Smith v. Kelley

Robert Kelley (defendant) was the sole shareholder and director of the law practice RKelley-Law, P.C. (the corporation), which was structured as a professional corporation. In 2005, Robert Smith (plaintiff), a United States Marine Corps veteran, was the victim of a mortgage-fraud scheme carried out by Louis Bertucci, a real estate attorney and former associate of the corporation. Smith sued Kelley, the corporation, and Bertucci, asserting that Kelley and the corporation were vicariously liable for Bertucci’s fraud. The United States District Court for the District of Massachusetts ultimately found the corporation vicariously liable and entered a judgment against it for over $200,000. But the district court entered directed verdicts in Kelley’s favor and entered no judgment against him personally. Thereafter, Kelley dissolved the corporation and continued operating his law practice as a sole proprietorship. The corporation’s clients continued to pay the sole proprietorship, and the sole proprietorship continued to use the same equipment, supplies, physical and email addresses, accounts, and health insurance as the corporation had used. Smith sued Kelley in Massachusetts state court, seeking a declaration that Kelley was the successor in interest to the corporation and thus was personally liable for the final judgment that had been entered against the corporation.