Upholding Parties' Contract Rights

NELF filed an amicus brief in support of MASSPOWER in this case before the Massachusetts Appeals Court.  The case involved construction of the termination provision in a power supply contract, which permitted MMWEC to terminate the agreement only for a material breach that materially and adversely affected MMWEC.  As NELF demonstrated in its brief, similar language, setting forth dual requirements of materiality and adverse effect, is used in termination clauses and other provisions in many corporate transactional, real estate, and commercial agreements.  Judge Ralph D. Gants had issued a decision below, in the Superior Court’s Business Litigation Session, in which he effectively nullified the second requirement of the termination provision at issue -- that the material breach have an adverse effect on the terminating party --  by ruling that any material breach of a material contract term, by virtue of that breach alone, adversely affects the non-breaching party.   Judge Gants further suggested that it would be “irrational” to require demonstration of adverse effect beyond the loss of the contractual right inherent in the material breach.  

NELF argued in its brief that Judge Gants’s construction of the parties’ agreement was inconsistent with the plain language and obvious intent of such restrictive termination clauses and would introduce uncertainty into a great many contractual relationships based on agreements containing similar language.  NELF argued, moreover, that affirmance of Judge Gants’s decision could discourage the construction of major projects in the Commonwealth, including energy facilities, that depend on enforcement of contract obligations for payment of capital and financing costs and to provide returns on investments.  The Appeals Court agreed with NELF’s contract interpretation and, finding a genuine issue of fact as to whether there was any adverse effect from the alleged breach here, remanded the case for trial.  In a footnote in its decision the Court expressly acknowledged the assistance of NELF’s brief.

Supporting Small Business

The claims in Thurdin v. SEI Boston, LLC presented two legal issues of first impression for the Massachusetts Supreme Judicial Court of considerable significance to small businesses in Massachusetts.  The plaintiff alleged that she was discriminated against in conditions of employment based on pregnancy/gender by SEI, a business with only three employees.  The issues before the Court were: (1) whether the Massachusetts Equal Rights Act, G. L. c. 93, § 102, (“MERA”) can be used to sue employers of fewer than six employees for discrimination even though such small employers are expressly excluded from the purview of employment discrimination claims in an earlier, comprehensive, and more specific state employment discrimination statute, G. L. c. 151B; and (2) whether MERA applies to on-the-job discrimination or just to discrimination in original hiring decisions.  

NELF’s amicus brief, filed in support of the employer jointly with the Associated Industries of Massachusetts and the National Federation of Independent Business Small Business Legal Center, answered both questions in the negative based on established principles of statutory construction. In its decision, the Massachusetts Supreme Judicial Court effectively nullified the express provision in G. L. c. 151B, § 1(5) exempting employers with fewer than six employees from employment discrimination claims.  While two dissenting Justices (Cordy and Cowin, JJ.) agreed with NELF’s arguments to the contrary, the Court held that employees of such small businesses can bring discrimination claims under MERA.  The majority opinion treats MERA, which neither mentions employment discrimination nor defines “employer” for such purposes,  and which is not available for recourse against larger employers subject to G. L. c. 151B, as having silently repealed c. 151B’s exemption of small employers from discrimination claims.  

Because of differences between c. 151B and MERA, the Court’s decision leads to the anomalous result that it is now easier for plaintiffs to pursue claims against very small employers than against larger employers.  The decision may also encourage settlement of meritless claims and seems inconsistent with the Legislature’s clear determination, embodied in c. 151B, that very small enterprises should be exempt from these claims. As NELF’s brief further explained, the cost of defending even one discrimination lawsuit can run well into six figures. Moreover, statistics reported in NELF’s brief suggest that most employment discrimination claims lack merit. Thus, the Court’s decision to allow employment discrimination litigation against employers of fewer than six employees can be expected to cause significant financial harm to those businesses least able to afford it, and often for the sake of meritless claims.  On the second issue in the case -- admittedly a closer call -- the Court held that MERA applies to on-the-job discrimination as well as discrimination in hiring.

Preserving the Exclusivity of Workers' Compensation Remedies

The appellant in this case asked the Massachusetts Supreme Judicial Court to reinterpret or find unconstitutional the exclusivity provision of the Massachusetts Workers’ Compensation Act (the “Act”), G. L. c. 152, § 24, so as to permit the non-dependent parents of an adult child who died on the job, and whose funeral costs were paid under the Act, to sue the child’s employer for loss of consortium due to wrongful death. 

Accepting NELF’s argument that the key to the applicability, and therefore the exclusivity, of remedies under the Act is not whether an injury is compensated but rather whether it is compensable, the Court concluded that the trial court had properly dismissed this wrongful death action against CVS.  The facts of the case are tragic: the plaintiffs’ 18-year-old son, Cristian Giambrone, was killed by a shoplifter whom he attempted to detain while working at a CVS store. While Cristian’s injury occurred on the job, he died almost immediately and without dependents and therefore no compensation was payable under the Act either to Cristian or to his family members.  While the plaintiffs have indisputably suffered a tragic loss, a decision in their favor would have substantially upset the careful legislative balance embodied in the Act by nullifying the protection afforded employers by the § 24 exclusivity provision.  

In addition to drawing the critical distinction between compensable and compensated injury, NELF’s brief in support of CVS countered the plaintiffs’ contention that applying the § 24 exclusivity provision to their claims would contravene Article XI of the Declaration of Rights of the Massachusetts Constitution by leaving them with no remedy.  NELF argued, inter alia, that Article XI does not preclude the Legislature from abrogating a common law right, even when there exists no other remedy.  The Court agreed with all of these arguments and further agreed with NELF that a ruling in plaintiffs’ favor would require reversal of clear precedent and undermine legislative policy choices whereby, in return for giving up his own right and that of his family members to sue under common law, an employee is assured of compensation under the Act regardless of fault or foreseeability of injury. The employer, in return for this no-fault obligation, is relieved of other possible liabilities and related transaction costs and gains a somewhat more predictable responsibility that it can treat as a cost of doing business. 

As the Court concluded, public policy decisions balancing competing societal interests are “a task for the Legislature” and not properly the role of judges.

Opposing the Retroactive Application of Concepts of Unfairness in Consumer Actions

In this case the Massachusetts Supreme Judicial Court entertained an interlocutory appeal from a preliminary injunction issued by Judge Ralph D. Gants, Presiding Justice of the Business Litigation Session of the Superior Court.  Judge Gants had enjoined Fremont from foreclosing on certain subprime home mortgage loans that he found to be in violation of G. L. c. 93A, the Massachusetts Consumer Protection Act.  Judge Gants’s decision below had relied, in part, on retroactive application to the time of the issuance of the loans of what he perceived to be a current-day concept of unfairness in mortgage lending.  

In an amicus brief filed in support of Fremont on behalf of itself and the Associated Industries of Massachusetts, NELF explained that amici’s interest in the case was not specific to mortgage lending and that amici were not without sympathy for the affected homeowners.  As NELF indicated, amici’s concern was instead with the trial court’s retroactive application of a current-day concept of unfairness to the time of the challenged conduct.  NELF argued that this was inconsistent with the fundamental principle of our common law that conduct must be judged by the standards in place when it occurs, raised constitutional concerns under the doctrines of void for vagueness and unlawful delegation of legislative power, and would impermissibly deprive businesses of certainty and predictability with respect to the conduct proscribed by Chapter 93A.  

The Court, apparently heeding NELF’s warnings, upheld the preliminary injunction on grounds that did not rely on retroactive application of a new standard of unfairness.  NELF’s brief had further argued that the Court’s standard for consumer unfairness decisions – whether the conduct runs afoul of “at least the penumbra of some common-law, statutory, or other established concept of unfairness” – is itself vague and unpredictable, providing insufficient guidance to trial courts and businesses alike, and should be replaced with the federal standard requiring violation of a “clear and well-established” public policy.  The SJC’s decision did not address this argument, and Massachusetts law therefore continues to rely on “penumbras” of “concepts” for consumer unfairness determinations.          

Opposing inappropriate Class Actions

The trial court in this case declined to certify under M.R.C.P. 23 a class of Wal-Mart employees alleging missed meal and rest breaks.  In doing so, the trial judge invoked the so-called de minimis exception to the requirement of class-wide injury for consumer class actions under G. L. c. 93A.  The de minimis exception, commonly understood as arising from the Court’s decision in Aspinall v. Phillip Morris Cos., 442 Mass. 381 (2004), as characterized by Justice Cordy in his dissenting opinion in that case, would permit a class to be certified under c. 93A even though some class members have not been injured.  

NELF, in an amicus brief filed in Salvas on behalf of itself and the Associated Industries of Massachusetts, argued in support of Wal-Mart that this purported de minimis rule under c. 93A’s class action provision was inapplicable to this Rule 23 certification.  NELF argued further that the de minimis exception was no longer viable even for c. 93A class actions after the Court’s decision in Hershenow v. Enterprise Rent-A-Car Co., 445 Mass. 802 (2006), confirming that consumers must have suffered actual injury to recover under c. 93A.  NELF explained that this substantive requirement may not be avoided through the mere procedural device of a class action.  

Apparently persuaded on this point, the SJC in Salvas rejected the common interpretation of its Aspinall decision as having created a de minimis exception to the requirement of class-wide injury for certification under c. 93A.  The Court explained that it found certification proper in Aspinall because, since the suit alleged economic harm and class members “alleged that they purchased the [purportedly light] cigarettes at a price that was higher than it would have been had the true properties of the cigarettes been honestly advertised,” there was an adequate showing that all class members had, in fact, been injured.  The Court further noted that its majority opinion in Aspinall “does not mention a ‘de minimis’ requirement” and proceeded to reject a de minimis test in the context of Rule 23 certifications.  While the Court’s decision raises other concerns, discussed at NELF’s October 2008 Board meeting, its rejection of a de minimis standard for either c. 93A or Rule 23 class certifications provides welcome clarification.