A Mere Continuation

An attorney liability issue before the Massachusetts Supreme Judicial Court

The instant case concerns a final judgment that was entered four years ago against a professional corporation, RKelley-Law, P.C. (the P.C.), for the fraudulent activity of one of its associates. The associate defrauded the plaintiff, Robert Smith, in a mortgage scam. The defendant in this case, Robert Kelley, was at all times the sole shareholder and officer of the P.C. The day after the entry of final judgment against the P.C., the defendant voted to wind up the corporation. That same day, he began operating his law practice as a sole proprietorship. Not long thereafter, the P.C. was placed into bankruptcy proceedings. The P.C. now has no assets, and the plaintiff seeks to recover from the defendant personally. For the reasons discussed infra, we conclude that, in the very unique circumstances of this case, the plaintiff may pursue successor liability against the defendant’s sole proprietorship, as it was a mere continuation of the former professional corporation.

The victim

The plaintiff, Smith, is a United States Marine Corps veteran. Smith I, 818 F. Supp. 2d at 340. He suffers from schizophrenia, posttraumatic stress disorder, and depression, and he is functionally illiterate. Smith II, 732 F.3d at 59. In 2005, Smith was living out of his car and working as a trash collector. Smith I, supra at 341. It was during this period that he was the victim of a mortgage fraud scheme. Smith II, supra.

The court reversed the grant of summary judgment to the defendant. (Mike Frisch)