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Bassett, et al. v. Triton Technologies, Inc., et al. (Lawyers Weekly No. 12-074-17)

COMMONWEALTH OF MASSACHUSETTS
SUFFOLK, ss. SUPERIOR COURT.
1684CV03475-BLS2
____________________
LAURA BASSETT, JAMIE ZALINSKAS, ALYSSA WRIGHT, and ALEXIS CRAMER, on behalf of themselves and all others similarly situated
v.
TRITON TECHNLOGIES, INC., S. JAY NALLI, and ANDREW S. BANK
____________________
MEMORANDUM AND ORDER ALLOWING PLAINTIFFS’ MOTION FOR CLASS CERTIFICATION
The four named plaintiffs used to work for Triton Technologies, Inc., as “inside sales” employees. They assert two distinct claims for unpaid wages. The first claim alleges that Defendants violated the overtime statute, G.L. c. 151A, § 1A, by not paying Plaintiffs time-and-a-half for working more than forty hours per week. The second claim alleges that Defendants violated the Sunday pay law, G.L. c. 136, § 6(50), by not paying Plaintiffs time-and-a-half for working on Sundays.
Plaintiffs have now moved to certify a class consisting of two distinct subclasses—one comprised of sales employees at Triton who have not received time-and-a-half for working more than forty hours in any given week, and another comprised of all sales employees who have not received time-and-a-half for hours worked on a Sunday.
The Court finds that class certification is appropriate because both sub-classes are so numerous that it is not practical to join all class members, there are questions of law or fact that are common to all members of each subclass and that predominate over questions of fact that affect only individual members, the claims of the named Plaintiffs are representative of the claims of each subclass, the named Plaintiffs and their counsel will fairly and adequately protect the interests of the class, and a class action would permit the most fair and efficient adjudication of this dispute. See Mass. R. Civ. P. 23.
Although Defendants do not oppose certification of the overtime subclass, they argue that the class should be limited to salespeople who claim to be owed overtime by Triton for work performed after November 13, 2013. Defendants point out that the
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overtime claim is subject to a three-year statute of limitations, see G.L. c. 151, § 20A,1 and this action was filed on November 14, 2016. Plaintiffs agree that it is appropriate to limit the overtime class to this three-year period. The Court will do so.
Defendants do oppose certification of the Sunday subclass. They argue that this claim is subject to a six-month statute of limitations under G.L. c. 136, § 9, and that none of the named Plaintiffs worked for Triton within six months before this lawsuit was filed (i.e. after May 13, 2015). The Court disagrees.
The Sunday claim is not governed by the six-month limitations period invoked by Defendants. That statute provides that “Prosecution for violations of sections two, three, or five [of chapter 136] shall be commenced within six months after the offense was committed.” G.L. c. 136, § 9. This limitations period only governs criminal prosecutions brought against persons who commit one of the crimes set forth in G.L. c. 136, §§ 2, 3, or 5. But this case is not a criminal prosecution, and Plaintiffs do not seek to enforce any part of sections 2, 3, or 5 of chapter 136.
The Sunday claim is actually governed by a three-year limitations period. As the Court explained in a prior decision in this case dated March 6, 2017, Plaintiffs may enforce the Sunday pay law by asserting a cause of action for non-payment of wages under G.L. c. 149, § 150. Cf. Drive-O-Rama, Inc. v. Attorney General, 63 Mass. App. Ct. 769, 769-770 (2005) (failure to pay time and a half for work on legal holidays, as required by G.L. c. 136, § 13, violated the Wage Act). All Wage Act claims, including claims to enforce the Sunday pay law, are governed by the three-year limitations period established in G.L. c. 149, § 150. It appears to be undisputed that each of the named Plaintiffs worked for Triton within three years before this action was filed.
The Court will certify the Sunday pay class but limit it to the applicable three-year statutory limitations period.
1 The limitations period for overtime claims used to be two years, but § 20A was amended effective November 18, 2014, to extent that period to three years. See St. 2014, c, 292, §§ 3, 4.
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ORDER
Plaintiffs’ motion for class certification is ALLOWED IN PART. The Court hereby certifies a class of plaintiffs that shall consist of the following two subclasses: (1) all sales employees of Triton Technologies, Inc., who did not receive compensation equal to one and one-half times their regular hourly rate for all of the hours that they worked in excess of forty house during any week at any time after November 13, 2013; (2) all sales employees of Triton Technologies, Inc., who did not receive compensation equal to one and one-half times their regular hourly rate for all of the hours that the worked on a Sunday at any time after November 13, 2013.
June 13, 2017
___________________________
Kenneth W. Salinger
Justice of the Superior Court

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Posted by Stephen Sandberg - June 16, 2017 at 12:47 am

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Rauhaus Freedenfeld & Associates LLP v. Prince (Lawyers Weekly No. 12-075-17)

COMMONWEALTH OF MASSACHUSETTS
SUFFOLK, ss. SUPERIOR COURT.
1684CV02016-BLS2
____________________
RAUHAUS FREEDENFELD & ASSOCIATES LLP
v.
TODD PRINCE
____________________
MEMORANDUM AND ORDER ON PLAINTIFFS’ MOTION TO DISMISS COUNTERCLAIMS
Rauhaus Freedenfeld & Associates LLP is an architectural firm based in Boston, Massachusetts, that specializes in designing animal hospitals. It is suing Todd Prince for not paying Plaintiff in full for designing renovations for an animal hospital owned by Prince in Deerfield, Illinois. Prince asserts various counterclaims.
Plaintiff has moved to dismiss four of the five the counterclaims; it does not seek dismissal of the counterclaim for breach of contract (Count I). The Court will allow the motion in part and deny it in part. Specifically, it will dismiss the claim for negligent misrepresentation but otherwise deny the motion to dismiss.
1. Fraud Claim. Plaintiff argues that the counterclaim for fraud (Count II) is not pleaded with the particularity required by Mass. R. Civ. P. 9(b). Under this rule, a claimant must “at a minimum” support their claim for fraud by specifically alleging “the identity of the person(s) making the” allegedly fraudulent “representation, the contents of the misrepresentation, and where and when it took place,” and must also “specify the materiality of the misrepresentation, [his] reliance thereon, and resulting harm.” Equipment & Systems for Industry, Inc. v. NorthMeadows Constr. Co., Inc., 59 Mass. App. Ct. 931, 931-932 (2003) (rescript).
Prince has stated his fraud claim with sufficient particularity. The allegations in the counterclaim plausibly suggest that Plaintiff’s agent made specific and false statements of fact to Prince at a meeting in September 2015, Plaintiff made specific and false promises in the parties’ contract that Plaintiff never intended to perform, Plaintiff made these false statements and promises to induce Prince to sign the contract, Prince did so to his detriment, and as a result Prince was damaged in that he paid $ 126,098.56 for draft drawings that he cannot use. These allegations state a claim for fraud. See Masingill v. EMC Corp., 449 Mass. 532, 540 (2007) (elements of
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fraud); McCarthy v. Brockton Natl. Bank, 314 Mass. 318, 325 (1943) (“A principal is liable for the fraud committed by his agent or servant acting within the scope of his employment.”); Cumis Ins. Society v. BJ’s Wholesale Club, Inc., 455 Mass. 458, 474 (2009) (fraud claim may be based on false promise if “the promisor had no intention to perform the promise at the time it was made”) (quoting Yerid v. Mason, 341 Mass. 527, 530 (1960)).
The Court reminds the parties, however, that an “intention not to perform a promise” cannot be inferred merely from later “nonperformance of the promise.” Galotti v. United States Trust Co., 335 Mass. 496, 501 (1957); accord McCartin v. Westlake, 36 Mass. App. Ct. 221, 230 n.11 (1994); see also Backman v. Smirnov, 751 F. Supp. 2d 304, 316 n.13 (D. Mass. 2010) (“Changing one’s mind is not proof that an earlier statement was false.”) (Stearns, J.) (applying Massachusetts law).
2. Chapter 93A Claim. Plaintiffs’ arguments for dismissing the counterclaim under G.L. c. 93A, § 11 (in Count III) are also without merit.
The plausible allegations of intentional fraud suffice to state a claim that Plaintiff engaged in deceptive conduct that violates c. 93A. See, e.g., Brewster Wallcovering Co. v. Blue Mountain Wallcoverings, Inc., 68 Mass. App. Ct. 582, 605 (2007) (“the finding of intentional misrepresentation (or common law fraud or deceit) … is sufficient foundation for a finding of a c. 93A violation in a business context”); The Community Builders, Inc. v. Indian Motorcycle Assocs., Inc., 44 Mass. App. Ct. 537, 557 (1998) (false promise with no intention to perform would violate c. 93A).
And the allegation that Plaintiff is located in Boston, and presumably did most of its work for Prince in its own offices, is sufficient at this stage to suggest that Plaintiffs’ alleged misconduct occurred “primarily and substantially” within Massachusetts, as required by G.L. c. 93A, § 11. Whether the center of gravity of the parties’ interactions and Plaintiff’s alleged fraud is in Illinois rather than Massachusetts is not an issue that can be resolved on a motion to dismiss, at least not in light of the facts alleged by Prince in his counterclaim. See Resolute Management, Inc. v. Transatlantic Reins. Co., 87 Mass. App. Ct. 296, 300-301 (2015).
3. Negligent Misrepresentation Claim. In contrast, the Court is convinced that Prince has not stated a viable claim for negligent misrepresentation in Count IV.
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Prince alleges (in paragraph 38) that Plaintiff failed to do everything it had promised in its contract. Those allegations support the counterclaim for breach of contract in Count I. But a promise is not a tortious misrepresentation unless the promising party never intended to perform, in which case the injured party has a claim for intentional misrepresentation. “[P]romises to perform an act cannot sustain a claim for negligent misrepresentation[.]” Cumis Ins. Society, 455 Mass. at 474.
4. Negligence Claim. Finally, the Court will deny Plaintiff’s request to dismiss Prince’s counterclaim for professional malpractice or negligence. Prince alleges that Plaintiff had a duty to ensure that its design met local zoning requirements and that it negligently breached that duty. Plaintiff contends that this claim should be dismissed because it had no duty to ensure compliance with zoning requirements absent a contractual agreement to do so. 1
Whether the standard of care that a reasonably competent architect should follow in this country includes a duty to ensure compliance with zoning requirements is a mixed question of law and fact that cannot be resolved on a motion to dismiss.
“Whether a duty of care exists” at all “is a question of law” and is therefore often “an appropriate subject of a motion to dismiss pursuant to rule 12(b)(6).” Leavitt v. Brockton Hosp., Inc., 454 Mass. 37, 40 (2009) (affirming dismissal of negligence claim because defendant owed no duty of care to plaintiff as a matter of law); accord O’Meara v. New England Life Flight, Inc., 65 Mass. App. Ct. 543, 544 (2006) (same).
1 Plaintiff does not argue that the counterclaim for negligence is barred by the “economic loss doctrine,” which generally provides that “purely economic losses are unrecoverable in tort and strict liability actions in the absence of personal injury or property damage.” Aldrich v. ADD Inc., 437 Mass. 213, 222 (2002), quoting FMR Corp. v. Boston Edison Co., 415 Mass. 393, 395 (1993). This rule “was developed in part to prevent the progression of tort concepts from undermining contract expectations,” on the theory that contracting parties are free to allocate the risk of economic loss as they see fit. Wyman v. Ayer Properties, LLC, 469 Mass. 64, 70 (2014); accord, e.g., Hunt Const. Group, Inc. v. Brennan Beer Gorman/Architects, P.C., 607 F.3d 10, 14 (2d Cir. 2010) (economic loss doctrine “serves to maintain the boundary between contract law, which is designed to enforce parties’ contractual expectations, and tort law, which is designed to protect citizens and their property” from physical harm) (quoting Hamill v. Pawtucket Mut. Ins. Co., 179 Vt. 250, 254, 892 A.2d 226 (2005)). Since Plaintiff has not raised the issue in support of its motion to dismiss Prince’s counterclaims, the Court will not consider it at this stage of the case.
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But whether Plaintiff’s duty of care required it to design a building that would comply with local zoning requirements is a question of fact. The standard of care owed by architects is a duty to do as good a job as one should expect from professionals in the same field in similar circumstances. “Architects, like other professionals, do not have a duty to be perfect in their work, but rather are expected to exercise ‘that skill and judgment which can be reasonably expected from similarly situated professionals.’ ” LeBlanc v. Logan Hilton Joint Venture, 463 Mass. 316, 329 (2012), quoting Klein v. Catalano, 386 Mass. 701, 718 (1982). “Establishing the applicable standard of care” owed by a member of some specialized profession “typically requires expert testimony” by someone with “sufficient knowledge of the practices” of professionals in the same field “to assert that the average qualified practitioner would, or would not, take a particular course of action in the relevant circumstances.” Palandjian v. Foster, 446 Mass. 100, 1045-106 (2006); accord LeBlanc, supra (same as to standard of care applicable to architects).
The counterclaim expressly alleges that Plaintiff “was under a duty to ensure [that] the design met the local zoning requirements,” Plaintiff breached that duty of care, and Prince was injured as a result. Nothing more is needed to state a claim for negligence. Cf. Adams v. Congress Auto Ins. Agency, Inc., 90 Mass. App. Ct. 761, 765 (2016) (elements of claim for negligence are “(1) duty; (2) breach of duty; (3) a causal connection between the breach of duty and damages; and (4) damages”).
ORDER
Plaintiff’s motion to dismiss part of Defendants counterclaims is ALLOWED IN PART with respect to the counterclaim for negligent misrepresentation and DENIED IN PART with respect to Defendants’ other counterclaims.
June 14, 2017
___________________________
Kenneth W. Salinger
Justice of the Superior Court

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Posted by Stephen Sandberg - June 15, 2017 at 9:12 pm

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Meunier, et al. v. Market Strategies, Inc. (Lawyers Weekly No. 12-072-17)

COMMONWEALTH OF MASSACHUSETTS
SUFFOLK, ss. SUPERIOR COURT.
1684CV01546-BLS2
1684CV03592-BLS2
____________________
JOHN J. MEUNIER, CHRISTY M. WHITE, and the JOHN J. MEUNIER 2012 IRREVOCABLE TRUST
v.
MARKET STRATEGIES, INC.
____and____
MARKET STRATEGIES, INC.
v.
COGENT RESEARCH HOLDINGS LLC
____________________
MEMORANDUM AND ORDER ON MARKET STRATEGIES, INC.’S MOTION FOR SUMMARY JUDGMENT
John Meunier, Christy White, and the John J. Meunier 2012 Irrevocable Trust (the “Trust”) claim that Market Strategies, Inc. (“MSI”) breached its contractual obligations to make certain payments to Cogent Research Holdings LLC (which the parties refer to as “Holdco”). They also claim that after signing the contract at issue MSI misrepresented its willingness and ability to pay what it owes and thereby committed deceptive acts in violation of G.L. c. 93A. Finally, Meunier and White seek declaratory judgment regarding the enforceability of certain non-competition, non-solicitation, and confidentiality agreements. MSI has moved for summary judgment.
The Court will grant summary judgment in MSI’s favor on the contract claim because Plaintiffs are not intended beneficiaries of MSI’s payment obligations to Holdco as a matter of law. It will also allow MSI’s motion with respect to the declaratory judgment claim because any dispute regarding enforceability of the non-competition or non-solicitation agreements is moot and Plaintiffs lack standing to challenge the confidentiality agreement on the ground that MSI committed a material breach of contract by not paying Holdco. However, the Court will deny the summary judgment motion with respect to the misrepresentation and c. 93A claims because they are independent from the contract claim.
1. Undisputed Factual Background. These actions arise from the May 2013 sale of Cogent Research LLC to MSI. At the time of the transaction, Meunier, White,
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and the Trust were the sole owners of Cogent Research. They agreed to sell Cogent Research to MSI in exchange for an “Initial Payment” of $ 8.0 million, a “Delayed Payment” of $ 2.0 million, and a “Contingent Payment” of roughly $ 3.15 million that was due after MSI received additional audited financial statements of Cogent Research. Meunier and White also agreed to work for MSI for three years and entered into a non-competition, non-solicitation, and confidentiality agreement.
Meunier, White, and the Trust created Holdco in connection with this transaction. They are the sole owners of Holdco. They transferred ownership of Cogent Research to Holdco, which in turn sold Cogent Research to MSI. The parties’ purchase agreement provides that MSI was required to pay an Initial Payment, Delayed Payment, and Contingent Payment to Holdco. MSI does not have any contractual obligation to make any of these payments to Meunier, White, or the Trust.
Although the parties’ purchase agreement provides that MSI was to make the Deferred and Contingent Payments to Holdco no later than April 30, 2016, a separate subordination agreement executed at the same time modifies those terms. The parties to the subordination agreement were Holdco, MSI, and an administrative agent representing Senior Lenders of MSI. Meunier and White signed this contract on behalf of Holdco. The subordination agreement provides in § 2.1 that the obligations of MSI to make the Delayed and Contingent Payments “shall be subordinate and subject in right and time of payment … to the prior Payment in Full of all Senior Debt” held by the Senior Lenders. It provides in § 2.3 that, so long as Senior Debt is outstanding, MSI shall not make and Holdco shall not accept payment of any part of the Deferred and Contingent Payments if doing so would cause MSI to default under the Senior Credit Agreement.1 And it provides in § 2.4(a) that Holdco shall not sue
1 In its prior decision dated February 23, 2017, the Court construed § 2.3 as providing that MSI shall not make and Holdco shall not accept payment of any part of the Deferred and Contingent Payments until the Senior Lenders are paid in full. The Court understood the clause barring payments that would cause a default as limiting payments to Holdco that would otherwise be permitted under § 2.2 if MSI were involved in a bankruptcy or similar proceeding. In their summary judgment memoranda, however, both sides say that § 2.3 permits MSI to make Deferred or Contingent Payments at any time—even if Senior Debt is still unpaid—so long as doing so does not breach any obligation owed to the Senior Lenders. The Court accepts the parties’ shared construction of their own contract.
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MSI or take any other action to enforce MSI’s payment obligations under the purchase agreement until the Senior Debt is paid in full.
2. Contract Claim. To date, MSI has not paid any part of the $ 5.15 million in Deferred and Contingent payments that it owes to Holdco. Plaintiffs claim that this constitutes a breach of the purchase agreement. Meunier, White, and the Trust all sued MSI in their own names, purporting to assert their own rights as intended third-party beneficiaries of MSI’s contractual promise to pay Holdco these amounts.
MSI contends that it is entitled to summary judgment on this claim because Plaintiffs have no standing to raise it. (On the merits, MSI contends that it is required or at least permitted to withhold these payments under the subordination agreement. It does not seek summary judgment on that ground.)
2.1. Legal Background — Intended Beneficiaries and Contract Interpretation. The purchase agreement provides (in § 9.09) that it “will be governed by and construed and enforced in accordance with” Massachusetts law.
“Under Massachusetts law, only intended beneficiaries, not incidental beneficiaries, can enforce a contract.” See Harvard Law School Coalition for Civil Rights v. President and Fellows of Harvard College, 413 Mass. 66, 71 (1992). “One need not be a beneficiary of every provision of the contract in order to be an intended beneficiary with enforceable rights; it is enough to be the intended beneficiary of the promise one is seeking to enforce.” The James Family Charitable Foundation v. State Street Bank and Trust Co., 80 Mass. App. Ct. 720, 725 (2011). An intended third-party beneficiary “stands in the shoes” of, and thus has no greater rights than, the contracting party whose rights the beneficiary seeks to enforce. Rae v. Air-Speed, Inc., 386 Mass. 187, 196 (1982), quoting Restatement (Second) of Contracts § 309 (1981); accord Campione v. Wilson, 422 Mass. 185, 194 (1996).
Plaintiffs would have standing to enforce MSI’s promises to pay Holdco only if the purchase agreement expressly or implicitly conveyed a “clear and definite” intent that Plaintiffs have the right to enforce those promises. See James Family Charitable Foundation, supra, at 724-725, quoting Lakew v. Massachusetts Bay Transp. Auth., 65 Mass. App. Ct. 794, 798 (2006), and Anderson v. Fox Hill Village Homeowners Corp., 424 Mass. 365, 366-367 (1997). “[T]he language and circumstances of the
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contract” determine whether the contracting parties intended that Plaintiffs would have the right to sue MSI for not paying amounts it owes to Holdco. Anderson, supra, at 367.
If written contracts are unambiguous, as they are here, a court “may determine whether” someone who was not a direct party to a particular promise “was an intended beneficiary as a matter of law.” James Family Charitable Foundation, 80 Mass. App. Ct. at 725. This follows from the general rule that “[i]f a contract … is unambiguous, its interpretation is a question of law that is appropriate for a judge to decide on summary judgment.” Seaco Ins. Co. v. Barbosa, 435 Mass. 772, 779 (2002). “Whether a contract is ambiguous is also a question of law.” Eigerman v. Putnam Investments, Inc., 450 Mass. 281, 287 (2007).
Although the parties disagree sharply as to whether the purchase agreement expressly or implicitly indicates that Plaintiffs are intended beneficiaries with the right to enforce MSI’s payment obligations, that does not mean that the contract is unclear. “[A]mbiguity is not created simply because a controversy exists between parties, each favoring an interpretation contrary to the other’s.” Indus Partners, LLC v. Intelligroup, Inc., 77 Mass. App. Ct. 793, 795 (2010) (affirming summary judgment based on contract interpretation), quoting Jefferson Ins. Co. v. Holyoke, 23 Mass. App. Ct. 472, 475 (1987).
Plaintiffs are mistaken in asserting that the parties’ dispute regarding their contractual intent is a factual question, and that the issue can only be decided at trial and after considering Plaintiffs’ subjective understanding that they would be able to enforce MSI’s payment obligations. Since the parties’ contracts are unambiguous, parol or extrinsic evidence regarding the parties’ intent is inadmissible. See, e.g., General Convention of New Jerusalem in the United States of America, Inc. v. MacKenzie, 449 Mass. 832, 835 (2007); Herson v. New Boston Garden Corp., 40 Mass. App. Ct. 779, 792 (1996). But even if parol evidence could be considered, Plaintiffs’ uncommunicated subjective intent would still be irrelevant. The meaning and effect of a contract “is not to be determined by the secret thought or unexpressed intent of any of the parties, but is to be determined by the intent as expressed by words and acts of all the parties in the light of the circumstances.” Tudor Press v. Univ. Distrib.
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Co., 292 Mass. 339, 341 (1935). In other words, “contracts rest on objectively expressed manifestations of intent,” and cannot be altered by “subjective and unexpressed expectations” of one party or side. Beatty v. NP Corp., 31 Mass. App. Ct. 606, 612 (1991). Thus, the terms of a written contract—and not a party’s subjective motives, desires, or intent—“determine whether performance under the contract would necessarily and directly benefit” a third-party and thus make them an intended beneficiary with the right to enforce the contract. Lonsdale v. Chesterfield, 662 P.2d 385, 390 (Wash. 1983) (en banc); accord James Family Charitable Foundation, 80 Mass. App. Ct. at 725.
2.2. Construing the Contracts. The Court concludes that the contract documents are unambiguous and that they do not contain any clear or definite expression that Plaintiffs have any right to enforce MSI’s payment obligations.
The purchase agreement provides (in § 2.05) that MSI is required to pay the Delayed and Contingent Payments to Holdco, the seller of Cogent Research. No provision requires MSI to make those payments to any of the Plaintiffs, or gives Plaintiffs any right to compel MSI to make the payments to Holdco.
Plaintiffs’ assertion that the purchase agreement expressly makes them intended third-party beneficiaries with the right to enforce MSI’s obligations to pay Holdco is without merit. Plaintiffs point to § 9.07 of the purchase agreement, which provides in relevant part that “[t]his Agreement will not confer any rights or remedies upon any Person … other than the Parties and their respective successors and permitted assigns[.]”This provision means what it says and nothing more: no person or entity that is not a party to the purchase agreement has any right to enforce and may not seek any remedies for a breach of this contract. Although each of the Plaintiffs is a party to the purchase agreement, § 9.07 does not state that all of the contracting parties are intended beneficiaries of all of the contract provisions. Nor does § 9.07 resolve the matter against Plaintiffs, as MSI contends. This provision does not say that the contracting parties have no right to enforce obligations that are not owed to them directly. The heading to this section (“No Third Party Beneficiaries”) does not matter, because § 9.03 provides that “[t]he headings contained in this Agreement are included for purposes of convenience only, and will not affect the
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meaning or interpretation of this agreement.” In sum, § 9.07 does not expressly resolve the issue one way or the other.
The fact that Meunier, White, and the Trust are the sole owners of Holdco, and therefore will directly benefit if and when MSI pays Holdco the Deferred and Contingent Payment amounts, is not enough to show that Plaintiffs are intended beneficiaries of the promise to make those payments to Holdco. See The James Family Charitable Foundation, 80 Mass. App. Ct. at 724 (intent to give third-party benefit of performance is not enough to make them intended beneficiary with right to enforce performance). Whenever someone contracts to pay money to a closely held company they know that the owners of the company will benefit from that payment. Typically, however, members or shareholders who wish to enforce a contractual obligation owed to a close corporation must bring a derivative action on behalf of the business; they do not automatically have any right to sue in their own names merely because they will benefit if the duty to the corporation is carried out. See, e.g., Pagounis v. Pendleton, 52 Mass. App. Ct. 270, 275 (2001).
The structure of MSI’s purchase and Holdco’s sale of Cogent Holdings indicates that the parties did not intend for Plaintiffs to be able to compel MSI to pay any part of the Deferred or Contingent Payments or seek damages if it failed to do so. If MSI had promised Holdco that it would make payments directly to Meunier, White, and the Trust, then Plaintiffs would have been intended beneficiaries of that promise. See Choate, Hall & Stewart v. SCA Services, Inc., 378 Mass. 535, 546 (1979). But since MSI instead promised to make payments to Holdco, with the understanding and expectation that the economic benefit of those payments would indirectly flow through to its members, Plaintiffs are merely incidental beneficiaries with no right to enforce those contract provisions. Id. at 547 & n.21;2 accord, e.g., Spring Valley IV Joint Venture v. Nebraska State Bank of Omaha, 690 N.W.2d 778, 782-783 (Neb.
2 The SJC quotes with approval the following example from the Restatement of Contracts: “B promises A to pay whatever debts A may incur in a certain undertaking. A incurs in the undertaking debts to C, D and E. If the promise is interpreted as a promise that B will pay C, D and E, they are intended beneficiaries . . . ; if the money is to be paid to A in order that he may be provided with money to pay C, D and E, they are at most incidental beneficiaries.” Id., quoting draft version of what became Restatement (Second) of Contracts § 302, Illustration 3 (1981).
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2005) (where bank had contractual obligation to disburse loan funds to individual borrower, who had disclosed that purpose was to invest in specific partnerships, the partnerships “were at most incidental beneficiaries of the loan agreements and … lack[ed] any enforceable property rights to the loan proceeds”).
As the United States Court of Appeals for the First Circuit has explained, “Massachusetts courts steadfastly have refused to accord intended beneficiary status under a contract whose terms, interpreted in the particular transactional setting, do not provide for the benefits of performance to flow directly to the third party.” Public Service Co. of New Hampshire v. Hudson Light and Power Dept., 938 F.3d 338, 343 (1st Cir. 1991) (holding that, where PSNH agree to repurchase electricity from Massachusetts Municipal Wholesale Electric Company, with understanding that local municipal power companies would benefit from PSNH’s payments to MMWEC, power companies were not intended beneficiaries and had no right to enforce contract) (applying Massachusetts law). Massachusetts is consistent with other jurisdictions in confining intended beneficiary status to people and entities that have a right directly to receive benefits from performance of a contractual promise. See, e.g., Choate, Hall, 378 Mass. at 547 n.21 (citing cases); Public Service, 938 F.2d at 343 n.12 (citing cases); Lonsdale, 662 P.2d at 390 (under Washington law, third-party is intended beneficiary only where “the contract necessarily and directly benefits the third person”) (quoting Vikingstad v. Baggott, 282 P.2d 824, 826 (1955).
Not only is there nothing in the purchase agreement to suggest that Plaintiffs are third-party beneficiaries of MSI’s obligations to pay Holdco, but in addition the subordination agreement confirms that the parties had no clear intent to give Plaintiffs any right to enforce those obligations.
Since the purchase agreement and subordination agreement were closely related and part of a single transaction, the Court must read them together and consider that circumstance in construing any part of either document. See Chelsea Indus., Inc. v. Florence, 358 Mass. 50, 55-56 (1970); Chase Commercial Corp. v. Owen, 32 Mass. App. Ct. 248, 250 (1992). The Court must construe the parties’ contracts in a manner that will give them “effect as … rational business instrument[s] and in a manner which will carry out the intent of the parties.” Robert and Ardis James
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Foundation v. Meyers, 474 Mass. 181, 188 (2016), quoting Starr v. Fordham, 420 Mass. 178, 192 (1995). And “the parties’ intent ‘must be gathered from a fair construction of the contract[s] as a whole and not by special emphasis upon any one part.’ ” Kingstown Corp. v. Black Cat Cranberry Corp., 65 Mass. App. Ct. 154, 158 (2005), quoting Ucello v. Cosentino, 354 Mass. 48, 51 (1968), and Crimmins & Peirce Co. v. Kidder Peabody Acceptance Corp., 282 Mass. 367, 375 (1933).
Plaintiffs’ claim that they are intended beneficiaries of MSI’s payment obligations cannot be squared with the terms of the subordination agreement. That contract, as explained above, provides that MSI’s obligations to pay Holdco under the purchase agreement are subordinate to MSI’s pre-existing obligations to repay its Senior Lenders. The subordination agreement also contained a covenant not to sue. It provides that Holdco “shall not … take any Enforcement Action with respect to” the Deferred and Contingent Payment obligations of MSI “without the prior written consent” of the administrative agent representing the Senior Lenders. The phrase “Enforcement Action” is defined to include bringing a lawsuit, or initiating or participating with others in a lawsuit, to collect all or any part of the Deferred or Contingent Payment amounts. The covenant that Holdco will not sue to enforce MSI’s payment obligations would have little meaning if Plaintiffs could circumvent it at any time by suing MSI in their own names rather than on behalf of Holdco.
For all of these reasons, MSI is entitled to summary judgment in its favor on the contract claim.3
3. Claims for Misrepresentation and Violation of G.L. c. 93A. In Counts II and III of their amended complaint, Plaintiffs claim that they relied to their detriment on false representations by MSI that it was willing and able to pay all amounts it owes
3 Plaintiffs made a request under Mass. R. Civ. P. 56(f) for more time to conduct discovery. But they have not shown that the additional discovery they seek would be relevant to the issue of whether Plaintiffs have standing to enforce MSI’s payment obligation under the purchase agreement. It would therefore be inappropriate to delay resolution of this part of the summary judgment motion to await further discovery. See Commonwealth v. Fall River Motor Sales, Inc., 409 Mass. 302, 308 (1991) (“One common reason for the denial of a continuance [under Rule 56(f)] is the irrelevance of further discovery to the issue being adjudicated in summary judgment.”).
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to Holdco by the due date specified in the purchase agreement. These are not fraud in the inducement claims, as the alleged misrepresentations occurred after the contracts were signed.
MSI argues that if Plaintiffs lack standing to assert their claim for breach of contract, as the Court ruled above, then they also lack standing to bring suit under G.L. c. 93A or for intentional or negligent misrepresentation.
This argument is without merit. The c. 93A and misrepresentation claims do not depend upon and are not derivative of Plaintiffs’ failed claim for breach of contract. Plaintiffs have mustered evidence sufficient to support their claims for misrepresentation. If they can prove that MSI committed a fraud or a deceptive act in violation of c. 93A by misrepresenting its willingness and ability to pay Holdco what it is owed, MSI cannot avoid liability under these theories on the ground that the subordination agreement still absolves it of any current obligation to pay Holdco. The Court will deny the summary judgment motion with respect to these two claims.
4. Declaratory Judgment Claim. Finally, Count IV of the complaint seeks a declaratory judgment regarding the enforceability of the non-compete, non-solicitation, and confidentiality provisions that Meunier and White agreed to as part of the purchase agreement. Plaintiffs did not directly oppose the summary judgment motion with respect to the declaratory judgment claim.
This claim is moot with respect to the non-competition and non-solicitation provisions because they expired by their terms on May 23, 2017, which was four years after the parties executed the purchase agreement. With respect to their duty not to disclose confidential information, Plaintiffs claimed that this provision was unenforceable because MSI had breached its obligation to pay all amounts owed to Holdco. Since Plaintiffs have no standing to enforce those contractual obligations, they also lack standing to seek declaratory judgment as a remedy for such a brief.
In sum, given that there is no longer any actual controversy about the part of this claim that is moot and Plaintiffs lack standing to press the rest of the claim, it would not be appropriate to declare the rights of the parties and MSI is instead entitled to summary judgment dismissing this claim. See Alliance, AFSME/SEUI, AFL-CIO, v. Commonwealth, 425 Mass. 534, 537-539 (1997) (in absence of actual
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controversy between the parties, claim for declaratory relief under G.L. c. 231A must be dismissed); City of Revere v. Massachusetts Gaming Comm’n, 476 Mass. 591, 607-608 (2017) (affirming dismissal of declaratory judgment claim for lack of standing); Manufacturing Imp. Corp. v. Georgia Pacific Corp., 362 Mass 398, 400-401 (1972) (affirming dismissal of declaratory judgment claim regarding rights under contract, because plaintiff alleged no facts under which it would be entitled to recover from defendant for breach of contract).
ORDER
Market Strategies, Inc.’s motion for summary judgment is ALLOWED IN PART with respect to the claims against it for breach of contract and declaratory judgment, which shall be dismissed with prejudice when final judgment enters in these consolidated actions, and DENIED IN PART with respect to the claims against it for violating G.L. c. 93A and for intentional or negligent misrepresentation.
June 12, 2017
___________________________
Kenneth W. Salinger
Justice of the Superior Court

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Posted by Stephen Sandberg - June 15, 2017 at 5:37 pm

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Bay Colony Property Development Company, et al. v. Headlands Realty Corporation, et al. (Lawyers Weekly No. 12-069-17)

COMMONWEALTH OF MASSACHUSETTS
SUFFOLK, ss. SUPERIOR COURT.
1784CV00936-BLS2
____________________
BAY COLONY PROPERTY DEVELOPMENT COMPANY and WILLIAM E. LOCKE, JR.
v.
HEADLANDS REALTY CORPORATION; PROLOGIS LOGISTICS SERVICES INC.; AMB PROPERTY II, L.P.; AMB PROPERTY CORPORATION; and PROLOGIS, INC.
____________________
MEMORANDUM AND ORDER DENYING DEFENDANTS’ MOTION TO DISMISS AND DENYING PLAINTIFFS’ CROSS-MOTION TO STRIKE
Bay Colony Property Development Company and William E. Locke, Jr., claim that Defendants hired them to plan, coordinate, and supervise the development of two different properties in Pennsylvania. They allege that Defendants promised to pay Bay Colony two percent of the development costs (the “Base Fee”) plus ten percent of the profits (the “Incentive Fee”) for its work on one site, and promised to pay the same percentage amounts to Locke for his work on the other site. Plaintiffs allege they have not been paid and are owed part of the Base Fees and all of the Incentive Fees for the two projects. Plaintiffs assert claims for breach of contract, unjust enrichment, and declaratory judgment as to enforceability of the alleged contracts.
Defendants have moved to dismiss on the ground that all claims are time barred. They argue that the statutory limitations period began to run on October 29, 2010, when AMB Property Corporation (“AMB”) sent a letter disputing whether it had any binding contract with Bay Colony. If that were correct, then all claims would be time barred—whether the Massachusetts six-year limitations period or the Pennsylvania four-year limitations period controlled—because this action was not filed in Middlesex Superior Court until November 14, 2016, more than six years later.
The Court concludes that it may consider the October 2010 letter in deciding the motion to dismiss, but that it must DENY the motion because that letter did not put Plaintiffs on notice of any actual or anticipated breach of contract.
1. Considering the 2010 Letter. Plaintiffs ask the Court to strike or at least disregard the October 29, 2010, letter that is attached to Defendants’ motion to dismiss. They argue that the Court may not consider this letter without converting
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the motion to dismiss into a motion for summary judgment because Plaintiffs did not attach the letter to, reference the letter in, or rely on the letter in drafting the complaint. The Court disagrees.
The authenticity of this letter and the fact that it was sent to Plaintiffs are not in dispute, as Plaintiffs acknowledged at oral argument.
It is therefore permissible and appropriate for the Court to consider the letter in deciding Defendants’ motion to dismiss. When deciding a motion to dismiss under Rule 12(b)(6), a court may consider “documents the authenticity of which is not disputed by the parties” without converting the motion into one for summary judgment.1 Town of Barnstable v. O’Connor, 786 F.3d 130, 141 n.12 (1st Cir. 2015), quoting Watterson v. Page, 987 F.2d 1, 3 (1st Cir. 1993); accord, e.g., SFM Holdings, Ltd. v. Banc of America Securities, LLC, 600 F.3d 1334, 1337 (11th Cir. 2010); cf. Smaland Beach Ass’n, Inc. v. Genova, 461 Mass. 214, 228 (2012) (judicial construction of federal rules of civil procedure applies to parallel state rules). No affidavit authenticating the document is needed because the authenticity of the copy provided by Defendants has been conceded. See City of Boston v. Roxbury Action Program, Inc., 68 Mass. App. Ct. 468, 469 n.3, rev. denied, 449 Mass. 1101 (2007) (summary judgment record).
2. No Actual Breach or Unequivocal Repudiation. The October 29, 2010, did not trigger the statute of limitations, however, because it did not constitute a breach of the contractual terms alleged in the complaint, did not put Plaintiffs on notice of an actual breach of contract, and was not an unequivocal repudiation of any future contractual obligations.
This letter put Defendants on notice that “AMB disputes that there is any binding agreement between it and [Bay Colony] with respect to either project. But the letter does not assert that AMB was refusing to pay any amounts that Bay Colony
1 This makes perfect sense. If the rule were otherwise, a defendant could instead attach an undisputed document to their answer and seek judgment on the pleadings based on that document. Since a Rule 12(c) motion for judgment on the pleadings is subject to the same standard as a Rule 12(b)(6) motion to dismiss, see Boston Med. Ctr. Corp. v. Secretary of the Exec. Office of Health and Human Svcs., 463 Mass. 447, 450 (2012), such a motion for judgment on the pleadings would be indistinguishable from Defendants’ motion to dismiss in this case.
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claims it was owed for services rendered. Instead, AMB wrote that “[w]e will respond in writing to you shortly detailing AMB’s position.” The letter went on to direct Bay Colony and Locke not to do any further work on either project, and not to have any contact with AMB except through its legal counsel.
Defendants are not entitled to dismissal of this action on the ground that the termination of any contractual arrangement between AMB and Plaintiffs triggered the statute of limitations. The complaint does not allege that AMB had no right to terminate the alleged contract. As a result, nothing in the complaint suggests that contract termination was in and of itself a contract breach that would start the limitations period.
Nor are Defendants entitled to dismissal on the ground that the October 2010 letter constituted a repudiation of AMB’s future contractual obligations and thus gave rise to a claim for breach of contract.
It is not at all clear that Plaintiffs could have brought a claim under Massachusetts law for anticipatory breach of contract, even assuming that this letter was an unequivocal repudiation.2 “With few exceptions, … ‘Massachusetts has not generally recognized the doctrine of anticipatory repudiation, which permits a party to a contract to bring an action for damages prior to the time performance is due if the other party repudiates.’ ” KGM Custom Homes, Inc. v. Prosky, 468 Mass. 247, 253 (2014), quoting Cavanagh v. Cavanagh, 33 Mass. App. Ct. 240, 243 (1992), rev. denied, 413 Mass. 1107 (1992). One of the exceptions applies where there has been “an actual breach accompanied by an anticipatory breach.” Cavanagh, supra, at 243 n.5; accord Parker v. Russell, 133 Mass. 74 (1882) (where defendant promised to support plaintiff for his entire life, and stopped doing so, plaintiff could sue for past and future damages). For example, if a defendant has an alleged obligation to make period payments to the plaintiff, refuses to pay the amounts currently owed, and makes “a clear and unequivocal repudiation” of its obligation to make future payments, “the statute of limitations begins to run from the date of the repudiation”
2 Plaintiffs raise this argument under Massachusetts law. Defendants have not, at those point, asserted or made any showing that the claims asserted in this action are instead governed by Pennsylvania law.
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with respect to both past and future damages. Callender v. Suffolk Cty., 57 Mass. App. Ct. 361, 364 (2003). But the complaint does not allege, and the letter proffered by Defendants does not reveal, any actual breach of contract as of October 2010.
On the other hand, if AMB had unequivocally repudiated its alleged future contractual obligations, Defendants could have sued immediately on a quantum meruit or unjust enrichment theory. See Cavanagh, supra, at 243 n.5. Where one party contracts to provide services in exchange for future compensation, and the other party refuses to make any further payments, the party that provided the services and is seeking payment is “entitled to treat the contract as rescinded” and bring an action in quantum meruit without waiting for the time when the compensation was supposed to be paid. Johnson v. Starr, 321 Mass. 566, 569-570 (1947).
In this case, however, none of Plaintiffs claims is time-barred (assuming, as Defendants do, that the Massachusetts six-year statute of limitations applies) because the October 29, 2010, letter was not a “clear and unequivocal repudiation” of Defendants’ alleged obligation to pay the Base Fees and Incentive Fees claimed by Plaintiffs. Cf. Callender, 57 Mass. App. Ct. 364.
AMB did not assert in the 2010 letter that it would not pay any part of the amounts that Plaintiffs claim they are owed. Instead, it merely stated that AMB “disputes that there is any binding agreement” and that AMB would explain its position in more detail later on.
This letter is not a repudiation of the alleged contract because it is not “a definite and unequivocal manifestation of intention [not to render performance]” (bracketed material in original). Coviello v. Richardson, 76 Mass. App. Ct. 603, 609 (2010), quoting Thermo Electron Corp. v. Schiavone Constr. Co., 958 F.2d 1158, 1164 (1st Cir. 1992); see also Nortek, Inc. v. Liberty Mut. Ins. Co., 65 Mass. App. Ct. 764, 766 & 769-770 (2006) (statute of limitations on contract claim did not begin to run when insurer responded to question about retrospective premiums by stating “that it would investigate the situation and get back to insured, because insurer took no “final or definitive position” as to whether insured must pay disputed amount).
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ORDER
Defendants’ motion to dismiss the complaint is DENIED. Plaintiffs’ cross-motion to strike exhibit B to the motion to dismiss is also DENIED.
7 June 2017
___________________________
Kenneth W. Salinger
Justice of the Superior Court

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Posted by Stephen Sandberg - June 15, 2017 at 2:03 pm

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AIDS Support Group of Cape Cod, Inc. v. Town of Barnstable, et al. (Lawyers Weekly No. 10-104-17)

NOTICE:  All slip opinions and orders are subject to formal revision and are superseded by the advance sheets and bound volumes of the Official Reports.  If you find a typographical error or other formal error, please notify the Reporter of Decisions, Supreme Judicial Court, John Adams Courthouse, 1 Pemberton Square, Suite 2500, Boston, MA, 02108-1750; (617) 557-1030; SJCReporter@sjc.state.ma.us

SJC-12224

AIDS SUPPORT GROUP OF CAPE COD, INC.  vs.  TOWN OF BARNSTABLE & others.[1]

Barnstable.     February 14, 2017. – June 14, 2017.

Present:  Gants, C.J., Lenk, Hines, Gaziano, Lowy, & Budd, JJ.

Hypodermic Needle.

Civil action commenced in the Superior Court Department on November 10, 2015.

A motion for a preliminary injunction was heard by Raymond P. Veary, Jr., J., and the case was reported to the Appeals Court by Robert C. Rufo, J.

The Supreme Judicial Court granted an application for direct appellate review.

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Posted by Stephen Sandberg - June 15, 2017 at 3:18 am

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Xu, et al. v. Donovan, et al. (Lawyers Weekly No. 12-066-17)

COMMONWEALTH OF MASSACHUSETTS
SUFFOLK, ss. SUPERIOR COURT.
1584CV01625-BLS2
____________________
EDWARD XU ppa Li Chen, LI CHEN, and PETER XU
v.
PAUL DONOVAN, TUFTS MEDICAL CENTER PARENT, INC., and TUFTS MEDICAL CENTER INDEMNITY COMPANY, LTD.
____________________
MEMORANDUM AND ORDER ALLOWING DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT
This dispute relates to a high/low agreement in a prior medical malpractice case. Plaintiffs had sued two doctors and a nurse who worked at Tufts Medical Center (“Tufts”). The parties to that prior action and Tufts agreed prior to the jury verdict that Plaintiffs would receive a maximum of $ 2.5 million for each defendant found to be liable and be paid $ 300,000 for each defendant found not to be liable. The jury found that the two physicians were liable for negligence and that the nurse was not. It award $ 24.43 million as damages against the doctors. In accord with the high/low agreement, Plaintiffs recovered only $ 5.3 million.
Plaintiffs claim they were fraudulently induced to enter into the high/low agreement by representations that the available insurance was capped at $ 2.5 million per defendant, and that in reality there was an excess insurance policy that provided up to $ 30 million in coverage with no cap per defendant. They seek damages from the parent of the medical center (Tufts Medical Center Parent, Inc., or TMCP), the captive insurer that issued the primary and excess insurance policies (Tufts Medical Center Indemnity Co., Ltd., or TMCIC), and Paul Donovan, who is a Senior Claims Administrator for Tufts and signed the high/low agreement on its behalf.
TMCP and TMCIC assert a counterclaim seeking a declaratory judgment stating that the total insurance coverage available for the claims in the underlying malpractice case, including both the primary and excess insurance policies, was capped at $ 2.5 million per person per claim or medical incident. TMCP, TMCIC, and Donovan move for summary judgment on all claims and counterclaims.
The Court concludes that TMCP, TMCIC, and Donovan are entitled to summary judgment in their favor. The excess and primary insurance policies
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unambiguously provide that the maximum coverage for the doctors and nurse sued in the prior action was $ 2.5 million per individual defendant. TMCP and TMCIC are entitled to a declaratory judgment to that effect. And Plaintiffs’ claims against all Defendants for fraud and for committing unfair and deceptive practices in violation of G.L. c. 93A, and its separate claim against Donovan only for negligence, all fail as a matter of law.
1. Parsing the Insurance Policies.
1.1. Reading Unambiguous Policy Language. “[C]onstruing the language of an insurance contract is a question of law for the trial judge,” and therefore is appropriate for resolution on a motion for summary judgment. Thattil v. Dominican Sisters of Charity of the Presentation of the Blessed Virgin, Inc., 415 Mass. 381, 385 n.6 (1993), quoting Cody v. Connecticut Gen. Life Ins. Co., 387 Mass. 142, 146 (1982). “Like all contracts, if the language of an insurance policy is unambiguous,” then a court must “construe the words ‘in their usual and ordinary sense.’ ” Boazova v. Safety Ins. Co., 462 Mass. 346, 350 (2012), quoting Hakim v. Massachusetts Insurers’ Insolvency Fund, 424 Mass. 275, 280 (1997).
The Court is persuaded that there is only one correct way to read Tufts’ primary and excess insurance policies with respect to per person professional liability coverage limits, and that the policies are therefore unambiguous with respect to that issue. See Surabian Realty Co. v. NGM Ins. Co., 462 Mass. 715, 718 (2012) (court “may conclude that language [in an insurance policy] is ambiguous only ‘where the phraseology can support a reasonable difference of opinion as to the meaning of the words employed and the obligations undertaken’ ”) (quoting Bank v. Thermo Elemental Inc., 451 Mass. 638, 648 (2008), and President & Fellows of Harvard College v. PECO Energy Co., 57 Mass. App. Ct. 888, 896 (2003)).
Although the relevant policy language is somewhat difficult to parse, that does not mean that it is ambiguous. Massachusetts Prop. Ins. Underwriting Ass’n v. Wynn, 60 Mass. App. Ct. 824, 827 (2004) (“While reading and understanding an insurance policy’s provisions as to coverages, exclusions, and exceptions is often a formidable task, difficulty in comprehension does not equate with ambiguity.”).
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Similarly, the fact that the parties disagree vigorously regarding the proper way to read the insurance policies does not demonstrate that there is a legal ambiguity either. See Boazova, 462 Mass. at 351 (“an ambiguity is not created simply because a controversy exists between the parties, each favoring an interpretation contrary to the other”) (quoting Lumbermens Mut. Cas. Co. v. Offices Unlimited, Inc., 419 Mass. 462, 466 (1995)).
1.2. The Coverage Limits. This lawsuit concerns three related insurance policies that provide professional liability coverage to physicians working at and employees of Tufts Medical Center. The primary policy was issued by a captive insurer belonging to Tufts’ predecessor. There is also an excess insurance policy that was issued by the same captive insurer. Finally, two reinsurance policies were issued by different syndicates of underwriters assembled by Lloyd’s of London.
The primary insurance policy provided each defendant in the underlying malpractice lawsuit with $ 2.5 million of coverage. The primary policy states that each “Insured Individual” is covered for professional liability up to $ 2.5 million for any one “medical incident,” a term that encompasses all of Plaintiffs’ claims in the malpractice case.1 The term “Insured Individual” is defined to include any physician working at and any other person employed by a named insured. It is undisputed that the three individuals sued in the underlying action were “Insured Individuals” for purposes of the primary policy.
The primary policy only provides up to $ 5 million in aggregate professional liability coverage for any one medical incident. The excess insurance policy provides up to $ 30 million in coverage in excess of the “underlying retention” for each medical incident. The “underlying retention” referenced in the excess policy are the limits of
1 Although the Declarations section states that the primary policy provides $ 2.5 million in professional liability coverage to each insured individual per “claim,” the policy specifies (on page 15) that this stated coverage per claim “is the total limit of the [insurer’s] liability for all Damages … as to all claims … arising out of a Medical Incident.” And the definition of “Medical Incident” states (on page 4) that all acts or omissions in furnishing Professional services “to one person shall be considered one Medical Incident,” and that all damages resulting from the treatment of one person “shall be considered as arising out of one Medical Incident.” All claims in the underlying medical malpractice action concern and arise from a single “Medical Incident” as that term is defined in the policy.
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the primary policy, i.e. $ 2.5 million per physician or other medical staff and $ 5.0 million in the aggregate. In other words, the $ 30 million in total excess coverage is in addition to the $ 5 million in primary coverage for professional liability claims.
The full scope and limits of the excess insurance coverage are not spelled out in the excess insurance policy but instead are delineated in the separate reinsurance policies. The excess policy incorporates by reference the coverage limits and other terms of two specified reinsurance policies. It does so in at least three places. First, the “coverage” provision on page 1 of the excess insurance policy states:
Coverage: As provided in the reinsurance listed on Schedule A attached hereto, the policy form of which is attached and incorporated by reference.
Second, the “insuring agreement” provision on page 3 states:
The coverage afforded by this policy is limited to indemnifying the Insureds for claims and expenses that meet the criteria for coverage under the reinsurance listed on Schedule A attached hereto. Indemnification is limited by the applicable per claim and aggregate limits of liability, and is excess of the Underlying Retention, as stated on the declarations page.
Third, the general “policy terms and conditions” provision, also on page 3, states:
The insurance afforded under this policy shall follow the terms and conditions of the reinsurance listed on Schedule A, the policy form of which is attached and incorporated by reference, and this policy shall be applied and interpreted as if the Company had issued the policy form of the reinsurance listed on Schedule A as the Company’s own insurance policy, except where the conditions set forth in this policy differ.
Therefore, one must read the specified reinsurance policies to determine what is covered by the excess policy, and to determine the per claim and aggregate limits of liability under the excess policy.
These three provisions make clear that the excess policy “was a so-called ‘follow form’ policy, meaning that its terms, conditions, and exclusions were the same as those in” the specified reinsurance policies. Allmerica Financial Corp. v. Certain Underwriters at Lloyd’s, London, 449 Mass. 621, 622-623 (2007). A “follow form clause” makes one policy “a carbon copy” of another policy, “with the only differences being the names of the parties and the [aggregate] coverage limitations.” Id. at 630. “Follow form language thus allows an insured to have coverage for the same set of potential losses (and with the same set of exceptions) in each layer of the insurance
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program.” Id. In this case, Tufts and its captive insurer wrote the excess policy to follow the terms and conditions of the reinsurance policy.2
Both reinsurance policies contain the following provisions regarding coverage limits. They state (at pages 12 or 11) that the reinsurer is only liable in excess of the “Underlying Amounts,” which is defined (at pages 39 or 36) to mean $ 5.0 million per medical incident with respect to claims for medical professional liability. These policies state in the Declarations section (at pages 37 or 34) that they cover a maximum of $ 30.0 million of liability in the aggregate for each medical incident. Most important, for purpose of this dispute, the reinsurance policies also state (at pages 41 or 40) that for any one medical incident: (i) the maximum coverage limit is $ 2.5 million per insured individual, and (ii) the reinsurance policy will only cover aggregate losses that exceed the “applicable underlying amount” of $ 5.0 million.
Since the excess insurance policy incorporates all of these coverage limits, terms, and conditions, the maximum coverage available under the excess policy to individual physicians and nurses practicing or working at Tufts Medical Center is limited to $ 2.5 million for any one medical incident. And since the excess and reinsurance policies only kick in after the underlying retention of $ 5.0 million is paid out under the primary insurance policy, the coverage for individuals under the excess policy is only implicated when three or more individual insureds are found to have liability that, all together, exceeds $ 5.0 million—assuming that, as in this case, neither Tufts nor any of the other affiliated organizations that is a named insured under the excess policy has been sued or found liable.
In sum, none of the insurance policies at issue here, read separately or together, would ever cover any individual physician or nurse for more than $ 2.5 million in professional liability arising from providing a course of treatment to a single patient. Tufts Medical Center and its predecessor provided its employees and physicians with $ 2.5 million in insurance coverage for professional liability arising from any one medical incident. Tufts limited the total exposure of its captive insurer
2 The assertion by Plaintiffs’ expert that the excess policy follows the terms and definitions contained in the primary policy is incorrect. The follow form clause quoted above specifies that the excess policy “shall follow the terms and conditions of the reinsurance” policies, not the primary policy.
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under the primary policy to $ 5.0 million. It arranged for any total liability above that amount—which could occur, for example, if three or more than individual defendants were found jointly liable for damages exceeding $ 5.0 million—to be covered indirectly through Lloyds of London. This was achieved by having Tufts’ captive insurer issue an excess insurance policy that provides coverage for an additional $ 30.0 million in aggregate coverage above the $ 5.0 million covered by the primary policy, and arranging for Lloyds to reinsure the entire amount of the excess coverage.3 But the excess and reinsurance policies did not expand the amount of professional liability coverage available for any one physician or nurse arising out of any one medical incident. That coverage was capped at $ 2.5 million per insured individual per medical incident.
Plaintiffs note that the excess policy also incorporates a term (at pages 43 and 42 of the reinsurance policies) stating that the $ 30 million limit on aggregate professional liability coverage for any one medical incident applies “[r]egardless of the number of persons and organisations who are insured under this Policy and regardless of the number of claims made and suits brought in connection therewith[.]” Plaintiff argue that this provision means that excess coverage of up to $ 30 million is always available with respect to any medical incident, regardless of the number of insureds found liable.
That is incorrect. The quoted language does not negate the $ 2.5 million limit on coverage for each physician, nurse, or other individual insured. It merely clarifies that the $ 30 million cap on aggregate insurance coverage applies even if the liability of any one individual insured would otherwise be fully covered. For example, if thirteen individual clinicians were found to be jointly liable for $ 32.5 million in damages arising from one medical incident, the excess and reinsurer’s total liability would be capped at $ 30 million even though paying the full damage award would not exceed the sub-limit $ 2.5 million per insured individual (since $ 32.5m ÷13 = $ 2.5m).
3 Presumable one advantage of this arrangement is that Lloyds would only have to deal with a single insured, i.e. Tufts’ captive insurer, which in turn would have to deal directly with Tufts and any other named insured or unnamed individual insured whose liability triggers the excess coverage.
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Plaintiffs cannot challenge the meaning of the unambiguous policy language through testimony by their expert witness, or using deposition testimony by a representative of Tufts Medical Center in the underlying malpractice case, regarding how one should construe the excess and reinsurance policies. “When the words of a contract are clear, they must be construed in their usual and ordinary sense, and we do not admit parol evidence to create an ambiguity when the plain language is unambiguous.” General Convention of New Jerusalem in the United States of America, Inc. v. MacKenzie, 449 Mass. 832, 835 (2007) (internal citation omitted). The same rule applies when interpreting an insurance policy. See, e.g., Commercial Union Ins. Co. v. Walbrook Ins. Co. Ltd., 7 F.3d 1047, 1052-1053 (1st Cir. 1993).
2. Resolving the Parties’ Claims. The Court’s reading of the insurance policies at issue resolves all of the claims and counterclaims asserted in this case.
The Tufts defendants, TMCP and TMCIC, are entitled to a judgment declaring that (a) the maximum coverage available to physicians, nurses, and other individuals insured or indemnified under the primary and excess insurance policies numbered NEMCIC-2006/07 and NEMCIC-XS-2006 together is $ 2,500,000 per claim or medical incident; and (b) the total coverage or indemnity available to Theresa M. Willett, M.D., John Fiascone, M.D., and Robert Bowen, N.P., for the claims asserted against them by the Plaintiffs in a prior medical malpractice lawsuit was $ 2,500,000 each. For the reasons discussed above, both conclusions follow from the plain language of the primary, excess, and reinsurance policies.
This conclusion also resolves all of Plaintiffs’ affirmative claims. Plaintiffs allege that Defendants’ fraudulently represented that the two physicians and nurse who were sued in the underlying malpractice case had only $ 2.5 million in professional liability coverage, and that Plaintiffs agreed to enter into the high/low agreement based on that representation.4 As explained above, however, this representation regarding the available insurance coverage was entirely accurate.
4 Plaintiffs assert separately numbered claims for fraud, intentional misrepresentation, and fraud in the inducement against each Defendant. These are all claims for intentional fraud; the different labels are mere variations in nomenclature, not differences in substance.
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The various claims of intentional fraud all fail as a matter of law because Plaintiffs cannot prove that any of the Defendants “made a false representation of a material fact,” which is an essential element of these claims. Masingill v. EMC Corp., 449 Mass. 532, 540 (2007), quoting Kilroy v. Barron, 326 Mass. 464, 465 (1950). Defendants are therefore entitled to summary judgment on these claims. See generally Roman v. Trustees of Tufts College, 461 Mass. 707, 711 (2012) (“A nonmoving party’s failure to establish an essential element of her claim ‘renders all other facts immaterial’ and mandates summary judgment in favor of the moving party.” (quoting Kourouvacilis v. General Motors Corp., 410 Mass. 706, 711 (1991)); Global NAPs, Inc. v. Awiszus, 457 Mass. 489, 500 (2010) (“The issue whether an attorney’s negligence was a proximate cause of a client’s loss may be resolved at the summary judgment stage.”).
Both Li Chen and Peter Xu have stated in sworn affidavits that, given the catastrophic nature of the injuries suffered by their son Edward Xu, they never would have entered into the high/low agreement if they had known there was an excess insurance policy that could “even possibly provid[e] greater coverage” than the $ 2.5 million per individual coverage limits of the primary policy.
This evidence is not sufficient to keep the fraud claims alive because Plaintiffs cannot establish that any of the Defendants committed a “fraud by omission” by failing to disclose the existence of the excess insurance policy. “Fraud by omission requires both concealment of material information and a duty requiring disclosure.” Sahin v. Sahin, 435 Mass. 396, 402 n.9 (2001). “A duty to disclose exists where ‘(i) there is a fiduciary or other similar relation of trust and confidence, (ii) there are matters known to the speaker that he knows to be necessary to prevent his partial or ambiguous statement of the facts from being misleading, or (iii) the nondisclosed fact is basic to, or goes to the essence of, the transaction.’ ” Knapp v. Neptune Towers Assocs., 72 Mass. App. Ct. 502, 507 (2008), quoting Stolzoff v. Waste Sys. Intl., Inc., 58 Mass. App. Ct. 747, 763 (2003).
Defendants had no duty to disclose the excess insurance policy. By statute, Tufts’ captive insurer had a duty to reveal to Plaintiffs “the amount of the limits” of its insureds’ liability coverage. G.L. c. 175, § 112C. That duty was satisfied when
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Tufts informed Plaintiffs that the defendants in the medical malpractice case each had $ 2.5 million in professional liability insurance coverage. Nothing in the statute required any Defendant to disclose the existence of the excess insurance policy; Tufts’ insurer merely had to accurately disclose the coverage limits, which it did through Tufts’ agent. None of the Defendants had a fiduciary or similar relationship with Plaintiffs that would give rise to any duty to disclose the existence of the excess insurance policy. Nor have Plaintiffs produced any evidence that Defendants falsely stated that there was no excess policy.
Since Plaintiffs’ claims under c. 93A are based solely on and thus are “wholly derivative of” their fraud claims, and the summary judgment record shows that Plaintiffs’ fraud claims are “legally unsupportable,” Defendants are entitled to summary judgment on the c. 93A claims as well. See Frohberg v. Merrimack Mut. Fire Ins. Co., 34 Mass. App. Ct 462, 465 (1993); accord Private Lending & Purchasing, Inc. v. First American Title Ins. Co., 54 Mass. App. Ct. 532, 539-540 (2002).
Finally, Plaintiffs’ claim for negligence against Mr. Donovan fails as a matter of law for much the same reasons. Count V of the complaint asserts that Mr. Donovan negligently failed to disclose either the maximum insurance coverage available in the underlying case or the existence of the excess insurance policy. As explained above, however, the undisputed facts demonstrate that Donovan accurately disclosed the correct maximum insurance coverage amounts. And Donovan had no duty to disclose the existence of the excess policy. Cf. Lev v. Beverly Enterprises-Massachusetts, Inc., 457 Mass. 234, 240 (2010) (“The existence of a duty of care is a question of law and, therefore, is an appropriate subject for summary judgment. If a defendant does not owe a legal duty to a plaintiff, then there can be no actionable negligence.”) (citation omitted).
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ORDER
Defendants’ motion for summary judgment on all claims and counterclaims is ALLOWED. Final judgment will enter declaring that the maximum coverage available under the primary and excess insurance policies together was $ 2.5 million per individual defendant, and dismissing Plaintiffs’ claims with prejudice.
June 2, 2017
___________________________
Kenneth W. Salinger
Justice of the Superior Court

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Posted by Stephen Sandberg - June 14, 2017 at 11:44 pm

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People for the Ethical Treatment of Animals, Inc. v. Department of Agricultural Resources, et al. (Lawyers Weekly No. 10-105-17)

NOTICE:  All slip opinions and orders are subject to formal revision and are superseded by the advance sheets and bound volumes of the Official Reports.  If you find a typographical error or other formal error, please notify the Reporter of Decisions, Supreme Judicial Court, John Adams Courthouse, 1 Pemberton Square, Suite 2500, Boston, MA, 02108-1750; (617) 557-1030; SJCReporter@sjc.state.ma.us

SJC-12207

PEOPLE FOR THE ETHICAL TREATMENT OF ANIMALS, INC.  vs.  DEPARTMENT OF AGRICULTURAL RESOURCES & another.[1]

Suffolk.     February 6, 2017. – June 14, 2017.

Present:  Gants, C.J., Lenk, Gaziano, Lowy, & Budd, JJ.

Public RecordsAgricultureAnimal.  Statute, Construction.  Privacy.

Civil action commenced in the Superior Court Department on October 14, 2014.

The case was heard by Christopher J. Muse, J.

The Supreme Judicial Court on its own initiative transferred the case from the Appeals Court.

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Posted by Stephen Sandberg - June 14, 2017 at 8:09 pm

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Oxford Global Resources, LLC v. Hernandez (Lawyers Weekly No. 12-065-17)

COMMONWEALTH OF MASSACHUSETTS
SUFFOLK, ss. SUPERIOR COURT.
1684CV03911-BLS2
____________________
OXFORD GLOBAL RESOURCES, LLC
v.
JEREMY HERNANDEZ
____________________
MEMORANDUM AND ORDER ALLOWING DEFENDANT’S MOTION TO DISMISS ON FORUM NON CONVENIENS GROUNDS
Oxford Global Resources, LLC, is a recruiting and staffing company that places individual contractors who have specialized technical expertise with businesses who need workers having such skills. Oxford hired Jeremy Hernandez to work in its Campbell, California, office. To accept Oxford’s offer Hernandez had to and did sign an offer letter and a separate “protective covenants agreement” (the “Agreement”) that contains confidentiality, non-competition, and non-solicitation provisions. The Agreement provides that it is governed by Massachusetts law and that any suit arising from or relating to that contract must be brought in Massachusetts.
Oxford alleges that Hernandez breached the Agreement by using information regarding the identity of Oxford’s customers to solicit those customers on behalf of a competitor in California. Hernandez has moved to dismiss this action under the forum non conveniens doctrine, arguing that this action should be heard in California, where he lives and worked for Oxford.
The Court concludes that the forum selection clause is unenforceable and that the interests of justice require that this case be heard in California. The Court will therefore ALLOW the motion to dismiss pursuant to G.L. c. 223A, § 5, and the common law doctrine known as forum non conveniens.
1. Enforceability of the Forum Selection Clause.
1.1. California Law Governs the Agreement. Whether Massachusetts courts will enforce a forum selection clause like the one agreed to by Hernandez must be decided under whatever law governs the contract as a whole. See Melia v. Zenhire, Inc., 462 Mass. 164, 168 (2012); Jacobson v. Mailboxes Etc. U.S.A., Inc., 419 Mass. 572, 575 (1995). Thus, before deciding whether the Agreement’s mandatory forum selection clause is enforceable the Court must decide which State’s law governs this
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contract.1 Although the Agreement specifies that it is governed by Massachusetts law, the Court concludes that choice-of-law provision is unenforceable and that the contract is instead governed by California law.
“A choice-of-law clause should not be upheld where,” as here, “the party resisting it did not have a meaningful choice at the time of negotiation — i.e., where the parties had unequal bargaining power, and the party now attempting to enforce the choice-of-law clause essentially forced the clause upon the weaker party,” and enforcing the clause would be unfair to the weaker party. Taylor v. Eastern Connection Operating, Inc., 465 Mass. 191, 195 n.8 (2013). This follows from the general rule that contracts of adhesion are not enforceable if “they are unconscionable, offend public policy, or are shown to be unfair in the particular circumstances.” McInnes v. LPL Fin., LLC, 466 Mass. 256, 266 (2013), quoting Chase Commercial Corp. v. Owen, 32 Mass. App. Ct. 248, 253 (1992); accord Sonic-Calabasas A, Inc. v. Moreno, 311 P.3d 184, 202-203 (Cal. 2013). As the American Law Institute has explained:
A choice-of-law provision, like any other contractual provision, will not be given effect if the consent of one of the parties to its inclusion in the contract was obtained by improper means, such as by misrepresentation, duress, or undue influence, or by mistake. Whether such consent was in fact obtained by improper means or by mistake will be determined by the forum in accordance with its own legal principles. A factor which the forum may consider is whether the choice-of-law provision is contained in an “adhesion” contract, namely one
1 The Court concludes and the parties seem to agree that the provision stating that the Agreement will be governed by Massachusetts law and that all actions relating to or arising out of the Agreement “will be submitted” to a court in Massachusetts is a mandatory forum selection clause that requires such contract claims to be tried in Massachusetts. Although the contract does not expressly state that jurisdiction in Massachusetts is exclusive or that such suits may not be brought elsewhere, the combination of the “will be submitted” language with a choice of law clause stating that Massachusetts law shall govern the contract has the effect of making Massachusetts the “mandatory and exclusive” venue. See Baby Furniture Warehouse Store, Inc., v. Meubles D & F Ltée, 75 Mass. App. Ct. 27, 31 (2009) (provision stating that contract is governed by Quebec law and that parties “agree to submit themselves to the jurisdiction of” Quebec courts for resolution of any disputes arising out of contract or parties’ relationship gave Quebec courts “exclusive jurisdiction over any disputes between the parties”); accord Boland v. George S. May Intern. Co., 81 Mass. App. Ct. 817, 826 n.12 (2012) (dictum).
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that is drafted unilaterally by the dominant party and then presented on a “take-it-or-leave-it” basis to the weaker party who has no real opportunity to bargain about its terms. Such contracts are usually prepared in printed form, and frequently at least some of their provisions are in extremely small print. Common examples are tickets of various kinds and insurance policies. Choice-of-law provisions contained in such contracts are usually respected. Nevertheless, the forum will scrutinize such contracts with care and will refuse to apply any choice-of-law provision they may contain if to do so would result in substantial injustice to the adherent.
Restatement (Second) of Conflict of Laws § 187 comment b (1971) (emphasis added).
It is apparent that the Agreement is a contract of adhesion and that Hernandez had neither the opportunity nor the bargaining power to negotiate over whether California or Massachusetts law would govern his non-competition, non-solicitation, and confidentiality agreements. The complaint specifically alleges that Oxford would not have hired Hernandez if he did not sign the Agreement, which makes clear that Hernandez had no opportunity to negotiate these issues. Oxford has neither alleged nor proffered any evidence suggesting that the parties had any negotiation over the choice of law or forum selection provisions contained in § 6.3 of the Agreement, or even that Oxford expressed any willingness to discuss those issues. The complaint also reveals that Hernandez had no bargaining power with respect to these issues. The complaint and its attachments indicate that Hernandez was hired to work as an entry-level employee. Oxford agreed to pay Hernandez $ 50,000 per year to work as an “account manager,” and alleges that Hernandez “had no previous experience or skill in the information technology staffing and consulting industry.” The only fair inference from the facts alleged by Oxford in its complaint is that Hernandez had no power to bargain over the combined choice-of-law and forum selection provision.
Oxford notes that § 7.5 of the Agreement states that Hernandez, by signing the contract, acknowledged that he had the opportunity to read the Agreement and to ask his own lawyer to review it, that he understood each provision, and that he was not under duress. But that boilerplate language cannot change the apparent facts that Hernandez had no bargaining power with respect to the choice-of-law and forum selection clauses in Oxford’s standard form contract, and that the Agreement signed by Hernandez was not the product of any negotiations between the parties.
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It is also apparent that the choice-of-law provision was an attempt by Oxford to circumvent California’s strong public policy against the enforceability of non-competition agreement. If the Agreement did not contain a choice of law provision, then California law would govern Oxford’s claims under the Agreement because California “has the most significant relationship to the transaction and the parties.” Bushkin Associates, Inc. v. Raytheon Co., 393 Mass. 622, 632 (1985); accord, e.g., Nile v. Nile, 432 Mass. 390, 401 (2000); OneBeacon America Ins. Co. v. Narragansett Elec. Co., 90 Mass. App. Ct. 123, 128 (2016). It is undisputed that Hernandez was a California resident who was recruited and hired by Oxford in California, to work in Oxford’s California office, and to service only California clients. Although Oxford says its principal place of business is in Massachusetts, Oxford has alleged no facts and presented no evidence suggesting that Hernandez’s contract with and work for Oxford implicated Massachusetts in any way.
Non-competition agreements like the one that Oxford required Hernandez to sign are not enforceable under California law. See Cal. Bus. & Prof. Code § 16600 (“every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void”). This statute codifies “California’s strong public policy against noncompetition agreements.” Advanced Bionics Corp. v. Medtronic, Inc., 59 P.3d 231, 236-237 (Cal. 2002). Even before the passage of § 1660, “it has long been the public policy of [California] that ‘[a] former employee has the right to engage in a competitive business for himself and to enter into competition with his former employer, even for the business of … his former employer, provided such competition is fairly and legally conducted.’ ” Reeves v. Hanlon, 95 P.3d 513, 517 (Cal. 2004), quoting Continental Car–Na–Var Corp. v. Moseley, 148 P.2d 9, 13 (Cal. 1944).
Oxford’s argument that the Agreement does not violate California law, because it only bars Hernandez from competing by using confidential information that belongs to Oxford, is without merit. The Agreement provides that Hernandez may not compete against his former employer using Oxford’s trade secret information, but it defines the concept of confidential information so broadly that it includes the “identity” of Oxford’s customers, prospective customers, and consultants. And the
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complaint alleges that Hernandez breached the Agreement merely by soliciting companies and individuals that he knew where customers of or consultants placed by Oxford. The non-competition restriction that Oxford seeks to enforce therefore goes far beyond what is permitted under California law or, for that matter, under Massachusetts law.
An employee is free to carry away his own memory of customers’ names, needs, and habits and use that information, even to serve or to solicit business from those very customers. Such “remembered information” is not confidential because the information itself, as distinguished from an employer’s compilation of such information into a list or database, is known to the customers and thus not kept secret by the employer. American Window Cleaning Co. of Springfield, Mass. v. Cohen, 343 Mass. 195, 199 (1961); accord Angell Elevator Lock Co. v. Manning, 348 Mass. 623, 625 (1965); Woolley’s Laundry, 304 Mass. at 391-392; May v. Angoff, 272 Mass. 317, 320 (1930). The same is true under California law. See Retirement Group v. Galante, 176 Cal.App.4th 1226, 1239-1241, 98 Cal.Rptr.3d 585, 594-596 (Cal. App. Ct. 2009).
Since the mere identity of customers is not confidential, the Agreement that Oxford seeks to enforce is the kind of non-competition agreement that is void under California law. Dowell v. Biosense Webster, Inc., 179 Cal.App.4th 564, 577-579, 102 Cal.Rptr.3d 1, 11-12 (Cal. App. Ct. 2009); Galante, supra.
In sum, the Agreement’s choice-of-law provision is not enforceable because it would result in substantial injustice to Hernandez by depriving him of the freedom to compete against Oxford in California that is guaranteed under California law, and it would do so based solely on a contract clause that Hernandez had no meaningful opportunity to negotiate when he was hired. See Taylor, 465 Mass. at 195 n.8. For the reasons discussed above, the Agreement is therefore governed by California law.
1.2. The Forum Selection Clause is Not Enforceable. The mandatory forum selection clause is unenforceable for much the same reasons.
Forum selection clauses are generally enforceable under California law “in the absence of a showing that enforcement of such a clause would be unreasonable.” Smith, Valentino & Smith, Inc. v. Superior Court, 551 P.2d 1206, 1209 (Cal. 1976). The mere fact that such a clause was part of a contract of adhesion, rather than the
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result of meaningful negotiation between the parties, does not render the provision unenforceable under California law. See Cal-State Business Prods. & Servs., inc. v. Ricoh, 12 Cal.App.4th 1666, 1679-1681, 16 Cal.Rptr.2d 417, 425-426 (Cal. Ct. App. 1993). “A mandatory forum selection clause … is generally given effect unless enforcement would be unreasonable or unfair,” even if it is made part of an employment agreement. Verdugo v. Alliantgroup, L.P., 237 Cal.App.4th 141, 147, 187 Cal.Rptr.3d 613, 618 (Cal. Ct. App. 2015).
However, where a forum selection clause is combined with a choice-of-law provision that would bar a claim or defense in violation of California public policy, the forum selection provision is also “unenforceable as against public policy.” See Verdugo, 237 Cal.App.4th at 154-157, 187 Cal.Rptr.3d at 624-625; accord Hall v. Superior Court, 150 Cal.App.3d 411, 413, 197 Cal.Rptr. 757, 759 (Cal. Ct. App. 1983).2
Since Oxford was hiring Hernandez to work for it in California, the evident reason why Oxford sought to make the Agreement subject to Massachusetts law and require that any lawsuits arising from the contract be brought in Massachusetts was that Oxford wanted to keep Hernandez from enforcing his rights under California law not to be subject to a broad non-competition agreement that barred any solicitation of Oxford’s former or prospective customers. Under these circumstances, the forum selection clause in the Agreement is not enforceable under California law.
2. Analysis of Proper Venue. In the absence of an enforceable forum selection clause, a plaintiff’s decision to bring suit in a permissible venue should be respected unless an adequate alternative forum is available and the relevant private and public interests strongly favor litigating the case elsewhere. Gianocostas v. Interface Group-Massachusetts, Inc., 450 Mass. 715, 723 (2008). “In general terms, the doctrine of
2 These holdings by the California courts are not idiosyncratic. For example, the United States Supreme Court has noted with respect to mandatory arbitration clauses that “in the event the choice-of-forum and choice-of-law clauses operated in tandem as a prospective waiver of a party’s right to pursue statutory remedies for antitrust violations, we would have little hesitation in condemning the agreement as against public policy.” Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 637 n.19 (1985); see also M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 15 (1972) (“A contractual choice-of-forum clause should be held unenforceable if enforcement would contravene a strong public policy of the forum in which suit is brought, whether declared by statute or by judicial decision.”) (dictum).
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forum non conveniens provides that, ‘where in a broad sense the ends of justice strongly indicate that the controversy may be more suitably tried elsewhere, then jurisdiction should be declined and the parties relegated to relief to be sought in another forum.’ ” Id., quoting Universal Adjustment Corp. v. Midland Bank, Ltd., 281 Mass. 303, 313 (1933). Thus, “dismissal may be appropriate ‘[w]hen the court finds that in the interest of substantial justice the action should be heard in another forum.’ ” Id., quoting G.L. c. 223A, § 5. “Decisions to grant or deny motions to dismiss on the ground of forum non conveniens are left to the discretion of the trial judge.” Id.
The Court concludes, in the exercise of its discretion, that it would be unfair to compel Hernandez to defend himself in Massachusetts and that justice would best be served by dismissing this action so it may be tried in California.
State courts in California provide an adequate alternative forum. They are just as capable of hearing this matter and deciding it fairly. Oxford does not contest this point. The choice-of-law issues discussed above have no bearing on whether this case should be tried in Massachusetts or California. Cf. Melia, 462 Mass. at 173-182. Thus, the Court’s determination that California law bars or at least limits Oxford’s contract claims is irrelevant when deciding Hernandez’s motion to dismiss on grounds of forum non conveniens. If California law applies and limits Oxford’s claims, that will be true whether this matter is tried in California or Massachusetts courts.
In weighing the relevant private and public interests, the Court must take into account the fact that all relevant events occurred in California and all of Oxford’s alleged harm or injury was incurred there. The Court credits Hernandez’s unchallenged testimony (by way of affidavit) that he interviewed for the Oxford job in California, signed the offer letter and Agreement in California, was trained by Oxford in California, did all of his work for Oxford in California, and reported to Oxford supervisors who were located in California. The Court also finds that all of the Oxford clients (which are the companies that hire Oxford to recruit and place technically skilled personnel) and consultants (who are the people Oxford places with its clients) with whom Hernandez worked were located in California. The Court further finds that Hernandez still lives and works in California, that all of the individuals whom Oxford accuses Hernandez of soliciting for his new employer are
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located in California, and that none of the conduct that Oxford accuses Hernandez of engaging in took place in Massachusetts or anywhere else outside of California.
As a result, the relevant private interests weigh heavily in favor of litigating this case in California. Since everything relevant to this case happened in California, it appears that all relevant witnesses are located in California and cannot be compelled to testify in Massachusetts. All other relevant evidence is presumably either located in California or available electronically so that it has no bearing on which forum is more convenient. It will be easier and more efficient for both Hernandez and Oxford to try this case in California. Indeed, Hernandez will be unable adequately to defend himself unless the case is litigated in California. And if Oxford were to obtain a judgment against Hernandez it would be much easier to enforce it if issued by a California court. The private interests strongly favor trial in California. Cf. Gianocostas, 450 Mass. at 726-727.
With respect to the relevant public interests, California has a much stronger interest than Massachusetts in deciding whether Hernandez breached his contract or committed a tort in trying to convince some of Oxford’s customers or consultants in California to use a competitor instead. Hernandez has been a California resident since before he first started working for Oxford in California. And the business operations that Oxford claims were unlawfully harmed are located in California and serve California customers. Massachusetts has very little interest in the outcome of this lawsuit. Thus, the public interests also strongly favor trial in California.
For all of these reasons, the Court concludes that California is the appropriate forum in which to litigate Oxford’s claims against Hernandez.
ORDER
Defendant’s motion to dismiss this action on grounds of forum non conveniens is ALLOWED. Final judgment shall enter dismissing all claims without prejudice.
June 9, 2017
___________________________
Kenneth W. Salinger
Justice of the Superior Court

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Posted by Stephen Sandberg - June 14, 2017 at 4:34 pm

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Langan v. Board of Registration in Medicine (Lawyers Weekly No. 10-103-17)

NOTICE:  All slip opinions and orders are subject to formal revision and are superseded by the advance sheets and bound volumes of the Official Reports.  If you find a typographical error or other formal error, please notify the Reporter of Decisions, Supreme Judicial Court, John Adams Courthouse, 1 Pemberton Square, Suite 2500, Boston, MA, 02108-1750; (617) 557-1030; SJCReporter@sjc.state.ma.us

SJC-12242

MICHAEL L. LANGAN  vs.  BOARD OF REGISTRATION IN MEDICINE.

June 13, 2017.

Board of Registration in MedicineDoctor, License to practice medicine.  Practice, Civil, Action in nature of certiorari.

Michael L. Langan appeals from a judgment of the county court denying his petition for relief in the nature of certiorari from a decision of the Board of Registration in Medicine (board).  We affirm.

Background.  Langan is a board-certified physician in geriatrics and internal medicine.  In 2008, after he had tested positive for various controlled substances, he and the board entered into a letter of agreement, under which he agreed to certain conditions in order to continue practicing medicine, including refraining from the use of alcohol and controlled substances without a prescription and submitting to substance use monitoring by Massachusetts Physician Health Services (PHS).  The letter of agreement provided that violating its terms would “constitute sufficient grounds for the immediate suspension of [Langan’s] license,” and that Langan had a right to an adjudicatory hearing as to any violation found by the board.

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Posted by Stephen Sandberg - June 13, 2017 at 3:32 pm

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Chamberland v. Arbella Mutual Insurance Company (Lawyers Weekly No. 11-077-17)

NOTICE:  All slip opinions and orders are subject to formal revision and are superseded by the advance sheets and bound volumes of the Official Reports.  If you find a typographical error or other formal error, please notify the Reporter of Decisions, Supreme Judicial Court, John Adams Courthouse, 1 Pemberton Square, Suite 2500, Boston, MA, 02108-1750; (617) 557-1030; SJCReporter@sjc.state.ma.us

16-P-861                                        Appeals Court

HEATHER CHAMBERLAND  vs.  ARBELLA MUTUAL INSURANCE COMPANY.

No. 16-P-861.

Bristol.     February 1, 2017. – June 9, 2017.

Present:  Carhart, Massing, & Henry, JJ.[1]

Insurance, Underinsured motorist, Arbitration.  Contract, Insurance, Arbitration.  Waiver.  Collateral Estoppel.  Judgment, Preclusive effect.  Arbitration.  Practice, Civil, Summary judgment, Waiver.

Civil action commenced in the Superior Court Department on March 4, 2015.

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Posted by Stephen Sandberg - June 12, 2017 at 6:04 pm

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