Corporate – LLC – Tax liabilities

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Where a plaintiff, having sold more than half of his interests in a limited liability company back to the company at its request, brought suit seeking reimbursement for his tax liabilities, a motion to dismiss the complaint should be denied because the plaintiff plausibly suggests that he is entitled to relief against the defendants under a contract theory and a promissory estoppel theory.

“Israel Drori alleges that he sold more than half of his interests in Zixi, LLC, back to the company at its request, Zixi treated the transaction in a manner that caused Drori to incur large and unnecessary tax liabilities, and rather than recharacterize the transaction to eliminate the adverse tax consequences Zixi entered into a binding contract to reimburse Drori for his tax liabilities. Drori also alleges that Edward Henderson (a former member of Zixi’s Board of Managers) and Gordon Brooks (the company’s Executive Chairman) later promised to make Drori whole out of their own funds or capital accounts if Zixi failed to do so. Drori asserts two claims for breach of contract against all three defendants; one count is styled as a claim for ‘promissory estoppel.’

“Henderson and Brooks have moved to dismiss the claims against them under Mass. R. Civ. P. 12(b)(6). The Court will deny this motion to dismiss because the facts alleged by Drori in his complaint plausibly suggest that he is entitled to relief against Henderson and Brooks under both of his claims. …

“First, the argument that Drori’s allegations about his communications with Henderson and Brooks ‘lack the required specificity to state a claim’ for breach of contract is without merit. …

“Drori is not required to state his contract claim with particularity. … Thus, the assertion by Henderson and Brooks that Drori cannot state a claim for breach of contract without specifying exactly ‘what statements were made,’ ‘the context in which those statements were made,’ and ‘when they were made’ is without merit.

“Second, the argument that the contract claim against Henderson and Brooks ‘fails for lack of consideration’ is also without merit. …

“Third, the assertion that Drori’s alleged oral contract with Henderson and Brooks cannot be enforced because it implicates the Statute of Frauds, G.L.c. 259, §1, cannot be resolved on a motion to dismiss.

“Assuming without deciding that the Statute of Frauds is implicated, whether Drori can ultimately prove that the promise by Henderson and Brooks was memorialized in a writing that satisfies the statute of frauds remains to be seen.

“But Drori is not required to allege in his complaint that the contract was in writing. …

“… Only where the complaint specifies that the agreement was ‘made orally and not in writing’ may a claim in a complaint be dismissed on the ground that it is barred by the statute of frauds. … Otherwise, if an alleged contract falls within the scope of the statute of frauds and a defendant raises the statute of frauds as an affirmative defense in accord with Mass. R. Civ. P. 8(c), then the plaintiff will have the burden at trial of proving the existence of a writing that satisfies the statute. …

“Henderson and Brooks make two arguments as to why the promissory estoppel claim should be dismissed. Neither has merit.

“First, Henderson and Brooks contend that Drori failed to allege that they made ‘any specific, unambiguous promises.’ This argument is unavailing for the reasons discussed above.

“Second, they also contend that the complaint does not allege that Drori relied to his detriment on the purported promise by Henderson and Brooks to personally cover Drori’s tax liabilities. That also fails for the reasons discussed above. One may reasonably infer from what is alleged in the complaint the Drori contends that, in reliance on the alleged promise by Henderson and Brooks, he continued to refrain from pressing Zixi to amend its 2019 return to make a Section 754 election. That is sufficient to survive the motion to dismiss. …

“Finally, Henderson and Brooks argue that they cannot be held personally liable under either claim because any promises that they made to cover Drori’s tax liability were made solely ‘in their representative capacities as officers and directors of Zixi.’

“This argument is unavailing at the motion to dismiss stage because that is not at all what Drori alleges in his complaint. …”

Drori v. Zixi, LLC, et al. (Lawyers Weekly No. 09-024-26) (6 pages) (Salinger, J.) (Suffolk Superior Court) (Docket No. 2584CV02570-BLS2) (March 11, 2026).

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