by Joseph N. Schneiderman
On August 23, 2016, the Supreme Judicial Court held that a student who was unlawfully suspended under the felony suspension statute, G.L. c.71, §37H1/2, did not need to seek review of her suspension to pursue the statutory tort of unlawful exclusion from public school, G.L. c.76, §16. Goodwin v. Lee Public Schools, 475 Mass. 280 (2016). This victory for students’ rights offers an opportunity for the Legislature to take action to further stem the flow of children in the school to prison pipeline.
The Case and Holding
Katelynn Goodwin was a senior at Lee Middle and High School in the Berkshires. In late December 2011, the principal suspended Ms. Goodwin under the felony suspension statute because the Lee Police suspected her involvement in a weapons theft. There was one obvious problem, however: a felony complaint never issued against Ms. Goodwin. Indeed, the superintendent admitted that Ms. Goodwin “perhaps not been charged yet.” A misdemeanor complaint ultimately issued against her in April 2012 for receiving stolen property. The school offered to lift the suspension but refused to allow Ms. Goodwin to graduate with her class. Ms. Goodwin graduated alone through an online program in 2013.
In December 2014, Ms. Goodwin sued for damages. A judge of the Superior Court dismissed Ms. Goodwin’s complaint on the grounds that she failed to appeal her suspension within five days pursuant to the felony suspension statute’s administrative process. Ms. Goodwin timely appealed and the SJC allowed her application for direct appellate review.
A unanimous Court reinstated Ms. Goodwin’s complaint and agreed that her right to tort recovery for unlawful exclusion constitutes a separate and distinct remedy from seeking reinstatement to school. The Court recalled that the statutory tort of unlawful exclusion has existed since 1845, although there have been relatively few recent cases analyzing the claims. The felony suspension statute, enacted in 1994, authorizes a principal to suspend when: (1) a student is charged with or convicted of a felony; and (2) the student’s continued presence would have a substantial detrimental effect on the general welfare of the school. A student could appeal the suspension to the superintendent-but the school committee does not review suspensions under the felony suspension statute. 475 Mass. at 284-286, compare G.L. c. 76, §17.
The Court reasoned that the felony suspension statute was only “triggered ‘[u]pon the issuance of a criminal complaint charging a student with a felony.’” Goodwin, 475 Mass. at 287 (quoting §37H1/2). Because the principal suspended Ms. Goodwin without any felony complaint issuing against her, the suspension violated Section 37H1/2 and Ms. Goodwin did not need to pursue any administrative review before seeking damages. The Court also rejected the notion that the felony suspension statute precluded any recovery in tort. Instead, the statute simply provides an “additional, immediate, review of a decision to exclude them from school, with the goal of readmission.” Id. at 288. Ms. Goodwin thus deserved her day in court.
Goodwin marks an overdue moment of accountability for schools in the crisis of juvenile delinquency based school suspensions. Some felony charges decidedly warrant suspension to preserve school safety. See Doe v. Superintendent of Schools of Stoughton, 437 Mass. 1 (2002) (principal properly suspended a high school freshman charged with the rape of a primary school student on the same campus). There are many “felony” crimes, however, that should never warrant a suspension, absent aggravating circumstances.
Specifically, a felony constitutes “any offense punishable by imprisonment in the State Prison,” G.L. c. 274, §1. Therefore, a student who has a fake driver’s license faces suspension if the principal believes that having a fake license poses substantial detrimental effect to the general welfare of the school. G.L. c. 90, §24B (punishable by five years in state prison.) The sheer breadth of offenses that may trigger suspension has grave potential to thwart a child’s education and the command that allegedly delinquent children “shall be treated not as criminals but as children needing aid, encouragement of guidance.” G.L. c. 119, §53.
Between 1997 and 2011, principals suspended an average of more than 100 students per year under the felony suspension statute. Melanie Riccobene Jarboe, “Expelled to Nowhere”: School Exclusion Laws in Massachusetts, 31 B.C. Third World L.J. 343, 376 (2011). Courts tended not to review suspensions critically, despite “ample indication that principals [suspended] indiscriminately and [did not] carefully consider each case”, as the Commissioner of Education urged. Id. at 352, 360. Those suspensions inevitably flushed students into the school to prison pipeline. Id. at 349–51, 357, 365–69.
The review process is messy at best. A student or parent must request review in writing within five days.. Goodwin, 475 Mass. at 282, n.4. There is also no guidepost to judicial review, and certiorari becomes the only (default) option, which does not account for the best rehabilitative interests of a child. Doe, 437 Mass. at 5. An unlawful suspension may deprive a student of their future. See Commonwealth v. Mogelinski, 466 Mass. 627, 647-648 (2013), S.C., 473 Mass. 164 (2015). (“futurelessness” may overcome a child who endures a prolonged delinquency case.)
Finally, there is no freestanding right to counsel in suspension proceedings. And, unfortunately, “many parents often do not have the mindset, time, or means to pursue redress against the educational system…and the parents who do have the resources are often ostracized, frustrated, and unsuccessful.” Expelled to Nowhere, 31 B.C. Third World L.J. at 352.
Where Do We Go After Goodwin?
The Legislature has three concrete ways to build on Goodwin to spur continued accountability. First, the Legislature should limit suspensions only to when a student stands indicted as a youthful offender for a felony offense that involves infliction or risk of serious bodily harm. G.L. c.119, §54.
Second, as the Court implicitly suggested, the Legislature should create flexibility in the administrative review process and expressly establish procedures for judicial review to the Juvenile Court–which has a statutory mandate to further the best rehabilitative interests of children. G.L. c.119, §§1, 53.
Finally, the Legislature should create an independent right to appointed counsel in suspension hearings-with the right to commence the process for tort recovery for unlawful exclusion pursuant to the Massachusetts Tort Claims Act. These changes would ensure due process for students and further the goal of ending unlawful exclusions from education.
Joe Schneiderman has an appellate practice in Massachusetts and Connecticut with a particular affinity for and focus on juvenile delinquency and municipal law. Joe gratefully dedicates this article to: his mother Ro (who passed away three weeks after he filed Ms. Goodwin’s brief), as well as his dear friend, mentor, and teacher, Robert Kyff.
Distinguishing Employees’ “General Skill or Knowledge” From Protectable Trade Secrets Under Massachusetts LawPosted: August 15, 2018
by Gregory S. Bombard and Adam M. Santeusanio
Trade secret claims often arise when a highly skilled employee leaves to work for a competitor. Under Massachusetts trade secret law, this fact pattern creates a tension between the employer’s interest in protecting its trade secrets and the employee’s competing interest in using his or her own general experience and abilities to foster a successful career. Though Massachusetts courts have long recognized this tension, the line between what constitutes a protectable trade secret as compared to an employee’s “general skill or knowledge” is not explicitly defined in Massachusetts case law. The inquiry is highly fact-based and does not easily lend itself to bright lines. This article examines the leading cases addressing the distinction between trade secrets and general skill or knowledge, and identifies the four factors courts most commonly use to draw the line.
I. The Legal Framework
Massachusetts law protects trade secret information, which is defined by statute as “a formula, pattern, compilation, program, device, method, technique, process, business strategy, customer list, invention, or scientific, technical, financial or customer data that (i) at the time of the alleged misappropriation, provided economic advantage, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, others who might obtain economic advantage from its acquisition, disclosure or use; and (ii) at the time of the alleged misappropriation was the subject of efforts that were reasonable under the circumstances . . . to protect against it being acquired, disclosed or used.”[i]
Although a company must safeguard the secrecy of purported trade secrets in order to seek legal protection for them, the company must, of course, disclose such secrets to at least some of its employees for use in the company’s business. That disclosure creates a legally-implied duty by the employee to maintain the confidentiality of the trade secrets. In addition, employees are often subject to contractual nondisclosure covenants, which survive the termination of employment.
However, Massachusetts courts recognize an important limitation on trade secret protection: a departing employee may continue to use his “general skill or knowledge acquired during the course of the employment” following his departure.[iii] This doctrine, which has been the law in Massachusetts since at least 1912,[iv] provides that an employer may not claim trade secret protection over an employee’s general skill or knowledge regardless of whether the employee developed it prior to or during his employment. By limiting the types of information that an employer can protect as trade secrets, the general skill or knowledge rule “effectuates the public interest in labor mobility, promotes the employee’s freedom to practice a profession, and [promotes] freedom of competition.”[v] The rule applies both when a former employer sues a former employee for misappropriation of the former employer’s trade secrets,[vi] and when an employer seeks to enforce post-employment restrictive covenants, like noncompetition agreements.[vii]
The facts of Intertek Testing Servs. NA, Inc. v. Curtis-Strauss LLC provides an example of how the doctrine plays out in practice. Intertek was a product inspection, testing and certification company that sued several of its former salespeople for having misappropriated “secret” information about “the quality of the relationship that certain customers had with Intertek,” including whether those relationships were “good,” “bad,” or “in-between.” Judge Gants, then sitting in the Business Litigation Session, granted summary judgment in favor of the salespeople, ruling that the strength of an employer’s relationship with a particular customer “certainly falls into the category of general knowledge acquired during the course of employment.” Speaking to the rule’s policy goal of promoting labor mobility, Judge Gants observed that “if this general information were deemed secret or confidential, then no salesman could ever work for a competitor, because every salesman inevitably knows this information and could not help but use it in some fashion.”[viii]
II. Distinguishing Trade Secrets from General Skill or Knowledge
Although the general skill or knowledge doctrine is widely cited in Massachusetts case law, no court has articulated a test for distinguishing between protectable trade secrets and nonprotectable general skill or knowledge. In the cases applying the doctrine, however, the courts most commonly consider the following four factors: (1) whether an employee had significant experience or expertise prior to starting their employment; (2) whether an employee assisted in the development of the alleged trade secret; (3) whether the alleged trade secrets were actually put to use or were merely inchoate “concepts” or “goals”; and (4) whether the alleged misappropriation involved the removal of documents or merely the contents of the employee’s memory. None of the four factors standing alone is dispositive.
A. The Employee’s Prior Experience or Expertise
Massachusetts courts are more likely to find that an alleged secret falls within an employee’s general skill and knowledge if the employee had significant experience, expertise, or education in the field before starting his employment. This factor is based on the policy that “the loss to the individual and the economic loss to society are both greatest when a highly trained and specialized person is prevented from employing his special abilities.”[ix]
For example, in Dynamics Research Corp v. Analytic Sciences Corp., an employer claimed its former employee misappropriated a system for managing data and providing feedback during the development of weapons systems for government contracts. Prior to his employment, the employee had been decorated by the Air Force for his management ability and had worked as a manager of an MIT laboratory. In fact, the employer hired him “in part because he [already] understood its management system concept.” The Appeals Court ruled that the alleged secret fell within the employee’s general skill and knowledge, observing he had come to the job “with knowledge and skill in the plaintiff’s area of operation” and “much of the [alleged trade secret] was known to the defendant prior to his employment.”[x] Conversely, in Junker v. Plummer, the employer’s claimed secret was a novel machine for “combining shoe cloth,” and the former employees “had never seen a combining machine” before their employment.[xi] There, the SJC ruled that the machine’s functionality was not part of the employees’ general skill or knowledge and was instead a protectable trade secret of their former employer.
B. The Employee’s Personal Participation in Developing the Secret
Massachusetts courts are more likely to find that an alleged secret falls within an employee’s general skill and knowledge if the employee directly participated in developing the alleged secret. The rationale behind this factor is that if the employee personally contributed towards the alleged secret’s creation or development, then the alleged secret may consist, at least in part, of the skill, knowledge, and experience that the employee brought to bear on the project.
Thus, in Chomerics, Inc. v. Ehrreich, the employee had been “personally actively involved in all of the inventions and discoveries made” by the employer in developing the alleged secret.[xii] Indeed, the employer’s “effort in this field was pioneered largely through [the defendant employee’s] inventions and research,” and the research into conductive plastics was “peculiarly his . . . almost private domain.” The Appeals Court ruled that the information fell within the employee’s general skill or knowledge as a scientist, despite the fact that the employer took reasonable measures to safeguard the information as a trade secret, including requiring the defendant to keep his laboratory notebooks locked up. Similarly, in New Method Die & Cut-Out Co. v. Milton Bradley Co., the employee “took part to a substantial extent in developing the [allegedly secret] process” for manufacturing cardboard toys, bringing to bear “his faculties, skill and experience.”[xiii] The SJC held that the process for manufacturing cardboard toys did not constitute a protectable trade secret, but rather was “the product of [the employee’s] knowledge,” which he developed in the course of his work for his former employer.
C. The Employer’s Unfinished Concepts and Goals
Massachusetts courts are more likely to find that information is within an employee’s general skill or knowledge where the alleged secret is merely an unfinished “concept” or “goal,” as opposed to information that has been reduced to practice in the form of a functioning devise, machine, or system. For example, in Chomerics, Inc. v. Ehrreich, the employer sought to develop electrically conductive plastics using “metal particles embedded in a plastic matrix.”[xiv] During his employment, the employee worked on a project to develop an electrically conductive gasket that contained less than 10 percent silver particles. The employee eventually quit and began working for a competitor, which soon thereafter patented an electrically conductive gasket that used less than 10 percent silver. The Appeals Court ruled that the use of a certain amount of silver represented only a “concept,” and that “when [the defendant] left [the plaintiff’s employ] he took with him nothing but possibilities and goals which had hitherto proved impossible to bring to fruition.” The Appeals Court ruled those “possibilities and goals” were part of the employee’s general skill or knowledge, not a protectable trade secret of the former employer.
By comparison, in Junker, the machine for combining shoe cloth was fully operational, in use in the employer’s manufacturing facility in “actual and substantial production.”[xv] Several of the plaintiff’s employees quit, started working for a competitor, and duplicated the machine, up to which point “there was none other faintly resembling it in use anywhere.” The SJC ruled that the machine was a protectable trade secret belonging to the employer.
D. Employees’ Memory and Nondocumentary Information
Massachusetts courts are more likely to find that an alleged trade secret falls within an employee’s general skill and knowledge if the employee allegedly used information from his memory, without taking away documents or electronically stored information. The SJC has, in several cases, “considered it significant that the former employee did or did not take actual lists or papers belonging to his former employer.”[xvi] For example, in American Window Cleaning Co. of Springfield v. Cohen, the plaintiff alleged that its former employees had misappropriated secret information regarding its customers. The SJC ruled the former employees had not breached their duty of confidentiality to their former employer because “[r]emembered information” regarding certain of the employer’s customers was “not confidential” and “a discharged employee, without the use of a list belonging to his former employer, may solicit the latter’s customers.”[xvii]
Similarly, in New Method Die & Cut-Out Co., the SJC ruled that an allegedly secret method for manufacturing cardboard toys was within the defendant employee’s general skill or knowledge, noting that “the defendant . . . when he left the employment of the plaintiff . . . took no documentary manufacturing data, cost figures, or customers’ lists and no drawing which were a part of the plaintiff’s files or were final drawings which had been used by the [plaintiff] for the manufacture of toys.”[xviii]
By contrast, in Pacific Packaging Products v. Barenboim, the plaintiff employer alleged that five of its former employees removed, among other things, sales history reports, cost books, invoices, and spreadsheets containing the employer’s information about particular customer accounts, all in order to form a competing company using the plaintiff’s customer base. In granting the plaintiff’s request for a preliminary injunction against the defendants’ use of the information, Judge Billings ruled “[m]y focus herein is almost exclusively on documentary information” alleged to have been misappropriated because “while it is theoretically possible to make the showing that a former employee used his memory to compete unfairly with the former employer, it is not―particularly where business, not technical, information is concerned―an easy task.”[xix]
Distinguishing trade secrets from general skill and knowledge is not a precise science and requires a fact-specific analysis. While Massachusetts courts have not articulated a specific set of rules to apply in making the distinction, the four factors discussed above provide an outline of the key considerations Massachusetts courts have used to decide whether certain information was within a departing employee’s general skill or knowledge.
[i] Massachusetts adopted a version of the Uniform Trade Secrets Act (“UTSA”), effective October 1, 2018. See Mass. Gen. Laws ch. 93, §§ 42-42G. Other UTSA jurisdictions distinguish trade secrets from general skill or knowledge. See, e.g., American Red Cross v. Palm Beach Blood Bank, Inc., 143 F.3d 1407, 1410 (11th Cir. 1998) (applying Florida law).
[ii] Jet Spray Cooler, Inc. v. Crampton, 361 Mass. 835, 840 (1972) (citing Restatement of Torts § 757, cmt. b.).
[v] CVD, Inc. v. Raytheon Co., 769 F.2d 842, 852 (1st Cir. 1985) (applying Mass. law).
[vii] See, e.g., EMC Corp. v. Loafman, No. 2012-3115-F, 2012 WL 3620374 (Mass. Super. Ct. 2012) (Wilkins, J.) (“Nor does general knowledge acquired on the job justify a non-compete.”) (citing Dynamics Research Corp. v. Analytic Sciences Corp., 9 Mass. App. Ct. 254, 267 (1980)).
[viii] Intertek Testing Servs. NA, Inc. v. Curtis-Strauss LLC, No. 98903F, 2000 WL 1473126, at *8 (Mass. Super. Ct. Aug. 8, 2000) (Gants, J.).
[ix] Dynamics Research Corp., 9 Mass. App. Ct. at 268 (quoting Harlan M. Blake, Employee Agreements Not to Compete, 73 Harv. L. Rev. 625, 684-85 (1960)); see also Harvard Apparatus, Inc. v. Cowen, 130 F. Supp. 2d 161, 175 n.31 (D. Mass. 2001) (applying Mass. law) (“The issue of whether the information lies within the employee’s general skill or knowledge depends, in part, upon the amount of knowledge and skill the employee had in the relevant area at the start of his employment.”).
[x] Dynamics Research Corp., 9 Mass. App. Ct. at 268; see also New Method Die & Cut-Out Co. v. Milton Bradley Co., 289 Mass. 277, 281-82 (1935) (finding no protectable secret where “much of the [allegedly secret] process was familiar to [the employee] from his [prior] experience”).
[xiii] New Method Die & Cut-Out Co., 289 Mass. at 282.
[xvi] Jet Spray Cooler, Inc. v. Crampton, 361 Mass. 835, 840 (1972) (citing cases). Like the other factors, however, this factor is not dispositive. The SJC ruled in Jet Spray Cooler that “the fact that no list or paper was taken does not prevent the former employee from being enjoined if the information which he gained through his employment and retained in his memory is confidential in nature.” Id.
[xviii] New Method Die & Cut-Out Co., 289 Mass. at 280.
[xix] Pac. Packaging Prod., Inc. v. Barenboim, No. MICV2009-04320, 2010 WL 11068538, at *1 (Mass. Super. Ct. Apr. 20, 2010) (Billings, J.). To avoid an injunction on that basis, the defendants represented to the court they had completely divested themselves of the paper and electronic versions of the plaintiff’s information. The court later found that representation to be a fraud on the court because the defendants had not in fact turned over the information; the court entered a default on the defendants’ counterclaims and awarded fees and costs in excess of $1 million to the plaintiff.
Gregory S. Bombard, a trial lawyer at Duane Morris, focuses his practice on trade secret litigation, business torts, and other complex commercial disputes. He represents pharmaceutical, manufacturing and technology companies in state and federal courts and arbitration proceedings throughout the United States.
Adam M. Santeusanio is a trial lawyer at Duane Morris. His practice focuses on intellectual property and commercial litigation.
by Tara J. Myslinski and Stephanie R. Parker
Filing a new complaint? If your client is part of a for-profit corporate entity and the dispute concerns that entity, there is a good chance that you are wondering whether some or all of your client’s potential claims are derivative or direct claims. There are plenty of ways to get tripped up in this context; it is wise to think early about all of the possible pitfalls in such a case and understand the road ahead.
In this article we discuss the steps an attorney facing this issue must take, including understanding the nature of your client’s entity at the outset of a case, determining whether your client has direct or derivative claims, and following the unique procedural and substantive rules applicable to derivative claims.
Understand the Nature of Your Client’s Entity and its Place of Formation.
The law of the state of the entity’s incorporation or registration will dictate substantive issues of law for claims concerning that entity. Procedural rules for the forum will govern procedural issues.
Issues of substantive law include whether claims are derivative or direct and whether a plaintiff has standing to pursue derivative claims against the entity. See Cannonball Fund, Ltd. v. Dutchess Capital Mgmt., LLC, 84 Mass. App. Ct. 75, 93 (2013) (quoting Harrison v. NetCentric Corp., 433 Mass. 465, 471 (2001)). The differences among the states on derivative suits can be substantial; for example, whereas under Massachusetts law a shareholder is required to make demand on directors in every case alleging derivative claims on behalf of a corporation, see G.L. c. 156D, § 7.42, a suit on behalf of a Delaware corporation may still allege futility of such demand. See Johnston v. Box, 453 Mass. 569, 578 & n. 15 (2009); Del. Ct. Ch. R. 23.1; see also 6 Del. C. §§ 18-1001 & 18-1002 (allowing any LLC member to bring derivative action).
In addition to ascertaining the state of your entity’s formation, study the entity’s governing documents for specific provisions that may apply to derivative suits. See, e.g., G.L. c. 156C, § 56.
Determine Whether Your Client has Direct or Derivative Claims, or Both.
In your complaint, you must specify whether each claim is brought directly by your client as an individual or derivatively by your client on behalf of the entity. This distinction is important because, as discussed below, you must comply with special procedural requirements for any derivative claims you assert.
In general, a derivative claim asserts a wrong done to the corporation, as opposed to any particular shareholder. As such, a derivative claim belongs to the corporation and any damages recovered on a derivative claim will go to the corporation. Examples of derivative claims include:
Wasting, mismanaging or misappropriating corporate assets, resulting in a general diminution of the value of corporate stock, assets, or cash on hand; see, e.g., Rubin v. Murray, 79 Mass. App. Ct. 64, 80 (2011);
- Engaging in acts of self-dealing and/or diverting corporate opportunities; see, e.g., Williams v. Charles, 84 Mass. App. Ct. 328, 338 (2013);
- Breach of a contractual obligation owed to the company, including breach of a non-competition provision; see, e.g., Pagounis v. Pendleton, 52 Mass. App. Ct. 270, 275 (2001); and
- Breach of a fiduciary or other duty owed by the defendant to the corporation. See, e.g., International Brotherhood of Electrical Workers Local No. 129 Benefit Fund v. Tucci, 476 Mass. 553, 558 (2017).
A direct claim, in contrast, alleges breach of a duty owed to the plaintiff as a shareholder, investor, or creditor of a corporation and seeks to remedy some harm that is distinct from that suffered by shareholders generally. IBEW, 476 Mass. at 558. As such, damages recovered on a direct claim will go directly to the plaintiff. Examples of direct claims include:
- Misrepresentation or fraud perpetrated on an individual investor in connection with his or her investment; see, e.g., Amorim Holding Financeria, S.G.P.S., S.A. v. C.P. Baker & Co., 53 F. Supp. 3d 279, 306-07 (D. Mass. 2014);
- Failure to make payments owed directly to plaintiff, such as profit distributions; see, e.g., Reeve v. Folly Hill Limited Partnership, 36 Mass. App. Ct. 90, 97 (1994);
- Dilution of one shareholder’s share value or equity while increasing the equity held by other shareholders; see, e.g., Donahue v. Rodd Electrotype Co., 367 Mass. 578, 600 n.25 (1975); and
- Breach of a fiduciary duty owed to a shareholder/member or freeze out of a shareholder/member. See id. at 579 n. 4.
In certain contexts, particularly cases involving a close corporation, the line separating direct and derivative claims can be blurred. In those contexts, good pleading practice may require alleging certain claims both individually and derivatively.
Follow the Procedural Prerequisites and Substantive Rules that Apply Uniquely to Derivative Suits.
1. As a Threshold Matter, Ensure Your Plaintiff has Standing.
Massachusetts law on a plaintiff’s standing to bring a derivative claim varies somewhat depending on the type of entity at issue. See G.L c. 156C, §§ 56-57 (LLCs); G.L c. 156D, §§ 7.40-7.47 (corporations); G.L. c. 109, §§ 56-59 (limited partnerships).
With respect to any entity in Massachusetts, however, to have standing to bring a derivative claim, a plaintiff must have been a shareholder (or member or partner) at the time of the alleged misconduct and must continue to be a shareholder throughout the entirety of the derivative litigation. G.L. c. 156D, § 7.41; see Billings v. GTFM, LLC, 449 Mass. 281, 289-96 (2007) (involuntary loss of ownership interest during pendency of litigation deprived plaintiff of standing to press derivative claims); see also Kolancian v. Snowden, 532 F. Supp. 2d 260, 262-263 (D. Mass. 2008) (“a narrow exception to this rule arises where the [event causing the loss of the plaintiff’s ownership interest] itself is the subject of a claim of fraud. . . [t]o establish that a merger was fraudulent, a plaintiff must plead with particularity that it was undertaken ‘merely to eliminate derivative claims’”) (quotation omitted). If your client is concerned that, during the pendency of the case, the defendant may eliminate your client’s interest, preliminary injunctive relief to halt that transaction may be necessary. See IBEW, 476 Mass. at 564 n.15.
If your client controls the entity by owning a majority of its shares or serving as its manager or president, your client may be able to bring a direct suit against a wrongdoer. But if the company is owned 50/50 and your client is one of the 50% owners seeking to sue the other 50% owner in the company’s name, the analysis is different. Although Massachusetts has yet to issue a clear decision on this issue, other jurisdictions uniformly hold that a 50% owner may not bring suit against another 50% owner in the company’s name without following derivative procedures. See, e.g., Swart v. Pawar, No. 1:14-cv-10, ECF #162 (N.D.W.Va. Nov. 19, 2015); Barry v. Curtin, 993 F. Supp. 2d 347, 352-53 (E.D.N.Y. 2014); Crouse v. Mineo, 189 N.C. App. 232, 238-39 (2008).
If the entity is a limited liability company, G.L. c. 156C, § 56 imposes additional constraints on a plaintiff’s standing. It requires that a plaintiff alleging a derivative claim be either: (1) a member authorized to sue by the vote of members owning more than 50% of the unreturned contributions to the LLC; or (2) a manager of the LLC authorized to sue by a vote of a majority of the managers. In either case, the vote of any member or manager who has an interest in the outcome of the suit that is adverse to the LLC’s interest must be excluded. Given this statutory rigor, unless the LLC’s operating documents state otherwise, a minority member, or single manager in a multi-manager LLC, would have to secure a favorable vote to obtain a non-interested majority in order to have standing to sue on behalf of the LLC. Compare G.L. c. 156D, § 7.41 (any shareholder holding stock at the time of wrongdoing may commence a derivative proceeding so long as they “fairly and adequately” represent the interests of the corporation).
2. Comply with Procedural Rules for Derivative Claims in Massachusetts State or Federal Court.
State and federal rules of civil procedure impose special pleading requirements on derivative claims. Specifically, in addition to any substantive law governed by the entity’s state of formation, Massachusetts Rule of Civil Procedure 23.1 requires that the derivative complaint:
- Be verified;
- Allege that the plaintiff was a shareholder or member at the time of the transaction at issue, or that the plaintiff’s share or membership thereafter devolved on him by operation of law from someone who was a shareholder or member at the time; and
- Allege with particularity the efforts made by the plaintiff to obtain the action he or she desires from the directors or comparable authority and the reasons for his failure to obtain the action.
The requirements of Federal Rule of Civil Procedure 23.1 are similar, but add that the plaintiff must plead that “the action is not a collusive one to confer jurisdiction that the court would otherwise lack.” The requirements of the Massachusetts Rule can be waived if a defendant proceeds to trial without addressing these issues, see Diamond v. Pappathanasi, 78 Mass. App. Ct. 77, 89 (2010) (involving a general partnership), but there is no analogous case law concerning the Federal Rule.
You also must name the company as a nominal defendant in any derivative action when filing suit in Massachusetts state or federal court, regardless of the state of formation of the entity. See Fusco v. Rocky Mountain I Investments Ltd. P’ship, 42 Mass. App. Ct. 441, 447 (1997); Gabriel v. Preble, 396 F.3d 10, 14-15 (1st Cir. 2005).
3. Properly Apply Substantive Law on Demand Requirements Prior to Filing a Derivative Suit.
The most frequently litigated issue of substantive law in derivative cases is demand/demand futility. Massachusetts substantive law imposes hurdles additional to the procedural requirement of Mass. R. Civ. P. 23.1.
A plaintiff intending to bring a derivative claim on behalf of a Massachusetts corporation must first demand that the corporation pursue the claim. G.L. c. 156D, § 7.42. “The rationale behind the demand requirement is that, as a basic principle of corporate governance, the board of directors or majority of shareholders should set the corporation’s business policy, including the decision whether to pursue a lawsuit.” Harhen v. Brown, 431 Mass. 838, 844 (2010). The procedure for making demand is detailed and is set forth in G.L. c. 156D, §§ 7.40, et seq. Massachusetts is a universal demand state, which means that demand must be made even if the plaintiff believes it would be futile due to a board’s interest or lack of independence. See Johnston, 453 Mass. at 578 n.15.
A plaintiff may only initiate a derivative action once the corporation has either (i) refused a demand to bring suit; or (ii) ignored the demand for at least 90 days (or 120 days if the decision regarding whether to pursue the claims is submitted to the shareholders for a vote). A derivative plaintiff may file suit before expiration of the waiting period if the plaintiff can show that irreparable injury would result by waiting for the period to expire. G.L. c. 156D, § 7.42.
If your client’s demand is refused and she disagrees with the corporation’s decision, you should carefully study G.L. c. 156D, § 7.44 and be prepared to challenge the refusal in your complaint and in your opposition to the inevitable motion to dismiss. In this context, the “business judgment rule” precludes the suit if the corporation can show that it determined in good faith and after reasonable inquiry that the suit would not be in the best interests of the corporation. G.L. c. 156D, § 7.44(a). Although challenging a director vote to refuse a demand is difficult because of the protections of the business judgment rule, Judge Kaplan of the Superior Court’s Business Litigation Session recently denied a motion to dismiss derivative claims in just that context. See Brining v. Donovan, No. 1684-CV-3422-BLS1 (Mass. Super. Ct. Sept. 14, 2017). The court questioned the directors’ independence given their close ties with the alleged wrongdoer and also found reasonable doubt as to whether the board conducted its investigation in good faith because its conclusion in the face of glaring financial improprieties was “so different from what an independent Board would be expected to do.” Id.
Limited Liability Companies
In contrast to corporation derivative suits, the futility exception is still alive in the context of LLC derivative suits, but must be well-pleaded to satisfy Mass. R. Civ. P. 23.1. See Billings, 449 Mass. at 289-90 n.19; see also Harhen, 431 Mass. at 844 (futility exception is pled by alleging that “a majority of [members] are alleged to have participated in wrongdoing, or are otherwise interested” and adopting definition of “interested” director as stated in ALI’s Principles of Corporate Governance, §§ 1.15 & 1.23); Diamond, 78 Mass. App. Ct. at 89 (“to satisfy rule 23.1, a complaint in a derivative action must plead with particularity either the presuit demand the plaintiff has made or the reasons why making such demand would have been futile”).
Limited partners alleging damage to the partnership must make demand upon the general partner or allege the reasons that doing so would be futile. G.L. c. 109, § 58.
4. Follow Procedural and Substantive Rules at the Conclusion of a Derivative Case.
A derivative proceeding filed in Massachusetts may not be discontinued or settled without court approval. Mass. R. Civ. P. 23.1; G.L. c. 156D, § 7.45.
As discussed above, damages recovered on a derivative claim will go to the entity. The Massachusetts Appeals Court recently noted that there may be some irony, particularly in the context of a close corporation, if this rule results in the wrongdoer benefiting from a share in the recovery. See Beninati v. Borghi, 90 Mass. App. Ct. 566, 567, n.11 (2016). This irony can be mitigated by the trial judge, who is “free to take the equities into account in fashioning any remedy under c. 93A.” Id. In an effort to remedy that type of unfair result, on remand to the Business Litigation Session in Beninati, Judge Sanders recently reduced a G.L. c. 93A damages award by a wrongdoer’s percentage of ownership interest in the company and directed that the company “shall not permit” any distribution of the damages to the wrongdoer. Beninati v. Borghi, Nos. 1284-cv-1985-BLS2, 1384-cv-1772-BLS2 (Mass. Super. Ct. June 30, 2017). An appeal of that decision is currently pending.
Massachusetts law authorizes the court to award attorneys’ fees and costs to the plaintiff upon conclusion of a case if the court finds that the proceeding has resulted in a “substantial benefit to the corporation.” G.L. c. 156D, § 7.46; see also Beninati , 90 Mass. App. Ct. at 568 (affirming denial of fee application in part because time records failed to make that distinction). The court may award the defendant its fees and costs if the court finds that the proceeding was commenced or maintained without reasonable cause or for an improper purpose. G.L. c. 156C, § 57 contains parallel fee-shifting provisions for derivative claims in the Massachusetts LLC context. Because Massachusetts law is not clear on the issue of whether an award of attorneys’ fees in derivative litigation is procedural or substantive, be sure to also understand the law of the entity’s formation state on this issue at the outset of your case.
Tara J. Myslinski is a partner in the business litigation boutique O’Connor Carnathan & Mack LLC based in Burlington. She focuses her practice in complex commercial and corporate litigation, frequently involving small-business shareholder disputes, complex contractual disputes, trade secret and non-compete litigation, and internal pre-litigation investigations.
Stephanie R. Parker is an associate in the business litigation boutique O’Connor, Carnathan & Mack LLC, based in Burlington, MA. Ms. Parker graduated from Northeastern University School of Law in May 2013. Prior to joining OCM, Ms. Parker worked as a judicial intern for The Honorable Patti B. Saris at the U.S. District Court for the District of Massachusetts.
Director Liability Under the Massachusetts Wage Act: The Supreme Judicial Court Clarifies the Law but Traps May Remain for the UnwaryPosted: May 14, 2018
by Mark D. Finsterwald
In Segal v. Genitrix, 478 Mass. 551 (2017), the Supreme Judicial Court (“SJC”) addressed whether members of a company’s board of directors may be personally liable under the Massachusetts Wage Act, G.L. c. 149, §§ 148, 150, for the company’s failure to pay wages to employees. In Segal, the SJC interpreted, for the first time, language in the Wage Act defining “employer” in the context of directors. The SJC held that the Wage Act does not impose liability on directors acting only in their capacity as directors. Even so, the Court did not fully insulate directors from Wage Act liability. There remains a possibility that directors could, perhaps unwittingly, become subject to personal liability in the event a company fails to pay wages.
The Wage Act
The Wage Act enables employees to sue employers who do not pay earned wages, with mandatory awards of treble damages and attorney’s fees for successful claims. Liability is not limited to the business entity, as the Wage Act defines “employer” to include “the president and treasurer of a corporation and any officers or agents having the management of such corporation.” This definition does not mention directors. Nor does it explain how to assess whether a person is an “agent having the management of such corporation.” G.L. c. 149, § 148.
Facts and Procedural History
Plaintiff Andrew Segal was the president of Genitrix, LLC, a biotechnology startup that he cofounded with defendant H. Fisk Johnson, III. Johnson was also an investor in Genitrix, and he appointed his representative, defendant Stephen Rose, to the company’s board of directors. Johnson funded Genitrix through a company called Fisk, which Johnson and Rose co-owned. Segal, as president, managed all of Genitrix’s day-to-day operations, including payroll.
In 2006, Genitrix began to have difficulty making payroll. Starting in 2007, Segal stopped taking salary to enable the company to meet its other financial commitments. Rose later declined to direct Fisk to invest enough money in Genitrix to pay Segal. In early 2009, Segal initiated Wage Act litigation against Johnson and Rose.
At trial, the judge instructed the jury that “a person qualifies as an ‘agent having the management of such corporation’ if he … controls, directs, and participates to a substantial degree in formulating and determining policy of the corporation or LLC.” The judge did not instruct the jury that the defendants needed to have been appointed as agents. Nor did the judge instruct the jury that defendants needed to have assumed responsibilities functionally equivalent to those of a president or treasurer. The jury found both defendants liable for Segal’s unpaid salary. Johnson and Rose moved for judgment notwithstanding the verdict, the trial court denied the motion, and Johnson and Rose appealed.
The SJC’s Analysis
At the outset, the Court stated that it viewed as significant the Legislature’s omission of directors from the Wage Act’s definition of “employer.” Segal, 478 Mass. at 558. Parsing the statutory language, the SJC dismissed the possibility that either defendant could be liable as president, treasurer, or any other officer, because neither of them held an office at Genitrix. Johnson and Rose could be liable only if they were “agents having the management” of the company. The Court explained that this language establishes “two important requirements: the defendant must both be an agent and have the management of the company.” Id. at 559. The Court differentiated between having some management responsibility and “having the management” of the company. “Having the management” means assuming responsibility similar to that performed by a corporation’s president or treasurer, the Court reasoned, “particularly in regard to the control of finances or payment of wages.”
As to agency, common law agency principles—set forth in the Restatement (Second) of Agency—counsel that directors are not typically considered agents. Restatement (Second) of Agency § 14C (1958). The SJC observed that “[a] board generally acts collectively, not individually.” Segal, 478 Mass. at 561. Such collective action does not confer individual agency authority on directors. Nevertheless, the Court explained that individual directors still could be “considered agents of the corporation if they are empowered to act as such, but any agency relationship stems from their appointment as an agent, not from their position as a director….” Id. at 563. An agency appointment could result from a board resolution, but also could “arise from either express or implied consent.” The Court gave as an example a scenario in which “a particular board member had been empowered to act individually as the functional equivalent of the president or treasurer of the corporation.” Genitrix, however, made no such appointment with respect to either defendant, instead delegating executive management authority (including dominion over wages) to Segal. Segal signed the checks, oversaw the payroll, and suspended the payment of his salary. Defendants had no such authority.
Moreover, just as a board’s collective authority over a corporation does not confer agency authority on an individual director, a board’s collective “oversight and control over management, finances, and policy is not oversight and control by individual board members.” Id. at 565. The Court noted that, since corporate statutes vest all management responsibility in a corporation’s board, if board members were to be considered agents and normal board oversight were considered “management,” then all directors would be personally liable under the Wage Act. That result would be inconsistent with the plain wording of the statute.
The Segal defendants’ participation in difficult board decisions that affected the company’s finances were not the acts of individual agents, did not involve the type of ordinary decisions left to individual managers, and did not confer Wage Act liability. Accordingly, the SJC determined that the trial court should have allowed defendants’ motion for judgment notwithstanding the verdict.
In addition to adjudicating the claim against Johnson and Rose, the SJC also provided guidance for instructing future juries. The Court explained that judges should instruct juries that there are two requirements for a defendant to qualify as an employer under the Wage Act: (1) the defendant must be an officer or agent; and (2) the defendant must have the management of the company. The Court cautioned that juries should be instructed that directors are not agents simply by being directors, and the collective powers of the board are distinct from the powers of individual directors. As to “having the management,” courts should instruct juries that the Wage Act imposes liability on the president, the treasurer, and other officers or agents who perform management responsibilities similar to a president or treasurer, “particularly in regard to the control of finances or the payment of wages.” Id. at 570.
Lessons for Directors and Corporate Advisors
After Segal, it is difficult, but not impossible, to establish Wage Act liability on the part of individual directors. Directors should be aware that they still may face personal liability (with attendant mandatory treble damages and fee shifting) if they are found to be agents of the corporation who performed responsibilities similar to that of a president or treasurer. Consequently, boards and their advisors should take precautionary measures to reduce the risk to directors.
Corporate counsel would be wise to include in companies’ governing documents language stating that individual directors are not authorized to speak or act on behalf of the company. Counsel should then advise boards to abide by such language in practice. While it is common for boards to delegate tasks and authority to particular directors or committees, counsel should screen such delegations carefully to ensure that they cannot reasonably be construed as conferring management or agency authority. Counsel also would be wise to monitor initiatives that might not expressly delegate agency authority but could be deemed to do so by implication.
To the extent a board bestows management or agency authority on individual directors or committees of directors, that authority should be limited to discrete issues. More importantly, that authority should not encroach on officer control over finances and wages. For example, individual directors should not have check-writing authority, control over payroll, or authority to approve or deny wage payments.
Overall, counsel should be vigilant in ensuring that boards and board committees, including compensation committees, exercise their oversight function collectively, with such collective action formally recorded. These steps would help directors perform their fiduciary responsibilities with less risk of personal liability under the Wage Act.
Mark D. Finsterwald is an associate at Foley Hoag LLP and a member of the firm’s litigation department. He focuses his practice in the area of complex business litigation.
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.
The Family Resolutions Specialty Court: A Community-Based Problem-Solving Court For Families in Conflict in Hampshire CountyPosted: October 26, 2017
by Hon. Linda S. Fidnick
Voice of the Judiciary
Traditional adversarial litigation can be ineffective in meeting the needs of families who are experiencing divorce or separation. Litigation may be an ultimately productive method for resolving conflicts between strangers — someone wins, someone loses, and the parties never see one another again. How profoundly different family cases with children are! Parents usually come to court at a complicated and painful time. Anger, mistrust, fear, grief — powerful emotions grip them. Yet, despite the demise of their personal relationship, parents must (and should) continue as parents. The more effectively they can work together, the easier it is for their children. Typically parents will need to continue to address one of the many unanticipated, yet inevitable, changes to their lives or the lives of their children after the case has concluded. Unfortunately, the traditional court process gives them no tools to resolve their disputes on their own.
The Hampshire Division of the Probate and Family Court is committed to finding better ways to help families through the court process. Our initiatives include a parent education program for divorcing parents that was expanded to include “For the Children” for never-married parents; “Only One Childhood,” an educational program for mid-conflict parents; a mediation program; and a program that provides attorneys for children. These programs have inestimably benefited the many families of Hampshire County. In this article I discuss a recent program developed by the Hampshire Probate and Family Court that has shown much promise: the Family Resolutions Specialty Court.
Starting in 2014, a group of Hampshire County-based professionals, including among others, Mike Carey, the Register of Probate, Pam Eldridge, Chief Probation Officer, Noelle Stern, Judicial Case Manager, Hon. Gail Perlman, former First Justice, Kathy Townsend, mediator, and Marsha Kline Pruett, Professor at the Smith College School for Social Work, began to meet and talk about ways to provide families with an alternative to the traditional court process within the court itself. The Family Resolutions Specialty Court (“FRSC”) is the result. Loosely based on a process that was developed in Australia’s family court, the FRSC has the following goals: to reduce conflict in cases involving children, to keep court proceedings child-focused, to give parents tools via mediation and the assistance of a clinically trained child specialist to address the problems facing their own family, and finally, to increase all parties’ satisfaction with the court process. We hoped that the FRSC would be more humane and more efficient than traditional family litigation, and ultimately give parents the ability to communicate well enough to obviate the need for repeated returns to court. We also created an FRSC Advisory Board comprised of a wide variety of professionals in the community. FRSC is available in most cases involving children. It has been used in initial divorces, complaints for modification, and complaints for contempt, whether the parents have counsel or are self-represented.
FRSC serves traditional and non-traditional families of all socio-economic backgrounds with children of all ages. FRSC is voluntary. Initially, both parents must opt in to the program. Either parent may opt out at any time. If a parent opts out, the case returns to the traditional court process and a different judge is assigned. Once the parties opt in, a probation officer completes an intake and screening. This initial assessment includes meeting with the parties and counsel to explain how FRSC works. If a significant history of domestic violence exists or one or both parents do not have the capacity to participate meaningfully, the family will be screened out. Once the family is screened in, its members are assigned a support team consisting of the family consultant (a mental health professional who remains involved with the case until resolution), an attorney for the children, a probation officer, and a mediator.
The family consultant conducts a guided interview to assess the family’s strengths and challenges and discusses various parenting arrangements. What is unique about this step is that the first in-depth conversation about the parenting plan comes to the parents from a mental health and developmental perspective, rather than a legal one. The parents are then referred to mediation. During this confidential process, issues requiring resolution are identified and parents are provided with tools to resolve future conflicts informally.
Next, a court conference is held. The parents, their counsel, the children’s attorney, the family consultant, the probation officer, and I attend. We sit at a table with the parents near me and facing each other. The parents bring photographs of the children. I ask each parent what his or her hope is for the outcome for themselves, for the children, and, importantly, for the other parent. Although parents are encouraged to speak directly to me, rather than by representations of counsel, attorneys are critical to the FRSC. Lawyers help participants understand their rights and obligations, identify relevant issues, ensure complete disclosures, and counsel clients to participate in a meaningful way. We use a problem-solving approach. The rules of evidence are suspended. Information is shared freely. The process is open and transparent. If a participant raises a concern that information is being withheld or misrepresented, he or she can request that the case be transferred back to the traditional court process.
At the court conference, we identify the resolved and contested issues, the information needed to determine the outcome of the contested issues, and outline the next steps. As a community-based court, we discuss whether referrals to parent education, substance abuse treatment, family counseling, or early childhood intervention may be helpful to the family. If so, the probation officer is key in referring members of the family to appropriate community agencies. The FRSC team members work with the family between conferences. The parents may choose to meet with the mediator, the family consultant, the probation officer, or attorney for the child in any combination and as often as needed. Court conferences are scheduled at appropriate intervals until all issues are resolved. The goal is resolution by agreement. However, if necessary, I will make a decision, either on a temporary basis or as a final judgment, if the parents are unable to agree.
Because of the attention to the case by all professionals involved from the very beginning, even the most complex case concluded in seven months, half of the time standard in the traditional track. This has been one of the unexpected, but greatly appreciated by the litigants, benefits of participating in FRSC.
The following are some comments of parents from their exit surveys:
“I now have much more contact with my children than when we began. . . . We have been able to agree on many issues that we did not agree on before.”
“FRSC helped ensure my child was enrolled in a high-quality pre- [kindergarten] program which has transformed our entire family’s quality of life and gave our child a strong foundation at a time when he was most vulnerable to instability.”
“This process was very beneficial to myself as a parent and was minimally stressful. . . . It has helped me to learn to never speak poorly of her dad in front of her . . . We fight almost never now and seem to be more understanding towards each other. . . . I would STRONGLY recommend this process to anyone getting divorced who have children. I hope this becomes the standard.”
“I have learned a tremendous amount through the programs associated with FRSC both as a parent and individual. . . . [FRSC] has helped to make me the best father I can possibly be. . . . We still have a long way to go but I am hopeful that in eliminating much of the negativity that typically surrounds divorce, it will allow us to become great co-parents. Truly life changing. I hope this continues and that all divorces with children can be done in this manner.”
Thus far, FRSC has succeeded in every aspect of its purpose. Children have a voice from the very beginning, which focuses their parents on the primacy of continuing to raise healthy children despite the marital or relationship dissolution. For those separating and divorcing parents who choose the process, they were able to come to closure in half the time (or less) than allotted for cases under our time standards. The families who have benefited from FRSC have been from all walks of life in our county: people from all manner of socio-economic, religious, health status, gender-identified, and educational backgrounds have benefited from it. Our hope is that the FRSC model will be the default process for all families experiencing divorce and separation throughout the Commonwealth.
Judge Fidnick is the First Justice of the Hampshire Probate and Family Court.