by Hon. Peter B. Krupp
Voice of the Judiciary
Many times a day in a criminal session judges decide whether setting an affordable bail will be sufficient to ensure a defendant will appear for future court dates. I have set or reviewed bail in hundreds of cases. I have rarely set bail with great certainty and almost always have had to decide based on woefully imperfect information.
There are serious risks of getting it wrong. If a defendant flees, justice for a victim may be substantially delayed or denied; releasing a violent or drug addicted defendant may create a risk to public safety; and setting unaffordably high bail for a defendant may have long-term effects on the defendant, even if an acquittal follows. Compounding the problem, bail decisions usually must be made quickly, so they are disproportionately susceptible to explicit and implicit biases; and the popular press does not help, usually reporting bail as a judicial critique on the severity of the crime rather than an individualized assessment of the defendant’s likelihood of appearing on the charges.
Given these challenges, much depends on effective advocacy by lawyers who must marshal relevant facts and information. Enter the Supreme Judicial Court in Brangan v. Commonwealth, 477 Mass. 691 (2017), which trained a fresh spotlight on the reasons for bail. Although it did not purport to change the law, Brangan, at a minimum, collected and clearly articulated the foundational principles underlying bail, re-centering judges and advocates on what matters and what does not. Before addressing the need for more effective and targeted advocacy, however, a quick overview may be useful.
At a defendant’s initial appearance, the Commonwealth may in certain serious cases move under G.L. c. 276, § 58A to detain a defendant without bail as dangerous. A petition for detention under § 58A triggers the right to an evidentiary hearing to decide whether the defendant is dangerous and, if so, whether a combination of financial and nonfinancial terms can reasonably assure the safety of others and the community. If no such conditions are available, the defendant is held without bail.
In the great bulk of cases, the Commonwealth does not or cannot seek detention under § 58A, but asks that bail be set to assure the defendant’s appearance at future court proceedings. The state and federal constitutions prohibit “excessive” bail, that is, bail “‘higher than an amount reasonably calculated to’ . . . assur[e] the presence of the accused at future proceedings.” Brangan, 477 Mass. at 699, quoting Stack v. Boyle, 342 U.S. 1, 5 (1951). When it comes to bail, one size does not fit all. One size does not even fit all people who commit the same crime. Bail decisions require individualization. As the SJC wrote, “bail that is set without any regard to whether a defendant is a pauper or a plutocrat runs the risk of being excessive and unfair.” Brangan, 477 Mass. at 700. Therefore, the court must determine how much the particular defendant is able to pay, and may set bail “no higher than necessary to ensure the defendant’s appearance.” Id. at 701.
Where no § 58A petition has been filed, “[u]sing unattainable bail to detain a defendant because he is dangerous is improper”; a “judge may not consider a defendant’s alleged dangerousness” in setting the amount of bail, although dangerousness may be considered in setting conditions of release. Id. at 701, 706. Therefore, arguments that a defendant poses a danger to the community, is a threat to public safety or a security risk, has been convicted of rape, failed to register as a sex offender, or had abuse prevention orders issued against him, may be properly advanced in a § 58A hearing, but not for setting the amount of bail, id. at 706-707, at least not unless they reflect directly on the defendant’s likelihood of appearing at future court dates.
A judge must set an affordable bail if it will cause the defendant to appear on future court dates. A bail greater than what the defendant can reasonably afford, but no higher than necessary to ensure the defendant’s appearance, may only be set if the judge issues “findings of fact and a statement of reasons . . . either in writing or orally on the record.” Id. at 707. A new Superior Court form has been issued for these purposes.
In light of these principles, advocacy must evolve to address the only purpose for setting bail: to ensure the defendant will appear at future court proceedings. Certain factors considered in the bail determination, see G.L. c. 276, § 57, par. 2; G.L. c. 276, § 58, par. 1, bear more directly on the risk of non-appearance (e.g., prior defaults, flight from arrest, strong family ties outside Massachusetts, a strong case against the defendant, a high potential penalty), while others bear less directly (e.g., prior 209A orders, prior convictions, open probation matters). Myriad other factors are relevant, including a defendant’s work history, medical condition, and age.
A few examples may help illustrate how prosecutors and defense attorneys need to think through the bail issues that apply to their particular defendant:
Ability to Post Bail. If the defendant has access to resources (or not), inform the court. Bring in tax returns, pay stubs, or an affidavit from the defendant’s employer. “The defendant tells me . . .” or “the police believe . . .” are not particularly persuasive. Put together a sworn statement addressing the defendant’s assets, or explaining where the proposed bail money is coming from and what the financial resources are of the people posting bail. What amount of bail has the defendant posted in earlier cases?
Prior Court Experience. If the defendant has previously been on bail, did the defendant default or appear? The Court Activity Record Information printout (“CARI,” formerly known as the “BOP”) does not show what bail was previously set, whether the defendant was able to post bail, the defendant’s history of appearing in court, or the reason for a default; and it is not always accurate or complete. Does the defendant have a record outside the Commonwealth? There is no substitute for getting docket sheets on a defendant’s prior cases from Massachusetts and other jurisdictions. If a prosecutor wants to rely on a defendant’s failure to remove an earlier default for four months, she should come prepared with documents demonstrating the defendant was not being held on another matter at the time.
Mental health/substance abuse. If the defendant has a drug problem or untreated mental health issue, be prepared to address where the defendant will live, or who the defendant will live with, to mitigate the risk that the defendant will not appear for court. How will medication compliance be monitored? Was defendant’s substance abuse problem addressed in earlier cases?
Effective bail advocacy in the Superior Court requires preparation to dig up information about a defendant’s past and present, information that is at least in some measure available to both the prosecution and the defense. This is often difficult and time-consuming and can rarely be done well on the fly. While a defendant has a right to a prompt bail hearing, in some cases counsel should be prepared to postpone a bail hearing so that information important to the bail determination may be gathered.
In this regard, bail presentations frequently suffer from the Committee for Public Counsel Services (and some district attorneys’ offices) acquiescing to bail appeals being prosecuted or defended by stand-in counsel representing the defendant or the Commonwealth in the Superior Court only for the bail appeal. See, e.g., CPCS Assigned Counsel Manual Policies and Procedures, Ch. IV, Part I, Sec. II.C.5 (“Counsel should facilitate the bail appeal procedure . . . [and] whenever possible, . . . represent the client at the hearing. (Emphasis added)). Most bail arguments cannot be assembled in an hour and should not be based on a quick read of the police report or a short interview with the defendant. Continuity of counsel is crucial. Whatever policies deter bar advocates from handling their district or municipal court clients’ bail appeals should be remedied to assure effective representation during this important phase of a criminal case.
Brangan has focused attention on the issue relevant in setting bail. Hopefully its clarity will also improve bail advocacy and cause lawyers on both sides of a case to assemble reliable facts and documents bearing on whether a defendant is likely to appear at future court proceedings.
Judge Peter B. Krupp has served as an Associate Justice of the Superior Court since 2013. He is a member of the Board of Editors of the Boston Bar Journal.
by Hon. Gary S. Katzmann
Voice of the Judiciary
From October 27, 2004 until September 15, 2016, it was my great privilege to serve as an Associate Justice of the Massachusetts Appeals Court. On September 16, 2016, after evaluation by the American Bar Association, nomination by President Obama, a hearing before the Senate Judiciary Committee, and confirmation by the United States Senate, I began service as a Judge on the United States Court of International Trade (CIT). In the federal constellation, in contrast to other specialized courts, the CIT is an Article III court, with lifetime judicial appointment, equivalent to a United States District Court, and with full powers in law and equity. The CIT judges can also sit by designation, upon assignment by the Chief Justice of the United States, on other Article IIII courts, that is, the District Courts and Courts of Appeals throughout the nation.
With the intense focus in recent years on the global marketplace, it is perhaps not surprising that there has been heightened interest in the work of the CIT — in particular, adjudication under domestic trade laws involving protection of U.S. businesses from unfair competition arising from unfair pricing by foreign companies and unfair subsidies to foreign companies by their governments. Yet, it should be noted that from the founding of this nation, international trade has presented matters for adjudication in our federal courts. The first case tried in the first court organized under the Constitution of the United States involved an importation dispute. Eventually, such disputes were heard by the U.S. Customs Court. The Customs Court Act of 1980 replaced that court with the CIT. That Act broadened the power of the court, creating a comprehensive system for judicial review of civil actions arising out of import transactions and federal transactions affecting international trade. This system is rooted in the mandate of Article I, Sec. 8 of the Constitution that “all Duties, Imposes and Excises shall be uniform throughout the United States.” The geographic jurisdiction of the CIT, the only national Article III trial court, encompasses all of the United States. The CIT has nine sitting judges, including the chief judge, who is a statutory member of the Judicial Conference of the United States, as well as senior judges. The CIT sits in the James L. Watson Courthouse in New York City, although it is authorized to sit elsewhere, including in foreign nations. While the Second Circuit sits across the street in Foley Square, the appeals from the final decisions of CIT go not to that court but to the Federal Circuit in Washington, D.C., and ultimately can reach the Supreme Court.
Since the geographical jurisdiction of the court extends throughout the United States, the judges of the court are assigned, as needed, to preside at trials at any place in the United States in the appropriate United States Courthouse. When a judge of the court conducts a trial outside New York City, the clerk of the district court in that judicial district may act as clerk of the CIT for that case, including selecting and summoning the jury.
The CIT possesses limited subject matter jurisdiction. It may hear only cases involving particular international trade and customs law questions. For example, the CIT hears disputes involving determinations made by the U. S. International Trade Commission and the Department of Commerce’s International Trade Administration regarding anti-dumping and countervailing duties (imposed when a foreign producer sells a product in the United States at a price that is below that producer’s sales price in its home market), protests filed with U.S. Customs and Border Protection regarding classification of goods and imposition of duties, decisions regarding Trade Adjustment Assistance by the U. S. Department of Labor or U.S. Department of Agriculture for workers and sectors injured by increased imports, and customs broker licensing. An exception to the CIT’s jurisdiction arises under the 1994 North American Free Trade Agreement, whereby in cases involving antidumping and countervailing duties imposed on Canadian or Mexican merchandise, an interested party can request that the case be heard before a special ad hoc binational panel.
In addition to specified types of international trade cases, the CIT has residual, exclusive authority to decide any civil action against the United States and its agencies or officers that arises from any law pertaining to international trade. Because the CIT possesses all powers in law and equity of, or as conferred by statutes on, a U.S. District Court, the CIT may grant any relief appropriate to the particular case before it, including, but not limited to, declaratory and monetary judgments, writes of mandamus, and preliminary or permanent injunctions. The CIT also has exclusive subject matter jurisdiction of certain civil actions brought by the U.S. Government under the laws governing import transactions, as well as counterclaims, cross-claims and third party actions relating to cases pending in the Court.
A few examples:
Is a Dixon Ticonderoga pencil manufactured by an American company – such that Dixon Ticonderoga can challenge a Chinese manufacturer on the basis that it is dumping pencils on the American market – that is, at less than fair value to the detriment of American business? The Chinese company said “no,” alleging that Dixon Ticonderoga is a Chinese manufacturer with no standing to sue under American laws. See https://www.cit.uscourts.gov//SlipOpinions/Slip_op17/17-11.pdf
A surety company that issued bonds to multiple importers to duties imposed under the United States’ custom laws, on entries of the importers’ goods into the national commerce, challenges the U.S. Customs agency’s demands for payments on the bonds. The surety alleges that defects in the bond forms void the bonds. The U.S. Government, on behalf of Customs, opposes these contentions, and argues that the bonds are valid, and that sovereign immunity bars the surety’s defensive theory that its obligations are discharged because its surety rights have been impaired. See https://www.cit.uscourts.gov//SlipOpinions/Slip_op17/17-103.pdf
Does the automatic stay in bankruptcy under the bankruptcy code stay a civil penalty action brought by the United States against the bankrupt party for alleged fraudulent representations made in the course of importing goods into the commerce of the country?
How should food casings composed of both textile and plastic be classified under the Harmonized Tariff Schedule of the United States for determining what tariff rate should apply to their importation? Millions of dollars hang in the balance.
These are all questions that have come before more me during this past, inaugural year on the court. We see the full panoply of complex matters – including administrative agency action, statutory interpretation, standing issues, contracts, insurance, sufficiency of evidence, and the intricacies of foreign institutions and practices. The menu of the issues, although more specialized than the diverse range presented by the general jurisdiction of the Massachusetts Appeals Court, are nearly always challenging. The quality of the lawyering is generally excellent, with appearances by many of the large firms and boutique firms specializing in international trade; the U.S. Department of Justice appears in every case on behalf of the Department of Commerce. There is a civility among the bar that is impressive.
Although our cases can include jury trials (such as a battle of experts in a customs classification case where the essence of a good is in controversy), the great bulk of our work is judicial review of administrative action – that is, appeals from agency decisions. In this respect, the work is the work of an appellate judge, and not really different from adjudication on the Appeals Court. Of course, one important distinction is that while an Appeals Court judge must persuade two other panelists comprising the three judge panel, on the CIT, with the exception of cases raising constitutional or vital public policy issues, we each sit alone. On the Appeals Court, there is a great volume of cases, and typically, for those cases that are argued, not more than thirty minutes is allotted to a case. On the CIT, while the volume is less, the records in each case are huge and the multiple issues raised by each case are complex. In this respect, the cases are akin in size to antitrust or multidistrict litigation. I have adopted the practice of some of my colleagues of sending counsel, at least two weeks in advance of argument, the many questions I will ask at oral argument. It is not uncommon for the arguments in a case to last two or three hours, but because the parties have the benefit of the questions and the ensuing discussion is truly a search to address challenging legal questions or to elucidate the record, the time flies. I have found that sending the questions in advance removes the “gotcha” quality of argument and truly advances the dialogue between the court and counsel. In retrospect, I have thought of some cases during my tenure on the Appeals Court when such a practice would have been beneficial to the process of decision.
As on the Appeals Court, on the CIT, the ultimate judicial product in a case is the opinion. On the Appeals Court, my view was that the decision should be understandable not only to the experienced litigator but to those unschooled in the law. So too on the CIT, my goal is to produce opinions which strip away the legal jargon and demystify the complex international trade cases that affect in a very real way the every day quality of life in this country.
Reminiscing about his service on the First Circuit, at my investiture Justice Breyer noted the longstanding connection to the First Circuit established by the CIT judges who sat by designation. Other judges and practitioners have remembered the CIT judges who have sat in the District Court in Boston over the years. Beyond that, the CIT, as constituted by a single judge, has sat in Boston in the adjudication of cases under the court’s jurisdiction. The relationship between the court and the Massachusetts legal community has been historic. May it continue to thrive.
Judge Katzmann is a Judge on the United States Court of International Trade. He previously served as an Associate Justice of the Massachusetts Appeals Court. He is a former member of the BBJ Board of Editors.
Massachusetts Appeals Court Permits Claim for Breach of Fiduciary Duties Against Company Counsel by Minority LLC MembersPosted: February 2, 2018
by Michael Cohen and William Cushing
In Baker v. Wilmer Cutler Pickering Hale and Dorr LLP, 91 Mass. App. Ct. 835 (2017), decided this past July, the Massachusetts Appeals Court allowed the minority members of a Massachusetts limited liability company to sue the LLC’s outside counsel for breach of fiduciary duty relating to counsel’s involvement in an alleged “freeze-out” scheme that benefited the majority members. Although the Supreme Judicial Court had previously held that counsel to closely-held corporations may owe fiduciary duties to individual stockholders, Baker is the first case in which a Massachusetts appellate court has permitted a claim for breach of fiduciary duty to proceed against outside company counsel by minority owners. Corporate lawyers should be acutely aware of the Baker decision and its implications.
The factual allegations relating to the underlying dispute that are set out below come from the plaintiffs’ complaint, as related by the Appeals Court’s opinion.
Elof Eriksson and W. Robert Allison formed Applied Tissue Technologies LLC (“ATT”) as a Massachusetts LLC in early 2000, at which time they were issued seventy-five and twenty-five percent membership interests in the company, respectively. (Both Eriksson and Allison later assigned portions of their interests to family trusts, and a former key employee was granted a small interest in ATT.)
In 2003, ATT adopted an amended operating agreement which provided, among other things, that (a) the members have exclusive management control over ATT, which they exercise by votes in proportion to their percentage interest in the company, (b) the agreement cannot be amended unless both Eriksson and Allison agree in writing, (c) the proportion of net profits to which each member is entitled cannot be reduced or diluted without that member’s consent, (d) if any member chooses to provide additional funds to the company, those advances are treated as loans for which ATT will pay interest at the prime rate, and (e) all members owe each other a duty of utmost loyalty and good faith in the conduct of ATT’s affairs.
By early 2012, ATT was facing financial difficulties, and Eriksson and Allison could not agree on how to address ATT’s challenges. Eriksson was willing to contribute capital in exchange for additional equity in the company, while Allison wanted outside investment and a new management team.
Around this time, company management urged Eriksson to gain “control” of the company. Eriksson reached out to his daughter, an associate at a Boston law firm, who in turn connected her father with a partner at the firm who had experience working with emerging companies. In February 2012, ATT’s chief executive officer signed an agreement to engage the law firm as company counsel. The agreement expressly provided that the law firm would represent ATT, and would not represent any individual members of ATT. Shortly thereafter, the law partner relocated his practice to another law firm, which provided ATT with a substantially similar engagement letter to represent only the company.
At the request of Eriksson and management, ATT’s outside lawyers initially drafted a plan to buy out Allison’s minority membership interests, along with an email that Eriksson would send making the buyout offer to Allison. Allison rejected the offer and responded that he wished to work to maximize ATT’s value for a more favorable exit down the road. He also reminded Eriksson of the minority protections in the ATT operating agreement and suggested that all members meet to address the issues facing the company. Soon after receiving Allison’s response, Eriksson and ATT’s outside lawyers prepared an alternative plan to forcibly remove the minority member protections by using General Laws chapter 156C, section 60, which authorizes a Massachusetts LLC to merge with another business entity (in this case, a Delaware LLC specifically created to facilitate the “freeze-out”) upon the vote of a simple majority of the members unless the company’s operating agreement provides otherwise. Because ATT’s operating agreement was silent about a member’s rights in connection with a merger, ATT could be merged into the new entity by a simple majority vote, thereby depriving the minority members of the protections for which they had previously bargained. ATT’s lawyers advised management that the merger would eliminate Allison’s “ability to interfere with company operations” and that, over time, the company could reduce Allison’s interest to “a smaller and smaller ownership position.”
Having accomplished everything necessary to effectuate the plan, Eriksson and company management met with Allison and informed him of the merger. They advised Allison to contact the company’s lawyers if he wanted copies of the new operating agreement and other company documents for the surviving entity. Over the ensuing months, the new Delaware LLC issued additional preferred interests to Eriksson and management, substantially reducing the interests of Allison and the other minority members in the surviving company.
In May 2015, Allison and the company’s other minority members sued, among others, the law firms that had acted as outside counsel to the company, along with the individual attorneys who had advised Eriksson and company management, alleging, among other claims, breach of fiduciary duty. The Superior Court dismissed the fiduciary duty claim and Allison and other minority members appealed.
Massachusetts law has long provided enhanced protections to minority shareholders in closely held corporations. In Donahue v. Rodd Electrotype Co. of New England, Inc., 367 Mass. 578, 593 (1975), the SJC held that shareholders in a closely held company owe each other a fiduciary duty of utmost good faith and loyalty, akin to the duties owed among partners in a partnership. And, in Schaeffer v. Cohen, Rosenthal, Price, Mirkin, Jennings & Berg, P.C., 405 Mass. 506, 513 (1989), the SJC observed that “there is logic in the proposition that, even though counsel for a closely held corporation does not by virtue of that relationship alone have an attorney-client relationship with the individual shareholders, counsel nevertheless owes each shareholder a fiduciary duty,” though the SJC’s decision in Schaeffer did not require it to determine that issue.
In Baker, the Appeals Court invoked a decision of the Michigan Court of Appeals holding that the lack of an attorney-client relationship between a fifty percent shareholder in a closely held professional corporation and counsel for the corporation did not necessarily preclude a fiduciary relationship between the shareholder and corporate counsel. Baker, 91 Mass. App. Ct. at 843-44 (citing Fassihi v. Sommers, Schwartz, Silver, Schwartz & Tyler, P.C., 107 Mich. App. 509, 309 N.W.2d 645 (1981)). Rather, a fiduciary relationship may arise when “one reposes faith, confidence, and trust in another’s judgment and advice,” and the existence of that relationship is largely a question of fact. Id. (quoting Fassihi, 107 Mich. App. at 514-15).
The Appeals Court observed that the defendants in Baker undertook their representation of ATT “with full knowledge” of the protections that the operating agreement afforded the minority members, that they “knew, or should have reasonably foreseen” that company counsel was “constrained by the operating agreement, and the consensual decision-making it imposed on important matters,” and that counsel could not act “in concert with the majority members, for the very purpose of eliminating those protections.” The court also noted counsel’s “purposeful steps” to conceal their activities from the minority members, even though the minority members “should have been able to repose trust and confidence that any counsel hired by the company would have communicated and consulted with them prior to undoing [the minority] protections.” Noting that the existence of a fiduciary relationship “is largely a question of fact,” the Appeals Court could not conclude that the defendant attorneys owed no fiduciary duty to the minority LLC members in this case based on the facts alleged in the complaint. Accordingly, the court reversed the dismissal of the complaint and remanded the case to the Superior Court so that the lawsuit could proceed. The defendants did not file a petition for further appellate review in the SJC.
The Baker decision yields at least two crucial practice points for attorneys working with LLCs and other closely held companies:
- Respect the Role of Company Counsel, and Remain Faithful to Your Client
An attorney retained by a corporation represents the corporate entity, not its shareholders, members, officers, employees, directors, or other constituents. Cf. Mass. R. Prof. Conduct 1.13(a) (attorney represents the organization), 1.13(f) (attorney shall explain identity of client to organization’s constituent with whom he is dealing if organization’s interests are adverse to that person). The corporate attorney may also represent a corporate constituent, but counsel must address potential conflicts of interest in accordance with the dual-representation rules. Mass. R. Prof. Conduct 1.13(g) (referring to Mass. R. Prof. Conduct 1.7). Attorneys engaged as company counsel owe allegiance to the entity, and they should be mindful of potential conflicts of interest involving those persons giving instructions and of the ways in which the interests of the entity and (all of) its owners may differ from the interests of those directing company counsel. The defendant lawyers in Baker would have been wise to suggest that Erikkson and management retain separate counsel to address personal interests.
- Respect Negotiated Contractual Rights
The members of ATT had agreed upon a set of rights intended to ensure that all members moved together, and they provided in the operating agreement that these rights could be varied only by express agreement of the members. The Appeals Court took a dim view of the use of a merger transaction, orchestrated by company counsel, to involuntarily deprive the minority LLC members of those rights, notwithstanding that the operating agreement did not expressly prohibit a merger or impose enhanced approval requirements in connection with a merger. Company counsel should ensure that advantageous contractual rights are changed only through a process that respects the “faith, confidence and trust” that members of an LLC may repose in company counsel.
Michael J. Cohen is a Partner in Brown Rudnick LLP’s U.S. Corporate and Capital Markets practice group, and is based in the firm’s Boston office. Michael represents early stage and mid-market companies in connection with mergers and acquisitions, joint ventures and strategic alliances, financing transactions and general corporate and commercial matters at all stages of the corporate life cycle. Michael also advises venture capital and private equity funds and would-be portfolio companies in connection with deal terms and transaction structuring.
William T. Cushing is an Associate in Brown Rudnick LLP’s U.S. Corporate and Capital Markets practice group, and is based in the firm’s Boston office. While at Boston University School of Law, Will was an Executive Editor for the Review of Banking & Financial Law. In 2014, Will worked as a legal Intern at the Massachusetts Attorney General’s Office in the Gaming Division.
by Colin Korzec and Mary H. Schmidt
On October 16, 2017, the Massachusetts Supreme Judicial Court issued Ajemian v. Yahoo!, Inc., 478 Mass 169 (2017), which holds that federal law, specifically the Stored Communications Act, does not prohibit an email service provider from disclosing email content to a decedent’s personal representative. This ruling is significant to the fiduciary community in Massachusetts because it helps define post mortem ownership of digital assets.
The issue in Ajemian v. Yahoo arose after John Ajemian died from a cycling accident. His brother and sister were appointed personal representatives of his estate. The personal representatives knew that their brother had a personal Yahoo email account, which they wanted to access as part of the estate settlement process. Yahoo refused their request for access and refused to disclose the account’s contents, citing what Yahoo considered to be a prohibition on disclosure imposed by the federal law known as the Stored Communications Act (18 U.S.C. §2701 et seq.)(the “Act”).
The Act was enacted in 1986 to create Fourth Amendment-like privacy protection for email and other digital communications stored on the internet. It limits the ability of the government to compel information from internet service providers. In addition, it restricts internet service providers’ ability to reveal information to nongovernment entities. Both civil and criminal penalties are provided for violations of the Act. The Act protects the privacy of users of electronic communications by making unauthorized access to electronic communications a criminal offense.
Yahoo claimed that the Act prohibited it from disclosing private emails to the personal representatives unless a specific statutory exception applied. According to Yahoo, no such exception applied in this instance. In addition, Yahoo maintained that the terms of service agreement that the decedent had agreed to when he created the email account gave Yahoo the discretion to refuse the personal representatives’ request. As a result, Yahoo was concerned with potential liability if it turned over the contents of the decedent’s email account to personal representatives absent specific authority in the the Act.
Yahoo prevailed in the probate court, which held that the requested disclosure was prohibited by the Act. The court also concluded that although the estate had a common-law property right in the account’s contents, disputed issues of material fact concerning the application of the terms of service agreement precluded summary judgment.
The SJC Decision
The SJC held that the Act did not prohibit Yahoo from voluntarily disclosing the contents of the account’s email communications to the personal representatives because the Act contains an exception that allows disclosure based on lawful consent (citing Section 2702 of the Act). The personal representatives argued that they could consent to release of the account’s contents because the account was property of the estate and therefore receiving the account’s contents would effectively allow them to take possession of estate property in their normal capacity as personal representatives. In contrast, Yahoo argued that under the Act lawful consent could come only from the account’s actual, original user.
The SJC disagreed with Yahoo and held that Yahoo’s interpretation of lawful consent would preempt state probate and common law, specifically state law allowing a personal representative to provide consent on behalf of the decedent, without any clear congressional intent to do so. The SJC, however, held that while Yahoo may divulge the content of the decedent’s communications, Yahoo is not required to do so if its terms of service agreement provided otherwise.
On the issue of whether Yahoo could the use the terms of service agreement with the decedent to limit access to the account by the decedent’s personal representative, the SJC divided. Yahoo argued that the terms of service agreement granted Yahoo the right to deny access to, and even delete the contents of, the account at its sole discretion, thereby permitting it to refuse the personal representatives’ request. Over Chief Justice Gants’ objection, the Court remanded that issue to the probate court for further proceedings on whether the terms of service agreement is an enforceable contract.
Justice Gants assumed for purposes of the opinion that the terms of service agreement is enforceable against the estate. Justice Gants further noted that the terms of service agreement grants Yahoo the right to terminate the agreement and the user’s access and to remove and discard any content within the service’s possession. Yahoo, however, could not contend that the termination provision gave Yahoo an ownership interest in the user’s content. Therefore, even if the terms of service agreement limits the estate’s property rights, Yahoo cannot claim ownership over the content still retained by Yahoo. Nor could the termination provision be reasonably interpreted to allow Yahoo to destroy emails after the personal representatives initiated a court action to obtain the messages. Justice Gants noted it was unfair to put the estate through the expense of another court proceeding and dissented from the majority’s decision to remand the case for further proceedings regarding the terms of service agreement.
Key Takeaways and Possible Future Developments
Given that this case has been remanded, it is far from concluded. However, even though the decision does not order Yahoo to disclose the emails to the personal representatives, the decision negates the email industry’s position that the Act prohibits disclosure. In and of itself, that is significant for personal representatives who seek access to internet communications of the deceased individual’s estate that they are administering.
Presumably, the Massachusetts probate court, on remand, will simply issue an order mandating disclosure, now that the SJC has confirmed that the personal representative may provide lawful consent under the Act. But what if the probate court, on remand, does not order the disclosure, and instead agrees with Yahoo that its terms of service agreement allows the company to destroy or withhold the emails? Chief Justice Gants indicates that if the trial court were to hold that Yahoo’s terms of service agreement were binding on the parties and permitted Yahoo to destroy the decedent’s email messages, the SJC “would surely reverse that ruling.”
Practitioners have begun to include specific authorizing language in their estate planning documents that addresses a fiduciary’s rights relative to an individual’s digital assets. These explicit directions should squarely address the lawful consent exception raised by the Act.
The SJC also suggested, in a footnote, that nothing precludes the Legislature from regulating the inheritability of digital assets. A majority of states have addressed the issues presented by Ajemian by enacting the Revised Uniform Fiduciary Access to Digital Assets Act (“RUFADAA”). RUFADAA was drafted through a collaborative effort between fiduciary professionals and internet service providers. RUFADAA extends the traditional power of a fiduciary to manage tangible property to include management of a person’s digital assets. As a compromise between the drafting parties’ interests, RUFADAA allows fiduciaries to manage digital property, but restricts a fiduciary’s access to electronic communications such as email, text messages, and social media accounts unless the original user consented to this access in a will, trust, power of attorney, or other record. There are currently several bills pending before the Massachusetts Legislature relating to varying forms of access by fiduciaries to digital assets. A Massachusetts Study Committee has recommended the adoption of RUFADAA in Massachusetts, but as of yet, RUFADAA has not been formally filed as a bill in the Commonwealth.
Mary H. Schmidt, Esq. is a partner at Schmidt & Federico and is a member of the Massachusetts Ad Hoc RUFADAA Study Committee. Colin Korzec is a National Estate Settlement Executive at U.S. Trust, Bank of America Private Wealth Management and Chair of the Massachusetts Ad Hoc RUFADAA Study Committee.
The Privity Defense in Commercial Warranty Actions: Still Lingering Forty-Five Years After Legislative AbolitionPosted: February 2, 2018
by David R. Geiger and Richard G. Baldwin
On July 21, 2017, in Organic Mulch & Landscape Supply of New England LLC v. Probec, Inc. [i] the United States District Court for the District of Massachusetts dismissed a groundskeeping supply business’s breach of warranty claims against a manufacturer to recover the purchase price, repair costs and lost profits from allegedly defective ice bagging equipment because plaintiff bought the equipment from a distributor rather than directly from the manufacturer. The court further denied plaintiff’s motion to certify to the Massachusetts Supreme Judicial Court (“SJC”) the question of whether privity was required for a commercial plaintiff’s warranty claim for economic loss, reasoning that the “answer is clear in the case law.” In support, the court asserted that since the late 1990s courts have “uniformly” required privity under these circumstances, citing opinions from four different Massachusetts federal judges.
This authority, however, appears to be at odds with the plain language of Mass. Gen. L. ch. 106, § 2-318, which provides:
Lack of privity between plaintiff and defendant shall be no defense in any action brought against the manufacturer . . . to recover damages for breach of warranty, express or implied, or for negligence . . . if the plaintiff was a person whom the manufacturer . . . might reasonably have expected to use, consume or be affected by the goods.
As discussed below, the Massachusetts federal court’s departure from the statutory language rests on a tenuous basis, particularly in light of the statute’s history and interpretation by the SJC, and raises significant practical and policy concerns.
The Path To The Federal Court Rule
The original version of § 2-318 abolished the privity requirement only for breach of warranty claims by a “natural person who is in the family or household of [the] buyer or who is a guest in his home . . . and who is injured in person” by a warranty breach.[ii] In 1971, the section was re-written to extend the abolition to “any action . . . to recover damages for breach of warranty, express or implied, or for negligence” by “a person whom the manufacturer . . . might reasonably have expected to use, consume or be affected by the goods.” In 1973, the legislature added a two-year statute of limitations for “all actions under this section,” and in 1974 extended it to three years.[iii]
For nearly twenty-five years, the 1971 amendment to § 2-318 was consistently interpreted to have eliminated the privity defense in all warranty cases.[iv] Even the Massachusetts federal court opinions noted above agree on this,[v] but they cite the SJC’s 1989 decision in Bay State-Spray & Provincetown S.S., Inc. v. Caterpillar Tractor Co.[vi] as a turning point in the statute’s interpretation.
The issue in Bay State-Spray was not privity, however, but which of two “literally appli[cable]” statutes of limitations governed a warranty claim for repair costs and lost profits against the manufacturer of an allegedly defective engine in a ferry sold to plaintiff by a shipyard. Section 2-318 establishes a three-year statute of limitations from the date of injury for actions “under this section,” which includes warranty claims, but Mass. Gen. L. ch. 106, § 2-725 imposes a four-year limitations period generally running from the date of sale for actions “for breach of any contract,” including “breach of warranty.” The SJC viewed the legislature as having two purposes in expanding § 2-318: “to eliminate requirements of privity and to express new principles of strict liability for personal injuries and property damage caused by a seller’s breach of warranty.” Based on the latter, the court reasoned that the limitations period of § 2-318 governed “tort-based warranty claims,” in which the product causes personal injury or damage to property other than the product itself, while that of § 2-725 governed “contract-based warranty claims,” in which the product causes only economic loss or damage to the product itself. As plaintiff’s claim was contract-based and brought more than four years after the sale, § 2-725 applied and barred the claim. In a footnote, the SJC mentioned that defendant had not argued that plaintiff’s lack of privity barred the claim.
Six years later, the United States District Court for the Southern District of New York in Hadar v. Concordia Yacht Builders[vii] relied on Bay State-Spray to conclude that Massachusetts law required privity for contract-based warranty claims. In Hadar, a yacht owner sued his shipbuilder and the distributors and manufacturers of epoxy resin and fabric used to construct the ship for a cosmetic defect allegedly caused by incompatibility between the resin and fabric. The distributor and manufacturer defendants asserted that lack of privity barred plaintiff’s warranty claims. The court interpreted Bay State-Spray to hold that § 2-725—which is entitled “Statute of Limitations in Contracts for Sale”—governed all aspects of contract-based warranty claims and that § 2-318 is inapplicable to such claims. The court reasoned that although Bay State-Spray “involved” statute of limitations issues, the SJC “did not limit its discussion of the scope of section 2-318 to [such] issues.” Because § 2-725 does not address privity, the court held Massachusetts still required it for contract-based warranty claims.
Less than a month later, however, the SJC held in Jacobs v. Yamaha Motor Corp., U.S.A.,[viii] that privity was not required for the purchaser of a consumer product to recover from its manufacturer for contract-based warranty claims. The court noted that Mass. Gen. L. ch. 106, § 2-316A expressly prohibits a “manufacturer of consumer goods”[ix] from disclaiming or limiting implied warranties or remedies for their breach, thus creating the “implication” that such a manufacturer indeed “makes an implied warranty . . . to the consumer,” i.e., that privity is not required. Moreover, § 2-318 is even “[m]ore explicit” and “on its face invalidate[d]” the manufacturer’s privity argument, since the statute’s abolition of the privity requirement “is not limited to recovery for personal injury but rather refers [more broadly] to ‘damages’ for breach of warranty,”—unlike two of the three official UCC alternatives for the section. The SJC also noted that Massachusetts’ § 2-318 is “at least as broad as,” and in some respects “goes beyond,” the UCC’s broadest Alternative C, which had been interpreted by courts across the country as permitting consumers to recover for non-personal injury warranty claims absent privity.[x]
While the Jacobs Court noted Bay State-Spray’s conclusion that § 2-318 had been enacted with a tort “focus,” it reasoned that focus should not “inhibit the independent development of the law concerning warranties.” Acknowledging in dicta the possibility that “[c]ontract-based warranty claims involving commercial transactions may generally call for different treatment than tort-based warranty claims,” the SJC asserted that buyers of consumer goods “deserve separate consideration because of the special legislation affecting them.” The court explained it was responding to this treatment by interpreting sections 2-316A and 2-318 to abolish the privity requirement for a buyer of consumer products to bring a contract-based warranty claim against the manufacturer.
Following Jacobs, developments in the Hadar litigation caused the New York court to revisit its prior ruling.[xi] Acknowledging the decision in Jacobs, but noting that its holding was limited to buyers of consumer products, the court retained its original conclusion for contract-based warranty claims “arising in the context of commercial transactions.” The court did not address the fact that its original decision was premised on § 2-725, while Jacobs did not even cite that section, much less say that it governed all aspects of contract-based warranty claims. Nor did the court acknowledge Jacobs’ affirmative reliance on § 2-318’s plain language that was “explicit” in its abolition of the privity requirement, including for economic loss claims, and was at least as broad as—and in some respects went beyond—UCC Alternative C.
Seven months later, the Massachusetts federal court in Sebago, Inc. v. Beazer East, Inc.[xii] adopted Hadar’s interpretation of Bay State-Spray and Jacobs to conclude that, under Massachusetts law, “commercial plaintiffs must allege privity to maintain a breach of warranty action against a manufacturer.” Later opinions of the Massachusetts federal courts follow Sebago and its analysis, generally without citing Hadar.[xiii]
The SJC’s Subsequent Decision in Theos & Sons
The SJC has not subsequently revisited the possibility raised in Jacobs that commercial contract-based warranty claims may warrant different treatment than tort-based warranty claims or, more pertinently, whether such claims should be treated differently from consumer contract-based warranty claims, which Jacobs explicitly held did not require privity.[xiv] But at least one post-Jacobs case strongly suggests the court does not view privity as a requirement even for commercial contract-based warranty claims.
In Theos & Sons, Inc. v. Mack Trucks, Inc.,[xv] a business that bought a commercial truck second-hand from another business sued the manufacturer for breach of the implied warranty of merchantability to recover for economic losses from failure of the truck’s engine. The SJC affirmed dismissal of plaintiff’s claim because the manufacturer had effectively disclaimed any implied warranty in its sale to the first buyer, holding that the disclaimer was effective against any subsequent buyer, even one unaware of the disclaimer. In reaching its conclusion, the SJC specifically noted that “§ 2-318 extends all warranties . . . to third parties who may reasonably be expected to use the warranted product,” without making any distinction between consumer or commercial transactions, and observed that while § 2-318 itself did not explicitly address the effects of warranty disclaimers on remote plaintiffs, the section’s comments did. Theos & Sons thus strongly implies that the court may view § 2-318’s abolition of the privity requirement for contract-based warranty claims as equally applicable to both commercial and consumer products.
Practical and Policy Concerns
Although the Massachusetts federal court decisions requiring privity apply only to commercial buyers and contract-based warranty claims, the decisions nonetheless have considerable practical and policy consequences. For example, commercial buyers that purchase through intermediaries such as distributors may lack a remedy if their immediate seller becomes insolvent. Indeed, that may be the outcome in Organic Mulch, where the court dismissed plaintiff’s claims against the manufacturer for lack of privity but claims against the distributor have been stayed by its bankruptcy filing.
While insolvency may be a comparatively rare occurrence, the federal court rule will almost always have litigation consequences. For example, since the manufacturer inevitably possesses the most critical information and documents concerning any alleged product defect, a plaintiff limited to suing its immediate seller must incur the additional burden of pursuing third-party discovery from the manufacturer to obtain information necessary to prosecute its claim. In addition, the rule is likely to foster multiple litigations: each party in the sales chain would have to bring a suit against the entity with which it was in privity until liability ultimately reaches the manufacturer.
The federal court rule also has significant policy consequences. For one, preventing suits against manufacturers that sell indirectly fails to situate liability, and the corresponding economic incentive, on the truly responsible entity. The SJC has noted in the tort context that the law seeks to impose liability on the party in the best position to prevent or remedy a product defect.[xvi] This principle should be not be rendered inapplicable by the happenstance that the product caused only economic loss, creating a contract-based claim, rather than personal injury or property damage that would create a tort-based claim. Moreover, to the extent the federal court’s position diverges from that of the state court’s, a manufacturer’s liability will turn not on its culpability but rather whether plaintiff’s claims can be removed to federal court.
In addition, interpreting § 2-318 contrary to its seemingly unambiguous meaning may run afoul of the SJC’s requirement that courts must “carry out the legislature’s intent, determined by the words of a statute interpreted according to the ordinary and approved usage of the language.”[xvii]
In light of this fundamental principle, Jacobs’ statement (albeit in the context of a consumer claim) that § 2-318 is “explicit” in abolishing the privity requirement for contract-based warranty claims and Theos & Sons’ strong implication that this abolition is as applicable to commercial as to consumer plaintiffs, courts and litigants would benefit by the SJC’s finally resolving the issue. Accordingly, a future federal court may want to consider requesting such a resolution. Alternatively, a direct state court appeal may provide the SJC that same opportunity.
[i] Civil Action No. 16-10658-RGS, 2017 U.S. Dist. LEXIS 113716 (D. Mass. July 21, 2017).
[ii] See Bay State-Spray & Provincetown S.S., Inc. v. Caterpillar Tractor Co., 404 Mass. 103, 108 n.6 (1989) (quoting 1957 version of statute).
[iii] See id. at 109.
[iv] See, e.g., id. at 104 (“Our discussion will require an analysis of the unique Massachusetts treatment of G.L. c. 106 § 2-318, . . . which the Legislature has used to eliminate requirements of privity”); Cameo Curtains, Inc. v. Philip Carey Corp., 11 Mass. App. Ct. 423, (1981) (“The fundamental purpose of § 2-318, as amended, is to eliminate lack of privity as a defense in a breach of warranty action.”).
[v] E.g., First Choice Armor & Equip., Inc. v. Toyobo Am. Inc., 839 F. Supp. 2d 407, 412 (D. Mass. 2012) (“For a time, Massachusetts courts assumed that § 2-318 eliminated the privity requirement for all breach of warranty actions regardless of the kind of injury involved.” (citing cases)); W.R. Constr. & Consulting, Inc. v. Jeld-Wen, Inc., Civil Action No. 01-10098-DPW, 2002 U.S. Dist. LEXIS 18686, at *20 n.3 (D. Mass. Sept. 20, 2002) (“Throughout the early 1980s, the Massachusetts courts appeared to treat § 2-318 as covering all breach of warranty claims.”).
[vi] 404 Mass. 103, 105–11 (1989).
[vii] 886 F. Supp. 1082, 1097–98 (S.D.N.Y. 1995).
[viii] 420 Mass. 323, 327–31 (1995).
[ix] Consumer goods are those “bought for use primarily for personal, family or household purposes.” G.L. c. 106 § 9-102 (made applicable by G.L. c. 106 § 2-103).
[x] 420 Mass. at 328–29. The UCC’s § 2-318 is captioned “Third Party Beneficiaries of Warranties Express or Implied” and provides three alternatives for state legislatures. Alternative A is the version Massachusetts adopted in 1957. Compare Bay State-Spray, 404 Mass. at 108 n.6 with Jacobs, 420 Mass. at 328 n.4. Alternative B abolishes the privity requirement for “any natural person who may reasonably be expected to use, consume or be affected by the goods and who is injured in person” by a warranty breach. Jacobs, 420 Mass. at 328 n.4. Alternative C abolishes the defense for “any person who may reasonably be expected to use, consume or be affected by the goods and who is injured” by a warranty breach, the only alternative that “concerns more than personal injury.” Id. Massachusetts’ current § 2-318, captioned “Lack of Privity in Actions Against a Manufacturer, Seller or Supplier of Goods,” like Alternative C, contains no limitation either to “natural” persons or injury “in person,” but is even broader in that, for example it also governs claims “for negligence.”
[xi] Hadar v. Concordia Yacht Builders, 92 Civ. 3768 (RLC), 1997 U.S. Dist. LEXIS 11182, at *11–15, 1997 WL 436464 (S.D.N.Y. Aug. 1, 1997).
[xii] 18 F. Supp. 2d 70, 97–99 (D. Mass. 1998).
[xiii] See First Choice, 839 F. Supp. 2d at 412–13; Irish Venture, Inc. v. Fleetguard, Inc., 270 F. Supp. 2d 84, 87 (D. Mass. 2003); W.R. Constr. & Consulting, Inc., 2002 U.S. Dist. LEXIS 18686, at *18–20.
[xiv] In Canal Electric Co. v. Westinghouse Electric Corp., an opinion on certified questions, the SJC declined to address whether a commercial plaintiff would be barred from recovering purely economic losses from the manufacturer of an allegedly defective generator absent privity, as that question was not certified to the Court. 406 Mass. 369, 370 n.1 (1990).
[xv] 431 Mass. 736 (2000).
[xvi] E.g., Colter v. Barber-Greene Co., 403 Mass. 50, 57 (1988) (“We hold a manufacturer liable for defectively designed products because the manufacturer is in the best position to recognize and eliminate the design defects.”).
[xvii] Goodridge v. Dep’t of Pub. Health, 440 Mass. 309, 319 (2003).
Mr. Geiger and Mr. Baldwin are partners in the litigation department of the Boston office of Foley Hoag LLP. They are both members of the firm’s Product Liability and Complex Tort Practice Group, of which Mr. Geiger is the chair.
by José P. Sierra
During the Spring and Fall legal conference seasons, emails addressing “data breaches,” “improving cyber defenses,” and “what you (or your general counsel/board) need to know about cyber security/insurance,” hit our inboxes on an almost weekly basis. Although it took some time, everybody now wants a slice of hot “cyber” pie, and law firms have been quick to jump on the cyber security bandwagon and form cyber-practices. What hasn’t gotten the same rapt attention of conference organizers, tech vendors, and the legal community is the coming age of artificial intelligence, or “AI.” There are at least two reasons for this. First, although large-scale deployment of self-driving cars is just over the horizon, most of the bigger, life-changing AI products are still years away. Second, most laypeople (including lawyers) do not understand what AI is or appreciate the enormous impact that AI technology will have on the economy and society. As a result, those in the “vendor” community (which includes lawyers) have yet to determine how their clients and their clients’ industries will be affected, and how they themselves can profit from the AI revolution.
AI and What It Will Mean for Everyone
AI may be defined as a machine or super computer that can simulate human intelligence by acquiring and adding new content to its memory, learning from and correcting its prior mistakes, and even enhancing its own architecture, so that it can continue to add content and learn. A few years ago, AI development and its celebrated successes were limited to machines out-playing humans in games like chess (e.g., IBM’s Watson beating world chess champion Gary Kasparov and winning on the show, Jeopardy). And while most of us are now familiar with “intelligent” assistants like “Siri,” “Alexa,” and other “smart” devices, for the average person, the full import of AI’s capabilities and potential hasn’t been grasped (though the advent of autonomous cars has given us some glimpse of things to come).
Already, AI can do many things that people can do (and in some cases better). In addition to driving cars, AI can detect and eliminate credit card payment fraud before it happens, trade stocks, file insurance claims, discover new uses for existing drugs, and detect specific types of cancer. Then there is the work that most people think can be done only by humans, but which AI can do today, including: (1) predicting the outcome of human rights trials in the European Court of Human Rights (with 79% accuracy); (2) doing legal work – numerous law firms have “hired” IBM’s Ross to handle a variety of legal tasks, including bankruptcy work, M&A due diligence, contracts review, etc.; and, more disturbing than possibly replacing lawyers, (3) engaging in artistic/creative activities, like oil canvas painting, poetry, music composition, and screenplay writing. In short, almost no realm of human endeavor – manual, intellectual, or artistic – will be unaffected by AI.
What AI Will Mean for Lawyers
Some legal futurists think that AI simply will mean fewer jobs for lawyers, as “law-bots” begin to take over basic tasks. Other analysts focus on the productivity and cost-savings potential that AI technology will provide. Two other considerations of the impending AI revolution merit discussion: revenue opportunities and the role lawyers can and should play in shaping AI’s future.
How AI May Shape the Legal Economy
Some of the most profitable practice areas in an AI-driven economy are likely to be:
- Patent Prosecution and Litigation. This one should be obvious and already has taken off. Fortunes will be made or broken based on which companies can secure and defend the IP for the best AI technologies.
- M&A. Promising AI start-ups with good IP will become targets for acquisition by tech-giants and other large corporations that want to dominate the 21st century economy.
- Antitrust. Imagine that Uber, once it has gone driverless, decides to buy Greyhound and then merges with Maersk or DHL shipping, which then merges with United Airlines. How markets are (re)defined in an AI-driven economy should keep the antitrust bar very busy.
- Labor and Employment. AI technology has the potential to disrupt and replace human labor on a large-scale. To take just one example, in an AI-created driverless world, millions of car, taxi, bus, and truck drivers will find themselves out of work. What rights will American workers have when AI claims their jobs? How will unions and professional organizations protect their members against possible long-term unemployment? Labor and employment lawyers will be at the forefront of labor re-alignment issues.
- Tax. If AI reduces the human labor pool, as expected, and there is a corresponding loss in tax revenue, the tax code will most likely need to be revised, which will mean new strategies for the tax bar.
- Cyber-law/compliance. The importance of protecting IP, proprietary, and confidential information, and the legal exposure of not doing so, will be even greater in the higher-stakes world of AI.
- Criminal Defense. Will AI help law enforcement solve crimes? Will AI be used to commit crimes? If so, both prosecutors and the defense bar will be busy prosecuting and representing more than the typical criminal defendant.
How Lawyers May Help Shape AI
Is there a role for the legal profession in the coming AI age other than helping our clients adapt to a “brave new world?” In my view, lawyers should play a necessary and leading role. For if AI has the potential to affect every industry and occupation and permanently eliminate jobs along the way, society’s leaders cannot afford to leave the decisions about which AI technologies will be developed in what industries (and which ones won’t) to sheer market forces. Private industry and investors are currently making these decisions based on one overarching criterion — profit — which means everything is on the table. Although that approach propelled the industrial and digital revolutions of the last two centuries, jobs lost by those revolutions were eventually replaced by higher-skilled jobs. For example, teamsters of horse-powered wagons were replaced by modern teamsters, i.e., truck drivers. That won’t be the case following an AI revolution. The ultimate question, therefore, in the coming AI century is what areas of human endeavor do we, as a society, want to keep in human hands, even if such endeavors can be accomplished faster, cheaper, and better by AI machines? As the profession responsible for protecting society’s interests through law and policy, lawyers cannot afford to take a back seat to the free-for-all development of AI, but instead must lead and help shape the AI century to come.
José P. Sierra is partner at Holland & Knight. He focuses his practice in the areas of white collar criminal defense, healthcare fraud and abuse, pharmaceutical and healthcare compliance, and business litigation.
Care and Protection of Walt: Breathing New Life into the Decades-Old Policy of Foster Care as the Last Resort.Posted: February 2, 2018
by Ann Balmelli O’Connor
To many, the Supreme Judicial Court’s holdings in Care and Protection of Walt, 478 Mass. 212 (2017)—that the Department of Children and Families (“DCF”) must comply with the law, that courts must ensure that DCF complies with the law, and that where parents or children are harmed by DCF’s breach of its legal obligations, a court may enter orders to remediate the harm —must seem unremarkable. But to attorneys who represent parents and children in state-intervention child custody cases, the decision is a welcome step towards realizing the law’s expectation that removing a child from his parents will be DCF’s “last resort.” Walt at 219.
Since 1954, the commonwealth’s policy has been to remove a child from his parents “only when the family itself or the resources available to the family are unable to provide the necessary care and protection[.]” Id. at 219, citing G.L. c. 119, § 1. When a court awards custody of a child to DCF, the court must determine whether or not DCF made reasonable efforts to “prevent or eliminate the need” to remove the child from his parent(s). G.L. c. 119, § 29C. There are four exceptions to DCF’s reasonable efforts obligation; unless an exception applies, DCF must make reasonable efforts before removing a child. Id. But for many years, juvenile courts routinely have excused DCF’s failure to make reasonable efforts for reasons beyond the statutory exceptions. Walt was one of those cases.
In Walt, DCF made no effort to avoid removing a three-year-old child from his parents because the investigating social worker believed Walt was at immediate risk of harm in the home. A trial judge, citing that risk, excused DCF’s failure to make reasonable efforts to avoid removing Walt. An Appeals Court single justice deemed that ruling error and, because DCF’s breach of its duty to make reasonable efforts had harmed Walt and his father by hindering their reunification, the single justice entered orders for visits and services in order to facilitate Walt’s return to his father’s custody. The single justice reported the issues to a panel of the Appeals Court, and the SJC transferred the case on its own motion.
On appeal, DCF argued that the trial judge only needed to determine whether DCF made reasonable efforts at an initial (usually ex parte) hearing on DCF’s request for emergency custody, not at a later 72-hour hearing. And at the ex parte hearing in Walt, the judge had determined that DCF did make the required efforts. The SJC rejected DCF’s argument and held that G.L. c. 119, § 24 plainly requires that the determination be made at both hearings. Walt at 223-224. The Court noted that the wisdom of requiring that the matter be revisited at the later (adversarial) hearing was illustrated in Walt, where the social worker’s ex parte claims regarding reasonable efforts were shown at the 72-hour hearing to have been “simply not true.” Id. at 225.
DCF next urged that the Court create an “exigent circumstances” exception to § 29C, which would excuse DCF from its duty to make reasonable efforts to avoid removing a child where a parent subjected the child “to serious abuse or neglect or an immediate danger of serious abuse or neglect.” Id. at 226. The Court declined to read that exception into § 29C, since the Legislature did not include it. The Court noted that “a judge must determine what is reasonable in light of the particular circumstances in each case, that the health and safety of the child must be the paramount concern, and that”—regardless of whether or not DCF made reasonable efforts—“no child should remain in the custody of the parents if his or her immediate removal is necessary to protect the child from serious abuse or neglect.” Id. at 225, 228.
DCF also claimed that the single justice exceeded his authority in ordering DCF to provide multiple father-son visits each week, permit Walt’s father to participate in special education meetings, and explore housing options for the family. The SJC disagreed; because DCF had violated its legal obligation to make reasonable efforts to avoid removing Walt, the single justice properly exercised his equitable authority in ordering DCF “to take reasonable remedial steps to diminish the adverse consequences of its breach of duty.” Id. at 228. Because the single justice acted long after Walt had been removed from his parents, he correctly entered orders designed to facilitate reunification. The Court observed that a juvenile court judge has the same authority. Id. at 228, 231.
As to the order for visitation, or “parenting time,” the Court stated that DCF’s schedule of one-hour visits every other week “imperil[ed] the father-son bond that was essential” to reunification Id. at 230. Accordingly, the single justice properly ordered a schedule “that would enable that bond to remain intact.” Id. (citations omitted). Equity likewise warranted the order that Walt’s father be permitted to remain involved in his education. Finally, because the parents would likely have difficulty obtaining housing benefits because Walt was in DCF’s custody—and housing “was likely a prerequisite to family reunification”—the single justice properly ordered DCF to explore housing options for the family. Id. at 230.
DCF has been removing children from their homes at higher rates over the past several years, and the foster care system is overwhelmed. Too often, DCF has removed these children without offering, let alone providing, any services or other assistance to their families. With this decision, the SJC has helped to ensure that DCF will follow the law, so that separating families and placing children in an overburdened foster care system truly will be the agency’s last resort.
Ann Balmelli O’Connor is the Attorney-in-Charge of the Appellate Unit of CPCS’s Children and Family Law Division. Attorney O’Connor, a former Assistant General Counsel for DCF, represented the child’s father in Care and Protection of Walt.