Decisions, Decisions

Here’s a link to my article in Business West about three recent decisions from the Massachusetts Commissions Against Discrimination (MCAD).

Do MCAD decisions really matter? You bet. When the full Commission interprets our commonwealth’s anti-discrimination law, Chapter 151B, judges generally defer to the MCAD’s interpretation. So take a look. And if you spot the typographical error in the second paragraph, just send me an email identifying the mistake and you might win a prize.*

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* Disclaimer: No, you won’t win a prize. But I promise to hold you in high esteem for your proofreading prowess.

New Gas Pipeline Decision

archimedes
Leverage requires a place to stand

Three environmental groups lost their case against the Federal Energy Regulatory Commission (FERC) because they lacked standing. As Archimedes noted, you can move the world with a long enough lever and a fulcrum, but only so long as you have a place to stand. Without standing, not only will you fail to move the world, but — as the three groups learned too late — you will also fail to move the United States Court of Appeals for the D.C. Circuit.

The story began when Spectra Energy applied to FERC for a certificate of public convenience and necessity (a permit) to build a natural gas pipeline to New York City via Jersey City. The Atlantic Chapter of the Sierra Club, Food & Water Watch, and NO Gas Pipeline intervened in the FERC proceedings and opposed the issuance of a certificate for several reasons, notably the increased likelihood that the gas in the pipeline would cause the homes of their Jersey City members to suffer from increased levels of radon. FERC did not fnd the objections persuasive and on May 2012 issued the certificate. The three organizations and the City of Jersey petitioned the Court of Appeals to review the decision.

On July 1, 2014, the court dismissed the petition for want of jurisdiction. It had other reasons for dismissing Jersey City’s petition, but for the environmental coalition the fatal issue was standing: the court held that each group had failed to show “injury in fact,” meaning “the invasion of a legally protected interest which is (a) concrete and particularized… and (b) actual or imminent, not conjectural or hypothetical.” In trying to demonstrate standing, the groups alleged that the pipeline would raise the risk of radon and terrorism, both of which could injure their Jersey City membership.

These risks were too speculative, the court decided. The supposedly heightened radon risk depended on energy companies choosing to (1) extract high-radon gas and (2) transport it without taking steps to reduce the radon levels. There was no evidence that Spectra would make these choices.

As for the terrorism threat, the court observed that the commission of an act of terrorism depends on the “intervening acts of third parties,” i.e. terrorists.  Perhaps the court had in mind the perverse incentive that would result from forbidding construction of a pipeline because of the chance that terrorists might try to blow it up. If acts of violent sabotage could serve as the basis for denying permits, some pipeline opponents might find themselves unable to resist the temptation to engage in them. And, besides, there is precious little that al Qaeda et al will not target or weaponize in the realm of infrastructure (or anything else, for that matter).

Here, however, I am speculating. But if I were trying to persuade a judge to deep six a project, I would keep this public policy issue in mind and refrain from relying on the target-for-terrorism argument. The main point for readers with an interest in the Northeast Expansion Project is that for standing purposes, organizations and the individuals that they consist of must demonstrate facts that establish “actual and imminent” injury. Harms that are too contingent and attenuated will not suffice. That remains true even if the organizations intervened at the FERC stage.

The take-away: In and of itself intervening in FERC proceedings is no guarantee that the intervenor will have standing to challenge FERC’s decision in court.

DTA discrimination case must go to jury

The Massachusetts agency that (according to the State Auditor) gave benefits to 1,164 people who were already dead, could not account for whereabouts of 30,000 electronic benefits transfer (EBT) cards, and (according to CBS Boston, the Boston Herald, and 22 News) allows benefits recipients to use their EBT cards in places such as Hawaii, Florida, California, Puerto Rico, and the Virgin Islands, received some good news recently. The Department of Transitional Assistance (DTA) must have relished the summary judgment it obtained in an age-discrimination case. But not for long. Yesterday the Appeals Court cut short any DTA celebrations when it ruled that the case must go to the jury.

The plaintiff, Diane M. Younker, alleged that DTA discriminated against her on the basis of her age (70) when it demoted her and gave her position (director of the Revere office) to a younger employee, Paul Sutliff (53). Ms. Younker also alleged that she lacked the necessary connections, with promotions going to employees who were more political wired.

DTA said that it demoted Ms. Younker because Mr. Sutliff would be better at dealing with what it claimed to be a pressing problem confronting the Revere DTA: overcrowding in the waiting room. The congestion was simply dreadful, it would appear. Now, admittedly, the demotion occurred in 2009 — a few years prior to the revelations about the DTA’s habit of giving cash to corpses — so at that point the most important skill for a director may well have been familiarity with feng shui as opposed to the ability to distinguish the living from the dead.

What bothered the Appeals Court was Ms. Younker’s testimony that nobody from HQ ever instructed her to implement any particular changes to address the waiting-room congestion, which contradicted the deposition testimony of Assistant DTA Commissioner John Augeri. “I was never given a specific set of implementations I was supposed to institute,” Ms. Younker averred. Ms. Younker’s affidavit refuting Mr. Augeri’s testimony “raised a genuine issue of material fact,” the Appeals Court held. Because direct evidence of discriminatory animus is rare, and the “circumstantial evidence… may be viewed as supporting a conclusion that the defendant’s proffered reason is false,” it should go to the jury.

The take-away for litigants? Buttressing a motion for summary judgment in a case that hinges on discriminatory animus requires detailed, credible evidence, both documentary and testimonial.

P.S. Reports from the ongoing political-patronage trial of John O’Brien contradict claims that DTA has long been turning a blind eye to waste, fraud, and abuse. As far back as 2007 the agency even had a unit dedicated to investigating benefit fraud, but it lost one committed member to the Probation Department (where the pension was higher). Patricia Mosca told the court about the prowess she brought to her job at DTA: “I could do it in my sleep,” she testified.

P.P.S. No word yet on whether the seating arrangements at DTA’s Revere office have improved since 2009.

All means nothing

What does “all” mean? In eminent domain law the word does not necessarily mean what you might think, according to today’s Supreme Judicial Court’s decision in Sorenti Bros, Inc. v. Commonwealth.  In fact, it can mean “nothing.”  Readers with an interest in takings and damages (e.g. landowners with property along the route of the Tennessee Gas Pipeline Company’s proposed northeast expansion project) may wish to pay particular attention.

The case involved a gas station, the construction of a flyover, and the elimination of a traffic island in Bourne, the town that describes itself as “the gateway to Cape Cod.”

The old road configuration was a boon to plaintiff’s Shell gas station. But the new highway configuration has made it a more difficult — and, therefore, less attractive — place to get to. As part of the flyover project the Commonwealth took part of the plaintiff’s land, bringing the eminent-domain statute into play.  The part of the statute that relates to partial takings provides that the landowner should receive damages for “all injury to the part not taken caused by the taking or by the public improvement for which the taking is made.”

Does “all” include the loss of business that the new road configuration means for the Shell gas station?  The jury said yes, but the Supreme Judicial Court said no.i_want_it_all___queen_by_agynesgraphics-d5zgn11

Because the new layout only renders the route to the gas station “more circuitous” the station’s owner is not entitled to damages. After noting that “luck [of enjoying]… being where the crowd is” does not amount to a right, the Court stated that the “limitations on access… do not approach the severity that has been found to justify damages for impairment of access.” At trial, the judge had instructed the jury that they could award damages for the impaired access, and they arrived at the sum of $4.15 million. The SJC, in contrast, decided that the plaintiff was simply not entitled to damages. From “all” to nothing.

Combating climate change a charitable purpose in Massachusetts

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A tax-exempt charitable activity

There are many places in Massachusetts that I shall never visit, but that I feel quite sure are, in some small way, benefiting humanity as a whole, and other species for that matter. Should this generalized benefit — a positive externality, I suppose economists would call it — earn the owners of such places an exemption from the local property tax? Yes, said the Supreme Judicial Court.

When a non-profit corporation applied for a tax exemption for its forest land in Hawley, Western Massachusetts, the local board of assessors said no, a decision the state’s Appellate Tax Board upheld. Why? Because, the boards claimed, mere forest management, in and of itself, does not benefit a sufficiently large number of people and is not, therefore, a charitable purpose. On May 15, the Supreme Judicial Court ruled that the boards were wrong.

The nonprofit corporation is the New England Forestry Foundation, Inc. (NEFF) and the forest for which it was seeking tax-exempt status is the 120-acre Stetson-Phelps Pine Ridge Farm. NEFF already had the benefit of reduced taxation under M.G.L. c. 61 but wanted tax-exempt status under a different statute, M.G.L. c. 59, S.5 (Clause Third). The value of the land: $96,000.  The tax rate: $200. This may strike readers as a pretty good deal, but the Court noted that applying for reduced-tax status under Chapter 61 every ten years for all NEFF’s properties entailed “administrative costs.”

In contrast to the Hawley Board of Assessors and Appellate Tax Board, which had decided that NEFF’s forest did not sufficiently benefit the public to qualify for an exemption under Clause Third, the Supreme Judicial Court (citing the Massachusetts 2011 Climate Change Report) held that “large forested blocks of land [contribute] to ‘ecosystem resilience’ in the face of rising temperatures and more severe storms because forests naturally absorb carbon and other emissions.”  The boards had thought the forest owners should have to do something with the land in order to qualify for the exemption, e.g. educate the public, invite people in to walk around and enjoy the scenery, etc. Not really, held the Court:

“[B]y holding land in its natural pristine condition and thereby protecting wildlife habitats, filtering the air and water supply, and absorbing carbon emissions, combined with engaging in sustainable harvests to ensure the longevity of the forest, NEFF engages in charitable activities of a type that may benefit the general pubic.”

The holding in this case invites many more applications for tax-exempt status from forest owners, and prompts a few questions. For example, while most of us probably agree that woodland-owning non-profit corporations should not have to pay as much tax as for-profit corporations, should the non-profits not have to pay any property tax at all? And what about other activities that foster “ecosystem resilience,” such as the Vickerys’ back-yard vegetable patch?

Before redefining myself, wife, and children as not so much a “family” and more of a “bona fide non-profit land conservation organization,” and dashing down to Amherst Town Hall to claim our tax-free status (esto perpetua), I shall re-read footnote 10 of the SJC’s decision.  To hold closed the metaphorical floodgates it sets out some “factors that may prove relevant” (nothing so stifling as a “precise formula”) for determining the bona fides of a land conservation organization. But I feel confident that after planting a few more apple and plum trees, plus a few quiet summer evenings devoted to libation-assisted imaginative lawyering, I shall meet the Court’s criteria and do my part to both restore climate equilibrium and further erode Amherst’s tax base.

Pipeline: House feels the need for speed

Although the Natural Gas Act preempts state laws about natural gas pipelines, it preserves the role state agencies play in issuing permits under federal environmental laws. This proviso appears in section 717b(d) of the statute. For example, because pipeline construction involves the discharge of water, the Clean Water Act requires the pipeline company to obtain a water quality certificate (in addition to a certificate of public convenience and necessity from the Federal Energy Regulatory Commission (FERC)). reduced speed

Not being immune to public pressure, state agencies have allegedly dragged their feet on occasion (e.g. failing to promptly process water-quality applications) a problem Congress sought to address in 2005 via the Energy Policy Act. Congress intended to accelerate the permitting process through expedited judicial review, which allows a pipeline company to petition the U.S. Court of Appeals for the D.C. Circuit if the agencies fail to meet FERC’s deadlines.

But according this report from the Interstate Natural Gas Association of America, since the act took effect the speed of permitting has gone down rather than up. In 2012 President Obama issued Executive Order 13604 directing federal agencies to “adhere to guidelines and schedules”  and, to that end, establishing a Steering Committee on Federal Infrastructure Permitting and Review Process Improvement. But the new committee does not seem to have injected or diffused sufficient alacrity into the executive branch.

So to solve the problem (again) Congress is considering another bill, the Natural Gas Pipeline Permitting Reform Act. This post on PipelineLaw.com provides some helpful background. At present, if an agency lets FERC’s deadlines slide the onus is on the pipeline company (not FERC) to go to court for an order telling the agency to comply with the timetable. Under the proposed bill if an agency fails to approve or deny a permit by FERC’s deadline, the permit will issue anyway. After passing the House (252:165) the bill is now before the Senate. With no action likely this side of the November elections, the bill will probably not have any effect on the Northeast Expansion that Tennessee Gas Pipeline Company proposes to build across northern Massachusetts.

Storm Team 7: Latest storm assessment news from the SJC

April 14, 2014:- An unsettling decision emerged from the Massachusetts Supreme Judicial Court (SJC) today. For readers who prefer executive agencies to stick to executing the law rather than making fundamental policy, the decision will come as rather a disappointment. The case involved the question of regulatory takings and its name is Fitchburg Gas & Electric Company v. Department of Public Utilities, No. SJC-11397. In this decision the seven justices of the SJC interpreted a statute one way, and then granted the enforcing agency the right to interpret the same statute in exactly the opposite manner. Appropriately, the statute in question had its origins in the confusion and finger-pointing that followed a natural disaster.cloud

After the storms of 2011, the consensus among state lawmakers was that the response of the utilities had been somewhat desultory.  So in 2012 the Massachusetts Legislature enacted a statute establishing the Storm Trust Fund to help the Department of Public Utilities (DPU) examine the power companies’ storm preparedness. The law required all electric utilities to pay for the Fund via an annual assessment.

But, readers may wonder, as rational economic actors with a duty to their shareholders, would not the utilities simply pass on the cost of the assessment to the consumers? Ah, the Legislature thought of that. In order to prevent that very outcome it crafted section 18, para. 3, prohibiting the utilities from seeking “recovery of any assessments in any rate proceeding before the department.” Five electric companies sued on the basis that, among other things, the law amounted to a regulatory taking. The result was today’s decision from the SJC upholding the law.

A quick reminder: Did the Legislature intend to give the utility companies leeway to pass the cost of the assessment on the consumers? No, because (as the court explained) the Legislature’s intent was to raise funds to “investigate public utilities’ storm preparedness and responsiveness” and require the companies to “absorb the costs associated with achieving these purposes.” So the DPU must prohibit the utilities from effectively recouping that cost, correct? No. The DPU can interpret the statute in a way that permits the utilities to do exactly that.

Yes, you read that correctly.

Here is how the court summarized its decision: “[T]he Legislature may… prohibit the companies from including the assessment as a direct cost in a rate proceeding… However, even when such an assessment is properly excluded from the rate base, the department must permit the utilities to achieve a fair and reasonable rate of return on their investment, in accord with our constitutional mandates… What constitutes a reasonable return is a fact-specific inquiry that must be made in the context of a particular rate proceeding.”

The court held that although the DPU could interpret the statute to prevent a utility from claiming the assessment as part of its rate base, the DPU could — on the other hand — “offset the impact of the assessment through the allowance of a higher rate of return.” In footnote 4 the court observed, “It appears that the [DPU]… has not settled on an interpretation of the statutory language.”

Because the industry is such a highly regulated one the case is, in some respects, quite complex. But in one regard it is reasonably clear: An executive agency may interpret a statute in a way that contradicts what the SJC has determined to have been the clear intent of Legislature in enacting it. If you can call that reasonably clear.

 

Trammeling Turtle Takes: A Taking?

This post is about real estate law. But, lest my alliterative headline cause confusion, I begin with three brief definitions. First, in the language of the law the word “taking” refers to the government acquiring somebody’s property. Second, the term “a take,” as it appears in endangered-species statutes, refers to somebody doing something that could cause harm to an endangered creature or its habitat. As for the third term, “trammel,” it was the only synonym I could find for “stop” that begins with the letter T. Now to consider whether the trammeling of turtle takes could constitute a taking.

turtle dollar sign
Who pays? Public purse or private landowner?

In 1991 a walker spotted an eastern box turtle “on or near” property that now belongs to William and Marlene Pepin in the town of Hampden in Western Massachusetts. Some years later, the Pepins decided to build a single-family home on their land but the Division of Fisheries & Wildlife imposed restrictions that would significantly increase the cost of the project by requiring them to set aside some of their land and pay money to the state, as this MassLive article points out. Why? Because the Division — on the basis of that 1991 sighting — had designated the Pepins’ land as a “priority habitat” for the eastern box turtle. Disrupting the habitat could constitute a “take” of the turtle within the meaning of the  Massachusetts Endangered Species Act (MESA). This meant that the Pepins, not the public purse, would bear the cost of preserving the habitat that supposedly once hosted an eastern box turtle.

Readers inclined to look for the term “priority habitat” in the statute should not bother. Although the Legislature created a framework for designating “significant habitats,” replete with notice, public hearing, judicial review of the agency decision, and recordation in the registry of deeds, it did not provide for “priority habitats.” That is a category the Division came up with all by itself. And shunning the procedural safeguards the Legislature built around the “significant habitat” designation, when it invented the “priority habitat” designation the Division decided to give landowners no similar protections.

Can an executive agency do this? The Supreme Judicial Court said yes, holding that by way of MESA the Legislature “delegated to the division broad authority” to implement the statute’s provision. The Court drew attention to the Legislature’s grant of authority to adopt “any regulations necessary,” words that appear in Section 4 of the statute, whose plain and ordinary meaning is clear. But what the Court ignored was Article 30 the Constitution of the Commonwealth of Massachusetts.

As I mentioned in a previous post, the Massachusetts Constitution prohibits the Legislature from delegating its lawmaking power, i.e. the power to make fundamental policy decisions, to executive agencies. This doctrine of non-delegation came up in the Pepin case. Attorney Donald R. Pinto, Jr., of the Boston law firm Rackeman, Sawyer & Brewster co-authored an amicus brief for the Pacific Legal Foundation, which argued that the Division’s decision “to strike this particular balance between species protection and economic development is the fundamental policy decision that must be made by the Legislature.” Although the amicus brief raised this important issue, the SJC did not address it.

As if flouting Article 30 were not enough, there is another issue here. When the government deprives landowners of their property, we call it a taking. When government does the same thing via regulations we call it a regulatory taking. How much value must a regulation destroy before we can call it a regulatory taking? In this case, the state government reduced the value of a parcel of real estate, and also required the owner to make a payment into a public fund.

Together, the reduction in value combined with the demand for money might amount to a taking. If the Pepins can stomach even more litigation, perhaps the Supreme Court of the United States will have an opportunity to let us know one way or the other.

New Pipeline in the Pipeline for Western Mass.

According to TV and print media, a new natural-gas pipeline might soon stretch 250 miles across northern Massachusetts, winding its way under a dozen or so towns in Berkshire and Franklin Counties.

The extension depends on several factors, including whether the pipeline owner (Tennessee Gas Pipeline Company) will get federal approval for its expansion plans. Although the pipeline might stay within the limits of current utility easements, some property-owners may be wondering what happens if the company ends up needing more land. This is one of those rare occasions when the law provides a short, clear answer: eminent domain.

Although the project would generate hundreds of construction jobs, a unanimous Bay State welcome seems unlikely. Environmentalists will point to the impact of fossil fuels on the climate and perhaps abutters will raise concerns about possible leaks and explosions. Some property-owners might be inclined to hold out, for reasons of high-mindedness or high expectations. Whatever their differences of opinion and interest, proponents and opponents alike should note that a federal law, the Natural Gas Act, gives pipeline owners an important advantage: if the company and the landowner cannot reach agreement the company can simply take the land, exercising a power usually reserved to governments as opposed to private actors. Here is a link to the relevant provision of the statute: 15 U.S.C. §717f(h).

In enacting this statute, Congress created a comprehensive national framework. So claims and objections based on state laws – even on state constitutions – cannot stand in the way of a natural-gas pipeline.

The company cannot engage in any takings quite yet. First it has to obtain a certificate of “public convenience and necessity” from theFederal Energy Regulatory Commission. But potential holdouts, beware:  From that point onward, armed with its certificate, Tennessee Gas Pipeline Company would have the right to take what it needs by eminent domain.

Gas in Mass.? Not so fast.

In October I gave a talk on the law surrounding hydraulic fracturing (fracking) and shared the stage with Professor Steven Petsch, a geologist who teaches at the University of Massachusetts, Amherst. oct 9 mtg 1 You can watch both presentations by clicking here. Mine starts around the 46-minute mark, by the way.

My presentation focused on the current regulatory ban on Class II wells and the question of whether it could withstand a courtroom challenge. Professor Petsch described the geology of the Pioneer Valley and made absolutely clear that nobody has discovered natural gas in the area. He also explained why: The history of the rock formations in Western and Central Massachusetts make it extremely unlikely that they contain recoverable natural gas.

About a year ago the Massachusetts State Geologist posted a helpful overview online, which you can read here. Like Professor Petsch, the State Geologist makes abundantly clear that nobody has discovered natural gas in Massachusetts.

Nevertheless an organization called Environment Massachusetts keeps claiming that gas deposits have been found here. The people who work for Environment Massachusetts may be right about a lot of things, but on this they are just wrong. So please remember, if a canvasser from Environment Massachusetts asks you for a contribution because (as their website alleges) “geologists recently discovered shale gas in Western Massachusetts,” you may decline with a perfectly clear conscience.

Court engages in time inflation and creates the 395-day year

How long is a year? That was the essence of the question the Supreme Judicial Court (SJC) answered on September 11 when it issued its decision in Brigade Leveraged Capital Structures, Inc. v. Pimco Income Strategy Fund, holding that the phrase “on at least an annual basis” means 395 days. Not as odd as it sounds, the decision represents a win for shareholder democracy and provides a reminder to attorneys who draft corporate bylaws to choose their words very carefully.

The dispute revolved around a bid to increase shareholder power. Pimco, the defendant investment management firm, managed two funds in which Brigade, the plaintiff, held shares. Brigade decided to nominate one of its partners to serve as a trustee on the boards of the two funds. Shareholders were set to elect the trustees at the funds’ next annual meeting. When it learned of the nomination, Pimco rescheduled the annual meeting from October 11, 2011, to July 31, 2012.

Brigade went to Superior Court asking for an order to make Pimco hold the 2011 shareholder meeting sooner. Pimco contended that under the terms of the bylaws it was entitled to reschedule the meeting even though the new date of July 31, 2012, was 19 months after the last shareholder meeting. In dispute was a provision in the trust’s bylaws which requires that regular meetings of shareholders “shall be held, so long as Common Shares are listed on the New York Stock Exchange, on at least an annual basis.” But what did that phrase — “on at least an annual basis” — mean?

Pimco said it could mean at any time during a fiscal year. With this approach, the management could conceivably hold one meeting in January 2013, but then not convene another one until December 2014, almost two years after the previous meeting. Rejecting Pimco’s interpretation, and siding with the shareholders, the SJC held that the phrase meant “no later than one year and thirty days (395 days) after the last annual shareholders meeting.” How and why did the court reach this conclusion?

Treating the bylaws the way it would a contract, the court construed the ambiguous provision against the party that drafted the document, namely Pimco.  In addition, it read the words in the context of another section of the bylaws that referred to an “annual period,” which ended 30 days after the anniversary of the last annual meeting. But there was also an important principle at stake: the shareholders’ right to meaningful corporate democracy. “Delay in holding a shareholder election diminishes electoral rights by allowing [the] trustees to become more deeply entrenched and to continue to harm the interests of shareholders.”

What makes this case important rather than simply intriguing? The fact that other trusts and corporations in Massachusetts have bylaws that contain the same terms as the bylaws at the center of Brigade v. Pimco, such as the “annual period” provision and the requirement for shareholder meetings “on at least an annual basis.” This is not because of lazy lawyering and a fondness for copy-and-paste. Even the most diligent, detail-oriented attorneys rely on previous examples because familiarity and predictability are valuable assets in corporate governance and law, and because those older bylaws have stood the test of time. Of course, at the heart of the Brigade v Pimco case was the very meaning of time.

So what should small business owners do? First, it is worth checking their company’s bylaws to learn whether they require shareholder meetings “on at least an annual basis.” Then they should decide whether the annual-meeting provisions, as a court would likely interpret them, will work in practice. If the bylaws need changing, they can amend them by following the steps laid out in the bylaws. Without question, this involves time and other valuable resources that owners would prefer to devote to growing the business. On the other hand, it can stop misunderstandings before they start, and (no matter what your attorney charges per hour) it will prove much less expensive than litigation.

Attorney Peter Vickery practices in Amherst, Western Massachusetts.

Can you hear the silence? The SJC can.

Do you remember that day in high school or college when you learned about the separation of powers? Today the Massachusetts Supreme Judicial Court issued a decision that contains some language which might leave you wondering whether, during the intervening years, somebody went and amended the Constitution.

The case is Massachusetts Teachers’ Retirement System v. Contributory Retirement Appeal Board and it is important for several reasons. This post deals with just one of those reasons, one that matters to anyone who might be affected by how much leeway a government agency has when it interprets a statute.

First some background.  In 2005 the Legislature passed a law allowing vocational education teachers to increase their pensions by having up to three years of non-teaching employment count toward their “creditable service.”  During that three-year period they must have been working in the same trade they ended up teaching, e.g. a plumber who becomes a vocational plumbing teacher can ask the retirement board to count three years of her pre-teaching plumbing when calculating her pension.

To qualify for this significant pension boost, teachers have to contribute “makeup payments” into the retirement system, in an amount equal to ten per cent of their regular annual compensation. They also have to pay “buyback interest.” But when should the interest accrue: when they entered the retirement system, or the start of the three-year period?

In answering that question, two agencies had competing interpretations of the statute. One agency, the Contributory Retirement Appeals Board (CRAB) said that the statute was clear and unambiguous. Interest should run from when the teacher joined the system. The other agency, the Massachusetts Teachers’ Retirement System (MTRS) disagreed, saying that the statute was silent on the issue.  The Supreme Judicial Court heard the same silence, and held that the way the MTRS filled the silence was reasonable and entitled to deference.

Can you hear the silence?

One topic for a future post is the question of how silent the statute really is. In the meantime, I would like to address a more basic, constitutional aspect of the case.

What the Court said in explaining its decision is worth noting, not only if issues like democratic accountability rank high on your list of priorities, but also if you think that at some point your life may be affected by how an executive agency interprets a piece of legislation.

By way of a prelude to the Court’s explanation, let me refresh your memory of that high school or college lesson. The Constitution of the United States embodies the doctrine of the separation of powers, allocating the executive, legislative, and judicial roles to three distinct branches.  The Massachusetts Constitution, which predates it, is more explicit. Article 30 states:

“In the government of this commonwealth, the legislative department shall never exercise the executive and judicial powers, or either of them: the executive shall never exercise the legislative and judicial powers, or either of them: the judicial shall never exercise the legislative and executive powers, or either of them: to the end it may be a government of laws and not of men.”

Because the Constitution prohibits the Legislature from delegating is lawmaking powers to the executive, courts and commentators refer to the “doctrine of non-delegation.” Of course, Massachusetts judges have long recognized that modern government requires some degree of delegation, but they have distinguished between situations where agencies are just “working out the details” of a policy that the Legislature has announced (which is permissible) and those where the agency is making “fundamental policy” (which is not).

If the Legislature has delegated to an agency the task of making “fundamental policy decisions” it has violated Article 30. That was a point the Court made very clear in 2006 when it decided Commonwealth v. Clemmey.  But in today’s decision, which did not mention the non-delegation doctrine, the Court said this:

“[T]he Legislature simply chose to be silent on the issue, thereby leaving a policy gap to be filled by agency action.”

So this is a policy question, without doubt, not merely a matter of “working out the details.”  Is the question of when interest accrues on a vocational teacher’s buyback a “fundamental policy question” or is it something less than that, e.g. a trifling or minor policy question?  This recent report on the commonwealth’s unfunded pensions liabilities may influence how you answer that question.  It mentions a figure of $23.6 billion.

One important lesson from today’s decision is this: It has become even easier for the Legislature to delegate policy questions to executive agencies, when even an issue that involves a multi-billion dollar unfunded mandate does not qualify as a “fundamental policy decision” of the sort that the Legislature has no constitutional right to delegate.  If you have any questions or comments about the decision, I welcome your posts.

This month in constitutional history

360th
Happy Birthday, Instrument of Government

My current successor as Governor’s Councilor for Western Massachusetts is one of three plaintiffs suing Governor Patrick over his refusal to appoint to the bench a would-be judge who, the complaint alleges, had obtained the consent of the Governor’s Council. Have you ever wondered why, when it comes to appointing judges, the Governor of Massachusetts needs the “advice and consent” of the Governor’s Council and the President of the United States needs the “advice and consent” of the Senate? Here is the reason.

Although there is little in the way of hoopla, this year marks an important point in constitutional history, namely the 360th anniversary of the adoption of Britain’s first (and shortlived) written constitution, the Instrument of Government. It is from the Instrument of Government that John Adams, the author of the Massachusetts Constitution, and the other framers of the U.S. Constitution drew some inspiration and at least one key phrase, namely “advice and consent.”

John Lambert and John Adams

The Instrument of Government was a product of the English Civil War, the overthrow of the monarchy, and the rise of Oliver Cromwell. In 1653 John Lambert, a general in Cromwell’s New Model Army, drafted the Instrument, article IV of which states that the “Lord Protector [i.e. Cromwell] with the advice and consent of the major part of the council shall dispose and order the militia for [the peace and good of the three kingdoms] in the intervals of Parliament.”  The phrase appeared again in the 1686 Massachusetts royal charter, which authorized the Governor to make judicial appointments with “the advice and consent of the council.” John Adams kept that proviso when he drafted Constitution of the Commonwealth of Massachusetts in 1780.

Adams’s fellow framers of the Constitution of the United States must have warmed to the phrase because it made its way into article II, section 2 in connection with the President’s power to make treaties and to appoint “ambassadors, other public ministers and consuls, judges of the Supreme Court, and all other officers of the United States whose appointments are not herein otherwise provided for and which shall be established by law.” These are appointments the President can made only with the “advice and consent of the Senate.”

As if that were not excitement enough, this month we celebrate the brief term of Anthony Ashley Cooper who, in August 1653 (while John Lambert was busy drafting the Instrument) served as Lord President of the Council of State, the executive body that intermittently ran England, Wales, Scotland, and Ireland during the Commonwealth. His term of office lasted for all of two weeks. Cooper was a royalist-turned-parliamentarian who returned to the royalist fold after Cromwell’s death, wisely as it turned out. After the restoration of the monarchy, Cooper continued to hold high office, including another stint as Lord President of the Council, and became first Earl of Shaftesbury. Poor John Lambert, in contrast, the drafter of the Instrument of Government, stayed true to the parliamentary cause and died in prison.

Anthony Ashley Cooper and John Lambert both made career choices with long-term consequences.  For members of the Massachusetts Governor’s Council who sue the Governor, the stakes are not so high.

How not to impress the judge

Earlier today the Massachusetts Appeals Court affirmed a motion to dismiss in the case of Kelley v. Cambridge Historical Commission (12-P-1309).  From the following description, I get the sense that the plaintiff’s complaint failed to impress the justices:

“[It] is written in a discursive, stream of consciousness style, it lacks any organizational coherence, and it is riddled with overblown language and inappropriate ad hominem attacks. As a result, the specific legal theories on which the plaintiffs purport to rely are not readily discernible.”

Then, in a footnote, they add: “We appreciate the difficulties the motion judge faced as he diligently tried to make sense of the plaintiffs’ alleged causes of action.”

From time to time (like most attorneys, I suspect) I have had to discuss with a client why things did not turn out as well as hoped, and although those conversations have always been professional not one of them has ever been delightful. But I am relieved that not once have I had to explain anything like the judicial blasting above.

While I do not know the lawyer who prompted it, I am grateful to him: I plan on framing and showing the foregoing expression of the Appeals Court’s ire to anyone who expresses misgivings about the admittedly spare and to-the-point nature of my legal writing.

Can you see a contract? The SJC can.

Picture this: Corporation A enters into a contract with Corporation B, which hires Mr. Individual as an independent contractor. Perhaps in your mind’s eye you will imagine two links in a chain, representing a contract between Corporation A and Corporation B.  But you will see no link between Corporation A and Mr. Individual because they do not have a contract with each other.

What if a court decides that Mr. Individual is not, in fact, an independent contractor but rather an employee of Corporation B and entitled to the protection of the Massachusetts Wage Act? Should Corporation A be liable to Mr. Individual, even though — unlike Corporation B — it had no relationship with him? “Yes,” said the Supreme Judicial Court in Depianti v. Jan-Pro Franchising International, SJC-11282, a case that brings to mind the Ishihara Color Test.

Some people will look at an Ishihara image consisting of colored dots and see a number. Others of us, myself included, will not. The Depianti decision demonstrates that I am not only color-blind; I am also contractual-duty-blind.

Can you see it?
Can you see it?

Jan-Pro is a Massachusetts cleaning company that operates a franchise system. It sells franchise rights to regional franchisees which, in turn, enter into contracts with unit franchisees. The unit franchisees are individuals who perform janitorial services.

One of Jan-Pro’s regional franchise holders was Bradley Mktg Enterprises, Inc., a corporation that sold a unit franchise to an individual named Giovani Depianti in 2003.  Five years later, Mr. Depianti sued in federal court claiming that he was not really an independent contractor but rather an employee and, as such, entitled to the protection of the Massachusetts Wage Act, M.G.L. c. 149, Section 148B.  Jan-Pro (yes, Jan-Pro) had misclassified him as an independent contractor, Mr. Depianti alleged.

Because it involved the interpretation of a state statute, the United States District Court asked the Massachusetts Supreme Judicial Court to decide three questions, including “whether a defendant may be liable for employee misclassification… where there was no contract for service between the plaintiff and the defendant.”  Answering in the affirmative, the Supreme Judicial Court held that Jan-Pro was the “agent” of the misclassification and merely used Bradley as its “proxy.”  The lack of a contractual relationship between Jan-Pro and Mr. Depianti should not stand in the way of liability.

According to the Court, this was the will of the Legislature.  The practice of employers wrongly classifying workers as independent contractors — and thereby avoiding the taxes associated with employees — was the mischief that the Legislature sought to remedy with the new Section 148B.  Because the statute is a remedial one, said the Court, it is “entitled to liberal construction… with some imagination of the purposes which lie behind [it].”  Depianti may suffer from a dearth of traditional contract law, but it has imagination by the bucketful, as the Court’s conclusion makes plain: “Limiting the statute’s applicability to circumstances where the parties have contracted with one another would undermine [its] purpose.” Any other conclusion would permit an “end run” around the Wage Act.

Certainly, when it enacted the independent-contractor provisions of the Wage Act, the Massachusetts Legislature may well have consciously intended to up-end the elemental principles that 1L law students learn in their first days of Contracts class. Absent a state equivalent of the Congressional Record, searching for evidence of such an intent would be in vain.  The lone dissenter, Justice Cordy, stated: “I see no evidence of legislative intent… to change the body of law that governs the liability of such distinct entities.”

By expanding the reach of the statute so dramatically without positive evidence of legislative intent the SJC’s decision has made the law less certain and less predictable, and rendered Massachusetts that much more challenging to do business in. The statute already made it so difficult for arms-length parties of comparable bargaining strength to create an independent-contractor relationship that the employers’ group Associated Industries of Massachusetts claimed that “virtually no individual in Massachusetts can unambiguously pass the legal test.” Even some Democratic state legislators (including liberal-progressive types such as Representative Lori Ehrlich and Senator Stan Rosenberg) signed on to a bill that would loosen the law.

You do not have to be a freedom-of-contract fanatic hankering for a return to the Lochner era to think that Depianti v. Jan-Pro makes legislative action all the more urgent.

Massachusetts recognizes associational discrimination

July 19, 2013: Massachusetts law has long protected employees from discrimination based on their disabilities, both real and perceived. It now also protects employees who have suffered discrimination on the basis of a another person’s disability, if that person is someone with whom the employee “associates” (e.g. a spouse). That was the decision that the Supreme Judicial Court released earlier today in the case of Flagg v. Alimed (SJC-11182).

The question before the Court was whether the state’s anti-discrimination law (M.G.L. c. 151B) “bars an employer from discriminating against its employee based on the handicap of a person with whom the employee associates.”  In an unequivocal answer, which endorsed the position of the Massachusetts Commission Against Discrimination (MCAD), the Court stated: “[W]e hold that associational discrimination based on handicap is prohibited under [M.G.L. c. 151B] § 4(16).”

Although they concurred in the opinion, two of the justices (Gants and Cordy) would have found for the plaintiff employee on narrower grounds.

The case involved an employee who was “fired because the employer feared the medical expenses his spouse was likely to incur because of her handicap,” not because of any request for “reasonable accommodations,” such as taking time off to care for her.  What concerned the two Justices Gants and Cordy was the possibility that plaintiff employees might use the Flagg decision to argue that employers now have a duty to provide them with reasonable accommodations — flexible schedules for example — based on the needs of the individuals they are associated with, e.g. disabled spouses. Such a reading of Chapter 151B after Flagg would go further than the Americans with Disabilities Act (ADA), an outcome the two concurring justices would have liked to forestall.

Will the MCAD and lower courts apply associational discrimination under Chapter 151B more broadly than under the ADA, as Justices Gants and Cordy fear? I suspect they will.

For a PDF of my Briefing Paper on the implications of the Flagg decision, click this link: associational-discrimination-paper.pdf.

The Santa [Clara] Clause

If you’re doing any kind of business online — as a buyer or a seller — the Appeals Court here in Massachusetts has just issued a decision you should know about. It concerns forum-selection clauses, those boilerplate terms that tell you that no matter where you live, the one and only place you can sue is, say, Santa Clara, California.

A few days ago the Appeals Court declined to uphold a forum-selection clause that was part of a contract Yahoo! provided in connection with e-mail accounts.  The case started when the administrators of a deceased Yahoo! email account owner asked the Massachusetts Probate & Family Court to rule that the estate should include the contents of the email account.  Yahoo! tried to dismiss the case saying the Massachusetts courts lacked jurisdiction because of the forum-selection clause, which provided that all disputes had to be litigated in Santa Clara, California. The Probate & Family Court sided with Yahoo!, but the Appeals Court reversed the decision.

Unlike many online contracts, this one was a browsewrap agreement, i.e. it did not require the user to click “I agree.” The Appeals Court held that the clause was too broad (in that it covered every kind of dispute, even those not related to the email account) and did not bind the administrators of the estate.

Unless and until the Supreme Judicial Court rules otherwise, the lesson is this: the courts in Massachusetts will not automatically enforce forum-selection clauses in browsewrap agreements. So if you’re an online merchant, it might be better to opt for a click-wrap instead, and (counter-intuitively) don’t make the agreement too broad. It’s one more step for the consumer, but that is the price of enforceability, for the time being anyway.

SCOTUS to rule on affirmative action

Before it rises for the summer, the Supreme Court of the United States will issue its decision in Fisher v. University of Texas at Austin. The case presents an opportunity to prohibit affirmative action in university admissions, and some commentators expect the justices to do just that. Even-handed and balanced approaches to the issue are rare, but I feel comfortable recommending this one: Even while voicing its hope that affirmative action is on the way out, the current edition of The Economist describes the increasing segregation of US cities and schools, an issue familiar to readers of my recent post on Springfield, Massachusetts.

Although the case is about admissions, Fisher could have an impact well beyond college campuses, perhaps even reaching into executive branch decisions at the state level. Whatever your stand on the policy — mend it, or end it — stay tuned.

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Attorney Peter Vickery