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However, the U.S. Supreme Court recently left no doubt that the Federal Arbitration Act (FAA) imposes significant limits on parties’ freedom of contract.

The FAA (9 U.S.C. § 1 et seq.) contains a narrow standard of judicial review that does not permit federal courts to review the merits of an arbitrator’s decision. It instead restricts review to instances of egregious arbitral misconduct, such as fraud or corruption. The business community – concerned about the risk of arbitrary and excessive arbitral awards that are effectively immune from review – for many years had been attempting to expand judicial review under the FAA by private agreement, typically by stipulating to review for errors of law. These efforts had met with decidedly mixed results in the federal circuits.

The Supreme Court recently sided with a minority of the circuits, ruling that parties cannot expand the FAA’s standard of review (Hall Street v. Mattel, 128 S. Ct. 1396 (2008)).

But all is not lost.

While the court closed the door to contractual expansion of judicial review under the FAA itself, the court unexpectedly raised the possibility that parties may nonetheless achieve the same result in federal court outside the FAA.

In a remarkable passage, the majority stated: “The FAA is not the only way into court for parties wanting review of arbitration awards: They may contemplate enforcement under state statutory or common law, for example, where judicial review of different scope is arguable.” Hall St., 128 S. Ct. at 1406.

This groundbreaking statement appears to establish for the first time that parties to a pre-dispute arbitration agreement may choose to opt out of the FAA, and stipulate instead to the applicability of state arbitration law when seeking federal judicial enforcement of an arbitral award.

Since the FAA’s standard of review expressly applies in federal court only, and since the issue before the court was federal judicial review, it would be inappropriate to read this passage as referring exclusively, if at all, to parties’ ability to enforce arbitral awards in state courts. Moreover, the parties’ supplemental briefing in the case, requested by the court, confirms the court was focusing on potential alternative means for federal court review of arbitral decisions.

A host of practical concerns

The cryptic opt-out passage in Hall Street raises a host of practical concerns. From the outset, parties wishing to follow the court’s lead should expressly state in their arbitration clauses they are opting out of the FAA. The FAA has a wide reach and its standard of review would otherwise apply in federal court to any binding arbitral award arising from a contract affecting interstate commerce.

Next comes the key question: Which state law should the parties choose for securing more expansive judicial review than what is available under the FAA? Parties may contract for state law because the FAA does not create federal-question jurisdiction but instead requires an independent jurisdictional basis, typically diversity of citizenship. While the Supreme Court suggested reliance on state statutory or common law, every state has some form of an arbitration statute that has generally superseded common-law enforcement of arbitral decisions, and contains a provision for limited judicial review substantially similar to the FAA.

Apparently New Jersey is the only state with an arbitration statute that, by its express terms, allows parties to expand judicial review by agreement. The statute does not provide any limits to contractual expansion and there apparently has not been any litigation testing its permissible scope. Contracting for review of legal errors should not be controversial, however, because this is an established standard of appellate review.

With the sole exception of New Jersey’s statute, state arbitration statutes contain judicial review provisions that do not allow for review on the merits. Appellate courts in many of these states – such as California, Connecticut, Illinois and North Dakota – have expressly rejected contractual expansion of judicial review. While most state courts have not addressed the issue, parties who select the uncertain law of one of these states run the risk that a court of the chosen state will follow Hall Street and decide parties cannot expand judicial review under the law of that state. That decision would govern the outcome in a later federal court action reviewing an arbitral award under the parties’ agreement.

Some states allow judicial review for certain errors of law under narrow statutory standards of review, namely, that the arbitrator has exceeded his or her powers by disregarding or misapplying the parties’ chosen law.

In Louisiana, for example, courts will review arbitral decisions for misapplication of the law when the parties have stipulated in their agreement that the arbitrator cannot commit material errors of law. The viability of this approach has not been tested in many states and is uncertain, because a court could interpret this strategy as a contractual end run around a statute’s hands-off standard of judicial review.

In Michigan, courts will review for substantial errors of law even when the parties’ agreement is silent on the matter. However, it’s unclear what constitutes a substantial error of law under this standard of review.

Garden State is the safest bet

The court in Scott v. NG U.S. 1, Inc. et al., 450 Mass. 760, 881 N.E. 2d 1125 (2008), reaffirmed the requirements for piercing the corporate veil that it articulated 40 years ago in My Bread Baking Co. v. Cumberland Farms, Inc., 353 Mass. 614, 233 N.E.2d 748 (1968).

Relying on those settled principles, the SJC held in Scott that the defendant parent corporation could not be derivatively liable for environmental contamination allegedly caused by a former subsidiary decades before the parent purchased the subsidiary.

In this important decision, the SJC expressly declined to follow the Massachusetts Appeals Court, which had ruled that the plaintiff should be permitted to develop evidence concerning the parent corporation’s alleged pervasive control over its subsidiary – notwithstanding that any such control would have commenced decades after the alleged contamination had occurred and the property at issue had been sold.

The facts of the case appeared, in the Appeals Court’s view, to pit against each other the policy goal embodied in the state’s Superfund law (i.e., that “the party that caused environmental contamination should be responsible for its cleanup”), and the fundamental corporate law principle that, except in rare circumstances, corporations are legally considered to be separate and distinct entities.

However, the SJC has now made clear, that “[n]either Federal (CERCLA) not State environmental laws displace bedrock principles of corporate common law.”

Migrating contamination

The plaintiff filed suit in the Massachusetts Superior Court seeking damages and reimbursement for cleanup costs for contamination on property in Salem, Mass. that he purchased in 2002.

The plaintiff alleged the contamination migrated from abutting land owned and operated in the 19th century by the Salem Gas Light Company as a gas works.

Among the defendants named was National Grid U.S.A., the corporate successor of New England Electric System (NEES). Since NEES had been the parent of Salem Gas, the plaintiff asserted that National Grid should be liable for cleanup costs resulting from Salem Gas’s alleged contamination.

However, it was undisputed that NEES did not become Salem Gas’s parent until long after the alleged contamination would have occurred. Specifically, in 1890, Salem Gas ended gas manufacturing operations on the abutting land and sold the property to a third party. The gas works itself was dismantled by 1906. Not until 20 years later, in 1926, did the corporate transactions begin that ultimately led to Boston Gas becoming a subsidiary of NEES in 1947.

The Superior Court awarded summary judgment to National Grid. The trial court reasoned that because no corporate relationship existed between NEES and Salem Gas when the alleged contamination occurred no legal basis existed for piercing the corporate veil and holding NEES’s successor, National Grid, liable as the successor parent of Salem Gas.

Policy considerations

The Massachusetts Appeals Court disagreed, however, and reinstated the plaintiff’s claim against National Grid based primarily on two considerations.

First, the Appeals Court read an earlier SJC decision, Attorney General v. M.C.K., Inc., 432 Mass. 546, 736 N.E. 2d 373 (2000), as permitting the disregard of the corporate form to prevent frustration of a significant statutory purpose (such as that embodied in the state Superfund Act).

Second, the Appeals Court rejected the Superior Court’s view that, for the corporate veil to be pierced, the parent corporation’s pervasive control over its subsidiary had to be contemporaneous with the allegedly offensive conduct.

Rather, the Appeals Court regarded as relevant the relationship between parent and subsidiary at any point in time. The Appeals Court reasoned that, just as the contamination on the plaintiff’s property did not disappear in the years after Salem Gas ceased operations on and sold the abutting land, neither did the parent corporation’s potential liability disappear so long as it failed to clean up the property during the time it exercised pervasive control over Salem Gas.

Apparently the Appeals Court concluded this should be regardless of whether the parent even knew the contaminated property had been owned decades earlier by its subsidiary.

Firm rejection

In its illuminating discussion of the equitable doctrine of corporate disregard in Massachusetts, the SJC firmly rejected the Appeals Court’s approach. Its opinion should be required reading for practitioners who deal with Massachusetts corporations. Some salient points are highlighted below.

First, the court in essence reinstated the Superior Court’s “contemporaneity” standard, by reaffirming the fundamental requirement of My Bread Baking that “corporate veils are pierced only in ‘rare particular situations,’ and only when an ‘agency or similar relationship exists between entities’. . . ‘and there is some fraudulent and injurious consequence of the intercorporate relationship.’”

In other words, pervasive control by the parent alone is not enough. For the veil to be pierced, both corporations – the subsidiary and the parent – must be engaged in the wrongful conduct “with substantial disregard of the separate nature of the corporate entities.” Thus, as the Superior Court had found, there could be no parental liability in this case because the corporations in question had no relationship whatsoever at the time of the alleged contamination.

The SJC also corrected as overly broad the Appeals Court’s apparent reading of Attorney General v. M.C.K., Inc. as potentially permitting disregard of the corporate form on policy grounds alone. To the contrary, the SJC emphasized that only where the My Bread Baking factors are present can frustration of a public policy or statute justify piercing the corporate veil. As the SJC put it: “[T]he statutory purpose of [the state’s Superfund Act] . . . is not advanced by doing violence to bedrock principles of corporate law.”

Finally, regarding the Appeals Court’s suggestion that, decades after the contamination, NEES might still be held liable for its subsidiary’s past conduct based on a failure to clean up the site, the SJC – taking into account that NEES sold its interest in Salem Gas in 1973 – noted that the lower court had “identified no source of a pre-1973 continuing duty to investigate possible contamination on properties sold by a related entity decades before there was any corporate relationship.” Absent any such duty, the focus of the case remained with the original alleged contamination, not any subsequent failure to remediate.

In short, the SJC’s decision affirms what corporate practitioners and commercial litigators have long believed: “[T]he corporate form may not be pierced to impose liability for actions taken (or not taken) by another entity long before the formation of a corporate relationship.”

This is welcome confirmation of a fundamental principle of Massachusetts common law. The decision should provide comfort to businesses and their counsel that they need not fear the imposition of liability on parent corporations under Massachusetts law for historic actions of newly acquired subsidiaries over which there was no possible parental control.

The cases, likely to be decided this year, may very well affect:

Those issues are: (1) whether MEPA applies to impacts on human health that do not involve a release or other damage to the physical environment; and (2) whether MEPA authorizes the secretary of energy and environmental affairs to require review of alternative project sites.

Neither issue was directly addressed by the parties to the appeal, but both were necessarily implicated by a decision affirming the trial court's order. For that reason, the New England Legal Foundation and Associated Industries of Massachusetts filed an amicus brief with the SJC arguing that both questions should be answered in the negative.

The court decided to the contrary, with potential ramifications extending well beyond BU's particular project.

Expanding meaning of 'environmental'

Superior Court Judge Ralph D. Gants had found BU's environmental impact report inadequate for failing to analyze the risk of direct human-to-human transmission of contagious disease — for example, by accidental infection of a laboratory worker who then leaves the facility.

Now upheld, that ruling expands the meaning of the word "environmental" for purposes of MEPA well beyond its scope as previously understood, by allowing the environmental affairs secretary to require review of project impacts on human health in the absence of any air or water pollution or other impact on the physical environment giving rise to the perceived health risks.

MEPA requires all state agencies to review and determine the "impact on the natural environment" of projects to be undertaken, permitted or financed by them and to use "all practicable means and measures to minimize damage to the environment." G.L. c. 30, Sects. 61, 62.

Significantly, human beings are not mentioned as one of the "natural resources of the commonwealth" in MEPA's comprehensive and detailed definition of "damage to the environment," G.L. c. 30, Sect. 61, or in comparable definitions in other state laws.

The court has nonetheless necessarily concluded that human beings are within the scope of this defined term in upholding Judge Gants' decision.

The U.S. Supreme Court has addressed similar statutory language in the National Environmental Policy Act, 42 U.S.C. Sects. 4321-4347 (2007), which requires an environmental impact statement for "major Federal actions significantly affecting the quality of the human environment ..." 42 U.S.C. Sect. 4332(C) (2007).

While NEPA itself does not define the term, the NEPA regulations define "human environment" to "include the natural and physical environment and the relationship of people with that environment." 40 CFR Sect. 1508.14 (2007).

In Metropolitan Edison Company v. People Against Nuclear Energy, 460 U.S. 766, 799 (1983), the Supreme Court held that NEPA did not require the Nuclear Regulatory Commission to consider the impact on area residents' psychological health of resumed operations at a nuclear facility following a serious accident.

The court explained:

"NEPA does not require the agency to assess every impact or effect of its proposed action, but only the impact or effect on the environment. If we were to seize the word 'environmental' out of its context and give it the broadest possible definition, the words 'adverse environmental effects' might embrace virtually any consequence of a governmental action that some one [sic] thought 'adverse.'

"But we think the context of the statute shows that Congress was talking about the physical environment — the world around us, so to speak." 460 U.S. at 772.

Secretary's authority expanded

In their amicus submission to the SJC in Allen, NELF and AIM argued for a similar interpretation of MEPA, suggesting that the Massachusetts Legislature had intended "environment" to mean the natural and physical world around human beings, including the air we breathe and the water we drink.

NELF and AIM argued that direct human health impacts potentially associated with the BU project and others like it were not the province of the environmental affairs secretary, but of other federal, state and local authorities. See, e.g., 42 U.S.C. Sect. 262a (2007); G.L. c. 111, Sects. 2, 3; 42 C.F.R. Sect. 73 (2005); Boston Public Health Commission Regulation, Biological Laboratory Regulations, Sects. 1.00-11.00 (2006).

Without discussion, the court implicitly rejected these arguments.

In addition to upholding MEPA's application to human health risks unrelated to any damage to the physical environment, the SJC upheld Judge Gants' ruling that BU's environmental impact report was inadequate for failing to study project locations other than the proposed Boston site.

Here, too, the court's decision appears to expand the environmental affairs secretary's authority under MEPA beyond what a straightforward reading of the statute's terms would indicate.

Section 62A of MEPA provides that, when an environmental impact report is required, the MEPA office "shall ... limit the scope of the report to those issues which by the nature and location of the project are likely to cause damage to the environment." G.L. c. 30, Sect. 62A (emphasis added).

The statute, therefore, appears to direct that both the basic "nature" and the "location" of the proposed project are a given, with the environmental impact review confined to the likely environmental impacts of a project of that nature at that location.

This reading is both logical and consistent with the statutory scheme. Only when one has fixed a project within a specific environment can one properly identify and evaluate the project's environmental impacts.

Furthermore, MEPA's purpose is to inform governmental permitting, land transfer and funding agencies' decisions whether to grant permits, transfer land or provide funding for proposed projects and, if so, on what conditions. 301 Code Mass. Regs. Sect. 11.01(1)(a) and Sect. 11.01(d) (2007).

None of these agencies has the power to require a private project proponent to proceed with a voluntary project at an alternative location to that proposed. This calls into question the utility of requiring review of an alternative site. To do so is effectively to require environmental impact review of a project that no one intends or can be required to undertake, is not pending before any governmental authority, and has a different environment than the environment that is actually at stake.

Moreover, the MEPA regulations identifying categories of projects or aspects thereof that do or may necessitate an environmental impact report demonstrate that a project's proposed location is critical to the threshold determination of MEPA applicability.

For example, 301 Code Mass. Regs. Sect. 11.03 (2007) requires the filing of an environmental notification form triggering potential MEPA review when a proposed project would entail alteration of "designated significant habitat" for rare species, "coastal dune, barrier beach or coastal bank," or "5,000 or more sf of bordering or isolated vegetated wetlands."

To read MEPA as permitting the environmental affairs secretary to mandate evaluation of alternative sites that would not involve these environmental features and, hence, would not trigger environmental impact review in the first place seems inconsistent with the basic regulatory scheme.

These regulations, like the statutory language itself, strongly suggest that the location of a project is simply not an "issue" or aspect of the project "likely to cause damage to the environment" subject to alternatives review. G.L. c. 30, Sect. 62A. The proposed project site is instead what determines the project's environment, the impact on which is to be examined.

The SJC, however, took a different view and found that, in this regard too, MEPA's scope is broader than the statutory language suggests. Justice Robert J. Cordy, in a concurring opinion, acknowledged that the case presented "the temptation to stretch our MEPA statute to ensure that all of the understandable concerns of [the project's] neighbors (even those more properly addressed elsewhere) are considered in the State environmental process ... ."

Cordy further noted that "there are many projects, such as hospitals, clinics, medical laboratories, nursing homes, prisons and even food processing plants," that pose the risk of human-to-human spread of contagious pathogens, and his concurring opinion appears to be an attempt to discourage regulators from applying the court's decision in a way that will have "unintended consequences for many projects of a different nature."

Cordy's concurring opinion notwithstanding, by expansively interpreting MEPA for purposes of the case before it, the court has placed very heavy reliance on the good sense of those government officials who will implement the regulatory program to limit this judicial interpretation of the statutory scope to extraordinary cases. Time will tell whether that reliance was well placed.

Jo Ann Shotwell Kaplan is general counsel of the New England Legal Foundation. She previously practiced for 17 years in the field of environmental law and litigation, most recently as a partner at Choate, Hall & Stewart in Boston.

Employment-at-will is the default standard governing employment relationships in 49 out of the 50 states, and in the District of Columbia.

This well-known rule is that, absent an agreement to the contrary, an employer is free to discharge an employee, and the employee is free to quit, for any reason or for no reason at all, and without any notice.

Generally, businesses support employment-at-will, assuming it provides them more flexibility with regard to employment decisions.

However, employment-at-will is not the panacea that many businesses may assume it to be. The doctrine has become riddled with numerous quirky and unpredictable common law exceptions from state to state, which expose employers to uncertain liability and unpredictable damages, especially given the wildcards of non-economic and punitive damages.

The courts have created numerous exceptions to employment-at-will, based on a perceived inequality of bargaining power between most employers and employees and often to serve social policy goals.

The most generally recognized exceptions are employee claims based on: (1) discharge contrary to the terms of an employer’s handbook, policy, or manual; (2) discharge in violation of a recognized public policy; and (3) breach of the implied covenant of good faith and fair dealing.

These common law claims evade precise definition. Consequently, employers have few, if any, clear guidelines to follow when making personnel decisions. Liability is similarly unpredictable because the contours of these common law claims expand or contract depending on the facts of each case, the particular jurisdiction, and the judge applying the law.

Even though employment-at-will may be the dominant legal paradigm, any employer who discharges an employee today risks exposure to significant defense costs and potentially large jury verdicts.

Abandon employment-at-will

Since this state of affairs actually does not serve the interests of employers or employees, NELF advocates in its white paper the abandonment of the common law employment-at-will doctrine and, in its place, the adoption of a comprehensive legislative wrongful discharge statute.

Such a statute would embody a quid pro quo where an employer’s liability and damages for discharge would be limited in amount and kind, in exchange for a “good cause” standard that would protect an employee from arbitrary termination.

Montana enacted just such a wrongful discharge statute in 1987, which Montana’s business community lobbied for in response to the extravagant damages awards in wrongful discharge cases. The law embodies precisely the quid pro quo proposed above, limiting employers’ exposure to wrongful discharge claims in exchange for holding employers to a good-cause standard when discharging non-probationary employees.

The Montana statute defines “good cause” as “reasonable job-related grounds for dismissal based on a failure to satisfactorily perform job duties, disruption of the employer’s operation, or other legitimate business reason.”

The statute expressly bars non-economic damages, and limits an employee’s economic damages to a maximum of four years’ pay, offset by the employee’s duty to mitigate. While codifying the common law handbook and public policy exceptions, the law significantly narrows them, such as by restricting the handbook exception to express promises in a written personnel policy.

The statute also expressly preempts all other common law tort and contract claims of wrongful discharge for at-will employees.

In practice, the Montana measure appears generally to have succeeded in reducing employers’ exposure to liability and damages, while imposing minimal additional costs for compliance with the good-cause standard.

Montana’s courts generally have applied the good-cause standard reasonably, and, according to employment lawyers in the Montana bar, the number of wrongful discharge suits has declined, due principally to the statute’s limit on damages. Leading economic indicators also show that the law has had no adverse impact on Montana’s overall economic performance and may well have benefited business.

Model Employment Termination Act

In 1991, the Uniform Law Commissioners proposed the Model Employment Termination Act (META), which generally embodies the same quid pro quo as the Montana law, preempting common law claims and limiting damages in exchange for providing good-cause protection to employees, along with recognizing a probationary period.

Unlike the Montana statute, META allows an employer and employee to define what constitutes good cause for discharge, or to waive good-cause protection altogether in exchange for limited severance pay in the event of future discharge.

Many state legislatures have considered, frequently more than once, wrongful discharge bills that typically borrow from these models and generally embody the same quid pro quo of limiting damages in exchange for just-cause protection.

The genesis of some of these bills appears to be a singular concern for the vulnerability of at-will employees. These bills are apparently not promoted as a balanced solution that can benefit both employers and employees. This fact may explain, at least in part, why no other state has yet enacted a wrongful discharge statute.

A balanced wrongful discharge statute would likely be a significant improvement over the current common law thicket of wrongful discharge claims, to the benefit of employers and employees alike.

Such a statute would protect both an employer’s discretion and an employee’s job security, and could also have longer-term benefits for the economy at large. Under a balanced statute, employees would be adequately compensated for, and employers adequately deterred from, adverse employment decisions that do not serve a legitimate business interest.

Conversely, the statute would protect an employer’s reasonable exercise of business judgment and would limit its exposure to damages in the event of liability. In the long run, a balanced statute and its measured application would reduce an employer’s costs associated with each employee, thereby increasing overall productivity and employment opportunities.

In Jepson v. Zoning Board of Appeals of Ipswich, et al. (Lawyers Weekly No. 10-177-07), the SJC found that the Ipswich Board of Appeals did not exceed its authority by allowing a developer to override dimensional requirements for the commercial aspect of a 40B plan.

The proposal, which would be undertaken by the local YMCA, contained commercial uses such as a day-care center, a bank and a coffee shop, along with residential units.

"It's an important decision for affordable housing," said Jeffrey W. Sacks of Boston, who co-authored an amicus brief in Jepson for the Citizens Housing & Planning Association and the Greater Boston Real Estate Board. "It makes it clear that affordable housing projects will get treated like other projects. A 40B project shouldn't be denied because the developer is trying to deliver a good product to the marketplace and include commercial amenities."

Michael E. Malamut of Boston, who co-authored the New England Legal Foundation's amicus brief, added that, as the first case to really address the issue, "this will give the go-ahead for further similar developments, which are cutting-edge in the urban planning field."

The attorney for one of the abutters, Catherine J. Savoie of Boston, said that the ruling will likely open the door for future cases in which the court has to decide where commercial components stop merely being "incidental" to a project.

"I can imagine a future case — and there will be future cases — where developers will attempt further incursions into commercial development under the umbrella of a Chapter 40B permit," she said. "It will remain for the court to have to decide how much they want to bend. ... The contours will have to be decided."

Meanwhile, Michael A. Tucker of Newburyport, who represented another abutter, noted that his client was not patently against a commercial component to the development. "We argued that if you'll have a commercial use, you need to approach the commercial variances in the way that has always been done traditionally," Tucker said. "That wasn't done here."

Tucker said that since the Jepson ruling came down, it has been difficult to advise attorneys involved in other 40B cases that contain commercial development what the parameters are.

"If you're on a zoning board, the only thing you can read out of the decision is that 40B is a trump card that overrides a lot of those variance requirements. If you're on a planning board or historical district commission, exactly what direction are you supposed to go in? That's the problematic aspect of Jepson," noted Tucker.

'An issue they wanted to address'

In St. Fleur v. WPI Cable Systems/Mutron, SJC No. 09961, the court will decide if an employee waived her right to a jury trial by signing her employer's arbitration agreement, even where she says she was only presented with the signature page and never saw the entire agreement.

"It is basic that before [the employee] can be charged with reading the arbitration agreement, she must be provided with a copy of it," wrote Howard I. Wilgoren of Boston, who represents the employee. "The undisputed fact that [she] did not know what the term arbitration meant until more than three years after she signed the one page document … negates any conclusion she knowingly and voluntarily waived her right to a jury trial."

Despite the employee's contention that the agreement was therefore not enforceable, the employer's Boston lawyer, Joseph F. Hardcastle, told Lawyers Weekly after oral arguments that directly above her signature in bold capital letters was an acknowledgment that she had carefully read the agreement, had entered into it voluntarily and had been given the opportunity to discuss it with counsel.

"The very reason that you put language like that in an agreement is to avoid situations like this where someone comes back and says they never read it," he said. "As a matter of Massachusetts law, when you sign an acknowledgment, you can't come back later and make that kind of argument."

In an amicus brief filed by the New England Legal Foundation, Benjamin G. Robbins added that the Federal Arbitration Act preempts an employee from raising a knowing-and-voluntary-waiver defense to avoid arbitration.

"Recognition of [the employee's] defense would not only usurp Congress's exclusive authority to limit the FAA's scope but it would also threaten the enforceability of arbitration policies adopted by employers throughout the Commonwealth," he wrote. "A decision in [her] favor would upset Massachusetts employers' settled expectations under the FAA and expose their arbitration agreements to the kind of subjective challenge presented here. Any such sea change … must emanate from Congress and not from a state court."

Briefs filed by the parties in St. Fleur can be found in the Brief Bank section of our website.

The new deal

The moderated discussion, featuring comments by Vice Chancellor Stephen P. Lamb of the Delaware Chancery Court and Justice Ralph D. Gants of the Massachusetts Superior Court Business Litigation Session (BLS), focused on procedural and structural differences between the two courts.

These differences, just as much as differences in the substantive law of the respective jurisdiction, should be considered by practitioners when deciding where to litigate a complex business case within the jurisdictions of both the Delaware court and an analogous New England forum.

For New England corporations formed under Delaware law, Delaware is an obvious choice if the litigation involves internal corporate governance. Unlike the BLS, for example, which is simply a session of the Massachusetts Superior Court, the Delaware Chancery Court is the ultimate interpreter of applicable corporate law for the many businesses incorporated in Delaware, subject only to appeal to the Delaware Supreme Court.

However, the Delaware court is more limited than its New England relatives. Thus, while the Delaware Chancery Court is considered by many to be the inspiration for the business court movement nationwide, it is primarily a court of equity. It is also a court of limited jurisdiction concentrated largely on internal corporate affairs. Other business or complex litigation courts, such as the BLS, typically cover a much broader range of business disputes, including “business v. business” cases and claims for damages tried to juries.

While Delaware Chancery has jurisdiction to hear preliminary injunction applications in non-competition cases, it does not have as strong a lead over other state courts in that arena as in the realm of internal corporate disputes. The law to be applied in such cases is often specified in the non-competition agreement and typically will be that of the state where the employee is employed or the business has its headquarters (neither of which may be in Delaware).

All business and complex litigation courts are likely to have considerable experience with the interpretation of non-competition agreements governed by the law of their own state. And when speed is of the essence, the best jurisdiction for preliminary enforcement of a non-competition agreement may be the one where the employee is located.

Significant resources

Delaware Chancery does have significant resources. The court is well funded, with five full-time judges. Each judge has two law clerks and one secretary. Judges are assigned a case and typically follow it through to the end. Relatively quick trial dates can be obtained when necessary.

Analogous courts in New England may not have equivalent resources. The BLS, for instance, has only one full-time judge and two judges who alternate every three months in a second session.

The BLS judges share one law clerk and a half-time secretary. Cases assigned to the full-time judge stay with him and the part-time judges are often available to hear cases on which they have had substantial involvement, even when they are not sitting in the BLS. Nevertheless, there is a certain discontinuity with respect to cases assigned to the second session. While a trial date two months out can be obtained where necessary, decisions on dispositive motions may be delayed significantly in the BLS given resource constraints.

Important distinctions

Keeping distinctions like these in mind will help in evaluating alternative forums. For example, since in the Delaware Chancery the same judge who will serve as the fact-finder and ultimate decider of a case will also hear any summary judgment motions, there is less likelihood that such motions will be effective in narrowing disputes or disposing of cases.

A summary judgment motion in Delaware may be useful in educating the judge about the facts of and the law applicable to a case, but the judge may decide to go ahead and have a trial, rather than risk reversal of a summary judgment decisions. On the other hand, in a court like the BLS, with much more limited court resources and jury trials, there may be an institutional imperative to grant summary judgment where warranted.

Another stark difference between the Delaware court and New England business courts is that the Delaware legislature has recently enabled Chancery Court judges to act as confidential mediators in business disputes, at the parties’ expense, even in matters that are not in litigation.

Over the past few years 75 percent of the mediated cases have been resolved on the day of the mediation or very shortly thereafter. If the matter is not resolved, there is no public record that mediation was requested or occurred and the parties are free to litigate or engage in further alternative dispute resolution process in or outside of Delaware.

Other recently adopted legislation grants the Chancery Court jurisdiction over legal disputes involving high technology issues and many of the judges’ subsequent mediations have involved intellectual property and technology-related disputes. No technology cases have yet resulted in published decisions, so the Chancery Court’s impact in this area of the law has yet to be felt.

Forum selection, whether in a pre-dispute contract such as a non-competition agreement or at the time of litigation, is often a complex decision. As a rule of thumb, where jurisdiction exists in both Delaware and a New England forum, if the case involves internal governance of a Delaware corporation Delaware Chancery is a natural choice. But even then there may be cases where strong local ties and the convenience of the parties warrant trying a corporate governance case in the BLS or another New England business or complex litigation court, which will apply a thoughtful interpretation of Delaware law.

Perhaps all that can be said by way of general guidance is that the nation’s first business court, given its considerable resources and expertise in the area of corporate governance, is very often worthy of serious consideration by New England companies looking for the optimal forum for resolution of their disputes.

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The following article, by NELF President