“NEGPA v. DEP: The SJC Upholds the Commonwealth’s Climate Change Mitigation Program”

David Lyons_102x126by David Lyons

Case Focus

In a unanimous decision last September, the Supreme Judicial Court (“SJC”) upheld the Commonwealth’s latest climate change regulations to reduce greenhouse gas emissions from electric generators, rejecting those generators’ arguments that the regulations violate the Massachusetts Global Warming Solutions Act (the “GWSA”).  New England Power Generators Ass’n, Inc. v. Dep’t of Envtl. Prot. (“NEPGA”), 480 Mass. 398 (2018).  With the Legislature and the Governor continuing to focus on this issue, the SJC likely will be called upon again to decide other climate change cases.

A Legacy of Policy Innovation

Massachusetts is one of a handful of states that have pressed the envelope in adopting climate change policy, from spearheading Massachusetts v. Environmental Protection Agency, 549 U.S. 497 (2007) (compelling EPA to begin the process to regulate carbon dioxide as a pollutant under the federal Clean Air Act) to coordinating the formation of the country’s first multistate emissions trading market, the Regional Greenhouse Gas Initiative (“RGGI”).  As the SJC noted, ever since the Legislature adopted the GWSA in 2008, Massachusetts has been “a national, and even international, leader in the efforts to reduce . . . climate change.”  NEPGA, 480 Mass. at 399.  Among other provisions, the GWSA mandated a reduction in greenhouse gas emissions by 80% below the 1990 level by 2050.  M.G.L. c. 21N, § 3(b).

Industry has strenuously opposed these policies, especially the electric generators who have shouldered the most immediate compliance burdens.  Regulating greenhouse gases at the state level both raises the costs for power plants and their customers, they argue, and fails to ameliorate the environmental problem, as emissions simply shift to neighboring, unregulated jurisdictions.

Kain v. Department of Environmental Protection, 474 Mass. 278 (2016), previously discussed in these pages, spurred more DEP action, including the regulations at issue in NEPGA.  Kain addressed M.G.L. c. 21N, § 3(d), which requires DEP to develop aggregate limits for different sources of emitters.  The SJC decided in Kain that the agency’s implementation of the RGGI program was insufficient to comply with the statutory mandate.  Among other things, the Court ordered DEP to promulgate “regulations that address multiple sources or categories of sources of greenhouse gas emissions, impose a limit on emissions . . ., limit the aggregate emissions released from each group of regulated sources . . ., [and] set [declining] emission limits for each year. . . .”  Id. at 300.

Kain thus laid the foundation for a series of climate-change policies.  Shortly thereafter, Governor Baker issued Executive Order 569, initiating a rulemaking process that culminated in the two key regulations contested in NEPGA.  The “Cap Regulation” was the focus of the plaintiffs’ challenge and imposes annual, declining limits for greenhouse gas emissions on in-state electric generators.  310 Code Mass. Regs. § 7.74.  The Clean Energy Standard, 310 Code Mass. Regs. § 7.75, requires utilities to procure more of their power from non-emitting sources.  Id.

The plaintiffs filed suit challenging the rulemaking on September 11, 2017.  Befitting the policy stakes, a single justice of the SJC reserved and reported the case to the full Court before any substantive motions or briefing at the Superior Court.  See M.G.L. c. 211, § 4A (empowering the SJC to transfer cases from the lower courts).

The SJC Upholds Sector-by-Sector Emissions Limits

The electric generators mounted a three-pronged attack on the regulations.  First, they alleged that DEP and the Department of Energy Resources lacked the authority to issue the Cap Regulation.  They argued that the GWSA provision directly regulating electric generators, G.L. c. 21N, § 3(c), forecloses other regulations under § 3(d), which generally authorizes sector-by-sector emission limits.  480 Mass. at 399.  Second, they argued that the Cap Regulation will increase greenhouse gas emissions.  Id.  Finally, they claimed that a sunset clause in the statute barred § 3(d) regulations from being effective beyond 2020.  Id.at 399-400.  The SJC was unpersuaded.

First, the Court concluded that §§ 3(c) and 3(d) complement, rather than conflict with, each other.  The electric sector is just one of several categories of emission sources within the scope of § 3(d).  Id. at 404.  The Court relied on conventional tools of statutory interpretation and an assessment of the Legislature’s overall policy objectives, noting that although § 3(c) aims specifically at electric generators, nothing in either § 3(c) or § 3(d) precludes electric sector regulations under § 3(d).  Id. at 406-07.  The SJC also rejected the plaintiffs’ argument that DEP’s interpretation was unreasonable.  Because electric generators account for roughly 20% of the state’s greenhouse gas emissions, the SJC reasoned that it would be anomalous to exclude electric generators from the declining sector-by-sector limits under § 3(d).  Id. at 405.

Second, the SJC rejected the plaintiffs’ argument that the Cap Regulation is arbitrary and capricious, holding that the generators had not met their burden to show that the regulation lacked “any conceivable grounds upon which [it could] be upheld.”  Id. at 410.  The plaintiffs argued that if high-carbon, in-state electricity is replaced by high-carbon, out-of-state electricity, consumers will face higher costs with no environmental gains.  The SJC characterized that concern as speculative and found “multiple conceivable bases to support the rule” in the administrative record.  Id. at 408.  Applied together, the SJC concluded that the Cap Regulation and the Clean Energy Standard will encourage the development of clean generation sources in Massachusetts and neighboring states.  Id. at 409-10.

Last, the SJC disagreed with the plaintiffs’ interpretation of a provision in the GWSA stating that § 3(d) regulations “shall expire on December 31, 2020.”  Rather than invalidating any emission limits effective beyond this date, the SJC concluded that the timing provision only requires DEP to issue new regulations by December 31, 2020, and likened the date to an “implementation deadline[], not [a] termination” date.  Id. at 411.

Looking Forward

Although the state has made significant strides to reduce emissions—cutting them by more than 20% between 1990 and 2016—the formidable economic and technical obstacles that stand in the way of the GWSA-mandated 80% reduction by 2050 mean that NEPGA will not be the last climate change case to reach the courts.

Indeed, with the wave of policymaking launched by the GWSA and reinvigorated by Kain continuing to build, climate change may reach the SJC again sooner rather than later.  On August 9, 2018, Governor Baker signed An Act to Advance Clean Energy, 2018 Mass. Acts c. 227.  Though less aggressive than a Senate version promoted by environmental advocates, the Act made several important changes, including raising the targets for the state’s Renewable Portfolio Standard (which requires utilities to procure energy from renewable sources).  The Act also directs the Department of Energy Resources to implement a Clean Peak Standard to promote clean energy sources to meet peak-period demands, which historically have been met by burning dirtier fuel sources.   Governor Baker also signed An Act Promoting Climate Change Adaptation, Environmental and Natural Resource Protection and Investment in Recreational Assets and Opportunity, 2018 Mass. Acts c. 209, which authorizes $2.4 billion in bonds for environmental projects and codifies initiatives begun by E.O. 569, including the statewide Hazard Mitigation and Climate Adaption Plan.  Most recently, the state expanded its regional leadership role, joining with nine other states and the District of Columbia to launch a regional strategy, analogous to RGGI, to reduce emissions from transportation.  With the reach of climate change regulations expanding rapidly, the SJC surely will address climate change again soon.

David Lyons is an associate at Anderson & Kreiger LLP.  He advises public- and private-sector clients in permitting and litigation matters, with a focus on environmental, energy, and municipal law.


In a Matter of First Impression, the Supreme Judicial Court Narrows the In Pari Delicto Defense

Emily Renshaw_102x126Jason Frank_102x126by Emily E. Renshaw and Jason D. Frank

Case Focus

In Merrimack College v. KPMG LLP, 480 Mass. 614 (2018), the Supreme Judicial Court limited the equitable doctrine of in pari delicto, which bars a plaintiff who has participated in wrongdoing from recovering damages for related losses. Vacating an order granting summary judgment for the auditor defendant, KPMG, the SJC held for the first time that, under the in pari delicto doctrine, only the conduct of “senior management,” those who are “primarily responsible for managing” a plaintiff entity, may be imputed to that entity. Merrimack could have broad implications for professional services providers and will likely lead to the further development of in pari delicto jurisprudence in Massachusetts.

The In Pari Delicto Doctrine

In pari delicto, Latin for “in equal fault,” is an equitable doctrine that courts historically have used to assign blame. In Massachusetts, the doctrine has generally operated to bar a plaintiff who engaged in intentional wrongdoing from recovering from a defendant who was an accomplice or co-conspirator. (Where a plaintiff and defendant are merely negligent, the Massachusetts comparative negligence statute, M.G.L. c. 231, § 85, applies.) The practical import of the in pari delicto doctrine is that the law “‘will not recognize a right of action’ based on inequitable conduct.” Merrimack Coll. v. KPMG LLP, 34 Mass. L. Rptr. 220, at 2 (Mass. Super. Ct. May 15, 2017).

Facts and Procedural History

Merrimack College incurred more than $6 million in losses as a result of a fraudulent scheme by its former Financial Aid Director, Christine Mordach. Unbeknownst to students who had received grants and scholarships, Mordach replaced some grants and scholarships with federal Perkins loans, which she approved without the students’ knowledge or consent.  As a result, Mordach was able to make her budget appear more balanced (reducing projected scholarship expense and ultimately increasing tuition revenue).  The unsuspecting students were saddled with debt they did not need (they were supposed to receive grants or scholarships) and had neither requested nor agreed to repay. Mordach pleaded guilty to federal charges, was sentenced to prison, and ordered to pay approximately $1.5 million in restitution.

Merrimack sought to recover its losses from its independent auditor, KPMG, bringing suit for breach of contract, negligence, negligent misrepresentation, professional malpractice, and violation of M.G.L. c. 93A, and contending that KPMG failed to detect Mordach’s fraud. KPMG moved for summary judgment, arguing, in part, that Merrimack’s claims were barred by the in pari delicto doctrine.  Merrimack contended that it should not be held liable for the misdeeds of a low-level employee.

The Trial Court Decision: In Pari Delicto Bars Recovery

The trial court granted summary judgment in favor of KPMG.  Relying on traditional principles of agency law, the court concluded that Mordach’s conduct was properly imputed to Merrimack. It deemed her to be a “relatively high-level staffer,” noting that, as Financial Aid Director, Mordach had overseen the award and distribution of almost $150 million in financial aid and had signed numerous annual management representation letters to KPMG. Merrimack Coll. v. KPMG LLP, 34 Mass. L. Rptr. 220, at 5. Furthermore, the court explained that in Massachusetts there is no “low-level employee” exception to the law holding employers vicariously liable for employee conduct. Id. at 4.

The trial court also concluded that Mordach’s fraud was “far more serious” than KPMG’s alleged negligence in failing to uncover it, thus further barring Merrimack’s recovery under the in pari delicto doctrine. Id. at 7.

Following the majority of courts, the court declined to recognize a blanket “auditor exception” to the doctrine, noting that such an exception would be inconsistent with Massachusetts law (which in the analogous context of legal malpractice, bars clients who engage in wrongdoing from suing their attorneys for joining in the wrongdoing. See Choquette v. Isacoff, 65 Mass. App. Ct. 1, 7-8 (2005)). Merrimack appealed from the grant of summary judgment, and the SJC accepted direct appellate review.

The SJC Decision

The SJC vacated the grant of summary judgment. Observing that he was writing on “essentially a clean slate of Massachusetts law,” Chief Justice Gants based his ruling on the purposes of the in pari delicto doctrine and principles of imputation. 480 Mass. at 626. In pari delicto, the court explained, is an equitable doctrine “focused squarely on the moral blame of the parties.” Id. at 621-22. The rules of imputation, on the other hand, are designed to allocate fairly risks between principals and innocent third parties. Id. at 621. Traditional rules of imputation under Massachusetts common law, the court noted, “are not without their limits,” and are inapplicable where the aim is to assign blame rather than allocate risk. Id. at 626-27. For example, when determining whether punitive damages—which require “a moral judgment” of the defendant’s conduct—are warranted against an employer for an employee’s misconduct, the court departs from traditional imputation rules. Id. at 627-28. In that circumstance, the court explained, the key factor is whether “members of senior management” are morally blameworthy by participating or acquiescing in the misconduct; “[t]he misconduct of lower-level employees—even those at the supervisory level—is insufficient to warrant punitive damages.” Id. at 628.

For similar reasons, the SJC held that under Massachusetts common law, a corporate entity’s “moral responsibility” can be measured only by the conduct of “senior management—that is, the officers primarily responsible for managing the corporation, the directors, and the controlling shareholders, if any.” Id. In Merrimack, the court ruled for the first time that, under the doctrine of in pari delicto, only the intentional misconduct of “senior management” may be imputed to the plaintiff and, “only then, will a court need to consider whether application of the doctrine would comport with public policy.” Id.

On this matter of first impression, while leaving open to interpretation the term “senior management,” the SJC observed that Mordach was not a member of senior management whose conduct could be imputed to Merrimack under the doctrine of in pari delicto. Although Mordach had substantial responsibilities as Financial Aid Director, she was “not among the select few who were primarily responsible for the management of the college[.]” Id. at 629.

The SJC declined to carve out as a matter of public policy an auditor exception to the in pari delicto doctrine, which the Court opined was unnecessary to its decision. The Court further raised a question about the intersection between the in pari delicto doctrine and another statute, M.G.L. c. 112, § 87A3/4, which provides for the apportionment of losses in cases involving an accounting firm in which a claim or defense of fraud is raised against the plaintiff or another party. The Court declined, however, to interpret the statute, noting that on remand the trial court may do so and consider its proper application. Id. at 632.

The Court made clear that its decision was narrowly confined to the question of imputation in the application of the in pari delicto defense. Thus, there seems to be no change in Massachusetts law with respect to the imputation of conduct by non-senior management for purposes of Massachusetts’s other comparative fault statutes or common law.

Implications

Merrimack could have broad implications for professional services providers, and the issues identified in the decision likely will lead to the further development of in pari delicto jurisprudence in Massachusetts. Notably, the SJC did not provide analytical tools to determine precisely what constitutes “senior management” for purposes of the in pari delicto doctrine. For example, applying Merrimack, will courts impute to a plaintiff corporation the conduct of a corporate controller who manages a 100-person finance department, and engages in a multi-million-dollar accounting fraud scheme? Merrimack may also result in strategic behavior by buyers and providers of professional services, as they seek to allocate and minimize risk, and such behavior may increase costs of service providers in Massachusetts. Following Merrimack, it is even more critical than ever for service providers to carefully define the scope of their corporate engagements, particularly in the context of audits and investigations.

Emily E. Renshaw is a partner at Morgan, Lewis & Bockius LLP in Boston.  Emily focuses her practice on securities litigation and complex business matters. She represents a diverse client base in an array of matters including shareholder and consumer class actions, derivative actions, governmental, regulatory, and internal investigations, and all forms of contractual disputes and business torts. She represents clients before state and federal courts at the trial and appellate levels and in regulatory proceedings before federal and state securities agencies.

Jason D. Frank is a partner at Morgan, Lewis & Bockius LLP in Boston. For the last two decades, Jason has represented clients in shareholder class actions, derivative suits, SEC proceedings, internal investigations, and a broad array of complex business litigation, including auditor malpractice. He has litigated in trial and appellate courts throughout the United States, appearing before courts in virtually every federal circuit.


Look no Further! The Scope of Consent Searches After Commonwealth v. Ortiz

Langsam

by Jessica Langsam

Case Focus

In Commonwealth v. Ortiz, 478 Mass. 820 (2018), a closely-divided Supreme Judicial Court held that, under the Fourth Amendment and article 14 of the Declaration of Rights, a suspect’s consent to search for weapons or drugs “in the vehicle” does not include consent to search under the hood (and under a removed air filter) unless it is “reasonably clear” to a “typical reasonable person” that consent extends beyond the interior of the vehicle and the trunk. Id. at 826-27. The case turned on the scope of the suspect’s consent and the application of the settled rule that “[t]he standard for measuring the scope of a suspect’s consent under the Fourth Amendment [and article 14] is that of ‘objective’ reasonableness — what would the typical reasonable person have understood by the exchange between the officer and the suspect?” Id. at 824 (quoting Florida v. Jimeno, 500 U.S. 248, 251 (1991)). Ortiz considered “the words spoken” in the exchange to be informed only by “the context” as it existed during that time, id., a narrower period than in previous cases and one that excludes a suspect’s lack of objection when his consent to the scope of the search is deemed ambiguous.

Background

An officer stopped the defendant’s car and asked if there was anything “in the vehicle that the police should know about, including narcotics or firearms.” Ortiz, 478 Mass. at 821. The defendant replied, “No, you can check.” Id. He exited the vehicle at an officer’s request and was then handcuffed. Id. at 821-822. A drug-detection dog walked around the vehicle but did not alert. Id. at 822. Officers searched the vehicle’s interior but found no contraband. Id. They then raised the hood, removed the air filter, and found a bag containing firearms. Id. The defendant watched from the side of the road but did not object. Id. He was arrested and subsequently told officers that the firearms belonged to him and that he had given consent to look in his vehicle. Id.

The defendant sought to suppress the firearms and his statements on the ground that the search unconstitutionally exceeded the scope of his consent. Id. After an evidentiary hearing, the court suppressed the evidence, ruling that although the defendant’s consent was free and voluntary, when the officer asked only about items “in the vehicle,” a typical reasonable person would understand the scope to have been limited to the interior, and the scope of the defendant’s consent was not expanded by his lack of objection during the search. Id. at 822-823.

The Majority Opinion

In this 4-3 decision, the SJC affirmed suppression, concluding that the defendant’s consent was limited to a search of the vehicle’s interior, which included, the Court said, the passenger compartment and the trunk. The majority cited a similar conclusion by the Tennessee Supreme Court in State v. Troxell, 78 S.W.3d 866 (Tenn. 2002). Ortiz, 478 Mass. at 824. There, an officer asked the driver of a pickup truck whether he had “any weapons in the vehicle”; the driver replied “no, nothing”; the officer asked, “Okay if we take a look?”; and the driver answered, “Yeah, go ahead.” Id. (emphasis in original). As the SJC noted, Troxell concluded that “[t]he verbal exchange therefore expressly indicated” that the officer intended to search “in the vehicle” (i.e., the cab) and that it was therefore “objectively reasonable to conclude that the consent to search included only the interior.” Id. (quoting Troxell, 78 S.W.3d at 872).

In essentially an alternative ruling, the majority stated that as a matter of fairness, the scope of consent, like voluntariness, must be unambiguous and that the scope of consent here was ambiguous and suppression was warranted because the police may not take advantage of an ambiguity that could be resolved with a clarifying question. Id. at 825-826. The Court held that “unless it is reasonably clear that the consent to search extends beyond the interior of the vehicle, the police must obtain explicit consent before a vehicular search may extend beneath the hood.” Id. at 826-827. It held that where, as here, the scope of consent to search was not reasonably clear, the defendant’s silence when the search extended to the hood was not a substitute for consent but was rather “mere acquiescence to a claim of lawful authority” and his failure to revoke consent was not an agreement to expand the scope beyond its initial limit. Id. at 827.

The Dissent

The dissent would have reversed suppression, noting that to apply the standard interpreting a suspect’s consent to search required considering not only the exchange itself but also the “facts and circumstances surrounding” it, including whether the defendant limited the scope, and, as stated in Jimeno, the “expressed object” of the search. Id. at 827-28. Concluding that the defendant did not limit consent to the interior and trunk, the dissent pointed to his “unqualified and unambiguous general consent” in response to the officer’s request to search for “any narcotics or firearms in the vehicle” and his lack of objection when officers looked under the hood, which would indicate to a “typical reasonable person” that he “authorized the entire search.” Id. at 828.

The dissent noted that whereas Troxell concluded that “in the vehicle” referred to the pickup’s cab, the Ortiz majority concluded that “in the vehicle” referred to the cab plus the trunk – and that there was no “meaningful difference” between the trunk and the hood because both were beyond the passenger compartment and opened separately. Id. at 828-29. The dissent also noted that Troxell’s “narrow focus on the colloquial use” of “in” ignored the conversation’s subject matter, and that Troxell’s search was more extensive in kind and duration and included a drug detection dog, an officer’s examination of the vehicle’s underside and gas tank, and removal of the gas tank at a service station (to which the defendant was instructed to drive), where drugs were found. Id. at 829. In contrast, the dissent found no ambiguity in the defendant’s consent to the scope of the search and noted that his failure to object when the search moved to the hood further evidenced his initial authorization for that portion of the search. Id. at 830.

Consent Searches Post-Ortiz

Cases prior to Ortiz considered a broader context to ascertain the scope of a suspect’s consent, including whether the defendant objected. In Commonwealth v. Gaynor, 443 Mass. 245, 255 (2005), cited by the Ortiz majority and dissent, the defendant argued that the scope of his consent was limited by what officers told him, which was that they wanted to test his blood and compare the results with results of testing connected to one victim. Id. However, the Gaynor Court held that a reasonable person likely would have concluded that the police were seeking the defendant’s blood test results, including his DNA profile, that the scope was not limited to the current investigation (there were additional victims), and that the defendant never limited the scope. Id. at 255-56. See, e.g., Commonwealth v. Caputo, 439 Mass. 153, 163 (2003) (holding that when defendant invited officers inside residence and then said that he did not want to talk with them, but did not ask them to leave and did not object when two officers reentered after inspecting his car, invitation to enter was not circumscribed). By way of explanation for limiting the context to only the exchange between the suspect and police, the majority noted that the law is already “quite protective of law enforcement” in that consent may be found valid even when the suspect was not informed of and was unaware of his right to refuse. Ortiz, 478 Mass. at 826.

Going forward, police who want to search a suspect’s vehicle should choose their words carefully and obtain explicit consent for a search beyond the vehicle’s passenger compartment and trunk. A suspect’s consent will likely not be held to be any broader than the plain language of that exchange and could turn, as it did here, on what the meaning of “in” is.

Jessica Langsam is Senior Appellate Counsel at the Middlesex District Attorney’s Office.  She has litigated motions to suppress and cases at trial and has argued before the Appeals Court and the Supreme Judicial Court.  This article represents the opinions and legal conclusions of its author and not necessarily those of the Middlesex District Attorney’s Office.


Massachusetts High Court Rules Judges Can Require Sobriety as Part of Probation in Commonwealth v. Eldred

CoakleyHutchinson

by Martha Coakley and Rachel Hutchinson

Case Focus

On July 16, 2018, the Massachusetts Supreme Judicial Court unanimously ruled in Commonwealth v. Eldred, 480 Mass. 90 (2018) that judges can require individuals with substance use disorders to remain drug-free as a condition of probation.  Although the Court stressed that judges should consider the challenges of addiction, the Court nevertheless found that judges must also “have the authority to detain a defendant” who has violated probation by using drugs.  Id. at 99.  It appears that the SJC is the first state supreme court to reach and decide this issue.

I. The Addiction Debate

Remaining drug-free is an almost universal requirement of probation.  Many courts, including specialty courts such as drug courts that take a public health approach to substance abuse, require offenders to stay clean, and respond to relapses with sanctions ranging from warnings to jail time.  But as the opioid crisis has swept the nation, many have begun to question the central role that courts play in battles with substance abuse.

Eldred cut to the heart of this growing debate.  The defendant, Julie Eldred, argued that requiring her to remain drug-free as a condition of probation violated her constitutional rights.  According to Eldred, addiction is a chronic brain disease that interferes with one’s ability to abstain from drugs. Eldred argued that punishing addicts like herself for a relapse punishes them for something over which they have no control and negates willfulness.  The prosecution disagreed, arguing that addiction is a condition that ranges in intensity and is responsive to penalties and rewards.  According to the prosecution, sanctions like jail time are an important tool that judges can use to encourage recovery and promote public safety.

Many of the Eldred amici weighed in on the science of addiction, focusing on the degree of control addicted individuals have over their drug use.  For instance, the Massachusetts Medical Society argued that relapse was a symptom of a disease that must be treated, not punished.  Other amici, however, pointed out that the scientific community has not yet reached consensus about whether addiction leaves someone powerless over their drug use.  The National Association of Drug Court Professionals noted that supervision and drug testing combined with graduated sanctions helps keep individuals in recovery, and cautioned the SJC against allowing “any particular theory of addiction to influence its decision.”

II. The Eldred Decision

Eldred arose out of the 10-day incarceration of Julie Eldred after she failed a court-ordered drug test.  Eldred, who had suffered from substance use disorder since age 15, had originally been convicted of larceny for stealing jewelry to support her addiction.  Eldred’s probation required her to enroll in outpatient treatment, submit to random drug screenings, and remain drug-free.  Although Eldred originally complied with her probation, enrolling in a program and starting on a course of Suboxone, she relapsed shortly thereafter and tested positive for fentanyl, a powerful opioid.  Because no inpatient drug treatment facilities had open spots, the judge overseeing Eldred’s detention hearing ordered her held in custody until one became available 10 days later.  Eldred, 480 Mass. at 93.

At the full hearing on her probation violation, Eldred argued that this 10-day detention was unlawful because her substance use disorder “rendered her incapable of remaining drug free.”  Id. at 92.  The judge disagreed, finding that Eldred had violated her probation, but nevertheless granted Eldred’s motion to report the question regarding the lawfulness of the drug-free condition to the SJC.  The SJC found that the question was improperly reported, but agreed to consider it nonetheless because it presented “issues of significant magnitude.”  Id. at 94.

Although the parties and amici focused their arguments on the addiction debate, the SJC declined to weigh in on the science.  Instead, the Eldred decision focused on a judge’s role in setting probation conditions.  Based on longstanding precedent, the SJC decided that judges may continue to require individuals to remain drug-free while on probation, and may detain individuals who violate that condition until their probation hearing.

The SJC framed the reported question in three parts.  First, when someone who is addicted to drugs commits a crime, may a judge require her to remain drug-free as a condition of probation?  Second, if an individual violates the drug-free condition, can she be subject to probation revocation proceedings?  Third, may she be held in custody while awaiting admission to an inpatient treatment facility?  Id. at 94.

The SJC answered all three questions in the affirmative.  While the Court noted that judges who deal with those who suffer from substance use disorder should act with “flexibility, sensitivity, and compassion,” the Court ruled that judges “must have the authority to detain a defendant facing a probation violation based on illicit drug use.”  Id. at 95, 99.  The Court disagreed with Eldred that the judge’s decision to detain her constituted a punishment for her relapse.  Rather, the Court likened it to a bail decision, since no final determination on whether Eldred had violated her probation had been made.  The Court noted that the judge simply sought to detain Eldred until an inpatient facility became available.  It also held that “although the appellate record before the court was inadequate to determine whether SUD affects the brain in such a way that certain individuals cannot control their drug use,” the trial court did not abuse its discretion in concluding that there was a wilful violation of the defendant’s probation.  Id. at 104.

Finally, although the SJC agreed with Eldred that substance use disorder itself cannot be criminalized, it pointed out that “relapse is dangerous,” both for addicted individuals and the community in which they live.  Id. at 99. The Court noted that judges, who are on the front lines of the opioid epidemic, “face unresolved and constantly changing societal issues with little notice and, in many situations, without the benefit of precedential guidance.”  Id.  The Court characterized these decisions as “especially unpalatable” when an offender is addicted to drugs.  Id.  While the Court, pointing to its own Standards on Substance Abuse, acknowledged that relapse is an accepted part of recovery, the Court stressed that relapse was dangerous nonetheless, and ruled that judges must continue to have the authority to detain defendants after a relapse that violates their probationary terms.

III. Eldred’s Implications

Although Eldred maintained the status quo for judges dealing with addicted offenders, it is unlikely to be the final word on the subject.  As the opioid epidemic grows, the way we view addition is changing.  Even the Attorney General’s Office acknowledged in its briefing that “exclusively punitive responses to addiction … do not make us safer.”  While the criminal justice system may be on the front lines of the crisis for now, that role may change as other jurisdictions, legislatures, agencies, and disciplines grapple with the same questions faced in Eldred.

Martha Coakley, the first female Attorney General of Massachusetts, served from 2007-2015. Her prior experience includes District Attorney of Middlesex County; Special Attorney, Boston Organized Crime Strike Force; and Resident Fellow, Harvard Institute of Politics, John F. Kennedy School of Government. Martha has been a national leader in consumer protection, and civil rights, among other areas.  As an active member and then President of the Women’s Bar Association, Martha supported and participated in the §12S petition panel for young women needing counsel in Court.  NAAG recognized her outstanding accomplishments in 2014 when she received the Kelley-Wyman Award, given annual to the AG who has done the most to achieve NAAG objectives, Martha graduated from Williams College and the Boston University School of Law. She is a Partner in Foley Hoag’s Administrative Department where she focuses on government and internal investigations, litigation, data privacy and security, and healthcare.

Rachel Hutchinson is an associate in the firm’s Administrative Law and Litigation departments, where she represents individual and corporate clients in a wide range of regulatory matters and civil disputes. Her practice focuses on regulatory compliance, government investigations, and white collar crime. Rachel also maintains a pro bono practice focused on civil rights and LGBT issues.


Goodwin v. Lee Public Schools

DAconley

by Joseph N. Schneiderman

Case Focus

On August 23, 2016, the Supreme Judicial Court held that a student who was unlawfully suspended under the felony suspension statute, G.L. c.71, §37H1/2, did not need to seek review of her suspension to pursue the statutory tort of unlawful exclusion from public school, G.L. c.76, §16.  Goodwin v. Lee Public Schools, 475 Mass. 280 (2016).  This victory for students’ rights offers an opportunity for the Legislature to take action to further stem the flow of children in the school to prison pipeline.

The Case and Holding

Katelynn Goodwin was a senior at Lee Middle and High School in the Berkshires.  In late December 2011, the principal suspended Ms. Goodwin under the felony suspension statute because the Lee Police suspected her involvement in a weapons theft. There was one obvious problem, however: a felony complaint never issued against Ms. Goodwin. Indeed, the superintendent admitted that Ms. Goodwin “perhaps not been charged yet.” A misdemeanor complaint ultimately issued against her in April 2012 for receiving stolen property.  The school offered to lift the suspension but refused to allow Ms. Goodwin to graduate with her class. Ms. Goodwin graduated alone through an online program in 2013.

In December 2014, Ms. Goodwin sued for damages. A judge of the Superior Court dismissed Ms. Goodwin’s complaint on the grounds that she failed to appeal her suspension within five days pursuant to the felony suspension statute’s administrative process. Ms. Goodwin timely appealed and the SJC allowed her application for direct appellate review.

A unanimous Court reinstated Ms. Goodwin’s complaint and agreed that her right to tort recovery for unlawful exclusion constitutes a separate and distinct remedy from seeking reinstatement to school. The Court recalled that the statutory tort of unlawful exclusion has existed since 1845, although there have been relatively few recent cases analyzing the claims. The felony suspension statute, enacted in 1994, authorizes a principal to suspend when: (1) a student is charged with or convicted of a felony; and (2) the student’s continued presence would have a substantial detrimental effect on the general welfare of the school. A student could appeal the suspension to the superintendent-but the school committee does not review suspensions under the felony suspension statute. 475 Mass. at 284-286, compare G.L. c. 76, §17.

The Court reasoned that the felony suspension statute was only “triggered ‘[u]pon the issuance of a criminal complaint charging a student with a felony.’”  Goodwin, 475 Mass. at 287 (quoting §37H1/2).  Because the principal suspended Ms. Goodwin without any felony complaint issuing against her, the suspension violated Section 37H1/2 and Ms. Goodwin did not need to pursue any administrative review before seeking damages. The Court also rejected the notion that the felony suspension statute precluded any recovery in tort. Instead, the statute simply provides an “additional, immediate, review of a decision to exclude them from school, with the goal of readmission.”  Id. at 288. Ms. Goodwin thus deserved her day in court.

Take-Aways

Goodwin marks an overdue moment of accountability for schools in the crisis of juvenile delinquency based school suspensions. Some felony charges decidedly warrant suspension to preserve school safety.  See Doe v. Superintendent of Schools of Stoughton, 437 Mass. 1 (2002) (principal properly suspended a high school freshman charged with the rape of a primary school student on the same campus).  There are many “felony” crimes, however, that should never warrant a suspension, absent aggravating circumstances.

Specifically, a felony constitutes “any offense punishable by imprisonment in the State Prison,” G.L. c. 274, §1. Therefore, a student who has a fake driver’s license faces suspension if the principal believes that having a fake license poses substantial detrimental effect to the general welfare of the school.  G.L. c. 90, §24B (punishable by five years in state prison.) The sheer breadth of offenses that may trigger suspension has grave potential to thwart a child’s education and the command that allegedly delinquent children “shall be treated not as criminals but as children needing aid, encouragement of guidance.” G.L. c. 119, §53.

Between 1997 and 2011, principals suspended an average of more than 100 students per year under the felony suspension statute.  Melanie Riccobene Jarboe, “Expelled to Nowhere”: School Exclusion Laws in Massachusetts, 31 B.C. Third World L.J. 343, 376 (2011). Courts tended not to review suspensions critically, despite “ample indication that principals [suspended] indiscriminately and [did not] carefully consider each case”, as the Commissioner of Education urged. Id. at 352, 360. Those suspensions inevitably flushed students into the school to prison pipeline.  Id. at 349–51, 357, 365–69.

The review process is messy at best. A student or parent must request review in writing within five days.. Goodwin, 475 Mass. at 282, n.4. There is also no guidepost to judicial review, and certiorari becomes the only (default) option, which does not account for the best rehabilitative interests of a child.  Doe, 437 Mass. at 5.   An unlawful suspension may deprive a student of their future. See Commonwealth v. Mogelinski, 466 Mass. 627, 647-648 (2013), S.C., 473 Mass. 164 (2015). (“futurelessness” may overcome a child who endures a prolonged delinquency case.)

Finally, there is no freestanding right to counsel in suspension proceedings. And, unfortunately, “many parents often do not have the mindset, time, or means to pursue redress against the educational system…and the parents who do have the resources are often ostracized, frustrated, and unsuccessful.” Expelled to Nowhere, 31 B.C. Third World L.J. at 352.

Where Do We Go After Goodwin?

The Legislature has three concrete ways to build on Goodwin to spur continued accountability.  First, the Legislature should limit suspensions only to when a student stands indicted as a youthful offender for a felony offense that involves infliction or risk of serious bodily harm.  G.L. c.119, §54.

Second, as the Court implicitly suggested, the Legislature should create flexibility in the administrative review process and expressly establish procedures for judicial review to the Juvenile Court–which has a statutory mandate to further the best rehabilitative interests of children.  G.L. c.119, §§1, 53.

Finally, the Legislature should create an independent right to appointed counsel in suspension hearings-with the right to commence the process for tort recovery for unlawful exclusion pursuant to the Massachusetts Tort Claims Act. These changes would ensure due process for students and further the goal of ending unlawful exclusions from education.

Joe Schneiderman has an appellate practice in Massachusetts and Connecticut with a particular affinity for and focus on juvenile delinquency and municipal law.  Joe gratefully dedicates this article to: his mother Ro (who passed away three weeks after he filed Ms. Goodwin’s brief), as well as his dear friend, mentor, and teacher, Robert Kyff.


Grand Manor: Extending the Claims Period for Environmental Property Damage

fraywitzerby Dylan Sanders

Case Focus

In a significant development under the Commonwealth’s hazardous waste cleanup law, Chapter 21E, the Supreme Judicial Court ruled that the statute of limitations for a claim of property damage under § 5 of Chapter 21E begins to run when a party learns that the property damage caused by contamination cannot be reasonably remediated. Grand Manor Condominium Association v. City of Lowell, 478 Mass. 682 (2018). This marks an extremely expansive limitations period during which such a claim can be brought. Before Grand Manor, most believed the limitations period began to run when the property owner learned of contamination and the identity of those responsible for it. Now, the running of the limitations period is only triggered when the property owner learns that the contamination will not be fully remediated.

Chapter 21E and its Statutes of Limitation

Chapter 21E permits a private party injured by a release of oil or hazardous materials to bring two types of claims. First, under §§ 4 and 4A, a party who has incurred costs from responding to a release may sue other statutorily responsible parties for reimbursement, contribution, or an equitable share of the response costs.

Second, under § 5(a)(iii), a party may recover economic damages to property interests beyond the party’s response costs. Property damages recoverable under §5 may be permanent damages, such as the diminished market value of property that will not be fully remediated by a cleanup, or they may be temporary damages, such as the rent lost while the property underwent assessment and/or remediation.

Although it was well-established that § 5 property damages were recoverable separate and apart from response costs, it was not clear what statute of limitations applied.  Chapter 21E initially had no independent statute of limitations; limitations periods were added in 1992 during a comprehensive overhaul of the law. Those periods require a private party seeking to recover response costs under §§ 4 and 4A to sue within three years of the latest of four events, the most generous of which typically is the date by which the party has incurred all of its response costs. See c. 21E, § 11A.

A private party seeking to recover damages under §5 must sue “within three years after the date that the person seeking recovery first suffers the damage,” or within three years of learning the identity of the party responsible for the damage, whichever is later.  See c. 21E, § 11A(4) (emphasis added).

But what does “first suffers the damage” mean?  Before Grand Manor, many practitioners counseled their clients not to wait to understand the full extent of the property damage before bringing a § 5 claim. They based that advice cautiously applying the plain meaning of “first suffers the damage.” Grand Manor may now cause many to change that advice.

The Grand Manor Condominium

At issue in Grand Manor was a condominium built on the site of a former landfill that had been owned and operated by the City of Lowell. In 1983, a developer purchased the site and later constructed the condominium.

In late 2008, the condominium association made underground repairs and encountered discolored soil. By early 2009, the association understood that at least a portion of the property was contaminated with hazardous materials from the site’s prior use as a landfill. The City, assuming responsibility for the response action, further assessed the site and concluded in June 2012 that the entire site was contaminated and that full remediation would not be feasible.

In October 2012, the condominium association and 36 current and former unit owners filed suit against the City. Pursuant to § 5, the unit owners sought property damages measured by their units’ diminished market value due to the contamination.

The City asserted that those claims were barred by the three-year statute of limitations. The unit owners moved for summary judgment, which the trial court denied. At trial, the jury was asked to decide whether the § 5 claims for property damage were time-barred, and, specifically, whether the claims were “brought within three years of the date they discovered, or should have discovered, both that they had suffered property damage and that the City of Lowell was legally responsible for the release of hazardous materials that caused the damage.”

The jury found that the unit owners’ property damage claims under § 5 were time-barred. The SJC accepted direct appellate review.

The Decision

On appeal, the unit owners argued that the trial court never should have submitted the statute of limitations issue to the jury. The owners contended that, since the SJC had previously held that § 5 property damages were damages for losses that a response action did not address, the response action had to be sufficiently advanced to put the owners on notice that they would, in fact, suffer such losses. The City, in turn, chiefly relied on the general principle that statutes of limitation ordinarily begin to run when a party has reason to know that they may have been harmed, not when a party knows the harm’s full extent.

The SJC declined to apply that common law rule to property damage claims under Chapter 21E and instead adopted the owners’ argument that, at least insofar as a property damage claim is one for permanent damage, the clock is not triggered until “the plaintiff learns whether or not remediation and response costs will fully compensate the plaintiff for the harm he or she has suffered. “478 Mass. at 683. Wrote the court, “This will not ordinarily occur until the plaintiff learns that the damage to his or her property is not reasonably curable by the remediation process.”

The SJC’s reasoning was threefold. First, the SJC concluded, the word “damage” in §11(4) does not mean contamination of the property, but rather only what the SJC characterized as “residual damage,” i.e., economic damage to property that cannot or will not be addressed by remediating the contamination, such as diminished property value.

Second, the SJC sought a bright-line rule to align the statute of limitations for a property damage claim with the Massachusetts Contingency Plan’s Phase III stage, the point in the assessment process at which it is often determined whether remediating the contamination is feasible. Although not all Phase III reports provide such a clear conclusion, the SJC apparently believed that aligning the claims’ timing with MCP reporting obligations would add some predictability.

Third, the SJC said that requiring a party to bring § 5 claims for permanent property damage before it was clear that the damage could not be cured by remediation would be “wasteful for both the parties and the court system.” 478 Mass. at 695. In so holding, the SJC implicitly rejected the common-law discovery rule’s balance between the competing interests of plaintiffs who might not know the basis of their claims and of defendants who might be disadvantaged with the passing of time.

The decision also implicitly reflects the SJC’s preference for a standard that furthers and arguably maximizes one of Chapter 21E’s core statutory purposes, which is “to ensure that costs and damages are borne by the appropriate responsible parties.” 478 Mass. at 684 (quoting Taygeta Corp. v. Varian Assocs., Inc., 436 Mass. 217, 223 (2002)).

Finally, the SJC addressed the statute of limitations for claims of temporary property damage under Chapter 21E, § 5(a)(iii), such as loss of rent. In an important if cryptic footnote, the SJC said that temporary damage claims are also “dependent on the remediation process” and “that the Phase II and Phase III reports required pursuant to the MCP therefore lend necessary clarity to such claims as well.” 478 Mass. at 694 n.15.

For this reason, and to avoid splitting claims under § 5, the statute of limitations for claims under § 5 should be uniformly defined.”  Id.

But it is not entirely clear what this means. Grand Manor’s central holding is that the limitations period for permanent property damage claims under § 5 does not start “until the plaintiff learns that the damage to his or her property is not reasonably curable by the remediation process.” 468 Mass. at 683. By definition, temporary property damage is temporary and ends through the remediation process. How then could the statute of limitations for both permanent and temporary property damages claims be “uniformly defined?” The answer to this riddle will need to be flushed out in future cases.

Dylan Sanders is a partner at Sugarman, Rogers, where he concentrates in disputes involving environmental issues, real estate, land use, and administrative law.


Education Reform: Doe v. Secretary of Education

fraywitzerby Ryan P. McManus

Case Focus

On April 24, 2018, the Supreme Judicial Court (SJC) upheld the constitutionality of a Massachusetts law regulating the number of Commonwealth charter schools that can been established in each school district.  The case, Doe v. Secretary of Education, 479 Mass. 375 (2018), marks the SJC’s latest foray into the complex and often controversial subject of education reform.

Education Reform in Massachusetts and the Establishment of Charter Schools

Understanding the Court’s decision in Doe requires some context on prior education reform litigation, legislative responses, and the current statutory limitations on charter schools.  In McDuffy v. Secretary of the Executive Office of Education, 415 Mass. 545 (1993), the SJC held that the Education Clause of the Massachusetts Constitution imposes an enforceable obligation on the Commonwealth to provide all students with a public education, and that individual students denied that right can sue to enforce it.  McDuffy addressed the constitutionality of the public school financing system, which was then primarily dependent on local funding (and local property taxes).

In the wake of McDuffy, the Legislature enacted the sweeping Massachusetts Education Reform Act (MERA).  MERA introduced a number of reforms, among them the establishment and funding of a “foundation budget” for each district, state oversight of school performance, examination-based assessments and data collection (the “MCAS” tests), and, for the first time, the authorization of charter schools.  (This article uses the term “charter school” to refer to Commonwealth Charter Schools, which were primarily at issue in Doe.  State law also authorizes the establishment of Horace Mann Charter Schools, which, unlike Commonwealth Charter Schools, require the approval of the local school district.)

From the beginning, charter schools have been subject to limitations.  The current statutory framework (at issue in Doe) limits charter schools in two ways.  First, the total number of charter schools that may operate in the state is capped at 120.  Second, no more than 9% of total public-school spending in each district may be spent on charter schools.  For school systems performing in the lowest decile statewide, that spending cap is increased to 18%.

The SJC’s Decision in Doe

In Doe, five students in Boston public schools alleged, on behalf of themselves and a class, that the spending cap applicable to charter schools violates the Education and Equal Protection Clauses of the Massachusetts Constitution.  Each of the students alleged that he or she was enrolled in a level three or level four school, meaning that under the Commonwealth’s system of classification, their schools were performing in the bottom fifth of all schools in Massachusetts.  Each of the students had applied to a charter school, but failed to secure a seat through the lottery used to determine admission.  The students alleged that additional charter schools capable of providing a constitutionally sufficient education to them and other Boston students were prevented from being established solely because Boston had reached its statutory spending cap for charter schools.

The Superior Court dismissed the students’ Education Clause claims, holding that they do not have a constitutional “right to choose a particular flavor of education.”  The Superior Court likewise rejected the students’ Equal Protection claim, holding that the cap on charter schools is rationally related to the Commonwealth’s interest in allocating funding between charter schools and district schools.  The students sought and obtained direct appellate review of the Superior Court’s decision by the SJC.  After affirming that the students had standing to bring their claims, the SJC addressed the merits under the Education Clause and Equal Protection Clause.

With respect to the Education Clause, the SJC agreed with the students that “the education clause imposes an affirmative duty on the Commonwealth to provide a level of education in the public schools for the children there enrolled that qualifies as constitutionally adequate.”  Doe, 479 Mass. at 387.  The Court further agreed that the students had pled sufficiently that “they have been deprived of an adequate education” and that their “complaint supports the claim that the education provided in their schools is, at the moment, inadequate.”  Id. at 388–89.  Nevertheless, the Court reasoned that the students failed to plead a violation of the Education Clause because they had not alleged facts suggesting that the “defendants have failed to fulfil their constitutionally prescribed duty to educate.”  Id. at 388.  In particular, the students had “not alleged any facts to support a claim that the Commonwealth’s public education plan does not provide reasonable assurance of improvements for their schools’ performance over a reasonable period of time.”  Id. at 389.  Put differently, because the Legislature had enacted measures aimed at remedying failing schools (including those contained in MERA), and because the students had not adequately alleged that those measures were ineffective, the SJC suggested that temporary deficiencies in the quality of a particular school or district, or in a particular student’s educational opportunities, do not amount to a violation of the Commonwealth’s constitutional duty to provide an education.

In affirming the dismissal of the students’ Education Clause claim, the SJC also faulted the students’ exclusive focus on the charter school cap, where charter schools are not “the Commonwealth’s only plan for ensuring that the education provided in the plaintiffs’ schools will be adequate.”  Id. at 390.  Even if a violation of the Education Clause had been properly alleged, the Court emphasized that the “specific relief [plaintiffs] seek”—striking the statutory cap on charter schools—“would not be available” because “‘[t]he education clause leaves the details of education policymaking to the Governor and the Legislature.’”  Id. (quoting Hancock v. Comm’r of Educ., 443 Mass 428, 454 (2005) (Marshall, C.J., concurring)).

With respect to the students’ Equal Protection claim, the SJC first concluded that the charter school spending cap was not subject to heightened scrutiny because it does not “significantly interfere” with any fundamental right to education.  Id. at 392.  The Court reasoned that charter schools were originally intended to serve as laboratories for the development of innovative approaches to public education, and as such there was no fundamental right to attend charter schools that that the cap could be deemed to interfere with.  Id. at 392–93.  The Court thus applied rational basis scrutiny to the charter school spending cap, concluding that it is rationally related to (among other things) the Commonwealth’s legitimate “attempt to allocate resources among all the Commonwealth’s students” – both those who attend charter schools and those who do not.  Id. at 394.

Implications of the Doe Decision for Education Reform Litigation

Although the SJC’s decision in Doe surely was a disappointment to charter school advocates, its implications for further school reform litigation is less than clear.

Doe does clarify that, to state a claim under the Education Clause, it is not enough to allege that certain students are not currently receiving a constitutionally adequate education.  Instead, a student must successfully plead, with supporting factual allegations, both (i) that he or she is not receiving a constitutionally required education and (ii) that state law “does not provide reasonable assurance of improvements for their schools’ performance over a reasonable period of time.”  Doe, 479 Mass. at 389.

Doe also demonstrates the SJC’s reluctance to mandate any particular policy reform to remedy a violation of the Education Clause.  Plaintiffs pursuing Education Clause claims should therefore expect that Massachusetts courts will not order any particular policy reform as a remedy.  Rather, the courts will at most – at least in the first instance – enter declaratory relief regarding the Commonwealth’s fulfillment of its constitutional duty to educate, and leave the choice of policy reform to the political branches.  Only if the political branches fail to respond might a court consider ordering specific reforms.

Ryan P. McManus is a partner at Hemenway & Barnes in Boston, where he concentrates his practice in the areas of appellate, fiduciary, and business litigation.  Ryan authored an amicus brief in Doe v. Secretary of Education on behalf of the Pioneer Institute, Inc., Cheryl Brown Henderson, and the Black Alliance for Educational Options.