Boston Business Litigation Blog

The United States Supreme Court held in the unanimous decision of New Prime Inc. v. Oliveira earlier this year that the Federal Arbitration Act's exclusion as to contracts of employment necessitated that the parties' arbitration clause be overridden and the plaintiff be allowed to pursue his lawsuit in the Massachusetts federal courts.

The United States District Court for the Eastern District of Virginia has held that, where a debtor in bad faith tenders a check or money order for substantially less than the amount owed on a loan, the receipt and deposit of that check will not constitute an "accord and satisfaction" under the Uniform Commercial Code ("UCC"), Section 3-311. Miffin v. Selene Finance LP.

"A nominee trust is 'an entity created for the purpose of holding legal title to property.'" Goodwill Enterprises, Inc. v. Kavanagh. Record title for the property held in a nominee trust is in the name of the nominee trust's trustee (not its beneficiaries), but such trustees "are often viewed as agents for the convenience of the principals (i.e., the beneficiaries)." Id. But what is the nature of a beneficial interest in a nominee trust? Is it more like an ownership share of a corporation or does it constitute a real property interest in the property held by the nominee trust?

In Massachusetts, petitions for the removal or relocation of a child from the Commonwealth are evaluated under one of two legal analyses, depending on whether one parent has sole/primary custody or the parents share physical custody. Where one parent has primary physical custody of the child(ren) a judge will determine whether there is cause shown to permit relocation by applying the "real advantage" analysis first set forth in the case of Yannas v. Frondistou-Yannas.The interests of the custodial parent weigh heavily in the real advantage test, as a custodial parent will be permitted to relocate if the move offers a genuine, recognizable advantage to that parent and is consistent with the child's best interests.

The United States Court of Appeals for the First Circuit has held, in a matter of first impression, that the Federal National Mortgage Association, commonly known as Fannie Mae, cannot be held vicariously liable for the acts of its agent absent actual authority from Fannie Mae for the agent's actions. Faiella v. Federal National Mortgage Association.

By Alina C. Hachigian

This summer I had the opportunity to intern with Fitch Law Partners. In addition to assisting attorneys with research and deposition preparations, over the course of the summer I was able to experience law outside the office as well. I traveled to different courts around the city and sat in on various matters ranging from criminal to family law. With each visit I began to better understand the in-court portion of litigation and the amount of intricacies that must come together within the courtroom in order to win a case. Exposure to this aspect of litigation provided me a more detailed view of the process as a whole and I found myself becoming more critical of the system itself. I questioned the purpose and effect of each dynamic I discovered in the courtroom and how such aspects affect different individuals. Overall, these experiences gave me a more nuanced view of litigation and allowed me to better consider how this type of work plays out within the framework of our society today.  

One of the main reasons that we at FITCH recommend that the vast majority of cross-border contracts contain international arbitration clauses is because of the New York Convention. More formally called the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, the New York Convention was ratified in 1959 and currently has 159 parties. It requires states to honor and enforce arbitral awards issued in any of the other member states, and means that by selecting international arbitration as the dispute resolution mechanism, parties can get their awards enforced virtually anywhere on the planet.

Massachusetts courts recognize two distinct types of custody of children. The first, physical custody, is what most litigants mean when they refer to having "joint custody" or "primary custody" of their child. Physical custody is a term that describes the amount of time the child spends in the care of each parent. Although physical custody is often the aspect of divorce or custody litigation that is most contentious, the second type of custody - legal custody - is also a fundamental element of parental authority. Legal custody refers to the parents' rights to make "major decisions regarding the child's welfare including matters of education, medical care and emotional, moral and religious development." M. G. L. c. 208, § 31. Legal custody can be either joint, in which the parties must confer with each other and reach shared decisions on these types of matters, or sole, in which one parent has the ability to make decisions about the child's health, education, or religion, even if the other parent disagrees. Joint legal custody, at a minimum, requires "two capable parents with some degree of respect for one another's abilities as parents, together with a willingness and ability to work together to reach results on major decisions in a manner similar to the way married couples make decisions." Rolde v. Rolde

The Double Jeopardy Clause of the Fifth Amendment provides that "No person shall...be subject for the same offence to be twice put in jeopardy of life or limb." That clause means that no person can be prosecuted twice for the same crime. Historically, the Double Jeopardy Clause had not been held to bar separate sovereign governments from trying an individual for the same crime, a doctrine known as the separate-sovereigns doctrine. Because the federal and state governments are separate sovereignties, the Double Jeopardy Clause had historically been held not to prohibit the Federal government from prosecuting an individual for an offense for which that individual had already been tried in state court.

In Obduskey v. McCarthy & Holthus L.L.P., the Supreme Court examined whether an entity engaged in the limited purpose of enforcing a security interest in a nonjudicial foreclosure proceeding fit the definition a "debt collector," thereby subjecting it to all of the provisions of the Fair Debt Collectors Practices Act ("FDCPA"). The Supreme Court unanimously ruled that the Respondent, McCarthy & Holthus LLP ("McCarthy"), hired by Wells Fargo to enforce its security interest by acting as its agent to foreclose on a defaulting, Colorado debtor's home, in that narrow instance, was not a "debt collector" within the meaning under the FDCPA, except with regard to the confines of §1692f(6). In order to reach its decision, the Court partitioned the FDCPA's definition of a "debt collector" into two parts: (1) a 'primary' debt collector defined as "any person . . . in any business the principal purpose of which is the collection of any debt, or who regularly collects or attempts to collect, directly or in-directly, debts[;]" and (2) for the purposes of §1692f(6) of the FDCPA, a 'limited-purpose' debt collector defined as also including "any person . . . in any business the principal purpose of which is the enforcement of security interests."

The inclusion - or non-inclusion - of beneficial trust interests in the marital estate for purposes of an asset division incident to a divorce is quite often a hotly contested issue. How does one account for a trust interest in a divorce? Did the trustee make any distributions during the marriage? Is the trust terminating anytime soon? If so, for what reason? And if it terminates, what happens to the principal? Is it - or its potential future acquisition - considered property?

Nominee trusts are common vehicles "for holding title to real property in which one or more persons or corporations, pursuant to a declaration of trust, declare that they will hold any property that they acquire as trustees for the benefit of one or more undisclosed beneficiaries." Berish v. Bornstein The trust is the record owner of the property, with the trustee(s) (but not the beneficiaries) named on the deed, thereby offering privacy to those beneficiaries. Nominee trusts also streamline ownership among multiple parties because the trustee(s) can act on behalf of all beneficiaries for matters concerning the property. Additionally, nominee trusts simplify transfers of ownership among beneficiaries, both by avoiding the recording process and also by excluding the subject property from probate. 

Hundreds of billions of dollars' worth of goods and services flow between the United States and China every year, and all of that commerce gives rise to disputes.  While we at FITCH usually recommend entering into International Arbitration agreements when contracting with parties in China, sometimes that is not an option, such as when Chinese companies creates knock-off products and sell them online to U.S. consumers.  While U.S. courts will have jurisdiction over these disputes, just serving process on Chinese companies or individuals can be bedeviling. 

In a fascinating decision, the Business Litigation Section of the Superior Court of Massachusetts recently held that a terminated doctor/shareholder could bring a breach of fiduciary duty action against the controlling director.  

The foreclosure process varies across the United States, but the process traditionally occurs in one of two ways:  judicial or  non-judicial foreclosures.  Residential foreclosures in Massachusetts are non-judicial, which means that the foreclosure process happens outside of the courtroom.  Non-judicial foreclosures, also known as power of sale foreclosures, allow the mortgagee to sell the property if the mortgagor defaults on their loan provided the mortgagee complies with the statutory requirements under G.L.c. 244 §§ 11-17B.  In addition to the requirements under the statute, mortgagees owe mortgagors a duty of good faith and reasonable diligence to protect their interest in the property. 

On March 26, 2019, the Supreme Court reversed the Second Circuit in the case of Sudan v. Harrison, which involved how foreign states may be served under the Foreign Sovereigns Immunities Act ("FSIA").  28 USC § 1608 governs service of process on foreign states, and explains that a foreign state may be served (1) "in accordance with any special arrangement," (2) "in accordance with an applicable international convention on service of judicial documents," (3) "by sending a copy of the summons and complaint and a notice of suit ... by any form of mail requiring a signed receipt, to be addressed and dispatched by the clerk of the court to the head of the ministry of foreign affairs of the foreign state concerned," or (4) by requesting the State Department to make service on the foreign state.  In Sudan v. Harrison, the plaintiffs mailed service of process to the head of the ministry of foreign affairs care of Sudan's US embassy.  When Sudan did not answer the complaint, a $314 million default judgment entered, which Sudan then challenged asserting that the mailing should have gone to the head of the ministry of foreign affairs at the actual ministry of foreign affairs, where that official works.

Business valuation arises in divorce cases where one or both spouses have an ownership interest in a closely held corporation - that is, a corporation which has a limited number of shareholders. This ownership interest is usually considered a marital asset, just like real property or a bank account, and is thus subject to equitable division in a divorce. Valuing a spouse's interest in this type of business can be a complex process due to the fact that there is no market on which a spouse could readily liquidate his or her shares. Accordingly, in many cases, the divorcing parties will retain a business valuator to determine the value of the spouse's ownership interest in the company.

Until the Supreme Court's recent decision in Obduskey v. McCarthy & Holthus LLP, 139 S. Ct. 1029 (2019), if you were an entity engaged solely in the enforcement of security interests on loans, such as through nonjudicial foreclosure proceedings, the federal Fair Debt Collection Practices Act (the "FDCPA") would have been applied to you in some states but not others.  That is because the United States Courts of Appeals were divided on the issue, with the Ninth and Tenth Circuits finding that the Act did not apply, and the Third, Fourth, and Sixth Circuits finding that it did apply.  The Supreme Court resolved that Circuit split last month when it found that businesses engaged solely in security-interest enforcement do not qualify as "debt collectors" under the FDCPA.  

The United States Supreme Court has agreed to consider a case that could resolve a split among the United States Courts of Appeals as to whether the discovery rule applies to the Fair Debt Collection Practices Act, 15 U.S.C. §§ 1692, et seq. ("FDCPA").  Rotkiske v. Klemm, et al., No. 18-328 (U.S., certiorari granted Feb. 25, 2019).

Last month, one defendant's application to vacate a med-arb award brought about two important developments in ADR case law in Massachusetts.

Described by the Supreme Judicial Court as "unwieldly and perplexing to apply in most instances," the Massachusetts spousal elective share statute, "is intended to prevent spousal disinheritance, either by inadvertence or design," through allowing "a dissatisfied surviving spouse" to "waive the provisions of a deceased spouse's will and take a statutorily prescribed share of the decedent's estate." Ciani v. MacGrath, 481 Mass. 174, 175, 186 n12 (2019). In Ciani, the SJC attempted both to clarify and fortify the statute, holding in part that it allows a dissatisfied surviving spouse to bring an action to realize the value of his or her share of the decedent's real estate. Where the decedent has left issue (i.e., offspring or lineal descendants), the statute entitles a dissatisfied surviving spouse to elect - in lieu of his or her formal bequest (or lack thereof) - to receive a share of the decedent's estate comprising one-third of the decedent's personal property and one third of the decedent's real property. The SJC focused its analysis on situations in which that share exceeds $25,000 in value, reading the elective share statute to allow a dissatisfied surviving spouse to receive (1) the first $25,000 from the decedent's personal property or, if necessary, from the decedent's real property as well; (2) income from the a trust containing the remaining third of the personal property for life; and (3) an ownership interest the remaining third of the decedent's real estate, for life. 

In our modern, globally interconnected world companies from different nations frequently enter into business agreements with one another. While such joint ventures can create exciting opportunities, they can also run into challenges, or sour altogether. Thus, it is important to consider dispute resolution mechanisms at the outset of a contract or joint venture between international partners. International arbitration is the dispute mechanism best suited to resolving cross-border disputes. As the following five reasons show, international arbitration should be selected as the dispute resolution method between international partners for virtually any international contract:

The Superior Court of Massachusetts recently annulled the decision of a local zoning board that had permitted construction of an outdoor aerial adventure park pursuant to what is commonly referred to as the "Dover Amendment" - i.e., G.L. c. 40A, § 3. In Sullivan v. Heritage Plantation of Sandwich, Inc., 35 Mass. L. Rptr. 281 (2018) ("Heritage Plantation"), the Court found that the particular outdoor adventure park at issue did not have a primary goal of educational significance and did not involve a nonprofit organization using its land for educational purposes, and, therefore, could not take advantage of the significant zoning exemptions offered by the Dover Amendment. 

It was bound to happen eventually.  Maybe your company just went global or maybe they've been working internationally for years.  But eventually, whether through some mistake in translation in an international contract, some global or local change in circumstances, or just picking a poor foreign partner, a dispute has arisen over some international transaction.

Business valuation arises in divorce cases where one or both spouses have an ownership interest in a closely held corporation - that is, a corporation which has a limited number of shareholders. This ownership interest is usually considered a marital asset, just like real property or a bank account, and is thus subject to equitable division in a divorce. Valuing a spouse's interest in this type of business can be a complex process due to the fact that there is no market on which a spouse could readily liquidate his or her shares. Accordingly, in many cases, the divorcing parties will retain a business valuator to determine the value of the spouse's ownership interest in the company.

The Texas Supreme Court has found that where a bank makes available a statement of account, consistent with Section 4-406 of the Uniform Commercial Code ("UCC"), the customer must bear the loss of forged checks, even when the bank did not send physical statements for the account. Compass Bank v. Calleja-Ahedo, 2018 Tex. LEXIS 1314 (Tex. Dec. 21, 2018).

You can sue for specific performance of the purchase and sale agreement ("P&S agreement").InOcean City Development, LLC v. Barrros,(Mass. Land Court, January 2, 2018), the Land Court addressed that issue, ordering the Seller to convey her property to the Buyer in accordance with the P&S agreement signed by the parties.

The Massachusetts Appeals Court recently addressed this issue in Miles v. Beusch, Docket 17-P-1511 (Mass. App. Ct. January 24, 2019) (Memorandum and Order Pursuant to Rule 1:28). In that case, the former Husband appealed the trial court's decision to attribute income to him for the purpose of calculating child support. 

Fitch attorney Jared Hubbard was at the Supreme Court this past November on behalf of a group of international law professors-including George Bermann of Columbia Law School and David Stewart of Georgetown Law School-who appeared as amici curiae (friends of the court) in the case of Sudan v. Harrison, Dkt. 16-1094.

An employee who filed a workers' compensation claim for a workplace injury while she was a temporary worker may file a negligence lawsuit against the company even though the company became her employer after she received workers compensation benefits for the injury from the temp agency's insurer, and the law prevents the employer company from taking retaliatory action against her for doing so. This principle was recently clarified by the Massachusetts Appeals Court, in Bermudez v. Dielectrics.

If you're a parent of a minor child of divorce in Massachusetts, can you relocate to a different state or country with your child (an issue the courts call "removal")?

Assuming no negotiated agreement to relocate with your co-parent (a preferred outcome in resolving these highly contentious disputes), and to help you answer this question in the context of contested litigation, Fitch family law attorneys will walk you through a judge's required functional analysis that is based on current Massachusetts law. It's a complicated process of gathering the facts of your particular case and connecting them to the correct legal standard.

The United States Court of Appeals for the Seventh Circuit has held that inspections of properties encumbered by defaulted mortgages, even where the property inspector left a hang tag requesting the homeowner contact the mortgage servicer, is not debt collection under the Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. § 1692 et seq. Schlaf v. Safeguard Property, LLC, No. 17-2811, 899 F.3d 459 (7th Cir. 2018).

In a recent decision by the Massachusetts Court of Appeals, the concept of a child's emancipation was at issue. In Bobblis v. Costa (https://www.mass.gov/files/documents/2018/10/18/17P0557.pdf), the court ruled that enrollment in ROTC does not constitute emancipation pursuant to the parties' separation agreement, as joining an ROTC program is not considered entry into the military for purposes of emancipation.

The Business Litigation Session of the Massachusetts Superior Court has joined other courts in holding that a bank is not liable to its customer for wiring money to a foreign account at the customer's instruction. The Plaintiff, Sarrouf Law LLP ("Sarrouf"), alleged negligence and breach of the California Uniform Commercial Code, but the Court found that the UCC expressly displaced common law and that the bank's conduct comported with the UCC's requirements. Sarrouf Law LLP v. First Republic Bank, No. SUCV2016-03069-BLS1 (Mass.Super. Aug. 2, 2018).

Many consumers and corporate executives alike believe that in order to have a contract that a court will honor, a prospective litigant must produce a written contract signed by both parties to the agreement. In fact, oral agreements are often enforceable, but Massachusetts law provides through the colorfully-named "Statute of Frauds" that certain categories of contracts must be in writing to be enforceable. Mass. Gen. Laws ch. 259, §1 provides several categories of contracts that can only be enforced by way of a civil action if there is a written agreement "signed by the party [or an agent of the party] to be charged therewith," including agreements for the sale of land and other real estate, and contracts that cannot be performed within one year.

In Colucci, Colucci, Marcus & Flavin, P.C. v. Citizens Bank of Massachusetts, No. CV 15-13536-GAO, 2018 WL 1567605, at *1 (D. Mass. Mar. 30, 2018), the United States District Court for the District of Massachusetts awarded summary judgment to Citizens Bank of Massachusetts ("Citizens Bank") on a law firm's claim of negligent misrepresentation, finding that the law firm's reliance was unreasonable pursuant to New York law.

Last month, the Judiciary Committee of the Massachusetts House of Representatives essentially killed any chance of the passage of the Jim Brooks Community Stabilization Act, Bill H.4142, by "referring the Act to study," a euphemism generally understood in the Massachusetts legislature to mean that a bill will languish and, eventually, fail to pass.