Petition for Writ of Certiorari — Benistar Ltd. v. Cahaly (No. 08-397)

Supreme Court brief2008

Ask Donna

What actually matters in this document.

Text

Supreme Court, U.S.

TLE D

\OX No.og. 087 397 SEP 24 2008

OFFICE OF THE CLERK

IN THE

Supreme Court of the United States

BENISTAR LTD., BENISTAR EMPLOYER SERVICES

TRUST CORPORATION, BENISTAR ADMIN SERVICES,

INC., DANIEL CARPENTER, MOLLY CARPENTER,

and CARPENTER FINANCIAL GROUP LLC,

Petitioners,

GAIL A. CAHALY, JEFFREY M. JOHNSTON,

BELLEMORE ASSOCIATES, LLC, MASSACHUSETTS

LUMBER COMPANY, INC., JOSEPH IANTOSCA,

INDIVIDUALLY AND AS TRUSTEE OF THE FAXON

HEIGHTS APARTMENTS REALTY TRUST AND FERN

REALTY TRUST, and BELRIDGE CORPORATION,

Respondents.

On PETITION FOR A Writ oF CERTIORARI TO THE

SUPREME JUDICIAL COURT OF MASSACHUSETTS

PETITION FOR A WRIT OF CERTIORARI

JACK E. ROBINSON

Counsel of Record

Of Counsel: RENISTAR

2187 Atlantic Street

ARTHUR R. MILLER Stamford, CT 06902

1525 Massachusetts Avenue .

: (203) 969-6000

Cambridge, MA 02138

(617) 495-4111 Counsel for Petitioners

218317 g

QUESTION PRESENTED

For over 60 years, this Court’s decision in

International Shoe Co. v. Washington, 326 U.S. 310

(1945), requiring certain “minimum contacts” with the

forum State, has been an unwavering limitation on the

power of courts to exercise personal jurisdiction over

nonresident defendants consistent with the Due Process

Clause. An alarming trend has emerged in courts across

the country whereby personal jurisdiction is exerted

over nonresident defendants solely through the use of

the state law concept of jurisdictional veil piercing, in

place of undertaking the federal constitutional

“minimum contacts” analysis required by /nternational

Shoe and its progeny. The Supreme Judicial Court of

Massachusetts has now stretched this practice far

beyond its constitutiona] breaking point. The question

presented is:

Whether jurisdictional veil piercing, which depends

upon the vagaries and vicissitudes of state law, can be

the sole basis to exert personal jurisdiction over

nonresident defendants consistent with the Due Process

Clause?

LIST OF PARTIES AND RULE 29.6 STATEMENT

1. The following are parties to the proceeding in the

court below:

Gail A. Cahaly, Jeffrey M. Johnston, Bellemore

Associates, LLC, Massachusetts Lumber Company, Inc.,

Joseph Iantosca, individually and as trustee of the Faxon

Heights Apartments Realty Trust and the Fern Realty

Trust, and Belridge Corporation, Plaintiffs-Appellants.

Benistar Ltd., Benistar Employer Services Trust

Corporation, Benistar Admin Services, Inc., Daniel

Carpenter, Molly Carpenter, Carpenter Financial

Group, LLC, and Benistar Property Exchange Trust

Company, Inc., Defendants-Appellees and Cross-

Appellants.'

Merrill Lynch Pierce Fenner & Smith, Inc.,

Defendant-Appellee.*

UBS Financial Services Inc. f/k/a PaineWebber Inc.,

Defendant-A ppellee.®

' Only Benistar Property Exchange Trust Co., Inc. did not

contest personal jurisdiction and, therefore, is not a party to

this proceeding.

* On September 15, 2008, Bank of America Corporation

announced that it had agreed to acquire Merrill Lynch. The

transaction is expected to close early in the first quarter of 2009.

* PaineWebber, although a defendant-appellee in the

Appeals Court of Massachusetts (“Appeals Court”), was not a

party to the appeal in the Supreme Judicial Court of

Massachusetts (“SJC”).

100

2. Benistar Ltd., Benistar Employer Services Trust

Corporation, Benistar Admin Services, Inc., and

Carpenter Financial Group, LLC, have no parent

corporations, and no publicly held company owns 10%

or more of their stock or membership interests.

TABLE OF CONTENTS

Page

QUESTION PRESENTED .................. i

LIST OF PARTIES AND

RULE 29.6 STATEMENT ................ ii

TABLE OF CONTENTS ............cceeeees iv

TABLE OF APPENDICES .................. vi

TABLE OF CITED AUTHORITIES ......... Vii

PUD cc ccescccccascescesetecse 1

Ne cee pees wee ee vas 1

RELEVANT CONSTITUTIONAL AND

STATUTORY PROVISIONS .............. 2

cass onc owe he deeawees kus 3

EE Sine enweessccecuseveeveewecest 4

Contents

REASONS FOR GRANTING THE PETITION

I. The Minimum Contacts Analysis of

International Shoe is Constitutionally

Required for all Determinations of

Personal Jurisdiction. ...............-. 16

II. The Substantial Confusion Among

Federal and State Courts Warrants

UE See GIs ote seeveceeseces 25

PET sees ucuvscedesveccteeankianss 29

TABLE OF APPENDICES

Appendix A — Amended Order And

Memorandum Of The Commonwealth Of

Massachusetts, Supreme Judicial Court

ee ccc rccevececere

Appendix B — Opinion Of The Supreme Judicial

Court Of Massachusetts, Suffolk Dated May

SEE ee ee eee

Appendix C — Opinion Of The Appeals Court

Of Massachusetts, Suffolk Dated April 17,

tlc wtedebduwenwe eenddecnesee ss

Appendix E — Judgment Of The Supreme Court

Of The State Of New York, County Of New

York, Commercial Division Dated And Filed

ee ek ob uae 6 6hen eee nee

Appendix F — Joint Stipulation Regarding

Personal Jurisdiction Dated March 4, 2003 ...

Page

87a

vii

TABLE OF CITED AUTHORITIES

Page

Cases:

“Automatic” Sprinkler Corp. of America v.

Seneca Foods Corp., 280 N.E.2d 423 (1972) ... 17

Burger King Corp. v. Rudzewicz, 471 U.S. 462

ict hGiae dp kenrumeliian te wbid odes anes 17, 21

Cahaly v. Benistar Property Exchange Trust

Co., Inc., 842 A.2d 1113 (Conn. 2004) ........ 7

Calder v. Jones, 465 U.S. 783 (1984) ...... 13, 20, 21

Cannon Mfg. Co. v. Cudahy Packing Co., 267

ED. eebntcddscnwescsovadan kh 18, 19, 26

Dakota Indus., Inc. v. Ever Best Ltd., 28 F.3d

IES. nc ncevugecds secsanandeds 27

Epps v. Stewart Info. Svcs. Corp., 327 F3d 642

EE Sa ce elo. auvendaee de oiucke wee 27

Erie Railroad Co. v. Tompkins, 304 U.S. 64

Di dhs én06skhecuhadsaseweondadkkdanenes 19

Hannon v. Beard, 524 F.3d 275 (1st Cir. 2008) ... 17

Hanson v. Denckla, 357 U.S. 235 (1958) ....... 17

Harlow v. Children’s Hospital, 432 F.3d 50 (1st

DET: Ri eccuvendndeutdices eceakewwenes 18

Vill

Cited Authorities

Page

Helicopteros Nacionales de Colombia, S.A. v.

Bs Se es ED ck weeccnndacccecees 17

Intech, Inc. v. Triple “C” Marine Salvage, Inc.,

826 N.E.2d 194 (Mass. 2005) ............... 24

International Shoe Co. v. Washington, 326 U.S.

ie it ea ea ieee el ee beet passim

Keeton v. Hustler Magazine, Inc., 465 U.S. 770

I i hai ta ale Te ee 13, 21

Miller v. Miller, 861 N.E.2d 393 (Mass. 2007) .. 24

Milliken v. Meyer, 311 U.S. 457 (1940) ........ 17

PHC-Minden, L.P. v. Kimberly-Clark Corp. 235

ee Is ok cu dddeawekeeeenes 28

Phillips v. Prairie Eye Center, 580 F.3d 22

it te ee a oe 18

Rush v. Savchuck, 444 U.S. 320 (1980) ....... 13, 21

Shaffer v. Heitner, 433 U.S. 186 (1977) ........ 16

United States v. Scophony Corp., 333 U.S. 795

EN i knkinnckedansedeceevensanisaseneous 20

Cited Authorities

Page

Wells Fargo & Co. v. Wells Fargo Express Co.,

566 F.2d 406 (9th Cir. 1977) .......ccccccces 28

World-Wide Volkswagen Corp. v. Woodson, 444

rk kd kv eondenad ena ddeks 13,17

Statutes:

MASS. GEN. LAWS ANN. ch. 223A, § 3 (2000) .. 3

NEV. REV. STAT. ANN. § 645G.300(2) (2008) .. 6

KR Ee ee ere 1

Rules:

Pes Be. CR TB BRIG anne cc cccccccscncccce 9

ae I GA BBE TID ow cc ccccccccccccsens 13

United States Constitution:

Fourteenth Amendment ..................05. 2

Cited Authorities

Page

Other Authorities:

IN 5 on oc cccccwsnebecesoees 7

SB C.ER. § 1.1GB1GR)-1NM|]) 2... ccccccccccccs 5

26 C.E-R. § 1.1031(k)-1(k)(2) «2.2... 2. eee eens 9

ech eck nes ib achindeouhe’ 5

SE vn icn spivanwabventecenenbace 4,7

ere Te eT ree 5

Phillip I. Blumberg, The Law of Corporate

Groups: Procedural Problems in the Law of

Parent and Subsidiary Corporations (1983) ... 25

Daniel G. Brown, Comment, Jurisdiction Over

a Corporation on the Basis of the Contacts of

an Affiliated Corporation: Do You Have to

Pierce the Corporate Veil?,61 U. CIN. L. REV.

EE tteiute ens kaneud tkeuseeeduenes 15, 16

Frank H. Easterbrook & Daniel R. Fischel,

Limited Liability and the Corporation, 52

Cl. CEE. Bis HU PORES ccc ccescvcccccese 14

Lonnie S. Hoffman, The Case Against Vicarious

Jurisdiction, 152 U. PA. L. REV. 1023 (2004)

Cited Authorities

Joseph Iantosca, et al. v. Merrill Lynch Pierce

Fenner & Smith, Inc., Civil Action No. 08-

0775-D, Suffolk Superior Court (filed Feb. 15,

DES Lebicies sevnse ves neeskdhaebeeddees

Press Release, Commission Denies Petition for

Rulemaking Related to “Qualified

Intermediaries” Under Internal Revenue

Code Section 1031, FTC (Aug. 26, 2008),

available at http://www.ftc.gov/opa/2008/08/

qis.shtm (last visited Sep. 23, 2008) .........

Jennifer A. Schwartz, Piercing the Corporate

Veil of an Alien Parent for Jurisdictional

Purposes: A Proposal for a Standard that

Comports With Due Process, 96 CAL. L. REV.

Page

WOE ED he be esenccecesscckéeduetes 15-16, 25, 26

John A. Swain & Edwin E. Aguilar, Piercing the

Veil to Assert Personal Jurisdiction Over

Corporate Affiliates: An Empirical Study of

the Cannon Doctrine, 84 B.U. L. REV. 445

ESC ne eee ee ee ee

TREASURY INSPECTOR GENERAL FOR

TAX ADMINISTRATION, U.S. DEP’T OF

TREASURY, PUBLN NO. 2007-30-172, Like-

kind Exchanges Require Oversight to Ensure

Taxpayer Compliance 7 n. 14 (Sep. 17, 2007)

(“2007 Treasury Report”) ..................

Cited Authorities

Page

William A. Voxman, Jurisdiction Over a Parent

Corporation in it’s Subsidiary’s State of

Incorporation, 141 U. PA. L. REV. 327 (1992)

(en EEE ARs eke aks eh ea ene ae weeweea se 16

4A Wright & Miller, Federal Practice and

Procedure § 1069.4 (3d ed. 2002) ........... 22

PETITION FOR A WRIT OF CERTIORARI

Petitioners Benistar Ltd., Benistar Employer

Services Trust Corporation, Benistar Admin Services,

Inc., Daniel Carpenter, Molly Carpenter, and Carpenter

Financial Group, LLC (collectively, “Benistar” or the

“Benistar defendants”), respectfully petition for a writ

of certiorari to the Supreme Judicial Court of

Massachusetts (“SJC”).

OPINIONS BELOW

The opinion of the SJC (App. 11la-52a) is reported

at 885 N.E.2d 800. The amended order and

memorandum cf the SJC, dealing solely with Benistar’s

personal jurisdiction arguments (App. 1la-10a), is

unreported. The opinion of the Appeals Court (App. 53a-

76a) is reported at 864 N.E.2d 548. The relevant trial

court orders are unreported.

JURISDICTION

The opinion of the SJC was issued on May 8, 2008.

App. lla. The SJC issued an amended order and

memorandum, dealing solely with Benistar’s personal

jurisdiction arguments, denying Benistar’s timely

petition for rehearing on June 26, 2008. App. 10a. This

Court’s jurisdiction is invoked under 28 U.S.C. § 1257(a).

RELEVANT CONSTITUTIONAL

AND STATUTORY PROVISIONS

The Due Process Clause of the Fourteenth

Amendment to the United States Constitution provides,

in relevant part: “No State shall * * * deprive any

person of life, liberty, or property, without due process

of law * * *.” U.S CONST, amend. XIV, § 1.

The Massachusetts long-arm statute provides, in

relevant part:

§ 3. Personal Jurisdiction Based Upon Acts

or Conduct Within Commonwealth.

A court may exercise personal jurisdiction

over a person, who acts directly or by an agent,

as to a cause of action in law or equity arising

from the person’s

(a) transacting any business in this

commonwealth;

(b) contracting to supply services or things

in this commonwealth;

omission in this commonwealth;

(d) causing tortious injury in this

commonwealth by an act or omission outside

this commonwealth if he regularly does or

solicits business, or engages in any other

persistent course of conduct, or derives

substantial revenue from goods used or

consumed or services rendered, in this

commonwealth * * *.

MASS. GEN. LAWS ANN. ch. 223A, § 3 (2000).

INTRODUCTION

This case raises important issues of constitutional

law that are litigated with great frequency in federal

and state courts across the country. It also presents a

valuable and ripe opportunity for this Court to provide

much-needed clarity concerning the limits imposed by

the Due Process Clause on the power of a court to

exercise personal jurisdiction over nonresident

defendants.

The Supreme Judicial Court of Massachusetts

(“SJC”) held that Massachusetts may hale Delaware

and Connecticut citizens into court to defend a contract

and tort action, even though they had no contacts in

their own right with Massachusetts. Plaintiffs even

stipulated in writing that none of the elements of the

Massachusetts long-arm statute were satisfied as to

certain of the defendants. The SJC was able to reach

this flawed result only by relying on the Massachusetts

contacts of Benistar Property Exchange Trust Co., Inc.

(“BPE”), a corporate affiliate of petitioners, applying

Massachusetts law to pierce the corporate veil of BPE,

and then attributing BPE’s Massachusetts contacts to

petitioners. At no time, however, did the SJC conduct

the federal constitutional “minimum contacts” analysis

required by /nternational Shoe and its progeny.

The SJC’s far-reaching and misguided decision

presents an important issue concerning the

administration of justice across the country: whether

there exists an exception to this Court’s “minimum

contacts” requirement for personal jurisdiction under

the Due Process Clause, in cases where the corporate

veil can be pierced as a matter of state law? This Court

has never addressed the issue, but “jurisdictional veil

piercing” is used with increasing frequency in the federal

and state courts to circumvent this Court’s repeated

holdings that personal jurisdiction over a nonresident

defendant requires proof of that defendant’s “minimum

contacts” with the forum State. Whether and when such

jurisdictional veil piercing is appropriate presents

fundamental questions of civil procedure and due

process, over which the federal and state courts are

hopelessly confused, and about which commentators

have been calling for this Court’s guidance for decades.

It is time for this Court to decide the matter once and

for all.

STATEMENT

1. Factual Background. The relevant facts are

undisputed. From 1998 until the end of 2000, BPE acted

as a “qualified intermediary” for like-kind property

exchanges under I.R.C. § 1031(a) (App. 54a), and

successfully completed over $100 million of exchanges.

SJC App. 1495-98; 6912; 6979-7036; 7101-7526; 7533-91;

7602-79; 7823-7973; 8347-96; 8440-42; 10291-10605

(Merrill Lynch and PaineWebber account statements).

Under normal circumstances, when a taxpayer sells an

investment property, tax must be paid on the gain. An

I.R.C. § 1031 Tax Deferred Exchange allows an

exception to payment of the capital gains tax. When a

taxpayer (called an “exchangor”) sells investment real

estate and replaces it with different investment real

estate using an exchange, the payment of capital gains

tax normally required on such a sale can be deferred.

As long as a property used for investment is replaced

with similar property within 180 days, no gain is

recognized at that time; rather, the gain is deferred until

the eventual sale of the replacement property. I.R.C. §

1031(a)(3). However, upon the sale of the relinquished

property, “Lif taxpayers take possession of the cash, they

are disallowed the tax advantages of the like-kind

exchange provisions.” TREASURY INSPECTOR

GENERAL FOR TAX ADMINISTRATION, U.S.

DEP’T OF TREASURY, PUBLN NO. 2007-30-172,

Like-kind Exchanges Require Oversight to Ensure

Taxpayer Compliance 7 n. 14 (Sep. 17, 2007) (“2007

Treasury Report”). In order to avoid taking possession

of the cash from the sale of the relinquished property,

exchangors normally rely on the “safe harbor” provided

by 26 C.F-R. § 1.1031(k)-1(g)(4), in which the exchangor

utilizes the services of a “qualified intermediary” (such

as BPE) to invest the cash until the purchase of the

replacement property. “(1 |f taxpayers do not specifically

follow the rules for like-kind exchanges, they could be

held liable for taxes, penalties, and interest on their

transactions.” 2007 Treasury Report at 1.

2. In its written agreements with the exchangors,

BPE promised to invest the cash during the 180-day

holding period with Merrill Lynch and later

PaineWebber, and to return the principal plus either

3% or 6% interest based on the exchangor’s selection.

App. 55a. BPE’s agreements with the exchangors did

not limit the kinds of investments that BPE could make

in order to generate the necessary 3% or 6% return.

SJC App. 6508; 6284 (BPE agreements). Nor is there

any statute or regulation that governs how § 1031

proceeds can be invested.*

3. Petitioner Daniel Carpenter (BPE’s chairman)

caused BPE to invest all client funds in stock options

and other securities offered through Merrill Lynch and

later PaineWebber. App. 55a. During the historic stock

market collapse of December 2000, PaineWebber

mishandled BPE’s investment accounts and caused

BPE to sustain losses of approximately $9 million of the

funds of seven clients, as well as over $2.4 million of

Carpenter’s own funds that he had invested in BPE.

App. 55a; 79a. In January 2001, the seven clients whose

funds were lost (respondents herein) sued BPE, BPE

president Martin L. Paley, Merrill Lynch, PaineWebber,

and the Benistar defendants in Massachusetts state

court on contract and tort claims. One of the clients also

sought to obtain prejudgment remedies against

Benistar in Connecticut, where Benistar is located.

However, Benistar prevailed in the Connecticut

‘ In August 2008, the Federal Trade Commission (“FTC”)

denied a petition to adopt reguiutions that would have imposed

restrictions on how § 1031 funds can be invested. See Press

Release, Commission Denies Petition for Rulemaking Related

to “Qualified Intermediaries” Under Internal Revenue Code

Section 1031, FTC (Aug. 26, 2008), available at http://

www.ftc.gov/opa/2008/08/qis.shtm (last visited Sep. 23, 2008).

The § 1031 industry remains unregulated at the federal level,

and only one State—Nevada—has (just recently) enacted laws

on the state level. See NEV. REV. STAT. ANN. § 645G.300(2)

(2008).

Supreme Court with a unanimous decision in its favor.

Cahaly v. Benistar Property Exchange Trust Co., Inc.,

842 A.2d 1113 (Conn. 2004).

4. In the Massachusetts action, the plaintiffs blamed

BPE’s investment strategy for the losses,

notwithstanding that investing in stock options is not

prohibited by I.R.C. § 1031(a), 26 C.FR. § 1.1031(k)-1,

case law, regulation, or—most importantly—BPE’s

written contracts with the plaintiffs. BPE, however,

attributed the losses to PaineWebber’s mishandling of

BPE’s investment accounts. As a result, BPE filed an

arbitration claim against PaineWebber. In December

2005, the arbitrators unanimously awarded BPE $12.6

million against PaineWebber. App. 77a-84a. In April

2007, the arbitration award was upheld on appeal and

final judgment was entered against PaineWebber. App.

85a-86a. In May 2008, after PaineWebber abandoned

further appeals of the award, BPE voluntarily assigned

the entire $12.5 million settled judgment to the plaintiffs,

thereby making them whole (and then some) on their

$9 million in losses.°

5. BPE president Martin Paley resided in

Massachusetts and BPE is a Delaware corporation that

maintained its offices in Paley’s home. SJC App. 1622.

From those offices, Paley solicited and obtained clients

® In February 2008, the plaintiffs filed a new action in

Massachusetts state court solely against Merrill Lynch arising

out of the same events. In their new complaint, the plaintiffs

make no allegations of wrongdoing against Benistar. See Joseph

lantosca, et al. v. Merrill Lynch Pierce Fenner & Smith, Inc.,

Civil Action No. 08-0775-D, Suffolk Superior Court (filed Feb.

15, 2008).

for BPE. SJC App. 1623. Paley handled all of BPE’s

marketing, had the exclusive interactions and

communications with the clients, solicited the clients,

and executed all of the transaction documents with the

clients. Jd. It is undisputed that both Paley and BPE

have sufficient minimum contacts with Massachusetts

to permit suit against them. By contrast, petitioners

Daniel and Molly Carpenter (Daniel’s spouse and an

officer of BPE) resided and worked in Connecticut. SJC

App. 8559; 8866. Daniel had no contact with the clients

and simply invested the clients’ funds after they had

been forwarded to BPE’s accounts, first at Merrill

Lynch (in New York) and later at PaineWebber (also in

New York). SJC App. 1625. Molly Carpenter was an

officer of BPE in name only—merely to allow BPE to

establish its Merrill Lynch and Paine Webber investment

accounts (which required the signatures of at least two

officers), lived and worked in Connecticut, and had no

contact with the clients or Massachusetts. SJC App.

3762; 3931; 4026; 4092-93 (plaintiffs’ testimony that they

never met with, spoke to, or communicated with Molly).

All of the remaining Benistar defendants are entities

that are organized under the laws of the State of

Delaware and maintain their principal places of business

in Connecticut. SJC App. 1630; 1632; 3140-41; 3148.

None of the petitioners were domiciled in

Massachusetts, maintained offices in Massachusetts,

transacted any business in Massachusetts, had any

contacts with Massachusetts, or otherwise engaged in

any acts enumerated in the Massachusetts long-arm

statute. App. 87a-90a; SJC App. 5819.

Ay eal

Dod

6. Procedural Background. On March 29, 2001,

Benistar Ltd., Daniel Carpenter and Molly Carpenter

filed in the trial court a motion to dismiss for lack of

personal jurisdiction pursuant to Mass. R. Civ. P.

12(b)(2).° Dkt. 29. By order dated April 30, 2001, the trial

court deferred decision on the motion pending

jurisdictional discovery. Dkt. 33. In a memorandum and

order dated November 21, 2001, the trial court denied

these Benistar defendants’ motion to dismiss. Dkt. 105.

On February 7, 2002, the remaining petitioners filed

in the trial court a motion to dismiss for lack of personal

jurisdiction pursuant to Mass. R. Civ. P. 12(b)(2).

Dkt. 149. By memorandum and order dated March 12,

2002, the trial court denied the motion. On August 29,

September 3, and September 10, 2002, all petitioners

filed in the trial court motions for reconsideration of the

denial of their motions to dismiss for lack of personal

jurisdiction, and all such motions for reconsideration

were denied. Dkts. 219-21, 224.

The trial began in November 2002 and was divided

into three phases. During the first phase (jury), the trial

court directed a verdict in favor of Molly Carpenter on

all but one cause of action. The sole remaining claim

against her, breach of fiduciary duty, was allowed to go

to the jury, notwithstanding that no fiduciary

relationship existed as a matter of. federal law.

See 26 C.F-R. § 1.1031(k)-1(k)(2) (disqualifying fiduciaries

from acting as qualified intermediaries). In December

° “(TJhe following defenses may at the option of the pleader

be made by motion: (2) Lack of jurisdiction over the person.”

Mass. R. Civ. P 12(b)(2).

2002, the jury returned a verdict against BPE, Daniel

Carpenter, Molly Carpenter, Paley, and Merrill Lynch

on all remaining claims in the amount of $8.6 million.

App. 13a.’

In March 2003, the plaintiffs stipulated in writing

that they had no dealings with most of the Benistar

defendants, and that none of the elements of the

Massachusetts long-arm statute were satisfied as to

these defendants. App. 87a-90a. Notwithstanding this

stipulation, the trial court refused to dismiss all claims

against these Benistar defendants for lack of personal

jurisdiction.

In September 2003, at the conclusion of the second

(non-jury) phase of the trial, the trial court awarded

plaintiffs double damages and attorneys’ fees against

BPE, Daniel Carpenter, and Paley, but significantly

found that Molly Carpenter was not liable for double

damages because there was “no evidence that [Molly’s]

? Within an hour after the verdict, in a story reported in

the Massachusetts Lawyers Weekly, two jurors telephoned

plaintiffs’ counsel, informed counsel that the entire jury was

having “some beers” at a bar in downtown Boston, and invited

all of the plaintiffs’ attorneys to join them. App. 67a. Despite

this shocking development, the trial court denied Benistar’s

motion te conduct an evidentiary hearing into possible jury

misconduct, and also denied Benistar’s motion for a new trial.

Id. The Appeals Court found that the jurors’ actions were

merely “inappropriate,” id., and held that “({t]here was no error

or abuse of discretion,” id., in the trial court’s failure to

investigate this outrageous and obviously prejudicial conduct.

The trial court did, however, grant Merrill Lynch’s motion for

judgment notwithstanding the verdict on different grounds.

conduct occurred primarily or substantially in

Massachusetts, .. . and no evidence connected Molly

with the plaintiffs or with Massachusetts in any but the

most desultory way.” Trial Ct. Order at 9 (Sep. 24, 2003).

Yet, in light of this finding, the trial court refused to

grant Molly Carpenter’s renewed motion to dismiss for

lack of personal jurisdiction. Dkt. 323. The trial court

then found in the third phase of the trial (also non-jury)

that the corporate veil of BPE should be pierced in order

to hold the remaining Benistar defendants substantively

liable on the jury’s verdict.

7. On appeal to the Appeals Court, all petitioners

challenged the trial court’s exercise of personal

jurisdiction over them. Benistar App. Ct. Br. 18-30;

Benistar App. Ct. Reply Br. 4-11. In its opinion, the

Appeals Court rejected Benistar’s arguments regarding

personal jurisdiction, holding that “(t]he plaintiffs’

theory of personal jurisdiction was necessarily

intertwined with the merits of their claim that corporate

disregard was appropriate in this case.” App. 66a.

On further appeal to the SJC, all petitioners once

again challenged the trial court’s exercise of personal

jurisdiction over them. Benistar SJC Br. 20-36; Benistar

SJC Reply Br. 16-19. In its initial 22-page opinion, which

focused almost exclusively on Merrill Lynch’s claims, the

SJC did not analyze Benistar’s jurisdictional arguments

at all, and rather dismissively devoted only one

paragraph to the remainder of Benistar’s claims.

App. 5la-52a. As a result, Benistar filed a timely petition

for rehearing in the SJC, which was denied on June 26,

2008, in an amended order and memorandum that dealt

solely with Benistar’s personal jurisdiction arguments.

App. la-10a. The SJC held:

The fundamental argument of the Benistar

defendants in their petition is that the

determination of personal jurisdiction should

be made before and not in light of the trial

judge’s findings on piercing the corporate

veil. This is not the law under either the

Massachusetts long-arm statute or the Due

Process [C]lause.

App. 7a.

The SJC did not hold that the Benistar defendants

have “minimum contacts” with Massachusetts sufficient

to render the assertion of jurisdiction over them fair,

just, and reasonable. Instead, the SJC simply

determined that because personal jurisdiction existed

over BPE, and the corporate veil between BPE and the

Benistar defendants could be pierced as a matter of

Massachusetts state law, that BPE’s forum contacts with

Massachusetts could simply be attributed to the

Benistar defendants.

8. Preservation of Federal Questions. Benistar has

consistently raised the federal questions sought to be

reviewed in this matter numerous times in the trial court

(Dkt. 29; 149; 219-21), the Appeals Court (Benistar App.

Ct. Br. 18-30; Benistar App. Ct. Reply Br. 4-11), and the

SJC (Benistar SJC Br. 20-36; Benistar SJC Reply Br.

16-19). As a result, the federal questions raised herein

were timely and properly raised below, and this Court

has jurisdiction to review the judgment of the SJC on a

writ of certiorari. Rule 14.1(g)(i).

REASONS FOR GRANTING THE PETITION

This Court has repeatedly held that personal

jurisdiction cannot be asserted unless the nonresident

defendant has minimum contacts with the forum State

“such that he should reasonably anticipate being haled

into court there,” World-Wide Volkswagen Corp. v.

Woodson, 444 U.S. 286, 297 (1980), and that “[eJach

defendant’s contacts with the forum State must be

assessed individually.” Calder v. Jones, 465 U.S. 783, 790

(1984). See also Keeton v. Hustler Magazine, Inc., 465

U.S. 770, 781 n.13 (1984) (“Each defendant’s contacts

with the forum State must be assessed individually.”);

Rush v. Savchuk, 444 U.S. 320, 332 (1980) (“The

requirements of Jnternational Shoe, however, must be

met as to each defendant over whom a state court

exercises jurisdiction.”). Notwithstanding this Court’s

clear and repeated holdings, however, federal and state

courts frequently permit the assertion of personal

jurisdiction in circumstances where such contacts are

not present, on the basis of the metaphysical concept of

“jurisdictional veil piercing” that this Court has never

endorsed.

“{T he use of veil piercing for jurisdictional purposes

is unwarranted as a matter of precedent and unwise as

a matter of policy.” Lonnie S. Hoffman, The Case Against

Vicarious Jurisdiction, 152 U. PA. L. REV. 1023, 1032

(2004). When this Court’s precedents are properly

understood, the doctrine of jurisdictional veil piercing

is both unnecessary and pernicious in its application. In

cases where it produces appropriate results, jurisdiction

might have been founded directly on the defendant’s

own contacts with the forum State. When, for example,

officers, employees, or shareholders of a corporate

enterprise deliberately conspire to cause harm in

another State, personal jurisdiction will generally be

appropriate on the basis of their individual activities

directed at that State. If, however, a rogue employee

commits harm in some distant State, that State cannot

exert personal jurisdiction over a shareholder in the

company unless he “purposefully availed” himself of the

privilege of doing business there. Jurisdiction over that

shareholder is plainly inappropriate under this Court’s

precedents. And the fact that the corporate veil might

be pierced for unrelated state law reasons does not

increase or decrease his relevant forum contacts one

iota. Jurisdictional veil piercing improperly makes

personal jurisdiction turn on state law merits doctrines

that are irrelevant to the purposes animating the Due

Process law of personal jurisdiction—and are

notoriously vague and arbitrary to boot. As Judge

Easterbrook has noted: “‘Piercing’ seems to happen

freakishly. Like lightning, it is rare, severe, and

unprincipled.” Frank H. Easterbrook & Daniel R.

Fischel, Limited Liability and the Corporation, 52 U.

CHI. L. REV. 89, 89 (1985).

In this case, the plaintiffs never attempted to show

that the Benistar defendants have any genuine personal

connection to Massachusetts. Indeed, the plaintiffs

affirmed in writing that they had no evidence of such

contacts and no intention of introducing any. App. 87a-

90a. Petitioners’ motions to dismiss for lack of personal]

jurisdiction should have been granted by the

Massachusetts trial court, and the decisions of the

Appeals Court and the SJC to affirm the denial of those

motions should be reversed and vacated by this Court.

Instead, the Massachusetts courts exerted authority

over the Benistar defendants on the basis of the

Massachusetts contacts of BPE, without any genuine

inquiry into whether (by joint action with BPE or

otherwise) they purposefully directed their actions at

Massachusetts in a manner sufficient to support

jurisdiction there.*

Federal and state courts, as well as legal

commentators, are hopelessly confused about whether,

and when, the forum contacts of one defendant can be

attributed to another on the basis of veil piercing.

“When the haze of state jurisdictional law collides with

the metaphor-filled fog of the ‘piercing the corporate

veil’ doctrine, the result is, predictably, a smog of the

thickest variety.” Daniel G. Brown, Comment,

Jurisdiction Over a Corporation on the Basis of the

Contacts of an Affiliated Corporation: Do You Have to

Pierce the Corporate Veil?, 61 U. CIN. L. REV. 595, 595

(1992). This Court should seize this opportunity to clear

the jurisprudential smog in this area because “[n]Jeither

state nor federal courts have made clear the situations

in which they will exercise jurisdiction over an out-of-

state corporation based on the presence of an affiliated

corporation within the forum.” /d.; see also, e.g., Jennifer

A. Schwartz, Piercing the Corporate Veil of an Alien

* In fact, one of the plaintiffs (Bellemore Associates, LLC)

is located in New Hampshire (SJC App. 6314), so it did not even

feel the effects of the investment losses in Massachusetts.

Parent for Jurisdictional Purposes: A Proposal for a

Standard that Comports With Due Process, 96 CAL. L.

REV. 731, 744 (2008) (“Unfortunately, the Supreme

Court has not yet considered the problem of veil-piercing

for jurisdictional purposes in light of its ruling in Asahi

[Metal Indus. Co., Ltd. v. Sr: perior Court, 480 U.S. 102

(1987)}.”); William A. Voxman, Jurisdiction Over a

Parent Corporation in it’s Subsidiary’s State of

Incorporation, 141 U. PA. L. REV. 327, 370 (1992) (“Part

of the confusion surrounding the question of when the

exercise of jurisdiction over a parent corporation based

on its ownership of a subsidiary is constitutionally valid

is due to the lack of specific United States Supreme

Court guidance in this area.”). National uniformity and

clarity are sorely needed in this area of the law. “In light

of the confusion among the courts concerning the

authority of states to exercise jurisdiction over

corporations on the basis of the activities of affiliated

corporations, the United States Supreme Court should

resolve the issue.” Brown, 61 U. CIN. L. REV. at 618.

I. The Minimum Contacts Analysis of International

Shoe is Constitutionally Required for all

Determinations of Personal Jurisdiction.

This Court has never held that jurisdiction can be

predicated on piercing the corporate veil. Instead, it has

articulated a simple, universal, two-part test for

determining personal jurisdiction. First, the exercise of

jurisdiction over nonresident defendants must be

authorized by the forum State’s long-arm statute.

Shaffer v. Heitner, 433 U.S. 186, 216 (1977). Second, the

defendant must have “certain minimum contacts with

[the forum State] such that the maintenance of the suit

does not offend ‘traditional notions of fair play and

substantial justice.’” International Shoe Co. v.

Washington, 326 U.S. 310, 316 (1945) (quoting Milliken

v. Meyer, 311 U.S. 457, 463 (1940)). Minimum contacts

generally require “‘some act by which the defendant

purposefully avails itself of the privilege of conducting

activities within the forum State, thus invoking the

benefits and protections of its laws,”” Burger King Corp.

v. Rudzewicz, 471 U.S. 462, 475 (1985) (quoting Hanson

v. Denckla, 357 U.S. 235, 253 (1958)), “‘such that he

should reasonably anticipate being haled into court

there.’” Jd. at 474 (quoting World-Wide Volkswagen

Corp., 444 U.S. at 297). When a forum State’s long-arm

statute is co-extensive with the outer limits of due

process, a court may sidestep the statutory inquiry and

proceed directly to the constitutional analysis. Hannon

v. Beard, 524 F.3d 275, 280 (1st Cir. 2008). The SJC has

interpreted the Massachusetts long-arm statute,

enacted in 1968, “as an assertion of jurisdiction over the

person to the limits allowed by the Constitution of the

United States.” “Automatic” Sprinkler Corp. of

America v. Seneca Foods Corp., 280 N.E.2d 423, 424

(1972).

This Court has recognized different thresholds for

minimum contacts, depending on whether the

jurisdiction asserted is “specific” or “general” in nature.

Specific jurisdiction permits the adjudication of only

those claims that relate to or arise out of a defendant’s

contacts with the forum. Helicopteros Nacionales

de Colombia, S.A. v. Hall, 466 U.S. 408, 414 n.8 (1984)

(“It has been said that when a State exercises personal

jurisdiction over a defendant in a suit arising out of or

related to the defendant’s contacts with the forum, the

State is exercising ‘specific jurisdiction’ over the

defendant.”). In contrast, “[w]hen a State exercises

personal jurisdiction over a defendant in a suit not

arising out of or related to the defendant’s contacts with

the forum, the State has been said to be exercising

‘general jurisdiction’ over the defendant.” Jd. at 415 n.9.

“For specific jurisdiction, the constitutional analysis is

divided into three categories: relatedness, purposeful

availment, and reasonableness.” Phillips v. Prairie Eye

Center, 530 F:3d 22, 27 (1st Cir. 2008). On the other hand,

“(t]he standard for evaluating whether . . . contacts

satisfy the constitutional general jurisdiction test is

considerably more stringent than that applied to

specific jurisdiction questions.” Harlow v. Children’s

Hospital, 482 F.3d 50, 64 (1st Cir. 2005).

Despite the routine and pervasive importance of the

issue in civil litigation, this Court has said remarkably

little about how the “minimum contacts” analysis should

proceed in cases involving corporations. The seminal

case is Cannon Mfg. Co. v. Cudahy Packing Co., 267 U.S.

333 (1925), in which a Maine corporation was sued in

North Carolina on the basis of activities conducted by a

wholly-owned subsidiary that “[t]hrough ownership of

the entire capital stock and otherwise, the defendant

dominates the Alabama corporation, immediately and

completely; and exerts its control both commercially and

financially in substantially the same way .. . as it does

over those selling branches or departments of its

business not separately incorporated .. .” Jd. at 335.

However, “(t]he existence of the Alabama company as a

distinct corporate entity is, however, in all respects

observed. Its books are kept separate. All transactions

between the two corporations are represented by

appropriate entries in their respective books in the same

way as if the two were wholly independent corporations.”

Id. This Court held that because [t]he corporate

separation, though perhaps merely formal, was real” and

“was not pure fiction,” the North Carolina contacts of

the subsidiary could not be attributed to the parent

corporation. /d.

Cannon strongly suggests that the corporate form

cannot be disregarded for purposes of asserting

jurisdiction, even under circumstances of complete

domination that might justify veil piercing under the

law of many States, so long as the separate corporate

existence is “not pure fiction.” Cannon fits uneasily at

best, however, into this Court’s modern jurisprudence

of personal jurisdiction. Cannon expressly disavows any

constitutional holding. It was decided under the now-

discredited “presence” theory of personal jurisdiction.

Id. at 334-35. It was decided before Erie Railroad Co.

v. Tompkins, 304 U.S. 64 (1938), and International Shoe.

And one commentator argues persuasively that it was

decided purely under the North Carolina long-arm

statute and, therefore, actually suggests nothing about

whether the constitutional limits on personal

jurisdiction could ever be satisfied through a veil

piercing theory. See Hoffman, supra, at 1067-74. Justice

Brandeis’s opinion for the Court in Cannon expressly

disavows any constitutional holding. 267 U.S. at 336 (“No

question of constitutional powers of the State, or of the

federal Government, is directly presented.”).

Nonetheless, Cannon is still frequently cited as the

leading case on personal jurisdiction in cases involving

the corporate form, and the separate contacts of parent

and subsidiary corporations, as well as shareholders.

See generally John A. Swain & Edwin E. Aguilar,

Piercing the Veil to Assert Persona! Jurisdiction Over

Corporate Affiliates: An Empirical Study of the

Cannon Doctrine, 84 B.U. L. REV. 445, 455-56 (2004);

compare United States v. Scophony Corp., 333 U.S. 795

(1948).

The only truly useful modern guidance this Court

has provided on these issues comes from a pair of cases

decided in 1984. In Calder v. Jones, 465 U.S. 783 (1984),

this Court considered a libel claim brought by a

California resident against the National Enquirer and

the author and editor of an article about him. All the

defendants were residents of Florida. Although personal

jurisdiction over the Enquirer itself in California was

clear, the editor and author “liken[ed] themselves to a

welder employed in Florida who works on a boiler which

subsequently explodes in California,” and urged that

they were not responsible for their employer’s California

contacts for jurisdictional purposes. 465 U.S. at 789.

This Court rejected that argument, focusing squarely

on the petitioners’ own conduct. This Court emphasized

that their actions were “expressly aimed at California,”

and that they knew their article would have a “potentially

devastating impact on respondent” and that “the brunt

of that injury would be felt by respondent in the State

in which she lives and works and in which the National

Enquirer has its largest circulation.” Jd. at 789-90. This

Court explained that “[p]etitioners are correct that their

contacts with California are not to be judged according

to their employers’ activities there,” but “[oJjn the other

hand, their status as employees does not somehow

insulate them from jurisdiction.” /d. at 790. Rather,

“Celach defendant’s contacts with the forum State must

be assessed individually.” /d.

In Keeton v. Hustler Magazine, Inc., 465 U.S. 770

(1984), this Court briefly applied the reasoning of Calder

to hold that personal jurisdiction over Hustler

Magazine did not necessarily establish personal

jurisdiction over its publisher, editor, and owner, Larry

Flynt. This Court explained again that “jurisdiction over

an employee does not automatically follow from

jurisdiction over the corporation which employs him; nor

does jurisdiction over a parent corporation

automatically establish jurisdiction over a wholly owned

subsidiary.” 465 U.S. at 781 n. 13. Instead, “[eJach

defendant’s contacts with the forum State must be

assessed individually.” /d. This Court cited Rush v.

Savchuck, 444 U.S. 320, 332 (1980), for the proposition

that “(t]he requirements of Jnternational Shoe ...must

be met as to each defendant over whom a state court

exercises jurisdiction.” Jd.

In 1985, this Court was presented with a question

about whether the forum contacts of one business

partner could be attributed to another. The issue was

whether personal jurisdiction might be asserted over

one co-owner of a restaurant franchise because of his

business partner’s trip to Florida. This Court stated

that “[w]Je have previously noted that when commercial

activities are ‘carried on in behalf of’ an out-of-state

party those activities may sometimes be ascribed to the

party ... at least where he is a ‘primary participan([t]”

in the enterprise and has acted purposefully in directing

those activities.” Burger King, 471 U.S. at 479 n.22

(citing /nternational Shoe, 326 U.S. at 320, and Calder,

465 U.S. at 790). This Court ultimately held that personal

jurisdiction was proper on other grounds, and that it

therefore “need not resolve the permissible bounds of

such attribution.” Jd. at 22. This Court’s dictum

essentially reinforces its earlier holding in Calder,

however, by stressing that personal jurisdiction over the

business partner would require proof that he personally

“acted purposefully in directing [the] activities” in the

forum State.

This Court’s personal jurisdiction precedents

endorse the simple principle that each defendant’s

contacts with the forum State must be analyzed

individually. As a matter of Due Process, a defendant

who has personally directed his own actions at the forum

cannot escape personal jurisdiction just because those

actions were performed on behalf of an employer or

corporation.’ On the other hand, a corporation’s own

contacts with a State do not subject every employee or

shareholder or affiliated corporation to jurisdiction

there, if the particular defendant played no sufficient

persona! role in those contacts. Those principles provide

a coherent and comprehensive resolution to the due

process issues posed by personal jurisdiction in the

corporate context, without the need for any confusing

and theoretically indefensible incorporation of state-law

veil piercing principles. As Professor Hoffman cogently

explains:

If a defendant has been involved in

committing some act of mischief in the forum,

modern doctrine already permits the exercise

® The state law “fiduciary shield” doctrine may nonetheless

bar personal jurisdiction in circumstances where the

defendant's contacts were entirely in a representative capacity.

See, e.g., 4A Wright & Miller, Federal Practice and Procedure §

1069.4, at 191-96 (3d ed. 2002).

of jurisdiction in the forum court over her,

regardless of whether she is present in the

state or not or whether she personally

committed the mischief or played a role in

directing such mischief from behind the

scenes. .. . [T]he only relevance of a close

relationship between otherwise separate

persons or entities in a specific jurisdiction

case should be part of the analysis of whether

the defendant’s degree of involvement with

the underlying controversy is sufficient to

bring it within the statutory and constitutional

ambit of judicial authority.

152 U. Pa. L. Rev. at 1097-98.

The state law of veil piercing, by contrast,

“is fundamentally ill-conceived as a doctrinal tool for

measuring state court power.” Jd. at 1102. “What does

a failure to follow corporate formalities, for instance, tell

us about the regulatory interests a state may have in

allowing suit to be maintained against a nonresident

defendant?” Jd. at 1085-86. “What possible significance

can there be in a finding that regular shareholder

meetings were not conducted to the jurisdictional

assessment of the defendant’s relationship to, and

interest in, avoiding suit in the forum or of the plaintiff’s

interest in maintaining suit there?” Jd. at 1086.

The veil piercing analysis conducted by the SJC in

this case is entirely inconsistent with assessing the

contacts of each Benistar defendant individually, as

required by this Court’s precedents. It substitutes

vague and notoriously arbitrary state law doctrines for

a close analysis of individual “minimum contacts” under

federal law. This Court should grant review to clarify

that /nternational Shoe and its progeny state the test

for personal jurisdiction in all cases, and not merely

those that do not involve corporate relationships.

There has been no showing here that personal

jurisdiction over Benistar exists in Massachusetts under

the minimum contacts test of International Shoe.

The plaintiffs and the SJC instead relied solely on state

law jurisdictional veil piercing. Indeed, plaintiffs have

essentially conceded that they were unable to satisfy

International Shoe as to several of the Benistar

defendants because they stipulated in writing that the

relevant elements of the Massachusetts long-arm

statute were not satisfied. App. 87a-90a. It is axiomatic

that “[t]he burden is on the party asserting jurisdiction

to prove jurisdictional facts.” Miller v. Miller, 861

N.E.2d 393, 398 (Mass. 2007). See also Intech, Inc. v.

Triple “C” Marine Salvage, Inc., 826 N.E.2d 194, 197

(Mass. 2005) (“A plaintiff has the burden of establishing

facts to show that the ground relied on under § 3 [of the

long-arm statute] is present.”). Thus, plaintiffs have

necessarily stipulated in writing that they could not

satisfy their burden of proving the requisite

jurisdictional] facts as to these defendants.

II. The Substantial Confusion Among Federal and

State Courts Warrants Review By This Court.

Despite the fact that this Court has consistently

framed the due process inquiry as a question of each

defendant’s individual “minimum contacts” with the

forum, and has never held that personal jurisdiction ©

could be based merely on veil piercing notions, the use

of veil piercing for jurisdictional purposes in the lower

courts is extremely common. As Professor Hoffman

explains, “Dean Phillip Blumberg’s masterful

multivolume treatise, The Law of Corporate Groups,

devotes an entire volume in excess of 450 pages (and a

supplement of nearly equal length) to cataloging judicial

decisions in which the substantive law is invoked as the

sought-after predicate for a vicarious jurisdictional

determination.” 152 U. Pa. L. Rev. at 1029 (citing Phillip

I. Blumberg, The Law of Corporate Groups: Procedural

Problems in the Law of Parent and Subsidiary

Corporations (1983)). “Virtually without dissent during

the better part of this century, the lower courts have

approved jurisdictional veil-piercing arguments to

satisfy the statutory and constitutional requirements

for amenability to suit.” Jd. at 1030.

Several distinct approaches have emerged, but

“{ojutcomes in [jurisdictional] veil piercing cases are

fraught with inconsistency and clear trends are difficult

to deduce even within individual jurisdictions.”

Schwartz, 96 CAL. L. REV. at 752. Schwartz categorizes

the cases into three general approaches: the corporate

formalities approach, the control approach, and a hybrid

approach combining the other two approaches.

Id. at 746-751. Courts taking the corporate formalities

approach seem to have adopted this Court’s invitation

in Cannon that courts should respect the corporate form

for jurisdictional purposes so long as it is not a complete

“fiction.” See id. at 747 (Cannon “continues to be cited

frequently to support decisions where courts refrain

from piercing the corporate veil to assert jurisdiction

over a foreign parent.”). “Indeed, because the Court

maintained the separate identity of the two

notwithstanding the complete dominion and control of

the parent over the subsidiary, some courts have viewed

Cannon as imposing an even higher standard than

traditional veil piercing doctrine.” Swain & Aguilar, 84

B.U. L. REV. at 455-56.'° The control and hybrid

approaches borrow more heavily from ordinary state veil

piercing doctrines. And, of course, many courts (like the

SJC here) simply rely on state veil piercing law directly.

Whichever approach a court adopts, “the court’s inquiry

will be fact dependent, discretionary, and difficult to

predict.” Schwartz, 96 CAL. L. REV. at 751. Whether a

State has violated the Due Process Clause by exerting

personal jurisdiction over nonresident defendants

cannot rest on such hazy, uncertain, and fact-specific

analyses.

Occasionally, a court will recognize that the federal

due process analysis and the state law veil piercing test

are not the same, and will attempt to draw distinctions.

Swain and Aguilar’s empirical analysis led them to

conclude that “the Cannon doctrine is as strong a precedent

today as it was the day after it was decided,” id. at 483, and that

“courts show a bias against foreign defendants, [and] that state

courts favor local plaintiffs.” Jd. Given Benistar’s harrowing

experience in the Massachusetts state courts, these conclusions

are not surprising.

The results remain inconsistent, however, both within

and across jurisdictions. For example, in Dakota Indus.,

Inc. v. Ever Best Ltd., 28 F.3d 910 (8th Cir. 1994), the

Eighth Circuit stated:

A determination to pierce the corporate veil

does not necessarily answer the question of a

court’s jurisdiction over the individuals

behind the veil . . . Whether an individual is

subject to the jurisdiction of a federal court is

a separate threshold issue, which the district

court conflated with the issue of the

individuals’ liability for corporate actions. The

district court should have undertaken a

minimum contacts/due process analysis

instead of merely piercing the corporate veil.

Id. at 915 (emphasis added). However, in E'pps v. Stewart

Info. Svcs. Corp., 327 F.3d 642 (8th Cir. 2003), a different

Eighth Circuit panel simply asserted that:

If the resident subsidiary corporation is the

alter ego of the nonresident corporate

defendant, the subsidiary’s contacts are those

of the parent corporation’s, and due process

is satisfied. .. . Personal jurisdiction can be

properly asserted over a corporation if

another is acting as its alter ego, even if that

alter ego is another corporation. .. . In view

of these principles, a court’s assertion of

jurisdiction is contingent on the ability of the

plaintiffs to pierce the corporate veil.

Id. at 649 (citations omitted).

A few decisions have held that veil-piercing is a

legitimate basis for jurisdiction, but nonetheless have

recognized that certain aspects of state veil-piercing law

are not relevant to the jurisdictional inquiry. In Wells

Fargo & Co. v. Wells Fargo Express Co., 556 F.2d 406,

425 (9th Cir. 1977), for example, the court noted that

undercapitalization,

which is important to deciding whether to

pierce the veil raised by a subsidiary

corporation in order to hold the parent

corporation liable for failure of the subsidiary

to meet its debts, may not be relevant to a

showiug that the two corporations are in fact

one so as to establish that the out-of-state

corporation—be it parent or subsidiary—is

present within the forum for jurisdictional

purposes.

The Texas Supreme Court has explained that “veil-

piercing for purposes of liability (‘substantive veil-

piercing’) is distinct from imputing one entity’s contacts

to another for jurisdictional purposes (‘jurisdictional

veil-piercing’),” and that “[clourts have acknowledged

that jurisdictional veil-piercing and substantive veil-

piercing involve different elements of proof.” PHC-

Minden, L.P. v. Kimberly-Clark Corp., 235 S.W.3d 163,

174-75 (Tex. 2007) (collecting authorities). The Texas

Supreme Court ultimately concluded that “fraud—which

is vital to piercing the corporate veil under section 21.223

of the Business Organizations Code—has no place in

assessing contacts to determine jurisdiction,” and that

“some of the factors courts look to in determining

whether an entity may be held liable as a ‘single business

999

enterprise,” such as the use of a common name, “are

irrelevant to an analysis of jurisdictional contacts.”

Id. at 175. “Whether two related entities share a

common name, however, does not affect whether each

has sufficient ccntacts with the forum for jurisdictional

purposes.” /d.

As the commentators discussed supra explain, the

case law in both state and federal courts is deeply

confused and inconsistent, and merits review by this

Court.

CONCLUSION

For the reasons explained above, the petition for a

writ of certiorari should be granted.

Respectfully submitted,

JACK E. RoBINSON

Counsel of Record

BENISTAR

2187 Atlantic Street

Stamford, CT 06902

(203) 969-6000

Counsel for Petitioners

Of Counsel:

ARTHUR R. MILLER

1525 Massachusetts Avenue

Cambridge, MA 02138

(617) 495-4111

APPENDIX A — AMENDED ORDER AND

MEMORANDUM OF THE COMMONWEALTH OF

MASSACHUSETTS, SUPREME JUDICIAL COURT

ENTERED JUNE 26, 2008

COMMONWEALTH OF MASSACHUSETTS

SUFFOLK, ss. SUPREME JUDICIAL COURT

No. SJC-10041

GAIL A. CAHALY

vs.

BENISTAR PROPERTY EXCHANGE TRUST

COMPANY, INC. & others! (and six companion cases’).

1. Benistar Ltd.; Benistar Employer Services Trust

Corporation (BESTCO); Benistar Admin. Services, Inc. (BAS]);

Carpenter Financial Group, LLC (CFG); Molly Carpenter;

Daniel E. Carpenter; Merrill Lynch, Pierce, Fenner & Smith,

Inc.; and U.S. Property Exchange.

2. Jeffrey M. Johnston vs. Benistar Property Exchange

Trust Company, Inc., & others. Massachusetts Lumber Company,

Inc. vs. Benistar Property Exchange Trust Company, Inc., &

others. Bellemore Associates, LLC vs. Benistar Property

Exchange Trust Company, Inc., & others. Joseph Iantosca &

others vs. Benistar Property Exchange Trust Company, Inc., &

others. R & B Enterprises, Inc. vs. Benistar Property Exchange

Trust Company, Inc., & others. Byron Darling vs. Benisiar

Property Exchange Trust Company, Inc., & others.

Appendix A

AMENDED ORDER AND MEMORANDUM

In Cahaly v. Benistar Property Exchange Trust

Company (and six companion cases), 451 Mass. 343

(2008), (Cahaly) we affirmed a judgment against the

defendants Benistar Properties Exchange Trust

(Benistar Trust); Benistar Ltd.; Benistar Employer

Services Trust Corporation (BESTCO); Benistar Admin.

Services, Inc. (BASI); Carpenter Financial Group, LLC

(CFG); Molly Carpenter; Daniel E. Carpenter; and U.S.

Property Exchange (collectively the Benistar

defendants).

The Benistar defendants have filed a petition for

rehearing in which they argue, inter alia, that the

assertion of personal jurisdiction over certain of them®

meets neither the requirements of the Massachusetts

long-arm statute, G. L. c. 223A, § 3, nor the requirements

of the Due Process clause of the Fourteenth Amendment

of the United States Constitution.

The petition is denied in all respects. This amended

order and memorandum addresses the issue of

jurisdiction only.

In Cahaly, supra, we affirmed that it was

appropriate to pierce the corporate veil (disregard the

3. The defendants who claim that there is no jurisdiction

over them are Benistar Ltd.; Benistar Employer Services Trust

Corporation (BESTCO); Benistar Admin. Services, Inc. (BASD);

Carpenter Financial Group, LLC (CFG); Molly Carpenter; and

Daniel E. Carpenter.

Appendix A

corporate form) of Benistar Trust. In their petition the

Benistar defendants do not challenge that

Massachusetts courts have jurisdiction over Benistar

Trust. Contrary to their claim, under both the

Massachusetts long-arm statute and Federal law, the

doctrine of piercing the corporate veil (appropriately

disregarding the corporate form) may properly play a

role in determining whether a defendant is subject to

personal jurisdiction. This case is one in which piercing

the corporate veil was so obviously appropriate that

imputing the conduct of Benistar Trust to the other

Benistar defendants is well within the range of what the

law of personal jurisdiction permits.

The facts found by the trial judge supporting

disregarding the corporate form (piercing the corporate

veil), all of which are supported by the evidence and none

of which are challenged by the Benistar defendants in

their petition, include the following: There was common

ownership of the various corporate entities where Daniel

Carpenter owned Benistar Limited, of which BASI was

a wholly owned subsidiary, and also owned CFG; either

alone or with Molly Carpenter he owned BESTCO; and

either Daniel, Daniel and Molly, or Benistar Ltd. owned

Benistar Trust.‘ Daniel Carpenter exercised pervasive

control over all of the entities, with participation from

Molly Carpenter as to the activities of Benistar Trust

4. As to U.S. Property, the trial judge found, and the

evidence supported, that U.S. Property was “clearly the

successor” to Benistar Trust, operating the same business out

of the same Newton, Massachusetts office with the same

computers and software and the same president, Martin Paley.

Appendix A

and substantial participation by Molly Carpenter as to

BASI. There was substantial evidence of a confused

intermingling of assets and activities in the form of “a

significant number of large fund transfers between and

among” all the entities; and “all of these entities had a

common principal place or places of business” at two

Connecticut addresses. Daniel Carpenter presented the

companies “as one group, with a common set of 28

employees and assets of $50 million, and for all of which

he, as ‘chairman,’ was the only person with check-signing

authority” for purposes of applying for insurance; the

companies’ services were advertised together on the

Benistar website; and clients of Benistar Trust “were

specifically assured that their money was safe with that

company because it was part of Benistar.” As to

capitalization, “none of the defendant companies was

adequately capitalized for the conduct of legitimate

business.” There was a near-total lack of observance of

corporate formalities: While each of the entities was

organized as a Delaware cor, ation, and some

appeared to have (form) bylaws, there was no evidence

of stockholder or director meetings, the keeping of

corporate minutes or other corporate records.

Corporate records were entirely absent. There was no

evidence of payment of dividends.

Benistar Trust was insolvent as of January 2001. The

judge found that “[t]he only officers or directors of any

of these corporations, Benistar [Trust] included, who

functioned as such, were Daniel and Molly.” Benistar

Trust was used as “a source of funds to support Daniel’s

personal penchant for risky option trading on the stock

Appendix A

market,” and that Benistar Trust was used to promote

fraud. In light of these factual findings, all supported

by the evidence, the conclusion to pierce the corporate

veil was more than amply supported.°®

The efforts of the Benistar defendants to insulate

themselves from liability on grounds of corporate form,

when all the corporate forms were created and

controlled by Daniel Carpenter with assistance from

Molly Carpenter, are unavailing under Massachusetts

law,® a conclusion strengthened by the adverse

5. The petition does not press various additional arguments

asserted in the defendants’ briefs as to the exercise of personal

jurisdiction over Molly Carpenter, and we need not address

them here. We note, however, the trial judge properly drew

adverse inferences from Molly Carpenter’s decision to invoke

her Fifth Amendment privilege against self-incrimination in

response to questions regarding her own contacts with

Massachusetts and her involvement with trading, and

converting, the plaintiffs’ funds. In addition there was

affirmative evidence that Molly Carpenter, a director and officer

of Benistar Trust, was involved with the scheme at issue in this

case to the extent that she “gave diree*ions to Merrill Lynch

and PaineWebber personnel on a few occasions with respect to

the handling or disposition of certain funds that Benistar

Property either was sending to, or had previously deposited

with, the brokerage firms,” and may have also directed brokers

to buy or sell stocks or options with the Benistar Trust funds.

6. The defendants claim that Delaware law should contro]

this issue. Massachusetts and other authority support the

decision of the trial judge to apply the law of the jurisdiction

where the underlying conduct took place (Massachusetts),

(Cont'd)

Appendix A

inferences correctly drawn from these defendants’

assertion of their Fifth Amendment privileges and

refusal to submit to questioning on issues relevant to

personal jurisdiction.

(Cont'd)

rather than the place of incorporation (Delaware). See, e.g.,

Evans v. Multicon Constr. Corp., 30 Mass. App. Ct. 728, 737 n.7

(1991) (applying Massachusetts law to issue of piercing

corporate veil because “the place of contracting, the place of

negotiation of the contract, the place of performance of the

contract, and the place of the subject matter of the contract

were in Massachusetts”). Even were we to agree that Delaware

law should govern, it would make no difference because there

was more than ample justification for disregarding the

corporate form under either Massachusetts or Delaware law.

In Massachusetts, the law of piercing the corporate veil

“differs in no material respect from the description in United

States v. Bestfoods, 524 U.S. 51, 62-63 (1998),” Scott v. NG US 1,

450 Mass. 760, 768 (2008). Delaware law similarly permits a

court to pierce the corporate veil of an entity “where there is

fraud or where [the entity] is in fact a mere instrumentality or

alter ego of its owner.” Geyer v. Ingersoll Publications Co., 621

A.2d 784, 793 (Del. Ch. 1992). “A subsidiary corporation may be

deemed the alter ego of its corporate parent where there is a

lack of attention to corporate formalities, such as where the

assets of two entities are commingled, and their operations

intertwined. . . [or] where a corporate parent exercises complete

domination and control over its subsidiary.” Mobil Oil Corp. v.

Linear Films, Inc., 718 F. Supp. 260, 266 (D. Del. 1989); see also

Fletcher v. Atex, Inc., 68 F.3d 1451, 1457 (2d Cir. 1995). As the

facts in this case well illustrate, under either Massachusetts or

Delaware law, this case is almost a paradigm for piercing the

corporate veil.

Appendix A

The fundamental argument of the Benistar

defendants in their petition is that the determination of

personal jurisdiction should be made before and not in

light of the trial judge’s findings on piercing the

corporate veil. This is not the law under either the

Massachusetts long-arm statute’ or the Due Process

clause. Under Massachusetts law, ownership of a

Massachusetts subsidiary does not, of course,

automatically confer jurisdiction over a parent

corporation, Escude Cruz v. Ortho Pharmaceutical

Corp., 619 F.2d 902, 905 (ist Cir. 1980), nor does

jurisdiction over a corporation automatically secure

jurisdiction over its officers. Kleinerman v. Morse, 26

Mass. App. Ct. 819, 824 (1989). However, the combination

of intermingling of officers and directors, and controlling

the operations of a Massachusetts subsidiary, is

sufficient to satisfy the long-arm statute. As the Appeals

Court held in Kleinerman v. Morse, supra at 823:

“Significant exercise of control by an out-

of-State parent corporation over a subsidiary

and significant intermingling of officers and

directors between parent and subsidiary have

served to establish jurisdiction in the State

where the subsidiary is conducting its

business operations. Willis v. American

Permac, Inc., 541 F. Supp. 118, 122 (D. Mass.

7. For purposes of this inquiry we apply Massachusetts,

not Delaware, law, regardless of what law applied to the veil-

piercing question. See, e.g., Good Hope Indus., Inc. v. Ryder

Scott Co., 378 Mass. 1, 5-6 (1979) (explaining Massachusetts law

of personal jurisdiction).

Appendix A

1982). Cf. My Bread Baking Co. v. Cumberland

Farms, Inc., 353 Mass. 614, 618-619 (1968).

Running the operations of a subsidiary in

Massachusetts constitutes a breadth of

business activity that necessarily involves

exercise of the privilege of conducting

business here. Hanson v. Denckla, 357 U.S.

235, 253 (1958). Compare Good Hope Indus.

v. Ryder Scott Co., 378 Mass. 1, 6-12 (1979);

Balloon Bouquets, Inc. v. Balloon Telegram

Delivery, Inc., 18 Mass. App. Ct. 935, 935-936

(1984); Gunner v. Elmwood Dodge, Inc., 24

Mass. App. Ct. 96, 100-101 (1987). By contrast,

ownership alone of the controlling stock of a

subsidiary does not confer jurisdiction over

an out-of-State parent corporation if the

parent does not exercise control over the

activities of the subsidiary. Escude Cruz v.

Ortho Pharmaceutical Corp., 619 F.2d 902,

905 (1st Cir. 1980).” ®

Despite the efforts of the Benistar defendants to

argue otherwise, Federal due process requirements,

which form the second prong of the personal jurisdiction

inquiry, are not to the contrary. Here too jurisdiction

over a parent corporation does not “automatically

establish jurisdiction over a wholly owned subsidiary.”

8. Although Kleinerman v. Morse, 26 Mass. App. Ct. 819

(1989), does not state its holding in terms of piercing the

corporate veil, piercing the corporate veil requires, if anything,

a higher degree of control and elements of fraudulent conduct,

than does the test in Kleinerman.

Appendix A

Keeton v. Hustler Magazine, Inc., 465 U.S. 770, 781 n.13

(1984). However, where the corporate form may be

disregarded, as it was appropriately done in this case,

imputing the contacts of the subsidiary with the forum

state to the parent comports with due process. See Epps

v. Stewart Info. Servs. Corp., 327 F.3d 642, 648-649 (8th

Cir. 2003); Lakota Girl Scout Council, Inc. v. Havey

Fund-Raising Mgt., Inc., 519 F.2d 634, 637 (8th Cir.

1975).

“Although [the parent], in its own right,

lacked sufficient minimum contacts with

Massachusetts to permit the assertion of

jurisdiction over its corporate person, [the

subsidiary] was unarguably subject to the

jurisdiction of the Massachusetts courts. Hence,

if [the subsidiary]’s contacts can be attributed

to [the parent], then the jurisdictional hurdle

can be vaulted.”

United Elec., Radio and Mach. Workers of Am. v. 163

Pleasant St. Corp., 960 F:2d 1080, 1091 (1st Cir. 1992).

Not every case dealing with the question of personal

jurisdiction over nonresident parent corporations

invokes the doctrine of piercing the corporate veil by

name. The underlying principle, however, is clear. “Since

the essence of personal jurisdiction is to bring

responsible parties before the court, a corporation which

is actually responsible for its subsidiary’s decision to

undertake instate activities should, in all fairness, be

within the state courts’ jurisdictional reach.” Donatelli

10a

Appendix A

v. National Hockey League, 893 F.2d 459, 466 (1st Cir.

1990). The defendants’ attempt to circumvent this

authority through an analogy to the purportedly

“similar” theory that was rejected in Rush v. Savchuk,

444 U.S. 320 (1980), is unavailing. That case did not

involve in any respect piercing the corporate veil, parent

corporations, or subsidiaries.

The relief granted in this case was appropriate

where Massachusetts had personal jurisdiction over

corporate entities and individuals to whom actions

establishing personal jurisdiction in Massachusetts

have been attributed.

The petition for rehearing is denied.

By the Court

(Cowin, Botsford, JJ., recused),

s/ Susan Mellen

Susan Mellen, Clerk

ENTERED: June 26, 2008

lla

APPENDIX B — OPINION OF THE SUPREME

JUDICIAL COURT OF MASSACHUSETTS,

SUFFOLK DATED MAY 8, 2008

SUPREME JUDICIAL COURT OF

MASSACHUSETTS, SUFFOLK

Suffolk, January 7, 2008—May 8, 2008.

GAIL A. CAHALY

vs.

BENISTAR PROPERTY EXCHANGE

TRUST COMPANY, INC., & others!

(and six companion cases’).

Present: MARSHALL, C.J., GREANEY, IRELAND,

SPINA, & CORDY, JJ.

1. Benistar Ltd.; Benistar Employer Services Trust

Corporation; Benistar Admin. Services, Inc.; Carpenter

Financial Group, LLC; Molly Carpenter; Daniel E. Carpenter;

Merrill Lynch, Pierce, Fenner & Smith, Inc.; and U.S. Property

Exchange.

2. Jeffrey M. Johnston vs. Benistar Property Exchange

Trust Company, Inc., & others. Massachusetts Lumber Company,

Inc. vs. Benistar Property Exchange Trust Company, Inc., &

others. Bellemore Associates, LLC vs . Benistar Property

Exchange Trust Company, Inc., & others. Joseph Iantosca &

others vs. Benistar Property Exchange Trust Company, Inc., &

others. R & B Enterprises, Inc. vs. Benistar Property Exchange

Trust Company, Inc., & others. Byron Darling vs. Benistar

Property Exchange Trust Company, Inc., & others.

12a

Appendix B

Practice, Civil, Relief from judgment, Judgment

notwithstanding verdict, New trial, Discovery.

Evidence, Disclosure of evidence. Judgment, Relief

from judgment. Fiduciary. Conversion.

Fraud. Jurisdiction, Personal.

MARSHALL, C.J. In this appeal we principally

consider two questions: first, whether a Superior Court

judge properly granted judgment notwithstanding the

verdict (judgment n.o.v.) to a defendant on the ground

of an “evidentiary gap” in the plaintiffs’ claims, and

second, whether she then properly vacated the

judgment n.o.v. and allowed the plaintiffs’ motions for a

new trial based on “newly discovered evidence” that

might close that gap. See Mass. R. Civ. P 50(a), 365 Mass.

814 (1974) (judgment n.o.v.), and Mass. R. Civ. P. 60(b)(2),

365 Mass. 828 (1974) (postjudgment relief on ground of

newly discovered evidence).* We affirm.

1. Procedural background. The plaintiffs in these

consolidated actions contracted with the defendant

Benistar Property Exchange Trust Company, Inc.

(Benistar Trust) to hold their funds in escrow while they

engaged in tax-advantaged “like-kind” property

exchanges in accordance with Internal Revenue Code,

26 U.S.C. § 1031 (2006) (§ 1031).‘ Rather than

3. The trial judge treated the plaintiffs’ motion, which was

styled as a motion for reinstatement of the jury verdict, as a

motion for a new trial, allowed the motion, and granted that

relief.

4. Title 26 U.S.C. § 1031 (2006) allows a seller of property

to defer recognition of a capital gain on certain real estate

(Cont'd)

l3a

Appendix B

safeguarding the plaintiffs’ funds in escrow accounts—

as its fiduciary and contractual duties to the plaintiffs

required—Benistar Trust deposited the funds in margin

accounts at Merrill Lynch, Pierce, Fenner & Smith, Inc.

(Merrill Lynch), and later at UBS PaineWebber Inc.

(PaineWebber), and used the funds to engage in high-

risk uncovered option trading. Benistar Trust ultimately

lost more than $8 million of the plaintiffs’ funds.®

Beginning in January, 2001, the plaintiffs filed

actions against Benistar Trust, Daniel Carpenter (its

owner), Molly Carpenter (its managing director and

treasurer; Daniel is her husband), Martin Paley (its

president), a series of entities affiliated with Benistar

Trust that were also controlled by Daniel and Molly

Carpenter,’ Merrill Lynch, and PaineWebber. The

(Cont’d)

transactions by using the proceeds of the sale to purchase “like-

kind” property within 180 days. 26 U.S.C. § 1031(a)(3). In order

to take advantage of this rule, the funds must be transferred to

an escrow account, qualified trust, or qualified intermediary

pending the purchase of replacement property. Benistar Trust

advertised itself as a “qualified intermediary” under § 1031.

5. The jury awarded $8,644,150 in compensatory damages

to the plaintiffs, divided in the following way to reflect each

plaintiff’s losses: Gail Cahaly, $992,230; Jeffrey Johnston,

$541,930; Massachusetts Lumber, $3,237,190; Joseph Iantosca,

$2,913,306.86; Belridge Corporation, $514,834.14; and

Bellemore Associates, $444,659.

6. Benistar Admin. Services, Inc.; Benistar Employer

Services Trust Corporation; Benistar Ltd.; Carpenter Financial

(Cont’d)

l4a

Appendix B

plaintiffs asserted claims against all of the defendants,

including breach of contract, conversion, breach of

fiduciary duty, intentional misrepresentation, and

violation of G.L. c. 93A. In addition, the plaintiffs alleged

that Merrill Lynch and PaineWebber aided and abetted

Benistar Trust’s conversion and breach of fiduciary duty

and violated the Connecticut Unfair Trade Practices Act

and the New York Consumer Protection Act.’

In March, 2002, the trial judge, who presided over

nearly the entirety of this litigation in the business

litigation session of the Superior Court, allowed the

plaintiffs’ motion for summary judgment on their claims

against Benistar Trust for breach of contract and

conversion. In July, 2002, the judge allowed

PaineWebber’s motion for summary judgment on the

plaintiffs’ claims against it. See note 11, infra. After

fourteen days of trial on the remaining claims, during

November and December, 2002, and having heard

testimony from more than a dozen witnesses, a jury

(Cont'd)

Group, LLC; and U.S. Property Exchange. For simplicity, we

shall sometimes refer collectively to Benistar Trust, Daniel —

Carpenter, Molly Carpenter, Martin Paley, and the named

affiliated entities as the “Benistar defendants.” We shall refer

to Daniel Carpenter as “Carpenter.”

7. The plaintiffs’ various complaints list additional causes

of action against Merrill Lynch, Pierce, Fenner & Smith, Inc.

(Merrill Lynch), and some of the other defendants that were

dismissed during the litigation, do not appear to have been

litigated, or otherwise have no bearing on this appeal.

|Sa

Appendix B

found Benistar Trust, Carpenter, Molly Carpenter,’ and

Paley liable on all of the plaintiffs’ common-law claims.

They found Merrill Lynch liable for aiding and abetting

conversion, aiding and abetting breach of fiduciary duty,

and for violating the New York and Connecticut

consumer protection statutes.°

However, in February, 2003, the judge allowed

Merrill Lynch’s motion for judgment n.o.v. on the

ground that the plaintiffs had failed, as a matter of law,

to present sufficient evidence that Merrill Lynch either

had “actual knowledge” of the Benistar defendants’

wrongful acts or provided “substantial assistance” to

Benistar’s wrongdoing, as required under New York law,

which controlled the claims." See, e.g., S & K Sales Co.

8. The only claim before the jury with respect to Molly

Carpenter was breach of fiduciary duty as to three of the

plaintiffs: Joseph lantosca, Belridge Corporation, and

Bellemore Associates. The jury found her liable to all three.

Not every cause of action was asserted against each of the other

Benistar defendants, a fact that has no bearing on this appeal.

9. After a separate bench trial in March, 2003, the judge

found the Benistar defendants, with the exception of Molly

Carpenter, liable under G.L. c. 938A, and awarded attorney’s fees

to the plaintiffs. In September, 2003, after a further separate

bench trial, the judge found that it was necessary and

appropriate to pierce the corporate veil and extend liability to

the remaining Benistar defendants, five corporations controlled

by Daniel and Molly Carpenter. See note 6, supra.

10. The judge also granted judgment n.o.v. on the New York

and Connecticut statutory claims for reasons derivative of her

setting aside the jury’s verdicts on the aiding and abetting

claims.

16a

Appendix B

v. Nike, Inc., 816 F.2d 8438, 847-848 (2d Cir.1987) (defining

elements of aiding and abetting claim under New York

law). See also infra.

In a posttrial motion, the plaintiffs brought forward

evidence that they asserted was “newly discovered” and

would address the deficiencies the judge had identified

in granting judgment n.o.v. to Merrill Lynch. The judge

allowed the plaintiffs’ motion for a new trial under rule

60(b)(2), based on the new evidence. She reported her

decision, along with her previous decision to grant

judgment n.o.v. to Merrill Lynch, to the Appeals Court,

under Mass. R. Civ. P. 64, as amended, 423 Mass. 1410

(1996), see Lyons v. Globe Newspaper Co., 415 Mass.

258, 261 n. 4, 612 N.E.2d 1158 (1993). She also entered

a final judgment against the Benistar defendants under

Mass. R. Civ. PR. 54(b), 365 Mass. 820 (1974), from which

the Benistar defendants appealed. The Appeals Court

considered all issues together, and affirmed. Cahaly v.

Benistar Property Exch. Trust Co., 68 Mass.App.Ct. 668,

864 N.E.2d 548 (2007). Merrill Lynch and the Benistar

defendants each filed an application for further appellate

review; the plaintiffs filed an opposition. We granted

further appellate review."

11. The plaintiffs’ claims against UBS PaineWebber, Inc.

(PaineWebber), are not before us. PaineWebber prevailed on

those claims in the Superior Court and in the Appeals Court.

The plaintiffs neither sought further appellate review of their

claims against PaineWebber nor requested, in their opposition

to the applications for further appellate review filed by the other

defendants, that this court also review their claims against

(Cont'd)

17a

Appendix B

2. Factual background.” The jury could have found

the following: Benistar Trust was a registered Delaware

corporation with a principal place of business in

Massachusetts. It was one of a number of business

entities set up and controlled by Carpenter, a tax

attorney and Connecticut resident. Carpenter was the

chairman and sole shareholder of Benistar Trust. His

wife, Molly Carpenter, was its managing director and

treasurer, and Paley, a Massachusetts resident, was its

president.'®

$$$ re ne —

PaineWebber in the event that one or both of the other

defendants’ applications was allowed. The applications filed by

the other defendants (Merrill Lynch and the Benistar

defendants) did not seek relief against PaineWebber. See

Bradford v. Baystate Med. Ctr., 415 Mass. 202, 204, 613 N.E.2d

82 (1993) (“as to a multiple party, multiple issue case . . . a party

successful in the Appeals Court [such as PaineWebber] as to

whom an application for further appellate review does not seek

relief need not be concerned with the proceedings before us

involving other parties”); Ford v. Flaherty, 364 Mass. 382, 386-

387, 305 N.E.2d 112 (1973) (plaintiff’s claims against third-party

defendant not before the court because no further appellate

review of any claim against it was sought).

12. We recite only such facts as are pertinent to our inquiry,

reserving recitation of certain facts for later discussion.

13. At their depositions, the Benistar Trust principals,

Carpenter, Paley, and Molly Carpenter invoked their right to

remain silent under the Fifth Amendment to the United States

Constitution in answer to every question put to them. At her

(Cont'd)

18a

Appendix B

The plaintiffs are individuals and entities who in 2000

entered into written agreements with Benistar Trust in

order to secure for themselves the tax benefits of § 1031

in connection with sales and purchases of real estate."

See note 4, supra. These agreements, in essence,

obligated Benistar Trust (1) to hold the funds that each

plaintiff derived from the sale of real property in a

Merrill Lynch “escrow custodial account” in the form of

either a six per cent “investment account” or a three

per cent money market account, at each plaintiff’s

election; (2) to transfer a plaintiff’s escrow funds to any

seller of “replacement property,” designated by the

plaintiff at such time and in such manner as the plaintiff

specified, see note 4, supra; and (3) if the plaintiff failed

to locate a suitable replacement property within the

time permitted under § 1031, to return the escrow funds,

with the applicable interest, to the plaintiff.

In October, 1998, Carpenter opened accounts at

Merrill Lynch for various of his enterprises, including

four accounts for Benistar Trust. These were corporate

(Cont'd)

deposition, Molly Carpenter invoked both the “spousal

privilege” and “all other applicable privileges”; the judge

determined that only the Fifth Amendment protectior. against

self-incrimination applied. At trial, Paley again responded to

every question by invoking his Fifth Amendment rights.

Carpenter and Molly Carpenter did not appear at trial.

14. Benistar Trust charged the plaintiffs a flat fee for its

services as a § 1031 qualified intermediary.

19a

Appendix B

working capital accounts, and not custodial, depository,

or escrow accounts. His account advisors for all of the

Benistar accounts were Gary Stern and Gerald Levine,

financial advisors with Merrill Lynch’s private client

group. In setting up the accounts, Carpenter forwarded

to Merrill Lynch Benistar Trust’s certificate and articles

of incorporation, bylaws, and corporate resolutions

authorizing the opening of the accounts. None of these

documents identified the nature of Benistar Trust’s

business as a § 1031 qualified intermediary.’* Carpenter

signed written representations that the money in the

*349 Benistar Trust accounts belonged to Benistar

Trust. Additionally, Carpenter identified his investment

objective as “income” and his “account risk factor” as

“aggressive.” He requested and received permission

from Merrill Lynch to engage in uncovered option

trading’® in one of the Benistar Trust accounts, after

15. The Merrill Lynch account opening documents,

prepared by Gerald Levine and signed by Carpenter and (in

some cases) Molly Carpenter, identified the business of Benistar

Trust as “real estate transactions” and “real estate,” information

that Levine testified came directly from Carpenter.

16. An “uncovered” option strategy involves contracting

to buy or sell a particular security, which one does not own, on a

date in the future, for an agreed price. Because the actual price

of the security on the date when the uption expires may be much

higher or lower than the agreed price, large gains or losses may

result. For uncovered calls, in which one contracts to sell at an

agreed price, the potential losses are unlimited.

20a

Appendix B

signing a document acknowledging his understanding

that uncovered options posed “special risks . . . [for]

potentially significant losses.”"”

Carpenter was, as he stated on the account form,

an “aggressive” investor. As soon as the accounts were

opened, he engaged in high-volume, high-risk uncovered

trading in puts and calls, concentrating almost

exclusively in the then-booming technology sector.

Carpenter often spent one hour or more each day on

the telephone with Levine or Stern discussing possible

trades, consuming far more of their time than their

other clients. However, Benistar’s trades were “totally

unsolicited,” meaning that Carpenter himself controlled

all investment decisions."* He paid little heed to Stern’s

and Levine’s repeated admonitions to temper his trading

style by broadening his portfolio into other sectors and

choosing some safer investments.

17. Although Merrill Lynch authorized Carpenter to

engage in uncovered option trading in several Benistar ‘Trust

accounts, most of the option trading was done through one

Benistar Trust account identified at trial as the “B10 account.”

For the sake of convenience, we shall refer hereafter to the

Benistar Trust “account,” in the singular.

18. As the judge stated in her memorandum of decision

and order on the plaintiffs’ claims pursuant to G.L. c. 93A, the

evidence showed that Carpenter “was unquestionably the

person entirely or virtually entirely responsible for authorizing

and directing the uncovered option trading with the plaintiffs’

funds” at Merrill Lynch.

2la

Appendix B

Carpenter’s investment strategy at first yielded

profitable returns, but by the spring of 2000, as the “dot-

com boom” of the late 1990’s began to flatten out, his

accounts sustained heavy losses.'? Merrill Lynch

administrative manager Thomas Rasmussen, branch

manager Hassan Tabbah, and members of Merrill

Lynch’s compliance department were concerned about

these losses. On September 20, 2000, Rasmussen

directed Levine to inform Carpenter that Merrill Lynch

would no longer permit Carpenter to open uncovered

positions in the Benistar Trust account. On Stern’s

recommendation, Carpenter moved his accounts to

PaineWebber in October, 2000, where, in less than three

weeks, Benistar Trust lost between $1.2 and $1.3 million.

By the end of December, 2000, PaineWebber began

closing out positions in the Benistar account.

We turn now to the decision of the judge to grant

Merrill Lynch’s motion for judgment n.0o.v.

3. Judgment notwithstanding the verdict.

a. Standard of review. Because the jury are a pillar of

our justice system, nullifying a jury verdict is a matter

for the utmost judicial circumspection. The touchstone

is reasonableness. We ask whether, construing the

evidence most favorably to the plaintiff, and “without

weighing the credibility of the witnesses or otherwise

19. A Merrill Lynch memorandum introduced in evidence

notes that Carpenter “was up approximately $200,000 near the

end of March 2000 and dropped about $1,000,000 over the option

expiration period of April and May.”

22a

Appendix B

considering the weight of the evidence, the jury

reasonably could have returned a verdict for the

plaintiff. .. . To be reasonable, the inference [or

conclusion] ‘must be based on probabilities rather than

possibilities and cannot be the result of mere speculation

and conjecture.’ ” Phelan v. May Dep't Stores Co., 443

Mass. 52, 55, 819 N.E.2d 550 (2004), quoting Tosti v.

Ayik, 394 Mass. 482, 494, 476 N.E.2d 928 (1985), and

McEvoy Travel Bur, Inc. v. Norton Co., 408 Mass. 704,

706 n. 3, 563 N.E.2d 188 (1990). See Tennant v. Peoria

& PU. Ry., 321 U.S. 29, 35, 64 S.Ct. 409, 88 L.Ed. 520

(1944). “[We] consider whether ‘anywhere in the

evidence, from whatever source derived, any

combination of circumstances could be found from which

a reasonable inference could be drawn’ in favor of the

nonmoving party.” Phelan v. May Dep’t Stores Co.,

supra, quoting McEvoy Travel Bur. Inc. v. Norton Co.,

supra. With these principles in mind, we turn now to

the merits.

b. Aiding and abetting liability. The claims

against Merrill Lynch for aiding and abetting breach of

fiduciary duty and aiding and abetting conversion arise

under New York common law, where it is well settled

that the plaintiff must show “(i) the existence of a

violation by the primary wrongdoer; (ii) knowledge of

this violation by the aider and abettor; and (iii) proof

that the aider and abettor substantially assisted in the

primary wrong.” Ryan v. Hunton & Williams, U.S.

Dist. Ct., No. 99-CV-5938 (JG), 2000 WL 1375265

(E.D.N.Y. Sept. 20, 2000). See S & K Sales Co. v. Nike,

Inc., 816 F.2d 848, 847-848 (2d Cir.1987); Mazzaro de

23a

Appendix B

Abreu v. Bank of Am. Corp., 525 F.Supp.2d 381, 387

(S.D.N.Y.2007); A.I.A. Holdings, S.A. v. Lehman Bros.,

U.S. Dist. Ct., No. 97 Civ. 4978(LMM), 2002 WL 88226

(S.D.N.Y. Jan. 23, 2002); Cromer Fin. Ltd. v. Berger, 137

F.Supp.2d 452, 470 (S.D.N.Y.2001); Nigerian Nat’l

Petroleum Corp. v. Citibank, N.A., U.S. Dist. Ct., No.

98 Civ. 4960(MBM), 1999 WL 558141 (S.D.N.Y. July 30,

1999); Williams v. Bank Leumi Trust Co., U.S. Dist.

Ct., No. 96 Civ. 6695(LMM), 1997 WL 289865 (S.D.N_Y.

May 30, 1997); Kolbeck v. LIT Am., Inc., 939 F.Supp.

240, 245 (S.D.N.Y.1996), aff’d, 152 F.3d 918 (2d Cir.1998).

See also Restatement (Second) of Torts § 876(b) (1977)

(“For harm resulting to a third person from the tortious

conduct of another, one is subject to liability if he...

knows that the other’s conduct constitutes a breach of

duty and gives substantial assistance or encouragement

to the other . . .”). The plaintiffs have cleared the first

hurdle of the evidentiary requirements: establishing

that the Benistar defendants both breached their

fiduciary duties to them and wrongfully converted their

funds. The question is whether they provided evidence

sufficient for the jury reasonably to conclude that Merrill

Lynch had “knowledge of” and “substantially assisted”

the Benistar defendants. Ryan v. Hunton & Williams,

supra. The plaintiffs concede that the lengthy trial did

not yield direct evidence of knowledge or substantial

assistance. They argue, however, that the “indirect,

circumstantial evidence” of these two elements was

“overwhelming.” No jury reasoning from the evidence,

however, would have been overwhelmed.

24a

Appendix B

c. Knowledge of a violation. We first consider

whether, viewing the evidence in its light most favorable

to the plaintiffs, the jury reasonably could have inferred

that Merrill Lynch “knew” of the primary wrongs

committed by the Benistar defendants. The knowledge

requirement of a New York aiding and abetting claim

demands a showing of “actual knowledge” of the

underlying wrongdoing. See Kolbeck v. LIT Am., Inc.,

supra at 246, and cases cited. That the aiding and

abetting defendant has been proven to have had notice

or “constructive knowledge” of the underlying wrong

will not suffice. See, e.g., Ryan v. Hunton & Williams,

supra (on motion to dismiss, allegations that defendant

suspected underlying fraud insufficient to aver “actual

knowledge”). See also Kolbeck v. LIT Am., Inc., supra

at 248 (absent fiduciary duty to plaintiff, defendants’

knowledge of accusations of fraud against primary

wrongdoer insufficient to impute requisite “actual

knowledge” for purposes of aiding and abetting

liability). The plaintiffs are not required to produce a

“smoking gun,” however. Actual knowledge “may be

implied from a strong inference of fraudulent intent,”

Mazzaro de Abreu v. Bank of Am. Corp., supra at 388.

On appeal the plaintiffs set out six “categories of

evidence” that they argue form the basis of a reasonable

20. It is uncontested that Merrill Lynch did not owe a

fiduciary duty to the plaintiffs. See Morin v. Trupin, 823 F.Supp.

201, 207 (S.D.N.Y.1993) (broker of packaged real estate deals

does not owe fiduciary duty to plaintiffs where he had “no

control” over materials forming basis of primary tortfeasor’s

fraud).

25a

Appendix B

inference that Merrill Lynch had “actual knowledge” of

the Benistar defendants’ underlying wrongdoing. They

also argue that the jury could reasonably have inferred

actual knowledge from disbelief of the Merrill Lynch

defendants’ testimony. On both points, we disagree.

As to evidence, the plaintiffs rely strongly on a

September 22, 2000, letter Carpenter wrote to

Rasmussen, protesting Merrill Lynch’s decision to

prohibit opening new positions in the Benistar Trust

account.”' In the letter Carpenter stated, among other

things: “We have chosen Merrill [Lynch] as our

depository for our clients so we cannot move the funds

elsewhere. If we cannot trade at Merrill [Lynch], we

21. In the September 22, 2000, letter, Carpenter stated that

he was writing “to lodge an official complaint” about Merrill

Lynch’s prohibiting Benistar Trust from opening new positions.

There was considerable testimony at trial about whether the

letter constituted the type of complaint that was required to be

reported to the Securities and Exchange Commission (SEC).

Robert Lau, an expert testifying on behalf of Merrill Lynch,

Rasmussen, and Duffy, and the Merrill Lynch attorney to whom

he referred the letter all testified that the letter was not the

type of complaint required to be reported to the SEC. The judge,

correctly in our view, rejected the plaintiffs’ argument that the

Merrill Lynch defendants’ testimony on this matter was false

and therefore probative evidence of liability, see Boston v.

Santosuosso, 307 Mass. 302, 349, 30 N.E.2d 278 (1940), on the

ground that testimony about whether the letter constituted a

reportable complaint was “confusing” and that, in any event,

had Merrill Lynch reported the letter as a “complaint,” the form

in which it was required to do so would not have triggered

further investigation by any regulatory authority “or anyone

else.”

26a

‘ppendix B

cannot trade anywhere, and you will have doomed us to

our losses in a volatile market that we were perfectly

positioned to profit from.” To the plaintiffs, the words

“depository” and “clients” were sufficient to inform

Merrill Lynch that the Benistar Trust account contained

third-party funds and that Carpenter was appropriating

those funds for his own use in violation of his fiduciary

duty to the third parties.”:** The link posited by the

plaintiffs requires many intermediate conclusions for

22. In further support of this assertion, the plaintiffs point

to evidence from a section of the Merrill Lynch “Compliance

Outline” (an internal document distributed to brokers in its

private client division) on “Money Laundering, Con Games and

Trading Abuses” that advises brokers to avoid schemes using

“intermediate” or “depository” accounts. The reference does

not define “depository” but does indicate that such accounts

are held for the benefit of third parties. In any event, it is

insufficiently revelatory of the tortious conduct at issue

reasonably to lead to an inference that Merrill Lynch had “actual

knowledge” of the Benistar defendants’ wrongs.

23. It is undisputed that, based on the trial evidence, no

one at Benistar Trust directly informed anyone at Merrill Lynch

that the funds in the Benistar Trust account belonged to third

parties and that Carpenter was misusing those funds in violation

of his agreements with those third parties. Levine, Rasmussen,

Stern, and Duffy testified that Carpenter had told them that

the money in the accounts was all his. Moreover, Rasmussen,

Levine, and Merrill Lynch attortiey Kewin Duffy all testified,

without contradiction, that they considered the reference to

“clients” to mean Carpenter’s or Benistar's ether companies.

Stern and Levine also testified that they considered Benistar

Trust and Carpenter to be one and the same for purposes of the

Merrill Lynch accounts.

27a

Appendix B

which there was no evidence: for instance, that the funds

in the Benistar Property account were third-party funds

contractually required to be held in escrow and that

Benistar Trust’s agreements with the third parties did

not permit using the funds for speculative trading. Even

assuming, arguendo, that the letter signified that

Benistar Trust had some unspecified fiduciary duty to

third-party clients relevant to the corporate accounts,

the “relevant ‘knowledge’ for liability to attach in a

fiduciary’s breach of duty is knowledge as to the primary

violator’s status as a fiduciary and knowledge that the

primary’s conduct contravenes a fiduciary duty”

(emphasis added). A./.A. Holdings, S.A. v. Lehman

Bros., supra, quoting Diduck v. Kaszycki & Sons

Contrs., 974 F.2d 270, 282-283 (2d Cir.1992). It takes a

leap in speculation, an impermissible leap for a jury, to

tie the September 22 letter to Merrill Lynch’s “actual

knowledge” of the underlying tortious behavior. See

Sheehan v. Goriansky, 317 Mass. 10, 17, 56 N.E.2d 883

(1944), quoting Davis v. Boston Elevated Ry., 222 Mass.

475, 479, 111 N.E. 174 (1916) (Gjury’s conclusion must be

“the result of logical reasoning from established facts”).

The plaintiffs’ second category of evidence is

similarly unpersuasive. This category of evidence is

comprised of Rule 405 of the Rules of the New York

Stock Exchange, Rule 3210 of the Rules of the National

Association of Securities Dealers, and Merriil Lynch

compliance policies that, in summary, require a broker

or financial adviser to use “due diligence” to “know the

client” when opening and managing the client’s

investment accounts. The plaintiffs argue that, because

28a

Appendix B

Stern and Levine both testified that they complied with

the “know your client” rules, the jury reasonably could

conclude that Stern and Levine, and thus Merrill Lynch,

knew about the nature of Benistar Trust’s business**

and also the nature of its wrongdoing.” The jury might

have believed Stern’s and Levine’s testimony that they

followed the “know your client” rules, in which case the

jury reasonably could infer that Stern and Levine knew

the nature of Benistar Trust’s services. Or the jury

might have disbelieved the brokers, in which case they

reasonably could infer that Stern and Levine failed to

follow the “know your client” rules. Neither alternative

translates to affirmative evidence that Merrill Lynch had

actual knowledge that the Benistar Trust account

contained third-party funds, and that Carpenter’s high-

risk options trading in the Benistar Trust account was

in breach of its fiduciary duties.

Third, the plaintiffs laid before the jury voluminous

documentary evidence of wire transfer authorizations

24. Several witnesses for Merrill Lynch testified that not

only did they not know the actual nature of Benistar Trust’s

business as a “qualified intermediary” under § 1031, but they

also had no understanding of § 1031 or its requirements until

the first of the plaintiffs’ lawsuits was filed in January, 2001.

25. The plaintiffs also argue that the words “property

exchange” and “trust” in Benistar Trust’s corporate name was

a loud, clear announcement to Merrill Lynch of the nature of

Carpenter’s business and of the underlying tortious conduct.

The references in Benistar Trust’s corporate name are

insufficient under New York law to support the scienter

requirement of an aiding and abetting claim.

29a

Appendix B

and wire transfer confirmations for the Benistar Trust

account that indicated that substantial sums flowed

constantly between Benistar Trust and various third-

party bank accounts, attorney trust accounts, and other

accounts of an evidently custodial nature.** A jury may

well have agreed with the plaintiffs that Merrill Lynch’s

apparent indifference to the large volume of wire

transfers was in derogation of its own written policies

for detecting “con games” and “scams””’ (although, as

the judge noted, the heavy traffic in wire transfers in

the Benistar Trust account was consistent with

Carpenter’s alleged representations to Merrill Lynch

that Benistar Trust bought and sold real estate). At

most, this conclusion leads reasonably to the inference

that Merrill Lynch “should have been aware” of possible

wrongdoings in the account. However, constructive

knowledge is not “actual knowledge.” See, e.g., Mazzaro

de Abreu v. Bank of Am. Corp., 525 F.Supp.2d 381, 388

(S.D.N.Y.2007) (knowledge of nature of transfers from

bank account and large sums of money in account do

not imply “actual knowledge of the underlying fraud”);

26. The plaintiffs also introduced evidence that Merrill

Lynch brokers were instructed that large volumes of wire

transfer activity in an account may signal a fraudulent scheme

and should be reported to the office of the general counsel.

27. In addition, a jury may well have agreed that such

indifference violated Merrill Lynch’s obligations under

Rule 405 of the Rules of the New York Stock Exchange to “[uJse

due diligence to learn the essential facts relative to every

customer, every order, every cash or margin account accepted

or carried... .”

30a

Appendix B

Ryan v. Hunton & Williams, U.S. Dist. Ct., No. 99-CV-

5938 (JG), 2000 WL 1375265 (E.D.N.Y. Sept. 20, 2000)

(bank officer’s authorization of large volume of transfers

between primary defendant’s account and subaccounts

does “not create an inference of knowledge of”

fraudulent scheme). See also Nigerian Nat'l Petroleum

Corp. v. Citibank, N.A., U.S. Dist. Ct., No. 98 Civ.

4960(MBM), 1999 WL 558141 (S.D.N.Y. July 30, 1999)

(allegations of knowing or reckless disregard of

irregularities in wire transfers and other “badges of

fraud” do not give rise to inference, “let alone a ‘strong

inference’ ” of underlying fraud).

Fourth, the jury heard testimony concerning a

telephone conference call on December 19, 2000, among

Stern, PaineWebber compliance manager Lori Enright,

Mitchell Rock (Stern’s close friend and Benistar’s

broker at PaineWebber),*® and Steven Feit (the

PaineWebber branch manager) in response to

PaineWebber’s concern about losses in the Benistar

account. Enright took notes of the conference. Both

Feit’s testimony (in deposition) and Enright’s testimony

and notes reflect that Stern told them that Benistar

Trust acted “as a third party liaison for real estate

transactions.”” From what we have said above, it is clear

that Stern’s information is insufficient to prove actual

knowledge of Benistar Trust’s fraudulent schemes.

28. Rock’s participation in the conference call was confined

to making introductions.

29. Enright and Feit also testified that they did not ask

Carpenter to elaborate on this description.

3la

Appendix B

We need not discuss at length the plaintiffs’ two

remaining categories of evidence. Testimony from

several Merrill Lynch employees that they viewed the

Benistar Web site homepage (which did not contain a

description of Benistar Trust’s business) and a linked

page that had nothing to do with § 1031 like-kind

exchanges has no probative value in establishing Merrill

Lynch’s knowledge of the primary wrongdoing.* That

Levine and Stern chose to respond to a memorandum

from their compliance department requesting more

information about Benistar Trust by ignoring the

request and praising Carpenter as an individual cannot

be converted into affirmative evidence of the underlying

fraud, even if, as the plaintiffs maintain, Levine and

Stern responded obliquely in order to continue reaping

substantial commissions from Benistar. See Mazzaro

de Abreu v. Bank of Am. Corp., supra at 388-389

(allegations of “profit motive”—garnering of

“substantial” transaction fees-insufficient of itself to

support inference of actual knowledge of underlying

fraud generating fees).

The indirect, circumstaitial evidence amassed at

trial may suggest that Merrill Lynch knew the nature

30. Referring to Benistar’s Web site, Hassan Tabbah

testified without elaboration that he “hit the website,” perhaps

in Stern’s presence. Stern testified that he merely glanced at

the Web site once when he was in Tabbah’s office, and Levine

testified that the only link on the Benistar Web site that he

visited concerned an unrelated tax strategy. These witnesses

denied seeing any information on the Web site concerning

Benistar Trust’s role as a qualified intermediary for § 1031

pans.

32a

Appendix B

of Benistar Trust’s business. But it does not erase the

evidentiary lacunae between Merrill Lynch’s knowledge

of Benistar Trust’s services and knowledge that

Benistar Trust was violating its fiduciary agreements

to clients and converting client funds by trading in the

Benistar Trust corporate account. Crucially, no evidence

of Merrill Lynch’s actual knowledge of Benistar’s

agreements with its clients was presented at trial.

Cf. Cronin v. Executive House Realty, U.S. Dist. Ct.,

No. 80 Civ. 7254, 1982 WL 1303 (S.D.N.Y. May 5, 1982)

(judgment n.o.v. not appropriate on claim for aiding and

abetting under New York law where bank official was

‘-fermed by one business partner that offering

siemorandum on which “loan write-up” was based

misrepresented another partner’s financial status).

Because the six categories of evidence do not

support a permissible inference of actual knowledge, the

plaintiffs gain nothing by claiming that their evidence

acquires “independent, confirmatory force” when

considered in light of the jury’s presumed disbelief of

the “implausible,” “self-serving” and “after-the-fact”

testimony of Merrill Lynch witnesses on key points. Nor

can a jury’s disbelief of the Merrill Lynch testimony

reasonably be viewed as independent affirmative

evidence supporting a conclusion that Merrill Lynch had

the requisite actual knowledge of the Benistar

33a

Appendix B

defendants’ wrongful actions. None of the cases the

plaintiffs rely on helps their cause.*! There was no error.

31. See Janigan v. Taylor, 344 F.2d 781, 784-785 (1st

Cir.1965) (evidence that, among other things, defendant was in

charge of corporation and had detailed knowledge of its

operations permitted jury to infer defendant’s full knowledge

of company’s affairs from disbelief of his testimony of

ignorance). See aiso Sheehan v. Goriansky, 317 Mass. 10, 16-17,

56 N.E.2d 883 (1944) (“The defendant urges that disbelief of

testimony was not evidence to the contrary. . . . There was,

however, more than mere disbelief of the defendant,” including

evidence of bloody glove on the deceased’s chest); Boston v.

Santosuosso, 307 Mass. 302, 349, 30 N.E.2d 278 (1940) (“disbelief

of evidence is not the equivalent of affirmative evidence to the

contrary. But where a material fact is established by evidence

and it is shown that a defendant’s testimony as to that fact was

wilfully untrue, this cireumstance not only furnishes a ground

for disbelieving other testimony of this defendant . . . but also

tends to show consciousness of guilt or liability on his part and

has probative force in connection with other evidence on the

issue of such guilt or liability” [emphases added});

Commonwealth v. Geisler, 14 Mass.App.Ct. 268, 274, 438 N.E.2d

375 (1982), quoting Commonwealth v. Porter, 384 Mass. 647, 653,

429 N.E.2d 14 (1981) (jury could fairly infer evidence of guilt

from disbelief of automobile accident defendant’s testimony

where physical evidence such as location and condition of

automobile, among other things, supported probable inference

of liability; “[w)hile proof of mere consciousness of guilt alone

may be insufficient to convict of crime . . . evidence of such a

state of mind when coupled with other probable inferences,

may be sufficient to amass the quantum of proof necessary to

prove guilt”). See Cronin v. Executive House Realty,

U.S.Dist.Ct., No. 80 Civ. 7254, 1982 WL 1303 (S.D.N.Y. May 5,

1982) (evidence of direct communication to aiding and abetting

(Cont'd)

34a

Appendix B

d. Substantial assistance of the wrongful conduct.

The judge also concluded that the plaintiffs had failed

to prove the third prong of a New York aiding and

abetting claim: that Merrill Lynch substantially assisted

in furthering the Benistar defendants’ wrongful

conduct. See Ryan v. Hunton & Williams, supra. Our

conclusion that the plaintiffs have not met their burden

of showing that Merrill Lynch had actual knowledge of

the Benistar defendants’ underlying tortious conduct

on the evidence adduced at trial, and our affirmance of

the judge’s order allowing a motion for a new trial on

the claims against Merrill Lynch, make it unnecessary

to address the issue of substantial assistance.”

We consider now whether the judge properly

ordered a new trial on the claims against Merrill Lynch.

(Cont'd)

defendant of concerns about primary defendant’s solvency and

authority leads to inference that aiding and abetting

defendant’s actions in failing to conduct normal credit checks

~and accepting certain promissory notes furthered wrongdoing).

Here, as described above, the plaintiffs failed at trial to produce

the affirmative evidence that would have allowed a reasonable

inference of actual knowledge to be drawn.

32. Our decision on the aiding and abetting claim makes it

unnecessary to address the plaintiffs’ parenthetical argument

that the jury’s verdicts in favor of the plaintiffs on the New

York Consumer Protection Act and the Connecticut Unfair

Trade Practices Act should be reinstated on the evidence

presented concerning aiding and abetting.

35a

Appendix B

4. New trial under Mass. R. Civ. PR 60(b)(2). Ina

posttrial motion, the plaintiffs brought forward evidence

that they argued addressed the specific deficiencies in

their case that led the judge to allow Merrill Lynch’s

motion for judgment n.o.v. We conclude that the judge

did not abuse her discretion in granting the plaintiffs a

new trial based on this evidence.

a. Discovery. The plaintiffs’ request for posttrial

relief must be situated in the context of the contentious

discovery disputes which marred this litigation, and in

which Merrill Lynch repeatedly and over a considerable

period before, right up to and during the trial failed to

meet its discovery obligations despite multiple and

focused discovery requests of the plaintiffs.

Merrill Lynch produced a limited, initial set of

documents in March, 2001, in response to two subpoenas

duces tecum from the plaintiffs.** However, Merrill

Lynch then refused to answer the plaintiffs’

interrogatories and document requests for the six

months from October, 2001, until a motion to compel was

allowed in March, 2002, first arguing that it was not

33. At the time of this initial document production, which

Merrill Lynch’s counsel later stated in an affidavit “was handled

by a paralegal employed by Merrill Lynch,” Merrill Lynch was

not yet named as a defendant in the case. Merrill Lynch was

initially a reach and apply defendant and a trustee process

defendant in two of the consolidated actions. The plaintiffs

moved to amend their complaint to add Merrill Lynch as a party

defendant in September, 2001; the motion was allowed in

January, 2002.

36a

Appendix B

subject to interrogatories or document requests

because it was not yet a party defendant, and later

arguing that it was not subject to such requests because

“by the time Merrill Lynch was made a party . . . the

deadline for discovery had already clearly passed.”™

The judge allowed the plaintiffs’ motion to compel

Merrill Lynch to respond to written discovery in March,

2002.* This was not the end of the matter, however.

Merrill Lynch’s refusal to produce certain other

documents, in particular its policy and procedure

manuals, led to additional rounds of increasingly specific

motions to compel production.** Numerous documents

34. Merrill Lynch’s position was that the plaintiffs should

be afforded no opportunity to serve Merrill Lynch with

interrogatories or document requests because Merrill Lynch

was not named as a party until after the expiration of a deadline

set by a scheduling order that predated Merrill Lynch’s

involvement as a party defendant in the case.

35. The judge required that the plaintiffs, if they in fact

chose to seek written discovery from Merrill Lynch, submit to

any written discovery requests by Merrill Lynch as well.

36. The plaintiffs filed an emergency motion to compel

production of, inter alia, Merrill Lynch’s policy and procedure

manuals, in June, 2002; this motion was allowed in part over

Merrill Lynch’s opposition. Other parts of the order allowing

this motion were modified after an emergency motion for

reconsideration by Merrill Lynch was granted in part and

denied in part, but Merrill Lynch specifically was required to

produce “any such manuals, or portions of manuals, that are

(Cont'd)

37a

Appendix B

responsive to the plaintiffs’ requests for Merrill Lynch’s

records concerning the Benistar account were not

produced by Merrill Lynch until much later-in some

cases, until the middle of the trial. Meanwhile, Merrill

Lynch fought a separate battle on the issue of

depositions.”

On the eve of trial in late November, 2002, Merrill

Lynch produced additional relevant documents

concerning its internal review of the Benistar account.*

(Cont'd)

responsive to [specifically numbered] requests.” In October,

2002, the plaintiffs filed yet another motion to compel Merrill

Lynch to produce its policy and procedure manuals for

inspection and copying, whick Merrill Lynch again opposed on

the ground that it already had responded adequately by making

available some portions of its manuals. This resulted in yet

another order from the judge, less than one month before trial,

specifically orde* ing that the plaintiffs’ counsel be permitted

to inspect, and copy relevant portions of, two particular manuals.

37. Merril! Lynch allowed the plaintiffs to depose its

employee Stern in October, 2001, but fought the plaintiffs’

attempts te depose other witnesses whom the plaintiffs learned

were involved in Merrill Lynch’s supervision of the Benistar

account. Merrill Lynch unsuccessfully opposed the plaintiffs’

motion to compel depositions from two key employees, Levine

and Tabbah; this motion to compel was allowed and the

depositions taken in February, 2002. The plaintiffs’ motion to

compel the deposition of an additional employee, Rasmussen,

who proved to be an important witness at trial, was denied.

38. The plaintiffs characterized these documents as “new”

computer printouts showing Merrill Lynch’s reviews of the

(Cont'd)

38a

Appendix B

On the second day of trial, Merrill Lynch disclosed

information about the expected testimony of one of its

witnesses, Rasmussen, the Merrill Lynch employee who

had made the decision to shut down the Benistar

account, and whom the plaintiffs had unsuccessfully

attempted to depose in advance of trial. This information

led the plaintiffs to suspect that Rasmussen’s files, which

should have included documents concerning Merrill

Lynch’s supervision of the Benistar account, had not

been produced to the plaintiffs. The plaintiffs therefore

moved for the immediate production of those documents,

along with those of another witness.

On Sunday, December 1, 2002, at around 8 PM., after

pretrial motions and the first five days of trial, and with

testimony set to resume the next morning after a

Thanksgiving hiatus, Merrill Lynch transmitted

additional documents by facsimile to the plaintiffs. These

documents, and more that Merrill Lynch produced the

next morning as the trial resumed, included documents

related to Merrill Lynch’s supervision of the Benistar

account that Merrill Lynch admitted it previously had

not produced.** “ The plaintiffs argued that these

(Cont'd)

Benistar account, naming new individuals at Merrill Lynch not

previously known to the plaintiffs who were involved in those

reviews. Merrill Lynch argued that these documents previously

had been made available to the plaintiffs at a witness deposition.

Resolving this dispute would require additional documents that

are not part of the record on this appeal.

39. An affidavit of plaintiffs’ counsel avers that there were

approximately 140 pages of documents not previously produced

(Cont'd)

39a

Appendix B

documents, which contained “many new names” the

plaintiffs previously had not seen, and some of which

concerned Merrill Lynch’s internal compliance review

of the Benistar account, fell within not only the plaintiffs’

discovery requests dating back to 2001, but also multiple

motions to compel production that the judge had

allowed.

It is undisputed that even after this additional

extraordinarily late round of document production,

Merrill Lynch at no time produced the documents

described below, which became the subject of the

plaintiffs’ rule 60(b)(2) motion for a new trial.

b. Mass. R. Civ. P 60(b)(2). The purpose of rule

60, which governs posttrial relief, is “to strike a proper

balance between the conflicting principles that litigation

must be brought to an end and that justice should be

done.” 11 C.A. Wright, A.R. Miller, & M.K. Kane,

Federal Practice and Procedure § 2851 (2d ed.1995).

(Cont’d)

by Merrill Lynch. The judge called for an affidavit from Merrill

Lynch to explain why the document production was so late.

40. Among the new documents, the plaintiffs found

particularly significant a facsimile cover sheet from Benistar

to Merrill Lynch stating, “Here’s the account selection,” which

the plaintiffs argued was referring to, and would have enclosed,

an account selection form from a Benistar client, in which the

client specified its choice of the type of “account” in which

Benistar was to hold its funds at Merrill Lynch. Merrill Lynch

disputes that there was any account selection “form” associated

with this document.

40a

Appendix B

A party seeking postjudgment relief on grounds of

“newly discovered evidence” invokes rule 60(b)(2), and

must satisfy four requirements: “(1) the evidence has

been discovered since the trial; (2) the evidence could

not by due diligence have been discovered earlier by

the movant; (3) the evidence is not merely cumulative

or impeaching; and (4) the evidence is of such a nature

that it would probably change the result were a new

trial to be granted.” United States Steel v. M. DeMatteo

Constr. Co., 315 F.3d 43, 52 (1st Cir.2002), citing Mitchell

v. United States, 141 F3d 8, 18 (1st Cir.1998).*!

The trial judge “typically has an intimate, first-hand

knowledge of the case, and, thus, is best positioned to

determine whether the justification proffered in support

of a [rJule 60(b) motion should serve to override the

opposing party’s rights and the law’s institutional

interest in finality.” Karak v. Bursaw Oil Corp., 288 F.3d

15, 19 (1st Cir.2002). “Consequently, we defer broadly

to the {judge’s] informed discretion in granting or

denying relief from judgment, and we review [the] ruling

solely for abuse of that discretion.” /d. This deferential

standard is particularly appropriate where, as here, the

41. Rule 60(b)(2) of the Massachusetts Rules of Civil

Procedure, 365 Mass. 828 (1974), is the same as Fed.R.Civ.P

60(b)(2). “In construing our rules of civil procedure, we are

guided by judicial interpretations of the cognate Federal rule

‘absent compelling reasons to the contrary or significant

differences in content.’ ” Doe v. Senechal, 431 Mass. 78, 81 n. 8,

725 N.E.2d 225, cert. denied, 531 U.S. 825, 121 S.Ct. 71, 148

L.Ed.2d 35 (2000), quoting Rollins Envtl. Servs., Inc. v. Superior

Court, 368 Mass. 174, 179-180, 330 N.E.2d 814 (1975).

4la

Appendix B

judge who ruled on the rule 60(b)(2) motion is not only

the same judge who presided over the trial, but also

the same judge who presided over the discovery phase

of the litigation and so was intimately familiar with the

parties’ discovery conduct.

c. Newly discovered evidence: Patterson. The

newly discovered evidence submitted by the plaintiffs

was twofold: an affidavit and accompanying exhibits

submitted by a Massachusetts attorney not affiliated

with the litigation and an affidavit submitted by the

defendant Paley. The more significant of these was the

affidavit and accompanying exhibits provided by

attorney David Patterson of Newton. In 1998, Patterson

represented an individual who sought to effectuate a

§ 1031 transaction, and who retained Benistar as the

qualified intermediary for the property exchange.”

According to findings of fact of the judge, between

October 21 and 23, 1998, Patterson communicated

several times by telephone and in writing ~. ith Merrill

Lynch’s Levine in order, in Patterson’s words, to “make

sure specifically that Merrill Lynch understood that

these were escrow funds, and that [Merrill Lynch had]

a general understanding of how this transaction was

meant to work.”** Levine was not a mere passive

42. Patterson’s client is not a party in these cases. She has

asserted no claims against Benistar Trust or the other

defendants.

43. In connection with their motion, the plaintiffs

submitted Patterson’s billing records, which show telephone

calls with Levine on October 21 and 22, 1998. The plaintiffs also

submitted the written communications between Levine and

Patterson, including a facsimile signed by Levine.

42a

Appendix B

recipient of information from Patterson. He actively

sought to respond to Patterson’s concerns. On October

22, Levine responded to a request from Patterson by

transmitting to him some account forms by facsimile.

The next day, Patterson sent Levine, both by mail and

by facsimile transmission, a copy of the escrow

agreement that his client had signed with Benistar

regarding the funds to be kept at Merrill Lynch, and a

copy of the exchange agreement that his client had

signed with Benistar and the seller of the property she

was purchasing through the § 1031 transaction, along

with a cover letter. The escrow agreement, which is titled

“Escrow Agreement” in bold capital letters, explains in

some detail that Patterson’s client, in order to effectuate

a § 1031 property exchange, “will be depositing with

Benistar an amount of funds to be deposited in the

Benistar accounts at Merrill Lynch,” and that these

funds are to be held in an “escrow custodial account” at

Merrill Lynch for the benefit of Patterson’s client. The

exchange agreement makes abundantly clear the nature

of the § 1031 transaction and Benistar’s role as an

intermediary.“

Years after Patterson’s client’s transaction was

completed, Patterson saw a newspaper article in the

Boston Globe about the trial and subsequent

proceedings in this case and, with his client’s permission,

44. Patterson sent these agreements to Levine shortly after

Carpenter opened the Benistar account in October, 1998. Stated

differently, from almost the beginning, Merrill Lynch’s

employee Levine had knowledge of the nature of Benistar

Trust’s business.

43a

Appendix B

contacted the plaintiffs’ counsel. In March, 2004, he

provided an affidavit attesting to his communications

with Levine, along with copies of the written

communications and telephone and billing records

indicating the relevant telephone calls and corroborating

the dates of the facsimiles.

The import of this evidence is readily apparent.

Far from being merely cumulative or impeaching, it cuts

to the heart of Merrill Lynch’s argument in its successful

motion for judgment n.o.v. that Merrill Lynch had no

“actual knowledge” of the nature of Benistar Trust’s

business or the nature of its misdeeds. In a May, 2002,

pretrial affidavit in support of Merrill Lynch’s motion

for summary judgment, and again at trial, Levine denied

knowing any of these facts about Benistar Trust’s

business during the relevant period; Levine also

pointedly denied having any contact with any of Benistar

Trust’s clients in Massachusetts.“ Moreover, Levine

45. In his pretrial affidavit, Levine specifically stated that

he “had no communications or other contact with anyone in

Massachusetts in connection with any of the Benistar accounts”

(emphasis added). Counsel for Merrill Lynch repeatedly

emphasized this point to the jury. In his opening argument, he

stated that “[nJo one ever called Merrill Lynch” and no

“documents . .. were ever provided to Merrill Lynch” that would

have revealed that “this was third-party money.” In his closing

argument, he again emphasized that none of the plaintiffs ever

had communicated with Merrill Lynch: “All it would have taken

was onc telephone call to Merrill Lynch by onc of thesc plaintiffs

to alert Merrill Lynch to what was going on. . . That call never

came.” Although Patterson’s client was not a plaintiff, the judge

found that his telephone call alerted Merrill Lynch in preciseiy

this way to the fact that Benistar was trading with the funds of

clients to whom it owed a fiduciary duty.

44a

Appendix B

testified at trial that, if he had been aware that the

Benistar Trust account held third-party or client funds,

Merrill Lynch would not have permitted Benistar Trust

to open corporate accounts or to engage in option

trading with the funds. In light of subsequent

developments, it would be reasonable for a jury not to

credit this testimony.** In allowing Merrill Lynch’s

motion for judgment n.o.v., the judge found that there

was “no dispute” that “no one at Merrill Lynch ever

saw any of the written agreements” that would have

revealed that the funds were being held in escrow for

the benefit of the plaintiffs, to whom Benistar Trust owed

a fiduciary duty as an intermediary, a conclusion that

cannot be sustained in the face of the Patterson

evidence.”

The Patterson evidence, if believed, shows what

Merrill Lynch knew about Benistar Trust’s business, its

arrangements with its clients, and its misdeeds, allowing

a jury to find, in the judge’s words, that Merrill Lynch

46. See notes 47 and 51, infra.

47. After the plaintiffs brought forward the Patterson

evidence, Levine averred in an amended affidavit that “it

appears, that I sent a facsimile in October 1998 to a David

Patterson.” Levine no longer denied all contact with Patterson.

Levine continued to deny receiving from Patterson the escrow

and exchange agreements and Patterson’s cover letter of

October 23, 1998. However, the letter bore Levine’s correct

facsimile number and address, and the judge found that

Patterson in fact sent both the cover letter and the escrow and

exchange agreements to Levine.

45a

Appendix B

“knew one or more of the other defendants was or were

breaching fiduciary duties owed to clients, converting

client funds, or both.” The judge found the Patterson

evidence credible and persuasive. In light of that, she

made specific findings that Merrill Lynch was in direct

communication with the Massachusetts representative

of at least one Benistar client, and that in the course of

this communication, that representative (Patterson)

sent Merrill Lynch multiple copies of the legal

agreements specifying Benistar’s role as an

intermediary holding third-party funds in escrow in its

account at Merrill Lynch. In addition, the judge found

that, notwithstanding Levine’s amended affidavit

testimony to the contrary, see note 47, supra, in fact

Patterson did explain to Levine, in a telephone

conversation, both the nature of a § 1031 exchange and

the fact that Patterson’s client’s funds would be held in

escrow at Merrill Lynch in the Benistar account. She

concluded that such evidence satisfied the requirements

of rule 60(b)(2). It “is not merely cumulative or

impeaching” and “is of such a nature that it would

probably change the result were a new trial to be

granted,” satisfying the third and fourth requirements

of the rule. United States Steel v. M. DeMatteo Constr.

Co., 315 F.3d 43, 52 (1st Cir.2002).

We reject Merrill Lynch’s contention that the

Patterson evidence was not, in fact, “discovered since

the trial” or, in the alternative, that it could “by due

diligence have been discovered earlier by the movant.”

Id. The basis for both of these claims is the undisputed

fact that the cover letter from Patterson to Levine was

46a

Appendix B

in the plaintiffs’ possession before trial. It was not

Merrill Lynch that produced this document, or any other

record of Levine’s communications with Patterson. A

copy of the cover letter sent by Patterson to Levine was

produced by Paley in response to the plaintiffs’ pretrial

document request.* In any event, as the judge noted,

the cover letter, by itself, would not establish “actual

knowledge” on the part of Merrill Lynch.* It is

Patterson’s affidavit, which details his oral and written

communications with Merrill Lynch, that gives the

document Paley produced in discovery its meaning and

force. It is undisputed that the Patterson affidavit itself,

- along with the escrow agreement, the § 1031 property

exchange agreement, and the records of telephone

conversations and facsimiles that together comprise the

Patterson evidence, have all been discovered “since the

trial.” Merrill Lynch’s sweeping statement that “the

‘newly’ discovered Patterson documents had been

48. The cover letter was addressed to Levine, but a natation

on the letter indicates that copies without enclosures were also

to be sent to Carpenter and Paley. To date, only the Paley copy

of the cover letter, along with an accompanying facsimile cover

sheet addressed to Paley, has been produced by any of the

defendants. The judge noted that Paley produced this document

“as part of a supplemental response to plaintiffs’ repeated

document requests and motions to compel production of

documents.”

49. The judge also noted that, by itself, the cover letter

would not be admissible in evidence against Merrill Lynch.

47a

Appendix B

produced to and were in possession of plaintiffs’ counsel”

before trial is far from accurate.™

We also agree with the judge that the plaintiffs met

their burden of showing that the Patterson evidence

could not by due diligence have been discovered earlier

by the movant. Parties to litigation are required to

exercise due diligence in the search for relevant

information, but the degree of diligence required to

satisfy the strictures of rule 60(b)(2) is not unlimited.

See Kettenbach v. Demoulas, 901 F.Supp. 486, 495

(D.Mass.1995) (“failure to pursue discovery to the utmost

limit does not preclude a successful Rule 60[b][2]

motion”), citing Krock v. Electric Motor & Repair Co.,

339 F.2d 73, 74-75 (1st Cir.), cert. denied, 377 U.S. 934,

84 S.Ct. 1338, 12 L.Ed.2d 298 (1964) (failing to make full

use of discovery does not require finding of lack of due

diligence).

This is not a case where the movant under rule

60(b)(2) failed to make the discovery requests of the

nonmoving party that would have yielded the evidence

before trial. See, e.g., Zurich N. Am. v. Matrix Serv.,

Inc., 426 F.3d 1281, 1290 (10th Cir.2005) (documents not

newly discovered when plaintiff knew documentation

50. It should be noted that, even in cases where the “newly

discovered” evidence was actually in the plaintiffs’ possession

before trial—which was not the case here—a judge may

no -ertheless properly exercise her discretion to allow a motion

i’ posttrial relief under rule 60(b)(2). See United States Steel

v. M. DeMatteo Constr. Co., 315 F.3d 43, 52 (1st Cir.2002); Alpern

v. UtiliCorp United, Inc., 84 F.3d 1525 (8th Cir.1996).

48a

Appendix B

was missing “almost a year prior to the start of trial,”

made “no attempt to explicitly include it” in the

discovery process, and abandoned its requests for the

documents for over one year). This is not a case where

the movant failed to exercise due diligence by failing to

call an important witness of whom the moving party was

aware before trial, see Parrilla-Lopez v. United States,

84] Fi2d 16, 19 (1st Cir.1988) (“the appellant himself

admits that he was aware, before trial, of the policeman’s

identity and knowledge concerning the accident”); or

making a strategic choice not to pursue the evidence,

see Knott v. Racicot, 442 Mass. 314, 325, 812 N.E.2d

1207 (2004), or failing to exercise “even minimal

diligence.” Karak v. Bursaw Oil Corp., 288 F.3d 15, 19

(1st Cir.2002) (moving party “fails to explain why this

evidence could not have been found, well before the entry

of judgment, in the exercise of even minimal diligence”).

Here the plaintiffs’ repeated efforts at increasingly

tailored discovery were impeded at nearly every turn

by Merrill Lynch.

It is unnecessary to decide whether Merrill Lynch

deliberately withheld or destroyed the key documents

that it did not produce. However, as the judge found,

“it is at least fair to say that Merrill Lynch should have

had these documents in its files, which would have led

to their production”®' (emphasis in original). The

51. The judge found that “one might well expect that

Merrill Lynch itself would have a copy of the Patterson letter

and its attachments. However, despite testimony from Levine

that his brokerage group filed and retained all correspondence

(Cont'd)

49a

Appendix B

plaintiffs made pretrial document requests that

squarely covered the documents. A party “treads on thin

ice when he argues that [the plaintiffs] could have

uncovered [the evidence] had [the] [plaintiffs been more

persistent in pursuing depositions and document

discovery when several [court] orders... were necessary

to compel discovery to move forward.” Kettenbach v.

Demoulas, 901 F.Supp. 486, 495 (D.Mass.1995). It would

reward obstruction of the orderly process of litigation

effectively to penalize the plaintiffs for failing to discover

what Merrill Lynch, for whatever reason, failed to

produce in a timely manner, or failed to produce at all.

The conduct of the nonmoving party is relevant to the

question whether the moving party in a rule 60(b)(2)

motion exercised due diligence. See, e.g., Alpern v.

UtiliCorp United, Inc., 84 F.3d 1525, 1536 (8th Cir.1996);

Kettenbach v. Demoulas, supra (rule 60[b][2] motion

allowed as to newly discovered tape recording containing

an incriminating conversation with person who was

apparently coconspirator with defendant where

(Cont'd)

relating to their clients and that they retained all Benistar-

related correspondence and documents, and despite pretrial

document requests of the plaintiffs to Merrill Lynch that

squarely covered this type of correspondence, Merrill Lynch

never produced a copy of the Patterson correspondence from

its files before, during, or after the jury trial.” These facts alone

do not conclusively prove that Merrill Lynch either intentionally

destroyed or refused to produce documents in its possession,

and the judge thus did not abuse her discretion in denying the

plaintiffs’ motion under Mass. R. Civ. P 60(b)(3), 365 Mass. 828

(1974).

50a

Appendix B

plaintiff’s failure to depose coconspirator, whose identity

was unknown before trial but might have been

discovered, was due in part to defendant’s own

discovery abuses). We conclude that the judge, who was,

as we noted earlier, intimately familiar with both the

plaintiffs’ attempts to obtain discovery and Merrill

Lynch’s resistance to that discovery, did not abuse her

discretion in finding no lack of due diligence on the part

of the plaintiffs.

d. Newly discovered evidence: Paley. The plaintiffs

also offered as newly discovered evidence a separate

affidavit from Paley. At trial, Paley invoked his Fifth

Amendment privilege against self-incrimination and

refused to answer any questions. See note 13, supra.

In his posttrial affidavit, Paley averred that in October,

1998, he had at least one very specific conversation with

Levine in which he explained Benistar Trust’s business

as an intermediary for § 1031 transactions, and

explained that the funds in the Benistar Trust account

at Merrill Lynch were third-party client funds. The

judge found that the Paley evidence, if credible, would

support the conclusion that Merrill Lynch had “actual

knowledge” that the Benistar Trust account contained

funds held in escrow for third-party clients, and provided

“substantial assistance” to Benistar in misusing those

funds. On the other hand, she also concluded that Paley’s

credibility was “extremely questionable” because his

sworn statement was given in return for the plaintiffs’

agreement to release Paley from damages “well in excess

of $16 million.” Because the Patterson evidence alone

was sufficient to warrant allowing the plaintiffs’ motion

Sla

Appendix B

for posttrial relief under rule 60(b)(2), we need net reach

the question whether the Paley evidence alane would

justify a new trial.” The plaintiffs are free to attempt to

introduce the Paley evidence at the new trial.

The plaintiffs argue that, rather than granting a new

trial, the court should allow their motion to reinstate

the jury verdict. We are mindful of the burden on al!

parties that a new trial represents. But the judge was

correct in concluding *mat the plaintiffs’ preferred

remedy would be inappropriate here. Even after the

introduction of the newly discovered evidence, disputed

issues of material fact remain; the credibility of the

witnesses and documentary evidence must be weighed

by the fact finder. As the plaintiffs would not be entitled

to summary judgment, they are not entitled to reinstate

the jury verdict.

5. Remaining claims. The judge denied the

motion of Carpenter, Molly Carpenter, and Benistar Ltd.

to dismiss the claims against them for lack of personal

jurisdiction. The Benistar defendants argue on appeal

that the judge lacked personal jurisdiction over any of

the Benistar defendants with the exception of Benistar

Trust. We have carefully considered their arguments in

light of the evidenee on the question. For essentially the

reasons articulated by the judge and by the Appeals

52. We thus express no opinion here on the proper

treatment under rule 60(b)(2) of “newly discovered” evidence

that was obtained in exchange for a release from civil liability

for a witness who had invoked his Fifth Amendment privilege

at trial.

52a

Appendix B

Court, we affirm. See Cahaly v. Benistar Prop. Exch.

Trust Co., 68 Mass.App.Ct. 668, 676-677, 864 N.E.2d 548

(2007). The Benistar defendants also appeal from the

judge’s denial of their motion for a new trial. Again, after

careful consideration of the arguments, and for

essentially the reasons articulated by the judge and by

the Appeals Court, we affirm. See id. at 677-678, 864

N.E.2d 548. After careful consideration we likewise

reject the remaining contentions of the Benistar

defendants for essentially the reasons offered by the

trial judge and the Appeals Court. See id. at 678-81,

864 N.E.2d 548.

6. Conclusion. For the reasons set forth above, we

affirm the denial of the Benistar defendants’ motion for

a new trial and the entry of judgment against the

Benistar defendants. We affirm the decision to grant

judgment n.o.v. to Merrill Lynch. We affirm the decision

granting the plaintiffs a new trial of their claims against

Merrill Lynch. We remand the consolidated cases to the

Superior Court for further proceedings consistent with

this opinion.

So ordered.

53a

APPENDIX C — OPINION OF THE APPEALS.

COURT OF MASSACHUSETTS, SUFFOLK

DATED APRIL 17, 2007

APPEALS COURT OF MASSACHUSETTS,

SUFFOLK

No. 05-P-1717

Suffolk. November 1, 2006. April 17, 2007.

GAIL A. CAHALY & others!

VS.

BENISTAR PROPERTY EXCHANGE

TRUST CO., INC., & others.”

Present: KANTROWITZ, COWEN

& GRAINGER, JJ

1. Jeffrey M. Johnston; Bellemore Associates, LLC;

Massachusetts Lumber Company, Inc.; Joseph Iantosca,

individually and as trustee of the Faxon Heights Apartments

Realty Trust and Fern Realty Trust; Belridge Corporation.

2. Benistar Ltd.; Benistar Employer Services Trust

Corporation; Benistar Admin. Services, Inc.; Carpenter

Financial Group, LLC; Molly Carpenter; Daniel E. Carpenter;

Merrill Lynch, Pierce, Fenner & Smith, Inc.; UBS PaineWebber,

Inc.; and U.S. Property Exchange.

54a

Appendix C

Practice, Civil, Relief from judgment, Judicial

discretion, New trial, Judgment notwithstanding

verdict. Judgment, Relief from judgment.

Jurisdiction, Personal, To reach and apply assets.

Conversion. Fiduciary. Fraud. Joint Tortfeasors.

GRAINGER, J. This matter, involving protracted

multiparty litigation, is presented in part by an amended

report pursuant to Mass.R.Civ.P. 64(a), as amended, 423

Mass. 1403 (1996), and in part by cross appeals from an

amended final judgment pursuant to Mass.R.Civ.P 54(b),

365 Mass. 820 (1974).

The following facts are uncontested: the plaintiffs

were investors who each separately contracted with

defendant Benistar Property Exchange Trust Company,

Inc. (Benistar), for the purpose of deferring tax

obligations on proceeds from the sale of their investment

properties. They did so pursuant to 26 U.S.C. § 1031

whereby a property owner may avoid recognition of

gains from the property’s sale by engaging in a

“like-kind” property exchange within 180 days. See 26

U.S.C. § 1031(a)(3) (2000). This tax advantage required

the plaintiffs to transfer their sale proceeds to an escrow

account, qualified trust, or qualified intermediary

pending their purchase of replacement property. The

plaintiffs here arranged for the proceeds from their

respective property sales to be sent to Benistar, which

advertised itself as a qualified intermediary under

§ 1031.

5Sa

Appendix C

Benistar thus came to be in possession of the

plaintiffs’ funds, subject to written agreements titled,

variously, “Exchange Agreement,” “Exchange Fee

Agreement,” “Escrow Agreement,” or “Account

Selection Form” (the agreements). The agreements

expressly provided that the plaintiffs’ funds were to be

invested in either a three-percent (per annum) “money

market” account or a six-percent (per annum)

“investment” account. The agreements also required

Benistar to deliver the escrowed funds to the sellers of

the replacement properties, or to the plaintiffs

themselves, upon the plaintiffs’ instructions. While in

possession of the plaintiffs’ funds, Benistar engaged in

high-risk options trading, eventually losing

approximately nine million dollars of the plaintiffs’ funds.

During the time of Benistar’s trading, the funds

were first held in brokerage accounts at Merrill Lynch,

Pierce, Fenner & Smith, Inc. (Merrill Lynch), and

subsequently transferred to similar accounts at UBS

PaineWebber, Inc. (PaineWebber). Additional facts are

discussed below as they arise in the context of relevant

claims.

Procedural history. Starting in January, 2001, the

plaintiffs filed actions (later consolidated) against

Benistar, various Benistar affiliates,* Merrill Lynch,

PaineWebber, Molly and Daniel Carpenter (officer and

owner of Benistar, respectively), and Martin Paley

3. Benistar Admin. Services, Inc.; Benistar Employer

Services Trust Corporation; Benistar Ltd.; Carpenter Financial

Group, LLC; and U.S. Property Exchange.

56a

Appendix C

(Benistar’s president), asserting claims of breach of

contract, conversion, breach of fiduciary duty, fraud,

misrepresentation, and violation of G.L. c. 938A. In

addition, the plaintiffs’ claims against Merrill Lynch and

PaineWebber included aiding and abetting the

conversion and breach of fiduciary duty committed by

Benistar, violation of the Connecticut Unfair Trade

Practices Act, and violation of the New York Consumer

Protection Act.

In March, 2002, the trial judge‘ granted summary

judgment to the plaintiffs on their claims of conversion

and breach of contract against Benistar arising out of

the misuse and eventual loss of their funds. She allowed

the remaining common-law claims and consumer

protection claims to proceed to trial. In July, 2002, the

judge granted summary judgment for PaineWebber on

the plaintiffs’ aiding and abetting claims, arising out of

PaineWebber’s relatively brief (three-month) role as

investment broker for Benistar’s speculations after

Merrill Lynch terminated the Benistar account. In

December, 2002, a jury found Benistar, its principals,

and Merrill Lynch liable on all of the plaintiffs’ common-

law and Connecticut and New York consumer protection

claims.

In February, 2003, the judge allowed Merrill Lynch’s

motion for judgment notwithstanding the verdict

(judgment n.o.v.). The judge found scant evidence that

4. This case benefited from docketing in the Superior Court

business litigation session; consequently, virtually all motions

were able to be heard and decided by the trial judge.

57a

Appendix C

Merrill Lynch had actual knowledge that Benistar was

using funds belonging to third parties, and no evidence

that Merrill Lynch had actual knowledge that any

restrictions attached to those funds.°

The plaintiffs’ claims under G.L. c. 938A were tried

to the judge in March, 2003. On these claims, she found

Benistar, Daniel Carpenter, and Paley liable and

awarded double damages; the judge found Molly

Carpenter not liable.

In February, 2004, and just within the one-year time

period prescribed by Mass.R.Civ.P. 60(b), 365 Mass. 828

(1974), the plaintiffs moved for reinstatement of the jury

verdict against Merrill Lynch on the basis of newly

discovered evidence, discussed in detail below. Benistar,

several corporate affiliates, and the Carpenters filed a

motion for new trial in May of the same year. The judge

held evidentiary hearings on those motions and, in

August, 2004, denied the plaintiffs’ motion to reinstate

the verdict, instead granting the plaintiffs a new trial

against Merrill Lynch based on the newly discovered

evidence. See Mass.R.Civ.P 60(b)(2). At the same time

the judge denied the Benistar motion for a new trial.

An amended rule 64(a) report issued in November,

2004, asking this court to review the trial court’s grant

\of judgment n.o.v. to Merrill Lynch as well as the grant

5. She also found insufficient evidence that Merrill Lynch

provided substantial assistance in the conversion or breach of

fiduciary duty.

58a

Appendix C

of a new trial against Merrill Lynch to the plaintiffs. On

the same day, an amended partial and final judgment

under rule 54(b) was entered on the plaintiffs’ claims

against the Carpenters, Benistar, certain Benistar

corporate affiliates,® Paley,? and U.S. Property

Exchange.® The judgment also dismissed all of the

plaintiffs’ claims against PaineWebber. The plaintiffs

have appealed from the judgment, and the Carpenters,

Benistar, and the corporate affiliates have cross-

appealed.

Discussion. We agree that the posture of this case

recommends a rule 64(a) report of the judge’s decisions

6. Benistar Ltd.; Benistar Employer Services Trust

Corporation; Benistar Admin. Services, Inc.; and Carpenter

Financial Group, LLC. As to these defendants, the judge

determined in September of 2003 after a jury-waived trial that

disregard of the corporate form was appropriate and that they

should share in the liability of Benistar and the Carpenters.

See part 1, infra.

7. Although the jury had returned verdicts for the plaintiffs

against Paley and the judge had found against him under G.L.

c. 938A, the final judgment was in Paley’s favor due to a

stipulation of dismissal entered after his posttrial agreement

to waive his testimonial privilege and provide evidence for the

plaintiffs’ use in their motion to reinstate the verdict against

Merrill Lynch. See note 10, infra, and accompanying text. (Paley

has not participated in the appeal.) \

8. U.S. Property Exchange was found liable as the

‘corporate successor to Benistar and has not participated in the

appeal.

59a

Appendix C

to grant judgment n.o.v. to Merrill Lynch and to grant

the plaintiffs a new trial, so that these can be considered

at the same time as the final judgment entered under

rule 54(b), avoiding piecemeal appellate review.’ We turn

first to the grant of a new trial against Merrill Lynch

and then discuss, in turn, Benistar’s appeal and that of

the plaintiffs involving PaineWebber. We conclude by

affirming in all respects.

The grant of a new trial with respect to claims

against Merrill Lynch. We review a judge’s decision

on a motion for relief from judgment under rule 60(b)

for a “clear abuse of discretion.” Tai v. Boston, 45

Mass.App.Ct. 220, 224, 696 N.E.2d 958 (1998), quoting

from Scannell v. Ed. Ferreirinha & Irmao, Lda., 401

Mass. 155, 158, 514 N.E.2d 1325 (1987). Here, the judge

found that the material presented by the plaintiffs as

newly discovered evidence under rule 60(b)(2) supported

their claim that Merrill Lynch had possessed actual

knowledge that Benistar was investing client funds

subject to restrictions, and had provided substantial

assistance to the Benistar defendants in their

misconduct.

9. “If the trial court is of opinion that an interlocutory

finding or order made by it so affects the merits of the

controversy that the matter ought to be determined by the

Appeals Court before any further proceedings in the trial court,

it may report such matter, and may stay all further proceedings

except such as are necessary to preserve the rights of the

parties.” Mass.R.Civ.P 64, as amended, 423 Mass. 1403 (1996).

See Lyons v. Globe Newspaper Co., 415 Mass. 258, 261 n. 4, 612

N.E.2d 1158 (1993), and cases cited.

60a

Appendix C

The judge based her rule 60(b)(2) analysis on two

sources of evidence presented by the plaintiffs. One

source, defendant Martin Paley, had asserted his

privilege under the Fifth Amendment to the United

States Constitution at trial, but waived that privilege in

February, 2004, when he provided an affidavit to the

plaintiffs."° In that affidavit, Paley, president of Benistar,

recounted a conversation with Gerald Levine, a broker

at Merrill Lynch, in which Paley stated that the money

in Benistar accounts was client funds held in escrow, and

that those funds were required to be made available to

clients upon request within forty-eight hours.

Merrill Lynch argues that the judge abused her

discretion because posttrial affidavits of codefendants

who exercised their Fifth Amendment privilege in a

criminal trial are not considered newly discovered

evidence in many circuits of the United States Court of

Appeals. See cases cited in United States v. Montilla-

10. The plaintiffs entered into a posttrial settlement

agreement with Paley in which they promised to dismiss their

claims against him if he waived his Fifth Amendment privilege

and testified, and if the plaintiffs’ motion to reinstate the jury

verdict was granted. (See note 7, supra.) Paley’s liability, jointly

and severally with other defendants, otherwise would have

stood around sixteen million dollars. Merrill Lynch asserts that

the affidavit represents no more than testimony purchased by

the plaintiffs, and should therefore be excluded on public policy

grounds. However, portions of Paley’s posttrial affidavit are

distinctly unhelpful to the plaintiffs, undermining this

contention. Paley and the plaintiffs were clearly adversarial

parties at trial. As the trial judge has noted, Paley’s credibility

is properly a matter for the jury to consider.

6la

Appendix C

Rivera, 115 F.3d 1060, 1065-1066 (1st Cir.1997). Our

courts have favored instead a case-by-case <nalysis.

See, e.g., Commonwealth v. Wolinski, 431 Mass. 228,

237-238, 726 N.E.2d 930 (2000); Commonwealth v.

Cintron, 435 Mass. 509, 516-518, 759 N.E.2d 700 (2001).

This approach has also been taken by the First Circuit.

See United States v. Montilla-Rivera, supra at 1066."

We reject Merrill Lynch’s contention that because

the trial judge strongly expressed her doubt about the

credibility of the Paley evidence, it cannot support the

allowance of a new trial. Case law in this Commonwealth

acknowledges that posttrial evidence of a witness who

did not testify is “the weakest sort of evidence,” but the

analysis does not end there. See Commonwealth v.

Evans, 439 Mass. 184, 203-204, 786 N.E.2d 375, cert.

denied, 540 U.S. 923, 124 S.Ct. 323, 157 L.Ed.2d 222

and 540 U.S. 978, 124 S.Ct. 445, 157 L.Ed.2d 322 (2003),

11. We likewise disagree with Merrill Lynch’s contention

that the plaintiffs failed to prove that Paley’s testimony was

unavailable because they did not request “a judicial ruling on

the propriety of Paley’s invocation of the Fifth Amendment.”

Merrill Lynch offers neither support for the assertion that such

a ruling is required nor any basis on which Paley’s invocation of

the Fifth Amendment privilege might have been adjudged

inappropriate. In other areas of our case law, we similarly

recognize a distinction between the posttrial admissibility of

evidence presented by defendants who previously exercised

their Fifth Amendment privilege during trial (thereby

controlling their own “unavailability”) and that presented by

other parties. Compare Commonwealth v. Ortiz, 393 Mass. 523,

529-530, 471 N.E.2d 1321 (1984), with Commonwealth v. Labelle,

67 Mass.App.Ct. 698, 701, 856 N.E.2d 876 (2006).

62a

Appendix C

citing Dirring v. United States, 353 F.2d 519, 520 (1st

Cir.1965). Although the trial judge opined that the Paley

evidence has “substantial credibility issues,” she also

found that the evidence nevertheless supports a rule

60(b)(2) motion because it is material, likely to affect

the outcome if believed, and admissible. The trial judge

was well within her discretion in finding that a jury may

consider the evidence, weigh its value, and determine

the witness’s credibility. We uphold the trial judge’s

determination that, as to the plaintiffs, Paley’s testimony

was newly discovered under the requirements of rule

60(b){2).

The second source of evidence considered by the

judge in her decision to grant a new trial was an affidavit

from attorney David Patterson, who represented a

Benistar client not party to the suit. Patterson’s affidavit

described oral and written communications with one of

Benistar’s primary brokers at Merrill Lynch during 1998

in which Patterson had explained the nature and

limitations of the Benistar-client relationship.

Patterson’s affidavit specifically described a cover letter

that he had mailed and faxed to the Merrill Lynch

broker, to which Patterson had attached copies of

Benistar-client agreements. Merrill Lynch argued that

the Patterson evidence could not support the grant of a

new trial because a copy of Patterson’s cover letter,

albeit without the enclosed agreements, had been

produced to the plaintiffs during pretrial discovery.'*

12. In keeping with the tangled nature of the web woven

below, this letter was never produced by Merril! Lynch, to whom

(Cont'd)

63a

Appendix C

In considering the exercise of due diligence required

by the language of rule 60(b)(2), the judge specifically

noted that the plaintiffs sent pretrial document requests

to the defendants—including, notably, Merrill Lynch—

“that squarely covered this type of correspondence.”

See Kettenbach v. Demoulas, 901 F.Supp. 486, 495

(D.Mass.1995) (“failure to pursue discovery to the utmost

limit does not preclude a successful Rule 60[b][2]

motion”), citing Krock v. Electric Motor & Repair Co.,

339 F.2d 73, 74-75 (1st Cir.) (failing to make full use of

discovery does not require a finding of lack of due

diligence), cert. denied, 377 U.S. 934, 84 S.Ct. 1338, 12

L.Ed.2d 298 (1964).

We conclude that the pretrial failure of plaintiffs’

counsel to follow the clear signposts provided by the

Patterson letter materially detracts from what would

otherwise be a textbook example of evidence—found by '

the judge to be “specific,” “credible,” and corroborated

by other contemporaneous evidence—entitling the

applicant to a new trial. Pretrial possession of the

Patterson letter, simply stated, means that the evidence

to which it leads could have been obtained under the

“due diligence” strictures of rule 60(b)(2), and cannot

therefore now be considered “newly discovered” within

the meaning of the rule.

(Cont'd)

it had been addressed and sent, and from whom production

could properly have been expected. Instead it was produced by

the defendant Paley—the very party whose credibility is now

attacked by Merrill Lynch on appeal.

64a

Appendix C

However, the judge properly exercised her

discretion in concluding that the Paley evidence was

sufficient, standing alone, to support the grant of a new

trial. The Paley evidence is material to the issue of

Merrill Lynch’s actual contemporaneous knowledge of

Benistar’s wrongdoing. It very likely would have

produced a different result, since the judge could not

properly have granted a judgment n.o.v. if Paley had

testified.'* See Wojcicki v. Caragher, 447 Mass. 200, 215,

849 N.E.2d 1258 (2006) (new evidence must be material

in sense that it would likely affect result). We therefore

affirm the judge’s order granting a new trial on the

claims against Merrill Lynch.

Appeal of the Benistar defendants."

1. The challenge to personal jurisdiction. In general,

personal jurisdiction is properly exercised over any

defendant in connection with the transacting of any

business in the Commonwealth (directly or through an

agent) or over a defendant who causes “tortious injury

in this commonwealth by an act or omission outside this

commonwealth if he regularly does or solicits business,

13. Other than that which was introduced posttrial, the

record contains no evidence that Merrill Lynch had actual

knowledge of any restrictions imposed on Benistar’s use of the

plaintiffs’ funds. Accordingly, we conclude that the judge was

correct in granting judgment n.o.v. in favor of Merrill Lynch.

14. The “Benistar defendants” are Benistar; Daniel and

Molly Carpenter; Benistar Ltd.; Benistar Admin. Services, Inc.;

Benistar Employer Services Trust Corporation; and Carpenter

Financial Group, LLC.

65a

Appendix C

or engages in any other persistent course of

conduct, or derives substantial revenue from goods

used or consumed or services rendered, in th

This text is long and has been trimmed here. Open the source document for the complete record.

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.