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.
by Hon. Linda E. Giles
Voice of the Judiciary
Age-based criteria are entrenched in Massachusetts law. I have found over two dozen statutes providing for sixty-or-over age classifications, on matters ranging, inter alia, from the Department of Elder Affairs’ definition of “elderly person” as an individual sixty years of age or over, G. L. c. 19A, § 14; to the Department of Labor Standards’ provision of an extra day of family and medical leave to care for an “elderly relative,” i.e., one at least sixty years of age, G. L. c. 149, § 52D; to the right to a speedy civil trial for sixty-five-year-olds,
G. L. c. 231, § 59F; to enhanced penalties for various crimes against the person of victims sixty or sixty-five years of age and older, G. L. c. 265, §§ 13K, 15A, 15B, 18, and 19 and G. L. c. 266, §§ 25 and 30; to the right of tenants aged sixty or more to a six-month stay in summary process proceedings, G. L. c. 239, § 9; and to the entitlement of “aged” persons sixty-five years or older to receive state supplementary payments from the Department of Transitional Assistance, G. L. c. 118A, § 1.
Perhaps I am not the most impartial arbiter on the subject of age-based legislation. As a sexagenarian fast approaching mandatory retirement age and acutely aware that Vermont judges do not need to retire until ninety (and federal judges not at all), I confess to being a reluctant “elder.” Moreover, some may argue that any attack on ageism in the law may be a “Trojan Horse” that could open the floodgates to subverting age-based benefits and entitlements. Nevertheless, I question the arbitrariness and effectiveness of many older-age-specific laws and issue a clarion call for the legislature to re-examine them. (Youth age classifications, e.g., the Juvenile Court cut-off age of eighteen when compared to the drinking age of twenty-one, G. L. c. 119, § 58; G. L. c. 138, § 34A, also are worthy of scrutiny but beyond the scope of this article.)
The battle for this not yet over-the-hill individual seems uphill at first. Some forms of age discrimination are undeniably necessary and reasonable, e.g., compelling children but not adults to be educated, or allowing adults but not children to vote. Age-based laws also are well-settled and plentiful. The federal Age Discrimination in Employment Act of 1967 (ADEA), which prevents age discrimination against persons forty years of age or older, is celebrating its fiftieth anniversary this year. Over forty years ago, the constitutionality of age-based classifications was enshrined in the United States Supreme Court’s holding in a Massachusetts case, Massachusetts Board of Retirement v. Murgia, 427 U.S. 307 (1976); in Murgia, the Court concluded that uniformed state police troopers facing mandatory retirement at fifty did not constitute a suspect class for purposes of equal protection analysis. Over the past several decades, there has been a proliferation of legislation aimed at protecting “elders,” commonly defined as sixty-five or older, from abuse, neglect, and discrimination.
To be sure, protecting vulnerable senior citizens from abusive or unfair treatment is a laudable government interest. Furthermore, “[t]he problems of government are practical ones and may justify, if they do not require, rough accommodations, illogical, it may be, and unscientific.” McGinnis v. Royster, 410 U.S. 263, 270 (1973), quoting Metropolis Theatre Co. v. City of Chicago, 228 U.S. 61, 69-70 (1913). Even so, chronological age has served as an arbitrary, overbroad, and expedient proxy for more relevant but difficult-to-quantify characteristics, such as frailty, vulnerability, or need. Older adults are subjected to disparate treatment on the basis of stereotyped assumptions about their abilities and disabilities; and protections for “elders” are premised on the inaccurate pigeon hole that they are impaired cognitively or are physically- or decisionally-challenged. Policy-makers lump older individuals into age-based, monolithic categories (e.g., middle-old, old, the oldest) without account for very real differences among the age cohorts. Cf. Kenneth F. Ferraro, “The Evolution of Gerontology as a Scientific Field of Inquiry,” Gerontology: Perspectives and Issues 13, 13-33 (3rd ed. 2007). As the average life expectancy has increased to 78.8 years, Centers for Disease Control and Prevention FastStats – Deaths and Mortality, and one in five over age sixty-five in Massachusetts is still working, “1 in 5 over 65 still on the job,” Boston Globe, June 12, 2017, elderly status, widely assumed to start at age sixty-five, has become an increasingly poor predictor of physical and mental limitations. Centers for Disease Control and Prevention, Quickstats: Estimated Percentage of Adults with Daily Activity Limitations by Age Group and Type of Limitation – National Health Survey, United States. Accordingly, fixed age thresholds for classifying people as old, which do not take into account improvements in health and longevity, seem increasingly anachronistic.
Furthermore, some protections for “elderly” persons, albeit well-intentioned, may not be so benign. For example, a mandatory reporting system in Massachusetts requires individuals in nineteen specified occupations, including physicians and nurses, to report suspected abuse of “elderly persons” sixty years of age or over to the Department of Elder Affairs. G. L. c. 19A, §§ 14, 15. Mandated disclosures under the law may implicate the release of the alleged victim’s privileged medical information, which, if done without that “elder’s” consent, would undermine his/her right to informational privacy. At least one legal scholar has argued that age-specific legislation may violate the civil rights of older adults and has called for expanding the scrutiny of age-based classifications from rational basis to intermediate. See Nina A. Kohn, “Rethinking the Constitutionality of Age Discrimination: A Challenge to a Decades-Old Consensus,” 44 U.C.Davis L.Rev. 213 (2010); Nina A. Kohn, “Outliving Civil Rights,” 86 Wash.U.L.Rev. 1053, 1058-59 (2009). In yet another context, health care systems sometimes rely on age-based classifications to deny older adults the right to obtain certain medical procedures regardless of need. Although doctors routinely tell patients over sixty-five that they are not good candidates for organ transplants, Johns Hopkins’ investigators have found that older adults can enjoy excellent transplant outcomes in this day and age. See Dorry L. Segev, M.D., Ph.D., et al., “Candidacy for Kidney Transplantation of Older Adults,” Journal of the American Geriatrics Society, Vol. 60, Issue 1 (January 12, 2012).
Maybe it is time to rethink the cavalier use of imperfect age-based criteria in our laws, starting with our very definition of “old age.” After all, population experts have concluded that sixty really is the new fifty. See, e.g., W. Sanderson, S. Scherbov, “Faster Increases in Human Life Expectancy Could Lead to Slower Population Aging,” PLOS ONE (April 2015). A number of research demographers have suggested that policymakers focus less on chronological age and embrace measures based on prospective age, i.e., the expected remaining years of life for a given age range. See W. Sanderson, S. Scherbov, “Rethinking Age and Aging,” Population Bulletin vol. 63, no. 4, Population Research Bureau (December 2008). Prospective age is a population-based concept that takes into account improvements in health and life expectancy which the static concept of chronological age does not. Id. Perhaps Oliver Wendell Holmes, Jr., one of Massachusetts’ greatest native sons, had the notion of prospective age in mind when, at the age of sixty-three, he quipped, “[o]ld age is fifteen years older than I am.” In the humble opinion of this purported “old ager,” truer words were never spoken.
 The opinions I express are my own and do not reflect the view of the Massachusetts Superior Court. Though I recommend legislative reform, I of course will continue to follow the law as it exists.
Judge Linda Giles has served as an Associate Justice of the Superior Court since 1998. She is an adjunct professor of law at Suffolk University Law School and a member of the Board of Editors of the Boston Bar Journal. Judge Giles is a graduate of McGill University and New England School of Law.
by Jonathan S. Williams
Voice of the Judiciary Guest Contributor
The members of the Boston Bar Association know that Massachusetts is in the midst of dramatic change in the administration of justice. Both necessity and opportunity are playing a part. Leaders in all three branches of government are looking more imaginatively at the forms and substance of justice than at any time since the days of Gideon and of the demurrer. An animating principle in the Trial Court’s thought is a strategic focus on the “user experience.” Looking through the public’s eyes demands that we reduce barriers to access, reduce unnecessary delays, and ensure that court action seeks to address underlying causes of legal conflict where possible. Specialty courts, alternative dispute resolution, opioid response, and justice reinvestment reforms are engaging everyone. Technology offers new kinds of opportunities to make court more accessible and efficient. It has dramatically changed law practice, and the public’s appetite for new technologies to engage their justice system electronically has never been greater.
My predecessor Harry Spence wrote last winter about the strength of the unique Massachusetts court governance model put in place in 2012. It pairs Trial Court leadership in myself and Chief Justice of the Trial Court, Paula Carey. She brings deep judicial knowledge and experience leading on matters of judicial policy and innovation. My job is to maintain and increase our administrative capacity to manage change. My varied preparation in North Carolina includes years of private law practice and years of state government administration in the justice field. It is a familiar challenge to take responsibility for finance, human resources and technology at a judicial system’s statewide scale. And over the past two years I was deeply engaged at looking at the future of North Carolina’s courts—and realized that state courts across the nation face the same necessities and opportunities. What drew me here is that the Massachusetts Trial Court today is action-oriented and is already deeply engaged in change.
If you are the managing partner of a large law firm, or manage your own solo practice, you know that few decisions weigh more heavily than workforce and technology investments. Likewise for the courts our workforce and our technology are fundamental to our success.
The work of every court employee is becoming more interesting and more demanding. One reason is the growing diversity of the communities we serve. To meet that need we are recruiting to broaden the diversity of our workforce, and helping new and current employees to expand their cultural appreciation and competency. This is a natural and necessary element of our strategies to reduce the influence of bias—implicit or explicit, whether based in race, ethnicity, religion or gender—in administering justice.
We not only need to do it, but talented potential employees expect us to model and support our core value of equal justice under the law. Today 23% of our employees are from minority groups compared to 24% of the state’s population in the last census. We need to continue targeted outreach in our recruiting so that talented minority candidates don’t overlook the justice system as a personally and professionally rewarding career in public service, and know that no avenue within the justice system is closed to them.
The nature of work in the courts is changing too, meaning we need to recruit for higher skills than ever. Technology will free our employees from much of the drudgery of managing the tide of paper, and allow more time to interact with and serve the public. Our facilities staff supports advanced energy management and other technologies, and maintains both historic and modern architectural properties. Professionalizing Court Security to counter contemporary risks has involved creating a formal academy that graduated its seventh class this summer, and recently achieved national accreditation as a law enforcement training program. We are supporting our workforce overall with more and more training. Working with our unions, we have made continuing education a core piece of Trial Court employment, almost doubling the number of attendees in the past four years.
Caring for our current employees and urgency in recruiting and hiring a talented new generation of employees are both critical to the strength of our justice system.
We all recognize the gap that has opened between court technology and the consumer technology demonstrated in the experiences of retail, finance, and health care. We are playing catchup but have made some wise strategic choices in technology that are beginning to pay off.
The creation and implementation of MassCourts retired 14 separate systems built in-house, designed with different philosophies and architectures dating back to the 1980’s. This change required two tough strategic choices. The first tough choice: stop hiring and retaining staff for continuous custom software development, and instead outsource the new IT case management system to a vendor specialized in court applications. Our in-house staff is focused on the infrastructure, service delivery, and better understanding the evolving needs of the courts. The second tough choice: close down the old systems completely and move all the old data into a completely modern database and middleware platform. Massachusetts chose this harder course and completed the major turn just 20 months ago. MassCourts will continually evolve not only to help manage the work of the courts now but to enable new ways for the courts to get their business done.
E-filing has just begun racing forward toward this future. On the criminal side tens of thousands of Electronic Applications for Criminal Complaint are being e-filed by police this calendar year. Civil e-filing is now rolling out, this year receiving thousands of pleadings and attachments, and more than 4,500 attorneys have enrolled. More and more the bar will be able to save time and client money by e-filing without running to the courthouse and managing snail mail, following the lead of our appellate courts. Inside the courthouse we will look to use e-filings to reduce reliance on paper, and enable judges and litigants to access and work with their documents both remotely and online.
The ability to pay many obligations online is being added to MassCourts over the next few months. It might sound odd at first, but we don’t want you or your clients coming to court to pay an outstanding fine or probation charge. Or more exactly, we want you to pay from wherever is most convenient. We do want you coming to court to accomplish something meaningful to advance your case or issue to resolution. We don’t want you or the public to spend time and money away from work, arranging child or parent care, finding transportation, and standing in security and cashier lines just to make a payment.
Digital recording of court proceedings has been in place for years in all but Superior Court criminal sessions; we have now finished installing or upgrading this technology in almost 300 of 429 courtrooms throughout the Commonwealth in all court departments. This latest generation technology supports two great changes for the bench and the bar: audio recordings can be streamed the next day remotely online, and production of official transcripts for most cases is being cut from 90 days to 30 days.
And over the past several years we have added more and more video connectivity. In the first six months of this year there were approximately 3,000 video events including jail-to-court arraignments, court-to-court probation hearings and emergency protection hearings, and even law office-to-court civil motions hearings to save counsel driving across the state for brief matters.
My confidence in our ability to do these things is immense. I have been visiting courthouses and meeting employees who are eager to share the initiatives they have undertaken. I have met scores of our new employees across all job types, and we are attracting great young people and mid-career movers. I have reviewed workforce diversity statistics and workshop reports that show our employees gaining capacity to work with diverse communities. I have visited a District Court that runs every small claims calendar with no paper files in the courtroom, and I have sat in on a Superior Court session where a judge in one county held court by video for probationers and counsel in another county. I see our e-filing numbers climbing every month. In other words, the action and engagement in change that drew me to the Massachusetts courts is being demonstrated every day.
The Supreme Judicial Court appointed Jonathan Williams to a five year term as Court Administrator for the Massachusetts Trial Court as of May 1, 2017. Williams previously served as the Senior Deputy Director of the North Carolina Administrative Office of the Courts. He has almost thirty years’ combined experience in government and in private law practice.