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.