SCVNGR, Inc. v. Punchh, Inc.: The SJC Instructs Trial Courts and Litigants on Analyzing Challenges to Personal Jurisdiction

fraywitzerby Evan Fray-Witzer

Case Focus

In SCVNGR, Inc. v. Punchh, Inc., 478 Mass. 324 (2017), the Supreme Judicial Court reversed a Superior Court Business Litigation Session decision that had dismissed the plaintiff’s complaint for lack of personal jurisdiction.  Notably, the SJC’s opinion prohibits the trial courts, when deciding a challenge to personal jurisdiction, from engaging in the frequently employed practice of skipping the analysis under the long-arm statute and jumping directly to the analysis under the Due Process Clause of the U.S. Constitution.  In reaching this conclusion, the SJC “clarif[ied]” that “the long-arm statute’s reach is not coextensive with what due process allows.” Id. at 330 n.9.

Background

SCVNGR, Inc., a Massachusetts-based company doing business as LevelUp, sued Punchh, Inc., a California-based competitor, for defamation.   Punchh moved to dismiss for lack of personal jurisdiction. Id. at 325. After allowing some limited jurisdictional discovery, Judge Kaplan of the Business Litigation Section allowed Punchh’s motion to dismiss, finding that Punchh lacked the minimum contacts with Massachusetts necessary for an exercise of personal jurisdiction to comport with the Due Process requirements of the U. S. Constitution. Id.  Although Judge Kaplan recognized that “typically a Superior Court judge presented with a Rule 12(b)(2) argument begins with an analysis of whether the requirements of the long-arm statute have been met,” he nevertheless proceeded directly to the federal Due Process considerations, noting that this was where “both parties ha[d] focused their arguments.”  Id.

LevelUp appealed the dismissal to the Appeals Court.  The SJC, of its own accord, took direct appellate review.  Id.

Analysis

“Prior to exercising personal jurisdiction over a nonresident defendant, a judge must determine that doing so comports with both the forum’s long-arm statute and the requirements of the United States Constitution.”  Id. at 325 (citing World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 290 (1980)).  Massachusetts’s long-arm statute, G.L. c. 223A, § 3, provides eight enumerated categories of actions which can give rise to personal jurisdiction over a foreign defendant.  Two of those categories address claims arising out of domestic relationships (marriage, divorce, child custody, and the like); one from the ownership of real estate within Massachusetts; and one from offering insurance within the Commonwealth.  The remaining four categories address claims that arise out of a defendant’s: (a) transacting business within Massachusetts; (b) contracting for goods or services within Massachusetts; (c) committing a tort within Massachusetts; and (d) committing a tort outside of Massachusetts that causes injury within Massachusetts if the Defendant also does or solicits business within Massachusetts or derives substantial revenues from goods or services provided in Massachusetts.

Unlike a number of other states, Massachusetts’s long-arm statute does not explicitly extend personal jurisdiction to the limits of the U. S. Constitution.  Nevertheless, two seminal SJC cases had seemed to interpret the statute to have the same broad scope.  In “Automatic” Sprinkler Corp. v. Seneca Foods Corp., 361 Mass. 441, 443 (1972), the SJC held: “We see the function of the long arm statute as an assertion of jurisdiction over the person to the limits allowed by the Constitution of the United States.”  Likewise, in Good Hope Indus., Inc. v. Ryder Scott Co., 378 Mass. 1, 5-6 (1979), the SJC held: “Since we have stated that our long arm statute, G. L. c. 223A, functions as ‘an assertion of jurisdiction over the person to the limits allowed by the Constitution of the United States,’ …the two questions tend to converge” (quoting “Automatic” Sprinkler). Good Hope also, however, contained the seeds of SCVNGR’s “clarif[ication],” stating that the long-arm statute “asserts jurisdiction over the person to the constitutional limit only when some basis for jurisdiction enumerated in the statute has been established.”  Good Hope, 378 Mass. at 1 (emphasis added).

Prior to SCVNGR, state and federal cases applying Massachusetts law frequently cited “Automatic” Sprinkler and/or Good Hope in support of the proposition that Massachusetts’s long-arm statute extended to the outer reaches of the Due Process Clause and that, as a result, the two-step inquiry could be addressed in a single inquiry.  See, e.g., OpenRisk, LLC v. Roston, 90 Mass. App. Ct. 1107 (2016) (Rule 1:28) (“The Massachusetts long-arm statute, G. L. c. 223A, § 3, however, allows for an assertion of jurisdiction over the person to the limits allowed by the Constitution of the United States. …It is appropriate, therefore, for the court to sidestep the statutory inquiry and proceed directly to the constitutional analysis”) (citations omitted); FTI, LLC v. Duffy, 2017 Mass. Super. LEXIS 93, at *8 (Suffolk Super. Ct. 2017); Let’s Adopt! Glob., Inc. v. Macey, 32 Mass. L. Rep. 573 (Worcester Super. Ct. 2015); Daynard v. Ness, Motley, Loadholt, Richardson & Poole, P.A., 290 F.3d 42, 52 (1st Cir. 2002).

In light of this precedent, the SCVNGR parties’ decision to focus exclusively on the question of whether the Court could exercise jurisdiction consistent with Due Process made perfect sense.  In baseball terms (this is, after all, summer in New England): since the runner cannot advance to third without touching both first and second bases, if the runner missed second, the question of whether he touched first is moot.  Indeed, in at least two cases pre-dating SCVNGR the First Circuit noted that even if Massachusetts’ long-arm statute might not extend to the limits of Due Process, examining the long-arm statute was not necessary if the claims clearly failed to meet the requirements of Due Process.  See A Corp. v. All Am. Plumbing, Inc., 812 F.3d 54, 58-59 (1st Cir. 2016); Copia Communs., LLC v. AMResorts, L.P., 812 F.3d 1, 3-4 (1st Cir. 2016).

In SCVNGR, though, the SJC was having none of it. It first clarified that “Automatic” Sprinkler’s sweeping language was more limited than might first appear:

To the extent that “Automatic” Sprinkler …identifies “the function of the long arm statute as an assertion of jurisdiction over the person to the limits allowed by the Constitution of the United States,” we take this opportunity to clarify that, in accordance with Good Hope. . . the long-arm statute’s reach is not coextensive with what due process allows.

SCVNGR, 478 Mass. at 330 n.9.

The SJC then stated that the order in which a lower court examines the two prongs of personal jurisdiction does indeed matter:

Our jurisprudence since Good Hope also makes clear that courts should consider the long-arm statute first, before approaching the constitutional question. …In this regard, it is canonical that courts should, where possible, avoid unnecessary constitutional decisions. … Determining first whether the long-arm statute’s requirements are satisfied is consonant with the “duty to avoid unnecessary decisions of serious constitutional issues. … [W]e cannot let the actions of private litigants force us to decide unnecessarily a serious question of constitutional law.”

Id. at 330 (citations omitted).

As a result, the SJC remanded the case to the Superior Court for a determination, first, as to whether the long-arm statute’s requirements were met and only then for a determination as to whether an exercise of jurisdiction comports with the requirements of Due Process.  In doing so, the SJC noted that the subsequent re-examination of the constitutional due process question would likely take place “on a presumably fuller record,” apparently assuming that the trial court would allow the parties some additional jurisdictional discovery before ruling on the remanded motion (id. at 330).

Another recent SJC opinion drives home the point that neither the parties nor the court can leapfrog over the long-arm statute and proceed directly to the constitutional question.  In Exxon Mobil Corp. v. Attorney General, 479 Mass. 312, 317 n.3 (2018), citing SCVNGR, the SJC noted that although the parties’ argument on the jurisdictional issues focused exclusively on the due process question, the Court would first analyze them under the long-arm statute, which it proceeded to do.

Takeaways

Two practical takeaways are clear:

  1. Notwithstanding any suggestion to the contrary in prior precedent, “the long-arm statute’s reach is not coextensive with what due process allows.”
  2. Neither practitioners nor the Court should address whether an assertion of personal jurisdiction comports with the requirements of the Due Process Clause without first addressing whether the plaintiff’s claims assert a cause of action that brings the case within the parameters of the Massachusetts long-arm statute.  In short, although the plaintiff may still get tagged-out for failing to touch second base, we will not know until a call is made at first.

Evan Fray-Witzer is a founding partner of Ciampa Fray-Witzer. He maintains an active employment litigation, counseling, and defense practice; a sophisticated litigation and counseling practice, representing businesses in a wide range of commercial disputes; and a thriving appellate practice in both the state and Federal Courts.


Trustees of Cambridge Point Condominium Trust v. Cambridge Point, LLC – SJC Proscribes “Poison Pill” and Prescribes an Uncertain Way Forward

saccardi

by Samuel B. Moskowitz

Case Focus

On January 19, 2018, the Supreme Judicial Court ruled that a condominium bylaw that, “for all practical purposes, makes it extraordinarily difficult or even impossible” for condominium trustees to sue the developer for defects in the common areas and facilities, is void as contravening public policy. Trustees of Cambridge Point Condo. Trust. v. Cambridge Point, LLC (“Trustees”), 478 Mass. 697, 709 (2018). Condominium boards celebrated the demise of this “poison pill” that developers increasingly insert in condominium documents to shield themselves from liability. Yet that celebration was premature, because the decision has limited reach and the “poison pill” continues to limit condominium trustees’ ability to initiate litigation in almost all other contexts.

Background

When the trustees of the seven-year-old Cambridge Point Condominium decided to sue the developer for $2 million in alleged common area defects, a condominium bylaw severely restricted their ability to initiate litigation. Under that bylaw, before suing anyone other than a unit owner, the trustees had to obtain the written consent of at least 80% of the unit owners. To do so, they first had to circulate their proposed complaint, specify a limit on legal fees and costs to be paid, and institute a special assessment to collect that sum. To prevent the owners from easing these requirements, the bylaw required that at least 80% of the owners must consent to its amendment. Making matters worse, the developer owned at least 20% of the units.

The trustees sued without first obtaining the requisite consent, seeking damages and a declaration voiding the bylaw. The superior court dismissed their suit, concluding that the bylaw was not prohibited by the condominium statute, G.L. c. 183A (the “Act”), and its use by developers did not constitute “overreaching” in contravention of public policy.” Trustees, supra at 691-701. The SJC granted direct appellate review.

No Violation of Condominium Act

Writing for the Court, Chief Justice Gants first addressed whether a “bylaw provision requiring unit owner consent to initiate litigation is … per se void because it is ‘inconsistent’ with the [A]ct.” Trustees, supra at 703. The Court rejected the trustees’ argument that the Act’s grant, in § 10(b)(4), to trustees of the exclusive authority to litigate common area claims proscribes any bylaw restricting that authority, reiterating the Court’s view that the Act is “essentially an enabling statute” that lays out minimum requirements for establishing condominiums and otherwise provides developers and unit owners with “planning flexibility” to work out in condominium bylaws matters not specifically addressed by the statute. Id.  at 701-02 (citing Scully v. Tillery, 456 Mass. 758, 770 (2010)). The Court also declined to apply the maxim of negative implication to invalidate a bylaw requiring unit owners’ consent for trustee litigation simply because such consent is statutorily required for some other trustee actions.

Invalid as Against Public Policy

The Court next determined whether developers’ use of the bylaw to shield themselves from common area defect claims contravenes public policy. Recognizing that the bylaw’s cumulative requirements “make it extraordinarily difficult for the trustees to sue the developer for defective construction,” the Court ruled that the “well-established public policy in favor of the safety and habitability of homes” outweighs the “public interest in freedom of contract.” Trustees, supra at 705-708. The Court noted that the right to obtain legal redress for homes that fail to meet minimum standards of safety and habitability are so vital they cannot be waived, and that “[t]his clear expression of public policy” required that the bylaw “be carefully scrutinized to determine whether it contravenes that … policy.” Id. at 708. Doing so, the Court found the bylaw more sweeping and unfair than a broad, express waiver, and it struck its use as overreaching by the developer, citing a long-standing exception to freedom of contract in condominium developments first laid out in Barclay v. DeVeau, 384 Mass. 676, 682 (1981) (“Absent overreaching or fraud by a developer, [courts] find no strong public policy against interpreting [the Act] to permit the developer and unit owners to agree on the details of administration and management of the condominium…”). Trustees, supra at 709.  In Trustees, the SJC determined that “it is overreaching for a developer to impose a condition precedent that, for all practical purposes, makes it extraordinarily difficult or even impossible for the trustees to initiate any litigation against the developers regarding the common areas and facilities of a condominium.” Id (emphasis in original)

Where Does That Leave Us?

Trustees continues the Court’s expansion of the rights of residential property owners to sue builders for defective construction, which the Court initiated in Albrecht v. Clifford, 436 Mass. 706, 710-11 (2002) (applying warranty of habitability to new home sales). It also continues the expansion of the rights of condominium trustees to sue developers for common area defects, following Berish v. Bornstein, 437 Mass. 252, 265 (2002) (organization of unit owners may sue for breach of the implied warranty of habitability over latent common area defects that implicate the habitability of individual units) and Wyman v. Ayer Properties, LLC, 469 Mass. 64 (2014) (economic loss rule does not apply to damage caused to common areas by builder’s negligence).

Yet, for condominiums, the decision is also quite narrow, because it invalidates the use of the bylaw only for building defect claims against developers. Even here, the Court provided little guidance on whether a modified bylaw might be acceptable. Would, for example, a bylaw requiring the same 75% owner consent that is statutorily required for improvements and casualty repairs be acceptable, especially if developer units cannot vote? Trustees does not say.

Moreover, the Court’s refusal to strike the provision universally presents far-reaching consequences for condominium boards. Outside of common area defect claims against developers, the provision continues to apply to all litigation by condominium trustees except suits against unit owners. Other litigation must be preapproved and specially assessed in condominiums where the bylaw exists. Is this a useful check on board power or an overly restrictive set of handcuffs that make condominium management more difficult? Those boards who celebrate the demise of the “poison pill” may come to realize that their indigestion is a long way from being over.

Samuel B. Moskowitz is shareholder at Davis Malm & D’Agostine, P.C. His practice focuses on real estate and condominium law. He is a former Chair of the Boston Bar Association Real Estate Section, the editor and a contributing author of Massachusetts Condominium Law (MCLE, May 2017). He gratefully acknowledges the assistance of Nour E. Sulaiman, a law student at Northeastern University School of Law, who contributed invaluably in the preparation of this article.


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

finsterwald

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

fidnickfidnick

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.

fidnick

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.