Urging the Maine Supreme Judicial Court to Adopt Reliance Damages As the Proper Measure  of Compensation for Breach of An Agreement to Negotiate in Good Faith
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This case raises an issue of first impression in Maine, namely what should be the proper measure of damages where a court has determined that there has been a violation of a duty to negotiate in good faith.  Here, the jury, after finding that the duty had been breached and over the defendants’ objection, was permitted by the trial judge to award “lost profits” to the plaintiff.  The appellant, Eastern Maine Electric Corporate, Inc., while not conceding that the jury finding that it had violated its duty was legally correct, also disputes that “lost profits” are a proper measure of damages. 
 
While there is a split in the decisions on this issue throughout the country, NELF has filed an amicus brief urging the Maine Supreme Judicial Court to adopt a general rule that where, as here, a deal has never been finalized, the appropriate measure of compensation for the violation of a duty to negotiate in good faith, should strictly be reliance damages, and not lost profits.  NELF relies on the reasoning of the New York court in Goodstein Constr. Corp. v. City of New York, which focused its legal analysis on the precise nature of the sole obligation that was breached, which was not a breach of a contract, but a breach of the duty of negotiate in good faith a contract not yet in existence.  Since the contract was never executed, NELF argued that it would be anomalous to award expectancy damages for the breach of an agreement that was never finalized.
 
In addition, NELF pointed out several policy and logical reasons that dictate that reliance damages are the most appropriate form of compensation when there has been a failure to negotiate in good faith.  Among these, NELF noted that holding “lost profits” to be the measure of compensation could have a deleterious effect on the use of term sheets and other interim agreements that are routinely used as the parties work through their negotiations; such a ruling would create an in terrorem regime in which such interim documents could be potential bases for “lost profits” damages, which are typically much larger than the actual costs that the parties have sunk into their contract negotiations.  (In this case, the lost profits damage award was $13.6 million, which is exponentially larger than the costs actually incurred by the plaintiff in the negotiations, which were estimated to be not more than $350,000.) 

Opposing Expansion of Whistleblower Protection in Maine

The case of Costain v. Sunbury Primary Care, decided by the Maine Supreme Judicial Court on September 9, 2008, raised the question whether the Maine Whistleblower Protection Act, 26 M.R.S. § 833, extends beyond a current employment relationship to protect an individual who participated in an investigation of a business before she became its employee.  The plaintiff, who alleged that she was fired by the defendant medical group after it was discovered that she had participated in an investigation of a physician in the group years before she was hired, argued even more broadly that the Act should protect an employee from adverse employment action based on any challenge the employee has ever made to the practices of any business that has employees. If adopted, this interpretation of the Act would have prohibited employers from considering any activity of a job applicant or employee challenging their own or any other employer’s business practices, and would have protected even the career corporate gadfly from the exercise of normal employer prerogatives under the employment-at-will doctrine.  

NELF’s amicus brief in support of the defendant argued that the Act, properly construed, is limited to protecting employees who challenge the business practices of their then employer, from whom they may fear reprisal, and the Court agreed. The Court held that the Act “unambiguously limit[s] the protection afforded . . . to (1) employees (2) who report to an employer (3) about a violation (4) committed or practiced by that employer” and that the plaintiff’s participation in the investigation at issue here did not fit these parameters because the “investigation of the doctor bore no relationship to the employment in which she was engaged at the time of the investigation.” 

Supporting Reversal of an Agency Decision that Requires Owners of an Artificial Water Storage Facility to Operate It as if It Were a Natural Lake

The Flagstaff Storage Project is an artificial reservoir constructed under state legislative mandate for the purpose of regulating the natural flows of the Kennebec River in Maine to enable its use during the entire year in connection with manufacturing and power generation.  Thanks to the operation of the Flagstaff Project and other water storage reservoirs regulating its flows, the Kennebec River is the most productive source of clean, renewable power in the State of Maine.  Despite these facts, the Maine Supreme Judicial Court, in a decision in this case rendered on July 26, 2007, decreed that the Flagstaff Project, an artificial creation, must be operated as if it were a natural water body in that any draw-downs of water in the reservoir must match the ebbs and flows of a natural lake.  Disagreeing with NELF, the Court affirmed the Maine Board of Environmental Protection’s denial of water quality certification for the project.  The Court deferred to and upheld the judgment of the Board that the use of other artificial impoundments as the reference standard for application of state water quality standards, rather than natural lakes, would require advance EPA approval under provisions of the federal Clean Water Act, 33 U.S.C. §§ 1251 et seq., and regulations thereunder.  The decision imposes an operational regime on the Flagstaff Project that is inconsistent with its historical operations and adversely affects beneficial policy goals, including the creation of electricity through the renewable means of hydropower and regulation of the Kennebec River’s flows for other commercial and recreational uses.

Seeking Reversal Of A Holding That The Passage Of River Water Through A Hydroelectric Dam Creates a “Discharge” Triggering The Federal Clean Water Act’s Requirement For State Water Quality Certification

In this case S.D. Warren Company (“Warren”) asked the United States Supreme Court to review the Maine Supreme Judicial Court’s denial of Warren’s appeal from a decision by the Maine Department of Environmental Protection (“DEP”) with respect to five contiguous hydroelectric dam projects in the Presumpscot River in Maine that Warren operates.  Warren’s appeal hinged on the meaning of the term “discharge” in § 401(a) of the federal Clean Water Act (“CWA”), 33 U.S.C. § 1341(a).  Under § 401(a), if the operation of Warren’s dams “may result in any discharge into the navigable waters,” Warren would be required to obtain a water quality certification from the DEP before it could renew its federal license to operate.  Based on numerous federal cases that had held in other contexts that an “addition” to the navigable waters had to occur in order for their to be a “discharge” under the CWA, Warren argued that, because it was undisputed that the operation of its dams neither increased nor decreased the amount of water in the river and added no pollutants, there was no “addition” to the river and, therefore, no “discharge.”  Therefore, DEP certification was not required by § 401(a). The Maine SJC agreed with Warren that an “addition” was required in order for there to be a “discharge,” but reasoned that, nevertheless, a “discharge” occurred because during the moments when the waters of the Presumpscot passed through Warren’s hydroelectric dams they were under private control and, therefore, had lost their status as waters of the United States. Accordingly, the SJC held, when those waters “are re-deposited into the natural course of the river it results in an addition to the waters of the United States.” 

When Warren petitioned the U.S. Supreme Court for certiorari, NELF filed an amicus brief in support, arguing that the legal test applied by the SJC to determine whether the flow of water through Warren’s dams results in an “addition,” and thereby a “discharge,” was erroneous under Section 401(a) of the CWA. NELF pointed out that by resting its decision on the ownership status of the water as it passed through the dams, the SJC failed to condition a discharge under the CWA on an actual addition to the waters at issue. In addition, the SJC’s reasoning would lead to absurd results, e.g., it would mandate a finding that an addition has occurred even where a dam’s operation reduces the volume of water in a river, since even a smaller volume of water reentering the river would still be an “addition to the waters of the United States.” Finally, NELF pointed out that the SJC’s test contradicted the Supreme Court’s teaching in South Florida Water Management District v. Miccosukee Tribe, 541 U.S. 95, 109 (2004) that the simple redeposit of the same water back into the body of water from which it came does not constitute an addition—and therefore cannot be a discharge—under the CWA. After the Supreme Court granted certiorari, NELF filed an amicus merits brief in support of S.D. Warren. In this brief NELF argued that, contrary to the SJC’s finding, river water passing through a hydroelectric dam never loses its status as waters of the United States.  

On May 15, 2006, the Supreme Court issued a decision rejecting Warren’s appeal.  Although the Court agreed with NELF that the SJC’s reasoning was incorrect and that the exercise of private control does not denationalize national waters, it nonetheless upheld the SJC’s decision on the ground that, under § 401(a), an “addition” is not required for there to be a “discharge.” Rather, the Court construed “discharge” according to its ordinary English usage, which the Court found to be a “flowing or issuing out.”  On this basis the Court found that the operation of Warren’s dams (and all other hydroelectric dams) did raise the potential for a discharge, and thus Warren was required to obtain DEP water quality certification before it could renew its federal license.

Arguing That Maine Should Interpret Its Disability Discrimination Law Consistently With Federal Law And The Majority Of Other States 

The issue in this case was whether the Maine Human Rights Act (“MHRA”), which prohibits employment discrimination based on a physical or mental disability, requires that a plaintiff must show a “substantial limitation on a major life activity” in order to prove a disability. This is the standard under the federal Americans with Disabilities Act (“ADA”); it is also the standard adopted under state anti-discrimination statutes in 43 of the 50 states. The question arises under Maine law because, unlike the federal statute, Maine’s statutory definition of disability does not expressly contain this requirement. 

The Maine Human Rights Commission (“MHRC”) promulgated a regulation in 1985 bringing Maine into line with the ADA by requiring a plaintiff to prove a substantial limitation on a major life activity.  However, that regulation was attacked in this case as invalid and ultra vires because it allegedly exceeded the Maine Legislature’s intent in the MHRA. The case involved a current employee of Wal-Mart in Maine, who has brought suit under the MHRA claiming that the company discriminated against him when it failed to accommodate his medical condition. He had been in a position that Wal-Mart said required 48-52 hours of work per week and did not allow two consecutive days off during one week. The employee presented Wal-Mart with a physician assistant’s note indicating that, as a result of high blood pressure and heart disease, he could not work more than 45 hours per week and required two consecutive days off each week. Because these limitations did not match the requirements of his position, Wal-Mart required him to give up that job. The company offered him another less stressful job, which he took. The plaintiff then sued in Maine state court under the MHRA. Wal-Mart removed the matter to federal court, which certified to the Maine Supreme Judicial Court (“SJC”) the question whether the plaintiff must meet the “substantial limitation” requirement in order to prevail in his suit under Maine law. 

In an amicus brief filed on July 1, 2005, NELF, together with co-amici the Maine Chamber of Commerce and others, urged the SJC to uphold the MHRC “substantial limitation” requirement, which would align Maine with the majority of other states and federal law.  Amici argued that the majority position preserves a reasonable balance between an employee’s right to non-discriminatory treatment and an employer’s right to protect its own economic interests by making reasonable employment decisions. Amici also argued that upholding the MHRC’s “substantial limitation” regulation would advance the economically desirable goals of national uniformity and predictability of results in employment matters while a rejection of the regulation would create a disincentive for businesses to remain or locate in Maine.  

On April 11, 2006, the Maine SJC sided with the plaintiff, deciding 4-3 that the MHRA does not require a showing of substantial limitation on a major life activity to establish a disability.  The Court concluded therefore that the MHRC’s regulation was invalid as ultra vires.

Protecting Landowners against Targeted Downzoning

This case involves the downzoning of a parcel slated for development as a retail shopping center by plaintiff Kittery Retail Ventures, LLC, (“KRV”). In 1999, KRV started work to develop a retail shopping mall as permitted by the Kittery zoning law then in effect. That zoning ordinance permitted up to 30% of a parcel to be developed for retail purposes. Because many town citizens opposed additional retail development, the Town passed a referendum on June 13, 2000 amending the zoning bylaw to restrict development to 15% of a parcel. When anti-development forces determined that the KRV project and others were grandfathered and would continue despite the zoning change, the citizens passed a referendum making the June 13, 2000 amendment retroactive to September, 1999. Campaign literature indicated that the intent of the retroactivity referendum was to prohibit otherwise grandfathered development. After the retroactivity referendum passed, the Town rejected KRV’s application to develop the property.  KRV then appealed to Superior Court, which granted summary judgment for the Town.  KRV then appealed to the Maine Supreme Judicial Court (“SJC”).  

In an amicus brief filed in support of KRV, NELF argued that retroactive zoning specifically intended to prohibit a particular development violates the Maine and United States Constitutions’ due process and equal protection provisions. Moreover, Maine recognizes the doctrine of equitable vested rights, which applies where the municipality has exhibited bad faith by amending a zoning provision during a real estate developer’s application process but before legal vested rights could accrue under a valid building permit.
  
On May 11, 2004, the SJC affirmed the decision below, ignoring NELF’s argument that the inhabitants of the town violated KRV’s due process rights by referendum and justifying the town’s conduct based on the good faith of the town selectmen and boards.  On May 24, 2004, KRV requested reconsideration and NELF submitted an amicus letter in support of reconsideration.  The SJC denied reconsideration August 12, 2004.  Thereafter, KRV petitioned the United States Supreme Court for certiorari on January 10, 2005, and NELF filed an amicus brief in support.  On March 7, 2005, the Supreme Court denied certiorari.

Reducing Penalties on Employers in Good Faith Disputes with Employees

Plaintiff Bisbing was employed as an emergency physician with the Maine Medical Center (“MMC”) and left voluntarily in 2000. He claimed that MMC owed him eight weeks of accrued vacation time. MMC countered that Bisbing, like all other MMC emergency doctors, worked an irregular schedule that had allowed ample vacation time. A jury found for Bisbing, and the presiding judge assessed treble damages and attorneys’ fees against MMC, in accordance with the Maine delayed wage statute. MMC appealed the award of treble damages and fees to the Maine Supreme Judicial Court, asserting that the statute contained an implicit good-faith defense against such relief. 

NELF filed an amicus brief supporting MMC, arguing that Maine case law limiting common-law punitive damages to egregious circumstances should apply to statutory multiple damages. An implied good-faith defense should prevent the imposition of a severe penalty on employers that have genuine factual disputes with employees about past due wages.  

On April 10, 2003 the Supreme Judicial Court issued its opinion upholding the lower court ruling. The court recognized that the “effect of the statute is harsh.” Nevertheless, it indicated that any remedy lay with the legislature because the plain words of the Maine delayed wage statute (unlike most other state delayed wage statutes) require multiple damages and attorneys’ fees without regard to the good faith nature of the employer’s defense.

Retroactive Invalidity of State Permitting Process

Maine has a permit-by-rule process that permits the construction of docks that meet specifications set out in the rule. The only procedural requirement is notification of the Department of Environmental Protection.  A landowner built a dock under the authority of the permit-by-rule. A Maine superior court held that the regulation authorizing the permit-by-rule process was void as ultra vires.  The court also held that the rule was arbitrary and capricious because it had a purpose in addition to protecting the environment, that of saving agency time and money. The court further held that the permit itself was invalid because it was based on the unlawful rule.  

While there were a number of issues on appeal, NELF’s brief focused on two.  First, NELF argued that the court erred, as a matter of law, in declaring the permit invalid.  Both the United States Supreme Court and the Maine Law Court have held that judicial invalidation of a statute or regulation does not automatically invalidate action taking under that statute or regulation.  Those precedents require that a court consider the rights that may have become vested and the protection of reliance interests. Second, NELF made the policy argument that permit-by-rule provisions are not arbitrary and capricious merely because one purpose behind them is saving money and staff time and streamlining the process for applicants. NELF pointed to well-established federal permit-by-rule processes and to analogous programs in other states, and argued that regulatory agencies act appropriately, responsibly, and reasonably when they act to conserve limited agency resources, focus enforcement activity, and streamline the regulatory process through a permit by rule.  

On April 29, 2003 the Maine SJC upheld the rule, finding that it was neither ultra vires nor arbitrary and capricious.  Since the rule and permit were valid, the SJC did not reach the retroactivity issue.

Statute of Limitation and “Discovery Rule” Applicability to Claims for Property Damage Due to Environmental Contamination
 
This case concerns statutory and common-law claims for property damage caused by the migration of contaminated groundwater onto real property, and the proper application of the statute of limitations to those claims. Taygeta brought this action against Varian, the former owner of adjacent property, alleging damage from the migration of contaminated groundwater. The parties agree that the applicable statute of limitations period is three years. The court issued an order, finding as “uncontroverted facts” that Taygeta was aware or reasonably should have been aware of the contamination on its property more than three years before the filing of the Complaint. The court issued an order dismissing the action“as barred by the statute of limitations” and Taygeta appealed, arguing that a cause of action accrues only after the plaintiff has actual knowledge of the harm and notice of the likely cause of the harm.  

Massachusetts law holds that a cause of action accrues “when the plaintiff discovers, or ... should reasonably have discovered, that she had been harmed or may have been harmed by the defendant’s conduct.” The discovery rule, an exception to the general rule that a cause of action in tort accrues at the time of injury, is based on the fact that certain wrongs are “inherently unknowable.” When the circumstances are such that the wrong is no longer “inherently unknowable,” the exception ceases to apply and the cause of action accrues.  NELF filed a brief in support of Varian, arguing that the plaintiff’s interpretation of the discovery rule would allow plaintiffs to ignore warning signs of injury. Discouraging a plaintiff from bringing a timely action is contrary to the principle underlying statutes of limitations that plaintiffs should be encouraged to bring actions when evidence is fresh and available.  The SJC ruled in March 2002 that Taygeta did not have an independent duty to investigate under Chapter 21E; that the statute began to run when Taygeta had actual knowledge of contamination; and that Taygeta thus had a surviving cause of action.

Urging that Indian Tribes are Subject to Maine's Freedom of Access Act When Acting in a Municipal Capacity

This appeal to the Maine Law Court arose out of the attempt by three paper companies to gain access to documents of the Penobscot Nation and the Passamaquoddy Tribe (collectively the "Tribes") through Maine's Freedom of Access Act ("FOAA"). The FOAA request was made after the companies learned that the Tribes had applied to the EPA for "Treatment as a State" status under Clean Water Act. The companies sought documents related to the Tribes' attempts to regulate water quality and to obtain permitting authority under the Clean Water Act. The FOAA defines "public records" as all records "in the possession or custody of an agency or public official of this State or any of its political subdivisions . . . [that] ha[ve] been received or prepared for use in connection with the transaction of public or governmental business or contain[] information relating to the transaction of public or governmental business" with several specific exceptions, none of which are relevant to this case. The Tribes rejected the request and contended that FOAA did not apply to them because, if it did, it "would constitute state interference with internal tribal affairs." The paper companies sued. The Superior Court held that, under the federal and state statutes governing the settlement of the Maine Indian land claims, when the Tribes act as "municipalities" of Maine, "they are reachable under state and federal law, but when they function as a tribe as to internal matters they are not." Using analyses adopted by the First Circuit and the Law Court, the Superior Court concluded that the requested records did not relate to "inner-workings of the tribes." The Court, accordingly, ordered production of the requested documents. The Tribes appealed. 

NELF filed an amicus brief in the Law Court on behalf of numerous Maine municipalities and several municipal water districts that would be affected by the Tribe's regulation of water quality outside of Indian land. The NELF brief argued that, when the Tribes act to regulate conduct and activities outside of Indian land, they act in their municipal capacity and are, therefore, subject to the requirements of FOAA. The Law Court agreed and held that the Tribes act in their municipal capacity when they "interact with persons or entities other than their tribal membership, such as the state or federal government." The Court, accordingly, held that "the Tribes' communications with the federal government or the state in the context of their water quality authority are not matters ‘internal' to the Tribes, and are subject to the public records provisions of" FOAA. The Court also held that the "Tribes are ordinarily acting with regard to internal tribal matters when they are engaged in the deliberative processes of self-government," and, therefore, minutes of tribal council meetings are not public records.