by Christopher T. Saccardi
Every day in Massachusetts state courts, people take on the burden of representing themselves in civil cases. While there are a number of reasons for this, the principal factor is obvious: lawyers are expensive, and many individuals simply can’t afford them.
There are no easy solutions to this problem, but Limited Assistance Representation (LAR), which was introduced in Massachusetts in 2009 and has been expanding through the trial courts, can help. It allows litigants to retain counsel for an essential phase of litigation, or for a crucial hearing, at a cost that is much less than what an attorney might charge to represent the client for a full case. LAR also allows an attorney to offer pro bono services for a particular litigation event without having to commit to taking on an entire case.
While this article draws primarily on procedures and experience with LAR in Housing Court to introduce practitioners to LAR, highlight its benefits, and identify key issues and potential pitfalls, the rules are very similar in the other courts in which LAR is now available to civil litigants—the District Court, the Boston Municipal Court, Probate and Family Court, and the Superior Court.
Under LAR, attorneys are permitted to represent clients on a limited basis after registering with the appropriate court and watching a short video or attending a training on the mechanics of LAR. The duration of the representation can vary by agreement reached between counsel and client. Representations can be as short as a single hearing or discrete task, or they can cover a longer period of time, such as assisting through the completion of discovery or even preparing for and conducting a trial.
For example, common parts of a Housing Court case that are particularly conducive to LAR are: answering or drafting discovery requests; drafting and filing motions; appearing to argue a motion, such as a motion to vacate a default judgment or to issue an execution; conducting a mediation with a Housing Specialist; or trying a summary process (eviction) case.
The mechanics of appearing and withdrawing under LAR vary slightly from court to court, but generally follow the same basic parameters throughout the Commonwealth: attorney and client must sign an agreement that details the specific nature of the representation and the tasks and period of time to be included. The attorney will then complete a set of LAR appearance and withdrawal forms that can be obtained from the appropriate court (or online) and which must be signed by both the client and the attorney. The withdrawal is filed as soon as the representation ends; in the case of LAR for a discrete hearing, it is not unusual to file the limited appearance form at the beginning of the hearing and to file the withdrawal in open court immediately following the conclusion of the hearing.
While LAR can be a convenient tool for both attorney and client, it does present some unique challenges that are important for practitioners to keep in mind. Litigants can risk disjointed or incomplete counsel from an LAR attorney who focuses narrowly on the specific task at hand without considering the overall litigation strategy. Or, a client who engages an attorney only to draft a motion could be ill-served, even if the motion is excellent, if the LAR agreement does not provide for properly preparing the client to argue that motion. It is therefore important for both attorney and client to carefully consider the appropriate duration of the representation and the way in which the included tasks will be defined. A failure to do this can lead to awkward situations, as a judge will occasionally not allow the LAR withdrawal if he or she feels that an additional task should be completed by the attorney. For example, a judge will sometimes ask the LAR attorney to postpone the withdrawal after a hearing in order to receive a copy of the decision and explain it to the client.
Another challenge can result if it is unclear to opposing counsel when exactly an LAR attorney has entered and, more importantly, has exited the case. Not knowing whether the adverse party is represented or is pro se can hamper the ability of opposing counsel to negotiate a resolution or simply to communicate about procedural issues. Timely providing copies of the limited appearance and withdrawal to opposing counsel is therefore critically important.
Housing Court Standing Order 1-10, which governs LAR in the Housing Court, contains several requirements counsel must follow to help avoid those potential pitfalls. For example, the signature block of any document filed by an LAR attorney must indicate that it is filed under a LAR representation; a failure to do this could convert the engagement from limited to full representation. The Standing Order also requires opposing counsel to serve documents related to matters within the scope of the limited representation on both the LAR counsel and the party. Similar rules apply in other courts. See, e.g., BMC Standing Order 1-10, District Court Standing Order 1-11, Superior Court Standing Order 2-17, and a memo and FAQ regarding LAR in Probate and Family Court. The LAR page on the Massachusetts state website provides a good summary of the various LAR rules, along with links to FAQs, standing orders, and court forms.
In sum, LAR can be a valuable tool, especially in courts that serve a large population of unrepresented parties. It can be used on a pro bono basis or for paying clients, and can be a helpful way to provide assistance to a party with a critical piece of litigation at considerably lower cost than full representation. Judges are generally appreciative of LAR attorneys because they understand that often the alternative is no representation at all. So long as counsel give careful consideration to how they delineate the duration of the representation and are familiar with the applicable rules, LAR can be a useful part of any practice.
Chris Saccardi, formerly a litigation associate at Edwards Angell Palmer and Dodge, LLP, opened his own practice in 2010 in which he focuses exclusively on landlord-tenant law. He was named to the BBA’s Public Interest Leadership program in 2012-2013 and has served as Co-Chair of the BBA’s Solo and Small Firm Section.
How to Get an LLC into Federal Court: Tips for Pleading Diversity Jurisdiction Over Unincorporated EntitiesPosted: May 14, 2018
by Thomas Sutcliffe
For federal diversity jurisdiction under 28 U.S.C. § 1332, a plaintiff, or removing defendant, must establish diversity of citizenship between the parties. Typically, that means that all of the plaintiffs must be citizens of a different state than all of the defendants. And a party wishing to get into federal court is required to plead diversity at the outset of litigation.
Pleading diversity, however, can be a challenge when the other party is an unincorporated entity. A corporation’s citizenship is straightforward; it is considered to be a citizen of both the state of incorporation and the state in which its principal place of business is located. The citizenship of other entities, such as LLCs and partnerships, is based upon the citizenship of each of its individual members or partners. See generally Americold Realty Tr. v. Conagra Foods, Inc., 136 S. Ct. 1012 (2016). A complaint or notice of removal, therefore, must say something about the citizenship of an unincorporated entity’s members. Failure to do so can result, at the very least, in a show cause order, especially within the First Circuit, where judges have not hesitated to raise the issue sua sponte. See e.g., N. Beacon 155 Assocs. LLC v. Mesirow Fin. Interim Mgmt. LLC, No. CV 15-11750-LTS, 2015 WL 13427609, at *1 (D. Mass. June 29, 2015) (finding that allegation in notice of removal that only pleaded state of organization and principal place of business of LLC parties insufficient); Fratus v. Vivint Solar Developer LLC, 1:16-CV-10517 (D. Mass June 8, 2016) (issuing show cause order sua sponte based on similar problem in plaintiff’s complaint); see also D.B. Zwirn Special Opportunities Fund, L.P. v. Mehrotra, 661 F.3d 124, 125 (1st Cir. 2011) (determining, sua sponte, that notice of removal failed to allege jurisdiction over LLC plaintiff).
Requiring a party to plead the citizenship of another party’s members results in something of a Catch-22. The membership of an LLC or partnership is often not publically available information, meaning a party trying to access federal court may not be able to determine the citizenship of its adversary until discovery. But parties typically cannot conduct discovery unless they can plead some basis for subject matter jurisdiction, leaving plaintiffs and removing defendants in a quandary.
The Pragmatic Approach Taken by Some Circuits
Some courts, outside the First Circuit, have started to address this dilemma by adopting a more pragmatic approach to pleading citizenship. For example, in Carolina Cas. Ins. Co. v. Team Equip., Inc., 741 F.3d 1082 (9th Cir. 2014), the Ninth Circuit embraced the “sensible principle that, at [the pleading stage], a party should not be required to plead jurisdiction [against an LLC] affirmatively based on actual knowledge.” Id. at 1087. Instead, the court held, it is enough for a plaintiff “to allege simply that the defendants were diverse to it,” and it is permitted “to plead its allegations on the basis of information and belief.” Id. Meanwhile, if the unincorporated entity – which presumably knows the citizenship of its own members – has information to the contrary, it is free to provide it and the court can “reevaluate its jurisdiction if contrary information emerged later.” Id. Until then, the court reasoned, the unincorporated entity is not in a position to complain.
The Third Circuit reached a similar conclusion in Lincoln Ben. Life Co. v. AEI Life, LLC, 800 F.3d 99 (3d Cir. 2015). In Lincoln, the court reasoned that “[d]epriving a party of a federal forum simply because it cannot identify all of the members of an unincorporated association is not a rational screening mechanism,” particularly given that “[t]he membership of an LLC is often not a matter of public record.” Id. at 108. As a result, the court forged a compromise aimed at “strik[ing] the appropriate balance between facilitating access to the courts and managing the burdens of discovery.” Id. Specifically, it held that it was enough for a plaintiff to “alleg[e] that none of the defendant association’s members are citizens of” the same state as the plaintiff. Id. at 107. Furthermore, plaintiffs were permitted to make that allegation on information and belief provided they “conduct[ed] a reasonable inquiry into the facts alleged,” such as by consulting publically available sources. Id. at 108. “If, after this inquiry,” the court held, “the plaintiff has no reason to believe that any of the association’s members share its state of citizenship, it may allege complete diversity in good faith.” Id.
The court in Lincoln went on to examine the plaintiff’s complaint and found that – when combined with the plaintiff’s opposition to the defendants’ motion to dismiss – its allegations were sufficient to plead diversity of citizenship. Specifically, the court noted that the plaintiff had alleged that:
- The LLC defendants had some connection to states where the plaintiff was not a citizen;
- Plaintiff’s counsel had “conducted a reasonable inquiry to determine the membership of the LLC defendants but found nothing of value;” and
- Plaintiff’s counsel “found no connection between the LLC defendants” and plaintiff’s home state.
Id. at 110.
Based on these allegations, the court concluded that the plaintiff had “alleged complete diversity in good faith.” Id. at 111.
Applying Carolina and Lincoln in the First Circuit
Can the approach of Carolina and Lincoln be applied in the First Circuit? Not exactly. In D.B. Zwirn Special Opportunities Fund, L.P. v. Mehrotra, 661 F.3d 124 (1st Cir. 2011), the First Circuit held, in a decision that predates Lincoln, that citizenship cannot be pleaded in the negative; that is, it is not enough to allege that the plaintiff and defendants are not parties of the same state, as the parties in that case had done. The problem, the court explained, was that even if a party was not a citizen of the same state as its adversary, that did not rule out the possibility that one of the parties was a stateless entity (such as a foreign corporation) in which case diversity jurisdiction would again be lacking. Id. at 126-27. As a result, the court required affirmative information regarding the citizenship of the plaintiff-LLC’s members.
But the Carolina/Lincoln approach still offers some guidance, and Massachusetts courts might be warming to it. In BRT Mgmt. LLC v. Malden Storage, LLC, No. CV 17-10005-FDS, 2017 WL 2726689 (D. Mass. June 23, 2017), for example, the court issued a show cause order, and the plaintiff, citing Lincoln, argued that it had searched publically available records but had been unable to determine the citizenship of the LLC defendant. Judge Saylor observed that the approach articulated in Lincoln conflicted somewhat with D.B. Zwirn, but he nonetheless concluded that Lincoln’s “basic reasoning is sound.” Id. at *1. He further held that, because BRT – like the plaintiff in Lincoln – had “consulted all available public information and alleged, in good faith, that there is complete diversity of citizenship,” it was entitled to take jurisdictional discovery. Id.
BRT suggests then that providing some indication of good faith research might go a long way towards overcoming the seemingly high burden set by D.B. Zwirn. The decision in D.B. Zwirn itself signaled that the court may be open to this kind of a pragmatic approach. Indeed, it is noteworthy that, in D.B. Zwirn, the court ordered the plaintiff-LLC to provide information regarding its citizenship, not the defendant who had removed the case to federal court (and who bore the burden of establishing jurisdiction). That suggests that the First Circuit may, in the future, be open to permitting jurisdictional discovery, at least in those instances where the party seeking federal jurisdiction makes an adequate threshold showing.
Lessons to Be Learned
So what are the lessons that can be gleaned from the case law? A few guidelines seem to emerge:
- First, a party seeking federal diversity jurisdiction involving an unincorporated entity should research publically available information to the fullest practical extent and describe those efforts in the complaint or notice of removal. Even if that research is inconclusive, it is helpful to establish good faith.
- Second, if the research reveals no contacts between the unincorporated party and the state of which the party seeking federal jurisdiction is a citizen, the complaint should say so. If there are some contacts, the complaint should explain (if possible) why those contacts are insufficient and/or explain why the unincorporated party’s connections to another state are more extensive. The party should also allege, if appropriate, on information and belief, that the parties are not citizens of the same state.
- Third, the party should try to allege the unincorporated party’s state of citizenship, even if it is only an educated guess. That will help avoid the kind of “negative” pleading the First Circuit rejected in D. B. Zwirn. Failing that, the complaint should at least try to allege facts ruling out the possibility that the unincorporated party is a “stateless” actor, such as, for example, establishing that the entity is based in the United States (and therefore presumably a citizen of some state).
The rules for establishing diversity jurisdiction over unincorporated parties are at times byzantine and arguably “def[y] logic.” Lincoln, 800 F.3d at 111 (all judges concurring). But neither the Supreme Court nor Congress has shown any sign of changing those rules, and courts are quick to enforce them. By putting a bit of extra time into alleging diversity jurisdiction over these entities, parties can save themselves considerable trouble in the future and ensure that they remain in the forum of their choosing.
Thomas Sutcliffe is an attorney at Prince Lobel Tye LLP. His practice focuses on complex commercial litigation.
by Matthew J. Kiefer and Louise B. Giannakis
The Commonwealth of Massachusetts prides itself on being “first in the nation” for many milestones: the first public park (Boston Common), the first college (Harvard) and the first to legalize same-sex marriage. A lesser known “first” was the Commonwealth’s formal recognition of the public trust doctrine, a legal concept dating at least to Justinian. The doctrine, first codified by the Colonial Ordinances of the 1640s, obligates the Commonwealth as trustee to ensure that land subject to tidal action is used for public benefit. The doctrine evolved into M.G.L. c. 91 (“Chapter 91”), the Public Waterfront Act (“Act”). Historically, the Act focused on preserving public access to the water, protecting tidelands for water-dependent uses such as fishing and boating, and encouraging uses and development that animate the waterfront. However, with record-breaking coastal flooding and sea level rise no longer distant threats, climate resilient waterfront development has become a policy imperative in Chapter 91 licensing.
Chapter 91 is a comprehensive licensing program, administered by the Massachusetts Department of Environmental Protection (“DEP”), to ensure that proposed waterfront development projects meet public benefit standards with respect to environmental protection, public safety, navigation, preservation of historic maritime industries, and recreational, commercial and industrial activities and uses. Licensing by DEP can be a complex and lengthy process, especially for large-scale urban projects. Although DEP has yet to incorporate formal climate resiliency requirements into its licensing program, a prudent project proponent should include climate resilience as an integral part of a project’s public benefit profile in light of the DEP’s recent licensing decisions, public comments and formal requirements established by other regulatory agencies, such as the Boston Redevelopment Authority (d/b/a Boston Planning and Development Agency or “BPDA”).
Do the regulatory homework: Effective representation of a proponent of a waterfront project requires a determination of how the Chapter 91 and associated regulatory standards and policy goals apply to a particular project. See Waterways Regulations, 310 CMR 9.00 et seq., Designated Port Area (DPA) Regulations, 301 CMR 25.00 et seq., Municipal Harbor Plan (MHP) Regulations, 301 CMR 23.00 et seq. Early analysis of site-specific factors by a cross-disciplinary team is often required to identify which Chapter 91 requirements are applicable to a particular site — such as whether the site is historically filled or currently flowed tidelands or is nontidal, whether it is above or below the historic low water mark, and whether it serves water-dependent or nonwater-dependent uses. This is critical to developing an effective Chapter 91 permitting path, and should include evaluation of appropriate climate resiliency measures. For example, as sea levels continue to rise, it would be wise to anticipate whether structures currently above the high water mark, and thus exempt from licensing, may become “intertidal” and thus subject to Chapter 91 jurisdiction.
Review other agencies’ climate change initiatives for guidance: As climate resiliency becomes a policy imperative for the modern world, federal, state and local agencies are increasingly launching initiatives and establishing requirements to protect communities from the adverse effects of climate change. In March, 2016, Governor Baker signed Executive Order 569, “Establishing an Integrated Climate Change Strategy for the Commonwealth,” and in early 2018, authorized over $1.4 billion in capital allocations “to mitigate and adapt to climate change” and “build a more resilient Commonwealth.” These climate resiliency investments include infrastructure repairs and improvements, as well as grants to communities through the Municipal Vulnerability Preparedness Program and the State Hazard Mitigation and Adaptation Plan. In October, 2017, the BPDA formally integrated climate resilience measures into its approval process under Boston Zoning Code Article 80 for Large Project, Planned Development Area and Institutional Master Plan Reviews by requiring a “Climate Resiliency Checklist Report” that incorporates sea level rise, storm surge, extreme precipitation, extreme heat events, and other considerations. Other Boston initiatives include the recently-approved Downtown Waterfront Municipal Harbor Plan, which encourages a comprehensive, district-wide approach to creating a climate resilient waterfront that overcomes the limitations of a parcel-by-parcel permitting process, and Climate Ready Boston, an ongoing city-wide planning effort to address the effects of climate change. At the federal level, the newly revised Federal Emergency Management Agency flood hazard maps increase the reach of flood zones and show a stepped-up focus on the topic.
Consider climate resilience measures in recently approved projects: Many questions remain on the Chapter 91 licensing implications of many potential climate resiliency measures. Can raised seawalls or berms be licensed if they reduce public pedestrian access? Would a flood protection berm consisting of new fill in flowed tidelands be licensable? Would raising the grade of a project site to anticipate rising sea levels allow for a commensurate increase in building height? What is the scope of responsibility for an individual licensee whose site is located on an area-wide flood zone and whose flood protection activities may not be effective until the entire area is protected?
Regulatory uncertainty notwithstanding, it is clear that adapting to sea level rise is necessary for the long-term viability of a waterfront project. For instance, the developers of Clippership Wharf in East Boston have designed a floodable harbor-walk that can act as a buffer for high seas and are importing significant amounts of new fill to raise parts of the seven-acre site above anticipated flood levels. The developers of a large mixed-use campus at Suffolk Downs in Boston-Revere have proposed a sunken amphitheater with capacity to hold millions of cubic feet of flood water for days to address anticipated flood levels. The developers of the L Street Power Station in South Boston have proposed an elevated floor of the building to accommodate the possible need to raise the ground level while maintaining a reasonable floor to ceiling height.
In short, even in the absence of clear regulatory requirements, waterfront development proponents should incorporate climate resilience measures early in the licensing strategy, not only to extend the project’s design life, but also to facilitate the licensing approval by anticipating the public benefit expectations of the DEP and interests of the waterfront communities.
Matthew J. Kiefer is a Director at Goulston & Storrs, focusing on real estate development and land use. Matt has extensive experience licensing projects under Chapter 91, including Clippership Wharf in East Boston, the Innovation and Design Building in the Ray Flynn Marine Park, and Building 114 and the Spaulding Rehabilitation Center in the Charlestown Navy Yard. He co-chairs the firm’s Climate Resilience Task Force.
Louise B. Giannakis is an Associate in Goulston & Storrs’ Real Estate practice group. Louise graduated from Boston College Law School in 2017 and is a member of the Urban Land Institute’s Young Leader Group.
by William G. Cosmas
Two years ago in this journal, I examined the process of obtaining a pardon in the Commonwealth of Massachusetts from the perspective of having represented one of the first successful petitioners for such relief since 2002. This article examines the Executive Clemency Guidelines issued by Governor Charles D. Baker (the “Baker Guidelines”) as compared to those that his predecessor, Governor Deval L. Patrick, issued in January 2014 (the “Patrick Guidelines”).
In Massachusetts, a governor’s Executive Clemency Guidelines (the “Guidelines”) largely govern the process from petition to clemency. Statutes and regulations set forth the procedure through which the Parole Board, acting as the Advisory Board of Pardons (the “Board”), reviews, evaluates, and considers petitions for clemency. The Guidelines set forth the qualitative framework for that analysis, through an expression of the governor’s philosophy concerning clemency and the criteria that he or she will use to determine whether a petitioner merits recommendation to the Governor’s Council (the “Council”) for relief. On the day after his inauguration, Governor Baker rescinded the Patrick Guidelines, under which Governor Patrick had issued four pardons at the close of his term, halting administrative review of existing petitions until he could draft and issue his own Guidelines. Baker Rescinds Ex-Gov. Patrick’s Clemency Guidelines, Associated Press, Jan. 16, 2015. Governor Baker described his decision as “standard operating procedure,” because with a new governor comes a new understanding of the nature and contours of the governor’s pardon power. See Gov. Baker To Submit New Pardon Guidelines In Coming Weeks, Associated Press, Jan. 23, 2015. The Baker Guidelines were issued in December 2015.
An Apparent Attempt to Streamline
While the Baker Guidelines offer streamlined, procedural clarity and hew closely to relevant law, the Patrick Guidelines contemplated a holistic review of each petitioner, “intend[ing] to inform” the Board—the “public officials who are most able to make informed decisions on the persons seeking relief” —in its preliminary analysis of each petition. See Patrick Guidelines (“PG”) at 1-2. In contrast, the Baker Guidelines emphasize his prerogative to “direct” the Board’s analysis, in language that agrees with the Board’s recently-revised regulations (see, e.g., 120 CMR 900.01(2) (2017) (“The [Board] shall be directed by the Governor’s Executive Clemency Guidelines in its consideration of petitions for executive clemency.”) See Baker Guidelines (“BG”) at 1-2. Such emphasis also reflects the governor’s constitutional power, under Article 73 of the Amendments to the Massachusetts Constitution, to determine which clemency petitions merit submission to the Council for approval. See In re Op. of the Justices, 210 Mass. 609, 611 (1912); see also M.G.L. ch. 127 § 152.
Both sets of Guidelines reserve that power notwithstanding their own terms, but the Baker Guidelines explicitly acknowledge that they do not bind the Council, whose “concurrent action” on a petition is required to issue a pardon. BG at 2; see In re Op. of the Justices, 210 Mass. at 611. This nod to the Council’s constitutional independence, see Pineo v. Exec. Council, 412 Mass. 31, 36-37 (1992), an esoteric point of law easily lost on those without experience on Beacon Hill, may prove crucial to future petitioners who reach the final stage of review. Without this provision, a petitioner (and his/her counsel) might assume that the same Guidelines that governed the lengthy process to that point also set the rules for Council’s essential consideration of a petition. In truth, there are no rules for the Council’s analysis or for any related hearing other than those, if any, promulgated by the Council for the occasion.
Finally, the Baker Guidelines offer added precision by incorporating relevant statutory and regulatory provisions. For example, both Guidelines indicate that, for certain offenses, a pardon “rarely” would include restoration of a petitioner’s firearms rights. Unlike the Patrick Guidelines, however, the Baker Guidelines specifically incorporate the offenses included in M.G.L. ch. 140 § 121’s definition of “violent crime”: “any crime punishable by imprisonment for a term exceeding one year… that: (i) has as an element the use, attempted use or threatened use of physical force or a deadly weapon against the person of another; (ii) is burglary, extortion, arson, or kidnapping; (iii) involves the use of explosives; or (iv) otherwise involves conduct that presents a serious risk of injury to another,” BG at 4. Although the Supreme Judicial Court struck down part (iv) of the statute as unconstitutionally vague in May 2016, Commonwealth v. Beal, 474 Mass. 341, 349-51 (2016), the precision that the rest of § 121 provides may help petitioners set more accurate expectations for the process.
An Embrace of Retributive Justice
Both Guidelines establish similar basic threshold considerations for pardon relief, but the Baker Guidelines imbue those considerations with a retributive theory of justice. Perhaps drawing the line for the Commonwealth’s retribution at the petitioner’s release from state supervision, the Patrick Guidelines first considered whether “[t]he grant of a pardon is in the interests of justice,” considering “the nature of the underlying offense(s), the impact of the crime on any victim(s) and society as a whole, the petitioner’s role in the underlying offense, and the fundamental fairness and equity of granting a pardon to the petitioner.” PG at 3. By contrast, the Baker Guidelines identify the “nature and circumstances of the offense” as the first “paramount consideration,” paying particular attention “to the impact on the victim or victims and the impact of the crime on society as a whole.” BG at 3. The greater the severity of the petitioner’s offense, the more time “that should have elapsed in order to minimize any impact clemency may have on respect for the law.” Id. at 2.
The second threshold question under the Patrick Guidelines focused on a petitioner’s rehabilitation, considering whether “the petitioner has been a law-abiding citizen and presents no risk for re-offense,” to determine whether a pardon would be consistent with maintaining public safety. PG at 3. That analysis focused on the petitioner’s “good citizenship” during a period of time following confinement or probation based on whether the petitioner’s offense was a felony or misdemeanor. PG at 3. The Baker Guidelines’ analogous “paramount consideration”—“the character and behavior, particularly post-offense behavior, of the petitioner”—presents a striking shift from the Patrick Guidelines. See BG at 3. A petitioner must have “clearly demonstrated acceptance of responsibility for the offense for which the petitioner is seeking clemency” —and appealing or challenging the underlying conviction or sentence is “[g]enerally… inconsistent with acceptance of responsibility.” Id. In other words, a petitioner who exercised his legal right to appeal or challenge a conviction twenty-five years ago, no matter the justification, unwittingly disadvantaged his future clemency petition to Governor Baker in the process. The Baker Guidelines also essentially require that a petitioner have “made full restitution” to victims economically injured by the petitioner’s crime(s), giving “stronger consideration to petitioners who have made restitution in a prompt manner.” Id. A petitioner’s public service will also lead to “stronger consideration,” whether that public service consists of “substantial assistance to law enforcement in the investigation or prosecution of other more culpable offenders” or “service in the military or other public service, or . . . charitable work.” Id.
Narrowed Opportunity for Petitioners
Both sets of guidelines provide additional factors to be taken into account in determining a petitioner’s entitlement to relief, such as requiring a period of “good citizenship” since release from government supervision, but the Baker Guidelines take a narrower focus, limiting opportunities for petitioners. The Patrick Guidelines considered “either (1) a compelling need for a pardon; or (2) extraordinary contributions to society that would justify restoration of his/her reputation as a concluding step of rehabilitation.” PG at 2. Similarly, the Baker Guidelines require petitioners to “demonstrate both good citizenship and a verified, compelling need,” but do not expressly consider the “extraordinary contributions to society” that might have tipped the balance to clemency under the Patrick Guidelines. BG at 3. Instead, the Baker Guidelines require disclosure and investigation of “whether the petitioner has been the subject of any civil lawsuit, including any restraining order, during the claimed period of good citizenship,” thus imposing a greater burden than the Patrick Guidelines, which required consideration only of restraining orders or civil contempt orders. See BG at 4; PG at 4.
On the whole, the Baker Guidelines provide additional clarity—but commensurately narrower paths to clemency—than those they replaced. It remains to be seen whether and in what circumstances Governor Baker will exercise his constitutional power to grant the “extraordinary remedy” of a pardon—and whether his Guidelines will impact his ability to do so.
William G. Cosmas, Jr., is an associate at Fitch Law Partners LLP, where he works primarily in the areas of business litigation, white-collar criminal defense, government investigations, real estate disputes, and complex civil litigation. In 2014, he represented a successful petitioner for clemency in Massachusetts.
The Massachusetts Securities Division (“Division”) is the state agency entrusted with protecting investors. And the scope of its power is considerable, ranging from the authority to order the disgorgement of profits to its ability to issue cease and desist demands. But parties defending against the Division’s Registration Inspections, Compliance and Examinations (“RICE”) Section are often disadvantaged by a very limited right to discovery.
Respondents in Division proceedings can, however, request to subpoena third parties, which can be valuable considering the paucity of other discovery tools. But getting the Division to issue a subpoena is not easy or intuitive. This article, therefore, provides an overview of the subpoena process in adjudicatory proceedings before the Division.
Discovery in Division Proceedings
Under the Division’s rules, respondents have no right to propound interrogatories or requests for documents. 950 C.M.R. § 10.01 et seq. Instead, the Division has held that RICE is only required to produce documents it identifies as exhibits in its pre-trial memorandum. Conversely, RICE may issue subpoenas even before an adjudicatory proceeding has begun. M.G.L. c. 110A, § 407(b).
Subpoenas can mitigate this imbalance, as there are many scenarios in which third parties will hold key information. For example, in insider trading cases, establishing whether information is material or obtained in violation of a fiduciary duty could depend upon information held by the third-party company whose shares were traded. With third-party subpoenas, respondents can gain advance notice of the evidence upon which RICE may rely at trial while also potentially obtaining exculpatory evidence which RICE would otherwise not be obligated to produce.
Right to Issue of Subpoenas
How do respondents obtain subpoenas in Division proceedings? At first, the answer may seem straightforward. Under M.G.L. c. 30A, § 12(3):
Any party to an adjudicatory proceeding shall be entitled as of right to the issue of subpoenas in the name of the agency conducting the proceeding. The party may have such subpoenas issued by a notary public or justice of the peace, or he may make written application to the agency, which shall forthwith issue the subpoenas requested.
That is, respondents appear entitled to subpoenas “as of right.”
The Division’s position, however, is that Section 12(3) does not apply to its adjudicatory proceedings because M.G.L. c. 110A, § 407(b) supplants it. See, e.g., In the Matter of Blinder, Robinson, & Co., Docket No. E-85-27, 1986 Mass. Sec. LEXIS 63 (Mass Sec. Div. April 30, 1986). As the reasoning goes, under Section 407(b), the Division “may” issue subpoenas, but is not required to, and therefore, there is a conflict between Section 12(3) and Section 407(b). And where Section 407(b) deals specifically with the Division but Section 12(3) is merely a default rule applicable to all agencies, Section 407(b) prevails. Accordingly, respondents in Division proceedings are subject to 950 C.M.R. § 10.09(l), which requires a respondent to make a “written application” for a subpoena to the Presiding Officer, who “may” grant the application.
No court has yet weighed in on the Division’s interpretation, however, and its position is open to challenge. First, nothing in Section 407(b), which was enacted after Section 12(3), states that it overrides Section 12(3), and there is “a very strong presumption against [the] implied repeal” of a statute, Commonwealth v. Hudson, 404 Mass. 282, 286 (1989) (internal quotation marks omitted), particularly where the statute unequivocally confers a procedural “right.” Nor is it clear there is a conflict between Section 12(3) and Section 407(b); the former deals with a respondent’s ability to issue subpoenas whereas Section 407(b) refers to the Division’s prerogative to do so. Moreover, the Division, in a slightly different context, has itself stated that “[a] party to an adjudicatory proceeding before the Division is entitled as a matter of right to the issuance of [a] subpoena.” In the Matter of Cohmad Sec. Corp., Docket No. E-2009-0015 (Mass Sec. Div. Nov. 17, 2009). There are, therefore, ample grounds upon which to invoke subpoena rights under Section 12(3).
What should a respondent do if it wishes to issue a subpoena under Section 12(3)? It could simply ignore Division precedent and serve a notarized subpoena pursuant Section 12(3). But RICE will almost certainly respond with a motion to quash, which in turn may result in an order to withdraw the subpoena from the Presiding Officer.
The prudent approach would be to file a motion before the Division under both Section 12(3) and 950 C.M.R. § 10.09(l). This approach affords two advantages. First, the Division may simply grant the subpoena, in which case the applicability of Section 12(3) is moot. Second, if the Division denies the subpoena, then the respondent will have preserved the issue for appeal under M.G.L. c. 30A, should the Division ultimately decide unfavorably. If the respondent believes that it cannot wait until after a final decision, it might also consider interlocutory relief by way of a mandamus action in the Superior Court pursuant to M.G.L. c. 249, § 5. Mandamus relief will likely be an uphill battle, however, as it is only available where a M.G.L. 30A appeal is an inadequate remedy. Because a court can always reverse the Division’s judgment and order more discovery, there is usually an adequate remedy. If there is an immediate need for the subpoena, however, a mandamus action may be an important option to preserve by moving for a subpoena under both Section 12(3) and Section 10.09(l).
Requesting a Subpoena
To request a subpoena from the Presiding Officer under 950 C.M.R. § 10.09(l)(1), the respondent must make a “written application,” which should consist of a copy of the proposed subpoena and a short motion. The Presiding Officer may deny a request if she determines that the subpoena would be “unreasonable, oppressive, excessive in scope, or unduly burdensome.” Id.
Both the Division’s rules and M.G.L. c. 30A, § 12(3) allow the subpoenaed party, but no one else, to move to quash the subpoena. Accordingly, the Division has held that only “a party to whom the subpoena is directed may move to vacate or modify the subpoena.” In the Matter of Cohmad Sec. Corp. RICE, however, has argued that applications for subpoenas are “motions” under 950 CMR § 10.07(a), entitling it to file an opposition. Thus far, the Division appears to have rejected RICE’s position, and a respondent should promptly move to strike any opposition RICE files.
RICE has also argued that any subpoena served prior to the exchange of pre-trial memoranda under 950 C.M.R. § 10.09(b) is per se unreasonable because it is inherently inefficient to serve subpoenas that may overlap with the documents that RICE may produce with its memorandum. RICE’s argument is difficult to square with the language of Section 10.09(l), which imposes no time limitation on requesting subpoenas, and Section 10.09(b), which deals solely with the exchange of documents between parties, not third-party subpoenas. At least one Presiding Officer has rejected RICE’s position that subpoenas must be filed after the exchange of pre-trial memoranda. In the Matter of Risk Reward Capital Management Corp., Docket No. E-2010-0057 (Sept. 23, 2014). Nevertheless, respondents seeking to obtain subpoenas should be ready to field similar objections.
Subpoenas are a valuable tool in proceedings before the Division. But respondents should anticipate resistance and RICE’s likely objections. By preparing to do so, respondents can maximize their chances of success, either before the Division or (if necessary) on appeal.
Thomas Sutcliffe is an associate at Prince Lobel Tye LLP. His practice focuses on complex commercial and administrative litigation.
by Mark Szpak, Seth Harrington and Lindsey Sullivan
In August, the United States Department of Justice (“DOJ”) and the Securities Exchange Commission (“SEC”) unsealed complaints alleging a scheme to hack into computer systems of newswire services in order to steal material nonpublic information, which the hackers then allegedly used to place trades.
This case is strikingly different than many other recently reported data-breach cases. Typically such cases have involved an attacker breaking into a company’s network to access personal nonpublic information (e.g., credit card numbers, medical history, social security numbers) that potentially could be sold to other criminals who would use it to attempt to commit identity theft or fraud. This hack involved information concerning publicly traded companies, obtained not from the companies themselves, but third-party newswire services. These complaints highlight that cyberattack risk is not limited to the theft of personal information but extends to any confidential information that hackers may seek to exploit for financial gain – trade secrets, insider information, customer prospects, bid packages, marketing data, business plans, etc. Companies need to understand this risk as well as how to prevent it and manage it if it occurs.
The Alleged Hacking and “Insider” Trading Scheme
The criminal complaints filed by the DOJ allege that nine individuals hacked into the computer systems of newswire services Marketwired, PR Newswire, and Business Wire, accessed nonpublic information, and allegedly used it to generate $30 million in illegal profits. The civil complaint, brought by the SEC against 32 individuals, alleges that the defendants generated more than $100 million in illegal profits by trading on the stolen nonpublic information in violation of federal antifraud laws and related SEC rules.
These newswire services were engaged by major publicly traded companies to publish corporate releases and, as a result, received confidential information hours and even days before the information was publicly released. By infiltrating the computer systems of these newswire services, the criminals were able to access – and act upon– the releases ahead of the market.
Few are surprised that the newswire services were targeted, but the extent of the scheme is drawing attention. The hacking allegedly lasted five years, during which the criminal attackers allegedly accessed over 150,000 press releases. In one instance, according to the SEC complaint, the hackers and traders were able to act within the 36-minute period between when the press release was provided to the newswire service and public disclosure of the release, executing trades that resulted in $511,000 in profit.
Compared to other cybercases, these complaints represent the relatively rare occurrence in which claims are brought against the perpetrators of the data breach and the individuals who seek to use and profit from the stolen information. As this article goes to press, no litigation is known to have been initiated against either the newswire services or the companies whose information is alleged to have been stolen in this attack. Yet, based on trends in litigation and regulatory enforcement efforts in matters involving data breaches of personal information, one can expect that claims against hacked entities or their clients may begin also to arise even where only nonpersonal information is involved.
With respect to private litigation, potential claims could face a number of hurdles. Any potential plaintiff would have to allege a cognizable injury as well as the breach of a duty owed by the defendant to the particular plaintiff. Many courts in breach cases have dismissed claims (under both tort and contract theories) based on the attenuated relationship between the plaintiff and defendant regarding an alleged duty to safeguard information for the benefit of the plaintiff. As we move beyond personal information, each new digital information context will raise questions regarding whether a duty to anticipate and protect against criminal cybertheft can be fairly imposed, in what circumstances, pursuant to what standards, and, if so, to whom is it owed.
With respect to regulators, the SEC has made clear its position regarding the importance of cybersecurity. In March 2014, Chair Mary Jo White explained that “the SEC have been focused on cybersecurity-related issues for some time” because “[c]yber threats  pose non-discriminating risks across our economy to all of our critical infrastructures, our financial markets, banks, intellectual property, and, as recent events have emphasized, the private data of the American consumer.” Other regulators (most notably the FTC) have also staked out a position of overlapping jurisdiction.
Best Practices for Companies
In a world where the electronic landscape and the sophistication of cyberhackers are both moving at high speed, here are nonetheless a few best practices that companies facing an actual or potential data security incident (i.e., all companies) can follow to mitigate potential risk:
- Think carefully about third-party vendors— Companies rely on numerous third parties for everything from corporate disclosures to marketing advice. Thoughtful contracting and training can go a long way to reducing the risk of loss or misuse.
- Supplement perimeter detection systems— According to the indictments in the newswire case, the criminal hackers were resident in the victims’ systems for years. The case illustrates the potential significance of taking a “defense-in-depth” approach to security and system monitoring.
- Be realistic about law enforcement and regulators— Notifying and cooperating with law enforcement can be important for many reasons, and the same is true for governmental regulators. But law enforcement usually focuses on getting the criminal attacker, while regulators (by comparison) often focus instead on examining any role the company had in having been criminally attacked. Keeping that difference in mind can be significant in dealing simultaneously with these respective governmental actors.
- Involve outside experts (both legal and forensic) at the earliest sign of a possible problem— Never guess or assume what may have taken place. Forensic experts can help your team assess whether an attack or breach has occurred, the actual scope of the breach, and how to contain it, while legal experts (both internal and outside counsel) can direct that forensic review and assess potential legal obligations involving notification, public statements, remediation, responding to law enforcement, dealing with regulators, preparing for litigation, and protecting the record.
- Carefully draft external statements— When an incident occurs, all outward facing statements should be carefully crafted to say only what is necessary, and to avoid committing to specifics until facts are definitely known. Before an incident occurs, promising any level of protection is risky because, if a hacker makes it into the system, the company’s statements will inevitably be second-guessed.
- Check your insurance— For the sake of planning, assume that erstwhile attackers will be able to access any system in your network. Consider, then, what kind of attack or what kind of data loss could cause the most exposure or disruption. Then make sure your insurance will actually cover those costs and that any related exposure to liability is indeed included. Evaluate your incident response preparedness through “tabletop exercises” to confirm that you have identified the potential risks and expenses.
- Avoid creating a bad record— Preservation of evidence after discovering a data breach often involves much more than just the usual email and paper files. In a network attack, the relevant evidence may include large groups of servers, firewall configuration records, network access logs, security management databases, vulnerability scan results, software hotfix schedules, or any number of other forensic or technical data sources that in most litigation rarely come into play. Identifying that relevant forensic and technical evidence and then maintaining it, while preserving applicable privileges and minimizing the interruption of critical ongoing company operations, can in many cases pose enormous challenges.
The panoply of costs that a cyberhack can impose make it clear that a well-developed program to secure all types of business information, not just personal information, can provide a competitive advantage. And when data thieves strike, regardless of the type of data they target, following a prompt and careful response protocol can pay significant legal dividends.
Mark Szpak is a partner in Ropes & Gray’s privacy & data security practice. He focuses on the wide range of challenges that arise after a computer network intrusion, including defending against multidistrict class actions in the U.S. and Canada, handling forensic investigations and responding to regulators.
Seth Harrington, also a partner in Ropes & Gray’s privacy & data security practice, represents clients in all aspects of the response to a privacy or data security incident, and he regularly advises clients on indemnification and insurance matters, including cyber risk insurance.
Lindsey Sullivan is an associate in Ropes & Gray’s business & securities litigation practice, where she focuses on assisting clients through forensic investigations and preservation efforts around privacy and data security breaches.