Posts tagged "Corporation"

Smith, et al. v. Unidine Corporation (Lawyers Weekly No. 12-097-17)

COMMONWEALTH OF MASSACHUSETTS
SUFFOLK, ss. SUPERIOR COURT
CIVIL ACTION
Nos. 2015-2667 and 2015-3417
consolidated with No. 2016-3297 1
DONALD SMITH and MATTHEW ALES
vs.
UNIDINE CORPORATION
MEMORANDUM AND ORDER ON SUMMARY JUDGMENT
In this action under the Massachusetts Wage Act, G.L. c. 149, §§ 148, 150 (the “Act”),
the employer, Unidine Corporation, and plaintiffs, former employees, cross move for summary
judgment. The principal issue presented is whether the former employees are entitled to recover
for the non-payment of commissions and a bonus. The employer says they are not because of the
terms and conditions of the governing agreement for calculating and paying commissions and
bonuses. The former employees assert that they should be paid the commissions as a matter of
law under the Act.2
The resolution of the motion turns on both the terms and conditions of the written
agreement regarding commissions and bonuses as well as the terms of the Act. The Act requires
1 These actions are consolidated into the lead case, Civil Action No. 2016-3297 BLS1.
The plaintiff in No. 2016-3297 is Correna Lukas. Unidine and Lukas do not move for summary
judgment in the lead case.
2 Plaintiffs also assert claims for breach of contract, breach of the implied covenant of
good faith and fair dealing, and “quantum meruit/unjust enrichment.” All claims are for nonpayment
of commissions or bonus.
1
the timely payment of wages. Wages include commissions “when the amount of such
commissions . . . has been definitely determined and has become due and payable . . . .” Id. The
terms of the written agreement determine what has been “definitely determined” and what is “due
and payable.”
BACKGROUND
The following facts, drawn from the parties’ Statement of Undisputed Material Facts, are
undisputed.
Unidine is in the business of providing dining management services to institutional
clients such as hospitals, senior living facilities, universities, etc. Unidine employs Directors of
Business Development (“DBDs”) to sell the services of Unidine and to develop and maintain
relationships with client customers as the contracts with the client customers are performed.
Plaintiffs, Donald Smith and Matthew Ales, were employed by Unidine as DBDs.3
DBDs earn a base salary and are eligible to participate in Unidine’s 2014 Sales
Commission and Bonus Plan (the “Plan”) subject to its terms and conditions. DBDs, including
Smith and Ales, acknowledge and sign the Plan each year. All of plaintiffs’ claims arise under
the 2014 Plan. The Plan applies to contracts with client customers executed in 2014.
Smith began work at Unidine on April 14, 2014, as an at-will employee, in the position of
DBD. He was paid a base salary of $ 125,000 per year, and a signing bonus of $ 25,000. Smith
was terminated from employment on May 29, 2015.
Ales began work at Unidine on January 3, 2012, as an at-will employee, in the position of
3 Signed employment letters in the record indicate that Smith and Ales were employees
at-will and that Massachusetts law governs the agreements.
2
DBD. His base salary was $ 80,000 per year and was increased to $ 90,000 on January 1, 2015. In
February 2015, Ales voluntarily resigned from Unidine.
The Plan
The Plan provides for the payment of commissions to DBDs subject to its terms and
conditions, based upon obtaining and maintaining for one year a new client account for Unidine.
Under the Plan, “[c]ommissions will be earned ratably over a twelve (12) month period. As such,
commissions will be paid on a monthly basis over the first year following execution (signed by
both parties) of the contract and commencement of service by Unidine.” Plan ¶ E.4 The Plan
further provides that commission payments “shall commence following the end of the first full
month of the account’s operation.” Id.
Paragraph E of the Plan lists a number of contingencies that must occur before the first
commission payment is due. Among those contingencies are the following:
– execution of a signed contract
– planning and execution of a transition meeting by the DBD with the client and
Unidine operations personnel
– development of the first Unidine invoice to the client
– “invoicing and collection of Initial Payment . . . .” Id. at ¶ E 6 (emphasis in
original)
-completion of the Commission Worksheet and Commission Submittal Checklist.
The Plan recognizes that the DBD has a continuing interest in the successful performance
of the contract. For example, the Plan allows the company to terminate commission payments if
the customer fails to pay any Unidine invoice or accrues an account receivable in excess of the
payment terms. Also, if the new account is terminated prior to the completion of twelve (12)
4 This quotation is from the Plan executed by Smith. The Plan executed by Ales is slightly
different. It states “[c]ommissions will be earned and paid ratably over a twelve (12) month
period as described in this section.”
3
months of commission payments, “any commission payments made will be returned to the
company over the same number of months as paid as well as any bonus payments. During this
period, in the event the Director of Business Development leaves the company for any reason,
any commission and/or bonus balance due the company will be due immediately to the company
and may be used to off-set any compensation due.” Id.5 Moreover, both Smith and Ales testified
in their depositions to the effect that they worked closely with the operations staff and maintained
contact with the customer as part of their jobs.6
Finally, the Plan provides that “[t]o be eligible for Commission Payment or bonus the
participant must be employed by Unidine at the time the Commission Payment or bonus is
processed and paid as described in paragraph E – Commission Payment.” Plan, ¶ B.
With respect to the payment of either a quarterly or annual bonus, the Plan is sparse. In
two paragraphs, reference is made to another, unspecified, “plan” which appears to include goals
for revenue to be generated by the DBD (although there is no definition of how the revenue
targets are set or calculated). If the DBD exceeds the goals by certain percentages (e.g., 125%,
150%, 200%), the DBD is “eligible” for payment of the bonus. The Plan does not explicitly
reserve any discretion to the company or its officers as to whether the revenue goals were met or
exceeded.
5 The application of this provision requiring return of commissions is subject to the
discretion of the officers of the company.
6 In particular, Ales testified that maintaining relationships was “part of my job” and gave
the example of going to the location of a customer (Three Pillars) and staying there for two
months to “smooth things out” when operations were going poorly.
4
Facts With Respect to Smith
Smith’s sole claim is that he is owed a commission7 with respect to a single customer,
Southeast Missouri Hospital. It is undisputed that Smith was responsible for the sale of services
to the hospital and that he worked to get the operations team set up to have a successful and
smooth start-up and launch. The hospital signed a contract with Unidine on November 24, 2014,
but dining services were not commenced until March 22, 2015. The hospital paid the initial
advance payment on March 24, 2015, and paid the first monthly invoice under the contract on
April 20, 2015. After Smith’s employment was terminated8 on May 29, 2015, Unidine sent Smith
a check in an amount (Smith concedes) that represents the value of two months of commission
payments (April and May). No further commissions were paid to Smith. Accordingly, Smith’s
claim in this lawsuit is for commissions that he alleges would have been paid to him in the ten
months after his termination. In his memorandum in opposition to Unidine’s motion for summary
judgment (and in support of his cross-motion for summary judgment), Smith states “[w]hile
Smith was not employed at the time his commission payment was due, all other contingencies
were satisfied.” Plaintiffs’ Memorandum, p. 10.
Facts With Respect to Ales
Ales claims that he is owed commissions with respect to five (5) client customers of
Unidine. Ales also asserts that he is owed a bonus under the Plan for the year, 2014. The five
7Smith makes no claim for an unpaid bonus.
8 Unidine states that Smith was terminated because Smith failed to pursue a business
opportunity for the company and because of Smith’s weak sales pipeline and disagreements with
senior management. Smith contends that he was not given any reason for his termination. In any
event, Smith does not allege that the termination of his at-will employment was wrongful or
motivated by bad faith.
5
customers are Wellspring, Cedarbrook, Bethesda, Three Pillars and Presence Health. Unidine
concedes that Ales performed some work to obtain each of these accounts. The undisputed facts
regarding each of the customers, however, are the following.
Wellspring. The contract between Wellspring and Unidine was entered into on
September 30, 2015. Ales voluntarily left the employment of Unidine seven months earlier, on
February 18, 2015. No commission was paid to Ales.
Cedarbrook. While Cedarbrook entered into a contract with Unidine on September 22,
2014, the Cedarbrook facility that was the subject of the contract had not been built. Unidine
began to provide dining services at Cedarbrook on August 10, 2015, six months after Ales left
Unidine. At the time of Ales’ resignation, Cedarbrook had not made its initial payment under the
contract, a first invoice had not been developed and Ales had not completed a transition meeting
or commission worksheet. No commission was paid to Ales.
Bethesda. Bethesda entered into a contract with Unidine on September 30, 2014. Unidine
began providing services on October 18, 2014. Ales earned his first commission on this account
for the month of December 2014. He was also paid a commission on this account for the month
of January 2015. Ales resigned from employment on February 18, 2015, and was not paid a
commission for February or any subsequent month.
Three Pillars. This contract was entered into on February 20, 2014. Services began on
May 1, 2014. Ales was paid his first commission on this account in June 2014. He continued to
receive commission payments through January 2015. When Ales resigned in February 2015, he
was not paid commissions for February or any subsequent month.
Presence Health. Unidine entered into a dining service contract with Presence Health on
6
January 20, 2014. Ales began receiving commissions on this account in April 2014, and was paid
commissions earned for the months of April through November 2014. In 2014, Presence Health
fell behind on payments owed to Unidine under the contract. Pursuant to paragraph E of the Plan,
commissions were suspended in December 2014 and January 2015 (“Commission Payment shall
terminate at the earlier of any of the following events: . . . 3. Non-payment of any Unidine
invoices by the client during the twelve (12) month term of the Commission Payment.”).
Commission payments did not resume before Ales resigned. No commissions were paid to Ales
on this account after November 2014.
Ales also claims that he earned a bonus in 2014 under the terms of the Plan that was not
paid by Unidine. The dispute on this issue is whether Ales should receive credit for the sale of
the Presence Health account in the calculation of total sales to determine whether a bonus is
owed. Ales admits that without credit for the Presence Health account against his 2014 sales
plan, he does not qualify for any quarterly or annual bonus in 2014. According to the Affidavit of
Steven Servant, Unidine’s Senior Vice President, he informed Ales that the Presence Health sale
would not count toward Ales’ bonus eligibility in 2014. Servant avers that he made that decision
“pursuant to the discretion given me under the Plan.” Servant Aff. ¶ 42. Ales admits that he did
not include the Presence Health sale on his internal monthly reports of business sold in 2014, at
the direction of Servant. Ales denies, however, that he was told that Presence Health would not
be counted for purposes of his bonus calculation.
In sum, Smith seeks payment of commissions in the amount of $ 44,424. Ales seeks
payment of commissions in the amount of $ 139,412, and payment of a bonus for 2014 in the
amount of $ 30,000. To the extent the non-payment of the amounts is found to be in violation of
7
the Act, any award is subject to automatic trebling, and an award of reasonable attorney fees.
DISCUSSION
Summary judgment is appropriate where there are no genuine issues of material fact and
the moving party is entitled to judgment as a matter of law. Mass. R. Civ. P. 56(c); Cassesso v.
Commissioner of Corr., 390 Mass. 419, 422 (1983). In this case, the parties cross-move for
summary judgment. Accordingly, both sides assert that there are no disputes of fact
material to the resolution of the motions.
I. Wage Act Claims
The Wage Act, G. L. c. 149, § 148, requires employers to pay employees all earned wages
on a weekly or bi-weekly basis.9 Massachusetts courts generally recognize that the purpose of
this statute is to prevent the unreasonable detention of earned wages by employers. Weems v.
Citigroup, Inc., 453 Mass. 147, 150 (2009). The Wage Act does not, however, define the term
“wages.” Thus, courts have considered various kinds of compensation to determine whether the
compensation should be held to be a “wage” under the Act.
As referenced above, “commissions” are specifically recognized as being covered by the
Act. G.L. c. 149, § 148, ¶ 4. Thus, commissions must be timely paid to an employee “when the
amount of such commissions, less allowable or authorized deductions, has been definitely
determined and has become due and payable.” Id. To be “definitely determined” a commission
must be “arithmetically determinable.” Wiedmann v. The Bradford Group, Inc., 444 Mass. 698,
708 (2005). Commissions are “due and payable” when “any contingencies relating to their
9 The Wage Act includes some exceptions to this general requirement, e.g., executive and
professional employees may request payment on a monthly basis.
8
entitlement have occurred.” McAleer v. Prudential Insurance Co. Of Am., 928 F. Supp. 2d 280,
288 (D. Mass. 2013)(quoting cases). Accordingly, a court applies the terms of the contract to
determine whether the commission is “definitely determined” and “due and payable.” Gallant v.
Boston Executive Search Assoc., Inc., 2015 WL 3654339, *7 (D. Mass. 2015).
A bonus that is discretionary or contingent upon the employee remaining with the
company for a defined period of time has been held not to be a wage under the Act. Weems, 453
Mass. at 153-154, citing Harrison v. Net Centric Corp., 433 Mass. 465, 466, 473
(2001)(compensation that vests over time is not earned until contingency of continued
employment is met); see also Sheedy v. Lehman Bros. Holdings Inc., 2011 U.S. Dist. LEXIS
131003 (D. Mass. 2011) (where bonus payment is contingent upon continued employment,
payment is not a “wage” under the Act).
A. Claim by Smith
Smith sold services to Southeast Missouri Hospital which made him eligible to receive
commissions. In fact, Unidine paid Smith the commissions owed for the two months following
the date when the commissions first became due and payable. At that point, Smith’s employment
with Unidine was terminated for reasons unrelated to Southeast Missouri Hospital.
Smith argues that commissions are due and payable to him for the following ten months
of the contract with Southeast Missouri Hospital even though he was no longer employed by
Unidine and could no longer provide any ongoing maintenance of the relationship between
Unidine and Southeast Missouri Hospital. He contends that the provision of the Plan that makes
a person ineligible to receive commissions after his employment is terminated is a “special
contract” that is prohibited by the Act. He relies on a recent case decided by the United States
9
District Court, applying the Act: Israel v. Voya Institutional Plan Services, LLC, 2017 WL
1026416 (D. Mass. 2017). In Israel, the Court granted summary judgment in favor of the
employee holding that commissions earned under the terms of a plan cannot be withheld based
upon the contract provision requiring the employee to be employed at the time of payment.
Unfortunately for Smith, the facts in his case are significantly different than the facts of
Voya. The key finding in Voya was that the commissions were “definitely determined” and “due
and payable” for past services provided before the termination of employment. Id. at *7. That the
commissions were not paid (as opposed to payable) at the time of the employee’s termination of
employment was because of the plan’s provision mandating payment following the third month
“after the month that production activity occurred.” Id. at *2. Thus, the Court found that the Act
prohibits a contract provision that would relieve an employer of the obligation to pay an earned
commission based solely on whether the employee remained employed on the date the company
elects to issue payment. In contrast to Voya, Smith’s claim fails because the commissions he
seeks were not earned and therefore were not “due and payable.”10
The Plan provides that commissions are earned ratably over a twelve month period. The
dictionary meaning of “ratably” is “apportioned.” Webster’s Ninth New Collegiate Dictionary
(1991). Giving the words of the contract their common sense meaning, it is beyond argument
that commissions were “earned” by the DBD each month as he performed or was available to
perform services in aid of the contract. This reading is consistent with the testimony of Smith and
10 Likewise, Perry v. Hampden Engineering Corp., 90 Mass. App. Ct. 1109 (2016) (Rule
1:28 Memorandum and Order), relied upon by plaintiffs, is inapposite. The commission payment
recovered in Perry was earned, and thus due and payable, prior to the date of termination of
employment.
10
Ales as to their ongoing obligations to the client customers. Likewise, Unidine’s Senior Vice
President (Steven Servant) described in his affidavit the ongoing responsibilities of a DBD as the
reason for requiring the commissions to be earned ratably over the twelve month period. Finally,
the Plan’s terms regarding the suspension of commissions when the client customer fails to pay
invoices and the possible retrieval of paid commissions if the new account is terminated during
the twelve month period further support the conclusion that commissions are earned each month
when, with the ongoing maintenance by the DBD, the customer account is fully performing.
Therefore, under the Plan governing the payment of commissions to both Smith and Ales
a commission is not earned when the DBD is no longer employed. Because there is no earned
commission after the termination of employment, a commission is not “due and payable” as
required for recovery of an unpaid commission under the Act.11 In the case of Smith, that means
that he is not entitled to the commission payments sought in his complaint. Summary judgment
dismissing Smith’s complaint is required.
B. Claim by Ales
Ales claims commissions are owed to him with respect to five client customers. Three of
those customers (Bethesda, Three Pillars and Presence Health) present the identical legal issue
discussed above with respect to Smith. That is that commissions were paid to Ales by
Unidine for the period of time before he terminated his employment. Thus, Ales was paid
11 Unidine advances the additional argument that commissions for months after the
termination of employment of a DBD are also not “definitely determined” as required by the Act.
The argument is based on the possibility that the client customer may change its food
requirements, eliminate a facility or otherwise take steps to reduce its invoice from Unidine. If
the amount collected from the client customer changes, then the commission changes. I view this
as further evidence in support of the conclusion that commissions are earned by the DBD each
month he performs services.
11
commissions for what he earned. He seeks, however, to be paid for commissions for the time
after he stopped performing services to Unidine and its client customers when he left the
employment of Unidine. Because such unpaid commissions were not earned and, therefore, not
“due and payable” there can be no recovery under the Act.
Ales’ claims for commissions with respect to Wellspring and Cedarbrook also fail. In
both cases, no commissions were earned even for the time before Ales left the company because
the Plan required an executed contract and the commencement of services before a commission
could be earned. Unidine did not have a contract (in the case of Wellspring) and did not begin to
provide services (in the case of Wellspring and Cedarbrook) until after Ales left employment.
Accordingly, Ales’ claims for commissions under the Act must be dismissed.
II. Claims for Breach of Contract, Implied Covenant of Good Faith and Fair Dealing and
Quantum Meruit
A. Commissions
The conclusion that commissions were not earned and due and payable to Smith and
Ales under the terms of the Plan necessarily resolves plaintiffs’ claims for breach of contract. If
commissions were not owed to Smith and Ales under the contract terms of the Plan, there also
cannot be a claim for breach of the implied covenant of good faith and fair dealing because to
allow such a claim would be, in effect, to re-write the partes’ contract. The implied covenant in
every contract protects the parties’ reasonable expectations under the contract but does not
“create rights and duties not otherwise provided for.” Bohne v. Computer Associates Intern. Inc.,
514 F. 3d 141, 143 (1st Cir. 2008), quoting Uno Restaurants, Inc. v. Boston Kenmore Realty
Corp., 441 Mass. 376, 385 (2004). Similarly, “[r]ecovery in quantum meruit presupposes that no
12
valid contract covers the subject matter of a dispute. Where such a contract exists, the law need
not create a quantum meruit right to receive compensation for services.” Boswell v. Zephyr
Lines, Inc., 414 Mass. 241, 250 (1993).
Smith makes clear in his Third Amended Complaint that he does not allege wrongful
termination of his employment. He avers that “while not terminated in bad faith, [he] was not
terminated with good cause.” Id. at ¶ 45. Moreover, the application of the implied covenant of
good faith and fair dealing as described in Gram v. Liberty Mutual Ins. Co., 391 Mass. 333. 335
(1984) protects only an employee’s right not to be deprived of compensation for past services.
Because plaintiffs were not denied compensation for past services under the terms of the Plan,
their claims for commissions alleging breach of contract, breach of the implied covenant and
quantum meruit fail.
B. Ales’ Claim for Bonus
At oral argument, counsel for Ales stipulated that Ales’ claim for an unpaid bonus does
not arise under the Wage Act. Instead, he maintains this claim under theories of breach of
contract, breach of the implied covenant of good faith and fair dealing, and quantum meruit.
Unlike the claims for unpaid commissions, Ales’ claim for an unpaid bonus raises a
genuine issue of material fact that precludes summary judgment. The fact issue presented is
whether, in the calculation of the bonus for 2014, Ales was entitled to have the company include
the revenue received from the Presence Health account. Unidine admits that if the Presence
Health contract had counted towards Ales’ sales quota, he would have been eligible to receive
bonus payments under the Plan. Unidine argues, however, that its management determined that
Presence Health should not be counted in the bonus calculation and that Ales was so informed.
13
Ales disputes that he was told that Presence Health would not be counted in his bonus
calculation. In his affidavit, Ales states that “I had no reason to believe that Presence Health
would not be counted towards my bonus threshold.”
Unidine argues that it had the discretion under the Plan to determine which accounts
would be counted for purposes of calculating a DBD’s bonus. When asked at oral argument to
identify the provision in the Plan upon which Unidine relies for such discretion, Unidine’s
counsel pointed to ¶ R:
Amendments, Revisions and Interpretation of the Plan: The President & CEO
of Unidine is the sole interpreter and arbitrator of the general and specific
provisions of the Plan and has the right to amend, withdraw, and modify The [sic] Plan at any time without notice.
As can be seen, this paragraph does not give Unidine the explicit discretion to refuse to pay a
bonus that was otherwise earned under the Plan. To the extent ¶ R attempts to reserve to
management the right to “interpret”, “withdraw” or “modify” the Plan, such power must be
viewed in the light of the implied covenant of good faith and fair dealing inherent in every
contract.
The Plan states that DBDs will be “eligible” for quarterly and annual bonus payments by
achieving 100% or more of a certain amount. While not explicitly stated, the amount which is the
base for calculating the bonus appears to be the “gross operating budget” for the client customer.
The Plan states that “[o]nly signed, opened accounts, including add-ons, will count toward
achievement of plan for both quarterly and annual bonuses.” Plan ¶ L. Other then those
conditions, the Plan says nothing further about how the client customer’s “gross operating
budget” is calculated or attributed to a DBD. In sum, the summary judgment record is
14
insufficient to determine, as a matter of law, whether Ales earned a bonus. Ultimately, whether
Ales is entitled to a bonus will depend on the parties’ understanding of the terms of the Plan and
the reasonable expectations of the parties as to how the bonus calculations were to be made.
Summary judgment must be denied with respect to Ales’ claim for a bonus based on breach of
contract and breach of the implied covenant of good faith and fair dealing.12
CONCLUSION
Unidine’s motion for summary judgment will be ALLOWED, in part, and DENIED, in
part. The motion is ALLOWED (a) to dismiss all claims by Smith in Civil Action No. 2015-
2667,13 and (b) to dismiss the Wage Act claim and all other claims for unpaid commissions by
Ales in Civil Action No. 2015-3417. The motion is DENIED with respect to the claim by Ales
for an unpaid bonus based upon breach of contract and the implied covenant of good faith and
fair dealing. Plaintiffs’ cross-motion for partial summary judgment is DENIED.
By the Court,
Edward P. Leibensperger
Justice of the Superior Court
Date: July 25, 2017
12 Ales’ bonus claim based on quantum meruit must be dismissed because the claim is
governed by contract principles. York v. Zurich Scudder Investments, Inc., 66 Mass. App. Ct.
610, 619 (2006).
13 Final judgment may enter in Civil Action No. 2015-2667, all claims having been
resolved.
15

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Posted by Stephen Sandberg - August 4, 2017 at 11:22 pm

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Commonwealth of Massachusetts ex rel. Kelly, et al. v. Novartis Pharmaceuticals Corporation, et al. (Lawyers Weekly No. 12-098-17)

COMMONWEALTH OF MASSACHUSETTS

SUFFOLK, ss SUPERIOR COURT

CIVIL ACTION

  1. 2016-03107-BLS1

COMMONWEALTH OF MASSACHUSETTS,

EX REL., ALLISON KELLY AND FRANK GARCIA

vs.

NOVARTIS PHARMACEUTICALS CORPORATION & Others1

1 Novartis Corporation and Genentech, Inc.

2 The District Court’s order actually dismissed the state claims with prejudice, notwithstanding its declination of jurisdiction over them. The First Circuit reversed that part of the District Court’s decision.  It observed that while the District Court could have dismissed the state claims based on the same reasoning applied to the federal claims had it retainedjurisdiction, once it declined jurisdiction, it was required to dismiss the state claims

MEMORANDUM OF DECISION AND ORDER ON

DEFENDANT’S MOTION TO DISMISS

RELATORS’ FIRST AMENDED COMPLAINT

Allison Kelly and Frank Garcia (Relators) brought qui tam actions against Genentech, Inc. (Genentech) and Novartis Pharmaceuticals Corporation (Novartis) in federal district court in Massachuesetts under the Federal False Claims Act (FCA), 31 U.S.C. § 3729 et seq., the Massachusetts False Claims Act (MFCA), G. L. c. 12, § 5B(a)(1)-(10), and several other analogous state statutes.  The federal claims asserted in their complaints were dismissed by the District Court for failure to plead the alleged fraud with the specificity required by Fed. R. Civ. P. 9(b).  See U.S. ex rel. Garcia v. Novartis  Pharm. Corp.,91 F. Supp. 3d 87 (D. Mass. 2015).  The dismissal was affirmed by the First Circuit Court of Appeals.  See U.S. ex. rel. Kelly v. Novartis Pharm. Corp.,827 F. 3d 5 (1stCir. 2016) (Kelly).  While the Relators’ FCA claims were dismissed with prejudice, their state claims were dismissed without prejudice because the District Court declined to exercise supplemental jurisdiction over them.2 The Relators then filed

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Posted by Stephen Sandberg - August 4, 2017 at 9:01 am

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Cave Corporation v. Conservation Commission of Attleboro (Lawyers Weekly No. 11-088-17)

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-944                                        Appeals Court

CAVE CORPORATION  vs.  CONSERVATION COMMISSION OF ATTLEBORO.

No. 16-P-944.

Plymouth.     April 6, 2017. – July 14, 2017.

Present:  Green, Blake, & Lemire, JJ.

Municipal Corporations, Conservation commission, By-laws and ordinances.  Wetlands Protection Act.

Civil action commenced in the Superior Court Department on January 9, 2015.

The case was heard by Richard J. Chin, J., on a motion for judgment on the pleadings, and a motion for clarification or reconsideration was considered by him.

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Posted by Stephen Sandberg - July 14, 2017 at 7:19 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
– 2 –
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.
– 3 –
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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Massasoit Industrial Corporation v. Massachusetts Commission Against Discrimination, et al. (Lawyers Weekly No. 11-031-17)

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-459                                        Appeals Court

MASSASOIT INDUSTRIAL CORPORATION  vs.  MASSACHUSETTS COMMISSION AGAINST DISCRIMINATION & another.[1]

No. 16-P-459.

Plymouth.     December 7, 2016. – March 23, 2017.

Present:  Cypher, Maldonado, & Blake, JJ.

Handicapped PersonsAnti-Discrimination Law, Handicap, Age, Employment, Termination of employment.  Employment, Discrimination, Termination.  Massachusetts Commission Against DiscriminationEmotional DistressDamages, Emotional distress.  Words, “Handicap.”

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Posted by Stephen Sandberg - March 23, 2017 at 3:45 pm

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Barrasso v. New Century Mortgage Corporation, et al. (Lawyers Weekly No. 11-010-17)

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

15-P-1458                                       Appeals Court

WILLIAM T. BARRASSO, JR.  vs.  NEW CENTURY MORTGAGE CORPORATION & others.[1]

No. 15-P-1458.

Suffolk.     October 20, 2016. – February 8, 2017.

Present:  Hanlon, Sullivan, & Blake, JJ.

Real Property, Mortgage, Record title.  Mortgage, Foreclosure, Real estate, Assignment.  AssignmentContract, Assignment, Modification.  Negotiable Instruments, Assignment, Note.  Practice, Civil, Summary judgment. Estoppel.

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Posted by Stephen Sandberg - February 8, 2017 at 5:21 pm

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G4S Technology LLC v. Massachusetts Technology Park Corporation (Lawyers Weekly No. 12-007-17)

COMMONWEALTH OF MASSACHUSETTS

 

SUFFOLK, ss                                                                                               SUPERIOR COURT

CIVIL ACTION

  1. 2014-02998-BLS2

 

 

G4S TECHNOLOGY LLC,

Plaintiff,

 

vs.

 

MASSACHUSETTS TECHNOLOGY PARK CORPORATION,

Defendant.

 

MEMORANDUM OF DECISION AND ORDER ON

DEFENDANT’S MOTION FOR SUMMARY JUDGMENT

            This is a contract-based dispute arising from a state and federally-funded project to design and construct a fiber optic network in western Massachusetts.  Plaintiff G4S Technology LLC (G4S), the design-builder on the project, instituted the lawsuit claiming that  the defendant Massachusetts Technology Park Corporation (MTPC) wrongfully denied a $ 10.1 Million “Request for Adjustment” claim and  improperly withheld an additional $ 4.1 Million based on unfounded claims of late delivery and poor quality of work.  MTPC counterclaimed, alleging   fraud and violation of Chapter 93A.[1]  In an earlier decision, this Court allowed MTPC’s motion for summary judgment as to G4S’s claims, relying on appellate case law which held that an intentional breach by one of the parties to a contract prevented it from recovering on its own contract-based claims so long as that breach was not de minimis.  See Memorandum of Decision and Order dated March 29, 2016 (the March 2016 Decision).

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Posted by Stephen Sandberg - February 2, 2017 at 3:56 am

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Murby, et al. v. Children’s Hospital Corporation (Lawyers Weekly No. 12-166-16)

COMMONWEALTH OF MASSACHUSETTS
SUFFOLK, ss. SUPERIOR COURT.
1684CV01213-BLS2
____________________
GUSTAVE H. MURBY, and Others1
v.
CHILDREN’S HOSPITAL CORPORATION, doing business as Boston Children’s Hospital, and Others2
____________________
MEMORANDUM AND ORDER ALLOWING FURTHER MOTION BY CHILDREN’S HOSPITAL CORPORATION TO DISMISS THIS ACTION
Plaintiffs brought suit in an effort to stop Boston Children’s Hospital from erecting a new clinical building on the site of the Prouty Garden, which they and many others value as a quiet sanctuary for Hospital patients and their families. In their amended complaint Plaintiffs allege that the Hospital illegally began site preparation and other construction work required for its proposed Boston Children’s Clinical Building (the “BCCB”) without first obtaining approval from the Department of Public Health (“DPH”) under the determination of need (“DoN”) law, G.L. c. 111, §§ 25B-25G. Plaintiffs also allege that the Hospital’s DoN application for the BCCB project improperly excluded the costs of certain renovation projects that the Hospital has already started or completed at its main campus in the Longwood medical area of Boston, and of a planned expansion of the Hospital’s Waltham campus.
The Court previously ordered that all claims against defendants Suffolk Construction Company, Inc., Turner Construction Company, and the Commissioner of the Massachusetts Department of Public Health be dismissed without prejudice because they are not proper or necessary parties.
The Hospital now moves to dismiss the rest of the case on the grounds that it became moot when DPH approved the Hospital’s DoN application. The Court will ALLOW that motion, and dismiss this case without prejudice, because it agrees that the claims asserted in this action are now moot. It will also declare the rights of the
1 Anne C. Gamble, Walter J. Gamble, M.D., Stephen Gellis, M.D., Loring Conant, Jr., M.D., Louise Conant, Brian Greenberg, Peggy Greenberg, Karen d’Amato, Neil Dinkin, Christine Barensfeld, and John W. Hagerman.
2 Suffolk Construction Company, Inc., Turner Construction Company, and Commissioner of the Massachusetts Department of Public Health.
– 2 –
parties with respect to one of the legal issues raised in the amended complaint. The Court takes judicial notice of the two DPH letter decisions that are attached to the Hospital’s memorandum of law: the October 27, 2016, letter decision in which DPH approved the Hospital’s DoN application, and the June 3, 2016, letter decision in which DPH rejected claims that certain ongoing or now completed renovations at the Longwood campus were part of the BCCB project and thus required DoN approval.3
The amended complaint asserts three general categories of claims, all of which are now either moot, must be pursued as part of the c. 30A appeal from the final decision by DPH, or raise a pure question of law that can be resolved at this time.
First, the main thrust of Plaintiffs’ amended complaint is their claim that it would be unlawful for the Hospital to destroy the Prouty Garden and use that land as part of the footprint for a new clinical building without first obtaining DoN approval for that BCCB project. Now that DPH has granted the very approval that Plaintiffs say was required, that part of the complaint is moot. Cf. Tusino v. Zoning Bd. of Appeals of Douglas, 90 Mass. App. Ct. 89, 92 (2016) (action seeking to compel building commissioner to order that house be removed became moot once local board of appeal ordered removal of house). A group of individuals that includes most of the Plaintiffs in this case recently filed a new lawsuit challenging DPH’s approval of the Hospital’s DoN application under G.L. c. 30A, § 14. Since that second lawsuit is the proper place to litigate any claims that the DoN approval was unlawful for some reason, this action “is properly dismissed as moot.” See Olmstead v. Department of Telecommunications and Cable, 466 Mass. 582, 592-593 (2013).
Second, Plaintiffs seek a declaration that the Hospital acted illegally by spending money to prepare to demolish the Wolbach Building, in order to make way for the planned new clinical building, before the Hospital obtained DoN approval for the project as a whole. Plaintiffs also seek monetary penalties against the Hospital for this alleged violation under G.L. c. 111, § 25G. As explained in prior decisions in
3 The Court may consider these DPH decisions in deciding the pending motion to dismiss because they are matters of public record and their authenticity is not in dispute. See Schaer v. Brandeis Univ., 432 Mass. 474, 477 (2000) (“matters of public record”); Simmons v. Galvin, 575 F.3d 24, 30 n.5 (1st Cir. 2009), cert. denied, 131 S.Ct. 412 (2010) (“documents the authenticity of which is not disputed”).
– 3 –
this case, DPH expressly authorized the Hospital to begin working on the demolition of the Wolbach Building before obtaining DoN approval for the larger BCCB project, subject to the condition that the cost of that work must be included in the “maximum capital expenditure” addressed by the Hospital’s DoN application for the larger project. DPH did so because it found that the Hospital would have to take down the Wolbach Building whether or not it used that site for a project subject to DoN approval.
Plaintiffs’ claim that DPH lacked statutory authority to allow the Hospital to incur certain site preparation costs before obtaining DoN approval, subject to the condition that the site could not be used for a new clinical building unless those expenses received retroactive DoN review and approval—and that the Hospital therefore acted illegally when it incurred those costs without prior DoN approval—raises a pure question of law that can be resolved on a motion to dismiss. See, e.g., Massachusetts Federation of Teachers, AFT, AFL-CIO v. Board of Educ., 436 Mass. 763 (2002). Since Plaintiffs have standing and there is an actual controversy between the remaining parties regarding whether the Hospital acted lawfully in spending money to prepare to demolish the Wolbach Building before obtaining DoN approval to build a new clinical facility, the Court is obligated to declare the rights of the parties as to this issue. See, e.g., Attorney General v. Kenco Optics, Inc., 369 Mass. 412, 418 (1976); Gennari v. City of Revere, 23 Mass. App. Ct. 979 (1987) (rescript).
DPH has ample authority and discretion to allow a DoN applicant to proceed in this manner, under circumstances like these, even though the DoN statute does not expressly contemplate that DoN approval may be granted after a limited amount of site preparation work on a construction project has already been completed. “In enacting the determination of need statute, the Legislature intended the department to have a major role in ‘defining the contours of the statute, and in considering its applicability on an ad hoc basis to projects that did not fit traditional norms.’ ” Shoolman v. Health Facilities Appeals Bd., 404 Mass. 33, 37 (1989), quoting Brookline v. Medical Area Serv. Corp., 8 Mass. App. Ct. 243, 254 (1979). The DoN statute only requires DPH review and approval for any “substantial capital expenditure” to construct any health care facility. See G.L. c. 111, § 25C. It is
– 4 –
undisputed that the minimum capital expenditure by hospitals requiring DoN approval from October 1, 2015, through September 30, 2016, was $ 17,826,988. See Amended Complaint ¶¶ 13-14.4 The amended complaint does not allege any facts plausibly suggesting that the Hospital incurred project-related costs in excess of $ 17.8 million before obtaining DoN approval.
As a result, Plaintiffs have not stated a viable claim that the Hospital acted unlawfully in spending some money to prepare to demolish the Wolbach Building without first obtaining DoN approval, subject to retroactive DoN review and approval before using that site to construct a new clinical facility—all as expressly authorized by DPH. Cf. Lopez v. Commonwealth, 463 Mass. 696, 701 (2012) (to survive motion to dismiss under Mass. R. Civ. P. 12(b)(6), complaint must allege facts that, if true, would “plausibly suggest[] … an entitlement to relief.”) (quoting Iannacchino v. Ford Motor Co., 451 Mass. 623, 636 (2008), and Bell Atl. Corp. v. Twombly, 550 U.S. 544, 557 (2007)).
“Where, as here, the scope of agency authority is at issue, [a court] must determine whether the agency is acting within ‘the powers and duties expressly conferred upon it by statute and such as are reasonably necessary to carry out its mission.’ ” Entergy Nuclear Generation Co. v. Department of Envtl. Prot., 459 Mass. 319, 331 (2011), quoting Morey v. Martha’s Vineyard Comm’n, 409 Mass. 813, 818 (1991). Powers granted by the Legislature to an administrative agency like DPH “include those necessarily or reasonably implied” by the statute as a whole. Alliance to Protect Nantucket Sound, Inc. v. Department of Pub. Utils., 461 Mass. 166, 187 (2011), quoting Grocery Mfrs. of Am., Inc. v. Department of Pub. Health, 379 Mass.
4 The Court takes judicial notice that this threshold rose to $ 18,065,167 effective September 30, 2016. See Department of Public Health memorandum titled “Annual Adjustments to Determination of Need (DoN) Expenditure Minimums,” dated November 28, 2016, at http://www.mass.gov/eohhs/docs/dph/quality/don/min-expenditure.pdf. See also Commonwealth v. Greco, 76 Mass. App. Ct. 296, 301 n.9, rev. denied, 457 Mass. 1106 and 458 Mass. 1105 (2010) (court may take judicial notice of facts “capable of accurate and ready determination by resort to resources whose accuracy cannot reasonably be questioned” (quoting Mass. Guide Evid. § 201(b)(2)); Cohen v. Assessors of Boston, 344 Mass. 268, 269 (1962) (taking notice of Appellate Tax Board rules); Katz v. Katz, 55 Mass. App. Ct. 472, 479 n.9 (2002) (taking notice of poverty guidelines issued by federal Secretary of Health & Human Services).
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70, 75 (1979). Thus, the DoN statute, like any statute that expressly authorizes an administrative agency to make particular decisions or take other actions, “carries with it by implication all incidental authority required for the full and efficient exercise of the power conferred. The Legislature need not enumerate nor specify, definitely and precisely, each and every ancillary act that may be involved in the discharge of an official duty.” New England Med. Ctr., Inc. v. Rate Setting Comm’n, 384 Mass. 46, 52–53 (1981), quoting Scannell v. State Ballot Law Comm’n, 324 Mass. 494, 501 (1949). For example, statutory authority for a state agency to take some action implicitly includes the power to issue a nunc pro tunc order that takes effect at an earlier time, to prevent a miscarriage of justice or for other good cause. Almeida Bus Lines, Inc. v. Department of Pub. Utils. 348 Mass. 331, 339 (1965). Similarly, DPH has the implicit statutory authority to allow a hospital to incur initial capital expenditures that do not exceed the “expenditure minimum” that triggers DoN review, and then retroactively review and approve those initial expenditures as part of its review of a larger capital project.
Third, Plaintiffs allege that the Hospital’s DoN application was incomplete because it failed to include all of the costs of demolishing the Wolbach building, costs of renovation projects at the Longwood campus that Plaintiffs allege were undertaken in order to prepare for the BCCB construction, or costs associated with construction planned at the Hospital’s Waltham campus. To the extent that the amended complaint sought injunctive relief requiring the Hospital to amend its DoN application to add those costs, that claim is now moot because DPH has taken final action on that application. To the extent that Plaintiffs instead allege that DPH could not lawfully approve the DoN application without considering additional costs that the Hospital failed to disclose, that claim must be raised in the separate lawsuit brought under c. 30A to challenge DPH’s decision. Plaintiffs are not entitled to seek declaratory relief in this action to assert a claim of error that must be raised in an action brought under c. 30A. Before the DPH issued its final decision, there was not yet any “actual controversy” regarding this claim that was capable of resolution under G.L. c. 231A, the declaratory judgment statute. See Town of Hingham v. Department of Housing and Community Development, 451 Mass. 501, 505-506 (2008). Now that
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DPH has taken final action, its decision may only be challenged under c. 30A in the other pending action, not through a claim for declaratory relief under G.L. c. 231A in this case. “[O]ne who is prosecuting in one court an appeal under the administrative procedure act may not of right circumvent that appeal by filing [or pursuing] a separate proceeding for declaratory relief[.]” Cennami v. Department of Pub. Welfare, 5 Mass. App. Ct. 403, 408 (1977).
In sum, since this action is now moot, Plaintiffs’ claims must be dismissed without prejudice, except as to the one issue on which the Court must declare the rights of the parties. See Hadge v. Second Federal Sav. & Loan Ass’n of Boston, 355 Mass. 782 (1968) (rescript).
ORDER
The motion by Children’s Hospital Corporation to dismiss this action is ALLOWED. Final judgment shall enter: (1) declaring that Children’s Hospital Corporation did not violate G.L. c. 111, §§ 25B-25G, the so-called determination of need statute, by incurring certain expenditures to prepare to demolish the Wolbach Building before obtaining approval from the Department of Public Health to construct a new clinical building at that site; and (2) dismissing all other claims without prejudice.
December 1, 2016
___________________________
Kenneth W. Salinger
Justice of the Superior Court

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Posted by Stephen Sandberg - December 9, 2016 at 2:29 pm

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OBP Corporation v. Welch Allyn, Inc. (Lawyers Weekly No. 12-156-16)

COMMONWEALTH OF MASSACHUSETTS
SUFFOLK, ss. SUPERIOR COURT
CIVIL ACTION
NO. 2016-01496-BLS1
OBP CORPORATION d/b/a OBP MEDICAL
vs.
WELCH ALLYN, INC.
MEMORANDUM OF DECISION AND ORDER ON
WELCH ALLYN, INC.’S MOTION TO DISMISS
PLAINTIFF’S FIRST AMENDED COMPLAINT
Defendant, Welch Allyn, Inc., allegedly misappropriated confidential business
information belonging to plaintiff OBP Corporation. The confidential business information was
a list of OBP’s customer names, along with confidential sales information. Welch Allyn obtained
the confidential information from Owens & Minor, Inc., OBP’s primary distributor. Welch
Allyn allegedly used the confidential business information to craft a marketing plan intended to
steal OBP’s customers and to eliminate OBP as a competitor in the market for a selfilluminating,
disposable vaginal speculum. Welch Allyn now moves to dismiss OBP’s First
Amended Complaint (Amended Complaint) pursuant to Mass. Civ. P. 12(b)(6). For the reasons
that follow, the motion is DENIED.
BACKGROUND
The following comes from the allegations, taken as true, in OBP’s Amended Complaint.
OBP sells a variety of medical examination instruments to hospitals and physician
offices, including a self-illuminating disposable vaginal speculum. It generates its customers
through direct marketing and sales efforts, and sells its products by entering into pricing
agreements directly with individual customers and with group purchasing organizations (GPOs)
acting on behalf of hospital systems and/or physician’s offices. The individual customer
agreements identify OBP’s customers and the prices OBP negotiated directly with them.
Similarly, the GPO agreements identify the prices OBP negotiated with the GPOs and include
provisions indicating that the terms of the agreement are confidential.
Since June 2011, OBP has used Owens & Minor to fulfill orders from OBP’s customers.
In connection with this service, Owens & Minor stocks its distribution centers with OBP
products. Owens & Minor orders products directly from OBP at an agreed upon unit price based
on demand from OBP’s customers. When Owens & Minor fulfills customer orders, it charges
customers according to the terms set forth in OBP’s pricing agreements with the customers.
OBP reimburses Owens & Minor through “rebates” for any difference between that price and the
fixed price Owens & Minor pays to OBP. As part of this process, OBP provides copies of the
relevant pricing agreements to Owens & Minor. In return for its fulfillment services, OBP pays
Owens & Minor an administrative fee.
Owens & Minor operates pursuant to a Code of Honor, made publicly available on its
website, in which it states that the customer and sales information of suppliers like OBP will not
be disclosed to third parties and will only be used for purposes of effectuating the parties’
business relationship. The Code of Honor specifically provides that:
[a]ll Company records and information related to the Company, its customers,
suppliers and teammates is confidential … [and] no teammate or director of the
2
Company may provide or disclose confidential or proprietary information to anyone
outside the Company (or even within the Company except to teammates who need
to know such information to perform their work) or use such information other than
in conducting the Company’s business.
Code of Honor at 9. The Code defines “confidential information” as “any information that has
not been disclosed to the public” including “customer lists, contracts, pricing and purchase
information,” “supplier lists, contracts, pricing and product information,” and “all written or
verbal agreements between the Company and its teammates, customers, suppliers, strategic
partners, agents and other third parties.” Id. at 9-10.
In November 2014, Welch Allyn, a global manufacturer of medical diagnostic equipment,
introduced a self-illuminating disposable vaginal speculum that competes with OPB’s product.
About a month before it did so, Welch Allyn obtained from Owens & Minor a spreadsheet
referred to as an “opportunity report.” The opportunity report lists OBP’s customer and sales
information associated with OBP’s vaginal speculum. The report specifically identified the
names and addresses of 582 customers who had ordered OBP’s vaginal speculum through Owens
& Minor and the annualized sales totals for each of these customers. OBP alleges that this
information came from the pricing agreements it shared with Owens & Minor on a confidential
basis.
After receiving the opportunity report, Welch Allyn employees exchanged several emails
concerning the information. In one email dated November 7, 2014, Welch Allyn’s Director of
Channel Management and Marketing wrote: “When we use this, let’s not be blatant about where
we got the info. I don’t want Owens to have problems with OBP, they may get their feathers
ruffled if they find out that Owens provided the list to us. Let’s just tread carefully here.” In a
second email dated November 18, 2014, Welch Allyn’s Product Manager for Vaginal Speculums
3
explained: “It’s rare that we are given a list of customers that are buying a known competitor … I
just wan[t] to make sure we try to take advantages in 2014.” In yet another email sent two days
later, Welch Allyn’s Vice President of Acute Care wrote to Sales Managers: “I wanted to reach
out to you on some targeted efforts surrounding the launch of our new LED vag spec. I’ve
attached a list of accounts using the OBP spec and their respective volumes. (This list was
supplied by Owens & Minor and should be treated as highly confidential. This shouldn’t be
emailed out or sent to anyone else.).” (Emphasis in original).
Welch Allyn ultimately used the information from the opportunity report to craft a
marketing plan allegedly intended to steal OBP customers and eliminate OBP as a competitor in
the market for the single-use medical examination instrument. The marketing campaign was
coordinated with a patent infringement lawsuit Welch Allyn filed against OBP in September
2014. In the lawsuit, Welch Allyn claimed that OBP’s vaginal speculum infringed on a Welch
Allyn patent and that OBP unlawfully copied Welch Allyn’s color coded trade dress. In an email
dated December 3, 2014, Welch Allyn’s Product Manager for Vaginal Speculums explained that:
The faster we can move customers over from OBP, the more impact we also have on
the litigation effort with regard to potential settlement. We want to disrupt OBP
business and growth as quickly as possible. I suggested a back pocket offer for initial
discount with larger purchase (end user). While I know we don’t typically want to
discount a new product, in this case business disruption may save us litigation costs.
Two months after this email was sent, in February 2015, Welch Allyn began offering what it
called the “OBP Back Pocket Offer” – an offer to provide OBP customers with a free reusable
light (having a retail value of $ 300) for use with the Welch Allyn vaginal speculum. The offer
significantly reduced the cost of Welch Allyn’s speculum. Around this time, Welch Allyn also
began sending sales representatives to hospital departments where OBP had long sold its
4
products.
In May 2016, OBP brought this action against Welch Allyn. OBP alleges that the
customer and sales data that Owens & Minor provided in the opportunity report was confidential
and that Welch Allyn wrongfully obtained and used this information in connection with the
launch of its self-illuminating vaginal speculum. OBP’s Amended Complaint asserts claims for
common law misappropriation of confidential business information (Count I), statutory
misappropriation of confidential business information (Count II), conversion (Count III), unjust
enrichment (Count IV), violations of c. 93A (Count V), and interference with business relations
(Count VI). Each claim is based on Welch Allyn’s alleged receipt and use of OBP’s confidential
customer information.
ANALYSIS
Welch Allyn moves to dismiss the Amended Complaint its in entirety pursuant to Mass.
R. Civ. P. 12(b)(6). To withstand a motion to dismiss under Rule 12(b)(6), a complaint must
contain “allegations plausibly suggesting (not merely consistent with) an entitlement to relief….”
Iannacchino v. Ford Motor Co., 451 Mass. 623, 636 (2008), quoting Bell Atl. Corp. v. Twombly,
550 U.S. 544, 555-557 (2007). Although the complaint need not set forth detailed factual
allegations, a plaintiff is required to present more than labels and conclusions and must raise a
right to relief “above the speculative level.” Id.
To prevail on a claim of misappropriation of trade secret or confidential business
information, a plaintiff must show that it: (1) possessed a trade secret or confidential business
information; (2) took reasonable steps to preserve the secrecy of that trade secret or confidential
business information; and (3) the defendant breached a duty not to disclose or use the trade secret
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or confidential business information. See Peggy Lawton Kitchens, Inc. v. Hogan, 18 Mass. App.
Ct. 937, 939 (1984). Welch Allyn argues that OBP’s misappropriation claims must be dismissed
because OBP’s Amended Complaint fails to assert facts satisfying any of these elements.
Specifically, it contends that the Amended Complaint does not allege sufficient facts to show
that: (1) the customer and sales information in the opportunity report belonged to OBP rather
than to Owens & Minor; (2) OBP took appropriate steps to ensure the confidentiality of the
customer and sales information; and (3) Welch Allyn had a duty to refrain from using the
customer and sales information. Welch Allyn further argues that these reasons also justify
dismissal of OBP’s other claims for conversion, unjust enrichment, violation of c. 93A, and
interference with business relations.1
A. Ownership of the Customer and Sales Information
Welch Allyn’s first contention fails because the Amended Complaint affirmatively
alleges that OBP owned the information in the opportunity report. Specifically, the Amended
Complaint alleges that the content of the opportunity report came from the customer names and
pricing information in OBP’s pricing agreements and that OBP provided those agreements to
Owens & Minor on a confidential basis for the sole purpose of facilitating Owen & Minor’s
fulfilment services. Taking these allegations as true, OBP adequately pleads ownership of the
confidential customer and sales information found in the opportunity report.
B. Efforts to Preserve Confidentiality
Welch Allyn’s second contention fails because Amended Complaint adequately pleads
1 Because Welch Allyn’s motion to dismiss the misappropriation count is denied, the court
declines to consider at this time the separate grounds for Welch Allyn’s motion to dismiss other
counts.
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that OBP took reasonable steps to keep its customer and sales information confidential, such as
by not making the information publicly known outside its business and by employing password
protected computers and employee agreements to protect against disclosure. See Optos, Inc. v.
Topcon Med. Sys., 777 F. Supp. 2d 217, 240 (2011). In making its argument, Welch Allyn
stresses that OBP has not alleged that it entered into a nondisclosure or confidentiality agreement
with Owens & Minor restricting the use of the information contained in the opportunity report.
The lack of such an agreement, however, is not fatal to OBP’s misappropriation claims.
In the absence of a confidentiality agreement, a confidential relationship will be implied
where the facts demonstrate that the disclosures were made to facilitate a specific relationship
such as that between employer and employee, purchaser and supplier, or prospective licensee and
licensor. See Burten v. Milton Bradley Co., 763 F.2d 461, 463 (1st Cir. 1985). The Amended
Complaint alleges that Owens & Minor’s role was to fulfill orders from customers that OBP
generated through its direct marketing and sales efforts. It further alleges that in order to
facilitate Owens & Minor’s fulfillment services, OBP was required to provide Owens & Minor
with the identity of its customers and the terms of its customer pricing agreements. These
allegations suggest that the disclosures of OBP’s customer and sales information were made in
order to promote the supplier/distributor relationship between Owens & Minor and OBP, and that
therefore a confidential relationship should be implied.
That such implication is appropriate is bolstered by the fact that Owens & Minor’s Code
of Honor, promoted on its website, specifically provides that it will not disclose customer and
sales information of suppliers like OBP to third parties and will only use such information for
purposes of effectuating the parties’ business relationship. The presence of the Honor Code on
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Owen & Minor’s website plausibly suggests that OBP took reasonable steps to preserve the
confidentiality of its customer information.
C. Duty Not to Use the Customer and Sales Information
Welch Allyn’s third argument, that the Amended Complaint fails to demonstrate a breach
of a duty to not use OBP’s customer and sales information, is also without merit. “Under
Massachusetts trade secret law, a third party who knowingly benefits from a trade secret which a
person in a confidential relationship obtained from the plaintiff is liable to the plaintiff for the
misappropriation of that trade secret.” Data Gen. Corp. v. Grumman Sys. Support Corp., 795 F.
Supp. 501, 507 (D. Mass. 1992); see also Optos, Inc., 777 F. Supp. 2d at 240 (“A party who
knowingly benefits from the breacher’s trade secret bounty is also liable.”); Curtiss-Wright Corp.
v. Edel-Brown Tool & Die Co., 381 Mass. 1, 3 n. 2 (1980) (observing that when a purchaser
provides a competitor with a supplier’s confidential plans and specifications, “[r]elief may be had
against [the] competitor despite the lack of any legal relationship between the competitor and the
supplier whose plans were appropriated.”). To recover, a plaintiff need show that the third party
had actual or constructive notice that the information it obtained and used was a trade secret. See
Curtiss-Wright Corp., 381 Mass. at 5-6 & n.4.
In the present case, the Amended Complaint states a claim for misappropriation against
Welch Allyn despite the absence of allegations that Welch Allyn and OBP themselves had a
confidential relationship. The Amended Complaint alleges that it is well known in the medical
instrument industry that customer and sales information is not public information. It also quotes
internal Welch Allyn emails from November 7, 18 and 20, 2014, suggesting that Welch Allyn
knew (1) the information it received from Owens & Minor was highly confidential, (2) receipt of
8
such information was extremely rare, and (3) Owens & Minor could get in trouble if OBP
discovered the disclosure. Taken together, these allegations plausibly suggest that Welch Allyn
had either constructive or actual notice that it was in possession of OBP’s confidential business
information and therefore had an obligation to refrain from using the information to compete
with OBP. See Curtiss-Wright Corp., 381 Mass. at 5-7 (holding that a defendant supplier who
received plaintiff’s confidential drawings from the Navy and used them to win a Navy bid was
properly held liable because the supplier knew, or should have known, that it had received the
plaintiff’s trade secrets).
CONCLUSION
For the reason stated above, Welch Allyn, Inc.’s Motion to Dismiss Plaintiff’s First
Amended Complaint is DENIED.
By the Court,
________________________
Edward P. Leibensperger
Justice of the Superior Court
November 14, 2016
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Posted by Stephen Sandberg - December 5, 2016 at 9:01 pm

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Rass Corporation v. The Travelers Companies, Inc., et al. (Lawyers Weekly No. 11-163-16)

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

15-P-358                                        Appeals Court

RASS CORPORATION  vs.  THE TRAVELERS COMPANIES, INC., & another.[1]

No. 15-P-358.

Suffolk.     February 24, 2016. – November 10, 2016.

Present:  Katzmann, Maldonado, & Blake, JJ.[2]

Insurance, Coverage, Insurer’s obligation to defend, Notice, Settlement of claim, Unfair act or practice.  Notice, Insurance claim.  Commercial DisparagementTrade Secret. Libel and SlanderConsumer Protection Act, Insurance, Unfair act or practice, Offer of settlement, Damages, Attorney’s fees.  Damages, Libel, Wrongful use of trade secret, Consumer protection case, Attorney’s fees.

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Posted by Stephen Sandberg - November 10, 2016 at 4:23 pm

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