Shepherd Kaplan Krochuk, LLC v. John R. Borzilleri.

NOTICE: Summary decisions issued by the Appeals Court pursuant to M.A.C. Rule
23.0, as appearing in 97 Mass. App. Ct. 1017 (2020) (formerly known as rule
1:28, as amended by 73 Mass. App. Ct. 1001 [2009]), are primarily directed to
the parties and, therefore, may not fully address the facts of the case or the
panel's decisional rationale. Moreover, such decisions are not circulated to
the entire court and, therefore, represent only the views of the panel that
decided the case. A summary decision pursuant to rule 23.0 or rule 1:28 issued
after February 25, 2008, may be cited for its persuasive value but, because of
the limitations noted above, not as binding precedent. See Chace v. Curran, 71
Mass. App. Ct. 258, 260 n.4 (2008).

COMMONWEALTH OF MASSACHUSETTS

APPEALS COURT

22-P-312

SHEPHERD KAPLAN KROCHUK, LLC

vs.

JOHN R. BORZILLERI.

MEMORANDUM AND ORDER PURSUANT TO RULE 23.0

The defendant and plaintiff in counterclaim in this case,

John R. Borzilleri, was employed by the plaintiff and defendant

in counterclaim, Shepherd Kaplan Krochuck, LLC (SKK), a

registered investment adviser, as a portfolio manager for a

private fund affiliated with SKK. In 2014 and 2015, Borzilleri

filed two lawsuits under the False Claims Act against nearly

twenty major pharmaceutical companies (qui tam lawsuits or qui

tam actions). These lawsuits alleged among other things that

these pharmaceutical companies conspired to defraud Medicare by

colluding to inflate prescription drug prices, causing losses of

approximately $200 billion.

After the United States Department of Justice decided not

to intervene in the qui tam lawsuits, and with knowledge about
when the lawsuits would be unsealed, see 31 U.S.C. § 3730,

Borzilleri, who had long been selling short the stock of these

pharmaceutical companies, escalated that selling. He also

crafted a press release that included information that the qui

tam lawsuits had been unsealed and sent it to recipients in the

financial and media industries. The complete factual details

are well known to the parties and will not be repeated here, but

it suffices to say that shortly thereafter he was fired by SKK.

Litigation ensued. SKK filed suit against Borzilleri,

seeking a declaration that its termination decision was lawful

and the recovery of damages stemming from Borzilleri's alleged

breach of contract and breach of the duty of loyalty.

Borzilleri asserted ten counterclaims in response. Five were

dismissed for failure to state a claim. Two of Borzilleri's

remaining counterclaims alleged that SKK had breached various

contractual obligations (Counts VI and VII). The other three

alleged that his firing was in retaliation for his filing of the

qui tam actions (Counts I, III, and IV). Such a retaliatory

firing would be unlawful. See 31 U.S.C. § 3730(h)(1). SKK

argues strenuously that Borzilleri engaged in unlawful insider

trading, and that that was why he was fired. Borzilleri argues

equally strongly that his views about the behavior of the

pharmaceutical companies, and the factual information that

underlay the qui tam actions were well known, that he had

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publicized them extensively prior to the press release and the

unsealing of the qui tam actions, and that he did not engage in

insider trading, which is to say trading stock "on the basis of

material, nonpublic information." United States v. O'Hagan, 521

U.S. 642, 651-652 (1997).

SKK moved for summary judgment on Borzilleri's five

remaining counterclaims and that motion was allowed as to

Borzilleri's retaliation-based claims due to a failure to show

pretext and retaliatory animus on the part of SKK but denied as

to Borzilleri's contract-based claims. The parties subsequently

stipulated and agreed to the voluntary dismissal of Borzilleri's

counterclaims except the retaliation-based claims (Counts I,

III, and IV), and all of SKK's claims. The judge "approved and

so ordered" the stipulation, which included the provision that

the "Stipulation shall constitute the final judgment of the

Court."

In this appeal, Borzilleri challenges the order allowing

summary judgment on his retaliation-based claims. The only

question properly before us is whether there is a genuine issue

of material fact as to whether the assertion by SKK that

Borzilleri was fired for alleged insider trading was a pretext

designed to cover up Borzilleri's firing in retaliation for his

filing of the qui tam actions. We view the summary judgment

record in the light most favorable to the nonmoving party,

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Borzilleri, drawing every reasonable inference in his favor.

See Bulwer v. Mount Auburn Hosp., 473 Mass. 672, 680 (2016).

Before us Borzilleri points to evidence he says raises a

genuine issue of material fact with respect to pretext: the

weakness of the allegation of insider trading, which, he

asserts, shows that SKK could not have thought he had engaged in

insider trading; SKK's shifting explanations of its concerns and

the reasons for the firing; SKK's unwillingness to put the

reason for the termination in writing; and contemporaneous notes

he made regarding his phone call on April 20, 2018, with Tim

Krochuck, the managing member of SKK.

Those contemporaneous notes were memorialized in an e-mail

that Borzilleri sent to himself (e-mail or notes). The summary

judgment record contains that e-mail, which was attached to

Borzilleri's affidavit in support of his opposition to SKK's

motion for summary judgment. Borzilleri's notes indicate that

during the April 20 phone call, in which Krochuck first

indicated that SKK desired "to sever its relationship with"

Borzilleri, Krochuck stated "that SKK was 'no longer concerned

about insider trading, after reviewing the Qui Tam documents,'"

but that SKK's "major concern was some kind of 'defamation' suit

by the Qui Tam defendants against SKK, myself [i.e., Borzilleri]

and my fund investors." There is also evidence in the summary

judgment record of a refusal by SKK to put any reason for

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dismissal in writing and evidence that could support a finding

that the contents of the press release were not and could not

have been considered by SKK to be material nonpublic

information, including evidence that the press release went out

after the qui tam lawsuits were unsealed, and that the

information in the press release was consistent with monthly

reports that Borzilleri had been issuing to the public for

years.

We think that the evidence pointed to by Borzilleri is

sufficient to raise a genuine issue of material fact with

respect to whether the claim of firing for insider trading was

merely a pretext and whether his firing was in fact in

retaliation for filing the qui tam actions.1

SKK argues that some of the evidence on which Borzilleri

now relies was not pointed to by Borzilleri in his pro se

1 SKK argues that the description of the phone call in
Borzilleri's affidavit in support of his opposition to SKK's
motion for summary judgment, is inconsistent with his sworn
statements in his deposition that he was never told the reason
he was terminated. Borzilleri's contemporaneous notes say only
that Krochuck spoke to him about severing the relationship
between SKK and Borzilleri during the April 20, 2018 phone call.
Since, as Borzilleri asserts in the joint statement of
undisputed material facts, that Borzilleri might not have
understood this to refer to termination, there is no necessary
contradiction between these two pieces of evidence. Cf. Ng
Bros. Constr., Inc. v. Cranney, 436 Mass. 638, 648 (2002) ("the
nonmoving party cannot create a material issue of fact and
defeat summary judgment simply by submitting affidavits that
contradict its previously sworn statements").

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opposition to the motion for summary judgment. The failure to

provide a written explanation, and the evidence that SKK could

not have thought the press release contained material nonpublic

information, were explicitly addressed in Borzilleri's

opposition. The e-mail and SKK's shifting explanations,

however, were not. Nonetheless, Borzilleri's responses in the

joint statement of undisputed material facts include a citation

to the e-mail in a response in which Borzilleri states that he

disputes whether the April 20 phone call informed him that he

was terminated as a result of "short-trading in the securities

of the qui tam defendants while potentially in possession of

material nonpublic information about them." He asserts that

"Mr. Krochuck made no mention of Dr. Borzilleri having violated

any corporate policies or trading laws. Dr. Borzilleri knew

immediately that the true reason for the separation was SKK'[s]

desire to quickly dissociate from Dr. Borzilleri's qui tam

activities." We think that this evidence was sufficiently put

before the judge to preserve the argument that a genuine issue

of material fact existed, and that the summary judgment motion

should not have been allowed as to counts I, III, and IV of the

counterclaim.

Accordingly, so much of the judgment that relates to counts

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I, III, and IV of the counterclaim is reversed. In all other

respects, the judgment is affirmed.

So ordered.

By the Court (Meade, Rubin &
Blake, JJ.2),

Clerk

Entered: May 3, 2023.

2 The panelists are listed in order of seniority.

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