## Facts

- Charles E. Fogarty acquired a 360-acre undeveloped tract in Hopkinton, Rhode Island, and later transferred it to Stone Ridge, Inc., a closely held corporation owned equally by Fogarty, Dr. Grant Schmidt, William McComb, and James Ottenbacher.
- Stone Ridge’s only meaningful asset was the property; the shareholders intended to develop it.
- A holding entity, Brushy Brook Development, LLC, later held title to the property, with Schmidt as managing partner.
- Disputes among the participants arose over development, and Brushy Brook sought to sell the property either to an outside buyer or to one or more shareholders.
- Ottenbacher (Stone Ridge’s president) asserted he retained Ralph Palumbo (CPA) and Jonathan Savage (attorney) to help implement a plan for Fogarty and Ottenbacher to buy out Schmidt and McComb or otherwise secure a favorable sale.
- Plaintiffs alleged Palumbo and Savage instead arranged for the property to be sold (August 15, 2005) to an entity in which Palumbo and Savage were principals, without plaintiffs’ consent, constituting fraud and breach of duties owed to them.
- Pilgrim Title Insurance Company served as title insurer and escrow agent for the closing; plaintiffs alleged it was negligent and/or participated in wrongful conduct.
- The Superior Court granted summary judgment to all defendants on all counts; plaintiffs appealed.

## Issues

1. Whether genuine disputes of material fact precluded summary judgment on fraud, breach of fiduciary duty, and related claims against Palumbo and Savage based on their alleged advisory role and alleged self-dealing acquisition.
2. Whether Pilgrim, acting as title insurer and escrow agent, owed and breached any duty to plaintiffs sufficient to support liability.
3. Whether plaintiffs’ claimed damages—especially lost profits from hypothetical development—were too speculative to be recoverable at summary judgment.

## Decision

- The Supreme Court reviewed the grant of summary judgment de novo.
- The Court affirmed summary judgment in favor of Pilgrim on all claims.
- The Court affirmed summary judgment as to certain claims and damages theories that lacked evidentiary support, including components of claimed lost-profits damages deemed speculative.
- The Court vacated summary judgment on certain claims against Palumbo and Savage where the record presented triable factual disputes about their relationship with plaintiffs, disclosure/omissions, and alleged conflicted conduct in acquiring the property.
- The case was remanded for further proceedings on the surviving claims.

## Legal Principles

- Summary judgment is proper only when, viewing the evidence favorably to the nonmovant, no genuine issue of material fact exists and the movant is entitled to judgment as a matter of law; appellate review is de novo.
- Whether a fiduciary or special relationship exists between professionals and alleged clients (or business counterparties) may be fact-dependent and unsuitable for resolution on summary judgment when the record supports competing inferences.
- Claims grounded in fraud and self-dealing can survive summary judgment where evidence permits a finding of material misrepresentation or omission, reliance, and resulting harm, and where intent and disclosure are disputed.
- A title insurer/escrow agent is not liable absent proof it undertook duties beyond its limited role or participated in, or had knowledge of, the alleged wrongdoing.
- Lost-profits damages must be proven with reasonable certainty; projections untethered to concrete facts and required inputs may be rejected as speculative as a matter of law, though other non-speculative damage measures may remain available.

## Conclusion

The court upheld dismissal of all claims against the title/escrow company and rejected speculative lost-profits components, but reinstated certain fraud and fiduciary-duty-based claims against the accountant and attorney because the record presented material factual disputes about duties, disclosure, and alleged self-interested acquisition of the property.


Fogarty v. Palumbo, 163 A.3d 526 (R.I. 2017)