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McGinnes v. Town of New Shoreham

Superior Court of Rhode Island, Washington

April 4, 2017

SARA MCGINNES AND CLIFFORD MCGINNES Plaintiffs,
v.
TOWN OF NEW SHOREHAM, ALBERT CASAZZA, JOHN PEZZIMENTI, NANCY DODGE, BARBARA MACMULLAN, BILL PENN, EVERETT SHOREY, KEVIN HOYT, NORRIS PIKE AND JACK SAVOIE Defendants.

          For Plaintiff: Michael Daly, Esq.

          For Defendant: Michael R. McElroy, Esq.; Leah J. Donaldson, Esq.; John O. Mancini, Esq.; Erin A. Hockensmith, Esq.; Anthony F. DeMarco, Esq.; Katherine Merolla, Esq.

          DECISION

          STERN, J.

         Before this Court are cross-motions for partial summary judgment. Plaintiffs, Sara McGinnes and Clifford McGinnes (Mrs. and Mr. McGinnes, respectively; collectively, Plaintiffs) ask this Court to grant summary judgment on Counts I and II of their First Amended Complaint. Defendants, Albert Casazza (Casazza) and John Pezzimenti (Pezzimenti) (collectively, Defendants), object to Plaintiffs' motion and ask this Court to summarily dispose of Counts I and II of the First Amended Complaint. Plaintiffs likewise object to Defendants' motion. Jurisdiction is pursuant to Super. R. Civ. P. 56.

         I Facts and Travel

         Block Island Power Company (BIPCO) is an electric utility company that serves the Town of New Shoreham (the Town) and has been privately owned and operated since 1925. Am. Compl. ¶ 16. Prior to June 14, 2012, Mr. McGinnes, Casazza, Jerome Edwards (Edwards), and Pezzimenti were equal shareholders of BIPCO, together owning the entirety of BIPCO's shares. Id. at ¶ 17. On June 14, 2012, Mr. McGinnes, Casazza, Edwards, and Pezzimenti executed an agreement titled "BIPCo Shareholders' Agreement" (Shareholders' Agreement). Id.

         at ¶ 18. The Shareholders' Agreement provided:

"If any of the current shareholders wishes to sell his stock, the remaining shareholders will have the right of first refusal to the sale.
"Should any of the current shareholders die, the estate may transfer the stock to a descendent heir. Should that descendant heir or the estate wish to sell the stock to a non related heir, the remaining shareholders will have the right of first refusal to the sale." Am. Compl., Ex. A.

         In November 2013, Edwards unfortunately passed away, and his BIPCO shares were converted to treasury stock, which resulted in Mr. McGinnes, Casazza, and Pezzimenti each owning one-third of the outstanding shares of BIPCO. Am. Compl. ¶ 20.

         Thereafter, on or about March 7, 2016, Mr. McGinnes conveyed his one-third ownership in BIPCO to Mrs. McGinnes as a marital gift. Id. at ¶ 22. The conveyance was accomplished by delivery of an endorsed certificate in accordance with BIPCO bylaws Article X, Section 2[1] and resulted in Mr. McGinnes transferring his ownership interest in BIPCO to his wife. Id. Neither Casazza nor Pezzimenti objected to the transfer; rather, the transfer was accepted and ratified. Id. at ¶ 23. Plaintiffs assert that the right of first refusal belonging to Mr. McGinnes as delineated in the Shareholders' Agreement was assigned to Mrs. McGinnes at the time of the transfer. Alternatively, Plaintiffs aver that Mr. McGinnes retained his right of first refusal as set forth in the Shareholders' Agreement. See id. at ¶ 24.

         In early 2016, Mr. and Mrs. McGinnes, Casazza, and Pezzimenti engaged in discussions with the Town and with Northern Transmission, LLC (Northern Transmission) about the possibility of selling BIPCO shares to either entity. Id. at ¶ 25. As a result of these discussions, the Town enlisted the Electric Utilities Task Group (EUTG) to aid in developing a plan for the future operation of BIPCO should the Town purchase ownership of BIPCO. Id. at ¶ 26. Several current members of BIPCO's Board of Directors-Barbara MacMullan, Bill Penn, and Everett Shorey-were part of the Town Council which formed the EUTG. Id. Thereafter, on May 18, 2016, the Town Council voted to support a potential purchase of BIPCO and directed Nancy Dodge (Dodge), the Town Manager at the time, to "submit a resolution advocating for the passage of a state law that would allow the Town to create a non-profit successor organization to which the Town would transfer the Shares and assets of BIPCO." Id. at ¶ 27. In addition, by spring 2016, negotiations for the Town and Northern Transmission's purchase of BIPCO had progressed to such a point where material and specific transactional terms were exchanged between the parties. Id. at ¶ 28.

         When Mrs. McGinnes had learned that Casazza and Pezzimenti intended to sell their BIPCO shares to the Town, she provided notice to Casazza, Pezzimenti, and the Town that she did not intend to divest her ownership in BIPCO and indicated that she would exercise her right of first refusal "on terms equal to those offered by the Town." Id. at ¶ 29. Dodge acknowledged Mrs. McGinnes's notice, but indicated that the Town intended to proceed with its purchase of Casazza and Pezzimenti's BIPCO shares nevertheless. Id. at ¶ 30; see also Am. Compl., Ex. B. Thereafter, Casazza and Pezzimenti entered into a Stock Purchase Agreement with the Town on July 11, 2016. Am. Compl. ¶ 31; see also Am. Compl., Ex. C. The Stock Purchase Agreement acknowledged Mrs. McGinnes's right of first refusal and set a closing date within 120 days of its execution. See Am. Compl. ¶ 31. Plaintiffs allege that, subsequently, the Town planned to assume full control of BIPCO by, among other things, forming a non-profit utility district or coop and retire Mrs. McGinnes's stock upon transfer of BIPCO stock to the new entity. See id. at ¶ 32.

         On October 3, 2016, the Town formed a "BIPCO Transition Team" at a Town Council meeting, which was composed of the members now composing the BIPCO's Board of Directors. See id. at ¶ 35. Thereafter, the Town closed on its purchase of Casazza and Pezzimenti's stock on November 7, 2016 and, that same evening, appointed the members of the BIPCO Transition Team to the Board of Directors. Id. at ¶¶ 37-40.

         Plaintiffs have pleaded claims for rescission of the Stock Purchase Agreement, breach of contract seeking specific performance of right of first refusal, breach of contract for damages, tortious interference with prospective business relationships, and breach of fiduciary duty against Casazza and Pezzimenti. The original Complaint also asserted a claim for breach of fiduciary duty against the current members of BIPCO's Board of Directors. On February 1, 2017, however, Plaintiffs voluntarily dismissed their claim against the board members. Subsequently, BIPCO was permitted to intervene in the action pursuant to Super. R. Civ. P. 24.

         II

         Standard of Review

         "Summary judgment is an extreme remedy and should be granted only when 'the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as [a] matter of law.'" Rose v. Brusini, 149 A.3d 135, 139 (R.I. 2016) (quoting Plunkett v. State, 869 A.2d 1185, 1187 (R.I. 2005)). "'Only when a review of the admissible evidence viewed in the light most favorable to the nonmoving party reveals no genuine issues of material fact, and the moving party is entitled to judgment as a matter of law, will this Court . . . grant . . . summary judgment.'" Id. at 139-40 (quoting Nat'l Refrigeration, Inc. v. Standen Contracting Co., 942 A.2d 968, 971 (R.I. 2008)). "The party opposing 'a motion for summary judgment carries the burden of proving by competent evidence the ...


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