Commonwealth v. Tradition (North America) Inc. / Jampel

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15-P-1543 Appeals Court

COMMONWEALTH vs. TRADITION (NORTH AMERICA) INC.; RONALD JAMPEL
& others,1 third-party defendants.

No. 15-P-1543.

Suffolk. October 5, 2016. - February 21, 2017.

Present: Meade, Milkey, & Kinder, JJ.

Bonds, Tax-exempt. Contribution. Contract, Performance and
breach, Implied covenant of good faith and fair dealing,
Indemnity, Bidding for contract, Misrepresentation, Unjust
enrichment, Interference with contractual relations,
Settlement agreement, Release from liability. Indemnity.
Massachusetts False Claims Act. Consumer Protection Act,
Unfair or deceptive act. Deceit. Fraud. Conspiracy.
Unjust Enrichment. Unlawful Interference. Release.
Limitations, Statute of. Practice, Civil, Enforcement of
liability on bond, Joinder of claims, Damages.

Civil action commenced in the Superior Court Department on
November 5, 2010.

1
Steven E. Goldberg, Trinity Plus Funding Company LLC, and
FSA Capital Management Services, LLC. We spell the parties'
names as they appear in the second amended third-party
complaint. Prior to the entry of judgment in this case,
Tradition (North America) Inc.'s third-party claims against
Adrian Scott-Jones and Capital Financial Partners, Inc., were
resolved by settlement; they are not parties to this appeal.
 2

Motions to dismiss a third-party complaint against certain
third-party defendants were heard by Frances A. McIntyre, J.,
and a separate motion to dismiss the third-party complaint
against another defendant was considered by Paul D. Wilson, J.

John E. Roberts (Michael R. Hackett also present) for
Tradition (North America) Inc.
Joseph J. Bial, of the District of Columbia, for FSA
Capital Management Services, LLC.
Douglas L. Wald, of the District of Columbia (Kevin P.
Martin also present) for Trinity Plus Funding Company LLC.
Julia McLetchie for Steven E. Goldberg.
Jeremy M. Sternberg, for Ronald Jampel, was present but did
not argue.

KINDER, J. The Commonwealth brought this enforcement

action against the defendant, Tradition (North America) Inc.

(Tradition), a broker for transactions involving municipal bond

derivatives, claiming that Tradition engaged in bid rigging and

other deceptive practices that harmed the Commonwealth in

violation of the Consumer Protection Act, G. L. c. 93A, § 2, and

the False Claims Act, G. L. c. 12, § 5B. Tradition denied the

allegations, asserting that it, too, was a victim of the alleged

bid-rigging scheme. Tradition filed third-party claims against

individuals and corporations with whom it had consulted in the

allegedly fraudulent transactions, including Ronald Jampel,

Steven E. Goldberg, Trinity Plus Funding Company LLC (Trinity),

and FSA Capital Management Services, LLC (FSA) (collectively,

the third-party defendants). The third-party complaint sought

contribution from the third-party defendants pursuant to G. L.
 3

c. 231B, § 1(a), for any liability Tradition might have to the

Commonwealth (contribution claims). It also alleged various

other claims, including breach of contract, breach of the

implied covenant of good faith and fair dealing, common-law

indemnification, unfair and deceptive trade practices, fraud and

deceit, intentional and negligent misrepresentation, civil

conspiracy, unjust enrichment, and tortious interference with

contractual relations (noncontribution claims).

On motions filed pursuant to Mass.R.Civ.P. 12(b)(6), 365

Mass. 754 (1974), a Superior Court judge2 dismissed Tradition's

third-party claims on multiple grounds, principally that the

contribution claims were foreclosed by Tradition's failure to

secure the release of claims against the third-party defendants

in its settlement with the Commonwealth, and the noncontribution

claims were time barred by the applicable statutes of

limitation. Tradition appeals.

For the reasons that follow, we conclude that the

contribution claims against all third-party defendants, as well

as the claims for breach of contract and breach of the implied

2
Two judges acted on the motions to dismiss. In a
comprehensive memorandum and order, the first judge allowed
motions to dismiss as to Jampel, Trinity, and FSA. In
addressing Goldberg's subsequent motion to dismiss, the second
judge adopted all of the first judge's reasoning, allowed the
motion, and entered final judgment as to all of the third-party
defendants. Because the judges' analyses of the issues are
identical, we refer to the judges in the singular.
 4

covenant of good faith and fair dealing against Jampel, were

properly dismissed. We conclude that the dismissal of the

remaining noncontribution claims was error.

Background. We summarize the facts alleged in Tradition's

seventy-page second amended third-party complaint (the third-

party complaint), accepting them as true for the purpose of our

review of the motions to dismiss. Harrington v. Costello, 467

Mass. 720, 724 (2014).

1. Guaranteed investment contracts. Government and quasi

government entities, like the Massachusetts Water Pollution

Abatement Trust (MWPAT), often raise money by issuing tax-exempt

municipal bonds. If all of the proceeds from a bond offering

are not used immediately, such an entity often invests idle

proceeds in a municipal bond derivative,3 like a government

investment contract (GIC), to earn interest. An entity selects

a GIC, typically offered by major financial institutions,

through a competitive bidding process conducted by an impartial

third-party broker. Bids are solicited from at least three

3
In the Commonwealth's complaint against Tradition,
"municipal bond derivatives" are defined as follows:

"(i) securities and other instruments used to reinvest
the proceeds of a tax-exempt municipal bond issue including
but not limited to investment agreements . . . paying a
stated rate of return for such reinvested proceeds; which
investment agreements are sometimes known as "Guaranteed
Investment Contracts" . . . and (ii) instruments used to
hedge interest rate risk relating to a tax-exempt municipal
bond issue."
 5

parties. The broker distributes the issuing entity's terms and

conditions prior to conducting an auction. By submitting a bid

at an auction, a bidder represents that it did not consult with

any other bidder and was not given a "last look" at competing

bids.

2. Tradition and the consultants. Tradition is a

subsidiary of Compagnie Financière Tradition (Compagnie), and

provides brokerage services to a select group of sophisticated

institutional clients. Compagnie is the third largest broker of

such services in the world. Tradition first entered the GIC

market as a broker in 1998, after being introduced to Jampel and

Adrian Scott-Jones (the consultants). The consultants proposed

to conduct GIC auctions on Tradition's behalf in full compliance

with all applicable laws and regulations. In reliance on those

representations, Tradition entered into an agreement (the

consulting agreement) with the consultants' employer, Capital

Financial Partners, Inc. (CFP), pursuant to which CFP and the

consultants agreed to "work on an exclusive basis on business

opportunities acceptable to Tradition . . . including, but not

limited to, [GICs]." Over the next ten years, CFP and the

consultants conducted approximately 138 GIC auctions across the

country on Tradition's behalf. At all times, CFP and the

consultants certified to Tradition that the auctions were
 6

conducted in a lawful manner. According to the Commonwealth,

however, that was not always true.

3. The 2000 and 2004 MWPAT GIC auctions. Tradition served

as the broker for MWPAT in connection with GIC auctions held on

October 19, 2000, and November 2, 2004, at which Trinity and FSA

were the respective winning bidders. Prior to each auction, one

of the consultants, Scott-Jones, allegedly informed Goldberg,

who was representing Trinity at the first auction and FSA at the

second, of the interest rate needed to win the auction. Armed

with that information, Trinity and FSA lowered their previously

submitted bids and still won the auctions. As a result, MWPAT

was deprived of a higher rate of return over the terms of those

two contracts. Tradition denies that it knew of the alleged

fraudulent conduct, noting, among other things, that it had no

financial incentive to engage in such wrongdoing, since it

received a flat fee for both auctions that was not contingent

upon the interest rate, yield, or other terms associated with

the winning bid.

4. March, 2007, Department of Justice subpoena. In March,

2007, Tradition received a subpoena from the United States

Department of Justice (DOJ) seeking documents concerning

numerous types of "municipal contracts" awarded pursuant to

competitive bidding, including GICs, anywhere in the country.

The subpoena sought documents related to certain specific
 7

persons and companies: "CDR Financial Products of Beverly

Hills, California, and/or David Rubin, and/or companies

controlled by David Rubin." The subpoena did not identify any

specific State or transaction that was under scrutiny. Nor did

it identify Tradition, CFP, or the consultants as subjects or

targets of the investigation.

Tradition retained outside counsel to respond to the

subpoena and conduct an internal investigation. Outside counsel

interviewed Scott-Jones and Jampel, both of whom denied any

wrongdoing. Outside counsel also reviewed documents responsive

to the subpoena and, ultimately, concluded that there was no

evidence of wrongdoing.

5. May 27, 2008, call from DOJ. On or about May 27, 2008,

Tradition received a telephone call from DOJ indicating that the

consultants had allegedly engaged in wrongdoing in connection

with GIC auctions allegedly brokered on behalf of Tradition.

DOJ uncovered the alleged wrongdoing by listening to telephone

conversations recorded by, among others, Trinity and FSA. Those

recordings had not been available to Tradition during its

internal investigation. According to Tradition, this May 27,

2008, telephone call was the earliest that it knew, or

reasonably could have known, of any alleged wrongdoing.

6. The swap transactions. On or about June 2, 2008,

Tradition further learned that CFP and the consultants were
 8

secretly awarded swap transactions4 and provided with other

revenue by Goldberg, Trinity, and FSA in exchange for sharing

confidential bidding information. The swap transactions related

to the MWPAT GIC transactions at issue or other GIC transactions

brokered in Tradition's name. Though the swaps allegedly were

awarded as a bribe, Tradition maintains that they served a

legitimate purpose by helping the issuing entities manage

interest rate exposure. Tradition further asserts that under

its consulting agreement with CFP it was entitled to the

compensation earned in connection with those swap transactions,

as well as the other revenue provided to CFP and the

consultants.

Discussion. 1. The contribution claims. While the

motions to dismiss were pending, the Commonwealth and Tradition

entered into a settlement agreement in which Tradition agreed to

make a payment to the Commonwealth in exchange for dismissal and

release of the Commonwealth's claims against Tradition. The

judge concluded that Tradition's contribution claims were barred

because the settlement agreement did not discharge the common

4
According to the third-party complaint, "A swap is a
derivative in which the counterparties exchange certain benefits
of one financial instrument for those of another."
 9

liability of all joint tortfeasors, a statutory prerequisite for

contribution.5 We agree.

We review the dismissal de novo, accepting the allegations

in the third-party complaint as true and drawing all reasonable

inferences in Tradition's favor. Curtis v. Herb Chambers I-95,

Inc., 458 Mass. 674, 676 (2011). In Massachusetts, claims for

contribution are governed by a statutory scheme adapted from the

Uniform Contribution Among Tortfeasors Act. See G. L. c. 231B,

§§ 1-4 (act), inserted by St. 1962, c. 730, § 1. Under the act,

"a joint tortfeasor who pays damages, whether under a settlement

agreement or a court imposed judgment, is entitled to

contribution." Medical Professional Mut. Ins. Co. v. Breon

Labs., Inc., 966 F. Supp. 120, 122 (D. Mass. 1997). Here,

Tradition seeks contribution under § 1(a) of the act: "where

two or more persons become jointly liable in tort for the same

injury . . . , there shall be a right of contribution among them

even though judgment has not been recovered against all or any

of them."

The act, however, contains certain conditions that must be

satisfied before a contribution claim can proceed. As relevant

here, § 3(d)(2) of the act provides that a party like Tradition

is barred from pursuing a claim for contribution unless, by its

5
The judge found that a separate settlement between MWPAT
and Trinity barred Tradition's contribution claim against
Trinity. On appeal, Tradition has abandoned the claim.
 10

settlement, it has "agreed . . . to discharge the common

liability and has within one year after the agreement paid the

liability and commenced [its] action for contribution." Section

4(a) of the act further provides that "[w]hen a release . . . is

given in good faith to one of two or more persons liable in tort

for the same injury . . . [i]t shall not discharge any of the

other tortfeasors from liability for the injury unless its terms

so provide."

Here, the settlement agreement released only Tradition.

The agreement stated expressly that it did not extend to Jampel

and Scott-Jones. Nor did it release any of the other third-

party defendants. Tradition, therefore, did not "discharge the

common liability" of Jampel, Goldberg, or FSA. See Medical

Professional Mut. Ins. Co., 966 F. Supp. at 123-124 (where

settlement agreement in underlying suit failed to secure release

of third-party defendant joint tortfeasor, §§ 3[d][2] and 4[a]

of act barred third-party plaintiffs from seeking statutory

contribution); Spinnato v. Goldman, 67 F. Supp. 3d 457, 467 (D.

Mass. 2014) (under act, "a claim for contribution . . . is

barred unless a judgment or settlement has discharged the common

liability").

Tradition contends that it was not required to release the

third-party defendants in its settlement with the Commonwealth

because, at the time the settlement agreement was signed, the
 11

statutes of limitation had already expired on any claims the

Commonwealth might have had against them. Thus, Tradition

argues, Jampel, Goldberg, and FSA had no liability left to be

discharged. In analyzing this argument, "[w]e begin with the

canon of statutory construction that the primary source of

insight into the intent of the Legislature is the language of

the statute." Deutsche Bank Natl. Trust Co. v. Fitchburg

Capital, LLC, 471 Mass. 248, 253 (2015), quoting from

International Fid. Ins. Co. v. Wilson, 387 Mass. 841, 853

(1983). Therefore, we turn to the language of the act.

Section 3(d) of the act provides that a "right of

contribution shall be barred unless [the moving party] has . . .

(2) agreed while action is pending against [it] to discharge the

common liability" (emphasis added). We discern no ambiguity in

this statutory language. Because Tradition's settlement with

the Commonwealth did not provide for the extinguishment of the

third-party defendants' liability, its contribution claims are

barred.6

6
Our interpretation of the act's requirements is in accord
with that of other courts interpreting statutes modeled on the
Uniform Contribution Among Tortfeasors Act. See, e.g., G & P
Trucking v. Parks Auto Sales Serv. & Salvage, Inc., 357 S.C. 82,
88 (Ct. App. 2003). There, in response to the same argument now
advanced by Tradition, the court held that, as a prerequisite to
a contribution claim, the extinguishment of a joint tortfeasor's
liability to an underlying plaintiff must have resulted directly
from the settlement agreement itself, rather than merely from
the expiration of the statute of limitations. Last, the court
 12

This interpretation is consistent with the underlying

purpose of the act -- a "more equitable distribution of that

burden among those liable in tort for the same injury." Hayon

v. Coca Cola Bottling Co. of New England, 375 Mass. 644, 648

(1978). Tradition had a right to pursue contribution claims

against joint tortfeasors to insure an equitable distribution of

liability. Before doing so, however, Tradition was required by

the act to secure the release and discharge of common liability.

Having elected to negotiate and secure only an individual

release and discharge, Tradition is barred from pursuing

contribution claims against Jampel, Goldberg, and FSA.7

2. The noncontribution claims. The judge determined that

Tradition's noncontribution claims were subject to dismissal on

multiple grounds. We address each of them in turn.

noted that the running of the statute of limitations does not,
in and of itself, "extinguish" a tortfeasor's liability, as the
running of the statute can be subject to waiver, tolling, and
estoppel. Id. at 89. See, e.g., our discussion in part 2.a.,
infra.
7
This result is consonant with the goal of creating a "more
equitable distribution" of liability among joint tortfeasors.
It was presumably open to Tradition to negotiate a settlement
with the Commonwealth that would have released all of the third-
party defendants. That would have "cost[] more, but [would
have] entitle[d] [Tradition] to seek contribution from any
remaining tortfeasor. [Section] 4(b) [of the act] was drafted
to encourage settlements in multiple party tort actions by
clearly delineating the effect settlement will have on
collateral rights and liabilities in future litigation."
Medical Professional Mut. Ins. Co., 966 F. Supp. at 124, quoting
from Barrios v. Viking Seafood, Inc., 6 Mass. L. Rptr. 281
(1996).
 13

a. The statutes of limitation. The judge concluded that

all of Tradition's noncontribution claims were time barred

because they were filed after the applicable limitations periods

had expired. In our de novo review, we bear in mind that

"where, as here, the plaintiff has claimed a trial by jury, any

disputed issues relative to the statute of limitations ought to

be decided by the jury." Riley v. Presnell, 409 Mass. 239, 248

(1991). Dismissal pursuant to rule 12(b)(6) based upon the

expiration of a statute of limitations is appropriate where it

is undisputed from the face of the complaint that the action was

commenced beyond the applicable deadline. See, e.g., Epstein v.

Seigel, 396 Mass. 278, 278-279 (1985) (upholding dismissal where

the "allegations of the complaint clearly reveal that the action

was commenced beyond the time constraints of the statute of

limitations"). Compare Harrington, 467 Mass. at 731-733 (court

rejected plaintiff's discovery rule and fraudulent concealment

arguments and affirmed dismissal).

The tort8 and G. L. c. 93A claims against Jampel, Goldberg,

Trinity, and FSA are subject, respectively, to three and four

year statutes of limitation that typically accrue from the date

of injury. See G. L. c. 260, §§ 2A (torts), 5A (c. 93A); Stark

8
Fraud and deceit, intentional and negligent
misrepresentation, civil conspiracy, unjust enrichment, and
tortious interference with contractual relations.
 14

v. Advanced Magnetics, Inc., 50 Mass. App. Ct. 226, 232 (2000).9

However, recognizing the unfairness of a rule that allows

statutes of limitation to run even before a plaintiff knew or

reasonably should have known that it may have been harmed, the

Supreme Judicial Court has adopted "a discovery rule for the

purpose of determining when a cause of action accrues, and thus

when the statute of limitations starts to run." Bowen v. Eli

Lilly & Co., 408 Mass. 204, 205 (1990). "This rule prescribes

as crucial the date when a plaintiff discovers, or any earlier

date when [it] should reasonably have discovered, that [it] has

been harmed or may have been harmed by the defendant's conduct."

Id. at 205-206. See Doe v. Creighton, 439 Mass. 281, 283 (2003)

(rule requires proof of "both an actual lack of causal knowledge

and the objective reasonableness of that lack of knowledge");

Szymanski v. Boston Mut. Life Ins. Co., 56 Mass. App. Ct. 367,

371 (2002). Under the discovery rule, the limitation period

accrues when the plaintiff has "sufficient notice of two related

facts: (1) that [it] was harmed; and (2) that [the] harm was

caused by the defendant's conduct." Harrington, 467 Mass. at

725. A plaintiff may be put on "inquiry notice" where it is

9
The claims for breach of contract and breach of the
implied covenant of good faith and fair dealing against Jampel,
which are subject to a six-year limitation period, see G. L.
c. 260, § 2; Patsos v. First Albany Corp., 433 Mass. 323, 327
n.6 (2001), were dismissed on other grounds. See part 2.b.ii.,
infra.
 15

informed of facts that would suggest to a reasonably prudent

person in the same position that an injury has been suffered as

a result of the defendant's conduct. See Bowen, supra at 208;

Szymanski, supra. Applying these principles here, we conclude

it was error to dismiss the noncontribution claims based on the

statutes of limitation.

Here, the judge concluded that Tradition was on inquiry

notice on March 7, 2007, when it received the DOJ subpoena.

Because the original third-party complaint was filed on April 4,

2011, more than four years later, the judge ruled that the

noncontribution claims were barred by the statutes of

limitation.

However, there is a factual dispute as to when Tradition

was on inquiry notice of its potential third-party claims based

on bid rigging by its consultants. According to the third-party

complaint, Tradition was first on notice of the potential third-

party claims on May 27, 2008, when DOJ called Tradition and

directly alleged that the consultants had engaged in wrongdoing.

If Tradition was not on inquiry notice until that date, the

claims were brought within the statutes of limitation. The

third-party defendants argue that the judge correctly determined

that Tradition was on inquiry notice at least as early as March

7, 2007, when it received the DOJ subpoena seeking information

related to GIC contracts, and initiated its own investigation.
 16

They emphasize that Tradition was a sophisticated broker and

that at the time there was ample public information available

regarding other government investigations in the municipal

derivatives industry to trigger inquiry notice.10

Our focus at this stage must be on the allegations in the

third-party complaint. Tradition asserts that the March 7,

2007, subpoena from DOJ generally sought documents concerning a

wide variety of "municipal contracts" awarded pursuant to

competitive bidding, not just GICs, from across the country.

The subpoena did not identify the two MWPAT GIC auctions now at

issue or even specifically seek documents related to MWPAT or

Massachusetts. Nor did the subpoena identify Tradition, CFP, or

the consultants as subjects or targets of the investigation. In

fact, the only entities and individuals specifically identified

in the subpoena had no connection to Tradition's GIC business.

Accepting these facts as true, as we must, we cannot conclude

that it is undisputed from the face of the complaint that

10
The judge charged Tradition with knowledge of (1) a
November 15, 2006, article in the trade publication "Bond
Buyer," reporting on a Federal Bureau of Investigation raid and
DOJ industry-wide investigation of anticompetitive practices in
the municipal bond industry; and (2) Bank of America's February,
2007, entry into a leniency program due to similar practices.
Neither is referenced in or attached to the third-party
complaint. As consideration of "matters outside the pleading"
can result in conversion of a motion to dismiss to one for
summary judgment, see rule 12(b), the parties dispute whether
this information was properly considered here. Having reviewed
the information and concluded that it does not alter our result,
we do not reach that issue.
 17

receipt of the subpoena put Tradition on inquiry notice of its

potential third-party claims.

The judge placed particular emphasis on the fact that

Tradition, upon receiving the DOJ subpoena, hired outside

counsel to conduct an internal investigation. She rejected

Tradition's assertion that the investigation did not uncover any

wrongdoing. Rather, she found that the investigation was

deliberately conducted without sufficient "due diligence," such

that it "border[ed] on willful ignorance." That conclusion may

or may not be borne out by further discovery, but it is not

supported by the third-party complaint. The judge found facts

and drew inferences about what Tradition should have known and

when Tradition should have known it "[b]ased on [her] general

experience before and on the bench." While a jury may

ultimately agree, it was not clear from the face of the third-

party complaint that Tradition's noncontribution claims were

untimely.11 In short, where the date triggering the statutes of

limitation is disputed, as it is in this case, the wiser course

is to present the matter to the fact finder. See, e.g., Kennedy

v. Goffstein, 62 Mass. App. Ct. 230, 235 (2004).

b. Other grounds for dismissal of noncontribution claims.

The judge concluded that even if Tradition's noncontribution

11
Based on our conclusion, we need not reach the question
whether the statutes of limitation were tolled based on
fraudulent concealment. See G. L. c. 260, § 12.
 18

claims against Jampel, Goldberg, Trinity, and FSA were timely,

they were subject to dismissal on alternate, independent

grounds.

i. Joinder. First, the judge reasoned that these claims

were dependent on survival of the contribution claims.12 We

disagree.

It is undisputed that Tradition, at the time it filed the

third-party complaint (before it reached a settlement with the

Commonwealth), had the right to assert contribution claims

against Jampel, Goldberg, Trinity, and FSA. See Mass.R.Civ.P.

14(a), as amended, 385 Mass. 1216 (1982) ("At any time after

commencement of the action a defending party, as a third-party

plaintiff, may . . . cause a summons and complaint to be served

upon a person who is or may be liable to him for all or part of

the plaintiff's claim against him"). Tradition also had a right

to assert other, independent claims against the third-party

defendants at the same time. See Mass.R.Civ.P. 18(a), 365 Mass.

764 (1974) ("A party asserting a claim to relief as . . . [a]

third party claim, may join, either as independent or as

alternate claims, as many claims, legal or equitable, or both,

as [it] has against an opposing party"). No one disputes that

12
Although this part of the judge's decision addressed only
the noncontribution claims with respect to Trinity, our
discussion applies equally to those claims as to the remaining
third-party defendants.
 19

the Superior Court had subject matter jurisdiction over the

noncontribution claims.13 See Mass.R.Civ.P. 12(b)(1), 365 Mass.

754 (1974).

Even if the noncontribution parties and claims had been

improperly joined in this action, their dismissal on that

ground, upon the dismissal of the contribution claims, is

precluded by our rules. See Mass.R.Civ.P. 21, 365 Mass. 767

(1974) ("Misjoinder of parties is not ground for dismissal of an

action. . . . Any claim against a party may be severed and

proceeded with separately"). See also Smith & Zobel, Rules

Practice § 21.2, at 320 (2d ed. 2006) (rule 21 was "designed to

cover actions . . . where the requirements for permissive

joinder have not been satisfied"). Simply put, we see no legal

basis for the dismissal of the noncontribution claims on the

basis of our rules as to joinder.

In dismissing the noncontribution claims "without

prejudice" the judge recognized that, in effect, the dismissal

was with prejudice because, at the time of dismissal, the claims

were time barred by the statutes of limitation. However, even

under circumstances where a court has the discretion to dismiss

13
This distinguishes the present case from those cited by
Trinity, in which a Federal court, after the dismissal of all
predicate Federal claims, exercised discretion and dismissed
supplemental State law claims over which it did not otherwise
have subject matter jurisdiction. See 28 U.S.C. § 1367(c)(3)
(2012).
 20

a claim, such a severe sanction should be imposed only in

extraordinary circumstances and as a matter of last resort.14

See, e.g., Monahan v. Washburn, 400 Mass. 126, 128-129 (1987)

("Involuntary dismissal is a drastic sanction which should be

utilized only in extreme situations. . . . The law strongly

favors a trial on the merits of a claim"). Applying this

principle here, where the noncontribution claims were dismissed

only due to the failure of the predicate contribution claims,

and such dismissal would bar subsequent litigation of the

noncontribution claims because the limitations periods have

expired, we conclude that the drastic sanction of dismissal is

not justified by extraordinary circumstances.

ii. Piercing the corporate veil -- Jampel. As an

alternative ground, the judge also dismissed the noncontribution

claims against Jampel because Tradition failed to sufficiently

allege facts to establish a basis to pierce the corporate veil

of CFP and hold Jampel personally liable. "The corporate veil

'may be pierced where' the corporate principal exercises (1)

'some form of pervasive control' over the activities of the

14
Trinity cites to what it suggests is contrary authority.
Unlike here, however, the cases cited involve the application of
rules that mandate dismissal under specific circumstances. See
Mass.R.Civ.P. 4(j), as appearing in 402 Mass. 1401 (1988)
(action "shall be dismissed" unless plaintiff shows "good cause"
why service was not made within ninety days); Mass.R.Civ.P.
25(a)(1), 365 Mass. 771 (1974) ("[T]he action shall . . . be
dismissed unless the failure of the surviving party to move for
substitution was the result of excusable neglect").
 21

corporation, and (2) 'there is some fraudulent or injurious

consequence' as a result." Kraft Power Corp. v. Merrill, 464

Mass. 145, 152 (2013), quoting from Scott v. NG US 1, Inc., 450

Mass. 760, 767 (2008). We agree that the third-party complaint,

even when viewed in a light most favorable to Tradition, fails

to adequately set forth a basis for piercing the corporate veil.

We disagree, however, that this requires dismissal of all

noncontribution claims against Jampel.

The consulting agreement, while signed by Jampel, was

between CFP and Tradition. To the extent that Tradition seeks

to hold Jampel liable for a breach of that contract, therefore,

it would need to pierce the corporate veil. Because Tradition

failed to plead a sufficient basis for doing so, the claims

against Jampel for breach of contract and breach of the implied

covenant of good faith and fair dealing were properly dismissed.

On the other hand, it is not necessary to pierce the

corporate veil to hold Jampel liable on the remaining

noncontribution claims. It is true that "[o]fficers and

employees of a corporation do not incur personal liability for

torts committed by their employer merely by virtue of the

position they hold in the corporation." Lyon v. Morphew, 424

Mass. 828, 831 (1997). However, "[e]mployees are liable for

torts in which they personally participated." Id. at 831-832.

Tradition has sufficiently alleged that Jampel personally
 22

participated in the wrongful conduct that gave rise to the tort-

based noncontribution claims.

iii. Damages. The judge also dismissed the

noncontribution claims against FSA for Tradition's failure both

to plead damages with specificity and to establish a causal

connection between those damages and the alleged scheme to

defraud. A plaintiff, however, need only plead special damages

with specificity, see Mass.R.Civ.P. 9(g), 365 Mass. 751 (1974),

and "[r]elief in the alternative or of several different types

may be demanded," Mass.R.Civ.P. 8(a), 365 Mass. 749 (1974).

Tradition has alleged damages in several categories: "swaps

revenue" not shared with Tradition, fraudulent travel and

entertainment reimbursement, and costs associated with its own

investigation. At this stage, we need not decide the scope of

damages to which Tradition may be entitled should it establish

liability at trial. On the narrow question whether the third-

party complaint adequately alleged some damages, we conclude

that, at a minimum, Tradition has adequately pleaded that FSA's

participation in the scheme damaged Tradition in the amount of

Tradition's costs to comply with the DOJ's subpoena and

investigation.15 See, e.g., Siegel v. Berkshire Life Ins. Co.,

15
Trinity suggests that the noncontribution claims asserted
against it were also dismissed on this basis. While that is not
clear from the record, our reasoning as to FSA applies equally
to Trinity, Jampel, and Goldberg.
 23

64 Mass. App. Ct. 698, 703 (2005) ("If a c. 93A violation forces

someone to incur . . . expenses that are not simply those

incurred in vindicating that person's rights under the statute,

those fees may be treated as actual damages in the same way as

other losses of money or property").

iv. Additional grounds for dismissal. Tradition's civil

conspiracy claim was dismissed as to all third-party defendants

for failure to state a claim on an underlying independent tort.

Because we reverse the dismissal of the underlying tort claims,

the dismissal of the civil conspiracy claim must also be

reversed.

Tradition's claims against FSA for fraud and tortious

interference with contractual relations were dismissed on the

ground that Tradition was improperly seeking to recover the

fruits of illegal transactions (i.e., compensation and revenue

received by CFP and the consultants as bribes). While we agree

that Tradition is not entitled to recover the fruits of illegal

activity, we cannot conclude at this early stage that the swaps

transactions at issue were illegal.16

Conclusion. So much of the judgment as dismissed the

contribution claims against all the third-party defendants, as

16
The third-party complaint included a claim for common-law
indemnification from Jampel. The indemnification claim was not
addressed by the judge in her memorandum of decision. We see no
basis to dismiss the claim.
 24

well as the claims for breach of contract and breach of the

implied covenant of good faith and fair dealing against Jampel,

are affirmed. In all other respects, the judgment is reversed.

So ordered.