

provide for a management fee to be paid to Ms. Scarcelli before the allocation of profit and loss.

Defendants do not deny that the operating agreements provide for an annual sum of $25,000 per

entity for management services to be paid to the manager. (Pl's Add'l S.M.F. ~ 40; Def's Reply Pl's

19

Add'l S .M.F. ~ 40.) Defendants point out that nonetheless the operating agreement does provide

that "[ u]nless approved by the Manager, no Member shall petform services for [Stanford] or be

entitled to compensation for services performed for [Stanford) or be entitled to reimbursement for

expenses." (Def's Supp•g S.M.F. ! 19.) The argument is that as manager Ms. Scarcelli had the

authority to hire herself as president of Stanford and then set her own salary, and that this is entirely

unrelated to the $50,000 she is paid by virtue of being manager of both LLCs pursuant to the

operating agreements. Defendants acknowledge that it is Mr. Norberg's (in his capacity as Trustee)

burden to create a dispute of fact on whether what Ms. Scarcelli has decided to pay herself is

excessive, but argue that he cannot meet this burden based on the undisputed facts.

The operating agreements do address distributions to members. They provide that "[aJfter

giving effect to the special allocations set forth in Section 4.4 ... Profit or Loss ... shall be

allocated to the Members in Proportion to the Percentages." (Pl's Add'l S .M.F. ~ 38.) They further

provide that "the timing and amount of all distributions shall be determined by the Manager. No

Member shall be entitled to any preferential distributions from the Company and, except as

provided in this Agreement, all distribution ofprofit to the Members shall be made in accordance

with their respective percentages." (Pl's Add'l S.M.F. ! 39 (emphasis added).) Defendants argue

that the undisputed facts demonstrate that Ms. Scarcelli has complied with these provisions and

made all necessary distributions. They claim that Plaintiffs' calculations demonstrating a shortfall

in their distributions are flawed and that any perceived shortfall can be explained by the fact that

pursuant to charging orders entered in Maine Superior Court any distributions owed to Ms.

Gleichman personally or the SNH Trust (of which she is the settlor and income beneficiary) are

paid directly to Ms. G1eichman's creditors, who happen to include Preservation Holdings-the

20

entity Ms. Scarcelli formed to purchase the debt claim JMB had against Ms. Gleichman and then

foreclosed on, (Def's Supp'g S.M.F. ~~ 64, 95-104.)

This factual milieu presents multiple genuine issues with respect to whether Ms. Scarcelli

breached her fiduciary duties owed to both companies or has performed her managerial duties in

good faith to the companies and their other member. First, as the Court indicated at oral argument,

it has serious concerns with the notion that Ms. Scarcelli can pay herself a salary that is many times

greater than the managerial fee explicitly contemplated in the operating agreements for the two

entities. The operating agreements for the entities do seem to grant her the authority as the memberw

manager to hire herself and the Court is not inclined to consider the parol evidence offered by

Plaintiffs that suggests that the managerial fee was meant to be the extent of Ms. Scarcelli's

compensation for managing the Companies in any capacity, whether it be as manager or president.

(See Pl's Add'] S.M.F. ~~ 18-20, 23, 34, 48.) It seems that Plaintiffs may not have got the result

they thought they bargained for in the restated opei·ating agreements for Stanford and Acadia after

those documents were re-negotiated by the parties during and around the mohth of September

2008. (PJ's Add'I S.M.F. ~ 21.) However, it is not the Court's job to re-write the operating

agreement to protect their interests after the fact.

Nonetheless, Maine's LLC Act imposes at least two limits on the discretion afforded a

member-manager notwithstanding the authority she may have under the operating agreement for

the LLC: first, a fiduciary duty to the company, which may be waived expressly in the operating

agreement, but was not done in the operating agreement for Stanford or Acadia; and second, a duty

of good faith and fair dealing, which cannot be waived. See 31 M.R.S. §§ 1521(3)(A), 1559(3).

The fact that Ms. Scarcelli has paid herself a salary that is not exclusively contemplated in the

operating agreement, which otherwise provides for her compensation, raises a genuine issue as to

21

whether her decision to hire herself as president and set her o':"n salary was undertaken with her

own best interest in mind, or that of the company. More disturbingly, the evidence shows that in

fact Ms. Scarcelli's salary has gone up and down year by year, and has not been the static amount

that Defendants suggest it is. (See Def's Supp'g S.M.F. ~, 13-14; Def's Opp'g S.M.F. f 14.)

Defendants offered a weak explanation for this at oral argument, claiming that in some years Ms.

Scarcelli has had to pay herself to make up for shortfalls in her presidential salary from years prior.

(Def's Reply to PJ's Add'[ S.M.F. f 50.) As the Court noted then, this does not sound like a salary.

It sounds like unallocated distributions paid out of the companies' profits under the guise of a

"presidential salary" to the majority member prior to the allocated distributions to which Plaintiffs

are entitled a share proportional to their membership interests. Such distributions, whether called

a "salary," "guarantee fee," or "preferred distribution" are explicitly disallowed by the operating

agreements. (PJ's Add'[ S.M.F., 39.) In other words, there is a more fundamental factual issue to

be resolved before the question of whether Ms. Scarcelli's presidential salary is excessive-that

is, whether it is even a "salary" at all.

Plaintiffs have also raised factual issues with regard to whether Ms. Scarcelli has breached

her fiduciary duties to the companies more broadly by, inter alia, taking actions that have resulted

in the companies losing value or put them out of compliance with state and federal regulations.

(PJ's Add'! S.M .F. f! 69-73, 120; Def's Reply to Pl's Add'l S.M .F. ,, 69-73, 120.)• Defendants do

not explicitly argue that there is no dispute of fact on this issue, instead relying on the argument

that Ms. Scarcelli did not owe the companies fiduciary duties or in any event cannot be held liable

for breaching such duties. As this Court held in the Prior Order, Mr. Norberg as Trustee is

•The Cou1t acknowledges Defendants' objections to the foundation for these facts and the format in which they were

presented. However, at this stage, the Cou rt carmot weigh the credibility of Ms. Gleichman and Mr. Norberg's

assertions relating to Ms. Scarcelli 's management of the companies. Defendants can attack Plaintiffs' credibility and

expose the absence of a basis for their knowledge of mismanagement al trial.

22

foreclosed from re-litigating any acts taken by Ms. Scarcelli in her capacity as manager of Stanford

prior to October 30, 2013. Ms. Gleichman is not so limited in her claim against Acadia, provided

she can prove she is a member of that company-an issue on which there is a genuine factual

controversy as found by this Court in the Prior Order. Ms. Scarcelli will of course enjoy the

presumptive protection of the business judgment rule in the face of any such challenges to acts she

has undertaken as manager of the companies. See Rosenthal v. Rosenthal, 543 A.2d 348, 353-54

(Me. 1988) ( courts "have long recognized that it falls outside the proper judicial domain to inquire

into and second-guess the prudence of particular business decisions honestly reached by those

entrusted with the authority to determine what course of action best advances the well-being of the

enterprise .... The business judgment rule does not, however, protect business decisions that

result from fraud or bad faith.").

Defendants challenge the accuracy of Plaintiffs' dam~ge calculations and the methodology

of their expert, arguing that it relies on a misconception of the relationship between "guaranteed

payments," income, and distributions. Plaintiffs will of course bear the burden of proving their

damages to a reasonable probability at trial, and Defendants will be able to attack the methodology

used by Plaintiffs at that time. But the issue of the amount of damages is a factual one and therefore

generally cannot be resolved on summary judgment. See, e.g., Carter v. Williams, 2002ME50,~

27, 792 A.2d 1093; Men-ill Trust Co. v. State, 417 A.2d 435, 440-41(Me. 1980). Plaintiffs have

put forward evidence of damages suffered as a result of Ms. Scarcelli's breach of fiduciary duties,

which, if proved, would entitle them to recover.

d. Breach of Contract and Remaining Claims

Plaintiffs barely survive summary judgment on Count XV, which states a claim for breach

of contract. Defendants argue, reasonably, that based on the Complaint and record, "it is not

23

entirely clear which alleged contracts Plaintiffs are pursuing under this theory." (Scarcelli Def's

Mot. Summ. J. 17.) Defendants then argue that, to the extent Plaintiffs are relying on the operating

agreements, Plaintiffs fail to articulate the contractual commitments allegedly breached and there

is no evidence of causation linking Ms. Scarcelli 's alleged breach to Plaintiffs' alleged damages.

Plaintiffs do not engage this argument head-on in their opposing memorandum, but they

do reference paragraphs in their statement of material fact for the proposition that Ms. Scarcelli

"ignor[ed] the limitations in the Operating Agreement as to her salary or management fees and her

obligations to account and provide[] access to books and records." (Pl's Opp'n Scarcelli Def's

Mot. Summ. J. 4 j 7.) There are explicit references in their opposition to Ms. Scarcelli's contractual

obligation to act in good faith in her capacity as manager of each entity, In sum, taken together,

Plaintiffs have just met their burden as plaintiffs opposing summary judgment to adduce evidence

of the elements of breach of contract. In particular, even in the absence of cogent argument to the

contrary, the Court is not convinced there is no genuine dispute of fact as to whether Ms. Scarcelli

has pe1forrned all of her duties and obligations as manager of the Companies in good faith. M.R.

Civ. P. 56(c) (movant's burden to show "there is no genuine issue as to any material fact"). See

Woods, Div. of Hesston Corp. v. Bath Indus. Sates, Inc., 549 A.2d 1129, 1132 (Me. 1988) ("Good

faith is a question of fact. , . .").Cf.Chartier v. Farm Family Life Ins, Co., 2015 ME 29, J 7, 113

A.3d 234 ("[AJ failure to comply in good faith with Maine's Uniform Commercial Code (U.C.C.)

or to perform under a regulated contract may constitute a breach of contract."); Marquis v. Farm

Family Mut. Ins. Co., 628 A.2d 644, 652 (Me. 1993) (same rule for insurance contracts which

likewise have an implied duty of good faith).

The same cannot be said for the other counts that Plaintiffs elected not to oppose in their

response to Defendants' motion. Defendants point out that a claim for to1tious interference (such

24

as that stated in Count XIV) "protects a person when someone else, not a party to the contract or

other economic relation, inte1feres." Beaudoin v. Community Partners, Inc., No. CV-05-330, 2006

Me. Super. LEXIS 291, *3 (March 3, 2006) (citing W. Prosser & W. Keeton, The Law of

Torts §129 at 978 (5th ed.1984); Restatement (Second) ofT01ts § 766); see also Fiskv. Mid Coast

Presbyterian Church, No. 2:16-cv-00490-JDL, 2017 U.S. Dist. LEXIS 68177, at *18 (D, Me. May

4, 2017). If Ms. Scarcelli has interfered with the contractual and advantageous relationship that

Ms. Gleichman had with Stanford or Acadia, her remedy is in contract. In any event, Ms.

Gleichman has not adduced prima facie evidence of the elements of this claim. See Rutland, 2002

ME 98,, 13, 798 A.2d 1104. Defendants are entitled to summary judgment on Count XIV of the

Complaint.

Plaintiffs also do not produce prima facie evidence sufficient to state a claim for judicial

dissolution of Stanford pursuant to 31 M.R.S. § 1595(1). Plaintiffs' argument that the fact that Ms.

Scarcelli "committed innumerable breaches of the operating agreement as well as her fiduciary

duties [is] more than sufficient to justify an order of dissolution" is not legally accurate. 31 M.R.S.

§§ 1595(1)(A)-(E) specifically delineate the circumstances un?er which a Court may order

dissolution, and the list does not include "innumerable breaches of the operating agreement and

fiduciary duties." Plaintiffs do not even attempt to fit the facts they adduce into any of the

delineated statutory categories, Defendants are entitled to summary judgment on Count VI.

Finally, Plaintiffs' request for an accounting of Stanford and Acadia stated in Count XX

fails for the same reason as Count XXI, which seeks an accounting as to Preservation Holdings.

The necessary relationship for accounting as an equitable remedy is not present between Ms.

Scarcelli and Plaintiffs; in any event, Plaintiffs are entitled to inspection and audit rights under the

operating agreements for the entities. To the extent that Plaintiffs have raised a factual issue with

25

I

r

respect to Ms. Scarceili's non-compliance with those provisions then Plaintiffs must pursue those

claims in the context of an action for breach of contract. (Def's Supp'g S.M.F. f 37; Pl's Opp'g

S.M.F. ~ 37.)

CONCLUSION

Based on the forgoing it is hereby ordered:

That Defendants' Second Motion for Summary Judgment in Granted in Part and Denied in

Piirt. Summ11ry judgment is entered in Defendants' favor on the following counts: Count I, Count

n, Count III, Count V, Count VI, Count VIII, Count XII, Count XIII, Count XIV, Count XX,

Count XXI, Count XXII, and Count XXIII.

Defendants' motion is denied with respect to Count IV and Count XV. All other counts

have been dismissed or otherwise ruled on in prior orders. These two counts, for breach of fiduciary

duty and breach of contract, are all that remain in the case.

The Clerk is requested to enter this Order on the docket for this case by incorporating it by

reference. M.R. Civ. P. 79(a).

Dated:------"5 _/_ "1_ / (_1_ ~ ( £_ ~

~a;;urphy

Justice, Business and Consumer Court

Entered on the Docket: f-1- £; I tq

Copies sent via Mail_ EleBronicaHy-::,.,..

26

STATE OF MAINE SUPERIOR COURT

CUMBERLAND, ss. BUSINESS AND CONSUMER COURT

LOCATION: PORTLAND ./

DOCKET NO. BCD-CV-17-11

PAMELA W. GLEICHMAN, et al., )

)

Plaintiffs, ) ORDER ON PLAINTIFF'S MOTION

) FOR PARTIAL RECONSIDERATION

v. ) OF SUMMARY JUDGMENT ORDER

)

ROSA SCARCELLI, et al., )

)

Defendants. )

Plaintiffs Pamela W. Gleichman ("Gleichman") and Karl S. Norberg ("Norberg") have

moved for partial reconsideration of this Court's summary jqdgment decision entered November

2, 2017. Defendants Rosa Scarcelli ("Scarcelli") and Preservation Holdings, LLC (collectively,

the "Scarcelli Defendants") and Defendants Stanford Management, LLC ("Stanford") and Acadia

Maintenance, LLC ("Acadia") (collectively, the "Entity Defendants") oppose the motion. The

Court heard oral argument on the motion on February 15, 2018. John Campbell, Esq. appeared for

Plaintiffs, G. Toby Dilworth, Esq. appeared for the Scarcelli Defendants, and James Wagner, Esq.

appeared for the Entity Defer1dants.

PROCEDURAL HISTORY

On November 2, 2017, this Court entered a combined order (the "Combined Order")

granting in part and denying in paii the Scarcelli Defendants' and the Entity Defendants'

(collectively, "Defendants"') motions for partial summary judgment. The Combined Order

awarded summary judgment for the Defendants on Count X (Declaratory Judgment as to ON

Holdings) and Count VII (Rescission, Nullification and Avoidance of Transfer to Scarcelli of

1 No,man, Han son & DeTroy, LLC, is also a named defendant in this matter. The instant motion does not concern it.

1

Membership Interests in Stanford Management, LLC). Plaintiffs do not move the Court to

reconsider those awards in the instant motion. The Court's disposition as to the remaining counts

on which Defendants moved for summary judgment was more complex. Relevant here, the Court

granted summary judgment in favor of all Defendants as to the claims brought by Norberg as

trustee of the Scarcelli-Norberg Holdings ("SNH") Trust in Count IV (Breach of Fiduciary Duty­

Derivative Action), Count V (Oppression and Breach of Fiduciary Duties- Owed to Pam, Karl,

and SNH Trust), and Count VI (Injunction and/or Dissolution of Stanford, etc.). 2

STANDARD OF REVIEW

"A motion for reconsideration of the judgment shall be treated as a motio11 to alter or amend

the judgment." M.R. Civ. P. 59(e). Courts should order relief pursuant to M.R. Civ. P. 59(e) when

it is "reasonably clear that prejudicial error has been committed or that substantial justice has not

been done." Cates v. Farrington, 423 A.2d 539,541 (Me. 1980). "Under Rule 59(e), the trial court

is free ... to alter or amend its judgment when convinced it was erroneous, and substitute the

proper judgment in its place." Most v. Most, 477 A.2d 250,258 (Me. 1984). A trial court's ruling

on a motion for reconsideration is reviewable for an abuse of discretion. Shaw v. Shaw, 2003 ME

153,112, 839 A.2d 714.

DISCUSSION

The issue the Court must decide on this motion for reconsideration is superficially simple:

what causes of action were before the Court on Defendants' motions for partial summary

judgment?

The Combined Order granted summary judgment in favor of Defendants by applying the

2 The Court also awarded summary judgment to the Defendants as to the claims brought by Gleichman in these

counts as they relate to Stanford based on its conclusion that Gleichman lacks standing to bring these claims,

Plaintiffs do not ask the Court to reconsider that ruling in the instant motion.

2

doctrine of claim preclusion, one of the two branches of i·esjudicata. (Combined Order at 11-16.)

See Pearson v. Wendell, 2015 ME 136, ~ 23, 125 A.3d 1149. Claim preclusion prevents relitigation

of claims if: "(l) the same parties or their privies are involved in both actions; (2) a valid final

judgment was entered in the prior action; and (3) the matters presented for decision in the second

action were, or might have been litigated in the first action.'' Portland Water Dist. v. Town of

Standish, 2008 ME 23, ~ 8, 940 A.2d 1097. "[A] voluntary dismissal with prejudice constitutes a

valid final judgment for purposes of claim preclusion." Darney v. Dragon. Products Co., 592 F.

Supp. 2d 180, 184 n.3 (D. Me. 2009) (citing United States v. Cunan, 156 F.3d 110, 114 (1st Cir.

1998)).

These same parties were involved in a prior action. Scarcelli sued Gleichman and Norberg

in 2011, and on June 17, 2013, these Plaintiffs filed an amended counterclaim and third-party

complaint (the "Counterclaim") in that lawsuit against Scarcelli, naming Stanford as a third-party

defendant. The Counterclaim was in many respects virtually identical to the Plaintiffs' Second

Verified Amended Complaint (the "Complaint") filed in this case, alleging inter alia breaches of

fiduciary duty on· the part of Scarcelli and seeldng judicial dissolution of Stanford. The

Counterclaim was disposed of in a mutually executed stipulation of dismissal filed on October 30,

2013 (the "Stipulation of Dismissal"). Gleichman's claims were dismissed without prejudice.

Norberg's claims-both individually and as trustee of the SNH Trust-were dismissed with

prejudice.

The Stipulation of Dismissal was the prior judgment on which Defendants based their claim

preclusion argument in their motions for partial summary judgment. The Scarcelli Defendants'

motion for partial summary judgment requested that the Comt grant summary judgment in their

favor on Counts IV, V, and VI of the Complaint on that ground. (Scarcelli's Mot. Summ. J. at 19.)

3

Pursuant to M.R. Civ. P. 7(b)(3)(2), the Scarcelli Defendants included with their motion a draft

order which specifically stated the relief to be granted by the motion: "Judgment is entered in favor

of Rosa Scarcelli and Preservation Holdings, LLC on Counts IV, V, VI, VII, and X of Plaintiffs

Second Verified Amended Complaint." However, the Scarcelli Defendants nanowed the scope of

their requested relief in the body of their memorandum of law in support of their motion, writing

that "Plaintiffs are barred from relitigating any claims arising from Ms. Scarcelli's alleged breach

of fiduciary duties owed to Stanford, Acadia, and Plaintiffs up until the date ofthe Stipulation of

Dismissal . ... 3" (Scarcelli's Mot. Summ. J. at 16 (emphasis added).)

In their oppositions to Defendants' motions for summary judgment, Plaintiffs' mam

argument was that the Stipulation of Dismissal was not a "valid judgment" and therefore claim

preclusion did not bar their claims. (Pl's Opp. Scarcelli Mot. Summ. J. at 8-12, 14-17; Pl's Opp.

Stanford Mot. Summ. J. 2-16.) This argument was unavailing because it did not apply any of the

recognized exceptions to the general rule that a final judgment is a valid judgment. N.E. Bank N.A.

v. Crochere, 438 A.2d 266,268,268 n. 7 (Me. 1981). However, Plaintiffs also raised the argument

that res judicata could not preclude claims as to continuing wrongs, because claims based on

conduct that post-dated the entry of the Stipulation of Dismissal could not have been litigated in

the first action. 4 Portland Water DisL, 2008 ME 23, 18, 940 A.2d 1097. (PJ's Opp. Scarcelli Mot.

3 Plaintiffs suggest that the Court should instead use June 17, 2013-the date of the filing of the Counterclaim-as

the date for detennining the scope of claim preclusion, because Plaintiffs were not required lo add claims that arose

after the Counterclaim was filed. The Court rules that October 30, 2013-the date of the entry of the Stipulation of

Dismissal-is a more appropriate bar date. That was the date on which the pa1iies voluntarily negotiated a release of

the relevant claims. But cf Darney, 592 F. Supp. 2d at 188.

4 The Court notes that it accepts this proposition because it went unchallenged by Defendants in their reply memoranda

to Plaintiffs' opposition to their motions for partial summary judgment and again in their oppositions to the instant

motion. But see Barth v. Town ofSanford, 200 I U.S. Dist. LEXIS 17934, No. Ol-CV-208-P-C *11-14 .(D. Me. Nov.

26, 200 I) (claim preclusion ba1Ted subsequent nuisance claim despite new allegatlons that post-dated prior judgment).

Cf Darney, 592 F. Supp. 2d at 185-88 (claim preclusion did not bar subsequent nuisance claim where plaintiffs made

a "broad[) effo1t to restrict their [] complaint to claims that arose since [the voluntary dismissal with prejudice of their

prior suit)").

4

Summ. J. 13-14.) This aspect of Plaintiffs' argument went unchallenged in the Scarcelli

Defendants' reply brief, which concerned itself exclusively with parrying Plaintiffs' collateral

attack on the prior judgment. 5

The issue before the Court thus comes into sharper focus. Even if the Defendants were

moving for summary judgment on Counts IV-VI in toto when they filed their motion, based on the

concession in their memoranda6 and their silence on the issue in their reply brief, did the Plaintiffs

waive the argument that summary judgment could not be aw;:irded on resjudicata grounds to the

extent that those counts state claims based on Scarcelli's conduct after the entry of the Stipulation

of Dismissal. Based on the transcript of the oral argument on the motions for summary judgment,

it is apparent that they were not asking the Court to rule on any causes of action that may have

accrued after the filing of the Stipulation of Dismissal:

THE COURT: Isn't there some post-November 2013 conduct that is at issue in this

case though? (Mot. Tr. 12 (Sep. 14, 2017).)

***

MR. DILWORTH: Now, after November 12th, 2013, they may have a claim that

there was another thing that Rosa Scarcelli did that gave rise to a new cause of

action.

THE COURT: Right.

MR. DILWORTH: That may be the case, but if you grant this motion, everything

up to that day is out of the case.

THE COURT: And your position would be that the she would-that the plaintiffs

would have to file a new action to-a new cause ofaction to argue that Ms. Scarcelli

did something actionable after November 20137

5 The prior judgment in the 2011 case consisted of both the Stipulation ofDismissal and the court's order on Scarcelli's

motion for partial summa1y judgment. The court's partial summary judgment order implicated only Count X of the

Complaint, which Plaintiffs are not asking the Cami to reconsider in the instant motion.

6 The Entity Defendants' motion for partial summary judgment incorporated the Scarcelli Defendants' memorandum

of law in suppo1i of their own motion.

5

MR. DILWORTH: I don't think they have to restart the case, but they have to

identify to us what it is after-

THE COURT: What the cause is.

MR. DILWORTH: -November 12th, because I think John will tell you that he has

alleged things. I think-the reason why we brought this case is-brought this

motion at · this time is for discove1y purposes. It's going to lili1it discove1y

tremendously. We think we 're going to sm1e a lot of time and effort, and fi1rther

litigation about issues that happened b~fore November of2013.

THE COURT: Okay. Understood.

MR. DILWORTH: But we don't think that it ·will necessarily kick out eve,ything.

Now, there may be issues of claim-excuse me-of issue preclusion that will

extend beyond, but that's-

THE COURT: That's not before me now.

MR. DILWORTH: That's not before you now, because that needs to be developed

a little bit more on the-

THE COURT: Understood .

MR. DILWORTH: -discovery.

THE COURT: Okay. (Mot. Tr. 13-14 (Sep. 14, 2017) (emphasis added).)

***

MR. DILLWORTH: Mr. Campbell says that none ofthe arguments-or none ofthe

issues after 2013 are barred. That may be true for some issues, but if issue

preclusion applies, then obviously he's already litigated those issues. Those issues

have been resolved. We 're not asking you to make an order on that at this point.

THE COURT: Okay. (Mot. Tr. 28 (Sep. 14, 2017) (emphasis added) .)

As to Norberg's claims, the Combined Order granted summary judgment to the Defendants

in full on Counts IV-VI.7 This Court ruled that Plaintiffs had failed to establish a prima facie case

that anything Scarcelli did after the entry of the Stipulation of Dismissal in the prior action could

7 See n.2 at p.2 of this Order, supra.

6

state a claim under those Counts. Here, on reconsideration, this Court determines that this ruling

was prejudicial error.

"[A] party seeking summary judgment always bears the initial responsibility of informing

the ... court of the basis for its motion." Cor~y v. Norman, Hanson, & DeTroy, 1999 ME 196, ,r

9, 742 A.2d 933 (alteration in original) (quoting Celotex Corp. v. Catrett, 477 U.S. 317, 323

( 1986)). "A defendant moving for a summary judgment has the burden to assert those elements of

the cause of action for which the defendant contends there is no genuine issue to be tried." Id. The

rationale for this rule sounds in basic fairness: a party resisting summary judgment is entitled to

notice of the grounds on which the movant is relying, so that it knows for which issues it is

obligated raise a genuine issue of material fact. See id.

Here, the only ground on which the Defendants moved for summary judgment on Counts

IV-VI was claim preclusion. Plaintiffs replied that claim preclusion could not encompass those

Counts to the extent that they rely on conduct after the entry of the Stipulation of Dismissal. As

noted above, Defendants generally accepted this proposition, and at the very least raised no

argument to rebut it in reply or at oral argument. Logically, the Court must on reconsideration here

rule that Defendants did not move for summary judgment on the causes of action stated in Counts

IV-VI that may have accrued after the entry of the Stipulation of Dismissal. The Court must further

rule that as a result, Plaintiffs were not required to establish a prima facie' case as to those causes

of action in defense of the summary judgment motion. See id It was thus prejudicial error to award

summary judgment to Defendants on the grounds that Plaintiffs did not do so.

Defendants argue that their damaging statements about causes of action based on conduct

occurring after the entry of the Stipulation of Dismissal related to other counts of the Complaint.

It is true that Defendants did not move for summary judgment as to all counts, and that some counts

7

arc based exclusively on allegations of post-Stipulation of Dismissal activity. However, as noted

above, it was the Defendants' burden "to assert those elements of the cause of action for which the

defendant contends there is no genuine issue to be tried." Id. The issue is not whether Defendants

"admit[ted] or concede[d] that Plaintiffs created a dispute of fact as to 'continuing wrongs' that

would preclude summary judgment as to Counts IV, V, and VJ." (Scarcelli's Mot. Summ. J. at 4.)

Rather, it is whether Defendants met their burden to assert that there was no genuine material

factual issue that the post-Stipulation of Dismissal conduct could not form a basis for those Counts.

The Comt rules that they did not.

At oral argument, Defendants suggested that Plaintiffs' motion for reconsideration should

be denied based on Plaintiffs' failure to move for a contin.uance or seek other relief under M.R.

Civ. P. 56(£). "M.R. Civ. P. 56(f) ... states that a party opposing summary judgment must be

allowed adeqLiate opportunity to conduct discovery or otherwise develop evidence in opposition

to the summary judgment motion." Angel v. Hallee, 2012 ME 10, ,r 13, 36 A.3d 922 (citing S.

Portland Police Patrol Ass 'n v. City o.fS. Portland, 2006 ME 55, ,r,r 11-12, 896 A.2d 960). Because

M.R. Civ. P. 56(b) allows a party to move for summary judgment before discovery is complete,

Rule 56(f) "protects a party opposing a summary judgment motion who for valid reasons cannot

by affidavit ... present facts essential to justify the adverse party's opposition to the motion." S.

Portland PoUce Patrol Ass 'n, 2006 ME 55; ,r 11, 896 A.2d 960. Under some circumstances, our

Law Court has affirmed summary judgment where the party resisting summary judgment failed to

avail herself of the protection of Rule 56(f). See Bangor Sav. Bank v. Richard, 2014 ME 20, ,r 3,

86 A.3d 1167.

Rule 56(f) has no bearing on the argument presented by Plaintiffs and adopted by the Court

in this order. Motions under Rule 56(f) presuppose fair notice of the issues for which the party

8

t • t •

resisting a summary judgment motion must raise a genuine material issue of fact. The Court is

now ruling that Plaintiffs were not obligated to raise a genuine material fact as to causes of action

which accrued after the entry of the Stipulation of Dismissal because the Defendants were not

moving for summary judgmen't as to those causes of action. Plaintiffs could not have been expected

to request more time for discovery on issues that were not before the Court on the summary

judgment motion.

The Court is satisfied that it is "reasonably clear that prejudicial enor has been committed

or that substantial justice has not been done," Cates, 423 A.2d at 541. Plaintiffs' motion for partial

reconsideration is therefore GRANTED.

CONCLUSION

Based on the foregoing it is hereby ORDERED:

That Plaintiffs' motion for partial reconsideration of summary judgment order is

GRANTED.

The Combined Order is hereby modified to strike the language from the first full paragraph

of page 15 through the end of the second full paragraph on page 16, found in Part III.A of that

order.

Paragraphs 3(a) and 4 of the conclusion of the Combined Order (p. 21) must also be

modified as follows:

(3) The Scarcelli Defendants' motion for partial summary judgment is GRANTED IN PART AND

DENIED IN PART as to Count IV, Count V, and Count VI.

a. As to Plaintiff Karl Norberg's claims in Counts IV, V, and VI, the Scarcelti Defendants'

motion is GRANTED IN PART AND DENIED IN PART. To the extent that those counts

state causes of action based on activity that predates the entry of the Stipulation of

Dismissal, the motion is GRANTED, To the extent that those counts state causes of action

based on activity that postdates the entry of the Stipulation of Dismissal, the motion is

DENIED.

9

(4) The Entity Defendants' motion for partial summary judgment is GRANTED IN PART AND

DENIED IN PART as to Defendant Stanford on Counts IV, V, and VI. To the extent that those

counts state causes of action bflsed on activity that predates the entry of the Stipulation of

Dismissal, the motion is GRANTED. To the extent that those counts state causes of action based

on activity that postdates the entry of the Stipulation of Dismissal, the motion is DENIED.

The Clerk is instructed to enter this Order on the docket for this case incorporating it by

reference pursuant to Maine Rule of Civil Procedure 79(a).

Dated: -~J_\_~_I\_t"_ _

Michaela Murphy, .JustkV'

Business and Consumer Court

Entered on the Docket: ~ L

Copies sent via Maii_E.lectronical\y~

10

STATE OF MAINE SUPERIOR COURT

CUMBERLAND, ss. BUSINESS AND CONSUMER COURT

LOCATION: PORTLAND

DOCKET NO . BCD-CV-17-11 /

PAMELA W. GLEICHMAN, et al., )

) COMBINED ORDER ON

Plaintiffs, ) DEFENDANTS ROSA SCARCELLI

) AND PRESERVATION HOLDINGS,

v. ) LLC'S MOTION FOR PARTIAL

) SUMMARY JUDGMENT AND

ROSA SCARCELLI, et al., ) STANFORD MANAGEMENT, LLC

) AND ACADIA MAINTENANCE,

Defendants. ) LLC'S MOTION FOR PARTIAL

) SUMMARY JUDGMENT

)

Defendants Rosa Scarcelli and Preservation Holdings, LLC (hereafter "Preservation")

(collectively, the "Scarcelli Defendants") have moved for partial summary judgment pursuant to

M.R. Civ. P. 56(a) on Plaintiffs Second Verified Amended Complaint (the "Complaint").

Defendants Stanford Management, LLC (hereafter "Stanford") and Acadia Maintenance, LLC

(hereafter "Acadia") (collectively, the "Entity Defendants") have also moved for partial summary

judgment. Plaintiffs timely opposed and the Scarcelli Defendants and the Entity Defendants

replied. Oral argument was heard on both motions on September 14, 2017. 1 Attorney John

Campbell appeared for Plaintiffs, Attorney G. Toby Dilworth appeared for the Scarcelli

Defendants, and Attorney James R. Wagner appeared for the Entity Defendants.

PROCEDURAL HISTORY

Plaintiffs' operative pleading is the 83-page Complaint filed with the Cumberland County

Superior Court July 26, 2016. The Superior Court (Cumberland County, Horton, J) entered an

1The Court notes that while Attorneys John Campbell and James Wagner appeared and were heard, the Entity

Defendants' motion was filed September 8, 2017 and was not yet fully briefed when oral argument was held. To the

extent that no second oral argument was held after an opposition was filed to the Entity Defendants' motion, the Court

exercises it discretion under M.R. Civ. P. 7(b)(7) and decides that motion without reargument.

order on the Scarcelli Defendants' and Entity Defendants' joint motion for partial summary

judgment on the pleadings on January 12, 2017, granting judgment in favor of all those defendants

as to Count XI (abuse of process) of the Complaint and dismissing Count XVI (punitive damages)

as redundant. Gleichman v. Scarcelli, CUMSC-CV-2015-539 at 6 (Me. Super. Ct., Cum. Cty., Jan.

12, 2017).

The Scarcelli Defendants now move this Court for summary judgment in their favor as to

Count IV (Breach of Fiduciary Duties- Derivative Action), Count V (Oppression and Breach of

Fiduciary Duties- Direct Action), Count VI (Judicial Dissolution of Stanford), Count VII

(Avoidance of Transfer of Stanford Membership Interests to Ms. Scarcelli), and Count X

(Declaratory Judgment- GN Holdings) of the Complaint. (See Complaint ,r,r 1?5-212, 216-223).

The Entity Defendants move for summary judgment as to them on Count IV, Count V,

Count VI, and Count VII. The Entity Defendants adopted the Scarcelli Defendants' arguments in

their own motion as well as the Scarcelli Defendants' statement of material facts. Plaintiffs filed

an opposition to the Entity Defendants' motion that offered grounds specifically directed at

defeating the Entity Defendants' motion for summary judgment. Plaintiffs also filed separate M.R.

Civ. P. 56(h)(2),(3) opposing and reply statements of facts for each motion. The Court's

disposition on the Scarcelli Defendant's motion controls much of the result on the Entity

Defendants' motion. Where grounds unique to the Entity Defendants have been raised the Court

addresses those arguments separately.

FACTUAL BACKGROUND

I. PARTIES

This motion comes before the Court in the context of almost a decade of litigation between

Plaintiffs and Defendant Rosa Scarce Iii, who are all family members. (Plaintiffs Statement of

2

Additional Facts ("P.S.A.F.") at~ 1). 2 Mr. Norberg is the sole trustee of the Scarcelli Norberg

Holdings Trust (hereafter "SNH Trust") (Defendants' Statement of Material Facts ("S.M.F.") at 1

7). Ms. Gleichman is the sole lifetime beneficiary of the SNH Trust. (S.M.F. ~ 8).

Stanford manages subsidized housing properties in the State of Maine. (S.M.F. ~ 1). Acadia

is a real estate maintenance company. (S.M.F. ~ 10). Ms. Scarcelli has been the President ofAcadia

and Stanford since 2006. (S.M.F. ~19-10). Ms. Scarcelli own 51 % of Stanford and is the majority

member; the remaining 49% is owned by the SNH Trust. (S.M.F. 113-4). Acadia's ownership is

disputed. (S.M.F. ~~ 11-13; Plaintiffs Statement of Facts in Dispute ("P.S.F.D.") at~~ 11-13). 3

However, there is no dispute that Ms. Scarcelli is the majority owner of Acadia. (Id.).

Preservation is not described in any Statement of Facts filed in support or opposition of

either motion, nor is it addressed in any Defendants' or Plaintiffs' briefs on this motion.

Preservation was founded by Ms. Scarcelli and she is the company's sole member. (Complaint 1

13). Plaintiffs' claims against Preservation under review in the present motion are unclear, other

than to the extent that Plaintiffs allege that Ms. Scarcelli has used that entity as a device to facilitate

the behavior complained of in the counts against her. (Complaint ~1 13, 202).

Although not a party to this lawsuit, a brief description of GN Holdings, LP, (hereafter

"GN") is appropriate here given its importance to the Scarcelli Defendants ' motion. GN is a limited

partnership which is a majority limited partner in several limited partnerships that own various

multifamily properties. (S.M.F. ~ 14). Although Plaintiffs dispute the ownership of GN in this

lawsuit, it is not disputed that on November 13, 2013 the Business and Consumer Court (Nivison,

J) entered an Order, in prior litigation between Ms. Gleichman and Mr. Norberg on the one side

2 As noted above, Plaintiffs filed separate M.R. Civ. P. 56(h)(2),(3) opposing and reply statements of facts for each

motion. Except where otherwise indicated, references to Plaintiffs' "statement of facts in dispute" and "statement of

additional facts" refer to those filed in opposition to the Scarcelli Defendants' motion for summary judgment.

3

See Note 2 supra.

3

and Ms. Scarcelli on the other, declaring that Ms. Scarcelli is the owner of a 70% equity interest

in GN. (S.M.F. ,r 30). Mr. Norberg was previously the general partner of GN, until as late as

November 2013. (S .M.F. ,r 17, P.S.A.F. ,r 39). Mr. Norberg is no longer a partner in GN. (S.M.F.

,r 41; P.S.A.F. ,r 39).

II. SEQUENCE OF EVENTS GIVING RISE TO THIS LAWSUIT

Despite Plaintiffs' twenty-three-page response to the Scarcelli Defendants' seven-page

statement of material facts, the parties agree on the general sequence of events giving rise to this

lawsuit. Ms. Scarcelli has served as president of Stanford and Acadia since 2006. (S.M.F. ,r,r 9­

10). Effective January 1, 2007, Ms. Gleichman gifted 41 % of her membership units in Stanford to

Ms. Scarcelli. (S.M.F. ,r 2). Ms. Scarcelli already held 10% of the membership units of Stanford,

(S.M.F. ,r 37), so Ms. Gleichman's gift made her the majority member of Stanford with 51 % of its

membership units. (S.M.F. ,r 3; P.S.A.F. ,r 50).

In 2011, after regulators cited deficiencies at some of the properties under the control of

GN, Ms. Scarcelli made a written demand upon Mr. Norberg in his capacity as general partner of

GN to remove Ms. Gleichman or entities controlled by her as general partners of various projects,

based on their alleged failure to fulfill their obligations to GN. (S.M.F. ,r 17). Mr. Norberg did not

respond to the demand, so Ms. Scarcelli then filed a complaint in Cumberland County Superior

Court in January 2012. (S.M.F. ,r,r 18-19). The complaint requested a declaratory judgment and

other relief and named GN, Ms. Gleichman, and Mr. Norberg as defendants. (S.M.F. ,r 19). After

a brief sojourn in the United States District Court for the District of Maine, the case was remanded

to Superior Court and eventually found its way here to the Business and Consumer Court. (S.M.F.

,r,r 20-22). It was here that Ms. Gleichman and Mr. Norberg filed their Amended Counterclaim and

Third-Party Complaint (hereafter the "Counterclaim"). (S.M.F. ,r,r 20-23). Ms. Gleichman and Mr.

4

Norberg named Stanford as a third-party defendant in the Counterclaim. (S.M.F. ,r 33; see

Counterclaim).

These two pleadings-Ms. Scarcelli' s complaint and the Counterclaim-dealt with several

of the same issues now before this Court. Ms. Scarcelli's complaint sought inter alia a judicial

declaration of her ownership interest in GN. (S.M.F. ,r 26). The Counterclaim alleged inter alia

breaches of duty on the paii of Ms. Scarcelli in her management of Stanford and sought judicial

dissolution of Stanford. (S.M.F. ,r,r 33-35). The Counterclaim was disposed of in an agreed-to

Stipulation of Dismissal filed by both parties on October 30, 2013. (S.M.F. ,r,r 39-42). Ms.

Gleichman's claims were dismissed without prejudice. (S.M.F. ,r 42). Mr. Norberg's claims-both

individually and as trustee of the SNH Trust-were dismissed with prejudice. (S.M.F. ,r,r 39-40).

Ms. Scarcelli's complaint was also largely disposed of by the Stipulation of Dismissal.

(S.M.F. ,r 39). Prior to the filing of the Stipulation of Dismissal, on October 18, 2013, Ms. Scarcelli

filed a motion for partial summary judgment on the count of her complaint that requested a judicial

declaration of her ownership interest in GN. (S.M.F. ,r 26). The parties exempted that issue from

the Stipulation of Dismissal and left it to the court to decide on the pending motion for partial

summary judgment. (S.M.F. ,r 39). The court ruled on the unopposed motion on November 13,

2013, granting judgment in favor of Ms. Scarcelli and declaring her the owner of a 70% equity

interest in GN. (S.M.F. ,r,r 29-30).

Although the 2012 litigation concluded with the entry of the court's order on November

13, 2013, the Plaintiffs have alleged in this lawsuit that Ms. Scarcelli has continued to breach her

fiduciary duties to them and continued to divert profits due to them. (P.S.A.F. ,r 27).

STANDARD OF REVIEW

Summary judgment is granted to a moving party where "there is no genuine issue as to any

5

material fact" and the moving party "is entitled to judgment as a matter oflaw." M.R. Civ. P. 56(c).

A material fact is one capable of affecting the outcome of the litigation. Savell v. Duddy, 2016 ME

139, ,r 19, 147 A.3d 1179. A genuine issue exists where the jury would be required to "choose

between competing versions of the truth." MP Assocs. v. Liberty, 2001 ME 22, ,r 12, 771 A.2d

1040. "Summary judgment is no longer an extreme remedy." Curtis v. Porter, 2001 ME 158, ,r 7,

784 A.2d 18. To survive a defendant's motion for summary judgment, the plaintiff must establish

a prima facie case for every element of the plaintiffs cause of action. See Savell, 2016 ME 139, ,r

18, 147 A.3d 1179. See also Spickler v. Dube, 644 A.2d 465, 467-68 (Me. 1994) (holding that res

judicata entitled the moving party to summary judgment).

DISCUSSION

I. MS. SCARCELLI IS ENTITLED TO JUDGMENT AS A

MATTER OF LAW ON COUNT X OF THE COMPLAINT

UNDER THE DOCTRINE OF ISSUE PRECLUSION

In Count X of the Complaint, Plaintiffs seek a declaratory judgment declaring that Ms.

Scarcelli is not the 70% owner of GN and that Mr. Norberg retains a 95% interest in that entity.

(Complaint ,r 223). The Scarcelli Defendants argue that res judicata precludes Plaintiffs from

relitigating this issue in light of the court's November 13, 2013 order on Ms. Scarcelli's motion

for summary judgment, naming her the owner of a 70% equity interest in GN.

Resjudicata consists of two branches: issue preclusion (formerly referred to as "collateral

estoppel") and claim preclusion (formerly referred to as "bar or merger"). Pearson v. Wendell,

2015 ME 136, ,r 23, 125 A.3d 1149. "[C]laim preclusion is focused on the claims set forth in the

prior proceeding, collateral estoppel concerns factual issues, and applies even when the two

proceedings offer different types ofremedies." Id. ,r 9. Issue preclusion "prevents the relitigation

of factual issues already decided if the identical issue was determined by a prior final judgment,

6

and the party estopped had a fair opportunity and incentive to litigate the issue in a prior

proceeding." Portland Water Dist. v. Town ofStandish, 2008 ME 23, ~ 9, 940 A.2d 1097. Issue

preclusion "arises only if the identical issue necessarily was determined by a prior final judgment."

Macomber v. MacQuinn-Tweedie, 2003 ME 121, ~ 25, 834 A.2d 140 (quotations omitted). This

prong of res judicata is "focused on factual issues, not claims, and asks whether a party had a fair

opportunity and incentive in an earlier proceeding to present the same issue or issues it wishes to

litigate in a subsequent proceeding." Id. ~ 22. The relevant factors a court should consider in

determining whether a party had a fair opportunity and incentive to litigate in an earlier proceeding

include

the size ofthe claim, the forum of the prior litigation, whether the issue was a factual

or a legal one, the foreseeability of future suits, the extent of the previous litigation,

the availability of new evidence, the experience of counsel, ... [and] procedural

opportunities available in the second suit that were unavailable in the first.

Gray v. TD Bank, NA., 2012 ME 83, ~ 21, 45 A.3d 735.

In the 2012 litigation, Plaintiffs had a fair opportunity and incentive to litigate the same

issue they bring in Count X. See id. ~ 22. Plaintiffs had an economic incentive due to the financial

and tax benefits at stake. (S.M.F. ~ 27.) Plaintiffs were represented by experienced counsel and

had all of the tools of discovery at their disposal. (S.M.F. ~ 25.) The Stipulation of Dismissal

explicitly carved out the issue of GN's ownership from the other claims to be dismissed, putting

Plaintiffs on notice that the court would be ruling on the issue. (S.M.F. ~ 39.) Although Plaintiffs

did not oppose Ms. Scarcelli' s summary judgment motion in the 2012 litigation, there is no genuine

dispute that they had a fair opportunity and incentive to do so.

Count X is barred by issue preclusion because the identical issue was determined by the

Court's judgment in its November 13, 2013 order on Ms. Scarcelli' s motion for summary judgment

in the prior litigation between these parties, and Plaintiffs had a fair opportunity and incentive to

7

litigate. The issue in that latter litigation and this case is identical, and the court entered final

judgment deciding that issue in the prior case.

Plaintiffs' arguments for why res Judie ata should not apply are unavailing. First, Plaintiffs

allege that the Order declaring Ms. Scarcelli owner of a 70% "equity interest" in fact only declared

that Ms. Scarcelli owns 70% of the "limited partner interests" of the limited partnership. As such,

Plaintiffs argue that they are entitled to seek declaratory relief as to the ownership of the "general

partner interests" in GN Holdings and how the partnership's ownership is distributed between

general partners and limited partners.

Plaintiffs claim that a review of the pleadings from the prior litigation shows that only the

limited partnership interest was in issue. However, regardless of what was litigated, the Court's

order in the 2012 Litigation clearly and unambiguously declares Ms. Scarcelli "the owner of a 70%

equity4 interest" in the limited partnership. The Court is not inclined to accept Plaintiffs invitation

to look beyond this plain, unambiguous language in a prior final judgment of this Court.

Plaintiffs next point out that this was a judgment on a motion for summary judgment for

declaratory relief and as such res judicata should not apply. Indeed, claim preclusion generally

does not apply where only declaratory relief is sought. See Se bra v. Wentworth, 2010 ME 21, ,r 10,

990 A.2d 538 (holding claim preclusion applied in that case despite the prior judgment being a

declaratory judgment because the claim seeking declaratory relief was joined with a claim for an

injunction). See also Restatement (Second) of Judgments, § 33, cmt. c ("When a plaintiff seeks

solely declaratory relief, the weight of authority does not view him as seeking to enforce a claim

against the defendant .... The effect of such a declaration [therefore] is not to [apply claim

4 Equity is "that portion ofa company's net worth belonging to its owners or shareholders." WEBSTER'S NEW WORLD

COLLEGE DICTIONARY 492 (5th ed. 2016). Thus, Ms. Scarcelli was declared the owner of 70% of all of the net worth

belonging to GN's owners.

8

pre cl usion.]").

But the Scarcelli Defendants prevail on this count as a matter of issue preclusion, not claim

preclusion. The exact issue Plaintiffs seek a declaratory judgment on in this case was already

decided in the prior litigation. Unlike claim preclusion, issue preclusion applies to declaratory

judgments with the same vitality as it applies to coercive judgments. See Restatement (Second) of

Judgments,§ 33, cmt. b ("If a declaratory judgment is valid and final, it is conclusive, with respect

to the matters declared ... even as to a party who makes no appearance in the action.").

That the motion was unopposed does not soften the judgment's preclusive effect. Id.

Plaintiffs' failure to oppose the motion-or seek relief under Rule 60(b), or on appeal-does not

make the judgment more vulnerable to collateral attack. See Caron v. City ofAuburn, 567 A.2d

66, 68 n. 5 (Me. 1989); Baliey v. City ofLewiston, 2017 ME 160, ,r 10, 168 A.2d 762.

The Plaintiffs have failed to raise any genuine, material factual ·dispute to demonstrate why

issue preclusion does not entitle the Scarcelli Defendants to judgment as a matter of law. See

Spickler, 644 A.2d at 467-68. The Court thus rules that the Scarcelli Defendants are entitled to

judgment as a matter of law on Count X of Plaintiffs' complaint and hereby grants the Scarcelli

Defendants' motion for summary judgment as to Count X of Plaintiffs' complaint.

II. THE SCARCELLI DEFENDANTS AND THE ENTITY DEFENDANTS ARE

ENTITLED TO JUDGMENT AS A MATTER OF LAW AS TO COUNT VII

BECAUSE THERE IS NO GENUINE FACTUAL ISSUE THAT THE TRANSFER

OF STANFORD MEMBERSHIP UNITS TO MS. SCARCELLI WAS A GIFT

As explained below, claim preclusion bars Mr. Norberg from litigating the issue of the

transfer of membership units in Stanford to Ms. Scarcelli. However, unlike Mr. Norberg's claims,

Ms. Gleichman's claims in the 2012 litigation were dismissed without prejudice. (S.M.F. ,r 42).

Therefore, she is not barred from bringing Count VII and seeking to avoid the transfer of 41

membership units in Stanford from Ms. Gleichman to Ms. Scarcelli. In their motion, the Scarcelli

9

Defendants claim that they are nonetheless entitled to judgment as a matter of law on this Count

because the transfer was an irrevocable inter vivas gift. Plaintiffs respond that there is a genuine

factual issue whether the gift was conditional.

An inter vivas gift requires three elements: (1) donative intent; (2) delivery with intent to

surrender all present and future dominion over the property; and (3) acceptance by the donee.

Brackett v. Larrivee, 562 A.2d 138, 139 (Me. 1989). An inter vivas gift is irrevocable and "[a]

change of mind by the donor .. . cannot undo th[e] completed gift." Id. at 140. Unlike a gift causa

martis, which is complete only upon the death of the donor, an inter vivas gift is made irrevocable

on delivery. Bickford v. Mattocks, 50 A. 894, 895 (Me. 1901).

There is ample record evidence to support a finding that the transfer of Stanford

membership units from Ms. Gleichman to Ms. Scarcelli was a valid and completed inter vivas gift.

(Complaint 1 47; S.M.F. 11 36- 38). Plaintiffs do not argue that the elements for an effective

donative transfer have not been met. Instead, Plaintiffs rely exclusively on Ms. Gleichman's

assertion by affidavit nearly ten years later that the gift was conditional. (P.S.F.D 138.)

There is no contemporaneous evidence to suggest that the gift was conditional. Plaintiffs

do not clearly articulate what consideration flowed from Ms. Scarcelli to Ms. Gleichman in

exchange for the transfer, and any such articulation is inconsistent with the allegations brought in

the Complaint. (Complaint 147). Therefore, the Court finds that Ms. Gleichman's mere assertion,

many years after the fact, that the gift was meant to be conditional is inadequate to generate a

genuine factual issue. Dyer, 2008 ME 106, 1 14, 951 A.2d 821 (plaintiff cannot create a factual

dispute for purposes of defeating summary judgment merely by raising "improbable references[]

and unsupported speculation"). On Ms. Gleichman's affidavit alone, no juror could reasonably

find that at the time of the transfer Ms. Gleichman intended the gift to be conditional.

10

The Court does not doubt that Ms. Gleichman regrets her decision to give Ms. Scarcelli her

41 membership units in Stanford, but to allow a disappointed donor to claim, many years after the

fact, that a gift was conditional would swallow the rule that completed inter vivas gifts are

irrevocable. See Brackett, 562 A.2d at 140. Plaintiffs cite Bryant v. Cribbie, No. 09-P-1421, 2010

Mass. App. Unpub. LEXIS 320 (App. Ct. Mar. 25, 2010) for the proposition that conditions on

gifts can be implied from circumstances and that where such an inference is reasonable, summary

judgment is not appropriate. To the extent that Bryant would dictate a different outcome here, this

Court declines to follow that case based on Maine case law and the policy reason explained above.

Based on the foregoing the Court thus hereby grants the Scarcelli Defendants motion for

summary judgment as to Count VII. There is no genuine question of fact that the transfer of 41

membership units in Stanford from Ms. Gleichman to Ms. Scarcelli was a valid and completed

inter vivas gift, and the Scarcelli Defendants and Entity Defendants are thus entitled to judgment

as a matter of law on that issue.

III . RES JUDICATA BARS MR. NORBERG FROM

RELITIGATING THE CLAIMS IN COUNT IV, COUNT V,

COUNT VI, AND COUNT VII OF THE COMPLAINT

A. Mr. Norberg's Claims Are Barred Generally by Res Judicata

Count IV is a derivative claim alleging breaches of fiduciary duties on the part of Ms.

Scarcelli, Count V is a direct claim grounded in a materially similar allegation, Count VI seeks

judicial dissolution of Stanford pursuant to 31 M.R.S.A. § 1595(1), and Count VII seeks an

avoidance of the transfer of Stanford membership units to Ms. Scarcelli. (See Complaint 11195­

212). The Scarcelli Defendants argue that resjudicata entitles them to judgment as a matter of law

under a claim preclusion theory because Plaintiffs brought these same claims against Ms. Scarcelli

in the Counterclaim filed in the 2012 litigation. Plaintiffs respond that claim preclusion does not

11

(or should not) apply.

Unlike issue preclusion, claim preclusion is focused not on the factual issues determined

by a prior final judgment, but "on the claims set forth in the prior proceeding." Pearson, 2015 ME

136, 19, 125 A.3d 1149. Claim preclusion prevents relitigation if: "(1) the same parties or their

privies are involved in both actions; (2) a valid final judgment was entered in the prior action; and

(3) the matters presented for decision in the second action were, or might have been litigated in

the first action." Portland Water Dist., 2008 ME 23, 1 8, 940 A.2d 1097. In other words, a valid

final judgment in a prior action will bar the claim of a party to that prior judgment where "the

matters presented for decision were, or might have been, litigated in the prior action." Beegan v.

Smith, 451 A.2d 642,644 (Me. 1982). "[A] voluntary dismissal with prejudice constitutes a valid

final judgment for purposes of claim preclusion." Darney v. Dragon Products Co., 592 F. Supp

2d 180, 184 n.3 (D. Me 2009) (citing United States v. Cunan, 156 F.3d 110, 114 (1st Cir. 1998)).

Under Maine law, a transactional test is used to determine whether the matters presented

for decision in the second action were, or might have been, litigated in the first action. To apply

this test, the court "examin[es] the aggregate of co1U1ected operative facts that can be handled

together for purposes of trial to determine if they were founded upon the same transaction, arose

out of the same nucleus of operative facts, and sought redress for essentially the same basic

wrong." Portland Water Dist., 2008 ME 23, 18,940 A.2d 1097. A "new" claim calllot avoid the

transactional test simply because it "relies on a legal theory not advanced in the first case, seeks

different relief than that sought in the first case, or involves evidence different from the evidence

relevant to the first case." Id. (quotations omitted). See also Draus v. Town ofHoulton, 1999 ME

51, 18, 726 A.2d 1257 (quoting Beegan, 451 A.2d at 645) ("When there is a final judgment against

a plaintiff, claims the plaintiff has against the same defendant are extinguished with regard to all

12

or any part of the transaction, or series .of connected transactions, out of which the action arose.").

Here, all three components of claim preclusion are satisfied. Generally, the same parties to

this action-Ms. Scarcelli, Ms. Gleichman, and Mr. Norberg-were parties to the 2012 litigation.

Plaintiffs do not dispute that this element has been satisfied, nor could they reasonably do so. The

Stipulation of Dismissal filed jointly by the parties to the 2012 litigation is a final prior judgment

for resjudicata purposes. Darney, 592 F. Supp 2d at 184 n.3. Finally, Counts IV, V, VI, and VII

of Plaintiffs' Complaint arise out of Ms. Scarcelli's alleged mismanagement of Stanford and

Acadia-allegations that are substantially similar to the allegations in the Counterclaim filed by

Plaintiffs in the 2012 litigation. The claims for relief are virtually identical, to the point that the

language itself is almost verbatim. A side-by-side comparison of the operative pleadings of the

two lawsuits illustrates that the claims arise out of the same transaction and seek redress for

essentially the same basic wrongs. See Portland Water Dist., 2008 ME 23, ,r 8, 940 A.2d 1097.

Counts IV, V, VI, and VII of Plaintiffs' Complaint are frequently a word-for-word recitation of

the allegations raised in the Counterclaim in 2012. 5 It is an unescapable conclusion on this record

that the claims arise out of the same transaction and seek redress for essentially the same basic

wrongs.

Plaintiffs do not argue that a voluntary dismissal with prejudice lacks preclusive effect

generally as a "valid final judgment." See Darney, 592 F. Supp 2d at 184 n.3. Nor do they argue

that the matters presented for decision in this second action could not have been litigated in the

first action. See Beegan, 451 A.2d 642, 645-46. Instead, Plaintiffs collaterally attack the

Stipulation of Dismissal, questioning the "validity" of the prior judgment. See Portland Water

5 The Counterclaim did not include a derivative action on behalf of Stanford, which Plaintiffs bring in Count IV of

the Complaint. Nonetheless, that claim might have been litigated in the prior action between these same parties and

still arises out ofthe same nucleus of operative fact. Portland Water Dist., 2008 ME 23, ,r 8,940 A.2d 1097.

13

Dist., 2008 ME 23, ~ 8, 940 A.2d 1097 (claim preclusion requires "valid" prior judgment). As

grounds for their collateral attack, Plaintiffs claim (1) it was a typographical error that the

stipulation dismisses Mr. Norberg's claims "with" instead of "without" prejudice, (P.S.A.F. ~~ 8­

16); (2) Attorney Dana Strout, Plaintiffs' lawyer at the time, lacked authority to sign the document

on behalf of Plaintiffs, (P.S.A.F. ~~ 17, 20, 22); and (3) the dismissal was ineffective because Ms.

Gleichman was under an Illinois court order not to allow any claims of hers to be abandoned.

(P.S.A.F. ~~ 2-3). As to (3), Plaintiffs argue that as settlor/ beneficiary of the SNH Trust, the Trust

was effectively her asset and thus the Illinois court order enjoined the Trust from dismissing any

claims with prejudice.

Plaintiffs' collateral attack on the validity of the prior judgment is impermissible at this

stage. It is well-established under Maine law that a final judgment is a valid judgment, unless one

of three specific exceptions apply: denial of due process, lack of jurisdiction, or adjudication of

issues beyond the scope of those submitted for decision. NE. Bank NA. v. Crochere, 438 A.2d

266, 268 n. 7 and accompanying text (Me. 1981) (citing Warren v. Waterville Urban Renewal

Authority, 290 A.2d 362, 365-66 (Me. 1972)). See also Bailey v. City ofLewiston, 2017 ME 160,

110, 168 A.3d 762 ("It is well established that a valid judgment entered by a court, if not appealed

from, generally becomes res judicata and is not subject to later collateral attack.") (quoting

Standish Tel. Co. v. Saco River Tel. & Tel. Co., 555 A.2d 478, 481 (Me. 1989)); Town of

Lincolnville v. Perry, 150 Me. 113, 119, 104 A.2d 884, 888 (l 954)("Ajudgment of a court having

jurisdiction, no fraud or collusion appearing, cannot, at the instance of a party to it, be impeached

collaterally by proof of errors.").

Plaintiffs do not challenge the jurisdiction of the court to enter the joint Stipulation of

14

Dismissal6 or claim that the court decided an issue outside of what the parties submitted in their

stipulation. 7 They do not explicitly allege a violation of due process in the 2012 litigation. The

three challenges Plaintiffs now attempt to bring may have been winning arguments on appeal

brought pursuant to M.R. App. P. 2, but the twenty-one-day period for bringing an appeal has long

since passed. Id. As an appeal from a consented-to voluntary stipulation of dismissal may have

been procedurally awkward, the Plaintiffs may have instead considered raising these three

arguments with the Business and Consumer Court in the original lawsuit in a motion· for relief

from judgment brought pursuant to M.R. Civ. P. 60(b) under its more forgiving one-year period.

Id. But the Court need not now consider whether those arguments would have won. The procedural

windows for attacking the validity of the entry of the 2013 Stipulation of Judgment have closed.

This analysis does leave one loose end: allegations of post-2013 misconduct on the part of

Ms. Scarcelli. Plaintiffs claim that some of the wrongful actions complained of in this case had not

yet occurred by the time of the court's entry of the Stipulation of Dismissal on November 13, 2013.

(P.S.A.F. -127). Plaintiffs suggest that these post-2013 wrongful actions state sufficient grounds

for relief for the claims now under review.

Despite allusions to "many continuing wrongs," Plaintiffs i:n fact only draw the Court's

attention to one in their opposition and Statement of Additional Facts: namely, Ms. Scarcelli's

auction of an entity called General Holdings (formerly Gleichman & Co.) to Preservation in 2014.

(Complaint 1152). Preservation had purchased rights to a note and guaranty obligation owed by

Plaintiffs and Gleichman & Co., related to their financing of a failed development project in

6 Plaintiffs challenge the jurisdiction of the court to dismiss the SNH Trust's claims in their opposition to the Entity

Defendants' motion. The issue is considered in Part II.B.2. infra of this Order.

7 Plaintiffs possibly level such an allegation against the Court' s decision declaring Ms . Scarcelli the holder of a 70%

equity interest in GN to the extent that they argue that the only question submitted to the Court on that issue was the

extent of Ms. Scarcelli's "limited partner interest" and not her equity interest. See Part I of this Order supra. That is

inapposite to the applicability of claim preclusion to the claims under review in this Part.

15

Chicago in 2007-2008. (Complaint~~ 13, 126). The purchase took place on November 20, 2012:

nearly a year before the entry of Stipulation of Dismissal in the previous lawsuit.

Even assuming that the purported auction took place and was improper, as this Court must,

Plaintiffs do not articulate why that action was a breach of fiduciary duty on the part of Ms.

Scarcelli to either themselves or Stanford, how it satisfies the elements required for judicial

dissolution pursuant to 31 M.R.S.A. § 1595(1), or why it is sufficient grounds to avoid the transfer

of Stanford membership units to Ms. Scarcelli. Plaintiffs cannot raise a factual issue for purposes

of defeating summary judgment if they cannot articulate its materiality. Savell, 2016 ME 139, ~~

18, 19, 147 A.3d 1139. See also Dyer v. D.O.T., 2008 ME 106, ~ 14, 951 A.2d 821 (explaining

that plaintiff cannot create a factual dispute for purposes of defeating summary judgment merely

by raising "conclusory allegations").

Based on the foregoing, the Court hereby grants the Scarcelli Defendants' motion for

summary judgment on Count IV, Count V, and Count VI of the Complaint as brought by Mr.

Norberg as an individual and in his capacity as Trustee for the SNH Trust.

B. Mr. Norberg' Claims Against Stanford Are Barred by Res J11dicata

Plaintiffs raise two issues unique to Stanford to argue that res judicata should not bar their

a

claims against that entity. First, Plaintiffs argue that Stanford was not party to the 2012 litigation

and that res judicata therefore cannot bar subsequent claims against it. Second, Plaintiffs claim

that the court lacked jurisdiction over SNH Trust in the 2012 litigation and therefore res judicata

does not bar SNH Trust from now pursuing a claim against Stanford.

1. Stanford Was a Party to the 2012 Litigation

Plaintiffs claim that Stanford was merely joined as a party in interest to the Counterclaim

16

in the 2012 litigation. (P.S.A.F. ,r,r 26-27). 8 Plaintiffs argue Stanford was only named as a party in

interest because Plaintiffs sought judicial dissolution of Stanford in the Counterclaim, and that the

Counterclaim did not seek an award of damages from Stanford (P.S.A.F. ,r 27). As such, Plaintiffs

argue that it would be unfair to bar them from bringing claims against Stanford now, because they

could not be expected to have brought those claims against a mere party in interest joined for the

limited purpose of recovering against the real interested defendant: Ms. Scarcelli.

Plaintiffs argument is based on a faulty premise: that Stanford was not a real party to the

2012 Litigation. Despite Plaintiffs' attempt to minimize the extent to which the Counterclaim made

allegations against Stanford or sought to recover from Stanford, the Counterclaim is replete with

allegations against Stanford and names Stanford as a third-party defendant in the caption. (P.S.A.F.

,r 25; S.M.F. ,r 33; see Counterclaim). The Plaintiffs' theory, in this case as in 2012, is that Ms.

Scarcelli used Stanford to her own advantage and to the disadvantage of its minority owner, the

SNH Trust. Stanford was as much a defendant in the Counterclaim as it is now in the Complaint.

2. The Court Had Jurisdiction to Enter Final Judgment

as to SNH Trust in the 2012 Litigation

Plaintiffs argue that Mr. Norberg's claims as trustee of the SNH Trust were not properly

joined to the GN Holdings litigation and therefore the court never had jurisdiction to dismiss SNH

Trust's claims. (P.S.A.F. ,r,r 23-25). Lack of jurisdiction is one of the limited exceptions to the

general rule that a final judgment is a valid one, and is therefore one of the few permissible means

of collateral attack of a prior judgment to defeat res judicata. NE. Bank NA., 438 A.2d at 268.

Plaintiffs note that SNH Trust was not named as a defendant in the 2012 Litigation, and

that SNH Trust was not joined in the litigation until Plaintiffs filed the Counterclaim. (P.S.A.F. ,r,r

8 All references to statements of facts in dispute and statements of additional facts in this sub-part and the following

sub-part refer to Plaintiffs statement of additional facts filed in opposition to the Entity Defendants' motion for

summary judgment. See note 2 of this Order, supra.

17

23-25). Ms. Scarcelli challenged this attempt to join SNH Trust to the litigation in a motion to

dismiss based on the fact that neither Ms. Gleichman nor Mr. Norberg had standing to pursue

claims on behalf of SNH Trust, the minority interest holder of Stanford. (P.S.A.F. ~ 28). Plaintiffs

cite Bank ofNY v. Dyer, 2016 ME 10, ~ 11, 130 A.3d 966 for the proposition that if a plaintiff

lacks standing, that plaintiff cannot invoke the court's jurisdiction to make any adjudication on the

merits. The Entity Defendants respond that Bank of NY is inapposite because in that case, the

plaintiff itself moved for dismissal without prejudice and did not dispute that it could not establish

standing. Id. ~ 11. The Entity Defendants point out that in the 2012 litigation, the motion to dismiss

was not granted and Mr. Norberg's claims as trustee in the Counterclaim were allowed. (P.S.A.F.

~ 28). Thus, unlike in Bank ofNY, there was a judicial determination that counterclaim plaintiff

SNH Trust did have standing to bring its claim.

Regardless of any earlier disputes about standing, at the time the Stipulation of Dismissal

was entered, SNH Trust was in the case and the court had jurisdiction over SNH Trust to enter its

voluntary dismissal with prejudice. (S.M.F. ~~ 39-40). The jurisdictional issue raised now was

already litigated in the motion to dismiss filed by Ms. Scarcelli in the prior lawsuit. (P.S.A.F. ~

28). Plaintiffs ultimately prevailed in that dispute and succeeded in joining SNH Trust as a plaintiff

in their Counterclaim. Plaintiffs cannot now argue that the court reached the wrong decision on

their adversaries' motion to dismiss and that it should have dismissed SNH Trust's counterclaims.

Royal Coachman Color Guardv. 111arine Trading & Transp., Inc., 398 A.2d 382,384 (Me. 1979)

("Once there has been full opportunity to present an issue for judicial decision in a given

proceeding, including those issues that pertain to a court's jurisdiction, the determination of the

court in that proceeding must be accorded finality as to all issues raised or which fairly could have

been raised, else judgments might be attacked piecemeal and without end.") (emphasis added).

18

Based on the foregoing, the Court hereby grants the Entity Defendants' motion for

summary judgment on Count IV, Count V, Count VI, and Count VII of the Complaint as brought

by Mr. Norberg as an individual and in his capacity as Trustee for the SNH Trust against Stanford.

IV. MS. GLEICHMAN HAS RAISED A GENUINE FACTUAL ISSUE

AS TO WHETHER SHE HAS STANDING TO BRING THE CLAIMS IN

COUNT IV, COUNT V, AND COUNT VI OF THE COMPLAINT

A. The Scarcelli Defendants

The Scarcelli Defendants have moved for summary judgment as to Counts IV, V, and VI

of the Complaint as to Ms. Gleichman on the grounds that Ms. Gleichman lacks standing to bring

those claims because she is not a member of Stanford or Acadia. Plaintiffs do not dispute that Ms.

Gleichman is not a member of Stanford. Plaintiffs dispute the assertion that Ms. Gleichman is not

a member of Acadia and claim that she retains a 49% interest in that company.

Every plaintiff "must establish its standing to sue, no matter the causes of action asserted."

Bank ofAm., NA. v. Greenleaf, 2014 ME 89, ,r 7, 96 A.3d 700. While there is "no set formula for

determining standing, a court may limit access to the courts to those best suited to assert a particular

claim." Lindemann v. Comm'n on Gov'tl Ethics and Election Practices, 2008 ME 187, ,r 8,961

A.2d 538 (quotations omitted). Maine statutory law provides that only "a member may maintain a

direct action against another member, a manager, or the limited liability company to enforce the

member's rights and otherwise protect the member's interests ...." 31 M.R.S.A. § 1631(1).

Standing to bring derivative actions on behalf oflimited liability companies in a derivative action

is likewise limited only to members. 31 M.R.S.A. §§ 1632, 1633(1). Only members may apply for

judicial dissolution oflimited liability companies. 31 M.R.S.A. § l 595(1)(D),(E).

Plaintiffs do not argue in their opposition that Ms. Gleichman has standing to bring a direct

or derivative action against Ms. Scarcelli regarding Stanford, but do allege facts suggesting such

19

a position in their Statement of Additional Facts. (P.S.A.F. ~~ 48-51). Statements of additional

facts filed pursuant to M.R. Civ. P. 56(h)(2) are not the proper place for legal arguments. See

Oceanic Inn, Inc. v. Sloan's Cove, LLC, 2016 ME 34, ~ 4 n.2, 133 A.3d 1021. As Plaintiffs fail to

address the issue in their opposition to the motion, the issue of Ms. Gleichman's standing to bring

Counts IV, V, and VI with regards to Stanford is waived.

The Defendants claim that Ms. Gleichman is not a member of Acadia because she and Ms.

Scarcelli both assigned all of their interest in that company to Stanford. (S.M.F. ~ 11). In support

of this position, the Scarcelli Defendants rely on a 2008 assignment document, signed by both Ms.

Scarcelli and Ms. Gleichman, that purports to assign their respective interests in Acadia to

Stanford. (Id.) Plaintiffs contest the issue of Acadia's ownership and question the authenticity of

the assignment document. (P.S.F.D. ~ 11). For her part, Ms. Gleichman has sworn that she has no

memory of signing such a document and claims that if her signature is genuine the assignment was

never meant to go into effect and never has. (Id.) Beyond Ms. Gleichman's sworn testimony,

Plaintiffs point to other record evidence suggesting that Ms. Gleichman's accountant and Ms.

Scarcelli's own lawyers understood Ms. Gleichman to be a minority member of Acadia after the

purported 2008 assignment. (Id.)

This Court is thus presented with two competing versions of the truth on a factual issue

material to the case. See MP Assocs., 2001 ME 22, ~ 12, 771 A.2d 1040. On the evidence provided,

the Court would be required to make a credibility determination as to which version to believe,

which is impermissible for summary judgment. Id. The Court thus rules that Plaintiffs have raised

a genuine factual issue as to the membership of Acadia. Therefore, the Scarcelli Defendants'

motion for summary judgment is denied in part as to Ms. Gleichman's claims in Counts IV, V,

and VI. Ms. Gleichman can proceed on those Counts only as they relate to Acadia.

20

B. The Entity Defend ants

The Entity Defendants do not offer any alternative grounds specific to Acadia as to why

Acadia is entitled to summary judgment, instead relying exclusively on the lack of standing

argument raised by the Scarcelli Defendants.9 As that argument failed for the Scarcelli Defendants

so too it must fail here for the Entity Defendants. The Court thus hereby denies Defendant Acadia's

motion for summary judgment.

CONCLUSION

Based on the foregoing IT IS ORDERED:

(1) The Scarcelli Defendants' motion for summary judgment is GRANTED as to Count

X.

(2) The Scarcelli Defendants' and the Entity Defendants' motions for summary judgment

are GRANTED as to Count VII.

(3) The Scarcelli Defendants' motion for summary judgment is GRANTED IN PART

AND DENIED IN PART as to Count IV, Count V, and Count VI.

a. As to Plaintiff Karl Norberg's claims in Counts IV, V, and VI, the Scarcelli

Defendants' motion is GRANTED.

b. As to Plaintiff Pamela Gleichman's claims in Counts IV, V, and VI, the

Scarcelli Defendants' motion is GRANTED IN PART AND DENIED IN

PART. The Scarcelli Defendant's motion is GRANTED to the extent that Ms.

Gleichman cannot proceed on those counts as they relate to Stanford. The

motion is DENIED to the extent that Ms. Gleichman may proceed on those

counts as they relate to Acadia.

(4) The Entity Defendants' motion for summary judgment is GRANTED as to Defendant

Stanford on Counts IV, V, and VI.

(5) The Entity Defendants' motion for summary judgment is DENIED as to Defendant

Acadia on Counts IV, V, and VI. Those counts remain pending as against Defendant

9 In three sentences at the end of their reply brief, the Entity Defendants point out that Plaintiffs cite no authority to

show that a LLC owes fiduciary obligations to its members. But nor do the Entity Defendants offer any authority to

show that a LLC does not owe fiduciary obligations to its members. See Wescott v. Allstate Ins., 397 A.2d 156, 163

(Me. I 979) ("[T]he burden of showing entitlement to summary judgment rests on the [moving party.]").

21

Acadia.

Accordingly, Counts IV, V, and VI of Plaintiffs' Complaint remain pending. Plaintiff

Pamela Gleichman's claims against Ms. Scarcelli arising out of Ms. Scarcelli's management of

Acadia, as well as her direct and derivative claims against and on behalf of Acadia, have survived

Defendants' motions for summary judgment.

The Clerk is instructed to enter this Order on the docket for this case incorporating it by

reference pursuant to Maine Rule of Civil Procedure 79(a).

~ ­

DATE SUPERIOR COU~ICE

BUSINESS AND CONSUMER COURT

; -dJ-1?

Entered on the Docket: /

Copies sent via Mail_ Electronically~

22

BCD-CV-2017-11

Pamela W. Gleichman and Karl Norberg v. Rosa Sarcelli, Stanford

Management, LLC, Acadia Maintenance, LLC, and Preservation Holdings, LLC

Pamela W. Gleichman and Karl Norberg

Counsel: John S. Campbell, Esq.

6 Mabel St.

Portland, ME 04103

Stanford Management, LLC and Acadia Maintenance, LLC

Counsel: James Wagner, Esq.

343 Ocean House Rd.

Cape Elizabeth, ME 04107

Rosa Sarcelli and Preservation Holdings, LLC

Counsel: George Dilworth, Esq.

84 Marginal Way, Suite 600

Portland, ME 04101

STATE OF MAINE BUSINESS AND CONSUMER COURT

CUMBERLAND, SS. LOCATION: PORTLAND v

DOCKETNO. BCD-CV-17-11

PAMELA W. GLEICHMAN and )

KARL NORBERG, individua11y and as )

Trustee of the SCARCELLI-NORBERG )

HOLDINGS TRUST, )

)

Plaintiffs, )

)

v. ) · ORDER ON PLAINTIFFS'

) MOTION TO COMPEL PRODUCTION

ROSA SCARCELLI, )

STANFORD MANAGEMENT, LLC, )

ACADIA MAINTENANCE, LLC, )

PRESERVATION HOLDINGS, LLC, and )

NORMAN, HANSON & DETROY, LLC )

)

Defendant. )

)

Presently before the court is Plaintiffs Pamela W. Gleichman and Karl Norberg's motion

to compel production of attorney's fees invoices submitted to and paid by Defendant Stanford

Management, LLC.

I. Background

Plaintiffs Gleichman and Norberg, in his individual capacity and as trustee of the

Scarcelli-Norberg Holdings Trust (the "SNH Turst"), have brought a complaint asserting more

than twenty counts against Defendants Rosa Scarcelli, Stanford Management, LLC ("Stanford"),

Acadia Maintenance, LLC, Preservation Holdings, LLC, and the law firm Norman, Hanson &

DeTroy, LLC. (See generally 2d V. Am. Comp!.) Generally speaking, the complaint arises out

of an ongoing dispute between Plaintiffs and Scarcelli over the management of and the use funds

from several closely-held entities. Id

Plaintiffs sought production of attorney's fee invoices from two firms, Defendant

Norman, Hanson & DeTroy, LLC and Bernstein Law Finn, LLC located in Chicago, that were

paid by Stanford. (Pls. Mot. Compel 1.) According to Plaintiffs, Scal'celli has refused to

produce the invoices, claiming attorney-client privilege. (Id.) Following a Rule 26(g), the court

entered an order instructing Plaintiffs to submit a written motion setting forth its arguments and

Defendants to submit their opposition. Pursuant to the court's instructions, Plaintiffs submitted

their motion to compel on June 5, 2017. Defendants filed theil' opposition on June 19, 2017. No

reply was filed.

Plaintiffs contend that Scarecelli, as the Manager of Stanford, has for several years

impermissibly intermingled her personal legal bills with Stanford's legal bills and has used

Stanford's funds to pay her personal legal expenses. (Id.) Defendants disclosed the amounts of

legal fees paid by Stanford, but refused to produce the invoices. (Id. at 2-3.) Plaintiffs expect

Scarcelli will claim to not lmow what the bills were for or that the invoices were for "corporate

matters.'' (Id. at 3-4.) Plaintiffs contend that the actual invoices are necessary to confronting

such responses. (Id. at 4.) Plaintiffs argue the attorney's fees invoices are not protected by the

attorney-client privilege for several reasons: (1) attorney billing records are generally not

privileged communications; (2) Plaintiffs are entitled to review the invoices us minority owners

.I

of Stanford; (3) only Scarcclli is asserting the privilege and the invoices are not confidential

communications between Scarcelli and her attorney; (4) the invoices are not protected under the

11 fiduciary-duty exception"; and (5) any privilege has been waived. (Id. 5-8.) Defendants

contend that the attorney's fees invoices are protected by both the attorney-client privilege and

the attorney work-product doctrine, that "fiduciary-duty exceptfon" is not applicable under

Maine law, and that there has been no waiver of the privilege. (Id. at 3-9.)

2

II. Standard of Review

"Parties may obtain discovery regarding any matter, not privileged, which is relevant to

the subject matter involved in the pending action, .. . " M.R. Civ. P. 26(b)(1 ). If an opposing

party fails to respond to a discove1y request, the discovering party may move for any order

compelling the opposing party to respond. M.R. Clv. P. 37(a)(2). If the court denies the motion

in whole or in pa1t, the court may issue protective orders to shield the party from whom

discovery is sought from any undue burden or expense. M.R. Civ. P. 26(c)> 37(a)(2).

Under Maine Rule of Evidence 502, a client has the privilege to refuse disclosure of and

prevent their attorney from disclosing the contents of any confidential communication between

the client or the client's representative and the client's attorney or the attorney's representative,

M.R. Evid. 502(b). Regarding legal entities, an officer, manager, trustee, or other agent

authorized to act on behalf of a legal entity in legal matters or in obtaining an attornets service

may claim the privilege on behalf of the entity. M.R. Evid. 502(c)(l)(D). The pmty asserting

the privilege has the initial burden of demonstrating its applicability. Harris Mgmt. v. Coulombe,

2016 ME 166, ~ 24, 151 A.3d 7. A communication is "confidential" and protected by the

privilege if it is (1) made to facilitate the rendition of legal services to the client, and (2) not

intended to be disclosed to any third pmty other than those to whom the client revealed the

information in t]1e process of obtaining professional legal services. M.R. Evid. 502(a)(5); see

Fiber Materfals, Inc. v. Subilia, 2009 ME 71, if 11 n.1, 974 A.2d 918 .

The attorney-client privilege-is subject to several exceptions enumerated in Rule 502: (1)

the crime-fraud exception, (2) claims through the same deceased client, (3) breach of duty by an

attorney or client, (4) documents attested by an attorney, (5) joint clients, and (6) pi1blic officel's

and agencies. M.R. Evid. 502(d). The opposing pa1iy bears the burden of demonstrating the

3

applicability of any exception to the privilege. Harris Mgmt., 2016 ME 166, ~ 24, 151 A.3d 7.

The attorney-client privileged may also be waived if a person entitled to asse1t the privilege

"voluntarily discloses or consents to the disclosure of any significant part of the privileged

matter." M.R. Evict. 510(a). "A privilege is waived when a 'significant part' or 'key element' of

the privileged communication has been disclosed by the party claiming entitlement to the

privilege," Jensen v. S.D. Warren Co., 2009 ME 35, ,r 31, 968 A.2d 528 (internal citation

omitted).

Attorney work product is also protected from disclosure under Maine Rule of Civil

Procedure 26. 2 Harvey, Maine Civil Practice§ 26:6 at 639-40 (3d ed. 2011). "[A] party may

obtain discove1y of "documents and tangible things .. , prepared in anticipation of litigation or

for trial by or for another party or by or for that other party's representative" only upon a

showing that (1) the party seeking discovery has a "substantial need" for the materials in the

preparation of the their case and (2) the patty is unable to obtain the "substantial equivalen1 of

the materials by other means" without Hundue hardship," M.R. Civ. P. 26(b)(3). Generally, in

order to be protected by the work-product doctrine, a document must be "created because of the

party's subjective anticipation of future litigation." Springfield Terminal Ry. Co. v. Dept. of

Tramp., 2000 ME 126, ~ 16, 754 A.2d 353. The anticipation of litigation must also be

"objectively reasonable." Id. Th".1s, the opposing party must show "that the documents were

prepared principally or exclusively to assist in aIJticipated or ongoing litigation.'' Id ~ I7. A

document prepared in the regular course of business may also be prepared in anticipation of

litigation, when it is party's business "to prepare fOl' litigation." Harriman v. Maddocks, 518

A.2d 1027, 1034 (Me. 1986). In ordering discovery of attorney work product, "the court shall

4

protect against dlsclosure of the mental impressions, conclusions, opinions, or legal theories of

an attorney or other representative of a party concerning the litigation." M.R. Civ. P. 26(b)(3).

III. Discussion

A. Attorney Billing Records May Contain Co11fidential Communications

As an initial matter, "fees paid for legal work and the general nature of legal work

perf01med do not constitute a 'confidential comm1.mication' and are, therefore, outside the

privilege.'> United States v. Osborn, 409 F. Supp. 406, 411 (D. Or. 1975) (citations omitted).

However, ''descriptions of services performed by an attorney necessarily intrnde upon the area of

confidential commnnication when they become more specific than the general responses, such as

'litigation', 'drafting of documents', or 'tax advice\ ... " Id, Thus, the invoices sought by

l

Plaintiffs or portions thereof may be protected by the privilege if they contain descriptions of the

legal services rendered that reveal confidential communications. See also In re Crescent Beach

Inn, 37 B.R. 894, 896 & n, 1 (Bankl·. D. Me. 1984).

B. Plaintiffs are not Entitled to the Invoices as Minority Members of Stanford

At various times in their motion, Plaintiffs appear to suggest that either they together or

Gleichman individ1.1ally are the minority members of Stanford. The Stanford Management, LLC

Amended and Restated Operating Agreement (the "Operating Agreement") expressly names

Scarcelli as the 51 % member and Gunna1· Falk as trustee of SNH Trust as the 49% member of

Stanford. (Defs. Ex. A § 2.8 & Ex. A.) According to Plaintiffs' verified complaint> Norberg

became the sole trustee of the SNH Trust in 2009. (V, 2d Am. Com pl.~~ 5-6.) Gleichman is the

lifetime beneficiary of the SNH Trust. (Id. ,r 5.) Thus, neither Gleiclunan nor Norberg in his

individual capacity are minority members of Stanford. Only Norberg in his capacity as trustee of

the SNH Trust is the 49% member of Stanford. Although the Operating Agreement permits

5

members to request and obtain true and full information regarding the state of the business, its

financial condition, and other information that is just and reasonable, the Operating AgTeement

expressly states, 11 The Manager shall have the absolute discretion to withhold any information

from a Member .. , that the Manager deems to be in the nature of trade sect·ets or confidential

information, the disclosure of which would not be in the best interest of the Company." (Defs.

Ex. A§ 5.6) (emphasis supplied), Thus, the Operating Agreement grants Scarce1Ji as manager of

Stanford the absolute discretion to withhold the attorney's fees invoices from Norberg and the

SNH Trust, so the Court rejects Plaintiffs' argument that they are entitled to the documents

because they are minority shareholders.

C, The "Fiduciary-Duty Exception" to the Attorney-Client Privllege

The "fiduciary-duty exception" to the attorney-cllent privilege advocated by Plaintiffs is

not among the recognized exceptions enumerated in Rule 502. See M.R. Evid. 502(d). Plaintiffs

have not cited, and the coutt is not aware of, any Maine case law recognizing a (lfiduciary-duty

exception" to the attorney-client privilege. (Pls. Mot. Compel 6-7.) The court declines to adopt

a new exception to the attorney-client pl'ivilege not expressly enumerated in the Maine Rules of

Evidence.

D. The Client Asserting the Privilege

Only the client may assert the attorney-client privilege. M.R. Evid. 502(b). Neither I

partles have been perfectly clear about who is asserting the attorney-client privilege and whether

they are asserting the privilege for all or some the attorney's fees invoices sought. In their

motion, Plaintiffs contend that only Scarcelli's personal attorney has asserted the privilege on her

I

behalf. (Id at 4-5.) Plaintiffs argue that Scarcelli cannot assert the privilege because the

invoices sought are not communications between Scarcelli and her attorneys; they are simply

6

bills paid by Stanford. (Id at 5-6.) However, this contention is contradicted by Plaintiffs'

assertion that all or some of the invoices are Scarc~lli's personal legal bills. (Id. at 1-2.) As

discussed above, attorney fee 1s invoices may be protected by the privilege if they contain

descriptions of confide11tial communications. Thus, Scarcelli may be entitled to asse1t the

attorney-client privilege with regard to any personal legal biJls that contain descriptions of

confidential communications. 1

Moreover 1 it appears that Stanford has also asserted the attorney-client privilege. The

Operating Agreement permits Scarcelli 1 as the sole manager, to exercise all powers of Stanford.

(Defs. Ex A § 5.1 (a),) As discussed above, a rnanag~r atJtho:r.ized to act on behalf of a legal

entity may claim the attorney-client privilege for the entity. M.R. Evid. 502(c)(l)(D).

Therefore, Scarcelli in her capacity as manager may asse1i the privilege for Stanford.

Defendants' opposition was filed on behalf of Defendants Scracelli, Stanford, and Preservation

Holdings, LLC by Scarcelli and Preservation Holding's attorneys. 2 (Defs. Opp'n Mot. Compel

l.) The motion was co-signed on behalf of Stanford's separate counsel. (Id. at 11.) Therefore,

Stanford has sufficiently asserted the attorney-client privilege with regal'd to any of its attorney

fee's invoices that contain descriptions of confidential communications between Stanford and its

attorney. Stanford cannot assert the privilege for any of ScarcelWs personal legal bills as it was

likely not the client in those communications.

1 Whether Scarcelli has waived the privilege by submitting her personal attorney's fees invoices

to Stanford is discussed below.

2 Tt is not clear to the court why Preservation Holdings has joined Defendants' opposition.

Plaintiffs> motion to compel makes no mention of Preservation Holdings and does not seek to

compel the production of any documents from P1·eservation Holdings. (Pls, Mot. Compel l.)

Pluintiffs seek to compel only invoices paid by Stanford. (Id) Defendants assert in a footnote

that Plaintiffs also are seeking documents from Preservation Holdings that are protected by tlte

attorney-client privilege, (Defs. Opp'n Mot. Compel I.) Defendants provide no suppo1t for this

assertion and do not address P!'eservation Holdings further. The court declines to address

Preservation Holdings> claim of privilege.

7

E. Waiver of the Privilege

As noted above, a client waives the privilege if he or she "voluntarily discloses 01·

consents to the disclosure of any significant part of the privileged matter."· M.R. Evid. 510(a).

Plaintiffs contend that Scarcelli waived any privilege when she intermingled her legal bills with

Stanford's legal bills, (PJs. Mot. Compel 8-9.) In their opposition, Defendants point out that

Scarcelli is entitled to indemnification for any acts performed within the scope of her authority as

manager of Stanford under the -Operating Agreement. (Defs. Opp' n Mot. Compel 8); (see Defs.

Ex. A § 5.5(b).) Though unclear, it appears Defendants arc suggesting that Scarcelli submitted

her personal legal bills to Stanford for payment under this indemnification provision. If Scarcelll

has submitted her personal attorney fee's invoices to Stanford, then Scracelli may have waived

the attomey-client privilege by voluntarily disclosing the contents of confidential communication

with her personal attorney to Stanford. On the other hand, jf the invoices submitted to Stanford

describe confidential communications by Scarcelli in her role as manage1·, the privilege may not

have been waived as to those communications. However, neither party has provided the court

with sufficient evidence to make such a determination. 3

F. Defendants have not met their Burden

As discussed above, the party asserting the privilege has the burden of demonstrating its

applicability. Harris Mgmt., 2016 ME 166, ~ 24, 151 A.3d 7. Based on the l'ecord presently

before the court, Defendants Scarcelli and/or Stanford have not met that burden. In their

opposition, Defendants simply assert that invoices sought Plaintiffs "contain detained

descriptions of conversations and email communications between attorneys and Ms. Sca1·celli

regarding legal advice and reveal the specific topics or issues discussed. The invoices go far

3 There is no suggestion that Stanford has waived its privilege by disclosing any of its attorney

fee's invoices to a third-party.

8

beyond describing the general nature of the work performed by the attorneys." (Defs, Opp'n

Mot. Compel 4.) Defendant further assert that, even if the invoices contain some non-privileged

information, the non-privileged information is minimal and would not justify the undue and

expensive burden of redacting the fovoices. (Id. at 5 n.3.) Defendants also asse1t that invoice are

separately protected by the work-product doctrine because they "contain specific details about

the research and development of legal theories, opinions, and strategies for the client." (Id ~

10.)

Defendants have not provided the court with any affidavits, a privilege log, or other

supporting evidence, The court cannot deny Plaintiffs' motion based solely Defendants'

unsupported asse1tions in its opposition memorandum. Based on the present record, the comt is

unable to determine whethe1· the ·documents contain information protected by either the attorney­

client privilege or the work-product doctrine, whether any such privilege has been waived under

the circumstances, and whether redaction of privileged information would be an undue burden,

Therefore, the court shall require Defendants to produce the attorney's fees invoices for in

camera review so that the court may be able to make such determinations, They must produce

any document to which they assert a privilege and indicate which privilege, or both, they are

asserting as to it.

IV. Conclusion

Defendants shall submit for in camera review the attorney's fee invoices from Norman, !.

Hanson & DeTroy, LLC and the Bernstein Law Firm, LLC that were paid by Stanford

Management, LLC that Defendants assert are protected by the attorney-client-privilege and/or

work-product doctrine.

9

Pursuant to Maine R1,.1le Civil Pl'ocedure 79(a), the Clerk is hereby directed to incorporate

this Order by reference in the docket.

Dated C, / ') 0 I i 't-

M. Michaela Murphy .--·

Justice, Business and CJ 1sumer Court

f nterecl on the Docket ~ /·3 o / (l

Copies sent via MaH_Electronically_i'

10

Pamela W. Gleichman, et al. v. Rosa Scarcelli, et al.

BCD-CV-17-11

Pamela W. Gleichman and Karl Norberg

Plaintiffs

Counsel: John Campbell, Esq.

60 Mabel Street

Portland, ME 04103

Preservation Holdings, LLC and Rosa Sarcelli

Defendants

Counsel: George Dilworth, Esq.

84 Marginal Way, Suite 600

Portland, ME 04101-2480

Norman Hanson and Detroy, LLC

Defendant

Counsel: Clifford Ruprecht, Esq.

66 Pearl Street, Suite 200

Portland, ME 04101

Acadia Maintenance, LLC and Stanford Management, LLC

Defendant

Counsel: James R. Wagner, Esq.

343 Ocean House Road

Cape Elizabeth, ME 04107

STATE OF MAINE BUSINESS & CONSUMER COURT

CUMBERLAND, ss. LOCATION: PORTLAND

DOCKET NO. BCD-CV-17-11 ,/

PAMELA W. GLEICHMAN et al., )

)

Plaintiffs, )

)

v. ) ORDER ON DEFENDANT

) NORMAN HANSON & DETROY,

ROSA SCARCELLI, et al., ) LLCIS MOTION FOR SUMMARY

) JUDGMENT

Defendants. )

Defendant Nonnan Hanson & DeTroy, LLC ("NHD") has moved for sum~ary judgment

pursuant to M.R. Civ. P. 56(c) on the remaining claims brought against it by Plaintiffs Pamela W.

Gleichman and Karl Norberg, both individually and in his capacity as TTustee of the Scarcelli­

Norberg Holdings Trust ("SNH Trust") (hereafter collectively "Plaintiffs"). Plaintiffs opposed the

· motion, The Court heard oral argument on the motion on September 14, 2017, Counsel for both

parties appeared and were heard.

PROCEDURAL IllSTORY 1

L Pa1ties

This motion comes before the Court in the· context of a history of litigation between

Plaintiffs and Defendant Rosa Scarcelli, who is Pamela Gleichman 's daughter and Karl Norberg 1s

step-daughter. (Plaintiffs Statement of Additional Facts ("P.S.A.F.") at ,r I.) Ms. Gleiclunan is the

grantor and lifetime beneficiary of the SNH Trust; Mr. Norberg is its trnstee. (P.S.A.F. ,r 15.)

Ms. Gleichman founded two property companies: Defendant Stanford Management, LLC

1 The f&cts in this section are drawn frotn the pal'ties' Statements of Facts filed in support of their briefing on this

motion. The infol'mation in this section is meant solely to provide context fol' the procedural posture of this case and

nothing herein should be construed as a finding of fact by the Court.

1

("Stanford,,) and Defendant Acadia Maintenance, LLC (''Acadia"). (P.S.A.F. ~ 1.) Today, Ms.

Scarcel!i owns 51 % of Stanford; SNH Trust owns 49%. (Defendant's Statement of Undisputed

Material Facts (''S.M.F.',) at~ 22.) Acadia 1s ownership is disputed; Defendants claim it is owned

100% by Stanford while Plaintiffs allege Ms. Gleichman retains a 49% ownership interest in the

company. 2 (S.M.F. 1 21; Plaintiffs Statement of Facts in Dispute (' 1P.S.F.D.") at ~ 21.) Ms.

Scarcelii manages both companies. (~.S.A.F. ~1 1t 15.) NHD is a law firm that has served as legal

counsel to Ms. Scarcelli individually and on behalf of Stanford. (S,M.F. ~~ 6-8, 11-14.) rt is

disputed whether NI-ID has served as counsel to Acadia. 3 (S.M.F. ~ 20; P.S.F.D. ~ 20.)

II. NHD Motion for Judgment 011 the Pleadings and the Present Motion

Plaintiffs alleged various causes of action against NHD arising out of its representation of

Ms. Scarcelli, Stanford, and Acadia in the 22 counts of their Second Verified_Amended Complaint

("Amended Complaint"). NHD was granted judgment on the pleadings as to Count VIII

(conversion) and Count XI (abuse of process) of the Amended Complaint, and Count XVI

("punitive damages") was dismissed as to NHD, in the Comt's Order entered December 15, 2016,

granting in part and denying in part NHD's motion for judgment on the pleadings.

NHD now moves this Court to grant summary judgment in its favor on three of the

remaining Counts against it: Count XVII, which alleges professional negligence; Count XVIII,

which alleges both that NHD breached its own independent fiducia1y ,duty to Plaintiffs and that

NI-ID aided and abetted Ms. Scal'cel Ii in breaching her fiducimy duty to Plaintiffs; and Count XIX,

which alleges negligent infliction of emotional distress. See Amended Complaint.

2 The resolution of this disputed fact Is unnecessary in deciding the present motion.

3 This factual dispute is likewise immaterial to the present motion.

2

BACKGROUND FACTS

NHD was involved in a failed exercise at reconciliation between the parties to this

lawsuit in Fall 2008 whereby they attempted to bring some peace to their acrimonious

relationship by redrafting the Operating Agreements for Stanford and Acadia. (P.S.A.F, ~if 4-6.)

Majority ownership and control of these companies had been transferred to Ms. Scarcelli in

January of 2007. (P.S.A.F. ~ 1.) NHD claims that it was serving only as counsel to Ms. Scarcelli

in this process. (S.M.F. ~ 6.) Plaintiffs allege that it can be implied from the facts that they too

were represented by NHD in the redrafting exercise. (P.S.A.F. ~14-6.) NHD continued to

represent Ms. Scarcelli from 2008 until at least 2012; it is not clear from the record whether

NHD continues to· serve as counsel to Ms. Scarcelli personally at present on mattets apart from

this lawsuit. (S.M.F. ~~ 6, 8; P.S.A.F. 117-9, 35).

STANDARD OF REVIEW

Summary judgment is granted to a moving party whete "there is no genuine issue as to any

material fact" and the moving party "is entitled to judgment as a matter oflaw.'' M.R. Civ. P. 56(c).

A material fact is one capable of affecting the outcome of the litigation. Savell v. Duddy, 2016 ME

139, ~ 19, _ A.3d _. A genuine issue exists where thejmy would be required to "choose between

competing versions of the truth." MP Assocs. v. Liberty, 2001 lvffi 22, ~ 12, 771 A.2d 1040.

To survive a defendant's motion for summary judgment, the plaintiff must establish a

prima facie case for every element of the plaintiff's cause of action. See Savell, 2016 ME 139, ii

18, _ A.3d _. A plaintiff cannot create a factual dispute for purposes of defeating summary

judgment merely by raising "conclusory allegations, improbable references, and unsupported

speculation[,]" even where "concepts such as motive 01· intent are issue," Dyer v. D. 0. T., 2008 ME

106, ~ 14,951 A.2d 821.

3

DISCUSSION

I. DIRECT CLAIMS

All three remaining Counts against NHD involve direct claims.,i Count XVII also includes

a derivative claim whereby the Plaintiffs purport to bdng a suit for professional malpractice against

Defendant NBD on behalf of Defendant Stanford and Defendant Acadia; Count XVIII includes an

aiding and abetting claim whereby Plaintiffs allege that NHD aided and abetted Ms. Scarcelli in

breaching her fiduciary duty to Plaintiffs (collectively, the <llndirect Claims"). 5 For organizational

purposes, the Court will first discuss the direct claims of all three Counts before moving on to the

Indirect Claims.

A. Rules of Law: Attorney-Client Relationship and Fiduciary Duties Owed by Attorneys

to Third Pmties

"[A]n attorney-client relationship is created when (1) a person seeks advice or assistance

from an attorney, (2) the advice or assistance sought pertains to matters within the attorney's

professional competence, and (3) the attorney expressly or impliedly agrees to give or actually

gives the desired advice or assistance." Bd. o.f Overseers ofthe Bar v. lvlangan, 2001 ME 7> ,r 9,

763 A.2d 1189. An attorney-client relationship "may be implied from the conduct of the parties."

Bd. ofOverseers ofthe Bar v. Dineen., 500 A.2d 262, 264-65 (Me. 1985). An attorney for a business

entity does not have an attorney-client relationship with its officets, directo1·s, or shareholders

simply by virtue of its

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