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Rose v. Brusini

Supreme Court of Rhode Island

November 29, 2016

Michael F. Rose, Jr. et al.
Stephen M. Brusini et al.

         Providence County Superior Court (PC 11-7329), Richard A. Licht, Associate Justice.

          For Plaintiffs: Peter J. Brockmann, Esq. Frank F. Sallee, Esq.

          For Defendants: J. David Freel, Esq. Paul S. Callaghan, Esq.

          Present: Suttell, C.J., Goldberg, Flaherty, Robinson, and Indeglia, JJ.


          Francis X. Flaherty, Associate Justice

         This case came before the Supreme Court on appeal by the plaintiffs, Michael F. Rose, Jr. and RC&D, Inc. (collectively plaintiffs), from a decision of the Superior Court granting the defendants' motion for summary judgment in favor of Attorney Stephen M. Brusini and the law firm Orson & Brusini Ltd. (collectively defendants). The plaintiffs argue that the hearing justice erred when he concluded that there was no evidence of proximate cause linking the defendants' alleged negligence and any damages the plaintiffs may have suffered, and that Rose's own conduct was the proximate cause of his damages. The matter came before this Court for oral argument on November 2, 2016, pursuant to an order directing the parties to appear and show cause why the issues raised by this appeal should not summarily be decided. After considering the oral and written arguments of the parties, and after a thorough review of the record, we are of the opinion that cause has not been shown and that this case should be decided at this time without further briefing or argument. For the reasons set forth in this opinion, we vacate the judgment of the Superior Court.


         Facts and Travel

         On January 7, 2004, Rose and David Egan formed a closely held corporation, RC&D, Inc. RC&D provided specialized construction services, equipment, and personnel for environmental restoration and related land development in the New England region. At first, Rose and Egan were equal owners of the corporation. The ownership percentages later changed, however, and Egan acquired 51 percent of the issued shares of RC&D stock and Rose held the remaining 49 percent. Egan was responsible for office administration and keeping and maintaining the financial records while Rose supervised field construction operations. Rose had very little personal involvement in managing or overseeing RC&D's finances and he did not have access to the company's books and records, which Egan kept password-protected through a software program called Quickbooks. In 2007 the two began discussing Rose's buyout of Egan's 51 percent interest in RC&D. In August 2008, after negotiations became contentious, Rose engaged defendants to represent him in connection with the buyout.

         By December 14, 2008, negotiations had progressed to a point where defendants were able to prepare a draft purchase and sale agreement (P&S) and circulate it to the parties. One component of the P&S involved Rose's purchase of Egan's shares of stock in RC&D and the second component involved a distribution from RC&D to Egan of the company's profits earned through December 31, 2008. On December 16, 2008, Egan's counsel sent a "redlined" version of the first draft of the P&S to defendants. Two days later, Egan finally sent an email to Rose containing some information about RC&D's finances, including balance sheets, a projection as of December 31 of assets and liabilities, and a schedule of accounts receivable.

         On December 19, 2008, Brusini advised Rose not to sign the P&S because Egan was refusing to provide critical financial information regarding RC&D. Later that day, during a conference call with the parties, Brusini reiterated his advice that Rose should not execute the P&S. And again, on December 22, 2008, Brusini called Rose to tell him the same thing, but Rose was intent on going forward.

         By email, on December 23, 2008 at 9:55 a.m., Brusini sent a marked-up draft of the P&S to, among others, Egan's counsel and Rose. At 10:06 a.m. the same day, Brusini sent a letter to Rose by email. The letter recounted their telephone conversations from December 19 and December 22 and specified, "I cannot recommend and do not recommend that you [Rose] sign the agreement as revised by [Egan's counsel]" because Rose had not been involved in the finances of the company and did not know what the finances of the company were. The letter continued:

"That said, I am aware that you are willing to take the risks outlined above and the risks generally posed by [Egan's counsel's] revisions, and that you are anxious to close these transactions as soon as possible. With that in mind, in the red-lined version that I sent to you earlier this morning I have attempted to make at least a few changes to [Egan's counsel's] version to provide you with some basic protections."

         The amended version of the P&S referred to in the letter included a "True-up Clause" to protect Rose in order "to capture post-closing any amount paid to Mr. Egan in connection with the buyout that, for any reason, [was] improper or incorrect."

         The closing on the buyout took place on January 6, 2009, and the distribution amount ($1, 204, 695.75) was paid in full to Egan. After the closing, Rose finally gained full access to RC&D's financial books and records, including Quickbooks. The financial books and records revealed that Egan, in the very limited information he had provided to Rose preclosing, had overstated the accounts receivable and assets and had understated the accounts payable, thereby resulting in a considerably higher 2008 year-end distribution to Egan. According to the company's books and records, the distribution paid by RC&D to Egan was approximately $584, 695.70 more than what Egan was entitled to under the terms and conditions of the P&S.

         Rose and ...

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