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Business Litigation Blog

Derivative suits on behalf of LLCs: No futility exception? Not so fast.

Superior Court Denies College's Attempt to Hold Auditor Liable for Failure to Detect Employee's Fraud

In an important recent decision in the Business Litigation Session of the Massachusetts Superior Court, Judge Kenneth W. Salinger rejected Merrimack College's attempt to hold its auditor KPMG, LLP liable for its failure to discover an employee's fraud.  

Are The Costs Of Mediation Recoverable In Fee-Shifting Cases?

Cost can be a deterrent when parties are considering whether to mediate a complex business dispute. Mediation is an excellent opportunity to settle a case in advance of costly trial preparation, but mediation requires parties to pay for both a mediator and their attorneys' time to prepare for and attend the mediation. Are those costs recoverable if mediation is unsuccessful and findings at trial require the losing party to pay the winning party's attorneys' fees and costs? According to recent federal case law in the District of Massachusetts, the answer to that question depends on the basis of the fee-shifting award.

Whistleblower Act: Allegations of Retaliation Fail Where the Conduct for Which the Retaliation is Alleged Was Committed by Co-Workers, Not Employer

The Whistle Blower Act, Mass. General Laws Ch. 149 § 185(b), provides that a public employer may not retaliate against a public employee who has (1) "blown the whistle" or, in other words, disclosed an activity, policy or practice of the employer that the employee believes is a violation of a law, rule, or regulation and a risk to public health, safety or the environment; (2) provided information to a public body conducting an investigation into such activity; or (3) objected to or refused to participate in such activity. Retaliation under the Act includes any adverse employment action, such as demoting, suspending or firing the employee who makes the disclosure or objects to the activity.

Driving Away From the Courts: Uber Drivers Must Arbitrate

In a recent decision, the Ninth Circuit Court of Appeals in San Francisco, ruled that private arbitration agreements between Uber and two former drivers in California and Massachusetts were valid and enforceable. The former drivers, who were seeking protections for themselves and on behalf of a proposed class of drivers from Uber's policies via a lawsuit in the federal courts, are now forced to return to arbitration, where they must seek individual redress. This strikes a heavy blow against Uber drivers in similar circumstances, who seek to be classified as employees rather than as independent contractors.

Federal Circuit Rules that Patent Suits Can Continue to Be Filed in Any District Where Defendant is Subject to Personal Jurisdiction

In a highly anticipated decision, the Federal Circuit recently issued an opinion denying a request made by TC Heartland LLC ("Heartland") for new restrictions on where patent suits can be filed.  In Re TC Heartland LLC, No. 2016-105, slip. op. (Fed. Cir. April 29, 2016).  

A Primer On The Defend Trade Secrets Act

A trade secret in the United States, once protected under state common law and state statute, is now officially a matter of national importance.  President Barack Obama signed into federal law on May 11, 2016 the bi-partisan Defend Trade Secrets Act (DTSA), which creates, among other things, a federal cause of action for the theft or misappropriation of trade secrets used in, or intended for use in, interstate or foreign commerce. See Pub. L. 114-153, 130 Stat. 376 (2016); see also 18 U.S.C. § 1836(c) ("The district courts of the United States shall have original jurisdiction of civil actions brought under this section."). "Trade secrets are the commercially valuable designs, processes, techniques, and other forms of information kept confidential by companies because, by virtue of their secrecy, they give companies an edge in a competitive marketplace."  H.R. Rep. No. 114-529, at 2 (2016).  Significantly, the DTSA provides ample remedies. It expressly permits relief for aggrieved trade secret owners in the form of compensatory and punitive damages, injunctive relief, and attorney's fees (in egregious cases). Furthermore, under both extreme and exigent circumstances, a plaintiff may, upon a sufficient factual showing, obtain an order seizing goods in commerce to protect against the unlawful dissemination of the trade secret, sales made in furtherance of the misappropriation, and the destruction of evidence.

Employers May Not Prohibit Class Actions, Holds The 7th Circuit

The 7th Circuit Court of Appeals recently created a schism between the Circuits that may lead to the Supreme Court's intervention on an important issue: whether an employer may bar employees from bringing class action claims by requiring claims to be arbitrated. The 7th Circuit, in deciding that employers cannot do so, has diverged from the 5th Circuit, leaving a circuit split that the Supreme Court will now likely be compelled to resolve.

Honey, You May Have To Testify: The Limits of the Spousal Disqualification In Civil Litigation (the Cosby edition)

The question of whether a spouse may be called as a witness in a civil case recently came up in the civil litigation surrounding the sexual assault allegations against comedian Bill Cosby. People often reflexively (and mistakenly) think that the issue is governed by the spousal privilege. In fact, in Massachusetts the spousal privilege is only applicable in criminal cases where one spouse is the defendant. M.G.L. c. 233 sec. 20, cl. 1. In those circumstances, the spousal privilege can be invoked by a witness to avoid being compelled to testify against his or her spouse. Com. v. Szerlong, 457 Mass. 858, 865 (2010). The testifying spouse can also choose to waive the privilege if the spouse wants to testify. Because the spousal privilege is applicable only in criminal proceedings, it is essentially irrelevant in civil litigation.

Of Jurors and Jury Instructions

I attended a recent Federal Bar Association breakfast that was hosted by a thoughtful member of the federal bench in Massachusetts. He raised an important question about juror comprehension: Should each juror have a personal copy of the Court's jury instructions and read along with the judge throughout the charge?  

Massachusetts Supreme Judicial Court Answers Important Workers' Compensation Benefits Question

In a ruling that brings certainty to employers and employees, this month the Massachusetts Supreme Judicial Court issued two opinions concerning workers' compensation benefits, specifically, the scope of an insurer's lien. Generally, under G.L. c. 152, the workers' compensation statute, most private employers in Massachusetts are mandated to purchase workers' compensation insurance or qualify as self-insured. The law enables employees to receive benefits after on-the-job injuries, but prohibits them from suing their employers. Under Chapter 152, injured employees can recover payment for damages such as medical expenses, rehabilitation costs, and lost wages. However, they cannot recover compensation for pain and suffering.

Navigating Massachusetts' New Parental Leave Law

In April 2015, Massachusetts' Parental Leave Act went into effect. G.L. c. 149, §105D, previously known as the Maternity Leave Act became the Parental Leave Act, applicable to both men and women. The law continues to apply only to employers with six or more employees. It provides for 8 weeks of unpaid leave for the birth of a child, adoption of a child or placement of a child pursuant to a court order, although if both parents work for the same employer, they can only take a combined total of 8 weeks of leave.  

Outrageous - But Is It Actionable?

With the advent - and ubiquity - of the internet and social media has come an exponential increase in the potential for the publication of negative statements about individuals, corporations, or other entities. While such statements may hurt feelings, thanks to the First Amendment they may not provide the basis for legal action in Massachusetts unless they meet the standard for defamation, which encompasses libel (written words) and slander (spoken words). See Ravnikar v. Bogojavlensky, 438 Mass. 627, 629-30 (2003). To succeed, a defamation plaintiff must prove the following: (1) the defendant made a statement "of and concerning" the plaintiff, to a third party; (2) the statement could damage the plaintiff's reputation in the community; (3) the defendant was at fault in making the statement, whether negligently where the subject is a private individual or with actual malice in the case of a public official or public figure; and (4) the statement caused the plaintiff economic harm or otherwise fits four specific criteria to be actionable without proof of economic loss. Scholz v. Delp, 473 Mass. 242, 249 (2015). Regarding (3), above, the First Amendment grants greater protection to statements made about public figures or about matters of public concern, making defamation claims in those contexts significantly more difficult to prove. 

Massachusetts Superior Court Holds That Plaintiffs Can Sue Distinct Corporations Under Single Integrated Employer Theory

In the recent case of Fitzgerald v. The Chateau Restaurant Corp., No. 14-01990-J, 2016 WL 344155 (Mass. Sup. Ct. Jan. 4, 2016), a former manager at The Chateau Burlington and The Chateau Andover restaurants filed a putative class action against parent company The Chateau Restaurant Corporation, Inc. and several related corporations which owned individual Chateau restaurants in the Massachusetts Italian restaurant chain. In his complaint, the Plaintiff alleged that he was routinely denied the opportunity to take his off-site meal break--because of a company policy that if only one manager was on site, that manager could not leave the restaurant--yet he still had his pay automatically deducted to account for such a thirty-minute meal break. Id. at *1-2. Fitzgerald filed a putative class action on behalf of himself and other similarly situated hourly managers at any Chateau restaurant location during the six-year period preceding the commencement of the action, alleging violation of the Massachusetts Wage Act, violation of the Massachusetts Overtime Act, breach of contract and unjust enrichment. Id.

What is the difference between a jury trial and a bench trial in Massachusetts?

Articles XII and XV of the Massachusetts Constitution guarantee the right to a trial by jury, but the choice of whether to exercise that right is a strategic decision that often depends upon the facts and circumstances of a case.  A case where the judge serves as fact-finder is referred to as a bench trial or a jury-waived trial.  When choosing between a jury trial and a bench trial, lawyers and their clients must first evaluate factors like the strength and complexity of the legal claims and defenses, the makeup of the parties, and the location of the trial. The identity of the trial judge may also be a consideration for a party deciding whether to proceed with a jury trial or a bench trial.   

Mass. Gen. Laws c. 93A, Section 9 versus Section 11

Massachusetts General Laws Chapter 93A, § 2 ("Chapter 93A") states:  "Unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce are hereby declared unlawful."  From that simple statement, numerous acts and practices can serve as the basis for a suit alleging a violation of c. 93A.  Under the definitions of Chapter 93A, any person involved in trade or commerce, including corporate persons, can sue and be sued for violating the statute.

The Specialized Role of the Business Litigation Session

Suffolk Superior Court in Boston is home to an innovative session called the Business Litigation Session, commonly abbreviated as "BLS".  Brought about by the advocacy of administrative judges, civil litigators, and leaders in the business community, the BLS has served as a statewide forum for the resolution of complex commercial disputes since 2000.  

Version 2.0 of Rule 37(e): Rebooting the Framework For Evaluating Sanctions Under the Federal Rules

By its nature, Electronically stored information ("ESI") has a tendency to become voluminous and can had a profound impact on the cost of litigation and the issues and obligations faced by litigants.  Federal Rule of Civil Procedure 37(e) is intended to provide a safe harbor from sanctions for the loss of ESI resulting from "the routine, good-faith operation of an electronic information system."  Since the rule was put in place in 2006, courts have applied very different analytical frameworks and standards when considering requests for sanctions for lost ESI.  Because of the problems created by the inconsistency and uncertainty of the rule's application, including concerns that parties would be held to a standard that required the over-preservation of ESI, the old rule has been scrapped and a revised version of Rule 37(e) goes into effect on December 1, 2015.

Gender-Based Discrimination Claim Remanded For Determination By Jury

Even a seemingly objective performance evaluation process may not insulate an employer from claims by an employee that their termination was discriminatory. In a 2013 unpublished decision, Rochat v. L.E.K. Consulting, LLC, 83 Mass. App. Ct. 1108 (2013), the Appeals Court reviewed a Superior Court decision to dismiss gender discrimination claims made by a terminated employee against her former employer. The terminated employee, a second-year consultant with a previously promising career with the firm, earned a negative performance review from the supervisor of a project she worked on toward the end of her second year. That review led, ultimately, to the termination of her employment. Until the last few months of her employment, the employee had generally positive reviews every six months during her tenure with the company and consistently received praise for her work ethic and enthusiastic attitude. She claimed that the decision to terminate her was the product of gender bias.

Appeals Court Clarifies Plaintiffs' Pleading Burden In G.L. c. 93A, § 11 "Center Of Gravity" Cases

Mass. Gen. Laws ch. 93A § 11 allows corporate plaintiffs to recover up to treble damages and attorneys fees from defendants who engage in unfair or deceptive trade practices. To invoke this powerful statute, however, the plaintiff must show that "the center of gravity of the circumstances that give rise to the claim is primarily and substantially within the Commonwealth." Kuwaiti Danish Comput. Co. v. Digital Equip. Corp., 438 Mass. 459, 473 (2003). A court will determine whether a plaintiff has done so "after making findings of fact, and after considering those findings in the context of the entire [Chapter 93A] § 11 claim."  Id. 

Challenging An Arbitration Award

Alternative dispute resolution is rightly gaining steam as an efficient, fair mechanism for the resolution of complex business disputes.  Many companies are redrafting their standard-form contracts to include mandatory arbitration clauses.  This is particularly true for companies doing business across state or national borders, so that they might avoid being hauled into court in a foreign jurisdiction.  But what if you agree to arbitrate a business dispute and end up losing?  Do you have any recourse?

Avoiding Some of the Uncertainty of Non-Compete Agreements: Fiduciary Duties of Minority Shareholders as a Basis For Enforcing Non-Compete Agreements

Evaluating the enforceability of a non-compete agreement under Massachusetts law involves an inherent degree of uncertainty.  This is because courts use subjective standards to determine whether to enforce a non-compete agreement based on whether it is: (1) reasonable in scope, length of time, and geographic area; (2) protective of a legitimate interest of the employer; and (3) supported by adequate consideration.  Thus, enforceability depends on the facts of a particular case.  Employers can increase the likelihood that a non-compete agreement will be enforced as written by tailoring non-compete agreements based on the guidance of past court decisions.  To that end, non-compete agreements should be limited to a duration of no more than 1-2 years. The geographic scope of a non-compete agreement should be limited to the area actually served by the employer or where the employer has specific plans to expand.  Non-compete agreements should also be presented to employees before hiring.  If the employee is already employed, employers should include some form of additional consideration, such as a raise or one time payment, for added certainty that a non-compete agreement will be enforced as written. 

Supreme Judicial Court Clarifies Scope Of Derivative Privilege

Cases often turn on the scope of an exception. Recently the Massachusetts Supreme Judicial Court clarified the "sharply limited" scope of the derivative attorney-client privilege, an exception to the basic rule that disclosure of otherwise privileged communications waives the client's right to prevent disclosure of those communications to third parties, whether in litigation or otherwise - even if that disclosure proves fatal to the client's case. See DaRosa v. City of New Bedford, 471 Mass. 446, 463 (2015). The SJC recognized that exception in a 2009 decision, holding that a third party's involvement in otherwise privileged communications would not waive that privilege where "the [third party's] presence is 'necessary' for the 'effective consultation' between client and attorney" such as where the third party's "role is to clarify or facilitate communications between attorney and client." Comm'r of Rev. v. Comcast Corp., 453 Mass. 293, 307-08 (2009).

Appeals Court Clarifies What Constitutes Exceeding An Arbitrator's Authority, Approves Arbitration of Wage Act Claims

The Massachusetts Appeals Court has ruled that an arbitrator exceeds her authority only when "she awards relief beyond the scope of the arbitration agreement, beyond that to which the parties bound themselves, or enters an award prohibited by law." Conway v. CLC Bio, LLC, 2015 WL 9883907, Mass. App. Ct. No. 14-P-350 (June 12, 2015), at 5-6. The Court also reiterated that the Federal Arbitration Act ("FAA") requires enforcement of an agreement to arbitrate statutory claims "absent a question of arbitrability, countervailing Congressional command, or cognizable challenge to the validity of the agreement to arbitrate." Id., at 10. 

Domestic Violence Leave in Massachusetts

In August 2014, An Act Relative to Domestic Violence was signed into law and became effective immediately. Section 10 of the Act, codified at G.L. c. 149, §52E, created new protections for an employee who is, or whose covered family member is, a victim of abusive behavior. Abusive behavior includes domestic violence, sexual assault, stalking, and kidnapping. Under the new law, employers with 50 or more employees must provide employees up to 15 days of unpaid leave in any 12-month period if the employee or covered family member of the employee is a victim of abusive behavior.

Why Massachusetts Companies Should Avoid Probationary Periods For Newly Hired Employees

Hiring qualified employees that are the right fit for a company is one of the hardest and most important jobs for employers.  A bad hire is not only a waste of time and money, but also causes morale problems and the risk of a wrongful termination claim if the employee is terminated.  Because it is impossible to have a perfect hiring record--particularly when a company is growing quickly and is hiring many new employees--employers often ask whether it makes sense to have a probationary period for new hires.

Massachusetts Guide to Evidence

Massachusetts is one of the few states that has not adopted some version of the Federal Rules of Evidence.  The rules of evidence in Massachusetts are not codified, meaning that evidentiary issues are governed by common law.  In 1982, the Supreme Judicial Court ("SJC") rejected a proposed codification of Massachusetts evidence law, yet encouraged lawyers to cite to the "proposed rules."  Lawyers had to understand case law in order to know the evidentiary rules that apply in Massachusetts, as well as be familiar with the federal rules of evidence and the "proposed rules."  

Court Dissolves Lis Pendens After Discovering Arbitration Clause

In a recent decision, Bliss Realty Trust v. Roos Company, LLC et al., Civil Action 2014-7562, Superior Court Judge Dennis Curran dissolved a lis pendens he had granted only months earlier after he learned that the party seeking the lis pendens failed to notify the Court that the contract at issue contained a binding arbitration provision.

Changes to Mass. R. Civ. P. 45

The Supreme Judicial Court recently amended Rule 45 of the Massachusetts Rules of Civil Procedure, effective as of April 1, 2015.  The most significant change in the amended Rule 45 is the allowance of "documents only" subpoenas to non-parties.  Previously, if only documents were sought from a non-party, Massachusetts practice involved serving a deposition subpoena that agreed to "waive the appearance" of the non-party at the deposition if the documents were produced.  Consistent with the federal practice, now Massachusetts practitioners can serve a "documents only" subpoena when only documents are needed.  The last line of Rule 45(b) makes clear that "[a] person commanded to produce documents, electronically stored information, or tangible things, or to permit inspection of premises, need not appear in person at the place of production or inspection unless also commanded to appear for a deposition, hearing, or trial." 

Employers Beware: A Weak Discrimination Complaint Too Often Leads To A Strong Retaliation Claim

There are many anti-discrimination statutes aimed at protecting employees, such as the Americans with Disabilities Act, the Age Discrimination in Employment Act, and Title VII of the Civil Rights Act of 1964 under federal law and the anti-discrimination provisions of Chapter 151B of the Massachusetts General Laws to name a few.  While understanding the nuances and the interplay between federal and state laws can pose challenges, the intention behind these laws is something that all well-meaning employers support.  Nevertheless, situations can arise when even the most well-meaning employer may find compliance with the law and the behavior required to avoid a lawsuit both counterintuitive and difficult.  One particularly dangerous area for employers can be found in the anti-retaliation language contained in many employment discrimination statutes.  This is because employers too often react negatively to the assertion of a claim and consequently turn a weak discrimination case into a strong retaliation claim.

Argument Foreclosed Where Party Did Not Appeal

A recent SJC decision illustrates the unfortunate position in which a party may find itself when it fails to file an appeal but finds itself before an appellate court nonetheless as a result of an appeal filed by the opposing party. In Town of Athol v. Professional Firefighters of Athol, Local 1751, 470 Mass. 1001 (2014), the Supreme Judicial Court considered arguments that arose when town of Athol unilaterally raised the co-payments paid by members of a firefighters' union for medical services. After the union filed a grievance, alleging that the town's action had violated its collective bargaining agreement, the matter proceeded to arbitration. An arbitrator determined that changes to health insurance benefits were mandatory subjects of collective bargaining and the town had violated the collective bargaining agreement by making the changes unilaterally.  The arbitrator required the town to return the co-payments to their original amounts and to "make union members whole for economic losses" incurred as a result of its improper action. The town appealed the arbitrator's award, filing a complaint in the Superior Court.

Earned Sick Time For Employees

In November 2014, Massachusetts voters approved a ballot question that requires all private sector employers to provide employees with up to 40 hours of sick leave per calendar year. Under the new law, which goes into effect July 1, 2015, employers of 11 or more employees must provide paid sick leave for employees. Employers having less than 11 employees must provide unpaid sick leave for employees. This law applies to full-time, part-time and temporary employees performing work for compensation.

How Does A Merger Affect An Acquired Company's Attorney-Client Privilege?

A Massachusetts Superior Court judge recently ruled that, when ABC Corporation merged with and acquired XYZ Corporation, ABC Corporation held XYZ Corporation's attorney-client privilege over pre-merger communications with counsel, even when those communications related to the merger itself. The decision is captioned Novack v. Raytheon Co., 2014 WL 7506205 (Oct. 24, 2014).

Changes to Voir Dire in Massachusetts Superior Court

Earlier this month, the Supreme Judicial Court announced an interim procedure to implement Chapter 254 of the Acts of 2014 -- i.e., a new statute, effective February 2, 2015, which grants attorneys and self-represented litigants the opportunity to participate in juror voir dire in the Massachusetts Superior Courts. The procedure is set out in Superior Court Standing Order 1-15: Participation in Juror Voir Dire by Attorneys and Self-Represented Parties, and it takes effect on February 2, 2015. 

Can I Buy a Tesla in Massachusetts?

The Commonwealth's highest court, the Massachusetts Supreme Judicial Court, recently answered that question in the affirmative.  On September 15, 2014, the Court decided Massachusetts State Automobile Dealers Association, Inc. v. Tesla Motors MA, Inc., 469 Mass. 675 (2014), in favor of Tesla, an electric vehicle manufacturer with roots in Silicon Valley.  In 2012, not long after Tesla began operations in Massachusetts, a statewide motor vehicle dealership organization and two dealerships brought a lawsuit against Tesla in the Norfolk Superior Court. 

Massachusetts High Court Compels Decryption of Computer Files

Television crime dramas - and televised congressional testimony - have made "taking the Fifth" part of our collective civic consciousness.  The Fifth Amendment to the Constitution provides that no person "shall be compelled in any criminal case to be a witness against himself," and, similarly, Article 12 of the Massachusetts Declaration of Rights states that no person shall "be compelled to accuse, or furnish evidence against himself."  But what happens when these 18th Century legal principles confront uniquely 21st Century circumstances?  

What Duties Does a Minority Shareholder/Employee Owe Following a Wrongful "Freeze Out"?

As discussed in a previous blog post, a well-drafted shareholder or employee agreement is extremely important to clarify the rights and duties of an employee who is also a minority shareholder of a Massachusetts close corporation.  The need for a clear agreement is especially important if there is a dispute concerning the termination of a minority shareholder/employee.  Where no agreement exists, or if the applicable agreement does not entirely govern the rights and duties of the parties in a particular situation, the obligations are governed by their fiduciary duties to each other, which may be unclear depending on the circumstances.

Employee Leave Requests Due To Complications From Pregnancy; What Massachusetts Employers Need To Know

Massachusetts employers must be aware of several potentially relevant laws when an employee requests leave or a reduced schedule as a result of complications from pregnancy.  Employers with at least six employees are covered by the Massachusetts Maternity Leave Act ("MMLA").  The MMLA entitles female employees that have completed an initial probationary period to up to 8 weeks of leave for the purpose of giving birth or adopting a child.  The leave is either paid or unpaid at the discretion of the employer, but it is only available once the child has been born.

Stages of a Lawsuit (Part 1)

Most first-time litigants are unfamiliar with the process by which a lawsuit moves from filing to resolution.  While every lawsuit is unique and different courts have different rules governing litigation procedure, most lawsuits in most courts follow a similar path from initial complaint to final judgment.  Understanding the different stages of a lawsuit can help prepare first-time litigants for the unfamiliar process ahead.

Supreme Judicial Court Expands Discovery Rule to Require Knowledge of "Whom to Sue"

The "discovery rule" delays the three-year statute of limitations period for plaintiffs to bring tort claims "where the plaintiff did not know or could not reasonably have known that he or she may have been harmed by the conduct of another" until the plaintiff gains actual or constructive knowledge of the wrong. See Koe v. Mercer, 450 Mass. 97, 101 (2007). In an opinion issued last week, the Supreme Judicial Court broadened the discovery rule to include knowledge of the responsible person's identity, reasoning that such knowledge "seems implicit in the requirement that a plaintiff know that the defendant's conduct caused him harm; without such knowledge, the plaintiff does not know whom to sue." Harrington v. Costello, 467 Mass. 720, 2014 WL 1362630 at *4 (April 9, 2014)

Electronic Submissions to the Appeals Court

The Massachusetts Appeals Court requires some pleadings to be filed electronically, rather than through hard copy.  Although the Standing Order concerning electronic filings has been effective for nearly three years, it is still a confusing process that is ripe for errors.  

Cover Two?

Arbitration clauses are common in corporate agreements, but can an employee invoke her company's arbitration clause in a contract with a plaintiff to compel arbitration? In a recent decision, the First Circuit held a defendant employee could do just, calling the plaintiff's arguments to the contrary "illogical and impractical." Grand Wireless, Inc. v. Verizon Wireless, Inc., No. 13-1149, 2014 WL 1054418 at *9 (1st Cir., Mar. 19, 2014).

"Strong Medicine" - Prescribed

The First Circuit has described default judgment - a ruling, as sanction, against a defendant on all of the factual allegations in the plaintiff's complaint - as "strong medicine," that "should be prescribed only in egregious cases." See Hooper-Hass v. Ziegler Holdings, LLC, 690 F.3d 34, 37-38 (1st Cir. 2012). 

CEO's Indirect Statements Can Give Rise to Retaliation Lawsuit

The First Circuit Court of Appeals issued a decision last week allowing a retaliation lawsuit to proceed because the company's CEO told others that he wanted to "get rid of" an employee, even though there was no evidence that the CEO made those statements directly to the supervisor who terminated the employee, or that the CEO was in any way involved in the termination decision.

Virtual Tort, Actual Personal Jurisdiction

As a society, we continue to realize the potential for on-line conduct to have real-world ramifications - something the Middlesex Superior Court further illustrated recently in the context of personal jurisdiction - in the first such opportunity for a Massachusetts trial court to do so. In Taylor v. Taylor, MICV2012-01222, 2013 WL 5988569 (Mass. Super. Ct. 2013), a Massachusetts couple ("Plaintiffs"), alleged their daughter-in-law ("Defendant"), who lives in Florida, engaged in a coordinated campaign to defame them and harm their Massachusetts-based real estate business after she lost a series of motions in divorce proceedings against the Plaintiffs' son in Florida. In their Complaint, the Plaintiffs claimed that Defendant, with the help of a private investigator (also a defendant, with his corporation), made a series of identical on-line postings on consumer websites, purportedly written by a disgruntled former employee and warning potential Massachusetts real estate customers to "[a]void [the Plaintiffs' real estate company] at all costs unless you want to fall victim to another couple [J]ewish scammers." According to the Complaint, these postings further claimed that Plaintiffs both take advantage of their employees and "perpetuate the brainwashing of thousands of innocent, hard working people."

Massachusetts Rules of Civil Procedure Amended to Provide "Clawback" of Privileged Materials

The Massachusetts Rules of Civil Procedure govern almost all civil cases in Massachusetts state courts.  Next year, new amendments to the Rules will take effect, significantly impacting the discovery process for many state lawsuits.  Most of the new amendments govern the exchange of electronically stored information (e.g., email messages), and have received much attention recently from lawyers and legal publications alike.  Another aspect of the amendments, however, has received less attention to date: the formalization of procedures providing for the return of privileged material that has been inadvertently disclosed.

Why Hire an Appellate Attorney?

Why should you hire an appellate attorney?  You may be happy with your trial counsel, having already worked and developed a good relationship with your trial counsel for months or perhaps years.  Plus, your trial counsel already knows the facts of your case.  There are, however, specific advantages to hiring appellate counsel.  

Preparing for a Successful Mediation

How should counsel and parties prepare for the mediation of a business litigation case?  For counsel, the process of mediation requires an entirely different mindset and style than he or she is accustomed to in court proceedings.  In fact, a common mistake that inexperienced practitioners make is to prepare for mediation as though it were an adversarial court proceeding.  Counsel should resist those natural impulses and instead focus on what the client needs to make the most of the opportunity presented at the mediation - that is, to get a good settlement. 

May Massachusetts employment laws be applied outside the state?

The Supreme Judicial Court recently held that a Massachusetts company could be sued by non- Massachusetts residents for conduct that occurred outside of Massachusetts. In Taylor v. Eastern Connection Operating, Inc., 465 Mass. 191 (2013), employees of a Massachusetts company who worked and lived in New York sued their employer under several Massachusetts statutes (specifically, those that govern the classification of workers as employees or independent contractors and the payment of wages and overtime compensation), claiming - among other things - that their employer had improperly classified them as independent contractors. Notwithstanding the fact that their written contracts with the employer contained "choice-of-law" provisions specifying Massachusetts state court as the jurisdiction where suit could be brought, the employer moved to dismiss the plaintiffs' claims, claiming lack of subject matter jurisdiction. 

Non-compete with inconsistent terms may not be enforceable

A recent Superior Court decision warns employers of the pitfalls that result from using non-compete agreements that contain inconsistent terms. In ARS Services, Inc. v. Morse, 2013 WL 2152181 (Super.Ct. 2013), Judge Edward P. Leibensperger considered whether to issue a preliminary injunction to a company that sought to enforce a non-compete agreement against a former employee who began competing directly against it in its existing market. 

Prejudgment Interest - Is Justice Delayed Really Justice Denied?

It can take years for a case to proceed from a complaint to a judgment. In Massachusetts, however, the injustice of a delayed judgment is remedied somewhat by an award of pre and post-judgment interest on money damages. This blog focuses on prejudgment interest, which is intended to compensate plaintiffs wrongfully deprived of the use of money to make them whole for that loss. Unless a claim is brought pursuant to a specific statute that provides a different interest rate, prejudgment interest accrues at the high rate of 12% under Massachusetts law. 

Foreign Corrupt Practices Act: An Overview

In many parts of the world, cash payments to government officials are not only routine, but required to do business. While some foreign governments may turn a blind eye to such practices, the United States does not. Under the Foreign Corrupt Practices Act (FCPA), both U.S. and non-U.S. persons and entities may incur civil and criminal liability, even for actions that take place outside U.S. territory. To ensure compliance with the law, anyone doing business overseas should be familiar with the provisions of FCPA.

What Right Does a Losing Party Have to Vacate an Arbitration Award?

Alternative dispute resolution is rightly gaining steam as an efficient, fair mechanism for the resolution of complex business disputes.  Many companies are redrafting their standard-form contracts to include mandatory arbitration clauses.  This is particularly true for companies doing business across state or national borders, so that they might avoid being hauled into court in a foreign jurisdiction.  But what if you agree to arbitrate a dispute and end up losing?  Do you have any recourse?  

UCC Article 9 Damages Provisions Displace Common Law

In a case handed down just last month, the Supreme Judicial Court reinforced the long-standing rule that provisions of the Uniform Commercial Code (the "UCC") displace common law principles that would otherwise apply in contexts not governed by the UCC.

How Long Will My Appeal Take?

A party must act quickly to appeal an adverse judgment.  Rule 3(a) of the Massachusetts Rules of Appellate Procedure requires that a Notice of Appeal be filed within 30 days with the clerk of the lower court.  This is the most important deadline of the appellate process; an untimely filing of the Notice of Appeal is subject to dismissal.

When Must An Employer Make A Reasonable Accommodation For An Employee's Disability?

Most employers know that they have a duty to make a reasonable accommodation for an employee's disability or job restriction, but what that actually means in practice can be confusing.  Statutes that require such accommodation are the Americans with Disabilities Act (ADA), 42 U.S.C. § 12101 et seq., and, in Massachusetts, the Massachusetts Fair Employment Practices Law, General Laws Ch. 151B.  To fall under the protection of either statute, the employee must have a physical or mental disability (or handicap) that substantially limits one or more of his or her major life activities.  The statutory definitions of major life activity are quite broad and can range from bodily functions to cognitive activities.

It's a bird! It's a plane! It's a contract!

Following an appellate mandate, a federal judge in California granted summary judgment to Warner Bros. in late March, all but ending almost a decade of copyright litigation between the entertainment conglomerate and Laura Siegel Larson, heir of Superman co-creator Jerry Siegel. See Larson v. Warner Bros. Entm't, Inc., 2013 WL 1164434 at * 9 (C.D. Cal. March 20, 2013). In a counterclaim, Warner Bros. sought (and was granted) a declaratory judgment that an October 2001 letter from Larson's then-attorney to Warner Bros.'s then-general counsel constituted a binding contract regarding the rights to the Man of Steel, even though subsequent negotiations to formalize the agreement fell apart. In January, the Ninth Circuit considered the letter kryptonite to Larson's claims under California law because it "constituted an acceptance of terms negotiated between the parties," specifically and accurately reflecting "the material terms [counsel for both parties] had orally agreed to" during a conversation three days earlier, in which they "had resolved the last outstanding point in the deal" following "years of negotiations." See Larson v. Warner Bros. Entm't, Inc., --- F.App'x. ---, 2013 WL 1113259 at *1 (9th Cir. 2013).

International Arbitration: Hearing Testimony by Videoconference

Testimony by videoconference in international arbitration offers the disputants both a fair means for assuring that relevant evidence is heard and an effective tool for cost reduction.

Employee or Independent Contractor Under Massachusetts Law? The Importance of Classifying Workers Correctly

Although the Massachusetts Independent Contractor Statute, M.G.L. c. 149, § 148B, is intended to protect workers by ensuring that they receive "the many benefits, both public and private, that employees enjoy," the fact that a worker may not want to be classified as an employee often does not matter when determining the worker's proper classification.

Property Owned in Family Trusts - A Recipe for Conflict

When parents or grandparents are able to pass down residential property or a family business to their children and grandchildren, it should be a piece of the American Dream come true.  And, with foresight, good planning and a little bit of luck, it can be.  Too often, however, these "gifts" can devolve into situations that tear extended families apart.  It often doesn't take long before family members start to treat each other unfairly and eventually become openly hostile towards each other.

Honey, You May Have To Testify: The Limits of the Spousal Disqualification In Civil Litigation (A Valentine's Day Blog)

In business litigation, the question of whether a party's spouse is fair game for a deposition often comes up. Sometimes, the question arises simply because a lawyer wants to demonstrate the willingness to "take the gloves off." Other times the issue arises because the spouse may be one of the only people likely to have knowledge of facts that could be central to the case. Regardless of the reason, Massachusetts lawyers should be aware of the applicable rules and the distinction between the spousal privilege and the spousal disqualification, which are set forth at M.G.L. c. 233 sec. 20(a) and (b). 

Kraft Power: Veil Piercing And The Survival of Actions Statute Collide

Where a plaintiff has been harmed by a company, and the principal of that company exercises "pervasive control" over it, a court may "disregard" the corporate form allowing the plaintiff to recover directly from the principal. What if the corporate principal has died? Can a plaintiff still pursue claims under a so-called "veil piercing" theory against the principal's estate? In Kraft Power Corporation v. Merrill, the Massachusetts Supreme Judicial Court concluded that certain claims survive the death of the corporate principal, and others do not.  The Court also held for the first time that a plaintiff cannot recover multiple damages for unfair and deceptive business practices under M.G.L. c. 93A where the defendant has died.

SJC: Release of Wage Act Claims Requires Specificity

In the recent decision Crocker v. Townsend Oil Company, Inc., the Massachusetts Supreme Judicial Court held that a general release that intends to release claims under the Massachusetts Wage Act, M.G. L. c. 149, §148 ("Wage Act") will be enforceable as to those claims only if the release contains an explicit waiver of Wage Act claims. If specific language waiving Wage Act claims is not included in a general release, such claims will not be released.

Arbitration Confidential: How to Keep Your Arbitral Proceeding Confidential

Aside from the flexibility to tailor the process to the particular needs of the case, arbitration also enjoys another major advantage over litigation: the ability to keep the proceedings confidential. Although a party involved in litigation can move to seal the court proceedings, public access to court records is a central tenet of the American legal system that cannot easily be restricted.

A Massachusetts Statute of Limitations Checklist

In evaluating any business litigation matter, one of the first and most critical points to consider (as a plaintiff or a defendant) is whether any aspect of the case may be untimely because it is barred by operation of a statute of limitation.  Too often, plaintiffs lose valuable claims because they (or their lawyer) fail to appreciate that the "clock" on one or more of their claims has run down.  Defendants, on the other hand, sometimes overlook excellent statute of limitations based defenses that can reduce or eliminate their exposure in a lawsuit.  Wouldn't it be useful if there were, in one place, a summary of the laws concerning the time limitations, accrual periods, and exceptions applicable to Massachusetts commercial cases?  Now there is one.  My colleague William G. Cosmas and I are pleased to share the Massachusetts Statute of Limitations Checklist that we prepared for publication with the Practical Law Company.  

Make Sure Your Partnership/Shareholder Agreement Has Escape Hatches

Quite often, I find myself litigating partnership and close corporation disputes that could have easily been avoided had the partners just taken a little more care in drafting their agreements.  The most common, avoidable problems are:

Well-Tailored, But Does It Fit?

Do "tailored remedies" always fit? The doctrine of spoliation recognizes that "a party who has negligently or intentionally lost or destroyed evidence known to be relevant for an upcoming legal proceeding should be held accountable for any unfair prejudice that results." Keene v. Brigham & Women's Hosp., Inc., 439 Mass. 223, 234 (2003). Judges should "impose the least severe sanction necessary to remedy the prejudice to the non spoliating party," which provides latitude to impose the sanctions proportionate to the nature of the spoliation. See Keene, 449 Mass. at 235; Fletcher v. Dorchester Mut. Ins. Co., 437 Mass. 544, 550 (2002). To the extent that destroyed evidence merely prejudices, but does not foreclose, another party's ability to prosecute or defend a claim in the litigation, certain evidence may be excluded as a result. Fletcher, 437 Mass. at 550.

Avoiding Legal Pitfalls When Employees Are Also Minority Shareholders

It is well recognized that the shareholders of a Massachusetts close corporation are fiduciaries of each other.  As a rule, this is true for majority shareholders, but the law may be much more nuanced regarding the duties of minority shareholders. A close reading of the Supreme Judicial Court's decision in the leading case Donahue v Rodd Electrotype, as well as the reasoning behind the commonly understood rule, suggests a minority shareholder's obligation to the majority is limited and depends on their ability to control or influence the close corporation and not simply their status as shareholders.  Moll, D., Of Donahue and Fiduciary Duty:  Much Ado About . . . ?, 33 Western New England L. Rev. 471, 478 (2011); See also, Blaiklock, A., Fiduciary Duty Owed By Frozen-Out Minority, 30 Ind. L. Rev. 763, 774 (1997).

Business Litigation Session Limits Partial Dispositive Motions

Prosecuting or defending a motion to dismiss or a motion for summary judgment can be a substantial undertaking.  In a complex case a motion for summary judgment can consume a hundred hours or more of attorney time and tens of thousands of client dollars.  At the same time, reviewing all of the submitted material and producing a reasoned opinion consume significant amounts of court resources, resources which are already stretched thin due to budgetary constraints.  Too often attorneys and litigants file motions to dismiss or for summary judgment as a matter of course, even when those filings will, at best, remove only a portion of the claims from a case, while achieving little or no reduction in further litigation cost or trial time.

Foreign Judgments Recognition Law Due for Update

The Commonwealth's policy regarding the recognition and enforcement of money judgments rendered by foreign courts has suffered from lack of clarity, as shown in the current version of the Uniform Foreign Money-Judgments Recognition Act, Mass. Gen. Laws ch. 235, sec. 23, (the "UFMJRA").  A corrective bill pending in the Massachusetts legislature, the Uniform Foreign-Country Money Judgments Recognition Act, if adopted, would promote both predictability and sound public policy with respect to the enforcement of foreign judgments in the Commonwealth. The new foreign judgments recognition legislation was promulgated in 2005 by the Uniform Law Commission and has been adopted by eighteen states.

Important Changes Brought About By The CORI Reform Law

The final changes brought about by the CORI Reform Law went into effect on May 4, 2012 and, with those changes, how employers access and use a job applicant's criminal history has changed.  Employers must comply with the new procedures or may face fines up to $50,000.

Privacy Settings Do Not Prevent Discovery of Social Media

While millions of Americans have become adept at managing their social network privacy settings to keep their postings hidden from the general public, individuals and companies involved in litigation should not expect those settings to shield information from discovery.  The recent trend among numerous federal and state courts has been to find that "[Social Networking Site] content is not shielded from discovery simply because it is 'locked' or 'private.'"  E.E.O.C. v. Simply Storage Management, LLC, 270 F.R.D. 430 (S.D. Ind. 2010).  While "privacy concerns may be germane to the question of whether requested discovery is burdensome or oppressive and...has been sought for a proper purpose...a person's expectation and intent that her communications be maintained as private is not a legitimate basis for shielding those communications from discovery."  Simply Storage at 434.  Several other recent cases have followed this same reasoning, including Romano v. Steelcase, Inc., 30 Misc.3d 426 (N.Y. Sup. Ct. 2010) (ordering access to plaintiff's Facebook and MySpace records); Offenback v. L.M. Bowman, Inc., 2011 WL 2491371 (M.D. Penn. June 22, 2011) (ordering production of relevant information housed on Facebook after in camera review).

The When of Mediating a Complex Business Dispute

Increasingly the question regarding mediation of a complex business litigation case is not whether but when. Among experienced litigation counsel, there is widespread agreement that mediation should be attempted in many if not most cases. The resources of time and money committed to mediation are usually modest compared to the requisites of full-blown litigation. It is a voluntary and confidential process. Though experiences may vary, I have found that mediation succeeds more times than not in obtaining mutually acceptable settlements. Even if a case does not immediately settle in mediation, both parties are apt to receive significant value in obtaining the assessment of a neutral third party and also in learning more about how the other party (or parties) calculates the risks and rewards of the case.

Read (and Draft) That Forum Selection Clause Carefully!

The Massachusetts Appeals Court has ruled that a party to a business contract could file suit in Massachusetts even though the contract specified that "jurisdiction shall vest in the State of Illinois."  The Appeals Court held that the "jurisdiction shall vest" language is merely permissive and does not require that suit between the contracting parties be brought in Illinois. Boland v. George S. May International Company, No. 11-P-1300, slip op. (Mass.App.Ct. June 7, 2012).  

Is It Possible To Recover Attorney's Fees in a Business Dispute?

Your company has been wronged. A vendor failed to deliver as promised causing lost sales. A customer has failed to pay for services rendered. A construction contractor's shoddy workmanship resulted in leaks and damage in your company warehouse. The defendant will not pay up voluntarily, so your business has decided to engage a law firm to file a lawsuit to recover the damages. Can your company recover its attorney's fees and other litigation costs? 

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