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 Hon. Gary S. Katzmann
Voice of the Judiciary
From October 27, 2004 until September 15, 2016, it was my great privilege to serve as an Associate Justice of the Massachusetts Appeals Court. On September 16, 2016, after evaluation by the American Bar Association, nomination by President Obama, a hearing before the Senate Judiciary Committee, and confirmation by the United States Senate, I began service as a Judge on the United States Court of International Trade (CIT). In the federal constellation, in contrast to other specialized courts, the CIT is an Article III court, with lifetime judicial appointment, equivalent to a United States District Court, and with full powers in law and equity. The CIT judges can also sit by designation, upon assignment by the Chief Justice of the United States, on other Article IIII courts, that is, the District Courts and Courts of Appeals throughout the nation.
With the intense focus in recent years on the global marketplace, it is perhaps not surprising that there has been heightened interest in the work of the CIT — in particular, adjudication under domestic trade laws involving protection of U.S. businesses from unfair competition arising from unfair pricing by foreign companies and unfair subsidies to foreign companies by their governments. Yet, it should be noted that from the founding of this nation, international trade has presented matters for adjudication in our federal courts. The first case tried in the first court organized under the Constitution of the United States involved an importation dispute. Eventually, such disputes were heard by the U.S. Customs Court. The Customs Court Act of 1980 replaced that court with the CIT. That Act broadened the power of the court, creating a comprehensive system for judicial review of civil actions arising out of import transactions and federal transactions affecting international trade. This system is rooted in the mandate of Article I, Sec. 8 of the Constitution that “all Duties, Imposes and Excises shall be uniform throughout the United States.” The geographic jurisdiction of the CIT, the only national Article III trial court, encompasses all of the United States. The CIT has nine sitting judges, including the chief judge, who is a statutory member of the Judicial Conference of the United States, as well as senior judges. The CIT sits in the James L. Watson Courthouse in New York City, although it is authorized to sit elsewhere, including in foreign nations. While the Second Circuit sits across the street in Foley Square, the appeals from the final decisions of CIT go not to that court but to the Federal Circuit in Washington, D.C., and ultimately can reach the Supreme Court.
Since the geographical jurisdiction of the court extends throughout the United States, the judges of the court are assigned, as needed, to preside at trials at any place in the United States in the appropriate United States Courthouse. When a judge of the court conducts a trial outside New York City, the clerk of the district court in that judicial district may act as clerk of the CIT for that case, including selecting and summoning the jury.
The CIT possesses limited subject matter jurisdiction. It may hear only cases involving particular international trade and customs law questions. For example, the CIT hears disputes involving determinations made by the U. S. International Trade Commission and the Department of Commerce’s International Trade Administration regarding anti-dumping and countervailing duties (imposed when a foreign producer sells a product in the United States at a price that is below that producer’s sales price in its home market), protests filed with U.S. Customs and Border Protection regarding classification of goods and imposition of duties, decisions regarding Trade Adjustment Assistance by the U. S. Department of Labor or U.S. Department of Agriculture for workers and sectors injured by increased imports, and customs broker licensing. An exception to the CIT’s jurisdiction arises under the 1994 North American Free Trade Agreement, whereby in cases involving antidumping and countervailing duties imposed on Canadian or Mexican merchandise, an interested party can request that the case be heard before a special ad hoc binational panel.
In addition to specified types of international trade cases, the CIT has residual, exclusive authority to decide any civil action against the United States and its agencies or officers that arises from any law pertaining to international trade. Because the CIT possesses all powers in law and equity of, or as conferred by statutes on, a U.S. District Court, the CIT may grant any relief appropriate to the particular case before it, including, but not limited to, declaratory and monetary judgments, writes of mandamus, and preliminary or permanent injunctions. The CIT also has exclusive subject matter jurisdiction of certain civil actions brought by the U.S. Government under the laws governing import transactions, as well as counterclaims, cross-claims and third party actions relating to cases pending in the Court.
A few examples:
Is a Dixon Ticonderoga pencil manufactured by an American company – such that Dixon Ticonderoga can challenge a Chinese manufacturer on the basis that it is dumping pencils on the American market – that is, at less than fair value to the detriment of American business? The Chinese company said “no,” alleging that Dixon Ticonderoga is a Chinese manufacturer with no standing to sue under American laws. See https://www.cit.uscourts.gov//SlipOpinions/Slip_op17/17-11.pdf
A surety company that issued bonds to multiple importers to duties imposed under the United States’ custom laws, on entries of the importers’ goods into the national commerce, challenges the U.S. Customs agency’s demands for payments on the bonds. The surety alleges that defects in the bond forms void the bonds. The U.S. Government, on behalf of Customs, opposes these contentions, and argues that the bonds are valid, and that sovereign immunity bars the surety’s defensive theory that its obligations are discharged because its surety rights have been impaired. See https://www.cit.uscourts.gov//SlipOpinions/Slip_op17/17-103.pdf
Does the automatic stay in bankruptcy under the bankruptcy code stay a civil penalty action brought by the United States against the bankrupt party for alleged fraudulent representations made in the course of importing goods into the commerce of the country?
How should food casings composed of both textile and plastic be classified under the Harmonized Tariff Schedule of the United States for determining what tariff rate should apply to their importation? Millions of dollars hang in the balance.
These are all questions that have come before more me during this past, inaugural year on the court. We see the full panoply of complex matters – including administrative agency action, statutory interpretation, standing issues, contracts, insurance, sufficiency of evidence, and the intricacies of foreign institutions and practices. The menu of the issues, although more specialized than the diverse range presented by the general jurisdiction of the Massachusetts Appeals Court, are nearly always challenging. The quality of the lawyering is generally excellent, with appearances by many of the large firms and boutique firms specializing in international trade; the U.S. Department of Justice appears in every case on behalf of the Department of Commerce. There is a civility among the bar that is impressive.
Although our cases can include jury trials (such as a battle of experts in a customs classification case where the essence of a good is in controversy), the great bulk of our work is judicial review of administrative action – that is, appeals from agency decisions. In this respect, the work is the work of an appellate judge, and not really different from adjudication on the Appeals Court. Of course, one important distinction is that while an Appeals Court judge must persuade two other panelists comprising the three judge panel, on the CIT, with the exception of cases raising constitutional or vital public policy issues, we each sit alone. On the Appeals Court, there is a great volume of cases, and typically, for those cases that are argued, not more than thirty minutes is allotted to a case. On the CIT, while the volume is less, the records in each case are huge and the multiple issues raised by each case are complex. In this respect, the cases are akin in size to antitrust or multidistrict litigation. I have adopted the practice of some of my colleagues of sending counsel, at least two weeks in advance of argument, the many questions I will ask at oral argument. It is not uncommon for the arguments in a case to last two or three hours, but because the parties have the benefit of the questions and the ensuing discussion is truly a search to address challenging legal questions or to elucidate the record, the time flies. I have found that sending the questions in advance removes the “gotcha” quality of argument and truly advances the dialogue between the court and counsel. In retrospect, I have thought of some cases during my tenure on the Appeals Court when such a practice would have been beneficial to the process of decision.
As on the Appeals Court, on the CIT, the ultimate judicial product in a case is the opinion. On the Appeals Court, my view was that the decision should be understandable not only to the experienced litigator but to those unschooled in the law. So too on the CIT, my goal is to produce opinions which strip away the legal jargon and demystify the complex international trade cases that affect in a very real way the every day quality of life in this country.
Reminiscing about his service on the First Circuit, at my investiture Justice Breyer noted the longstanding connection to the First Circuit established by the CIT judges who sat by designation. Other judges and practitioners have remembered the CIT judges who have sat in the District Court in Boston over the years. Beyond that, the CIT, as constituted by a single judge, has sat in Boston in the adjudication of cases under the court’s jurisdiction. The relationship between the court and the Massachusetts legal community has been historic. May it continue to thrive.
Judge Katzmann is a Judge on the United States Court of International Trade. He previously served as an Associate Justice of the Massachusetts Appeals Court. He is a former member of the BBJ Board of Editors.
Massachusetts Appeals Court Permits Claim for Breach of Fiduciary Duties Against Company Counsel by Minority LLC MembersPosted: February 2, 2018
by Michael Cohen and William Cushing
In Baker v. Wilmer Cutler Pickering Hale and Dorr LLP, 91 Mass. App. Ct. 835 (2017), decided this past July, the Massachusetts Appeals Court allowed the minority members of a Massachusetts limited liability company to sue the LLC’s outside counsel for breach of fiduciary duty relating to counsel’s involvement in an alleged “freeze-out” scheme that benefited the majority members. Although the Supreme Judicial Court had previously held that counsel to closely-held corporations may owe fiduciary duties to individual stockholders, Baker is the first case in which a Massachusetts appellate court has permitted a claim for breach of fiduciary duty to proceed against outside company counsel by minority owners. Corporate lawyers should be acutely aware of the Baker decision and its implications.
The factual allegations relating to the underlying dispute that are set out below come from the plaintiffs’ complaint, as related by the Appeals Court’s opinion.
Elof Eriksson and W. Robert Allison formed Applied Tissue Technologies LLC (“ATT”) as a Massachusetts LLC in early 2000, at which time they were issued seventy-five and twenty-five percent membership interests in the company, respectively. (Both Eriksson and Allison later assigned portions of their interests to family trusts, and a former key employee was granted a small interest in ATT.)
In 2003, ATT adopted an amended operating agreement which provided, among other things, that (a) the members have exclusive management control over ATT, which they exercise by votes in proportion to their percentage interest in the company, (b) the agreement cannot be amended unless both Eriksson and Allison agree in writing, (c) the proportion of net profits to which each member is entitled cannot be reduced or diluted without that member’s consent, (d) if any member chooses to provide additional funds to the company, those advances are treated as loans for which ATT will pay interest at the prime rate, and (e) all members owe each other a duty of utmost loyalty and good faith in the conduct of ATT’s affairs.
By early 2012, ATT was facing financial difficulties, and Eriksson and Allison could not agree on how to address ATT’s challenges. Eriksson was willing to contribute capital in exchange for additional equity in the company, while Allison wanted outside investment and a new management team.
Around this time, company management urged Eriksson to gain “control” of the company. Eriksson reached out to his daughter, an associate at a Boston law firm, who in turn connected her father with a partner at the firm who had experience working with emerging companies. In February 2012, ATT’s chief executive officer signed an agreement to engage the law firm as company counsel. The agreement expressly provided that the law firm would represent ATT, and would not represent any individual members of ATT. Shortly thereafter, the law partner relocated his practice to another law firm, which provided ATT with a substantially similar engagement letter to represent only the company.
At the request of Eriksson and management, ATT’s outside lawyers initially drafted a plan to buy out Allison’s minority membership interests, along with an email that Eriksson would send making the buyout offer to Allison. Allison rejected the offer and responded that he wished to work to maximize ATT’s value for a more favorable exit down the road. He also reminded Eriksson of the minority protections in the ATT operating agreement and suggested that all members meet to address the issues facing the company. Soon after receiving Allison’s response, Eriksson and ATT’s outside lawyers prepared an alternative plan to forcibly remove the minority member protections by using General Laws chapter 156C, section 60, which authorizes a Massachusetts LLC to merge with another business entity (in this case, a Delaware LLC specifically created to facilitate the “freeze-out”) upon the vote of a simple majority of the members unless the company’s operating agreement provides otherwise. Because ATT’s operating agreement was silent about a member’s rights in connection with a merger, ATT could be merged into the new entity by a simple majority vote, thereby depriving the minority members of the protections for which they had previously bargained. ATT’s lawyers advised management that the merger would eliminate Allison’s “ability to interfere with company operations” and that, over time, the company could reduce Allison’s interest to “a smaller and smaller ownership position.”
Having accomplished everything necessary to effectuate the plan, Eriksson and company management met with Allison and informed him of the merger. They advised Allison to contact the company’s lawyers if he wanted copies of the new operating agreement and other company documents for the surviving entity. Over the ensuing months, the new Delaware LLC issued additional preferred interests to Eriksson and management, substantially reducing the interests of Allison and the other minority members in the surviving company.
In May 2015, Allison and the company’s other minority members sued, among others, the law firms that had acted as outside counsel to the company, along with the individual attorneys who had advised Eriksson and company management, alleging, among other claims, breach of fiduciary duty. The Superior Court dismissed the fiduciary duty claim and Allison and other minority members appealed.
Massachusetts law has long provided enhanced protections to minority shareholders in closely held corporations. In Donahue v. Rodd Electrotype Co. of New England, Inc., 367 Mass. 578, 593 (1975), the SJC held that shareholders in a closely held company owe each other a fiduciary duty of utmost good faith and loyalty, akin to the duties owed among partners in a partnership. And, in Schaeffer v. Cohen, Rosenthal, Price, Mirkin, Jennings & Berg, P.C., 405 Mass. 506, 513 (1989), the SJC observed that “there is logic in the proposition that, even though counsel for a closely held corporation does not by virtue of that relationship alone have an attorney-client relationship with the individual shareholders, counsel nevertheless owes each shareholder a fiduciary duty,” though the SJC’s decision in Schaeffer did not require it to determine that issue.
In Baker, the Appeals Court invoked a decision of the Michigan Court of Appeals holding that the lack of an attorney-client relationship between a fifty percent shareholder in a closely held professional corporation and counsel for the corporation did not necessarily preclude a fiduciary relationship between the shareholder and corporate counsel. Baker, 91 Mass. App. Ct. at 843-44 (citing Fassihi v. Sommers, Schwartz, Silver, Schwartz & Tyler, P.C., 107 Mich. App. 509, 309 N.W.2d 645 (1981)). Rather, a fiduciary relationship may arise when “one reposes faith, confidence, and trust in another’s judgment and advice,” and the existence of that relationship is largely a question of fact. Id. (quoting Fassihi, 107 Mich. App. at 514-15).
The Appeals Court observed that the defendants in Baker undertook their representation of ATT “with full knowledge” of the protections that the operating agreement afforded the minority members, that they “knew, or should have reasonably foreseen” that company counsel was “constrained by the operating agreement, and the consensual decision-making it imposed on important matters,” and that counsel could not act “in concert with the majority members, for the very purpose of eliminating those protections.” The court also noted counsel’s “purposeful steps” to conceal their activities from the minority members, even though the minority members “should have been able to repose trust and confidence that any counsel hired by the company would have communicated and consulted with them prior to undoing [the minority] protections.” Noting that the existence of a fiduciary relationship “is largely a question of fact,” the Appeals Court could not conclude that the defendant attorneys owed no fiduciary duty to the minority LLC members in this case based on the facts alleged in the complaint. Accordingly, the court reversed the dismissal of the complaint and remanded the case to the Superior Court so that the lawsuit could proceed. The defendants did not file a petition for further appellate review in the SJC.
The Baker decision yields at least two crucial practice points for attorneys working with LLCs and other closely held companies:
- Respect the Role of Company Counsel, and Remain Faithful to Your Client
An attorney retained by a corporation represents the corporate entity, not its shareholders, members, officers, employees, directors, or other constituents. Cf. Mass. R. Prof. Conduct 1.13(a) (attorney represents the organization), 1.13(f) (attorney shall explain identity of client to organization’s constituent with whom he is dealing if organization’s interests are adverse to that person). The corporate attorney may also represent a corporate constituent, but counsel must address potential conflicts of interest in accordance with the dual-representation rules. Mass. R. Prof. Conduct 1.13(g) (referring to Mass. R. Prof. Conduct 1.7). Attorneys engaged as company counsel owe allegiance to the entity, and they should be mindful of potential conflicts of interest involving those persons giving instructions and of the ways in which the interests of the entity and (all of) its owners may differ from the interests of those directing company counsel. The defendant lawyers in Baker would have been wise to suggest that Erikkson and management retain separate counsel to address personal interests.
- Respect Negotiated Contractual Rights
The members of ATT had agreed upon a set of rights intended to ensure that all members moved together, and they provided in the operating agreement that these rights could be varied only by express agreement of the members. The Appeals Court took a dim view of the use of a merger transaction, orchestrated by company counsel, to involuntarily deprive the minority LLC members of those rights, notwithstanding that the operating agreement did not expressly prohibit a merger or impose enhanced approval requirements in connection with a merger. Company counsel should ensure that advantageous contractual rights are changed only through a process that respects the “faith, confidence and trust” that members of an LLC may repose in company counsel.
Michael J. Cohen is a Partner in Brown Rudnick LLP’s U.S. Corporate and Capital Markets practice group, and is based in the firm’s Boston office. Michael represents early stage and mid-market companies in connection with mergers and acquisitions, joint ventures and strategic alliances, financing transactions and general corporate and commercial matters at all stages of the corporate life cycle. Michael also advises venture capital and private equity funds and would-be portfolio companies in connection with deal terms and transaction structuring.
William T. Cushing is an Associate in Brown Rudnick LLP’s U.S. Corporate and Capital Markets practice group, and is based in the firm’s Boston office. While at Boston University School of Law, Will was an Executive Editor for the Review of Banking & Financial Law. In 2014, Will worked as a legal Intern at the Massachusetts Attorney General’s Office in the Gaming Division.
by Carol A. Starkey
“No more wasted money,” is how President Trump has characterized his proposal to cut $54 billion from the federal budget. To get there, the administration has placed the Legal Service Corporation (LSC) and its approximate $366 million in federal appropriations on the chopping block. The President’s budget – released in March – eliminates this program entirely, a proposal that attempts to carve out the backbone of civil legal aid to the poor in this country. The consequences of such a proposal would, at best, render those most vulnerable amongst us unable to properly access our courts for daily needs such as housing, health care or safety, and at worst, keep them from exercising their basic rights to survive in this country.
Last month, I once again had the privilege as your Bar Leader to travel to Washington, DC to meet with members of the Massachusetts delegation and advocate for the reinstatement of funds as part of a larger lobbying effort with the American Bar Association. Shortly after those visits, a deal was struck in Congress to fund LSC through October 1st. This is good news in the short term, but when it comes to access to justice, short term solutions are not nearly enough.
Quite simply, LSC provides necessary legal aid to low income individuals and families in Massachusetts and throughout this country at large. The LSC is an independent nonprofit established by Congress in 1974 to provide financial support for civil legal aid to low-income Americans. LSC is a grant-making organization, distributing more than 93% of its federal appropriation to eligible nonprofits delivering civil legal aid. It is the largest single funder of civil legal aid in the country, including $5 million annually to Massachusetts-based legal services organizations.
The need for this essential service is undeniable. In the United States, 80 percent of qualified applicants – those who meet the income eligibility requirements and face serious legal problems – are turned away simply because there isn’t adequate funding to take them on as clients. This figure is unacceptably high. These are people, amongst others, who are our neighbors being wrongfully evicted from homes, women and children in our communities already made vulnerable by poverty trying to safely escape abusive partners, parents trying to advocate for a beloved child with special needs, and veterans, many of whom come home struggling with serious mental and physical health issues, trying to secure the benefits that are rightfully theirs, so as not to end up homeless.
This urgent need alone is enough to justify keeping this line item, which represents about one hundredth of one percent of the entire federal budget. But what if Congress and the President also knew that preserving LSC would actually save taxpayer money and support the economy? That’s just what three independent economists conducting separate evaluations have found.
In 2014, the Boston Bar Association (BBA) released Investing in Justice, a report which showed that taking a preventive approach to legal issues would help families, save government funds and ensure fairness in our justice system. Simply put, investing in civil legal aid programs pays dividends by avoiding back-end costs.
The BBA report – representing the work and opinions of legislators, judges, business leaders, academics, and legal services representatives – is the result of 18 months of intensive research into the problems and unseen costs that arise when people do not have access to adequate legal assistance.
For example, in Massachusetts, when studying the impact on state expenditures of representation by a civil legal aid attorney in eviction and foreclosure cases, economists at The Analysis Group concluded that for every dollar spent on civil legal aid in eviction and foreclosure cases, the state stands to save $2.69 on the costs of other state services, such as emergency shelter, health care, foster care, and law enforcement.
In addition, the firm Alvarez & Marsal analyzed the costs of domestic violence and what savings could occur if additional civil legal aid representation was available in such cases. They determined that every $1 spent on legal aid yields $2 in medical and mental health care savings, including $1 to the state and $1 to the federal government.
The Boston Bar Association has long argued that legal assistance is an essential service for those who are struggling to deal with the issues that go to the heart of their families and livelihoods, like housing and personal safety. But we can also make the case that it is the fiscally prudent thing to do.
Others can, too. We need our leaders – both in Washington and here at home – to understand that advocating for every American to have access to justice is not only a just cause, but a sound investment that is worth our resources.
As lawyers, you have a valuable perspective to bring to this issue, one that lawmakers will find substantive and relevant. To that end, I’m pleased to share the Boston Bar Association’s podcast: How to Talk to Your Legislators About Civil Legal Aid, featuring an interview with Equal Justice Coalition Chair Louis Tompros of WilmerHale.
I hope you enjoy it, and then reach out to both your state representative and your senator in support of increased funding for legal aid. Your voice is needed to tell legislators and others how much we care about legal aid funding, backed up by our findings that investing in civil legal aid actually saves money while improving people’s lives.
Carol A. Starkey is the president of the Boston Bar Association. She is a partner at Conn, Kavanaugh, Rosenthal, Peisch & Ford.
by Hon. Richard A. Simons
Voice of the Judiciary
As trial court judges, we sit in a unique position to place the litigants who appear before us on a path toward changing behaviors that have previously led to poor decision making. For example, in the context of the Probate and Family Court, judges routinely issue orders to (a) coerce a recalcitrant parent to honor his/her financial obligations toward his/her children; (b) create incentives for a parent suffering from substance abuse disorder to obtain treatment by predicating access to children upon engaging in treatment; and (c) address issues of violence in the home by ordering enrollment in intimate partner violence prevention programs. At times, these interventions have been successful in changing the trajectory of an entire family’s life.
A unique feature in the Probate and Family Court is that many of our cases go on for years. While we may be successful in resolving the issues in a divorce or unmarried custody case, we often times see the parties again and again on subsequent complaints for modification or complaints for civil contempt. Not only do these frequent case filings crowd our busy dockets and drain valuable court resources, but they also foment inter-parental conflict which adversely impacts their children’s emotional adjustment and development. In my time on the bench, I have even begun to hear the disputes of grown children born of parents over whose custody cases I have presided. The cycle of poor decision-making and ineffective conflict resolution continues unabated.
In the fall of 2013, my Chief Probation Officer, Amy Koenig, and I attended a Judicial Institute training program for courts considering starting a Changing Lives Through Literature (“CLTL”) program in their court. We arrived curious yet somewhat skeptical. A few hours later however, we left the program energized and inspired. We heard from Judges Robert Kane, Rosalind Miller and Kathe Tuttman, who passionately shared their observations of how the study of literature was used as a tool by probationers to change their behavior. College professors and probation officers joined the chorus of describing the success of this alternate sentencing program.
On the car ride back to the Berkshires, Chief Koenig and I began to brainstorm how we could make this program work in the Probate and Family Court. We faced unique challenges in our court that those in other trial court departments did not have to confront. We do not have litigants “on probation” in the Probate and Family Court. How would we mandate attendance? Who should attend the program? Mothers? Fathers? Should the parties attend together? If they were to attend the program together, what child care coverage should be made available for their children? What time of day could we have such a program when time is at such a premium for young working families?
These challenges provided opportunities to explore and create a meaningful program for young families who find themselves in the midst of a child custody dispute in the Probate and Family Court. Holding onto the essential ingredients of the successful program of CLTL, we developed a twelve week intervention program called, Enhancing Families Through Literature (“EFTL”). The court issues an Order requiring the parties to attend the program along with their children. Monetary sanctions (or community service orders for indigent litigants) are imposed for any non-compliance with the court’s Order. Chief Koenig and I participate with the families in each of the sessions.
The program takes place at our local library once per week for twelve weeks, from 5:00 p.m. to 7:00 p.m. The evening begins with parents enjoying a catered meal together with their children. At 5:30, the parents retire to one area of the library, and the children go to a separate area. For the first eight weeks, the parents participate in a traditional “CLTL” formatted program. Our facilitator, Professor Matthew Müller, from Berkshire Community College, leads a discussion on assigned readings, including works by Raymond Carver, William Faulkner and Franz Kafka. While the parents are studying literature, the children are participating in a program led by four certified Head Start Teachers called “Every Child Ready To Read Program” developed by the Association for Library Service to Children and the Public Library Association.
The final four weeks of the program consist of an interactive program among parents and children led by the early childhood educators. They teach about the importance of the word in parenting. Reading to children is modeled for parents. Parents and children work on projects together. At the conclusion of each of the twelve sessions, each child is given a book, so that by the end of the program the child’s library has increased by 12 books.
The program culminates in a graduation ceremony at the courthouse. In addition to gifts of books awarded to all participants and children, Berkshire Community College issues a transcript to each parent documenting an earned college credit. Participants speak and share what the program meant to them and their family. One of the speakers at last years’ graduation proudly shared the following:
My time in the literature segment with Professor Müller gave me a chance to experience literature that I’ve never read before. His approach, great personality brought the words of those stories to life. Admittedly I couldn’t understand why our selected readings were so dark and almost never had the traditional “happy ending” or resolution. Then it dawned on me recently; Perspective. Perspective is everything, not only in literature but it applies to real life in many ways by giving us a dose of allegorical reality. Never judge a book by its cover, and never judge a person too quickly or you might miss out on someone that could change your life forever.
The study of literature within this magic framework of classes with a judge, probation officer and college professor challenges participants to see the world through different eyes. During class, participants hear differing views and interpretations of the same stories from classmates. Imagining how each character in a story feels often leads to eye-opening discussions. The discussions lead to listening. Listening leads to tolerance. Tolerance leads to acceptance. Acceptance leads to communication. Communication leads to better conflict resolution.
People share their thoughts, without judgment, and in doing so provide themselves and their co-parent with important insights and understanding. One year, we were a discussing the short story, “Bodies” by Phil Klay, an American writer and Iraq veteran. One of the participants was a man who was deployed several times to the Middle East and rarely displayed any emotions other than anger. He began to open up and shared how his feelings toward deployments changed after the birth of his son. What I did not realize at the time was that this statement broke the ice between him and his child’s mother. She confided in the instructor that she never knew he prioritized his son in that fashion. From that point, on they began to talk and compare notes about their son.
The benefits of this program continue to unfold. Parents begin to see themselves as a team raising their child rather than adversaries in a courtroom. In addition, the wonder of reading to children is spread to families that might not have experienced this joy before. Parents experience how snuggling and reading with a child opens up communication between parent and child as well. Most important, the overwhelming majority of these families resolve their pending cases by agreement as they begin the journey of resolving future conflicts through communication and negotiation.
As with other worthwhile programs offered in the Trial Court, Enhancing Families Through Literature empowers litigants to make lasting changes in their behavior, leading to better decisions for them and for their children.
Judge Simons is the First Justice of the Berkshire Division of the Probate and Family Court. In 2016, he and Chief Koenig were recognized by AFCC for innovation in a court-connected program.
I have always seen the practice of law as one of the most significant means of participating in our unique American democracy. As lawyers, we are accustomed, by training and practice, to embracing an adversarial role while still advancing a principled position.
Still, many of us in the bar could not help but be deeply troubled by the implications of some of the rhetoric in this year’s election campaign upon our long-held principles of American jurisprudence, including respect for the rule of law, due process, equal rights, and access to justice. Like so many of you, I have been angered and saddened to hear comments, and learn of events, that disrespect individuals who identify as minorities, or come from diverse backgrounds, beliefs and cultures. Such conduct erodes our Constitutional democracy, resulting in divisiveness, fear, and anxiety, all of which are felt acutely not only by adults, but perhaps most disturbingly, by our children as well.
In this context, I wanted to reach out to my colleagues at the bar to let you know that I believe the work of the Boston Bar Association, and its mission, have rarely been more relevant.
The BBA has a strong record of rising above division, finding common ground, and inspiring diverse groups to overcome disagreement to advance access to justice and excellence in the practice of law. We are – and will continue to be – a solutions-oriented convener that welcomes all stakeholders to exchange ideas and build relationships. But we also bear a responsibility, to one another and in the service of our communities, to be ever watchful and vigilant in ensuring that individual and due process rights remain valued and protected as bedrock principles in the implementation of our laws.
I write to our members now, to assure you that the BBA stands ready, willing and able to answer any necessary call to action resulting from this climate of uncertainty and ever changing events.
Over the past week, we have heard many expressions of concern, – both from our members and from local organizations with whom we partner. But we have also experienced a true sense of inspiration by the commendable desire of those same members and organizations to become actively engaged. We recognize that as lawyers, we are at our best when we are dealing with well-defined issues and actual cases and controversies. I want to state — unequivocally — that we remain committed to our work on the following fronts:
- The BBA is committed to protection of due process rights for all, as enumerated in the United States Constitution, with its Bill of Rights, and our Massachusetts Constitution, with its Declaration of Rights. Yet it is not enough for us to remain watchful. We will be empowering others to do the same through “Know Your Rights” programs in our communities and schools.
- We must remain cognizant of deportation as a potential collateral consequence of involvement with the justice system. Just this week, the SJC heard arguments on a case regarding the so-called Annie Dookhan defendants, in which the BBA filed an amicus brief asking the Court to vacate all remaining convictions without prejudice. The risk that any of these individuals might face deportation proceedings on the basis of a conviction supported by tainted drug-lab evidence adds greatly to our argument for a “global remedy.”
Harassment, discrimination, and hate crimes:
- I share the concern of many of our members over the recent spike in acts of violence and intimidation against members of minority populations. Such actions must never be tolerated. We will continue to work with our partners at the six local affinity bar associations – and seek ways to engage with other, similar organizations – to defend individuals and groups that are under threat, and to educate people about their rights.
Access to justice:
- Our advocacy on behalf of access to justice for all residents will not waver. Join me on January 26th at Walk to the Hill as we once again make the case to the Governor and the Legislature, for a substantial increase in funding for civil legal aid, building on the BBA’s Investing in Justice task-force report. Providing all with access to justice is more important than ever.
- In addition, we are working with Attorney General Maura Healey and other legal services organizations to identify emerging legal needs in the community, particularly as they pertain to the increase in Hate Crimes and Immigration issues.
The BBA will continue to do everything we can to support the core values of meaningful access to justice and of diversity and inclusion that are at the heart of who we are as an organization of lawyers. Now is the time for all of us at the BBA to show Boston, the country, and the world that we can continue to advance respectful, innovative, and common-ground solutions to big challenges. But that must start at home with listening to one another and getting involved. I am proud and grateful to work with all of you, and I have no doubt that you will continue the great tradition in this Commonwealth during times of change or uncertainty, by rolling up your sleeves and asking the simple question, “How can I help?”
Carol A. Starkey is the president of the Boston Bar Association. She is a partner at Conn, Kavanaugh, Rosenthal, Peisch & Ford.
The Supreme Judicial Court issued a number of influential decisions in its most recent term. The Boston Bar Journal Board of Editors thought it would be fitting to release a special edition of the Journal dedicated to summarizing several of these cases. In addition to the articles that appear in this special edition, we encourage readers to look at our past articles featuring decisions from the 2015-2016 term: Kace vs. Liang and Maling v. Finnegan, Henderson, Farabow, Garrett & Dunner, LLP.
– The Boston Bar Journal Board of Editors