Director Liability Under the Massachusetts Wage Act: The Supreme Judicial Court Clarifies the Law but Traps May Remain for the Unwary

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by Mark D. Finsterwald

Case Focus

In Segal v. Genitrix, 478 Mass. 551 (2017), the Supreme Judicial Court (“SJC”) addressed whether members of a company’s board of directors may be personally liable under the Massachusetts Wage Act, G.L. c. 149, §§ 148, 150, for the company’s failure to pay wages to employees. In Segal, the SJC interpreted, for the first time, language in the Wage Act defining “employer” in the context of directors. The SJC held that the Wage Act does not impose liability on directors acting only in their capacity as directors. Even so, the Court did not fully insulate directors from Wage Act liability. There remains a possibility that directors could, perhaps unwittingly, become subject to personal liability in the event a company fails to pay wages.

The Wage Act

The Wage Act enables employees to sue employers who do not pay earned wages, with mandatory awards of treble damages and attorney’s fees for successful claims. Liability is not limited to the business entity, as the Wage Act defines “employer” to include “the president and treasurer of a corporation and any officers or agents having the management of such corporation.” This definition does not mention directors. Nor does it explain how to assess whether a person is an “agent[] having the management of such corporation.” G.L. c. 149, § 148.

Facts and Procedural History

Plaintiff Andrew Segal was the president of Genitrix, LLC, a biotechnology startup that he cofounded with defendant H. Fisk Johnson, III. Johnson was also an investor in Genitrix, and he appointed his representative, defendant Stephen Rose, to the company’s board of directors. Johnson funded Genitrix through a company called Fisk, which Johnson and Rose co-owned. Segal, as president, managed all of Genitrix’s day-to-day operations, including payroll.

In 2006, Genitrix began to have difficulty making payroll. Starting in 2007, Segal stopped taking salary to enable the company to meet its other financial commitments. Rose later declined to direct Fisk to invest enough money in Genitrix to pay Segal. In early 2009, Segal initiated Wage Act litigation against Johnson and Rose.

At trial, the judge instructed the jury that “a person qualifies as an ‘agent having the management of such corporation’ if he … controls, directs, and participates to a substantial degree in formulating and determining policy of the corporation or LLC.” The judge did not instruct the jury that the defendants needed to have been appointed as agents. Nor did the judge instruct the jury that defendants needed to have assumed responsibilities functionally equivalent to those of a president or treasurer. The jury found both defendants liable for Segal’s unpaid salary. Johnson and Rose moved for judgment notwithstanding the verdict, the trial court denied the motion, and Johnson and Rose appealed.

The SJC’s Analysis

At the outset, the Court stated that it viewed as significant the Legislature’s omission of directors from the Wage Act’s definition of “employer.” Segal, 478 Mass. at 558. Parsing the statutory language, the SJC dismissed the possibility that either defendant could be liable as president, treasurer, or any other officer, because neither of them held an office at Genitrix. Johnson and Rose could be liable only if they were “agents having the management” of the company. The Court explained that this language establishes “two important requirements: the defendant must both be an agent and have the management of the company.” Id. at 559. The Court differentiated between having some management responsibility and “having the management” of the company. “Having the management” means assuming responsibility similar to that performed by a corporation’s president or treasurer, the Court reasoned, “particularly in regard to the control of finances or payment of wages.”

As to agency, common law agency principles—set forth in the Restatement (Second) of Agency—counsel that directors are not typically considered agents. Restatement (Second) of Agency § 14C (1958). The SJC observed that “[a] board generally acts collectively, not individually.” Segal, 478 Mass. at 561. Such collective action does not confer individual agency authority on directors. Nevertheless, the Court explained that individual directors still could be “considered agents of the corporation if they are empowered to act as such, but any agency relationship stems from their appointment as an agent, not from their position as a director….” Id. at 563. An agency appointment could result from a board resolution, but also could “arise from either express or implied consent.” The Court gave as an example a scenario in which “a particular board member had been empowered to act individually as the functional equivalent of the president or treasurer of the corporation.” Genitrix, however, made no such appointment with respect to either defendant, instead delegating executive management authority (including dominion over wages) to Segal. Segal signed the checks, oversaw the payroll, and suspended the payment of his salary. Defendants had no such authority.

Moreover, just as a board’s collective authority over a corporation does not confer agency authority on an individual director, a board’s collective “oversight and control over management, finances, and policy is not oversight and control by individual board members.” Id. at 565. The Court noted that, since corporate statutes vest all management responsibility in a corporation’s board, if board members were to be considered agents and normal board oversight were considered “management,” then all directors would be personally liable under the Wage Act. That result would be inconsistent with the plain wording of the statute.

The Segal defendants’ participation in difficult board decisions that affected the company’s finances were not the acts of individual agents, did not involve the type of ordinary decisions left to individual managers, and did not confer Wage Act liability. Accordingly, the SJC determined that the trial court should have allowed defendants’ motion for judgment notwithstanding the verdict.

In addition to adjudicating the claim against Johnson and Rose, the SJC also provided guidance for instructing future juries. The Court explained that judges should instruct juries that there are two requirements for a defendant to qualify as an employer under the Wage Act: (1) the defendant must be an officer or agent; and (2) the defendant must have the management of the company. The Court cautioned that juries should be instructed that directors are not agents simply by being directors, and the collective powers of the board are distinct from the powers of individual directors. As to “having the management,” courts should instruct juries that the Wage Act imposes liability on the president, the treasurer, and other officers or agents who perform management responsibilities similar to a president or treasurer, “particularly in regard to the control of finances or the payment of wages.” Id. at 570.

Lessons for Directors and Corporate Advisors

After Segal, it is difficult, but not impossible, to establish Wage Act liability on the part of individual directors. Directors should be aware that they still may face personal liability (with attendant mandatory treble damages and fee shifting) if they are found to be agents of the corporation who performed responsibilities similar to that of a president or treasurer. Consequently, boards and their advisors should take precautionary measures to reduce the risk to directors.

Corporate counsel would be wise to include in companies’ governing documents language stating that individual directors are not authorized to speak or act on behalf of the company. Counsel should then advise boards to abide by such language in practice. While it is common for boards to delegate tasks and authority to particular directors or committees, counsel should screen such delegations carefully to ensure that they cannot reasonably be construed as conferring management or agency authority. Counsel also would be wise to monitor initiatives that might not expressly delegate agency authority but could be deemed to do so by implication.

To the extent a board bestows management or agency authority on individual directors or committees of directors, that authority should be limited to discrete issues. More importantly, that authority should not encroach on officer control over finances and wages. For example, individual directors should not have check-writing authority, control over payroll, or authority to approve or deny wage payments.

Overall, counsel should be vigilant in ensuring that boards and board committees, including compensation committees, exercise their oversight function collectively, with such collective action formally recorded. These steps would help directors perform their fiduciary responsibilities with less risk of personal liability under the Wage Act.

Mark D. Finsterwald is an associate at Foley Hoag LLP and a member of the firm’s litigation department. He focuses his practice in the area of complex business litigation.


The Internet and the Afterlife

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by Colin Korzec and Mary H. Schmidt

Case Focus

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.

Background

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.


Care and Protection of Walt: Breathing New Life into the Decades-Old Policy of Foster Care as the Last Resort.

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by Ann Balmelli O’Connor

Case Focus

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.


ZBA’s Broad Powers under Chapter 40B Do Not Include Alteration of Property Rights

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by Kevin O’Flaherty, Alana Rusin, and David Zucker

Case Focus

 

The Decision

On November 13, 2017, the Supreme Judicial Court (“SJC”) held in 135 Wells Avenue, LLC v. Housing Appeals Committee, 478 Mass 346 (2017) (“135 Wells”), that, although a local zoning board of appeals (“ZBA”) has broad powers to grant “permits or approvals” under G.L. c. 40B, it does not have the authority to modify municipal property rights, including restrictive covenants.

Background

Sections 20 to 23 of G.L. c. 40B (“Chapter 40B”), the Anti-Snob Zoning Act, were enacted in 1969 to “ensure that the local municipalities did not make use of their zoning powers to ‘exclude low and moderate income groups.’” 135 Wells, supra, at 351. Chapter 40B allows developers of projects that contain at least 25% “affordable housing” (defined as housing for those earning 80% or less of the area median income) to apply for all local approvals in a single “comprehensive permit,” and gives the ZBA the “authority to . . . override local requirements or regulations, and to issue ‘permits or approvals’” for all aspects of the development. Id. The override provision empowers ZBAs to approve projects that are higher, denser, or larger than otherwise allowable under existing regulations, and even to allow residential uses in non-residential zones. See, e.g., Eisai, Inc. et al. v. Housing Appeals Committee & Hanover R.S. LP, 89 Mass. App. Ct. 604 (2016). When a town is below certain Chapter 40B thresholds (e.g., less than 10% of the town’s housing stock is affordable), it is very challenging for a town to deny a comprehensive permit. See G.L. c. 40B, § 20; 760 C.M.R. § 56.03(1); DHCD Guidelines (rev. Dec. 2014). Finally, an applicant for a comprehensive permit aggrieved by a ZBA’s decision may appeal to the Housing Appeals Committee (“HAC”) in the Department of Housing and Community Development. G.L. c. 40B, § 22.

In May 2014, 135 Wells Avenue, LLC applied for a comprehensive permit to construct a 334-unit 40B development on land in Newton. The site was zoned for limited manufacturing use and also was subject to restrictive covenants granted to Newton that, among other things, prohibited residential use and required a portion of the site to remain open space. The developer concurrently filed with Newton’s legislative body (“Aldermen”) a petition to amend the restrictive covenants to allow residential use and to permit construction in the open space area. The petition was denied in November 2014. The ZBA also denied the developer’s comprehensive permit application on the grounds that Chapter 40B does not allow the ZBA to amend or waive restrictive covenants that constitute city-owned interests in land which can be amended or released only by the Aldermen.

In December 2014, the developer appealed the ZBA’s decision to the HAC; a year later, the HAC affirmed the ZBA’s decision, holding that the restriction and requested amendments are not within the sort of “conditions or regulations” or “permit or approvals” that are subject to Chapter 40B. The developer then sought judicial review by the Land Court. In August 2016, the Land Court determined that Chapter 40B does not allow either the ZBA or the HAC to require the city to amend the deed restriction to allow for residential use. The Land Court also held that the fact that the site was never used for limited manufacturing as envisioned when the property interests were granted did not change the validity of those interests. The developer sought direct appellate review. The SJC affirmed the Land Court’s rulings and reasoning in full.

Analysis

The key to understanding 135 Wells is to recognize that, although Chapter 40B grants a ZBA broad authority to grant “permits or approvals,” it does not include “authority . . . to order the city to relinquish its property interest.” 135 Wells, supra, at 348. Also key is the fact that the SJC had previously decided that the deed restrictions at issue are property interests of Newton, id. at 353 (citing to Sylvania Elec. Prods. Inc. v. Newton, 344 Mass. 428, 430 (1962)), and that “both affirmative and negative easements [such as restrictive covenants] are to be treated equally” as property interests. Id. at 357.

In reaching this conclusion, the SJC rejected the developer-appellant’s attempt to distinguish this case from Zoning Bd. of Appeals of Groton v. Housing Appeals Committee, 451 Mass. 35 (2008) (“Groton”), in which the SJC reversed a decision that “order[ed Groton] to grant an easement over town land pursuant to the board’s power to grant permits or approvals under Chapter 40B” on the basis that there is a “fundamental distinction between the disposition or creation of a property right and the allowance of a permit or approval.” 135 Wells at 356 (citing Groton, supra, at 40-41). In 135 Wells, the SJC extended Groton’s logic, holding that the fundamental distinction between a property right and a permit or approval applies equally to affirmative easements (at issue in Groton) as it does to restrictive covenants (at issue in 135 Wells). In doing so, the SJC rejected the developer’s attempt to characterize the restrictive covenants at issue as the “functional equivalent of a ‘permit [ ] or approval[ ]’” that the ZBA or HAC could override under Chapter 40B. Id. at 353. The SJC distinguished the Aldermen’s allowance of prior amendments to the same restrictive covenant as acts of a legislative body instead of a local permit authority, and explained that Chapter 40B does not authorize a ZBA to modify restrictive covenants because these are interests in land, not land use permits or approvals. Id.

The Takeaway

135 Wells addressed a heretofore unsettled question under Chapter 40B: if a project is on land subject to a deed restriction held by a municipality, may a local ZBA modify or eliminate the restrictive covenant?  In 135 Wells, the SJC held that Chapter 40B does not give a ZBA this power. Accordingly, developers seeking relief from deed restrictions running in favor of a municipality must seek their removal or modification from the local municipal legislative body.

Kevin P. O’Flaherty is a Director at Goulston & Storrs PC and a member of the firm’s litigation group. The focus of his practice is real estate litigation of all types. Over the course of his 25-year career he has represented private developers, individuals, institutions and public agencies in zoning and permitting matters, eminent domain cases, commercial landlord/tenant disputes, purchase and sale cases and a wide array of other real estate related matters. Alana Rusin and David Zucker are Associates at Goulston & Storrs PC where they practice real estate litigation.


Massachusetts High Court Rules State Law Does Not Authorize Detention Based on ICE Detainers Alone

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by Tad Heuer and Daniel McFadden

Case Focus

On July 24, 2017, in Lunn v. Commonwealth, the Massachusetts Supreme Judicial Court ruled that state and local officials are not authorized to arrest immigrants based on civil immigration detainers issued by U.S. Immigration and Customs Enforcement (“ICE”).  As a result, public safety officials in Massachusetts generally cannot detain or hold a person in custody based solely on the existence of an ICE detainer.  It appears that the SJC is the first state highest appellate court to reach and decide this issue.

The Detainer Controversy

Although ICE officers frequently detain people accused of being “removable” (i.e., subject to deportation), ICE does not always make the initial arrest.  Rather, ICE often issues “detainers” to the state or local public safety officials who have certain immigrants in their custody.  A detainer is ICE’s “request” that, if an immigrant of interest to ICE is in the custody of local authorities for any reason, the authorities voluntarily delay that individual’s release by up to 48 hours to allow ICE to transfer him or her into immigration custody.  This is an efficient mechanism for ICE to seize immigrants who are being released from prison, who have been arrested, or who have simply been pulled over for a traffic stop.

Detainers have been controversial because they essentially ask state and local officials to hold people in custody absent a judicial warrant or probable cause.  Most violations of immigration law are not crimes, and most removal proceedings are purely civil matters handled by administrative courts within the Department of Justice.  Nor do detainers typically provide information establishing probable cause.  Critics of current ICE practice have contended that neither state law, nor the state or federal constitutions, permit a warrantless arrest in such circumstances.

Prior to Lunn, challenges to the legality of compliance with ICE detainers had met with some success.  In 2014, the Maryland Attorney General issued a memorandum concluding that “an ICE detainer, by itself, does not mandate or authorize the continued detention of someone beyond the time at which they would be released under State law.”  The Virginia Attorney General issued an official opinion reaching the same conclusion in 2015.  In Massachusetts, a Single Justice of the SJC ruled in May 2016 that law enforcement officials are “without authority to hold [a person], or otherwise order him held, on a civil [ICE] detainer.” Moscoso v. A Justice of the East Boston Div. of the Boston Mun. Court, No. SJ-2016-0168, slip op. at 1 (May 26, 2016). However, until Lunn, it appears that no state’s highest appellate court had squarely addressed the question.

The Lunn Decision

The Lunn case arose from the detention of Sreynoun Lunn, an immigrant ordered removed from the United States in 2008.  However, ICE was apparently unable to execute that order because Mr. Lunn’s country of origin declined to issue the necessary travel documents, and he was therefore released.

In 2016, Mr. Lunn was held by Massachusetts authorities on a larceny charge, which the state court dismissed for lack of prosecution.  Ordinarily, Mr. Lunn would have been free to go.  However, ICE had issued an immigration detainer requesting that Massachusetts authorities continue holding Mr. Lunn for up to two days beyond when he would otherwise have been released.  Consequently, even though all charges had been dismissed, court officers detained Mr. Lunn for several more hours, until ICE agents arrived and took him into federal custody.

Mr. Lunn promptly sought a ruling that state officials were wrong to hold him based solely on ICE’s civil immigration detainer.  A single justice of the SJC reserved and reported this question to the full Court.

In agreeing with Mr. Lunn, the SJC first explained that “the administrative proceedings brought by Federal immigration authorities to remove individuals from the country are civil proceedings, not criminal prosecutions.”  The Court further explained that ICE detainers are issued for the purpose of this “civil process of removal,” and are purely requests for voluntary state or local assistance.  In its briefing, the federal government even expressly conceded that state authorities are not obligated to enforce ICE detainers.

The Court then turned to the question of whether Massachusetts officials have statutory or common-law authority to arrest people solely because the officials received a voluntary request from the federal government to hold the person for a civil proceeding.  The Court found no such authority.  The Court also rejected the federal government’s argument that state law enforcement officers possess “inherent authority” to enforce detainers.  Accordingly, it is generally unlawful for Massachusetts state and local officials to arrest and detain a person based solely on an ICE detainer.

However, Lunn does not preclude executing an arrest for other independent reasons (for instance, if the person is subject to a state or federal warrant arising out of suspected criminal activity).  Nor does Lunn prevent officials from providing ICE with advance notice of a given detainee’s or inmate’s intended release date.

The Lunn decision could also carry implications beyond the immigration context, particularly its conclusion that a law enforcement officer has no arrest powers outside of those expressly granted by statute or common law.  As the Court stated, “[t]here is no history of ‘implicit’ or ‘inherent’ arrest authority having been recognized in Massachusetts that is greater than what is recognized by our common law and the enactments of our Legislature.”  Further, the Court indicated its discomfort with any expansion of common-law arrest powers, explaining that “[t]he better course is for us to defer to the Legislature to establish and carefully define” new arrest powers.  This language likely will be useful to future criminal defendants and civil rights plaintiffs who seek to challenge other forms of warrantless detention.

Notably, authorship of the Lunn decision was attributed as “By The Court,” rather than to any specific justice, and the reasons for the Court doing so remain unclear.  What is known is that this approach is rare, having last been employed over two decades ago. While typically employed in cases (like Lunn) involving regulation of the judicial branch or the practice of law, it is infrequent even then: in the vast majority of decisions in such cases, opinions are authored by specific and identified justices.

Open Questions

The Lunn decision leaves several open questions.  For example, the SJC did not reach the question whether Mr. Lunn’s arrest would, if nominally authorized by state statute, be permitted by the state and federal constitutions.  This is not strictly academic.  Governor Baker has drafted legislation that would authorize such detention in at least some circumstances.  Critics have expressed strong opposition to any such law on multiple constitutional grounds.

The SJC also did not reach the question of whether an arrest would be lawful if a particular detainer form provided sufficient information to establish probable cause that the individual had committed a federal crime.  Nor did the SJC address whether an arrest would be permissible if made by a state or local official acting pursuant to a state-federal partnership under 8 U.S.C. § 1357(g).  That statute permits ICE to specially deputize state and local officials to act with the authority of ICE officers.  In Massachusetts, ICE has executed such agreements with the Massachusetts Department of Corrections and the Sheriff’s Offices of Bristol and Plymouth counties.  These outstanding questions will have to await resolution in future cases.

Tad Heuer is a partner at Foley Hoag LLP practicing administrative law.  He is currently a member of the Board of the Boston Bar Journal.  Daniel McFadden is a litigation associate at Foley Hoag LLP, where his practice includes representation of both individuals and organizations on immigration law matters.


Endrew F. v. Douglas County and its Impact on Special Education Law

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by Daniel T. S. Heffernan

Case Focus

“Anxiously awaiting” was an apt description of the feeling among the lawyers who represent school districts and families of the approximately two hundred thousand students currently eligible for special education in Massachusetts, as they waited for the Supreme Court’s decision in Endrew F. v. Douglas County, 137 S.Ct. 988 (2017). The Court was expected to delineate the level of services school districts must provide to students with special needs, an issue that it had not addressed in-depth since Board of Education v. Rowley, 458 U.S. 176 (1982).

The Individuals with Disabilities Education Act (“IDEA”), 20 U.S.C. §1400 et seq., provides that each special education eligible student must receive a “free appropriate public education” (“FAPE”). FAPE includes special education and related services that are provided at public expense and under public supervision, and that meet the state’s education standards. The school district must provide special education and related services “in conformity with the [student’s] individualized education program,” or IEP. §1401(9)(D). This IEP is “the centerpiece of the statute’s education delivery system for” the eligible student. Honig v. Doe, 484 U.S. 305, 311 (1988). The IEP must describe the student’s present level of performance and must detail measurable goals for the student and how their progress is to be gauged.

In assessing the adequacy of the school district’s IEP for a particular student, the key inquiry is whether the IEP will enable the student to make “effective progress.” The Court first addressed the “effective progress” standard in Rowley. The student in Rowley received her special education services and accommodations in a regular education setting (“inclusion” program), was performing better than many others in her class, and was advancing easily from grade to grade. The district argued that FAPE requirements were merely aspirational while the parents pushed for additional programming, arguing that districts were required to provide students with disabilities the educational opportunities that were exactly equivalent to their non-disabled peers. The Rowley Court charted a middle path, requiring school districts to provide an IEP that was “reasonably calculated to enable the child to receive educational benefits.” Rowley, 458 U.S. at 207. The Court noted that for students in regular-education classes, an IEP may generally be required to facilitate grade advancement. However, recognizing the wide spectrum of students with IEPs, the Court refrained from establishing “any one test for determining the adequacy of educational benefits conferred upon all children covered by the Act.” Id. at 202.

In in Endrew F., a student with autism was educated in Colorado’s Douglas County School District from preschool through fourth grade. Dissatisfied with his progress, his parents placed him in a private special education school and sought reimbursement and prospective funding for that placement. The key issue in the dispute was whether Endrew would make effective progress in the public school program that was essentially a continuation of the programming he had been receiving. The fact that his IEPs had essentially carried over the same goals and objectives from year to year demonstrated to the parents that he was not making effective progress. Endrew clearly had done much better in his private placement.

Endrew’s parents litigated the matter through an administrative proceeding at the Colorado Department of Education, which deemed Endrew’s IEPs appropriate and, therefore, denied their claims for reimbursement and for placement in the private school going forward.

The federal district court reviewing the administrative determination found that while Endrew had not made “immense educational growth,” he had at least made “minimal progress.” Endrew F. v. Douglas County, No. 12-2620, 2014 WL 4548439, at 9 (D. Colo. 2014). On appeal, the Tenth Circuit affirmed, holding that an IEP was sufficient if it conveyed an educational benefit that was merely more than “de minimis.” Endrew F. v. Douglas County, 798 F.3d 1329, 1341 (10th Cir. 2015).

The Supreme Court, however, unanimously rejected the “de minimis” standard. The Court examined the history surrounding the passage of IDEA, noting that the IDEA was an “ambitious” piece of legislation aimed at remedying the pervasive and tragic stagnation of students with disabilities. The Court stressed the importance of the unique needs and abilities of the particular student when assessing the adequacy of the individualized educational plan of that student, noting that “[a] focus on the particular child is at the core of the IDEA.” Endrew F., 137 S.Ct. 988 at 12.

The Court restated Rowley’s general principle that the school district must provide an IEP reasonably calculated to enable the student to make progress that is appropriate in light of the student’s particular circumstances. For some students, like the student in Rowley, keeping pace with their non-disabled peers and advancing from grade to grade may be appropriate progress. But for students like Endrew, who were in programs substantially or completely separate from their non-disabled peers, the student’s own potential determines what achievement is “appropriate in light of the student’s circumstances.” For these students, the educational program must be “appropriately ambitious” and provide “the chance to meet challenging objectives.” Endrew F., 137 S.Ct. 988 at 14.

Even before Endrew F., some of the hearing officers with the Massachusetts “court” of original jurisdiction for special education disputes, the Bureau of Special Education Appeals (BSEA), had ordered private residential placements when day placements alone were inadequate to allow the students to acquire independent living skills in preparation to successfully transition to group homes as young adults. See In Re: Boston Pub. Schs., BSEA # 1702809, 22 MSER 239 (Figueroa, 2016); In Re: King Philip Reg’l Sch. Dist., BSEA # 12-0783, 18 MSER 20 (Crane, 2012). While one hearing officer’s decision is not binding on another hearing officer, the few BSEA decisions to interpret Endrew F. thus far have construed it as either equivalent to the standard already being applied in Massachusetts or, in two opinions, as adding an “appropriately ambitious” overlay to that standard. In Re: Norton Pub. Schs., BSEA #1609348, 22 MSER 169 (Berman, 2017); Boston Publ. Schs. & Mass. Dept. of Mental Health, BSEA #1707097, 23 MSER 59 (Berman, 2017).

It therefore appears that, after Endrew F., students with special needs can continue to demand IEPs designed to tap their particular potential to make reasonable progress towards realistic educational goals.

Dan Heffernan concentrates his practice in the areas of special education, civil rights, personal injury, medical malpractice, and children’s torts. He represents children with special needs and their families, people injured in accidents, and those who have had their civil rights violated.


Barbuto v. Advantage Sales & Marketing, LLC: Employers May Risk Disability Discrimination Claims by Prohibiting Use of Medical Marijuana by Qualified Disabled Employees

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by David B. Wilson and Jason McGraw

Case Focus

Since 2013, Massachusetts has allowed qualifying patients with certain medical conditions to lawfully obtain and use marijuana for medical purposes under the Medical Marijuana Act. St. 2012, c. 369, §1 et seq. Even so, the possession of marijuana remains a federal crime. 21 U.S.C. §§ 812(b)(1), (c), and 844(a). Thus, many Massachusetts employers maintain strict drug-free workplace and testing policies that prohibit the use of all “illegal drugs” and make no exception for the use of lawfully prescribed medical marijuana. In the landmark decision Barbuto v. Advantage Sales & Marketing, LLC, 477 Mass. 456 (2017), the Supreme Judicial Court (“SJC”) held that an employer with such a policy may be subject to a disability discrimination claim under Massachusetts law if the employer takes an adverse employment action or otherwise discriminates against a “qualified handicapped employee” based on the employee’s off-site, off-duty use of lawfully-prescribed medical marijuana. Id.

Background

In 2014, Cristina Barbuto was hired for an entry-level position with Advantage Sales and Marketing, LLC (“Advantage”), contingent upon her passing a mandatory drug test. Barbuto disclosed to her soon-to-be supervisor that she would test positive for marijuana because she used lawfully-prescribed medical marijuana to treat her Crohn’s disease. Id. at 458. She also told the supervisor that she did not use medical marijuana daily and would not use medical marijuana before or at work. Although the supervisor initially told Barbuto that her use of medical marijuana “should not be a problem” and called later to “confirm[] that her lawful medical use of marijuana would not be an issue with the company,” Advantage terminated Barbuto’s employment after her drug test results came back positive for marijuana. Id.

Barbuto filed suit alleging the mandatory drug test was an invasion of her privacy and that her termination was unlawful. The SJC addressed the termination claim.

Key Holdings In Barbuto

Massachusetts Disability Discrimination Law Applies to Qualified Handicapped Employees Who Use Medical Marijuana as Treatment

Under the Commonwealth’s anti-discrimination law, a “qualified handicapped employee” has: (1) a right to reasonable accommodation for a handicap to enable the employee to perform the essential functions of their job, and (2) a right to be free from discrimination because of their handicap. Id. at 460 & n.4. In Barbuto, the SJC held for the first time that these protections extend to qualified handicapped employees who lawfully use medical marijuana to treat their handicaps. Id. at 464.  Therefore, where an employer’s drug policy prohibits the use of marijuana and a qualified handicapped employee requests an accommodation to use medical marijuana, the employer has an obligation to: (1) participate in an interactive process, and (2) provide a reasonable accommodation, unless such an accommodation would impose an undue hardship on the employer’s business.

Advantage, which had not engaged in an interactive process, argued that Barbuto was not a qualified handicapped employee because the only accommodation she sought (the continued use of medical marijuana) was a federal crime, and was therefore unreasonable. Id. at 462. The SJC disagreed, and held that under the Medical Marijuana Act “the use and possession of medically prescribed marijuana by a qualifying patient is as lawful as the use and possession of any other prescribed medication.” Id. at 464.

Advantage also argued that even assuming Barbuto was a qualified handicapped employee, it had not engaged in handicap discrimination where Barbuto had been terminated not because of her handicap, but rather because she had failed a drug test that all employees were required to pass. Id. at 462. The SJC disagreed, holding that termination for violating such a policy “effectively denies a handicapped employee the opportunity of a reasonable accommodation, and therefore is appropriately recognized as handicap discrimination.” Id. at 467.

Failure to Engage in the Interactive Process Is Sufficient to Support a Claim of Disability Discrimination

The SJC permitted Barbuto’s claims for disability discrimination under Massachusetts law to survive the defendant’s motion to dismiss because the employer had wholly failed to participate in the interactive process. The Court emphasized that the “failure to explore a reasonable accommodation alone is sufficient to support a claim of handicap discrimination” where an employee can prove that a reasonable accommodation existed that would have enabled that employee to perform a job’s essential functions. Id. at 466.

An Employer’s Undue Hardship Defense Can Be Proven in a Number of Ways

Although the Court did not need to reach the defense of undue hardship in this case, the Court provided guidance for employers as to when an accommodation would not be required because it would cause the employer undue hardship. An undue hardship may be proven where the use of medical marijuana would: impair the employee’s work performance; pose an unacceptably significant safety risk to the public, the employee, or fellow employees; or violate an employer’s contractual or statutory obligations, thereby jeopardizing its ability to perform its business. Id. at 467-68. The Court also noted that the Medical Marijuana Act does not require employers to permit on-site medical use of marijuana as an accommodation to an employee. Id. at 464–65.

No Cause of Action under the Medical Marijuana Act or for Wrongful Termination in Violation of Public Policy

The SJC rejected Barbuto’s other claims – that her termination amounted to a violation of the Medical Marijuana Act and wrongful termination in violation of public policy. The Court held that aggrieved employees do not have a private right of action under the Medical Marijuana Act, “where such employees are already provided a remedy under our discrimination law, and where doing so would create potential confusion.” Id. at 470. Similarly, the Court declined to recognize a cause of action for wrongful termination in violation of public policy, “[b]ecause a competent employee has a cause of action for handicap discrimination where she is unfairly terminated for her use of medical marijuana to treat a debilitating medical condition.” Id. at 471.

More to Come on Marijuana and the Workplace

While Barbuto provided employees and employers with much guidance, many questions remain.

For example, nothing in Barbuto requires employers to tolerate the recreational use of marijuana by an employee. But what about accommodating a qualified handicapped employee without a medical marijuana card who lawfully uses marijuana purchased at a recreational dispensary to self-treat their handicap? That question remains unanswered in Massachusetts.

May employers require post-offer, pre-employment drug testing for all employees, regardless of their job duties or the potential safety risks to the employer, the employee, or the public? Although the issue has not yet been addressed by the SJC (the issue was stayed in the Superior Court while the unlawful termination claims were appealed), Barbuto’s claim under the Massachusetts Privacy Act survived the defendant’s motion to dismiss. Barbuto alleged that Advantage’s “drug test was unreasonable and not commensurate with her [entry-level, non-safety sensitive] job duties or with the type of business and industry in which [it] is engaged.” Barbuto v. Advantage Sales & Marketing, LLC, 2016 WL 8653056, at *2 (Mass. Super. May 31, 2016). In denying the motion to dismiss, the Superior Court noted that “[t]he only time the Supreme Judicial Court has held that a drug testing procedure violated [the Massachusetts Privacy Act] was in a case where the employee being tested was not engaged in a dangerous or safety-sensitive occupation.” Id. (emphasis added and citation omitted).

Whether the Medical Marijuana Act is preempted by federal law is another interesting question that has yet to be addressed, although other state courts have dealt with the issue of preemption of their state medical marijuana laws. See, e.g., Noffsinger v. SSC Niantic Operating Co. LLC, — F.Supp.3d –, 2017 WL 3401260 (D. Conn. Aug. 8, 2017) (holding that the Connecticut medical marijuana statute is not preempted by the federal Controlled Substances Act, the Americans with Disabilities Act, or the federal Food, Drug, and Cosmetic Act).

David B. Wilson is a Partner at Hirsch Roberts Weinstein LLP where he practices labor and employment law. Dave is also an active member of the Boston Bar Association.

Jason M. McGraw is an Associate at Hirsch Roberts Weinstein LLP where he practices labor, employment, and higher education law. Jason is also an active member of the Boston Bar Association.