In Re McBurney Law Services, Inc.

In re McBURNEY LAW

SERVICES, INC. 2001-159-M.P.,

Nos. 2000-11-M.P.

Supreme Court of Rhode Island.

May record, for, according

in 1980 are benefit of his children who members respondent, who became a the bar. shareholder volun- tarily employment and as- terminated his July corporation with the as of sociation 29, 1993. The termination of this relation- amicable, than and several ship was less disagreements among arose the sharehold- ers, including dispute percent- over the in the cor- age respondent’s ownership lawfully poration and the number of shares the articles of issued accordance with that incorporation. The record discloses Jacobson, Alan William William Mark respondent twenty-five is the holder of Kolb, Providence, plaintiff. for McBurney shares of common stock that Rallis, ownership maintains of an Providence, consists John G. for defen- The percent corporation. dant. of 25 of the shareholders, according other to the testi- WILLIAMS, C.J., Present mony McBurney, F. and his John Jr. LEDERBERG, BOURCIER, wife, Ann McBurney, manager the office FLANDERS, GOLDBERG, JJ. III, McBurney, McBurney are John F. McBurney. McBurney Christine and Mark OPINION However, au- incorporation the articles of GOLDBERG, com- thorized the issuance 100 shares of Justice. McBurney, As of mon stock to John F. Jr. This case came Supreme before the (the July agreed valuation date Court on March on for petition by parties), when Kevin terminated his by McBurney certiorari the petitioner, petitioner, with the there was employment Services, Law (McBurney petition- Inc. or dispute whether an additional 100 about er), to review a decision of the valuation issued in excess of the shares had been Court, panel appointed by pursuant by the articles of incor- permitted number II, Article 10(g) Supreme Rule of the Further, respon- poration. although Rules, Court to determine the fair market professional corporation dent is a service corpora- value of shares of the petitioner law, engaged in the practice (Kevin tion issued to Kevin or governed by 10(g),1 respon- Rule neither respondent). McBurney complied with Rule dent nor Facts and Travel 10(g) provisions chap- or the of G.L. 1956 govern professional petitioner professional The is a ter 5.1 of title service law; 10(g) Rule corporation engaged practice corporations, in the service to which by McBurney, specifically it was founded F. refers. The record discloses John Jr. II, professional corporation Supreme ineligible, 1. Article Rule 10 service Court Rules, (1) corpora- Redeem the shareholder’s shares entitled “Professional service shall: * * * (2) (limit- liability partnerships shares to tions and limited or Cause the shareholder's that, entities)” eligible per- liability provides purchased by person or ed in subsec- an (g): sons.” "If shareholder dies becomes was not edged transfer respondent did not his shares mistake, rather, any fraud or but nor did result of eligible to an shareholder he offer acquired that was based information for redemption, them to the tax respondent’s later returns Similarly, McBur- required 7-5.1-5. practice and custom reflected ney comply obligations did not with the as one-third shareholders imposed 10(g) require income, salary and benefits. purposes of professional corporation, upon the service Further, his admitted that respondent shareholder, of a ineligibility redeem percent reflected a 25 stock certificate cause shareholder’s shares or them to be panel, corporation. in the ownership eligible person. Rule purchased over any reasoning, in the absence corporation and the 10(g)(4) accords the McBurney, granted objection three ineligible shareholder months modify stipulation. the motion to the the agree on fair market value of or, value, agreement an failing shares of the regarding A the value decision corporation apply the must Court this as of petitioner assets and liabilities the panel, appointment for of a valuation “as date, interest ac- including the valuation * * * 7-5.1-5, § by provided G.L.1956 cruing departure the date of from Kevin’s the market value” of the determine fair by panel. the McBurney, from was issued respon- The record discloses that shares. panel’s the determination We note that dent, upon voluntary departure his chal- the shares not been value of has McBurney, tendered his shares back never Indeed, a lenged party. such by either willing- indicate petitioner, nor did he a pro- of the challenge light is unavailable to have shares redeemed.2 On ness his § that the determination vision in 7-5.1-5 13, 2000, McBurney January peti- filed a of the market value of the shares fair panel, tion for of valuation final and by “is objected. In an respondent to which parties.” binding upon 21, 2000, this order entered on March The has issues petitioner raised several granted and petition appointed Court Court, including before whether this panel (panel). the valuation by counsel stipulation that was executed preparing the evi- On June subject was to modifica- for both by dentiary hearing panel, scheduled agree- tion the absence into a counsel for both entered Second, stipu- if the parties. ment both respon- that stipulation providing written aside, an issue appropriately lation was set to have owned 25% dent “shall be deemed and to whether Kevin’s shares exists as outstanding issued shares of and the other were the shares of shareholders [d]ate,” thus stock as of the [valuation of the number of shares issued in excess from the burden of relieving party incorporation either by the articles of authorized maintained, that he has proving, thus, as Kevin petitioner were void. The larger McBurney, in the percentage argued owned a there is no evidence that maintained, or, findings that petitioner panel’s that the support record to were issued original issued to Kevin were over-issued 100 shares that shares McBurney, canceled void. The re- John Jr. were such were F. shares respondent, reissued to modify moved to 75 shares were spondent subsequently McBurney III and respondent acknowl- John F. Christine stipulation. this The attempted rejoin the he testimony panel respondent and testified that In before ineligible firm and 1994. he shareholder in 1993 denied that was an Stipulation The McBurney. challenges petitioner next prejudgment to an award interest began in hearings Before ineligible ground shareholder on that case, petitioner for the and the counsel provided by 10(g), interest is not Rule or that respondent stipulated, writing, Further, 7-5.1-5.3 allow- to have “[respondent shall be deemed able, the appropriate an issue exists as to outstanding of the issued and owned 25% Finally, commencement date. petitioner as of the [v]aluation shares of stock panel, has argued appoint- [d]ate;” an reflected agreement pursuant ed has 10(g), authority no parties’ conflict compromise between questions may to decide of law and sugges ing There has been no positions. finding application issue a relative to party either estoppel judicata collateral or res to cases fraud, product mutual mistake pending Superior in the Court. pre have stated lack consent. “We Standard of Review viously ‘stipulated agreements [must] * * * placed on the record or be re “Our review on a writ of certiorari en writing to an agreed-upon [to duced is restricted to examination of the rec agreement itself does not sure] ord determine competent whether controversy a source of further become supports evidence decision and wheth ” v. Providence litigation.’ DiLuglio and er maker any the decision made errors of (R.I. Inc., 757, Body, 755 A.2d 776 Auto ruling.” in that v. Asadoorian War 2000) E.W.H. & Associates v. Committee, (quoting 573, wick School 691 A.2d 577 (R.I.1993)).4 1287, (R.I.1997). Furthermore, Swift, A.2d 1288-89 618 we must deter con stipulation The before us meets these mine patently whether decision was “ ” A ditions and should have been honored. ‘arbitrary, discriminatory, or unfair.’ v. with the assent of stipulation D’Ambra North Providence entered into School Committee, (R.I.1992). clients, 1370, A.2d 1375 their relative an 601 counsel and courts, law, province § 3. not of General Laws 1956 7-5.1-5 entitled "Eli- that "are the ** gibility personnel pro- parties a TI Federal Credit of stock” to lawsuit —Transfer DelBonis, 921, (1st pertinent "(a) part: If v. 72 F.3d 928 vides in sharehold- Union Cir.1995). ineligible, er a court must determine becomes he or she shall transfer " overriding poli eligible person, or his or her shares an or ‘whether there are rules redemption granting cy compel or de offer them to the considerations ” * * * relief[,]‘ ‘ineligi- at nying particularly their fair market value. where a [An] such " stipulation ble shareholder’ includes a shareholder elect- 'inadver disputed factual ” therein[,]’ ing employ- incorporated to retire or withdraw tently from active a situation corporation.” ment in the clearly MP v. is not before us. Associates 1040, (Me.2001). Liberty, 771 1049 any applicable policy stipulation may a never addressed The dissent maintains that fraud, findings made product or otherwise be set aside if it is the considerations duress, However, stipulation in this case. simply when it vacated or mistake. that is here, where, stipulation par Finally, "the sug before us. is no situation There contract,” there is gestion stipulation of the nature a was entered into takes fraud, no discre authority that a court "can exercise by or mistake. a result of duress whatever, except Further, perhaps to by in the matter cases cited the dissent set clearly 73 Am. shown.” party from fraud heavy burden a faces seek relieve forth (2001). are Stipulations 12 We sat stipulation, ing of a and then Jur.2d relieved stipulation was in in this case that the only evident 'the isfied “where becomes binding and there is of a contract agreement a clear mis the nature was made under ” take[,]’ suggestion fraud. no concerns issues of and mistake claim, or evidentiary fact modify element of insufficient reason to a stipulation upon parties conclusive removes and freely by that was into entered counsel the controversy. issue from It is no the actual with consent their clients. longer question by for consideration Smith, In Richardson v. 691 A.2d Therefore, agreement

tribunal. absent an (R.I.1997), this Court reversed a deci so, of the parties do a stipulation has justice sion of trial that purported to of a attributes consent order or con- agreed vacate a consent order judgment sent and cannot be set aside parties absence consent of simply a litigant because longer no wants parties agreement. both held to be its We bound terms. DeFusco 727, justice that it was clear for the Giorgio, (R.I.1982); error trial 440 A.2d see Hasman, to vacate a into also Hasman v. entered (R.I.1995) (mem.). parties “without obtaining either first “Although a con- judgment parties sent consent of all imprima- receives a or without a motion court’s tur, judgment having proof is in been made presented essence a contract and 60(b) between parties [Super.R.Civ.P.] under litigation” establishing fraud, is to mistake, be construed as a mutual contract. Trahan v. the lack of actual Trahan, (R.I.1983). consent the existence of other extraordi The record discloses that parties nary Richardson, both circumstances.” this dispute compromised original their A.2d at 546. litigation When positions, respondent’s percent- relative to issues through compromise resolve age ownership McBurney, thus remov- faith, good it is well settled that “courts ing this from controversy issue compromised will enforce the settlement precluding challenging regard might, ‘without to what result [the] stipulation at a point. later An order been, have the parties would had chosen ” consented to the parties can not be litigate.’ to v. Employee Mansolillo Re “opened, or set changed aside without the Providence, tirement Board 668 A.2d of assent in of the of absence (R.I.1995) 313, Homar, (quoting 316 Inc. v. fraud, mutual mistake or actual absence of Associates, 288, Farm North 445 A.2d Douglas eonsent[.]” Construction and (R.I.1982)). may A not party escape its Supply v. Corp. Wholesale Center obligations simply one of the par because Street, Inc., North Main 119 R.I. may not agreement ties consider the to be (1977). None those palatable they to them as when entered Further, factors present are here. re- Mansolillo, into it. 668 A.2d at 317. spondent’s counsel acknowledged that this appeal, On respondent suggest has

stipulation intended was to certain resolve ed a binding stipu that modification of issues in the case and was not the result party’s seeking lation is similar to a but, relief any instead, mistake from resulted during from an admission made course knowledge his lack of cir- his client's note, discovery. however, pre-trial acknowledged We cumstances. Counsel that argument this recent vintage. when is of stipulation he with his discussed Indeed, client, in seeking his written motion “prevailed upon agree he him modify stipulation argument and in his percent stipulate to it because panel, respondent simply didn’t before the sup- [he] have other evidence stated port [respondent’s] a that the motion contention of one- was based information third acquired interest until saw later to be [respondent’s] ought granted [he] 1988 tax return.” We unjust deem this to be an McBurney. avoid enrichment rule, modify stipula- Thus, granting motion light of our raise or waive we conclude, therefore, argument properly are is satisfied this not tion. We Pineda, it modi- panel before Court. See State committed clear error when (R.I.1998). stipulation objection fied the over petitioner. ap this issue were raised, reject sugges propriately we Having stipulation determined that the gov tion that relief from an admission is conclu- binding parties, both upon as relief erned the same standard from respondent’s sively percentage established a are consent order because two funda we ownership McBurney, need ad- legal concepts. An mentally different ad second claimed error rel- petitioner’s dress mission is one-sided occurrence of stock and the ative to an over-issuance voluntary acknowledgment of the exis “[a] fair stock. market value adversary’s tence of facts relevant to an (7th Dictionary,

case.” Black’s Law Prejudgment Interest ed.1999). contrast, stipulation In is a Turning to next claim of er- petitioner’s agreement and is defined as two-party “[a] ror, argues that the erred McBurney voluntary opposing agreement between when it from the date awarded interest parties concerning point[.]” some relevant voluntarily that Kevin terminated his rela- added.) Id. (Emphasis at Based tionship McBurney. petitioner with definitions, upon these it is clear that the by filing petition maintains that with this parties in case executed a appointment of a valua- seeking Court' important relative to an fact contro purchase tion panel, elected to versy, thereby relieving both sides from respondent’s shares avoid dissolution of the necessity presenting evidence rela and that interest should Thus, to that tive issue. standard for of the election to commence date relief an admission should not be purchase. objected note that Kevin We applied by Further, this Court on review. on the in light of our well-settled rule alia, litigation ground inter that there was has conclusively admission that been es “ pending against McBurney which he ‘(1) may only tablished be withdrawn seeking dealing, “redress for unfair litigant the admitting diligently; has acted fraud, fiduciary obligations and breach of (2) if to might adherence the admission proof far require which considerations and (3) truth; suppression cause a beyond appraisal of the value of mere preju withdrawal can be made without corporate] [the stock[.]” party the re dice who made ” Trust, quest,]’ Kelley Realty v. K & H prejudg that It is well settled (R.I.1998)(mem.) 646, (quot where a only is available ment interest ing Electric v. Paul Forsell & General Co. statute, construed, strictly expressly when Son, Inc., R.I. “Indeed, has held grants [C]ourt it. ‘[t]his (1978)), persuaded are not that we right to receive interest that because high could meet the standard neces Kevin common .judgments on was unknown at made in to withdraw an admission sary statute, by right law as it is a created good Finally, faith. we are without an strictly any statute will construe [C]ourt to review this adequate properly record so as judgments that awards interest on to failed make issue because unduly changes enacted extend its reasons for to findings of fact set forth ”5 by DiLuglio, the [L]egislature.’ As we in DiLuglio, 1.1-90. noted “[t]his Further, language unambiguous,” A.2d at previously we have and sets the “ ‘[bjecause for purchase time interest on the strictly price held that we con- are from the shares the date of the election struing the to [awarding prejudgment statute purchase DiLuglio, the shares. interest], anything we should avoid reading ” Thus, at 777. the tribunal is without dis- by implication.’ into the statute Sig- Id. equitable authority cretion or to set a dif- 7-5.1-5, § nificantly, neither nor Rule ferent commencement Id. date. at 777-78. 10(g), expressly provides for the award of Therefore, 7-1.1-90, § according to inter- prejudgment interest on the valuation not begin est does to run unless and until panel. Unfortunately, reached is an purchase there election to the shares. the decision us panel simply before there Clearly, is no evidence in this case “statutory awards interest at the rate of McBurney that purchase elected to re- (12%) percent twelve commencing July spondent’s shares on the valuation date as 1993[,]” to and fails reference statuto- nor panel, established are we con- ry authority or set forth its reasons for vinced that this appropriate starting is the doing The respondent so. argues date for interest begin. We are satis- 7-1.1-90.1, G.L.1956 entitled “Avoidance fied, however, by filing petition with buyout,” applies by dissolution stock seeking this Court of a analogy to the facts of this case allow panel, formally valuation elect- purchase interest to be added to the purchase respondent’s ed to shares. price of his shares. Rhode Pro- Island’s Clearly, purpose of a valuation panel is Act, § fessional Corporations Service 7- to establish the of the ineligible value 5.1-1, chapter references 1.1 of title 7 and shareholder’s corporation interest provides Rhode Island Business redeem shares or cause the shares to Corporations Act shall apply profession- purchased by eligible person to avoid Thus, al business corporations. cases dissolution of the corporation. According- which the seeks avoid a ly, are of the opinion we this is the dissolution purchase and elects to appropriate date for on pur- interest shareholder, § shares of the excluded 7- Therefore, price begin. por- chase procedure 1.1-90 sets forth for the valua- ordering decision of the shares, tion and sale of the shareholder’s begin date is including guarantee payment. a bond quashed and we direct that interest shall situations, In provides those the statute accrue from the date that the Rule 10 that the shareholder “is to inter- entitled petition was filed with Court. est, at on judgments the rate in civil ac- Authority of Panel tions, purchase price on the of the shares filing the date of the of the election to Finally, noting that various * * purchase pending the shares *.” Section 7- civil actions remained between the consistently provision 5. This Court we will by has held that for the award of interest is made strictly provide 10(g)(4) except provided construe statutes that for the statute or Rule in interest, 7-1.1-90, disagree award of that we not the will extend G.L.1956 we with the statutes; 10(g)(4) we reach of these nor will read dissent’s conclusion that Rule "im anything prejudgment plicitly compo into a interest statute includes [an interest] such nent,” by implication. DiLuglio analogous See v. Providence that is to arbitration awards. Inc., (R.I.2000); Body, Auto We decline to deviate from our numerous holdings Clark-Fitzpatrick, prior to read Foundation Co. and refuse an interest Inc./Franki Gill, (R.I.1994). component into a 451-52 a statute or rule where one Thus, although recognizes the dissent that no exist. does not Fur- Court, parties. of the stipulation in the Superior panel the the with parties ther, portion of quash and vacate that it “has or we findings declared that made no setting the commence- panel’s the decision determinations or conclusions which affect interest and petitioner prejudgment that ment date for those cases.” The asserts as of that interest shall commence panel authority the had no to decide the direct petition for January the date the judicata or res estoppel issue collateral panel the to its findings. related factual We Having A reinstated appointed by Supreme the filed with this Court. agree. panel parties, we have not stipulation has limited of the pursuant 10(g) to Rule the Court regarding the the number of the mar- issue responsibility determine fair reached —to corporation. by lawfully by issued the ineligible ket value of shares held shares Finally, we the deci- professional quash portion in a service cor- shareholder the authority decided issue purportedly has no to make sion poration —and estoppel judicata. and res rulings of The of whether collateral question law. controversy are parties preclud- the to this FLANDERS, Justice, dissenting in part determined re-litigating

ed issues in concurring part. panel question of law and is to be is governed by this Court’s well-established respectfully I dissent from Court’s judicata res or collateral es- principles of (1) respect propriety with opinion toppel. Accordingly, portion of the panel’s the valuation decision vacate question decision that addresses the of res (2) the date when interest stipulation, and is judicata estoppel quashed. or collateral accrue the value of begin to should I attorney’s ownership. stock withdrawing

Conclusion deny pan- affirm the would certiorari and its conclusion, (except in all respects In a case of im- el’s decision is first findings, made deter- of the that it no pression 10(g) Supreme under assertion minations, that affect other conclusions parties Court Rules. parties). between the controversy family pending litigation unfortunate are mem- long do I believe that engaged prac- bers who would so because were authority to vacate the possessed recognize panel tice of law. We the issues concerning testimony Kevin stipulation raised and the parties’ difficult, stock McBurney’s (lawyer) percentage of presented panel were con- cor- ownership professional service fusing painful. ac- and sometimes We McBurney Legal Services knowledge significant poration time and effort (MLS firm), its that it did abuse their or law expended by panel members and so, it properly Clearly, doing the valu- discretion performance. admirable valuation award is panel applied final and ation decision lawyer’s ineligibility from the date of binding and the critical upon a shareholder has to continue as not been performed work challenged. passed upon This Court has firm.

alleged errors of law. admissions, of fact is Like parties nor upon the neither conclusive petition granted, for certiorari fact-finding by the tribunal— stip- irrevocable vacating the decision when, here, the evidence quashed. especially We di- ulation the is would not in- that its enforcement respondent’s percentage shows rect the jus- truth or the interests of in conducive to be determined accordance terest shall tice. As panel lawyer the valuation buyout price must have the on a within three concluded, enforcing departure the this months of the lawyer’s re- —was case quired would reflect law lawyer’s 10(g) not the true under Rule to redeem McBurney’s percentage shares upon obtaining of stock in the a fair- ownership law market value for firm his stock—even because it would be to without contrary what willing- his consent and even without any the law firm’s own tax returns showed as on his part ness to his offer shares the the lawyer’s ownership the share in firm Thus, firm for purpose. law law when he withdrew as a shareholder. always firm trump held card here be- I agree also do not that the law firm cause, upon the of the three- expiration purchase elected to lawyer’s shares period agreement month to reach an with under peti- G.L.1956 it 7-1.1-90.1 when lawyer, it alone could redeem McBur- tioned appoint this Court to a stock ney’s unilaterally or without —with value his shares some seven years after he cooperation his the valuation panel —once became ineligible continue an as MLS ascertained the fair-market value of the my shareholder. In opinion, the eleetion- stock. to-purchase-shares statute inapplica- was Thus, I believe appropriate that the date ble to this situation because MLS never begin calculation interest on the shares; “elected” purchase on the valuation award the date was of McBur- contrary, required do so if law to all, ney’s ineligibility in 1993. After it failed to another eligible cause share- date must be used to value the buy lawyer’s holder to shares or to 10(g)(4) stock. Rule if provides that (with- reach an agreement with the lawyer professional corporation services is unable in three of his on ineligibility) months to cause another eligible shareholder to value of his shares the professional ser- stock, purchase withdrawing lawyer’s II, vices corporation. See Article Rule it shall redeem the itself by paying shares 10(g) of the Supreme (“If Court Rules lawyer to the the stock’s fair-market value shareholder or becomes ineligible, dies as of the date of withdrawing share- professional corporation services shall: If ineligibility. holder’s the law firm is (1) Redeem the shareholder’s shares unless to reach an agreement unable the valu- prohibited by accomplishing such withdrawing ation shareholder’s (2) redemption, Cause or the shareholder’s (as of the his or ineligibil- stock date of her purchased by shares to be eligible per- ity) three within months from the date ** *.”) son or persons (Emphases add- thereof, apply then the must ed.) for the appointment this Court of a lawyer failure of lawyers to value the stock. Id. In this transfer eligible his shares to an or person case, the law firm failed to do so in a to offer them to law firm cannot have manner, timely causing seven-year delay prevented firm the law from proceeding proceedings. valuation Instead of under 10(g). McBurney not could punishing lawyer him providing eligible have his transferred shares to an time-depreciated with a award for val- shareholder or law firm without firm, ue of his stock in the law instead their consent or without a court order rewarding the law firm for its inexcusa- contrast, requiring procedure. such In delay in applying ble this Court the law firm—if it could not cause another panel, of a would eligible to purchase shareholder the stock interest on award the valuation of the law- agreement it could reach an with yer’s stock the firm from the date of the

887 panel, the McBurney at firm. and thereby enforcing law the lawyer’s ineligibility, however, that MLS eventually learned own incen- providing this Court’s rules 25 of its 100 autho- issued shares parties to these dis- never tives for the settle of the four children rized shares one equitably. putes quickly and (Mark), at long practicing had ceased who of Review Standard in McBurney firm withdrew the when for petition This to us a case comes on McBurney’s re- Consequently, at certiorari, in and our standard review from the quest, the relieved “examining a limited the such cases is one: ultimately stipulation the erroneous if an of law has record to determine error firm it- as the law McBumey, found that City v. S been committed.” Providence returns, truly in its tax had admitted self (R.I.1997) Inc., 351, 665, & J 667 in the firm. one-third of the shares owned Brewing Corp. (quoting Matter of Falstaff of fact such as the one stipulation A Fire, A.2d Narragansett Brewery Re: 637 in case is not conclusive- panel vacated 1047, (R.I.1994)). weigh do not 1049 “We is it other- upon parties, nor ly binding below, presented but the evidence rather 1894, long ago As wise irrevocable. inspect the record determine fact-finding tribu- recognized that Court legally competent evidence exists therein discretion, nals, stip- can aside set their findings made the trial support fact circum- proper ulations of under Packings justice.” Gregson Id. See also v. Wilbur, 18 R.I. See Wilbur stances. 535 Corp., & Insulations (1894) (holding A. that (R.I.1998). trial party a “could have moved before the having stipulation] it aside to set [the mistake, through think that we been made might court proof mistake the Vacating Stipulation motion”). properly granted have hearing began, Before the jurisdictions other numerous McBumey stipulated per- that held a 25 may stipu- aside have held that courts set ownership firm. cent interest law mistake, lations of fact because a panel began But evi- before to receive showing equitable a that other cir- upon stock, McBurney his dence on value of in- cumstances warrant such relief firm represented learned that law had justice. terests its tax otherwise on most recent returns. Indeed, Indeed, rule that courts general presented pan- the evidence fact-finding “have tribunals el showed that from 1987 to 1993 the and other determining whether consistently firm on its tax broad discretion stated returns set stipulation, may to a McBurney ownership party held a one-third hold stipulation enforcement stipu- in the firm. aside where had because, justice.” at would not be conducive percent figure lated to the (2001). For time, Stipulations only evidence of stock Am.Jur.2d his Supreme Court of example, Judicial ownership that he knew about consisted twenty- should copy “[a] his Maine held that share certificate has apparent it becomes be adhered unless five shares and an affidavit John founder, injustice Jr., upon it inflict a manifest may law firm’s McBurney, parties or where contracting stating forming MLS one purpose children, ‘the was agreement of becomes evident his four each benefit ” M.P. As- a clear mistake.’ practiced had made under at one time or another whom 888 1040,

sociates v. Liberty, 771 A.2d adopt 1049 the test relieving used for party (Me.2001) T I (quoting Federal Credit Un from admissions under Rule 36 of the Su DelBonis, (1st 921, ion v. 72 F.3d 928 perior Court Rules of Civil Procedure. Cir.1995)). Sparaco admissions, See also Tenney, Stipulations, v. like facilitate the 436, (1978) (hold 175 Conn. 399 A.2d 1261 orderly disputes by resolution of relieving ing that may courts set aside stipulations parties if of the burden of proving issues they fraud, are product duress, of or undisputed. Generally, are courts mistake), and Henry F. Michell Co. v. will treat stipulations and admissions as Fitzgerald, 318, otherwise, 353 Mass. 231 N.E.2d 373 binding; they longer would no (1967) (holding may that courts set aside serve as a tool litigation. to streamline stipulations if justice). State, not (R.I. conducive to A Corp. Cardi 524 A.2d 1092 however, party, 1987). may simply Court, however, unilateral This has held that ly withdraw from the stipulation or refuse admissions are not irrevocable and that to abide its terms. The appropriate “an may admission if withdrawn course of action is for party to move admitting litigant diligently; acted if the fact-finding tribunal to release it from adherence to the admission must cause a stipulation, citing equitable truth; suppression of the the with grounds for doing so. Sinicropi v. Mi drawal can be made without prejudice to * * lone, (2d 66, Cir.1990);6 915 F.2d 69 [opposing] party see Id. at 1095 Stipulations § also 73 Am.Jur.2d (quoting General Electric Co. v. Paul For Son, Inc., sell & 121 R.I. Thus, it is settled that fact-finding tribu- 1101, (1978)). I believe that nisi nals, such as attorneys of we tribunals, prius such as the in this appointed per 10(g) to value McBur- case, should apply this same test when firm, shares the MLS law possess ne/s faced with a request grant relief from a the inherent authority party release a stipulation.7 from a stipulation. factual But what crite- they Here, ria should apply to determine wheth- entered into a stipula- er to vacate the stipulation? I would tion of fact before panel’s hearing be- Wright, 6. See Cooper, also 18 Miller & Feder- able to stipulations obtain a release from al Practice and Procedure: Jurisdiction readily fact more judg than from consent (1981), stating 4443 at that a judgment ments. A court enters a consent * * * "[s]tipulation of individual issues can be case, judgment a final ain and the consent according basically vacated contractual judgment precludes relitigat- fraud, mistake, principles ignorance, ing judgment. the issues addressed in the Al mutual breach.” lowing parties petition for release from judgments stipula such on the same basis as hand, 7. On the other I do not believe that the hamper orderly tions would administra obtaining stipulations test for relief from justice compromise tion of finality should be obtaining the same as the one for judgments City themselves. See Provi judgments relief from or consent decrees. dence, 749 A.2d at 1093-94. But I would not See, e.g., City Employee Providence v. The stipulations, especially factually afford errone Providence, Retirement Board here, stipulations ous such as the one at issue (R.I.2000). Although this Court has ac judg the same level of deference as consent knowledged possible that it is for a court to request ments because for relief from a party judgment release a from a consent if the occurs, here, fraud, stipulated fact moving party before can demonstrate mutual mistake, entered; thus, judgment final has or actual absence of does not consent on the part implicate negotiating parties, respecting concerns Mansolillo v. about the final Providence, Employee ity judgments party Retirement Board that obtain whenever a (R.I.1995), parties should be seeks vacate a consent decree. decision mak- the decision and whether gan, agreeing that was a 25 ruling,” in that any made of law corporation, rather er errors percent owner of when, “patently was But after whether the decision than a owner. one-third ” returns, discriminatory, or unfair.’ ‘arbitrary, the law firm’s tax examining Committee, discovered, McBurney’s attorney before School Asadoorian v. Warwick (R.I.1997) evidence, (citing to receive panel began 577 stipulation this was incorrect as a factual v. North Providence quoting D’Ambra (the 1370, 1374, tax Committee, matter law firm’s returns from School to (R.I.1992)). 1987 to showed him be one-third I believe that Because owner), action appropriate he took mov- to competent evidence the record contains his ing panel to release client from the to support decision relieve panel’s of a stipulation grounds mistake of on stipulation McBurney erroneous from the presented fact. McBumey’s counsel ownership concerning percentage his had panel why with information about he firm, have affirmed MLS I would law mistakenly stipulating erred discretionary ruling that vacat- panel’s only percent McBurney owned stipulation, effect own- gave ed this full corporation, rather than the one-third firm itself had ership share that the in the he as shown law firm’s fact owned correct, thereby elevat- admitted was tax returns. fal- truth over form and ed substance and lacy. panel’s decision to release from the erroneous McBurney unduly prejudice

did not MLS it because II many years too had for relied on its own Interest Calculation showing lawyer tax to returns the panel The Court holds also of the law firm. one-third owner The mo- interest on the not have awarded should for panel relief occurred before the McBurney’s ineligi- valuation award from any had begun to receive evidence. No Rather, it resulted, bility date in 1993.8 believes delay sought, no continuance was law firm’s appli- that we should treat the and no prejudice argued. to MLS was naming to for the MLS have to retain ex- cation this Court did not additional panel McBurney’s shares as perts discovery. Although or take further valuation for shares,” rationale, governed it did “election panel purchase not articulate its an to 7-1.1-90.1, election-to-purchase apparently accepted these circumstances result, pan- As a support as sufficient to its to set statute. decision begin to ac- valuation award did stipulation. aside the As have noted el’s above, purchase to crue until MLS “elected” purpose Court’s review by requesting McBurney’s shares not to Kevin on certiorari is determine whether panel some of a valuation discretionary correct in its was determinations; years ineligible. he became can we a dis- seven after nor reverse statute, however, election-to-purchase cretionary ruling just might because we proceed- to properly applicable is not questions have these factual differ- decided firm has never “elect- Rather, ing because the law ently. review “is our restricted purchase McBurney’s shares. On ed” to of the record determine examination by law contrary, required to do it was supports any competent whether evidence panel awarded inter- parties agreed interest to if the use It be noted that should McBumey’s shares. est on rate of percent that 12 would be correct so upon McBurney’s ineligibility in pursuant power 1993 and our inherent inability and upon its another cause fashion a fair remedy, and conclusive eligible Cheetham, shareholder to do so. See Rule Cheetham 121 R.I. 10(g). The only (1979), issue for the we believe that decide was how much the law firm would the date of the initial for demand ECC’s be required pay for dissolution serves the most appropriate fair-market value of his shares when he historical proceedings event these ineligible, became impossible but the commencement the accrual of statu interest.”). for firm case, the law to “elect” purchase tory to his McBurney’s In this shares these circumstances. withdrawal from the firm was tantamount the initial to demand for dissolution Here, MLS’s apply own failure to to because, Hendrick pur absent a lawful for appointment Court the of valua- of McBumey’s chase shares nine within tion panel buy- it failed to reach —after months from date of ineligibility, the his out agreement with McBurney within the firm liqui the should have dissolved period three-month our rules allowed dated after his See withdrawal. Rule parties negotiate for agreed- the to an 10(g)(3) that if (providing neither the cor upon redemption price delayed the reso- — nor poration eligible shareholder pur lution of “how the much” law firm to owed ineligible lawyer’s chases the stock the (“[i]f McBurney. 10(g)(4) See Rule no (9) law firm “within nine months from the agreement is reached within such three occurred, ineligibility date that the then (3) period, month corporation ap- the shall corporation’s the license to practice shall ply appointment to this court for of three be terminated forthwith [remain and the (3) fact, qualified persons”).9 In ing] shall promptly shareholders take all recently § Court disavowed use of 7- steps necessary to cause the dissolution 1.1-90.1 calculate a stock- liquidation of corporation”). when, purchase here, pro- situation as Thus, I disagree majority’s with the meth ceedings unduly protract- themselves were odology calculating for the interest Hendrick, ed. See Hendrick v. McBurney, owes to I MLS and would (R.I.2000) (stating 795 n. panel’s have affirmed award inter § “[w]e are mindful that pro- 7-1.1-90.1 from est the date of his ineligibility to vides for statutory interest on share continue as a shareholder in 1993. purchase price to accrue ‘from the date of filing purchase the election to Although 10(g)(4) silent Rule is * * protracted shares *.’ Given nature appointed whether the valuation can us, however, of the proceedings before ineligi- award interest on of an valuations Although § initially solely profes- G.L.1956 7-5.1-5 al- valuation board on the ineligible corporation. lows either the shareholder or the sional services Because our professional corporation apply services specifically lawyers prac- rules address who appointment this Court for the professional of a valuation in a tice service board, II, our 10(g), "supersede own Article Rule of the any statutory because these rules therewith,” Supreme specific: Court regulation Rules more once in conflict G.L.1956 8-6-2(a), expired 10(g) § three months have date I hold that su- would Rule lawyer’s ineligibility persedes regard to continue as a 7-5.1-5 with who is reaching appointment shareholder without required apply firm the valu- for any agreement withdrawing agree share- with the ation if the fail to on a price paid withdrawing holder on the for the with- for the value shareholder’s stock stock, drawing 10(g) ineligi- shareholder's within three from the months date places applying bility. appointment onus of Lombardi, 773 Co. v. in a Allstate Insurance professional ble shareholder’s stock (R.I.2001)). 870 n. 2 corporation, services believe withdrawing truly shareholder is to obtain that these arbitration situations I believe shares, his a fair-market value for or her analogous to the decision are more fair panel’s duty to determine “the corpo- than panel in this case is a market of the stock as the date of value” Both purchase election to shares. ration’s ineligibility a com- implicitly includes such prac- firm lawyer and the law chose to Otherwise, the law firm could de- ponent. professional corpora- as a service tice law lay indefinitely by the shares purchasing applicable rules re- knowing that tion waiting of a valua- seek panel appointed this Court quired here, board, thereby, driving down withdrawing shareholder’s stock value a pay- ineligibility the fair-market value the amount her to contin- of his or date of shareholder, merely if the could ineligible able to shareholder ue as a re- agree thereon. The rules also taking advantage the law firm’s (or eligible another quired of mon- depreciating unpaid time value shareholder) fair- buy that stock for its ey withdrawing due for the shareholder’s value three months of the market within stock. ineligi- date withdrawing shareholder’s of I also believe that arbitration awards Furthermore, have bility. we stated provide appropriate analogue most in- purpose granting prejudgment type required Our rules situation. prompt encourage is to terest panel lawyers that a act as arbitrators See, disputes. settlement of reasonable to determine the fair-market value Trenn, 1305, v. 1311 e.g., Merrill withdrawing shareholder’s stock as of (R.I.1998) ear- (noting “encouragfing] date of that shareholder’s withdrawal. overriding ly [is] settlement claims— ar Numerous cases from this Court allow prejudgment-interest statute goal of our * * * prejudgment to award interest bitrators ”). reasons, I For these believe only that prevailing party, provided case be to resolution of this would best not expressly prohibited have 10(g) arbi- read Rule and the above-cited See, doing e.g., the arbitrators from so. pur- pari cases in materia. tration Paola Commercial Union Assurance relatively time 10(g)’s Rule short pose of 935, (R.I.1983). Companies, 461 A.2d 937 pay- prompt is clear: to insure deadlines has held repeatedly this Court money by the firm of whatever ment that, request when the an arbitra ineligible owing due may be par tor to determine the amount that one reflects, But, as the record shareholder. other, ty specific owes to the without a attempt comply no with made MLS interest, mention of then the arbitrator by applying 10(g)(4)’s requirement authority award interest. possesses the of a valuation appointment for the Sentry Grenga, that, Insurance Co. v. See within months time so six sufficient 998, (R.I.1989). addition, In we McBurney’s ineligibility, A.2d after recently jurisdic “the law in to this report held that valuation decision could its * * * Instead, years interest waited seven prejudgment [is] tion MLS Court. the valua- may apply be awarded when arbitrator for the circumstances, that a these only panel. amount Under asked determine ** have attorney should not withdrawing recover *." is entitled to plaintiff flouting of the the brunt of MLS’s Northern Insurance to bear Progressive Murinov. and, in an (R.I.2001) rules, we would Co., 557, (citing applicable context, arbitration we uphold should

panel’s decision to award interest In on its re Chaselle S. decision, starting from the date 2001-102-Appeal. No. lawyer’s ineligibility. Supreme Court of Rhode Island.

In Skaling Co., v. Aetna Insurance June (R.I.1999), we stated that have recognized “[w]e purpose

statutes that prejudgment award encouragement

is the early settlement 10(g)(4)’s claims.” Rule strict time line

for the valuation professional of shares in corporations

service evinces that same

public policy. fear that majority’s

decision this case undermines policy,

sound and in fact encourage will

intentional and careless delays resolving

disputes between law firms and withdraw-

ing shareholders because orga- law firms

nized professional corporations service

in similar circumstances will every have

incentive to reaching any avoid

agreement with withdrawing attorney delay

and to applying to this Court for the

initiation process. of the valuation For all reasons,

of these I would have held that properly awarded in-

terest dating to 1998.

Conclusion

I deny would affirm certiorari and

panel’s decision in respects, all except

I concur with the majority’s decision

grant certiorari and portion to vacate that

of the panel’s decision purported

limit the issue-preclusion effects of its de- agree

cision. portion

panel’s ruling beyond authority. its

Case Details

Case Name: In Re McBurney Law Services, Inc.

Court Name: Supreme Court of Rhode Island

Date Published: May 21, 2002

Citation: 798 A.2d 877

Docket Number: 2001-159-M.P., 2000-11-M.P.

Court Abbreviation: R.I.