2004-816, BARRY COHOON & a. v. IDM SOFTWARE, INC. & a.

summary judgment to the plaintiffs, Barry Cohoon and Joseph McCarran. The and Robert Sheppard ap peal orders of the Trial Court (McHugh, J.) granting (Leggett), Stuart J. Sheppard (Sheppard), J. Tracy Emerick, Dana W. Leggett NADEAU, J. The defendants, IDM Software, Inc. (IDM), John H. Leggett

defendants John H. Leggett and Stuart J. Sheppard. Glahn, III and Andrea L. Daly on the br ief, and Mr. Glahn orally), for McLane Graf Raulerson & Middleton, P.A., of Manchester (Wilbur A.

defendant IDM Software, Inc. Rosenblatt and Michael S. Owen on the brief, and Mr. Rosenblatt orally), for Cook, Little, Rosenblatt & Manson. P.L.L.C., of Manchester (Arnold

brief and orally), for the plaintiffs. Cleveland, Waters and Bass, P.A., of Concord (William B. Pribis on the

No. 2 004 - 816 Rockingham

page is: http://www.courts.state.nh.us/supreme. a.m. on the morning of their release. The direct address of the court's home reporter@courts.state.nh.us. O pinions are available on the Internet by 9:00 Errors may be reported by E - mail at the following address: errors in order that corrections may be made before the opinion goes to press. Hampshire, One Noble Drive, Concord, New Hampshire 03301, of any editorial Readers are requested to notify the Reporter, Supreme Court of New well as formal revision before publication in the New Hampshire Reports. NOTICE: This opinion is subject to motions for rehearing under Rule p. 2 22 as 2

withhold payment of the investors’ clai ms in full. earlier litigation, it would be a fraud on the Court now to seek to defendant. By taking the position that the corporation did in the investors the amounts of money that it received from the law firm earlier case, the corporation obligated itself to full y refund to its with the investors in the context of settlement discussions in the [investors] $635,000, and by refusing to negotiate a lesser amount By claiming that the corporation had a legal obligation to pay its

court ruled: application of the doctrine of judicial estoppel more than the case at bar.” The defendants’, noting that it could not “imagine a case crying out for the The trial court initially granted the plaintiffs’ motion and denied the

for summ ary judgment. “PLEA OF LAW – JUDICIAL ESTOPPEL” against IDM. All of the parties moved majority shareholders’ duty against Leggett and others, and a claim captioned rescission under RSA 4 p. 2 21 - B:25 against all principal defendants, breach of Leggett and Sheppard, among others. Their writ asserte d causes of action for Subsequently, Cohoon and McCarran brought this action against IDM,

shareholders to consider approving a plan of dissolution of the corporation. shareholders dated May 19, p. 2 2003, IDM gave notice of a special meeting of however, the parties settled the malpractice suit for $900,000. By letter to its to the investors pursuant to RSA 421 - B.” Before the court issued the order, a separate component the amount of money that it would be required to return the court ruled that it would “permit [IDM] as part of its damages, to include as to exclude evidence of rescission damages. In an order dated March 24, 2003, The defendant - attorneys in the malpractice suit filed a motion in limine

$635,000, plus interest, costs and attorneys’ fees.” “[l]iability for claims of rescission pursuant to N.H. RSA 4 p. 2 21 - B:25 totaling In its pretrial statement, IDM elaborated on this element of damages, alleging damages a sserted by IDM in that action was “exposure to shareholder claims.” IDM sued its prior counsel for malpractice (the malpractice suit). Among the 421 - B:11 (Supp. 2005). As a result of errors made in registering its shares, shares had not been registered or properly noticed in compliance with RSA Cohoon and McCarran purchased shares of IDM, each payi ng $30,000. The well as a director, of IDM. Sheppard is also a director and shareholder of IDM. in the record before us. Leggett is the president and majority shareholder, as The following facts were either fo und by the trial court or are supported

remand. plaintiffs cross appeal. We affirm in part, reverse in part, vacate in part and p. 3 3

party if not estopped. unfair advantage or impose an unfair detriment on the opposing party seeking to assert an inconsistent position would derive an that party’s earlier positio n. A third consideration is whether the whether the party has succeeded in persuading a court to accept inconsistent with its earlier position. Courts also regularly inquire judicial estoppel is whether the party’s later position is clearly One factor to consider in deciding whether to apply the doctrine of

(2001); see Pack Monadnock, 147 N.H. at 426. doctrine in a particular case.” New Hampshire v. Maine, 5 p. 3 32 U.S. 742, 750 noted three factors that “typically inform the decision whether to apply the Lumber & Cedar Co., 152 N.H. ___, ___ (decided December 15, 20 05). We have 147 N.H. 419, 425 - 26 (2002) (quotation omitted); see Kelleher v. Marvin contradictory argument to prevail in another phase.” In re Pack Monadnock, prevailing in one phase o f a case on an argument and then relying on a “The doctrine of judicial estoppel generally prevents a party from

apply to the facts of this case.” the trial court “erred when it ultimately ruled that judicial estoppel did not alternative grounds support the decisi on). Specifically, the plaintiffs argue that court reaches correct result on mistaken grounds, we will affirm if valid cross - appeal. Cf. Sherryland v. Snuffer, 150 N.H. 262, 267 (200 p. 3 3) (where trial not address t his argument, however, because we find merit in the plaintiffs’ because the plaintiffs failed to prove the elements of that doctrine. We need IDM first argues that the trial court erred in applying equitable estoppel

facts de novo.” Id. N.H. 426, 429 (20 0 p. 3 3). “We review the trial court’s application of the law to the the light most favorable to the non - moving party.” Furbush v. McKittrick, 149 affidavits and other evidence, and all inferences properly drawn from them, in “In reviewing a trial court’s summary judgment ruling, we consider the

the plaintiffs cross appeal. Sheppard, J. Tracy Emerick, Dana W. Leggett and Robert Sheppard appeal and and Sheppard, but not to the other individual defendants. IDM, Leggett, reconsideration, the court clarified that its findings were applicable to Leggett Upon motion of the individual defendants for clarification an d/or

RSA p. 4 421 - B and also under the doctrine of equitable estoppel.” grounds that [rescission] is available to the plaintiffs both under the terms of nevertheless affirmed its gr ant of summary judgment to the plaintiffs “on the the requirements for judicial estoppel had been met was erroneous. It evidentiary hearing. The court then ruled that its previous order finding that The defendants moved for reconsideration and the court held an 4

case, whatever the court may have thought or believed about IDM’s position in court never issued any order or decision adopting IDM’s position in the prior judicial estoppel analysis.” IDM, on the oth er hand, asserts that “[t]he trial the Court did not publish this decision does not matter in the context of a limine to exclude evidence of rescission damages. They argue, “The fact that position in the court’s order on the malpractice defendant - attorneys’ motion in estoppel inquiry is satisfied because the trial court clearly accepted IDM’s The plaintiffs contend that the second factor in the general judicial

wronged party be induced to act. noted in Pack Monad nock do not contain a requirement that the alleged that party’s earlier position.” Id. (quotation omitted). Thus, the factors we whom estoppel is asserted did not “succeed[] in persuading a court to accept (emphasis added). That is just another way of saying that the party against court or superior court to take action.” Pack Monadnock, 1 p. 4 47 N.H. at 4 26 that the earlier position taken by the State “did not induce either the probate alleged wronged party to take action.” What Pack Monadnock actually says is Pack Monadnock as requiring “that the change in position did not induce the v. Aetna Life Ins. Co., 690 F.2d 595, 598 (6th Cir. 1982). The court misread reliance by the alleged wronged party that is not required. See, e.g., Edwards The trial court read int o the doctrine of judicial estoppel an element of

fact the Court’s ruling on that issue postdated the settlement itself. effect that [rescission] was available to the shareholders because in acceptance of the plaintiffs’ position in the original lawsuit to the the original lawsuit to settle could not have been this Court’s The bottom line is this. The inducement for the defendant in

showing. Specifically, it stated: The trial court found that the plaintiffs here could not make that

adoption induced the other party to take certain action to its detriment.” showing that the Court adopted the first position of the party and that that doctrine of judicial estoppel is implemented in this state there has to be a interp reted our decision in Pack Monadnock as “saying . . . that before the decided by the Court until after the first lawsuit was settled.” The court then were entitled to [rescission] pursuant to RSA p. 4 421 - B:25, was not formally “the issue under consideration, namely whether or not the shareholders of IDM however, the court noted that the malpractice case settled befo re trial and that finding that the first factor had been met. With regard to the second factor, In reversing its decision on judicial estoppel, the trial court upheld its

Kelleher, 1 p. 5 52 N.H. at ___. Pack Monadnock, 1 p. 4 47 N.H. at 426 (quotations and citations omit ted); see 5

apply. persuading the first court to accept its position, that judicial estoppel should sufficiently asserted its position to the first court, and sufficiently succeeded in for such purposes. We believe that under the unique facts of this case, IDM the first court to accept its position or in some other way, or to define success that the party to be estopped succeed in the first action, either by persuading We need not now determine whether judicial estoppel always requires

22 p. 5 5. position should be a distinction without a difference.” AFN, 798 F. Supp. at whether a court is asked to rely or has in fact relied o n a prior inconsistent other end is the view that “if what is at issue is the integrity of the court, second court was misled is not present.” Edwards, 690 F.2d at 599. At the of the judicial process is unaffected; the perception that either the first or the unwarranted because no risk of inconsistent results exists. Thus, the integrity court’s acceptance of the party’s position, “application of the rule is omitted). Thu s, at one end of the spectrum is the view that without the first AFN, Inc. v. Schlott, Inc., 798 F. Supp. 219, 224 - 25 (D.N.J. 1992) (footnote

court even if ultimately unsuccessful in the prior action. offending party need only have played “fast and loose” with the necessarily having been judicially adopted, or whether the at least was successfully maintained in that action without assertion was actually adopted by the court in the prior action or is whether a party can be estopped only when its inconsistent If there is an uncertai n aspect of the doctrine of judicial estoppel it

respect to the second factor. One court has observed: In particular, courts have taken a number of different approaches with

doctrine’s application in specific factual contexts.” Id. at 7 p. 5 51. applicability of judicial estoppel. Addi tional considerations may inform the establish inflexible prerequisites or an exhaustive formula for determining the (quotation and brackets omitted). “In enumerating these factors, we do not general formulati on of principle.” New Hampshire v. Maine, 532 U.S. at 750 estoppel may appropriately be invoked are probably not reducible to any observation of other courts that “the circumstances under which judicial case. Indeed, in New Hampshire v. Maine, the Supreme Court restated the Monadnock and Kelleher are not fixed elements to be appl ied blindly in every Before addressing that question, we note that the factors recited in Pack

Monadnock, 147 N.H. at 42 p. 6 6. “succeeded in persuading [the trial] court to accept [its] earlier position.” Pack that case.” Thus, the parties frame the dispositive question as whether IDM 6

denied access during discovery. testimony allegedly based on privileged communications to which IDM was statute, federal preemption, and the admission into evidence of deposition we need not address its arguments regardi ng the proper interpretation of that from denying that the plaintiffs are entitled to rescission under RSA 421 - B:25, alternative ground. Cf. Sherryland, 150 N.H. at 2 p. 6 67. Because IDM is estopped affirm the tria l court’s grant of summary judgment against IDM on that Having concluded that judicial estoppel is appropriate in this case, we

liquidation. unfair detriment if prohibited from achieving creditor status in IDM’s employee and Leggett as a debt holder and employee, the plaintiffs would suffer 100% of its outstanding liabilities to creditors, including Sheppard as an had proposed to pay the outside shareholders $.132 per share, while paying the payment of the corporate debts.” (Quotation omitted.)). As the corporation dissolution of a corporation its property passes to i ts stockholders subject to 124 N.H. 701, 70 p. 6 6 (1984) (“We subscribe to the general rule that after the shareholder to judgment creditor. Cf. Jenot v. White Mt. Acceptance Corp., IDM, they would eleva te their priority in the corporate liquidation from malpractice suit. If the plaintiffs were to succeed in a rescission suit against used those rights to obtain a settlement from the defendant - attorneys in the in consistent position that the plaintiffs have no rescission rights after IDM the initial settlement itself, but by now allowing IDM to maintain the IDM’s argument misses the point. The plaintiffs would be hurt not by

benefited from the [malpractice] settlement and were not in any way hurt by it.” “provided the ‘pool’ from which plaintiffs are tryin g to collect . . . plaintiffs detriment. In particular, IDM argues that because the malpractice settlement not met because it gained no unfair benefit and the plaintiffs suffered no unfair IDM next argues that the third factor in the judicial estoppel analysis is

to the court’s failure to issue the order. reliance by the wronged party is not a required factor, we attach no significance apply the doctrine of judicial estoppel. As we have already determined that We conclude this is sufficient judicial acceptance of I DM’s position to now stated: “Upon reflection, the Court accepts the position of [IDM] on this issue.” costs attorney’s fees and interest.” In ruling on the motion in limine, the court under [RSA] 421 - B(25) is the – is – is wha t they paid in, the $ p. 6 635,000 plus entitled to get their money out of liquidation. And what they’re entitled to business, the shareholders did not have to sue the corporation: “They – they’re their rescission rights. He further represented that since IDM was no longer in corporation had an outstanding liability on its books to its shareholders for IDM’s attorney represented to the court in the malpractice suit that the p. 7 7

a knowingly false representation or concealment of material facts; asserting estoppel must prove the following essential elements: (1) another who reasonably relies upon them to his injury. The party own act, representations or commitments communicated to Equitable estoppel serves to forbid one to speak against his

defendants. were applicable to Leggett and Sheppard, but not to the other individual individual defendants moved for clarification. The court ruled that its findings whether it applied to the individual defendants as well as to IDM. The judgment to the plaintiffs on grounds of equitable estoppel was unclear as to case.” However, the court’s later order affirming its grant of summary the individual defendants because “[n]one were parties to the malpractice judicial estoppel, the court stated that judicial estoppel could not be applied to equitable estoppel to them. In an order subsequent to its initial order on Fina lly, Leggett and Sheppard argue that the trial court erred in applying

and remand for entry of a judgment in accordance with this opinion. liquidation of IDM is not an issue before us. Accordingly, we reverse this ruling them. The portion of their judgment that they may actually receive upon the plaintiffs are entitled to an individual judgm ent in the amount owed to p. 7 700 (1991). We conclude that having brought suit solely on their own behalf, no redress.” Real Estate Planners v. Town of Newmarket, 134 N.H. 696, 699 action by one who seeks to invoke [a] remedy on behalf of another who seeks approval the proposition that a “court may and should refuse to entertain [an] the requested relief to persons who were not parties to the action,” citing with W e have upheld a trial court’s “refus[al] to amend [a] petition to extend

judgment in an undetermined amount to non - parties.” We agree. in the manner it did, the Trial Court essentially (and improperly) awarded a who have elected to take no action.” They argue that “[b]y fashioning its order potentially compromises their judgment “based upon the rights of individuals The plaintiffs assert that this was error because, among other things, it

will be to the moneys available for payment. Limitations has expired and it is known how many claimants there specific verdict in favor of the plaint iffs until the Statute of similarly - situated shareholder. Thus, the Court cannot award a under the statute is no greater than the entitlement of any other The plaintiffs’ entitlement to full recovery and [rescission] damages

barred by the statute of limitations. Specifically, the tri al court ruled: judgment until the claims of all other shareholders had been asserted or were them a specific judgment and in ruling instead that they could not obtain a The plaintiffs next contend that th e trial court erred in declining to award p. 8 8

DUGGAN and GALWAY, JJ., concurred.

rulings. order against Leggett and Sheppard and rem and for further findings and Crown Paper, 142 N.H. at 571 (quotation omitted). Accordingly, we vacate the basis for the trial court’s decision, in terms of facts found and law applied.” opportunity for adequat e review in this court by providing us with the actual (quotation omitted); see RSA 491:15 (1997). “The object is to allow an ultimate decision.” Crown Paper Co. v. City of Berlin, 142 N.H. 563, 571 (1997) make findings of the ‘basic’ or ‘essential’ facts that are sufficient to support the Where a party requests findings and rulings, “the court is obligated to

the trial court found to support the other elements of equitable estoppel. made to the court or to the shareholders. We are similarly unsure what facts whether the representation that the trial court found to support estoppel was particulars of the original litigation and its settlement.” Thus, we are unsure IDM elected to keep the shareholders completely in the dark with respect to the testimony at the evidentiary hearing strongly suggests that the principals of of settlement, was John Leggett.” In another order, it found that “[t]he made it clear that their real client, the one making all of the decisions in terms settlement discus sions the attorneys representing the corporation as plaintiff For instance, in one order the court stated: “It should be noted that during . . . found to support the application of equitable estoppel to Leggett and Sheppard. va rious written orders, we are unable to determine what undisputed facts it rulings of law, and provided narrative explanation for many of its rulings in its Although the trial court ruled on IDM’s requests for findings of fact and

[the plaintiffs’] burden on summary judgment.” (Citation omitted). We agree. estoppel and the uncontested genuine issues of material fact required to meet they contend that we are “left to guess at both the ‘specific facts’ required for representations made by them that serve to equitably estop them. As a result, individuals. They argue that the trial court’s ord ers fail to identify the specific made in the underlying malpractice suit were made on behalf of them as estoppel to them because, among other things, none of the representations Leggett and Sheppard assert that the court erred in applying equitable

Cadle Co. v. Bourgeois, 149 N.H. 410, 41 p. 8 8 (2003) (citation omitted).

ignorant of the truth; and (3) a resultant injury. induced to rely upon the false representation or concealment, (2) a re cipient who was intentionally, or through culpable neglect,