Posts tagged "Authority"

Massachusetts Bay Transportation Authority v. Clear Channel Outdoor, Inc. (Lawyers Weekly No. 09-006-18)

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COMMONWEALTH OF MASSACHUSETTS
SUFFOLK, ss. SUPERIOR COURT.
1884CV00268-BLS2
____________________
MASSACHUSETTS BAY TRANSPORTATION AUTHORITY
v.
CLEAR CHANNEL OUTDOOR, INC.
____________________
MEMORANDUM AND ORDER DENYING CLEAR CHANNEL’S MOTION FOR A TEMPORARY RESTRAINING ORDER
In 2003 the Massachusetts Bay Transportation Authority granted Clear Channel Outdoor, Inc., a 15-year license to operate billboards on MBTA property. That license will expire in early March 2018.1 The MBTA recently issued a request for responses by parties willing to enter into a six month license to operate the same billboards beginning after the Clear Channel license expires. The MBTA received bids from Outfront Media LLC, which agreed to enter into a six-month license, and Clear Channel, which refused to accept a term that short. The MBTA disqualified Clear Channel. It intends to award a six-month license to Outfront Media.
The MBTA brought this action. It seeks declarations that its recent request for responses is lawful, Clear Channel is not entitled to enforce a right of first refusal contained in its 2003 license, and neither of these disputes is subject to the arbitration clause in the 2003 license. It also seeks certain preliminary injunctive relief to enforce terms of the parties’ existing license. The parties agreed upon a schedule for the filing of cross-motions for a preliminary injunction, with a hearing on those motions now scheduled for February 22.
Clear Channel has filed an emergency motion seeking a temporary restraining order that would bar the MBTA from taking any steps to license its billboards to or contract with Outfront Media, or from “interfering in any way with Clear Channel’s rights in the billboards themselves or the permits necessary to operate those billboards.”
The Court will DENY this motion for a TRO because Clear Channel has not met its burden of showing that it is entitled to the requested relief. “A preliminary
1 The parties have submitted two different versions of their license. One states that it terminates on March 3, the other says March 5.
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injunction [or a TRO] is an extraordinary remedy never awarded as of right.” Winter v. Natural Res. Def. Council, Inc., 555 U.S. 7, 24 (2008). To the contrary, “the significant remedy of a preliminary injunction should not be granted unless the plaintiffs [have] made a clear showing of entitlement thereto.” Student No. 9 v. Board of Educ., 440 Mass. 752, 762 (2004). Clear Channel has not yet made such a showing.
1. Clear Channel Has Asserted No Claims. Clear Channel’s request for injunctive relief is premature because Clear Channel has not asserted any counterclaims or any other kind of affirmative claim against the MBTA.
To obtain preliminary injunctive relief, “the applicant must show a likelihood of success on the merits of the underlying claim; actual or threatened irreparable harm in the absence of injunction; and a lesser degree of irreparable harm to the opposing party from the imposition of an injunction.” Wilson v. Commissioner of Transitional Assistance, 441 Mass. 846, 860 (2004). Since Clear Channel seeks to enjoin governmental action, the Court must also consider whether the requested injunctive relief will promote or at least not adversely affect the public interest. See Siemens Bldg. Technologies, Inc. v. Division of Capital Asset Management, 439 Mass. 759, 762 & 765 (2003) (affirming denial of injunction sought by disappointed bidder because injunction would adversely affect the public interest).
Thus, the filing of a meritorious claim or counterclaim is a condition precedent to seeking injunctive relief. See, e.g., Litton Industries, Inc. v. Colon, 587 F.2d 70, 74 (1st Cir. 1979) (injunction “must be based on a valid cause of action alleged in the complaint”); Goerlitz v. City of Maryville, 333 S.W.3d 450, 455 (Mo. 2011) (en banc) (“an injunction is a remedy and not a cause of action; therefore, it must be based on some recognized and pleaded legal theory”). “[A]ny motion or suit for either a preliminary or permanent injunction must be based upon a cause of action…. ‘There is no such thing as a suit for a traditional injunction in the abstract. For a traditional injunction to be even theoretically available, a plaintiff must be able to articulate a basis for relief that would withstand scrutiny under’ ” a motion to dismiss for failure to state a claim. Alabama v. U.S. Army Corps of Engineers, 424 F.3d 1118, 1127 (11th Cir. 2005), quoting Klay v. United Healthgroup, Inc. 376 F.3d 1092, 1097 (11th Cir.2004).
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The Court will not deny the TRO motion on this basis, however. Instead, it will assume that Clear Channel is prepared to assert counterclaims consistent with the legal theories outlined in its motion papers. In its memorandum, Clear Channel asserts two distinct theories under which it seeks relief against the MBTA. As explained below, neither theory supports the issuance of the requested TRO.
2. Claim that the MBTA Sought Commercially Unreasonable Terms. Clear Channel asserts that “the MBTA has violated its own contractual obligation to Clear Channel to afford it a right to bid on a solicitation that does not include terms that are commercially unreasonable or intended to defeat Clear Channel’s option,” meaning its right of first refusal.
Clear Channel has not demonstrated that such a claim is likely to succeed. And Clear Channel is not entitled to preliminary injunctive relief if it cannot prove that it is likely to succeed on the merits of its claims. See Fordyce v. Town of Hanover, 457 Mass. 248, 265 (2010) (vacating preliminary injunction on claim brought under public bidding statutes).
It seems unlikely that Clear Channel can prevail on a claim that it had some contractual right to have the opportunity to bid on a new billboard license on terms that Clear Channel considers to be commercially viable. To the contrary, the license agreement between Clear Channel and the MBTA specifies, in the same right-of-first-refusal provision upon which Clear Channel relies, that the MBTA could “publish a solicitation of bids” to license the billboards after Clear Channel’s contract expires “under such terms and conditions deemed to be in the best interests of the MBTA.” The only commercially reasonable interpretation of this unambiguous provision is that the MBTA retained the discretion to decide what terms and conditions for a new billboard license would be in its best interests. Clear Channel has no contractual right to dictate to the MBTA what license terms would be acceptable to Clear Channel, and then require the MBTA to grant a license on those terms. See generally Robert and Ardis James Foundation v. Meyers, 474 Mass. 181, 188 (2016) (court must construe contracts in manner that gives them “effect as … rational business instrument[s] and in a manner which will carry out the intent of the parties”) (quoting Starr v. Fordham, 420 Mass. 178, 192 (1995)); Seaco Ins. Co. v. Barbosa, 435 Mass. 772, 779 (2002) (“If a
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contract … is unambiguous, its interpretation is a question of law that is appropriate for a judge to decide on summary judgment.”); Eigerman v. Putnam Investments, Inc., 450 Mass. 281, 287 (2007) (“Whether a contract is ambiguous is also a question of law.”); Indus Partners, LLC v. Intelligroup, Inc., 77 Mass. App. Ct. 793, 795 (2010) (“ambiguity is not created simply because a controversy exists between parties, each favoring an interpretation contrary to the other’s.”) (quoting Jefferson Ins. Co. v. Holyoke, 23 Mass. App. Ct. 472, 475 (1987)).
Clear Channel could not circumvent the provision quoted above by invoking the implied covenant of good faith and fair dealing, which “is implied in every contract.” See Weiler v. PortfolioScope, Inc., 469 Mass. 75, 82 (2014), quoting Uno Restaurants, Inc. v. Boston Kenmore Realty Corp., 441 Mass. 376, 385 (2004). The implied covenant “does not create rights or duties beyond those the parties agreed to when they entered into the contract.” Boston Med. Ctr. Corp. v. Secretary of Executive Office of Health & Human Servs., 463 Mass. 447, 460 (2012) (affirming dismissal of claim), quoting Curtis v. Herb Chambers I-95, Inc., 458 Mass. 674, 680 (2011). Instead, the implied covenant only governs “the manner in which existing contractual duties are performed.” Eigerman v. Putnam Investments, Inc., 450 Mass. 281, 289 (2007).
Nor is Clear Channel likely to be able to prove that the MBTA crafted unreasonable terms in a deliberate effort to nullify Clear Channel’s right of first refusal, and thereby violated the implied covenant. Cf. Weiler, 469 Mass. at 82, (“The implied covenant provides ‘that neither party shall do anything which will have the effect of destroying or injuring the right of the other party to receive the fruits of the contract….’ ”) (quoting Druker v. Roland Wm. Jutras Assocs., Inc., 370 Mass. 383, 385 (1976)).
It appears to be undisputed that Outfront Media is able to perform and is prepared to accept the terms proposed by the MBTA. Although Clear Channel insists that those terms are not commercially reasonable, Outfront Media apparently disagrees. Under these circumstances it will be hard for Clear Channel to establish that the MBTA’s request for responses was a charade, rather than a good faith effort to enter into a short, six-month lease of the billboards for reasons that make sense to
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the MBTA and Outfront even if they make no sense to Clear Channel. In any case, Clear Channel has not made any such showing yet.
3. Claim that Clear Channel has a Right of First Refusal. Clear Channel’s other legal theory is that the MBTA has breached the parties’ license agreement by refusing to give Clear Channel any chance to exercise its right of first refusal.
This claim cannot justify issuing a temporary restraining order because Clear Channel has not shown that it will suffer any irreparable harm if the TRO does not issue.2 As the moving party, Clear Channel has the “burden of showing it would suffer an irreparable harm absent an injunction.” GTE Products Corp. v. Stewart, 414 Mass. 721, 726 (1993). A party may not obtain preliminary injunctive relief without proving that it will suffer irreparable harm in the absence of such an order, and that such harm to the plaintiff from not granting the preliminary injunction would outweigh any irreparable harm that defendants or the public interest are likely to suffer if the injunction issues. See, e.g., American Grain Products Processing Institute v. Department of Pub. Health, 392 Mass. 309, 326-329 (1984) (vacating preliminary injunction on this ground); Nolan v. Police Comm’r of Boston, 383 Mass. 625, 630 (1981) (same).
The right-of-first-refusal provision in the parties’ existing license provides that: (1) before the MBTA awards any bid or accepts any proposal to license its billboards for a term beginning after the termination of Clear Channel’s license, the MBTA shall provide notice to Clear Channel “of all material terms and conditions offered by and such third person’s bid or proposal;” and (2) Clear Channel will then “have the right for a period of three calendar days to notify the MBTA that it accepts each and every term and condition offered by such third person.”
The current factual record suggests that the MBTA’s failure to give Clear Channel three days to exercise its right of first refusal will never cause Clear Channel
2 As a result the Court need not address the MBTA’s arguments or Clear Channel’s counterarguments regarding whether the right-of-first-refusal provision is void and unenforceable because it is against public policy as reflected in the Commonwealth’s public bidding statutes, or whether Clear Channel has forfeited any right of first refusal by failing to submit a responsive bid expressing a willingness to accept the terms and conditions proposed by the MBTA.
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any harm. That is Clear Channel has made clear that it is unwilling to accept all of the material terms that Outfront Media is prepared to accept. Clear Channel did so first in its own response to the MBTA’s request for responses. It reiterated the point in the declaration filed in support of its TRO motion. In all of these submissions Clear Channel has expressly stated that it refuses to enter into a six-month license, or to agree to other terms that the MBTA considers to be material. Clear Channel cannot show that it will be harmed if it never has the opportunity to exercise its right of first refusal without showing that Clear Channel is in fact willing to do so on the terms specified in its license. To date Clear Channel has not made such a showing.
Even assuming that Clear Channel may change its mind and agree to accept all the material terms agreed to be the winning bidder if given the opportunity to do so, however, Clear Channel is unlikely to suffer any irreparable harm if the Court denies the request for a TRO and waits to address the same issues in a few weeks on the parties cross-motions for a preliminary injunction and with the benefit of a more complete record.
The mere fact that the MBTA is moving forward execute a contract with Outfront Media and to make plans to transition its billboard license away from Clear Channel is unlikely to cause Clear Channel any irreparable harm in the next few weeks. If the Court is convinced at the preliminary injunction stage that any new license with Outfront Media is unlawful because the MBTA has breached its contractual obligation to give Clear Channel a right of first refusal, it can grant Clear Channel appropriate relief that will prevent any irreparable harm. The execution of a contract with Outfront Media, or work by Outfront Media to apply for billboard permits that would take effect after Clear Channel’s current license expires, would not interfere with any of Clear Channel’s existing rights in the billboards or its existing permits to operate those billboards. It appears to be undisputed that if Clear Channel’s existing license from the MBTA expires on the current termination date then Clear Channel’s existing permits will in effect be void.
The mere fact that Clear Channel finds itself in limbo, uncertain as to whether it will still be the MBTA’s billboard licensee after its current license expires, is not causing Clear Channel any irreparable harm. Clear Channel has known from the
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moment it entered into the current 15-year license that its rights under that agreement would terminate in early March 2018 and may not be renewed. Although the current license provides that the MBTA must give Clear Channel three days to exercise its right of first refusal, the MBTA could comply with that provision by triggering the refusal period four days before the current license expires. The mere fact that Clear Channel finds itself facing a period of uncertainty that was clearly contemplated in its existing license is not the sort of irreparable harm that would justify issuing the requested TRO.
Although Clear Channel also argues that it will suffer irreparable loss of good will and harm to existing customer relationships if it is unable to enter into a new billboard license with the MBTA, that claim is not relevant to the pending motion for a temporary restraining order. The parties have agreed upon a schedule for the briefing and hearing of cross-motions for a preliminary injunction that will give the Court some time before the current license expires to decide whether the MBTA should be allowed to transfer its billboard license from Clear Channel to Outfront Media. If the Court were to rule in Clear Channel’s favor, it could grant relief that would prevent this kind of alleged irreparable harm. As a result, Clear Channel will not suffer this kind of allegedly irreparable harm merely because it does not obtain a TRO. Cf. Packaging Indus. Group, Inc. v. Cheney, 380 Mass. 609, 617 n.11 (1980) (“Irreparable harm is absent if trial on the merits can be conducted before the injury occurs.”).
Finally, Clear Channel has not met its burden of showing that the proposed TRO would promote or at least would not be inconsistent with the public interest. If the MBTA is correct in its view that Clear Channel is not entitled to enforce its contractual right of first refusal, or if Clear Channel remains unwilling to accept all the material terms and conditions that the one successful bidder is prepared to accept, then the MBTA needs to be prepared to have its successor licensee in place and ready to manage the MBTA billboards. The requested TRO would prevent the MBTA from doing the planning and preparations needed effectively to manage this part of its physical plant.
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Since Clear Channel has not shown that it will suffer irreparable harm over the next few weeks if the MBTA continues to move forward with its plans to contract with Outfront Media, and the public interest may be harmed if the Court bars the MBTA from doing so, the Court will exercise its discretion to deny Clear Channel’s request for a TRO. Cf. Lightlab Imaging, Inc. v. Axsun Technologies, Inc., 469 Mass. 181, 194 (2014) (“Trial judges have broad discretion to grant or deny injunctive relief.”).
ORDER
Defendant’s motion for a temporary restraining order is DENIED.
January 31, 2018
___________________________
Kenneth W. Salinger
Justice of the Superior Court read more

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Posted by Stephen Sandberg - February 2, 2018 at 1:04 pm

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Mui v. Massachusetts Port Authority (Lawyers Weekly No. 10-016-18)

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-12296

TZE-KIT MUI  vs.  MASSACHUSETTS PORT AUTHORITY.

Suffolk.     November 6, 2017. – January 29, 2018.

Present:  Gants, C.J., Gaziano, Budd, & Cypher, JJ.

Massachusetts Wage Act.  Massachusetts Port Authority.  Public Employment, Sick leave benefits.

Civil action commenced in the Superior Court Department on October 17, 2014.

The case was heard by Robert B. Gordon, J., on motions for judgment on the pleadings.

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

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Posted by Stephen Sandberg - January 29, 2018 at 4:02 pm

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Brockton Housing Authority v. Mello (Lawyers Weekly No. 11-010-18)

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-1708                                       Appeals Court

BROCKTON HOUSING AUTHORITY  vs.  KEITH G. MELLO.

No. 16-P-1708.

Plymouth.     November 6, 2017. – January 26, 2018.

Present:  Sullivan, Blake, & Singh, JJ.

Housing Authority.  Landlord and Tenant, Termination of tenancy.  Controlled Substances.  Words, “Keeping.”

Civil action commenced in the Southeast Division of the Housing Court Department on January 25, 2016. read more

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Posted by Stephen Sandberg - January 26, 2018 at 4:29 pm

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Massachusetts Bay Transportation Authority v. Boston and Maine Corporation, et al. (Lawyers Weekly No. 12-124-17)

COMMONWEALTH OF MASSACHUSETTS
SUFFOLK, ss. SUPERIOR COURT
CIVIL ACTION
No. 17-00153-BLS1
MASSACHUSETTS BAY TRANSPORTATION AUTHORITY
vs.
BOSTON AND MAINE CORPORATION & others1
MEMORANDUM OF DECISION AND ORDER ON
PLAINTIFF MASSACHUSETTS BAY TRANSPORTATION AUTHORITY’S
PARTIAL MOTION TO DISMISS DEFENDANTS’ COUNTERCLAIMS
Plaintiff, Massachusetts Bay Transportation Authority (MBTA), filed this action for
declaratory and injunctive relief against defendants, Boston and Maine Corporation, Springfield
Terminal Railway Company, and Pan Am Southern LLC (referred to collectively as “Pan Am”).
The dispute involves the implementation of positive train control (PTC), a safety system aimed at
preventing train accidents. Pan Am alleged eleven counterclaims against the MBTA. MBTA
now moves to dismiss three of the counterclaims pursuant to Mass. R. Civ. P. 12(b)(6). The
three counterclaims allege misrepresentation (Count VIII), promissory/equitable estoppel (Count
IX), and violation of G.L. c. 93A, § 11 (Count X). For the reasons stated below, the MBTA’s
motion to dismiss is allowed.
BACKGROUND
The facts as revealed by Pan Am’s counterclaims are as follows.
The MBTA is a body politic and corporate and a political subdivision of the
1 Springfield Terminal Railway Company and Pan Am Southern LLC.
Commonwealth of Massachusetts. It operates bus, subway, commuter rail, and ferry systems in
and around Boston, Massachusetts. The Pan Am defendants operate freight lines over tracks
that, in some instances, are owned and/or used by the MBTA.
Since 2010, Pan Am worked closely and cooperatively with the MBTA to plan and
prepare for the implementation of PTC on tracks over which both parties operate. The parties
worked to comply with a 2008 federal mandate requiring that PTC be implemented on certain
rail lines, including lines that carry certain minimum levels of passenger traffic. PTC is designed
to prevent train-to-train collisions, derailments resulting from excessive speed, and other types of
accidents. Generally, PTC uses a combination of on-board and rail-side technology to track and
control train movements on the rail lines outfitted with this technology. In this dispute, the rail
lines affected include both MBTA-owned trackage, over which Pan Am operates freight trains
pursuant to a reserved freight easement, and Pan Am-owned trackage, over which the MBTA
initiated and expanded commuter rail operations at the end of 2016.
According to Pan Am, under federal law, PTC must be implemented on the rail lines at
issue because the MBTA operates passenger trains on them. Absent the MBTA’s use of these
rail lines, no PTC system is required. In addition, freight trains may not operate on tracks
handling passenger traffic that are required to have PTC unless those freight trains are equipped
with a PTC system that is compatible with the commuter rail’s PTC system.
After the federal government imposed the 2008 PTC requirements, Pan Am alleges that
the MBTA agreed that the MBTA would implement a dual-type PTC system on the jointly used
tracks. The MBTA wanted to use Advanced Civil Speed Enforcement System (ACSES) PTC, a
type of PTC that Amtrak uses on some MBTA tracks, but is generally not used for freight
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operations. Throughout the country, freight rail operators almost exclusively use Interoperable
Electronic Train Management System (I-ETMS) PTC, a different type of PTC that is allegedly
more sophisticated and dynamic. Interstate freight trains exclusively equipped with I-ETMS
PTC are not able to pass over jointly used trackage if the MBTA only implements ACSES PTC.
Thus, it is alleged that the MBTA acknowledged that it needed to outfit the jointly used trackage
with I-ETMS PTC so that the MBTA’s own operations would not unduly interfere with Pan
Am’s operations.
In a 2010 filing with the Federal Railroad Administration, the MBTA described its plans
to implement a dual ACSES and I-ETMS PTC system. In 2010, Pan Am and the MBTA
discussed and agreed that the MBTA would implement a dual-type PTC system at the MBTA’s
expense. According to Pan Am, the MBTA was obligated to implement a dual-type PTC system
under a 1976 Deed and a 2011 Trackage Rights Agreement, which mandate that the MBTA is
responsible for ensuring, at the MBTA’s expense, that the MBTA’s services or operations do not
interfere with or impede Pan Am’s operations.
In reliance on the MBTA’s plans to implement a dual system, Pan Am waived a Capacity
Study as an accommodation to the MBTA. The study would have cost hundreds of thousands of
dollars and taken months to complete. A Capacity Study, however, would have demonstrated the
need for a dual PTC system to accommodate the MBTA’s commuter rail services without
unreasonably interfering with Pan Am’s freight services.
In July of 2014, the MBTA and Pan Am entered into an “Agreement for Pan Am
Southern to Support the MBTA Wachusett Extension Project.” This agreement detailed certain
construction necessary for the initiation of new commuter rail service on the Fitchburg commuter
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rail line called the Wachusett extension. The agreement referenced the parties’ intention to
memorialize the final details of an agreed upon PTC system in a 2014 PTC agreement. Shortly
thereafter, the parties memorialized the final details of the PTC system in a 2014 PTC Agreement
in which the MBTA committed to install both an ACSES and I-ETMS PTC system on shared
trackage, as necessary, to allow both passenger and freight trains to operate without undue
interference. The MBTA’s General Manager, Beverly A. Scott, and the MBTA’s General
Counsel, Paige Scott Reed, signed the 2014 PTC Agreement. Both individuals expressly
represented to Pan Am that approval by the MBTA’s Board was not required. The 2014 PTC
Agreement provided for, among other things, “the installation of an ACSES PTC wayside system
on all portions of the jointly used rail lines, installation of an I-ETMS PTC wayside system on
certain specified sections of the jointly used rail lines, and the equipping of a specified number of
. . . [Pan Am’s] locomotives with ACSES compatible on-board systems and a specified number
of . . . [Pan Am’s] locomotives with I-ETMS compatible on-board systems.” Counterclaims at
34.
After signing the 2014 PTC Agreement and until late 2016, the MBTA and Pan Am
worked cooperatively towards implementing the terms of the agreement. After the MBTA
completed construction work on the Wachusett extension, on September 30, 2016, Pan Am
permitted the MBTA to initiate limited commuter rail service on the new line (two round trips
per day). The MBTA planned to offer full commuter rail service shortly thereafter.
On October 26, 2016, however, once the MBTA initiated limited service and publicly
announced its planned expansion of the Wachusett extension, the MBTA “made an abrupt and
stunning reversal.” Counterclaims at 22, 39. Despite the 2014 PTC Agreement and public
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representations, the MBTA announced to Pan Am that it was disavowing the 2014 PTC
Agreement. The MBTA refused to install the I-ETMS PTC system on shared trackage. The
MBTA sought to install only the ACSES PTC system, which means, according to Pan Am, that it
will be unable to use the shared trackage without substantial and prohibitive interference, delays,
and costs.
Pan Am asserts contract claims against the MBTA seeking to require the MBTA to install
both the I-ETMS and ACSES PTC systems on the shared trackage. Under the 2014 PTC
Agreement, the MBTA’s obligations are express and specific. Pan Am also asserts that the
MBTA’s obligation to implement the I-ETMS system exists independently from the 2014 PTC
Agreement. More specifically, Pan Am points to a 1976 Deed and a 2011 Trackage Rights
Agreement, which Pan Am explains in detail in its counterclaims. See Counterclaims at 23-38.
On November 21, 2016, over Pan Am’s objections, the MBTA expanded commuter rail
service on the Wachusett extension to include twenty-six daily round trip passenger trains. The
MBTA continues to refuse to install a dual PTC system on the shared tracks at issue, but
allegedly retains benefits of providing commuter rail service on the Wachusett extension.
The MBTA asserts that it is not bound by the 2014 PTC Agreement because its Board is
entitled, as a matter of law, to disavow the 2014 PTC Agreement. After the MBTA filed this
action for declaratory and injunctive relief seeking a declaration that the contracts do not bind the
MBTA to install dual systems, Pan Am filed eleven counterclaims against the MBTA. Pan Am
asserts contract claims arguing that the MBTA is bound by the 1976 Deed, the 2011 Trackage
Rights Agreement, and the 2014 PTC Agreement to perform. As an alternative, if the
agreements are unenforceable, Pan Am asserts that the MBTA is liable to perform pursuant to its
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counterclaims alleging misrepresentation (Count VIII), promissory/equitable estoppel (Count
IX), and violation of G.L. c. 93A, § 11 (Count X). Those counterclaims are the subject of the
MBTA’s motion.
ANALYSIS
To survive a motion to dismiss, the counterclaimant’s “[f]actual allegations must be
enough to raise a right to relief above the speculative level . . . [based] on the assumption that all
the allegations in the . . . [counterclaims] are true (even if doubtful in fact) . . . .” Iannacchino v.
Ford Motor Co., 451 Mass. 623, 636 (2008), citing Bell Atl. Corp. v. Twombly, 127 S. Ct. 1955,
1964-1965 (2007). In other words, “[w]hile a complaint [alleging counterclaims] attacked by a
. . . motion to dismiss does not need detailed factual allegations . . . a plaintiff’s obligation to
provide the ‘grounds’ of his ‘entitle[ment] to relief’ requires more than labels and conclusions
. . . .” Iannacchino, 451 Mass. at 636, quoting Bell Atl. Corp., 127 S. Ct. at 1966. Dismissal
under Mass. R. Civ. P. 12(b)(6) is proper where a reading of the counterclaims establishes
beyond doubt that the facts alleged do not support a cause of action which the law recognizes,
such that the counterclaims are legally insufficient. See Nguyen v. William Joiner Center for the
Study of War and Social Consequences, 450 Mass. 291, 295 (2007).
Estoppel (Count IX)
In Count IX, Pan Am claims that it reasonably relied, to its detriment, on the MBTA’s
repeated representations and promises that it would pay for and install a dual PTC system. The
MBTA, however, argues that the estoppel claim must be dismissed because estoppel cannot
apply to a claim against the government. As a governmental body, the MBTA asserts that its
agents, even its General Manager and General Counsel, cannot bind the MBTA, absent Board
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approval. Pan Am argues that the MBTA is mischaracterizing its estoppel counterclaim and
explains that the counterclaim “is premised on its detrimental and good faith reliance on
MBTA’s representations that MBTA would implement I-ETMS on the jointly used tracks when
Pan Am agreed to the Wachusett Infrastructure Agreement, when it agreed not to insist upon
MBTA’s completion of a capacity study, and when it agreed to permit MBTA to commence
commuter rail service on the Wachusett Extension without having conducted a capacity study.”
Defendants’ Opposition at 10.
“Circumstances that may give rise to an estoppel are (1) a representation intended to
induce reliance on the part of a person to whom the representation is made; (2) an act or omission
by that person in reasonable reliance on the representation; and (3) detriment as a consequence of
the act or omission.” Bongaards v. Millen, 440 Mass. 10, 15 (2003). All three elements of
estoppel must be present, and the party asserting estoppel has a heavy burden to prove all three
elements. Sullivan v. Chief Justice for Admin. & Mgt. of the Trial Court, 448 Mass. 15, 28
(2006). “[T]he reliance of the party seeking the benefit of estoppel must have been reasonable.”
Turnpike Motors, Inc. v. Newbury Group, Inc., 413 Mass. 119, 125 (1992). “But the doctrine of
estoppel is not applied except when to refuse it would be inequitable.” Cleaveland v. Malden
Sav. Bank, 291 Mass. 295, 297 (1935), quoting Boston & Albany R.R. v. Reardon, 226 Mass.
286, 291 (1917) (“In order to work an estoppel it must appear that one has been induced by the
conduct of another to do something different from what otherwise would have been done and
which has resulted to his harm and that the other knew or had reasonable cause to know that such
consequence might follow”).
Massachusetts courts, however, “have been ‘reluctant to apply principles of estoppel to
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public entities where to do so would negate requirements of law intended to protect the public
interest.’” Sullivan v. Chief Justice for Admin. & Mgt. of the Trial Court, 448 Mass. at 30,
quoting Phipps Prods. Corp. v. Massachusetts Bay Transp. Auth., 387 Mass. 687, 693 (1982).
“[T]he rule against applying estoppel to the sovereign continues almost intact where a
government official acts, or makes representations, contrary to a statute or regulation designed to
. . . ensure some . . . legislative purpose.” McAndrew v. School Comm. of Cambridge, 20 Mass.
App. Ct. 356, 361 (1985). The public’s interest in seeing that a governmental agency of the
Commonwealth adheres to legislative policies “overrides any equitable considerations.” Phipps
Prods. Corp. v. Massachusetts Bay Transp. Auth., 387 Mass. at 693. “A common thread
underlying . . . [the] reluctance . . . [of courts] to apply principles of estoppel to public entities
has been the idea that deference to legislative policy should trump individual acts or statements
of a government official that may be contrary to such policy. Otherwise, protections afforded the
public interest are thwarted.” Sullivan v. Chief Justice for Admin. & Mgt. of the Trial Court, 448
Mass. at 30-31.
In Massachusetts, public officials cannot make binding contracts without express
authority. Dagastino v. Commissioner of Correction, 52 Mass. App. Ct. 456, 458 (2001).
Authority to bind their governmental employer exists only to the extent conferred by the
controlling statute. Id. Entities that deal with a government agency, such as Pan Am, must
therefore “take notice of limitations upon that agency’s contracting power and cannot recover
upon a contract which oversteps those limitations.” Id. Under G.L. c. 161A, §§ 3(f) & 3(k), the
Legislature gave the MBTA’s Board, and not its managers, the authority to enter into contracts
and to provide for the construction and modification of mass transportation resources. The
-8-
counterclaim does not allege that the MBTA’s Board approved the 2014 PTC Agreement.
Pan Am’s claim of equitable estoppel fails on the element requiring reasonable reliance.
As a matter of law, Pan Am could not have reasonably relied on representations by the MBTA’s
employees as to their authority to enter into a contract binding the MBTA. Harrington v. Fall
River Hous. Authy., 27 Mass. App. Ct. 301, 309 (1989) (holding that “as matter of law” reliance
on representations of government employees is unreasonable). The Appeals Court in Harrington
quoted the following passage from the U.S. Supreme Court in Heckler v. Community Health
Servs., Inc., 467 U.S. 51, 63-64 (1984): “[T]hose who deal with the Government are expected to
know the law and may not rely on the conduct of government agents contrary to law . . . .”
Harrington v. Fall River Hous. Authy., 27 Mass. App. Ct. at 309. “In Massachusetts, also, one
relies at his peril on representations by a government official concerning legal requirements.” Id.
Consequently, Pan Am cannot rely on the doctrine of estoppel to force the MBTA to comply with
the PTC commitments or to recover damages from the MBTA. See Phipps Prods. Corp. v.
Massachusetts Bay Transp. Auth., 387 Mass. at 693-694 (refusing to apply estoppel to MBTA in
connection with the sale of a building). See also United States Leasing Corp. v. Chicopee, 402
Mass. 228, 229-232 & n.4 (1988) (refusing to apply estoppel, concluding that under city charter,
contract required mayoral approval; thus, contract executed and approved by school
superintendent and city solicitor could be disavowed). Accordingly, Pan Am’s estoppel
counterclaim in Count IX must be dismissed.
Misrepresentation (Count VIII)
The MBTA also moves to dismiss Pan Am’s misrepresentation counterclaim in Count
-9-
VIII.2 Pan Am asserts that the MBTA, through its General Manager and General Counsel,
negligently misrepresented their authority to bind the MBTA to an agreement to install a dualtype
PTC on jointly used track. Pan Am contends that the MBTA knew that Pan Am would rely
on the representations of the General Manager and General Counsel. Therefore, Pan Am
contends that it justifiably relied to its detriment on the MBTA’s negligent misrepresentations.3
“In order to recover for negligent misrepresentation a plaintiff must prove that the
defendant (1) in the course of his business, (2) supplied false information for the guidance of
others (3) in their business transactions, (4) causing and resulting in pecuniary loss to those
others (5) by their justifiable reliance on the information, and that he (6) failed to exercise
reasonable care or competence in obtaining or communicating the information.” Gossels v. Fleet
Nat’l Bank, 453 Mass. 366, 371-372 (2009).
As can be seen, Pan Am faces, again, the question of whether, as a matter of law, it could
justifiably and reasonably rely on representations of employees of a governmental body as to
their authority to enter into a contract binding the MBTA. As described previously,
Massachusetts law holds that such reasonable or justifiable reliance cannot be established, as a
matter of law, when a party is contracting with a governmental body.
The MBTA also argues that Pan Am cannot repackage its contract claim as a tort claim
2 Pan Am is not proceeding on a claim for intentional misrepresentation in Count VIII.
Instead, it seeks to assert a claim for negligent misrepresentation.
3 The MBTA also argues that Pan Am’s negligent misrepresentation claim should be
dismissed for lack of presentment under the Massachusetts Tort Claims Act, G.L. c. 258. Under
G.L. c. 258, § 4, however, the Massachusetts Tort Claims Act’s presentment requirements do not
apply to counterclaims. See G.L. c. 258, § 4 (“The provisions of this section shall not apply to
such claims as may be asserted by third-party complaint, cross claim, or counter-claim . . . ”).
-10-
based on negligent misrepresentation. “[F]ailure to perform a contractual duty does not give rise
to a tort claim for negligent misrepresentation . . . Plaintiffs who are unable to prevail on their
contract claims may not repackage the same claims under tort law.” Cumis Ins. Soc’y, Inc. v.
BJ’s Wholesale Club, Inc., 455 Mass. 458, 474 (2009). “[F]ailure to perform a contractual
obligation is not a tort in the absence of a duty to act apart from the promise made.” Anderson v.
Fox Hill Village Homeowners Corp., 424 Mass. 365, 368 (1997). Pan Am either has an
enforceable contract or it does not. If it does not, Pan Am cannot obtain enforcement of the
contract by asserting that the MBTA’s employees were negligent. Consequently, Pan Am’s
negligent misrepresentation counterclaim in Count VIII is dismissed.
Chapter 93A (Count X)
Finally, the MBTA moves to dismiss Pan Am’s Chapter 93A counterclaim in Count X.
In Count X, Pan Am claims that the MBTA violated G.L. c. 93A, § 11 because it was acting in
the course of trade or commerce when its employees misrepresented their authority with respect
to the implementation of PTC. Pan Am asserts that the MBTA’s conduct, as alleged in their
counterclaims, was unfair and deceptive. The MBTA argues that Count X should be dismissed
because: (1) the MBTA is not a suable “person” under Chapter 93A and (2) the conduct at issue
did not involve the MBTA engaging in trade or commerce. Pan Am argues, among other things,
that whether the MBTA was engaged in trade or commerce under Chapter 93A is a factual
inquiry that should not be decided on a motion to dismiss. Because it is clear, as a matter of law,
that the MBTA’s conduct was not in the context of trade or commerce, the motion to dismiss
must be granted.
Under Chapter 93A, “[u]nfair methods of competition and unfair or deceptive acts or
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practices in the conduct of any trade or commerce are hereby declared unlawful.” G.L. c. 93A, §
2(a). See G.L. c. 93A, § 1(b) (defining “trade” and “commerce” as, “the advertising, the offering
for sale, . . . the sale, rent, lease or distribution of any services and any property, tangible or
intangible, real, personal or mixed . . . and any other article, commodity, or thing of value
wherever situate, and shall include any trade or commerce directly or indirectly affecting the
people of this commonwealth”). Under G.L. c. 93A, § 11, “[a]ny person who engages in the
conduct of any trade or commerce and who suffers any loss of money or property, real or
personal, as a result of the use or employment by another person who engages in any trade or
commerce of an unfair method of competition or an unfair or deceptive act or practice declared
unlawful by section two . . . may, as hereinafter provided, bring an action in the superior court
. . . .” A “person” under the statute, “shall include, where applicable, natural persons,
corporations, trusts, partnerships, incorporated or unincorporated associations, and any other
legal entity.” G.L. c. 93A, § 1(a).
“[T]he proscription in Section 2 of ‘unfair or deceptive acts or practices . . .’ must be read
to apply to those acts or practices which are perpetrated in a business context.” See Poznik v.
Massachusetts Med. Professional Ins. Ass’n, 417 Mass. 48, 50-53 (1994) (holding that
Massachusetts Medical Professional Insurance Association, a nonprofit joint underwriting
association established by Legislature, was not engaged in trade or commerce and was not
subject to suit under Chapter 93A),4 quoting Lantner v. Carson, 374 Mass. 606, 611 (1978).
4 After the Supreme Judicial Court’s decision in Poznik, the Legislature amended the
applicable statutes to include “any joint underwriting association established pursuant to law” as
a “person” under G.L. c. 176D, § 1. Wheatley v. Massachusetts Insurers Insolvency Fund, 465
Mass. 297, 300 (2013). The court subsequently determined that joint underwriting associations
were subject to a consumer action under Chapter 93A. Id.
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“The question whether a transaction occurs in a business context must be determined by the facts
of each case.” Poznik v. Massachusetts Med. Professional Ins. Ass’n, 417 Mass. at 52. Courts
consider “the nature of the transaction, the character of the parties and their activities, and
whether the transaction was motivated by business or personal reasons.” All Seasons Servs., Inc.
v. Commissioner of Health & Hosps. of Boston, 416 Mass. 269, 271 (1993).
In this case, the MBTA cannot be subject to a claim for violation of Chapter 93A because
it was not engaged in trade or commerce when it engaged with Pan Am concerning the 2008
federal mandate regarding PTC. All of the conduct alleged in Pan Am’s counterclaims involves
the parties’ efforts to comply with the 2008 federal mandate regarding PTC, including their
negotiations as to how they would achieve such compliance. The MBTA was acting at all times
in furtherance of its statutory mission to provide mass transportation services to the public. Its
compliance with the federal mandate was necessary to further this mission. See Bretton v. State
Lottery Comm’n, 41 Mass. App. Ct. 736, 738-739 (1996) (concluding that State Lottery
Commission was not a “person” engaged in “trade or commerce” for purposes of Chapter 93A).
See also Rodriguez v. Massachusetts Bay Transp. Auth., 33 Mass. L. Rptr. 418, *14 (Mass.
Super. Ct. Mar. 31, 2016) (Kaplan, J.) (concluding that MBTA is not engaged in trade or
commerce when it performs its statutorily mandated task of providing mass transit services to
public). Because the MBTA’s activities were driven by legislative mandate, not by “business or
personal objectives,” Chapter 93A does not apply. Bretton v. State Lottery Comm’n, 41 Mass.
App. Ct. at 739. See Peabody N.E., Inc. v. Marshfield, 426 Mass. 436, 440 (1998) (“This court .
. . has repeatedly held that c. 93A does not apply to parties motivated by ‘legislative mandate, not
business or personal reasons’”)(citation omitted). For these reasons, Pan Am’s Chapter 93A
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counterclaim against the MBTA must be dismissed.
CONCLUSION
Plaintiff Massachusetts Bay Transportation Authority’s Partial Motion to Dismiss
Defendants’ Counterclaims is ALLOWED. The Pan Am Defendants’ Counterclaims in Count
VIII (misrepresentation), Count IX (promissory/equitable estoppel), and Count X (violation of
G.L. c. 93A, § 11) are DISMISSED.
By the Court,
______________________________
Edward P. Leibensperger
Justice of the Superior Court
Dated: August 18, 2017
-14- read more

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Posted by Stephen Sandberg - September 7, 2017 at 1:36 am

Categories: News   Tags: , , , , , , , ,

Rodriguez v. Massachusetts Bay Transportation Authority (Lawyers Weekly No. 11-099-17)

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-942                                        Appeals Court

RAQUEL RODRIGUEZ[1]  vs.  MASSACHUSETTS BAY TRANSPORTATION AUTHORITY.

No. 16-P-942.

Suffolk.     April 7, 2017. – July 31, 2017.

Present:  Grainger, Sullivan, & Kinder, JJ.[2]

Massachusetts Bay Transportation Authority, Contract.  Railroad.  Contract, What constitutes, Offer and acceptance.  Practice, Civil, Motion to dismiss.

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

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Posted by Stephen Sandberg - July 31, 2017 at 10:44 pm

Categories: News   Tags: , , , , , ,

A.L. Prime Energy Consultant, Inc. v. Massachusetts Bay Transportation Authority (Lawyers Weekly No. 12-052-17)

COMMONWEALTH OF MASSACHUSETTS

SUFFOLK, ss.                                                                                             SUPERIOR COURT

                                                         CIVIL ACTION

  1. 1684CV05562

 

 

A.L. PRIME ENERGY CONSULTANT, INC.

 

vs.

 

MASSACHUSETTS BAY TRANSPORTATION AUTHORITY

 

 

RESERVIATION AND REPORT OF AN INTERLOCUTORY ORDER TO THE APPEALS COURT

 

 

This action arises out of a contract between the plaintiff, A.L. Prime Energy Consultant, Inc. (Prime), and the defendant, Massachusetts Bay Transportation Authority (MBTA) for the supply of Ultra Low Sulfur Diesel Fuel (ULSDF) (the Supply Contract), and the unilateral termination of the Supply Contract by the MBTA.  Prime asserts, among other claims, that the MBTA breached the Supply Contract by terminating it before its end date. read more

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Posted by Stephen Sandberg - May 10, 2017 at 5:04 am

Categories: News   Tags: , , , , , , , , , ,

A.L. Prime Energy Consultant, Inc. v. Massachusetts Bay Transportation Authority (Lawyers Weekly No. 12-052-17)

COMMONWEALTH OF MASSACHUSETTS

SUFFOLK, ss.                                                                                             SUPERIOR COURT

                                                         CIVIL ACTION

  1. 1684CV05562

 

 

A.L. PRIME ENERGY CONSULTANT, INC.

 

vs.

 

MASSACHUSETTS BAY TRANSPORTATION AUTHORITY

 

 

RESERVIATION AND REPORT OF AN INTERLOCUTORY ORDER TO THE APPEALS COURT

 

 

This action arises out of a contract between the plaintiff, A.L. Prime Energy Consultant, Inc. (Prime), and the defendant, Massachusetts Bay Transportation Authority (MBTA) for the supply of Ultra Low Sulfur Diesel Fuel (ULSDF) (the Supply Contract), and the unilateral termination of the Supply Contract by the MBTA.  Prime asserts, among other claims, that the MBTA breached the Supply Contract by terminating it before its end date. read more

Read more...

Posted by Stephen Sandberg - May 8, 2017 at 8:52 pm

Categories: News   Tags: , , , , , , , , , ,

Aiguier v. Financial Industry Regulatory Authority, Inc., et al. (Lawyers Weekly No. 12-029-17)

1
COMMONWEALTH OF MASSACHUSETTS
SUFFOLK, ss. SUPERIOR COURT
CIVIL ACTION
NO. 16-02491 BLS I
DUSTIN AIGUIER
v.
FINANCIAL INDUSTRY REGULATORY AUTHORITY, INC., CUSTOMER 1-W, CUSTOMER 1-H, CUSTOMER 2, CUSTOMER 3, CUSTOMER 4-W, and
CUSTOMER 4-H
and
THE SECURITIES DIVISION OF THE OFFICE OF THE SECRETARY OF STATE, intervener
MEMORANDUM OF DECISION AND ORDER ON THE DEFENDANTS’ MOTIONS TO DISMISS
INTRODUCTION
This case, once again, raises the issue of whether, or pursuant to what standard, the Superior Court may adjudicate a claim made by a registered representative of a securities broker-dealer that he is entitled to have records of customer complaints expunged from the data bases maintained by defendant Financial Industry Regulatory Authority, Inc. (FINRA). Plaintiff Dustin Aiguier was formerly a registered representative of New York Life Securities LLC (NYLife). While with NYLife, four complaints were lodged against him by six of his customers (including two sets of spouses) (collectively, the Customers). The plaintiff has filed a complaint which he styles: “Amended Petition for an Order of Expungement of Customer Dispute Information from the Central Registration (CRD System)” (the Complaint). In addition to FINRA, the Complaint also names the Customers as defendants (although the plaintiff seeks no relief with respect to them). The Securities Division of the Office of the Secretary of the
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Commonwealth has intervened in this action as a defendant on the ground that it is a primary regulator of the securities industry in Massachusetts and is responsible for protecting the public’s interest in access to information concerning customer complaints. The case is now before the court on all of the defendants’ motions to dismiss the Complaint. They move for dismissal asserting that: (a) the Superior Court lacks subject matter jurisdiction (Mass.R.Civ.P. 12(b)(1)) and (b) the Complaint fails to state a claim on which relief may be granted (Mass.R.Civ.P. 12(b)(6)). For the reasons that follow, their motions are allowed.
FACTUAL BACKGROUND
The court will begin by summarizing the relevant factual allegations in the Complaint, assumed to be true for purposes of this motion, as well as relevant information contained in attachments to the Complaint, to the extent necessary to address the issues raised by the defendants’ motions. It will then describe the regulatory framework relevant to this dispute.
The Plaintiff’s relationship to NYLife and the Customer Complaints
The plaintiff was a registered representative of NYLife until June 3, 2015, when he was discharged. Four written complaints against him were submitted to NYLife by his customers, each involved the sale of annuities. NYLife settled each of the claims without an arbitration proceeding being commenced. As required by FINRA rules, it reported the claims and settlements to FINRA, and a description of each claim and the settlement, as well as the plaintiff’s response to each claim, are available to the public on FINRA’s BrokerCheck website. The complaints are reported in BrokerCheck in the following order: the first was received on September 10, 2015 and settled for $ 40,229.37; the second was received on August, 13, 2015
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and settled for $ 95,961.16; the third was received on July 28, 2015 and settled for $ 12,286.78; and the fourth was received on January 1, 2013 and settled for $ 8,500.
After the plaintiff left NYLife, its representatives solicited customer complaints against him. Three of these complaints were the result of this solicitation, which was in some way related to a pyramid scheme engaged in by a NYLife management employee.
The disclosures regarding the first three claims and settlements are false and misleading.1 As to the fourth, the plaintiff followed all rules and procedures in the sales process, NYLife found that he had not engaged in any wrong doing, and the settlement was made in the interest of good customer relations.
FINRA
FINRA is a private, not-for-profit corporation organized under the laws of Delaware. It is a self-regulatory organization (SRO) registered with the Securities and Exchange Commission (the SEC). Under federal securities law, as an SRO, it plays a central role in the regulation of the securities industry. As applicable to this case, FINRA is required to “establish and maintain a system for collecting and retaining registration information” for representatives of broker-dealers. See 15 U.S.C. §§78o-3(i)(1)(A) and (i)(5). In forms approved by the SEC, FINRA collects, among other items, “information about registered personnel, including customer complaints . . . .” See SEC Release No. 34-71959, 79 Fed. Reg. 22734 (Apr. 17, 2014); see also Desiderio v. Nat’l Ass’n Sec. Dealers, 191 F.3d 198, 201 (2nd Cir. 1999) (“the SEC . . . must approve all [FINRA’s] rules and regulations”). The complaints are recorded in an electronic
1 There is an allegation in the Complaint that a manager at NYLife “improperly recognizes revenues prematurely and then reverses them subsequently.” The court has difficulty understanding how this allegations ties to the plaintiff’s allegations that three of the claims are false and misleading. The complaint contains additional allegations concerning records and reports that allegedly establish that the Customer claims are false or misleading, but these allegations are not material to any issue raised by the motions to dismiss.
4
database called the Central Registration Depository (CRD) which FINRA maintains in compliance with federal securities law and an agreement with the state securities regulators in all 50 states. The federal securities law requires that this complaint information, as well as other data, be available to the public. See 15 U.S.C. § 78o-3(i)(1)(B) (“A registered securities association shall . . . establish and maintain a . . . a readily accessible electronic or other process, to receive and promptly respond to inquiries regarding . . . registration information on its members and their associated persons.”). FINRA fulfills this obligation with an on line internet resource which it calls BrokerCheck. The four customer complaints lodged against the plaintiff, as well as information concerning the reason that NYLife discharged him, are available to the public on BrokerCheck together with the plaintiff’s response to each complaint.
FINRA has promulgated Rule 2080, which addresses the means by which information concerning a broker that exists in the CRD may be expunged. It states, in relevant part:
(a) Members or associated persons seeking to expunge information from the CRD system arising from disputes with customers must obtain an order from a court of competent jurisdiction directing such expungement or confirming an arbitration award containing expungement relief.
(b) Members or associated persons petitioning a court for expungement relief or seeking judicial confirmation of an arbitration award containing expungement relief must name FINRA as an addition party and serve FINRA with all appropriate documents unless this requirement is waived pursuant to subparagraph (1) or (2) below.
(1) Upon request, FINRA may waive the obligation to name FINRA as a party if FINRA determines that the expungement relief is based on affirmative judicial or arbitral finding that:
(A) The claim allegation or information is factually impossible or clearly erroneous;
(B) The registered person was not involved in the alleged investment related sales practice violation, forgery, theft, misappropriation or conversion of funds; or
5
(C) The claim, allegation or information is false.
(2) If the expungement relief is based on judicial or arbitral findings other than those described above, FINRA, in its sole discretion and under extraordinary circumstances, also may waive the obligation to name FINRA as a party if it determines that:
(A) The expungement relief and accompanying findings on which it is base are meritorious; and
(B) The expungement would have no material adverse effect on investor protection, the integrity of the CRD system or regulatory requirements.
FINRA has also promulgated Rules 12805 and 13805 which set out the manner in which an arbitration panel is to address matters of expungement that are brought before it. These Rules direct the panel to:
(a) Hold a recorded hearing session (by telephone or in person) regarding the appropriateness of expungement. This paragraph will apply to cases, . . . , even if a customer did not request a hearing on the merits;
(b) In cases involving settlements, review settlement documents and consider the amount of payments made to any party and any other terms and conditions of a settlement;
(c) Indicate in the arbitration award which of the Rule 2080 grounds for expungement serve(s) as the basis for its expungement order and provide a brief written explanation of the reason(s) for its finding that one or more Rule 2080 grounds for expungement applies to the facts of the case;
(d) Assess all forum fees for the hearing session in which the sole topic is the determination of the appropriateness of the expungement request against the parties requesting expungement relief.
See September 2015, FINRA Notice to Arbitrators and Parties on Expanded Expungement
Guidance.
6
DISCUSSION
The defendants argue that the Superior Court does not have jurisdiction to adjudicate the plaintiff’s claim. The complaint does not allege the basis for the court’s jurisdiction. It also does not indicate whether the plaintiff’s claim arises under the common law or a state or federal statute or regulation. Rather, following the factual allegations, the Complaint simply asks that the “Court enter an order pursuant to FINRA Rule 2080 expunging Disclosure” of the four Customer complaints against him that are disclosed in BrokerCheck. This seems to presume that this court has subject matter jurisdiction under Rule 2080 to adjudicate a dispute between the plaintiff and FINRA. It does not.
This court addressed this same issue in Hundley v. Financial Industry Regulatory Authority, Inc., CA No. 14-2523-BLS 1 (Sup.Ct., May 15, 2015). In that case the court noted that Rule 2080 was only a procedural directive that told a registered representative to obtain an order from a court of competent jurisdiction, but not the basis on which such a court would adjudicate a dispute between a registered representative and another party concerning whether the registered representative was entitled to expungement.2 Subpart (b) of Rule 2080 only explains the circumstances under which the associated person should, or need not, name FINRA as a party to the case, but offers no guidance as to who the adverse party would be in addition to FINRA, which is only the custodian of records created by the broker-dealer. In Hundley, this court provided the following explanation of why Rule 2080 cannot be the basis for jurisdiction in the Superior Court.
2 Indeed, Rule 2080 seems to assume that, in many instances, arbitrators or a court would have already adjudicated the grounds for expungement before the court order referenced in this rule is sought. See Section (b)(1) “Upon request, FINRA may waive the obligation to name FINRA as a party if FINRA determines that the expungement relief is based on affirmative judicial or arbitral finding that . . . “ and Section (b)(2) “If the expungement relief is based on judicial or arbitral findings other than those described above, . . . .”
7
It seems doubtful that FINRA, a private Delaware corporation, could promulgate a rule for its members that had the effect of directing a state court to hold a particular kind of hearing or to make particular types of findings in aid of the administration of FINRA’s data base. Indeed, in cases such as the one before the court where the customer lost interest in pursuing his claim after expressing his displeasure with Hundley to his employer, it is difficult to see how this court could adjudicate the issues necessary to make the type of findings that the arbitration panel is directed to make in Rule 12805. Rule 12805 authorizes the panel to consider a representative’s request for expungement even when the complaining customer has not filed a claim, in order to provide a forum in which a broker could request relief in the nature of expungement [even when the customer was uninterested in the proceeding]. This rule seems to envision an abbreviated telephone hearing, adequate under some circumstances to rule on a request for expungement. The Superior Court generally sits to adjudicate disputes between adverse parties and relies on the adversary system for the presentation of cases. What would the Superior Court do if FINRA waived Hundley’s obligation to name it as a defendant? Could it allow Hundley to file a complaint in which there is no party defendant? Or perhaps Hundley should be required to name his customer as a defendant even though all the customer did was complain to SAI about Hundley’s conduct more than six years ago?
In the present case, NYLife settled with the customers after investigating the claims and no arbitration proceeding was begun. Nonetheless, the result is the same. The customers have no financial interest in the outcome of the claims the plaintiff asserts in the Complaint and may well be disinterested in whether BrokerCheck reports their complaints against him or not. Indeed, the Complaint does not purport to state a claim against any Customer or request any relief from the Customers. The court finds no basis on which they can be included as defendants in this case. It appears that NYLife has paid for an attorney to represent them and move for dismissal of the Complaint, but the court has grave concerns about naming a person as a defendant in a case in which no claim is asserted against him/her, thereby putting that person to the potential expense of retaining counsel to explain the nature of the proceeding and what if anything he/she must do in response to being served with a summons and complaint.
In Hundley, this court then went on to comment on a decision by a Federal District Court in a similar case:
8
In In the Matter of Lickless, 2011 WL 2471022 (N.D. Cal., June 22, 2011) the broker filed a complaint in a California state court seeking expungement of information concerning him in the CRD. FINRA removed the case to Federal court. The District Court, however, concluded that “[t]here is nothing in the [Securities] Act, rules or regulations that provide substantive criteria as to when expungement is appropriate. . . .While FINRA Rule 2080 addresses expungement, it only sets forth procedures, not a substantive duty.” Id. at 4. Therefore, the District Court held that the complaint for expungement raised no question of Federal law, and it remanded the case to the California state court for lack of Federal jurisdiction. This court agrees with the Federal court’s conclusion: Rule 2080 creates no legal obligation or duty for the court to enforce.
Since Lickless was decided, three other Federal District Courts have also concluded that Rule 2080 does not create either Federal jurisdiction or give rise to a question of Federal law and therefore, as courts of limited jurisdiction, they lacked jurisdiction to hear cases in which registered representatives sought expungement of customer complaints. See Spalding v. FINRA, 2013 WL 1129396 (N.D. Ga., Mar. 19, 2013); Doe v. FINRA, 2013 WL 6099270 (C.D. Ca., Nov. 19, 2013); Flowers v. FINRA, 2015 WL 9487450 (S.D. Ca., Sept. 24, 2015). While the Massachusetts Superior Court is a court of general jurisdiction, each of these cases supports this court’s view that Rule 2080 does not create any substantive rights for a court to enforce or a private cause of action in which a registered representative could bring an action against some unidentified party, in addition to FINRA, so that his right to expungement could be adjudicated in an adversary proceeding. The court does not have subject matter jurisdiction to decide a case putatively brought under Rule 2080.
Although not mentioned in the Complaint, at oral argument the plaintiff stated that he was not proceeding under a right established by Rule 2080 (or any other statute), but rather under the Superior Court’s general equitable jurisdiction. In Hundley, the court addressed this possible basis for jurisdiction as well, even though it was not raised by the plaintiff in that case. It began by noting, that, in Lickless, after the Federal District Court remanded the case to the California Superior Court, that court dismissed it. The plaintiff registered representative appealed, and the
9
Court of Appeal reversed. See Lickliss v. Financial Industry Regulatory Authority, 208 Cal App. 4th 1125 (2012). Again, in Hundley, this court considered the implications of that opinion:
The Court of Appeal held that Lickliss did not only invoke Rule 2080 in requesting expungement, but also the court’s equitable powers. It noted, as had the Federal court, that Rule 2080(b)(1) is a procedural rule that governs when FINRA may waive the requirement that it be a party to court proceedings for expungement. The Court of Appeal commented that the facts alleged in the complaint supported Lickliss’ contention that the customer complaints against him were very old and stale. It then held as follows: “Exercising that right [to seek expungement] under a rule that provides no substantive criteria for delivering the remedy of expungement, Lickliss called upon the court’s inherent equitable powers to weigh the equities favoring expungement against the detriment to the public should expungement be granted. This is enough to pass demurrer.” Id. at 1135. There does not appear to be any record of what happened to Lickliss’ case thereafter.
As it did in Hundley, this court does not find that, under Massachusetts law, a court of general jurisdiction has the inherent equitable authority “to weigh equities favoring expungement against the detriment to the public should expungement be granted.” Indeed, the court has found no Massachusetts case in which a court has ordered expungement of a record maintained by a private entity. If FINRA had created a specific right to expungement in its rules, and then refused to expunge records when a registered representative allegedly had met all of the criteria for expungement, the registered representative might well be able to state a claim in the nature of breach of contract that could be adjudicated in a state court. As explained above, Rule 2080 does not do that.
If the court treats FINRA as if it were a government agency (it is certainly heavily regulated by the SEC), the court’s authority to order expungement, in the absence of a statute expressly prescribing that remedy is very limited. In Vacaro v. Vacaro, 425 Mass. 153 (1997), the Supreme Judicial Court addressed the question of whether a probation record recording the entry of a chapter 209A restraining order could be expunged on the motion of the defendant, when the order was vacated. The SJC reviewed the statutory scheme that required retention of c.
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209A records, but limited public access to them. It then explained that expungement was generally available only in two circumstances: (1) when the statutes that direct that certain records be kept also grant a court the power to expunge them (Id. at 157); and (2) when the government’s retention of a record violates a person’s due process rights.3 As noted, there is no statute, regulation or FINRA rule that directs expungement, rather Rules 2080, 12805, and 13805 only provide a mechanism for arbitration of a registered representative’s request that records be expunged.
Turning to the due process argument, the plaintiff is unable to establish that FINRA (if it constitutes a government actor in this regard) has violated the plaintiff’s due process rights. FINRA is not alleged to have taken any action in this case other than posting on BrokerCheck information that was provided to it by NYLife that reflects that the plaintiff’s customers made written complaints against him and NYLife settled the claims. FINRA played no role in the assertion of the complaints or their resolution. There is no allegation that FINRA took some action to cause NYLife to discharge the plaintiff or to prevent him from acting as a registered representative for some other broker-dealer. At worst, the posting of this information on a publicly available database might impair the plaintiff’s reputation among potential customers. However, proving an injury to reputation is insufficient to establish a due process violation under either the United States Constitution or Article 12 of the Massachusetts Declaration of Rights. As the SJC explained in Vacaro: “The United States Supreme Court has held that a person’s
3 Expungement of Chapter 209A orders has also been ordered where the wrong person was identified as the party defendant. See Commonwealth v. Alves, 86 Mass. App. Ct. 210 (2014). However, in the Complaint, the plaintiff alleges that the Customers were his customers at NYLife. Expungement has also been ordered where a restraining order entered as a result of a fraud on the court. See Commonwealth v. Adams, 65 Mass. App. Ct. 725 (2006). No court has played any role in the posting of the Customer complaints on BrokerCheck. It may also be noted that in the Appeals Court’s recent decision J.S.H. v. J.S., No. 15-P-1607 (March 1. 2017), the Court held that the “argument that the records should be expunged because there was insufficient legal or factual basis for the c. 258 order to have issued is without merit.” Slip Op. 4. That is, at best, what the plaintiff alleges in this case, i.e., the Customer complaints did not have any merit.
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reputation is not a protected liberty interest under the Fourteen Amendment to the United States Constitution unless ‘a right or status previously recognized by state law [is] distinctly altered or extinguished.’ Paul v. Davis, 424 U.S. 693, 711 (1976).” Id. at 160; see also n. 8 (“This analysis is referred to as the ‘stigma plus’ test for determining whether an injury to an individual’s reputation constitutes a deprivation of [protected] liberty or property interest.”). The SJC held that it would follow the teaching of Paul “in deciding whether art. 12 has been violated.” Id. at 161.
At oral argument, the plaintiff argued that he can meet the “stigma plus” test because he is now a registered representative of another broker-dealer, but subject to special supervision under a consent order that he entered into with the Securities Division. The plaintiff’s argument answers itself. He is subject to special conditions under a “consent order” that he agreed to enter into in connection with an adjudicatory proceeding before the Securities Division of the Office of the Secretary of State conducted pursuant to G.L. c. 110A, § 207A, with rights of appeal to the Superior Court under G.L. c. 30A, § 14. Even if that proceeding and consent order are related to any of the Customer complaints reported in BrokerCheck, he is not subject to any limitations in his work as a registered representative because they were reported in BrokerCheck. Indeed, he would have had to disclose those complaints when he applied for association with a new broker-dealer on Form U4 whether or not they were available to the public on BrokerCheck. And, if he wished to litigate the validity of any Customer complaint in that proceeding, he had a forum affording him due process in which to do so.
At argument, the plaintiff also placed great reliance on Police Comm’r of Boston v. Municipal Court of Dorchester Dist., 374 Mass. 640 (1978), but the case is not helpful to him. In that case, the SJC held that “a Juvenile Court [has the power] to issue appropriate orders
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[including expungement] ancillary to their existing statutory and common law jurisdiction.” Id. at 661 and n. 15. It explained that “where a juvenile proceeding has been terminated due to the absence of any evidence of delinquency, expungement would seem justified. . . . The power of a court in such circumstances is not dependent on its possession of general equity powers, but is an incident of and ancillary to the court’s original jurisdiction.” Id. at 662. (Internal citatations omitted, emphasis added) Police Comm’r of Boston does not support the plaintiff’s contention that the Superior Court has some free standing equitable jurisdiction to adjudicate a case in which a party claims that, on balance, equities favor the expungement of a record maintained by a state agency where no statute provides a right to seek expungment under identified standards and there is no due process violation associated with their retention.
Moreover, the plaintiff has an adequate remedy at law. Under FINRA rules 12805 and 13805, the plaintiff has the right to demand arbitration of his claim that the records of the Customer complaints should be expunged. In such an arbitration the adverse party would be NYLife, an entity with an obvious interest in contesting the allegations concerning its conduct averred in the Complaint, but which is not a defendant in this case. A review of the Complaint clearly demonstrates that the party against whom all of the plaintiff’s factual allegations are directed is NYLife, which allegedly solicited three of the Customers to lodge complaints against the plaintiff in connection with a vaguely described pyramid scheme perpetrated by the manager of its Boston office. Of course, the plaintiff cannot name NYLife as a defendant in this action because his application to be a registered representative of NYLife on Form U4, the uniform application for securities industry registration, includes a provision in which the applicant “agrees to arbitrate any dispute, claim or controversy that may arise between me and my firm, or a customer.” A court ought not reach to find equity jurisdiction to adjudicate a claim against
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FINRA, which is only the record custodian, as a means to circumvent the arbitration provisions that govern the resolution of claims that the plaintiff asserts against NYLife.4
Accordingly, this court holds that it does not have jurisdiction in equity to consider the plaintiff’s claim for expungement. And, even if equitable jurisdiction existed, the facts alleged, if true, would not support an order of expungement, and, therefore, the Complaint fails to state a claim.
ORDER
For the foregoing reasons, the defendants’ motions to dismiss are ALLOWED. Final Judgment shall enter dismissing the Complaint.
______________________
Mitchell H. Kaplan
Justice of the Superior Court
Dated: March 10, 2017
4 It may be noted that the plaintiff served the manager of NYLife with a subpoena to appear at a deposition on October 13, 2016, before the Amended Petition for Expungement was even filed on November 2, 2016, well knowing that FINRA would move to dismiss it. The court entered an order that the deposition not go forward until after the motion to dismiss was heard. read more

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Posted by Stephen Sandberg - April 4, 2017 at 10:24 am

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A.L. Prime Energy Consultant, Inc. v. Massachusetts Bay Transportation Authority (Lawyers Weekly No. 12-027-17)

COMMONWEALTH OF MASSACHUSETTS

SUFFOLK, ss.SUPERIOR COURT

CIVIL ACTION

  1. 1677CV01366

A.L. PRIME ENERGY CONSULTANT, INC.

vs.

MASSACHUSETTS BAY TRANSPORTATION AUTHORITY

MEMORANDUM OF DECISION AND ORDER ON

DEFENDANT’S MOTION TO DISMISS

In July 2016, defendant Massachusetts Bay Transportation Authority (MBTA) terminated its two-year fuel supply agreement with plaintiff A.L. Prime Energy Consultant, Inc. (Prime). The MBTA explained that thetermination was made pursuant to its exercise of a contractual right that permitted termination for convenience.The MBTA terminated the contract in order to take advantage of cost savings it believed it could achieve by purchasing fuel through the Commonwealth’s existing statewide fuel contract.  Prime alleges that the MBTA abused its discretion when it invoked the termination for convenience provision and that therefore the MBTA is liable for breach of contract and breach of the covenant of good faith and fair dealing.  The matter is now before the Court on the MBTA’s motion to dismiss pursuant to Mass. R. Civ. P. 12(b)(6).  For the reasons that follow, the motion is DENIED. read more

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Posted by Stephen Sandberg - March 31, 2017 at 8:34 pm

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Coren-Hall v. Massachusetts Bay Transportation Authority (Lawyers Weekly No. 11-015-17)

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-300                                        Appeals Court

ALEXIS D. COREN-HALL[1]  vs.  MASSACHUSETTS BAY TRANSPORTATION AUTHORITY.

No. 16-P-300.

Suffolk.     December 13, 2016. – February 23, 2017.

Present:  Milkey, Massing, & Sacks, JJ.

Practice, Civil, Presentment of claim under Massachusetts Tort Claims Act, Interlocutory appeal, Summary judgment.  Massachusetts Tort Claims Act.  Notice, Claim under Massachusetts Tort Claims Act.  Massachusetts Bay Transportation Authority, General manager. read more

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Posted by Stephen Sandberg - February 23, 2017 at 6:43 pm

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