Posts tagged "massachusetts"

Gallagher v. Cerebral Palsy of Massachusetts, Inc., et al. (Lawyers Weekly No. 11-117-17)

NOTICE:  All slip opinions and orders are subject to formal revision and are superseded by the advance sheets and bound volumes of the Official Reports.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-1152                                       Appeals Court

SUSAN GALLAGHER  vs.  CEREBRAL PALSY OF MASSACHUSETTS, INC., & others.[1]

No. 16-P-1152.

Norfolk.     April 6, 2017. – September 13, 2017.

Present:  Green, Blake, & Lemire, JJ.

MassHealth.  Massachusetts Wage Act.  Labor, Overtime compensation, Failure to pay wages.  Independent Contractor Act.  Regulation.  Practice, Civil, Motion to dismiss, Summary judgment.

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

Posted by Stephen Sandberg - September 13, 2017 at 6:36 pm

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

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
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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
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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 . . . ”).
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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

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

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

New Bedford Educators Association v. Chairman of the Massachusetts Board of Elementary and Secondary Education, et al. (and two consolidated cases) (Lawyers Weekly No. 11-108-17)

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-654                                        Appeals Court

NEW BEDFORD EDUCATORS ASSOCIATION  vs.  CHAIRMAN OF THE MASSACHUSETTS BOARD OF ELEMENTARY AND SECONDARY EDUCATION & others[1] (and two consolidated cases[2]).

No. 16-P-654.

Middlesex.     May 4, 2017. – August 23, 2017.

Present:  Trainor, Vuono, & Sullivan, JJ.

Practice, Civil, Standing, Declaratory proceeding, Action in nature of mandamus, Relief in the nature of certiorari. Administrative Law, Standing, Judicial review.  Declaratory ReliefMandamusBoard of EducationCommonwealth, Education.  EducationSchool and School CommitteeLabor, Public employment. read more

Posted by Stephen Sandberg - August 23, 2017 at 2:33 pm

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

Riva v. Massachusetts Parole Board (Lawyers Weekly No. 10-136-17)

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

SJC-12270

JAMES RIVA  vs.  MASSACHUSETTS PAROLE BOARD.

August 18, 2017.

Supreme Judicial Court, Superintendence of inferior courts.  Parole.  Practice, Criminal, Discovery.

The petitioner, James Riva, appeals from a judgment of a single justice of this court denying his petition pursuant to G. L. c. 211, § 3.  We affirm.

Riva is currently serving a life sentence for second degree murder.  After the parole board (board) denied him parole in January, 2015, he filed a complaint in the Superior Court seeking certiorari review and a declaratory judgment in connection with claimed constitutional violations that occurred in the course of the proceedings before the board.  The board’s motion to dismiss the complaint was allowed as to the declaratory judgment claim but denied as to the certiorari claim.  Riva’s subsequently-filed motion to compel discovery was initially denied, but, on Riva’s motion for reconsideration, the motion judge indicated that the motion was allowed “to the extent that the administrative record shall reflect the evidence relied upon by the parole board to issue its decision.”  Riva then filed a “motion for relief,” which also pertained to certain discovery.  After this motion was denied, Riva filed his G. L. c. 211, § 3, petition in the county court.  In the petition, he argued that his case could not proceed in the trial court without the requested discovery.  The single justice denied the petition without a hearing. read more

Posted by Stephen Sandberg - August 18, 2017 at 11:39 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 read more

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

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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

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

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Massachusetts Fine Wines & Spirits, LLC v. Alcoholic Beverages Control Commission (Lawyers Weekly No. 12-094-17)

                                      COMMONWEALTH OF MASSACHUSETTS

SUFFOLK, ss.                                                                            SUPERIOR COURT

                      CIVIL ACTION

  1. 2017–003120-C

 

MASSACHUSETTS FINE WINES & SPIRITS, LLC[1]

 

vs.

 

ALCOHOLIC BEVERAGES CONTROL COMMISSION

MEMORANDUM OF DECISION AND ORDER ON

CROSS-MOTIONS FOR JUDGMENT ON THE PLEADINGS

This is an action for judicial review, pursuant to G.L. c. 30A, § 14, of a decision of the Alcoholic Beverages Control Commission (“ABCC” or the “Commission”) finding that the plaintiff, Massachusetts Fine Wines and Spirits, LLC d/b/a Total Wine & More (“Total Wine”), sold certain alcoholic beverage products at a retail price below their “invoiced cost” in violation of 204 Code Mass. Regs. § 2.04(1).  The matter is before the Court on the parties’ Cross-Motions for Judgment on the Pleadings.  For the reasons set forth below, the Commission’s motion is DENIED and Total Wine’s motion is ALLOWED. read more

Posted by Stephen Sandberg - July 31, 2017 at 7:10 pm

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FBT Everett Realty, LLC v. Massachusetts Gaming Commission (Lawyers Weekly No. 12-082-17)

COMMONWEALTH OF MASSACHUSETTS

SUFFOLK, ss SUPERIOR COURT

CIVIL ACTION

  1. 2016-03481-BLS1

FBT EVERETT REALTY, LLC

vs.

MASSACHUSETTS GAMING COMMISSION

MEMORANDUM OF DECISION AND ORDER ON

DEFENDANT’S MOTION TO DISMISS FBT EVERETT, LLC’S COMPLAINT

PURSUANT TO MASS. R CIV. P. 12(b)(1) AND 12(b)(6)

Plaintiff FBT Everett Realty, LLC (FBT) entered into an Option Agreement with Wynn MA, LLC (Wynn), an affiliate of Wynn Resorts, pursuant to which Wynn acquired the option to purchase a parcel of land in Everett, Massachusetts owned by FBT (the Everett Parcel), if Wynn was awarded a casino license by the defendant Massachusetts Gaming Commission (the Commission).  In this action, FTP alleges that it suffered losses as result of the Commission’s tortious interference with that Option Agreement.  Its Complaint pleads a single count of intentional interference with contract in which it claims that, as a result of unlawful pressure exerted on Wynn by the Commission, Wynn insisted that FBT renegotiate the purchase price of the Everett Parcel, reducing that purchase price from $ 75 million to $ 35 million.  The case is now before the court on the Commission’s motion to dismiss FBT’s complaint pursuant to Mass. R. Civ. P. 12(b)(1) and 12(b)(6).  In particular, the Commission contends that it is a “public employer” under § 1 of the Massachusetts Tort Claims Act (G. L. c. 258, §§ 1 et seq., the MTCA), and, therefore, under § 10(c) it is immune from suits for intentional torts, including intentional interference with contractual relations.  For the reasons that follow, the motion is 2 read more

Posted by Stephen Sandberg - July 4, 2017 at 1:43 am

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McEvoy v. Savings Bank Life Insurance Co. of Massachusetts (Lawyers Weekly No. 12-084-17)

1
COMMONWEALTH OF MASSACHUSETTS
SUFFOLK, ss. SUPERIOR COURT
CIVIL ACTION
NO. 2017-1961 BLS1
LESLIE V. McEVOY, individually and on behalf of a class of similarly situated persons,
vs.
SAVINGS BANK LIFE INSUARNCE CO. OF MASSACHUSETTS
MEMORANDUM OF DECISION AND ORDER PLAINTIFF’S MOTION FOR A PRELIMINARY INJUNCTION
The plaintiff Leslie V. McEvoy alleges that she holds a participating whole life insurance policy issued by the defendant Savings Bank Life Insurance Co. (SBLI).1 In this action, she seeks to enjoin all SBLI’s policyholders from voting on a proposed conversion of SBLI from a stock life insurance company to a mutual life insurance company. The case came before the court on June 27, 2017 on the plaintiff’s motion for a preliminary injunction enjoining the vote until additional disclosures concerning the plan of conversion demanded by her were made to SBLI’s other 480,000 policyholders. In her complaint, the plaintiff alleges that the vote on the plan of conversion is to occur at a Special Meeting of policyholders scheduled for that purpose on June 28, 2017. It appears, however, that voting has actually been underway for weeks. While the meeting was scheduled for 11:00 AM on June 28, 2017, and policyholders present at the meeting who had not previously voted could vote at that time, voting opened on May 19, 2017 and could be accomplished by mail, phone call, or on the internet, so long as the votes were
1 It appears that the plaintiff owns two policies, each in the face amount of $ 1,000, although was is pledged to a division of the State of New Hampshire.
2
received in time to be counted by the time of the meeting. As a result, the majority of votes cast in this election may well have been received by SBLI management before the annual meeting. In consequence, from a practical perspective a motion brought before the court on the afternoon of June 27th to preliminarily enjoin the vote that was to be completed and tallied the following morning was not timely.
The proposed conversion of SBLI into a mutual insurance company calls for the SBLI shareholders, 30 Massachusetts banks or banks that had acquired Massachusetts banks, to receive $ 57.3 million in return for their shares in SBLI. This sum is to be financed through the issuance of Surplus Notes. While SBLI and its financial advisers have been working for some time on the sale of these Surplus Note to certain financial institutions, at oral argument the court was informed that the closing on that transaction was still two or three weeks away. In theory, therefore, the court could still issue a mandatory preliminary injunction voiding the vote, which would of course preclude any possibility that SBLI could issue the Surplus Notes on the schedule now contemplated, and ordering that revised informational materials be sent to policyholders and a new vote undertaken. The court declines to enter such an extraordinary order and, accordingly, DENIES the motion for a preliminary injunction.
Generally, it is this court’s practice to issue a comprehensive memorandum of decision when addressing a motion for preliminary relief in a case of this nature. However, in this case it appears that speed is more important than a carefully crafted explanation of the court’s reasoning, so that the plaintiff may consider any other opportunities for the relief she requested. Accordingly, what follows is a summary statement of court’s reasoning.
3
DISCUSSION
Background
The history of how Louis D. Brandeis originally devised and promoted the establishment of SBLI and it then came to be reorganized on multiple occasions by the Massachusetts Legislature is set out in prior decisions, including Goldstein v. Savings Bank Life Ins. Co. of Massachusetts, 435 Mass. 760 (2002) and, on remand, the Superior Court’s decision on Cross-Motions for Summary Judgment dated July 3, 2008 (Gants, J.) (Goldstein). Its unique status as the only life insurance company previously required to conform to both G.L. c. 175 and G.L. c. 178A has been noted by the SJC. Id. at 770. Indeed, the conflicts inherent in an entity that owes obligations to shareholders and policyholders has been the catalyst for much prior litigation. It appears that more recent events have increased the shareholder banks’ desire to liquidate their interests in SBLI. First, they no longer sell a material number of SBLI policies or annuity contracts and therefore no longer have a business interest in the insurer. More critically, recent adoption of the so-called Basel III capital rules increased the risk weighting for non-publicly traded equity securities owned by banks, like the shares of SBLI, from 100% to 400%. In consequence, SBLI’s bank shareholders must increase the capital held against their investment in SBLI by a factor of four.
Following meetings with financial, actuarial and legal advisors, the plan to convert SBLI to a mutual insurance company wholly owned by its policyholders by having SBLI purchase all shares was adopted by the interested parties as the most expedient means for the shareholders to exit, while permitting SBLI to continue to serve the purpose for which it was founded–providing
4
secure, low-cost life insurance. The plan was unanimously approved by SBLI’s nine member board of directors. While these directors are elected by the shareholder banks, five of the members are independent. The shareholders then voted to approve the conversion. The plan also had to be approved by the three member Policyholders Advisory Board (PAB), a statutorily mandated body established by the Legislature in connection with a 2010 reorganization of SBLI, whose mission is to protect the interests of policyholders and promote SBLI’s purpose. The current chair of the PAB is a former Massachusetts Commissioner of Insurance. The PAB unanimously approved the plan of conversion in October, 2016, and, following its review of a fairness opinion prepared by the actuarial firm Milliman, Inc. that opined that the conversion was fair to policyholders on an actuarial basis, once again in January, 2017. The plan of conversion still, however, required the approval of the Commissioner of Insurance. See G.L. c. 175, § 19D(2). After nearly four months of review, by letter dated May 25, 2017, the Commissioner also approved the plan, subject to conditions not relevant to the pending motion. Among the findings that the Commissioner was required to make in order to approve the conversion is that the plan is “not prejudicial to the policyholders of such company or to the insuring public.” Id.
With respect to this finding, the Commissioner noted that SBLI management was of the view that participating policyholders and the shareholders have an interest in SBLI’s surplus, while the staff of the Division of Insurance is of the view that only the shareholders have an interest in the surplus. The $ 57.3 million to be paid to the shareholders represented an amount substantially less than the percentage of the surplus that SBLI attributed to the shareholders.
Of particular note to the pending motion, the Commissioner observed that the annual costs of the interest to be paid on the $ 57.3 million of Surplus Notes, plus the creation of reserves necessary to repay the Notes on maturity (something in the nature of a sinking fund), exceeds the
5
amount of the dividends currently being paid to shareholders. However, because of the new Basel III requirements, pursuant to which the bank shareholders will have to increase their capital in respect of the shares by a multiple of four, their cost of holding SBLI shares will also increase by a factor of four. In consequence, shareholder dividends could be expected to increase by the same factor, an amount which would not violate statutory limitations on dividends that shareholder owned life insurance companies may issue. At that point, the amount of annual dividends paid to the banks would substantially exceed the interest and reserve expenses associated with the new Surplus Notes.
The last step in the plan of conversion is a vote to approve the plan of conversion by the policyholders; a majority of policyholders who vote is required for approval. According to the Chair of the PAB, the Commissioner reviewed and approved the disclosures sent to the policyholders soliciting their votes for the plan of conversion (hereafter referred to as the Notice).
Analysis of the Claims
It is important to note that the issue before the court on this motion for a preliminary injunction is not whether the plan of conversion is good, bad, or indifferent, as it affects the interests of policyholders, including those that have participating policies and receive annual dividends, as well as those that hold policies that do not provide a right to annual dividends. Rather, the question is whether any disclosures in the Notice are materially misleading, either by what they say or omit to say. It is also notable that the plaintiff’s complaint does not allege a breach of fiduciary duty by SBLI Board or the PAB. This case, as presently pled, is solely about the nature of the disclosures.
6
The parties have not provided the court with any case that addresses the standard to apply in assessing the disclosures that should be made to policyholders when a stock insurance company is converted to a mutual company. The parties have both relied on a Superior Court decision—Silverman v. Liberty Mut. Ins. Co., 13 Mass. L.Rptr. 303 (2001) (Gants, J.)—to define the standard. That case, however, addressed the demutualization of an insurance company. In consequence, in that situation the policyholders clearly owned all of surplus and held voting rights, both of which they would be conceding in a demutualization. This case presents the reverse situation, further complicated by the unique structure of SBLI. Policyholders will be acquiring all voting rights and full ownership of any surplus available for distribution to equity holders on liquidation. The policyholders will obviously not receive any cash in this transaction, nor will they be required to pay for the shares that will be acquired by SBLI, although the value of the entity which they will then own will certainly be affected by the amount paid to the departing shareholders. Nonetheless, Silverman provides a useful guide. There Justice Gants wrote:
A mutual insurer has a duty to provide its policyholders with full and honest disclosure of material facts relating to a transaction that requires policyholder approval. .. .An omitted fact is material if there is a substantial likelihood that a reasonable shareholder would consider it important in deciding how to vote. . . . The standard contemplates a showing of substantial likelihood that, under all the circumstances, the omitted fact would have assumed actual significance in the deliberations of the reasonable shareholder. Put another way, there must be a substantial likelihood that the disclosure of the omitted fact would have been viewed by the reasonable investor as having significantly altered the total mix of information available.” (Internal citations and quotations omitted.)
It is, perhaps, worthy to note that this description of the law of disclosure was borrowed from securities cases in which the person receiving the disclosure was truly an investor primarily concerned with a monetary return on the investment. Here, the recipients of the information are policyholders who purchased a life insurance policy (or annuity contract) specifically designed to
7
be low cost and secure, in the sense that if a claim was made for insurance benefits or redemption it would be paid. Only those policyholders that owned participating policies had any expectation of dividends (which would be modest), and no expectation that SBLI would ever be liquidated and the policyholder receive some part of surplus.
With these standards in mind, the court turns to the areas of disclosure in the information sent to policyholders soliciting their votes (hereafter the Notice) that the plaintiff alleges were materially misleading.
The NOLs
The plaintiff’s first claim of “egregiously” misleading disclosure involves so-called NOLs. SBLI has $ 219 million in Net Operating Losses (NOLs) that could be used to offset future profits of the company for federal income tax purposes. SBLI management’s financial forecast assumes that SBLI will be in a position to begin making use of these NOLs, subject to certain restrictions, in 2021. The Notice discloses that: “If the Internal Revenue Service . . . determines that the Conversion constitutes a change of control . . . SBLI’s ability to utilize these NOLs will be limited.” The Notice went on to explain that SBLI believes that the Conversion would not constitute a change in control, but the IRS might take a different position. The Notice fairly disclosed the value of the NOLs to SBLI and that the conversion places them at risk. The Notice appropriately takes no position on the likelihood of IRS audit in the years 2021 and subsequent when SBLI hopes to begin to be able to make use of the NOLs or the ultimate outcome of any dispute with the IRS concerning “change of control” and how that would limit SBLI’s to use the NOLs to offset taxable income. It appears that the plaintiff’s real argument as it relates to the NOLs is not the disclosure, but rather whether the conversion is too risky because this contingent asset might be forfeit. That risk is, however, is sufficiently disclosed.
8
The Piper Jaffray Fairness Opinion
The plan of conversion calls for the shareholders to receive $ 500 for each Class A share (the voting shares, of which there are only one for each shareholder) and $ 128 for each Class B share. As part of the conversion process, the shareholders received a fairness opinion from the investment banking firm Piper Jaffray to the effect that the plan was fair to shareholders. The Piper Jaffray opinion was not included in the Notice sent to the policyholders. The Notice provided a copy of the Milliman opinion, which addresses the fairness of the conversion to the policyholders from an actuarial point of view.
The plaintiff argues that the failure to include the Piper Jaffray opinion was materially misleading because Piper Jaffray arrived at a number of values for a Class B share, one of which was based on a discounted cash flow analysis that yielded share values of $ 85.10 to $ 92.87. However, another version of the cash flow analysis provided values of $ 174.64 to $ 191.30. Under the Piper Jaffray analyses any changes in operational results that result in changes in cash flow produce very substantial changes in projected share values because Piper Jaffray was using discount rates of 14% to 18% based on a capital asset pricing model which was undoubtedly affected by the SBLI’s modest size, as well as the completely illiquid nature of a share of SBLI stock. This court questions whether a discounted cash flow analysis of after-tax cash flows theoretically available to equity holders of SBLI is particularly useful to a shareholder or a policyholder.2 However, from a policyholder’s perspective it would have little to do with a
2 Piper Jaffray noted that the illiquidity of an investment in SBLI “is the result of SBLI’s unique ownership structure, in which ownership is restricted to Massachusetts-chartered savings banks and acquirers thereof. Based on academic research, institutional studies, market, examples of discounts on illiquid securities, and Piper Jaffray’s professional experience, Piper Jaffray has applied an illiquidity discount of 30%, and such discount is incorporated in the numerical results for all of the valuation methodologies enumerated below.”
9
policyholder’s principal concerns: will SBLI be able to pay any claims, issue a dividend if the policy is participating, or redeem the policy if it is a whole life policy.
According to SBLI, the Commissioner recommended against inclusion of the Piper Jaffray opinion in the Notice. The court can understand why. While a shareholder bank voting in favor of the plan of conversion must have support for its decision, because it has fiduciary obligations to its own shareholders, it is unclear how this information will materially assist a policyholder in addressing the impact of the conversion on policyholders’ interests. The PAB withheld its final approval of the plan until it received an opinion from Milliman, one of the largest actuarial firms in the world, that the conversion was fair to policyholders from an actuarial point of view.
The Costs of the Surplus Note
The plaintiff complains about a failure to disclose the costs to SBLI of the Surplus Notes. Frankly, the court does not fully understand the plaintiff’s argument in this respect. The Notice includes pro formas that assume completion of the conversion and clearly show that $ 57.3 million of Surplus Notes will be issued and that they will bear interest at 6% a year, which is a rate in excess of that which management asserts it will have to offer to sell the Notes. The pro formas also reflect approximately $ 6.5 million of transaction related expenses. It is self-evident that the Notes will have to be repaid on maturity.
The court does believe that the Notice could have been more clear in comparing the annual cost associated with the debt service on the Notes and the creation of a reserve (similar to a sinking fund) to repay the Notes on maturity with the current amount of the dividends being paid to the shareholders, which is much less. The assumption that makes the conversion
10
attractive to policyholders, and was important to the Commissioner, is that the SBLI Board, which is controlled by the shareholders, will vote to increase the dividends as a consequence of the very substantial increased capital requirements that the banks will incur with respect to their SBLI shares as a result of Basel III. It seems that this is the most relevant information that a policyholder, at least a participating policyholder hoping for dividends, would want. The court believes that this could have been more clearly stated in the Notice, but does not find what is stated materially misleading.
The Dilution of Participating Shareholders Interest in Surplus
The plaintiff argues that the Notice should disclose that participating policyholders will suffer dilution of their dividend rights. The court finds that this argument is simply in error. There is nothing in the conversion that will transform non-participating policies into policies that will be entitled to dividends.
The Quoted Passage from Goldstein
The plaintiff argues that it was misleading to quote a passage from Goldstein which reads: “this Court declares as a matter of law that the precise percentage of original surplus that is attributable to stockholder equity is 37.5 percent.” The quote is found in that part of the Notice that describes SBLI’s historic method of accounting for its surplus following a 1992 reorganization. There, the Notice explains that beginning with the 2001 financial statements, the amount of surplus attributable to the shareholders has been based on the assumption that the shareholders’ interest in the surplus following the 1992 reorganization was 37.5% or approximately $ 39.5 million. The Notice comments that this assumption was “affirmed” by that
11
statement from the Goldstein opinion quoted above. The use of the word “affirmed” is perhaps a bit much, but it is not materially misleading. Moreover, the plaintiff has not argued that $ 57.3 million is more than the shareholders’ interest in the surplus. For its part, the Division of Insurance believes that the shareholders would be entitled to all of the surplus if SBLI liquidated. Arguably, a plan of conversion that allowed the shareholders to withdraw all of their ownership in the surplus on the sale of their shares to SBLI would be fair from a monetary point of view.
Miscellaneous
The plaintiff makes a number of arguments that appear to assert mismanagement of SBLI. Whether those complaints are valid cannot inform the question of whether the Notice is materially misleading. If the conversion succeeds, the policyholders will have voting control over SBLI and can replace management.
* * *
In sum, the court finds that the plaintiff is not likely to succeed on the merits of her claim that: “The Notice prominently and falsely states to Policyholders that ‘the premiums, benefits, values, guarantees and dividend rights of your insurance policies or annuity contracts WILL NOT be reduced, changed, or affected in any way as a result of the Conversion.’” It appears to this court that this statement read in the context of the entire Notice is not materially misleading. The policies will not be affected. The policyholder claims will be superior to claims made under the Surplus Notes. Dividend rights afforded participating policyholders are also not directly affected, although undoubtedly indirectly affected by the future profitability of SBLI, but as to that, the expenses and risks associated with the issuance of the Notes are generally disclosed.
12
Irreparable Injury
To succeed on a motion for a preliminary injunction, the moving party bears the burden of showing: (1) a likelihood of success on the merits of its claim; (2) that it will suffer irreparable harm if injunctive relief is not granted; and (3) that its harm, if injunctive relief is denied, outweighs any harm that would be suffered by the party enjoined, if the injunction issued. See Boston Police Patrolmen’s Ass’n, Inc. v. Police Dept. of Boston, 446 Mass. 46, 49-50 (2006); Packaging Indus. Group. Inc. v. Cheney, 380 Mass. 609, 616-617 (1980).
In this case, weighing the harm that would be inflicted on not only SBLI, but also potentially on all of the 480,000 other policyholders of SBLI, if the injunction issues, against plaintiff’s alleged harm, suggests to the court that it would be highly improvident to enter an injunction effectively delaying this transaction for an indefinite period, if not putting the entire conversion at risk. The court does not yet know whether the policyholders voted to approve the plan of conversion. If they did not, the motion is moot. If they did, the costs of vacating the results of the vote, revising the Notice, and beginning the process anew could be enormous. In addition to which, further delay could well increase the interest rates required to place the Surplus Notes in the current environment of generally rising interest rates (the Federal Reserve Bank increased rates again only two weeks ago). Potentially, an injunction could make institutional investors now interested in buying the Notes wary.
It appears to the court, that most purchasers of SBLI policies are primarily concerned with the premium cost and security of their policies, rather than their interest in SBLI’s surplus in the unlikely event of SBLI’s liquidation. Eliminating the bank shareholders, who are not policyholders and no longer market SBLI policies or annuity contracts, but nonetheless have
13
voting control over SBLI and fiduciary duties to their own constituencies will be beneficial to policyholders. SBLI could then be managed exclusively for the benefit of the policyholders that will own it. The court cannot help but note that the only plaintiff in this case owns only two $ 1,000 policies, one of which she pledged. Given the nature of the allegedly misleading statements about which the plaintiff complains and the potential of undoing this transaction that most policyholders may well find favorable (even if the Piper Jaffray opinion were attached to the Notice), or, at least, making it far more costly, the court declines to enter the extraordinary relief requested.
Moreover, the underlying theme of the plaintiff’s complaint is that this conversion was intended to unfairly further the interests of the shareholders at the expense of the policyholders. While there is no claim for breach of fiduciary duty against the SBLI Board asserted, that is the underlying subtext. All of the shareholders who will be receiving cash for their shares are Massachusetts banks or acquirers of Massachusetts banks. If the conversion results in the unlawful transfer of value from the policyholders to the shareholders, there are other claims that could, at least in theory, be asserted.
The court finds that the potential harm that would arise from the entry of a preliminary injunction undoing the vote and undoubtedly the issuance of the Surplus Notes outweighs the potential irreparable harm that would result from its entry.
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ORDER
For the foregoing reasons, the plaintiff’s motion for a preliminary injunction is DENIED.
____________________
Mitchell H. Kaplan
Justice of the Superior Court
Dated: June 30, 2017 read more

Posted by Stephen Sandberg - July 3, 2017 at 6:32 pm

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Dudley v. Massachusetts State Police (Lawyers Weekly No. 11-071-17)

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-2                                          Appeals Court

RICHARD DUDLEY, JR.  vs.  MASSACHUSETTS STATE POLICE.

No. 16-P-2.

Bristol.     December 1, 2016. – June 1, 2017.

Present:  Cypher, Maldonado, & Blake, JJ.[1]

Massachusetts Tort Claims Act.  Governmental Immunity.  Dog.  Police, Negligence.  Negligence, Governmental immunity, Police.  Practice, Civil, Summary judgment.

Civil action commenced in the Superior Court Department on February 1, 2013. read more

Posted by Stephen Sandberg - June 1, 2017 at 5:18 pm

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