PROVIDING OUTSOURCED LEGAL SERVICES TO MASSACHUSETTS ATTORNEYS

The buyer and seller of real estate assume numerous obligations when they execute a purchase and sale agreement (“P&S”).   Among other duties, the seller agrees to provide full possession of the premises, and that the premises will comply with applicable building and zoning laws.  A P&S will commonly include the following provision, or similar language tailored to the particular circumstances:

Possession and Condition of Premises.  Full possession of said premises … is to be delivered at the time of the delivery of the deed, said Premises to be then (a) on the same condition as they now are … and (b) not in violation of … building and zoning laws, and (c) in compliance with the provisions of any instrument referred to [in this agreement]

A buyer may argue that this “Condition of Premises” provision creates a warranty, enabling the buyer to sue the seller after the sale is complete if premises fail to comply with applicable laws.  However, the Condition of Premises clause does not create a warranty, does not survive the closing and, therefore, cannot provide a basis for the buyer to sue the seller after the sale is complete.

Massachusetts courts have rejected such warranty claims, noting that other provisions of the standard P&S make clear that the obligations imposed by the Condition of Premises section do not survive the closing.  The standard P&S also contains a provision entitled “Acceptance of Deed,” which provides that,

the acceptance and recording of a deed by the BUYER … shall be deemed to be a full performance and discharge of every agreement and obligation herein contained or expressed, except such as are, by the terms hereof, to be performed after the delivery of the deed.

Relying on the Acceptance of Deed provision, courts have held that the Condition of Premises provision does not create warranties or covenants that survive the recording of the deed.  Instead, it merely states conditions which, if not satisfied, justify the buyer’s refusal to close the sale.  It does not entitle the buyer to complete the sale, record the deed, and then sue to enforce those obligations or for damages.  By virtue of the Acceptance of Deed provision, such conditions cease to exist when the deed is accepted and recorded.

In Albrecht v. Clifford, 436 Mass. 706 (2002), the Massachusetts Supreme Judicial Court held that the obligations contained in the Condition of Premises provision (¶ 9 of the P&S in that case) are conditions rather than warranties.  According to the Court,

The Albrechts allege in Count I of their complaint that Clifford breached the terms of the purchase and sale agreement because “the Residence delivered to the Albrechts at or about the time of delivery of the deed was not completed in accordance with the requirements of the contract and is in violation of certain building laws.” …  The judge entered summary judgment on Count I because it was based on a paragraph of the purchase and sale agreement (paragraph 9), that did not survive the Albrechts’ acceptance of the deed but merged with it. …

Acceptance of a deed ordinarily merges all obligations in the purchase and sale agreement, except for those specified in the deed itself. McMahon v. M & D Bldrs., Inc., 360 Mass. 54, 59, 271 N.E.2d 649 (1971). Consistent with this rule of merger, the agreement in this case expressly states that: “The acceptance of a deed by the BUYER … shall be deemed to be a full performance and discharge of every agreement and obligation herein contained or expressed, except such as are, by the terms hereof, to be performed after the delivery of said deed.”

There is an exception to this general rule when a home builder agrees to undertake an obligation, such as constructing or repairing a building on the property, that is in addition or collateral to the conveyance of the deed….

The Albrechts contend that paragraph 9 of the agreement created an obligation that was collateral to the conveyance of the deed and, as such, constituted a contractual warranty that the residence would comply with the applicable building codes. This contention is incorrect. Paragraph 9 of the agreement states that:

“Full possession of [the residence] … is to be delivered at the time of the delivery of the deed, said premises to be then (a) fully completed in accordance with the requirements hereof, and (b) not in violation of any building, planning, health … or zoning laws…. The Buyer and its consultants shall be entitled personally to inspect said premises prior to the delivery of the deed in order to determine whether the condition thereof complies with the terms of this or any other clause hereof.”

This paragraph is not a warranty. Rather, it describes some of the conditions on which the Albrechts could have refused to purchase the residence. The agreement provided that if Clifford had been unable to provide good title, convey or deliver possession of the residence, or “if at the time of the delivery of the deed the premises do not conform with [the agreement’s] provisions”-including paragraph 9-he had up to thirty days to use reasonable efforts to remedy any of these problems. If he failed to fix any problems within that time, the agreement would have become void. We agree with the judge that Count I of the Albrechts’ complaint fails because paragraph 9 is not a contractual warranty that survived the Albrechts’ acceptance of the deed.

Id. at 716-17.  (Emphasis added, footnote references omitted).

Similarly, in Solomon v. Birger, 19 Mass. App. Ct. 634 (1985), the Court stated,

Section 4 of that agreement calls upon the seller to convey a good and clear record and marketable title, free from encumbrances, except, among other things, provisions of existing building and zoning laws. Section 9, upon which the plaintiffs heavily rely, provides: “Full possession of said premises free of all tenants and occupants … is to be delivered at the time of the delivery of the deed, said premises to be then (a) in the same condition as they now are, reasonable use and wear thereof excepted, and (b) not in violation of said building and zoning laws….” Into this latter section, i.e., § 9, the plaintiffs read a warranty by the sellers that the premises at the time of delivery of the deed will conform to the building code of the city of Newton. If the agreement so warrants, the materials submitted by the plaintiffs in opposition to the defendants’ motion for summary judgment are sufficient to raise a question of fact whether at the closing between the parties a building code violation existed.

We do not think that the purchase and sale agreement so warrants. Sections 4 and 9 of the agreement are interdependent. Section 4 deals fundamentally with the state of the title. It does so expressly and mentions building and zoning laws, party wall agreements, taxes, and betterments as aspects of title considerations. There is a blank subparagraph in which counsel tailoring the agreement may insert references to such things as easements. Under § 4, certain fundamental criteria for conveyance of title are established so that the buyer, between the time of execution of the purchase and sale agreement and delivery of the deed, can investigate what kind of pig is in the poke. If the buyer discovers a building or zoning law violation, the buyer may, under § 9, opt out of the agreement, unless the defect is cured in accordance with the provisions of § 10. Section 9 is not expressed in terms of warranty, but rather in terms of the conditions upon which the buyer may accept or refuse conveyance.

It is difficult to imagine that an agreement designed by a real estate association would contain a twenty-year warranty about a fact of which the seller is likely to have imperfect knowledge, i.e., whether his structure, at the time of sale, conforms in every respect with the building code.

Id. at 640-41.  (Emphasis added, footnote reference omitted).

To the same effect is the decision in Limoncelli v. Grover, 27 Mass. L. Rptr. 195, 2010 WL 3038900 (Mass. Super. 6/25/10), where the Court stated,

Clause 9 of Limoncelli’s contract provides that “Full possession of said premises … is to be delivered at the time of the delivery of the deed, said premises to be then … (b) not in violation of said building and zoning laws …” Massachusetts courts have held that (1) identical language in a purchase and sale agreement, in combination with a merger clause, fails to create a warranty or collateral obligation, and (2) acceptance of the deed extinguishes all of the seller’s obligations under the purchase and sale agreement. See Albrecht v. Clifford, 436 Mass. 706, 716-18, 767 N.E.2d 42 (2002); Solomon v. Birger, 17 Mass.App.Ct. 634, 640-43 (1985).

Id. at *2.  (Emphasis added).

Commentators agree.  Massachusetts Practice states,

The provision stating that the property at the time of the closing will not be in violation of building and zoning laws is not a warranty by the seller that the premises at the time of the closing will conform to building and zoning laws; rather, it is a condition upon which the purchaser may accept or refuse conveyance. In other words, the purchaser may not bring an action against the seller after the closing should he discover that the property is in violation of building or zoning laws in some respect. If the purchaser discovers such violations before the closing and the seller is unable to make the premises conform to the agreement, the purchaser may, depending upon the wording of the agreement, terminate the agreement and receive a refund of his deposit, require the seller to use reasonable efforts during a specified period to correct the problem, or accept the property in its present condition with or without a reduction in the price.

36A Mass. Prac. Consumer Law, §28:35 (3rd ed.)  (Footnote references omitted).

In sum, the Condition of Premises provision of a standard P&S does not create a warranty enforceable after the parties have complete the sale.  That conclusion flows from the language of that provision, which creates only a condition on the buyer’s duty to complete the sale, and from the clear language of the “Acceptance of Deed” provision.

In a previous post, I explained that when the settlor of a trust fails to execute a schedule of beneficiaries, the trust is void and cannot receive a conveyance of property.  That raises the question: who owns property which has been conveyed to a failed trust?  Does the property revert to the seller or does the trustee hold it, but in his or her individual capacity?  The answer depends on whether consideration was paid for the attempted conveyance.

The Court in In re: Callahan, 419 B.R. 109 (Bkrtcy. D. Mass. 2010), after concluding that the trust failed for lack of beneficiaries, held that title to the conveyed property did not revert to the third party transferor, but instead became vested in the debtor, individually, stating, “When the 121 Westwood Road Realty Trust failed, under Massachusetts law, the Debtor took title to the Falmouth Property in her individual capacity.”  419 B.R. at 127.

Calnan v. McCarthy, 12 Mass. L. Rptr. 522, 2000 WL 33170094 (Mass. Super. 10/18/00), also supports the conclusion that property conveyed for consideration to a trust which fails is held by the trustee of the failed trust in his or her individual capacity.  In Calnan, one McCarthy created a trust and then took a conveyance, as trustee, from a third party for valid consideration.  The Court held that the trust was void and decided that title to the conveyed property was held by McCarthy individually.  “[I]n the circumstances of this case, no trust ever came into existence and the defendant should be deemed to hold the property in his individual capacity.”  Id. at *3.

The Restatement (Second) of Trusts (1959) states,

Where the owner of property transfers it upon a trust which fails, and he receives from the transferee consideration for the transfer as an agreed exchange, there is no resulting trust and the transferee holds the property free of trust.

Id. at § 423.  Comment “a” to § 423 further provides,

Private trusts. Where the owner of property sells it and at the direction of the purchaser transfers the property to the purchaser in trust for a third person, the purchaser and not the seller is the person who creates the trust. Hence, if the trust fails there is no reason why the property should be returned to the seller, and there is no reason why he should not keep the purchase price. The purchaser in such a case can properly retain the property. The situation is the same in substance as though the seller had transferred the property to the purchaser free of trust and the purchaser had thereupon declared himself trustee of the property, in which case if the trust fails the purchaser can retain it free of trust.

See also Restatement (Third) of Trusts, § 8, Com. “f” (2003)

Commentators have reached the same conclusion, stressing that the presence or absence of consideration for the conveyance determines who owns the property

If an owner of property gratuitously transfers it and properly manifests an intention that the transferee should hold the property in trust, but the trust fails, the transferee holds the trust estate upon a resulting trust for the transferor or his estate….

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There is no resulting trust in favor of a transferor who received consideration for the transfer in trust.  If the transferee paid the consideration and thereupon held the property in a trust which failed, the transferee can keep the property — there is no resulting trust — for otherwise the transferor would be unjustly enriched.” (Emphasis added, footnote reference omitted).

14D Mass. Prac. Summary of Basic Law, § 18.39 (2014).  See also Bogert, Trusts, 6th Ed. (West Pub. Co., 1987), § 75, p. 283 (“[The transferor] cannot reasonably be said to have intended a return of the property, after having been paid its value, if the trust failed. He must be deemed to have intended that the trustee retain the property as his own.”); Bogert’s Trusts and Trustees, § 468 (2014) (“The court of equity must decide what shall be the disposition of the subject matter of the trust which has failed. If the transfer in trust was for a consideration paid by the trustee, he is allowed to retain the property because of the certainty that the settlor would have intended such a result and would not have expected a return of the property”).

Accordingly, in the normal case where the purchaser has paid the seller to transfer property to a trust of which the purchaser is trustee, a failure of the trust results in the purchaser taking title to the property as an individual.

For days, Alice had a nagging feeling that she was forgetting something.  Being the owner and manager of a real estate empire, there were many things to remember, and just as many things she might have forgotten.  That sense of something overlooked was particularly aggravating as Alice had spent the last month getting her estate in order, making sure that when she passed away her properties would be divided among her seven sons and one daughter exactly as she intended:  everything to a trust of which her daughter, Honoria, was the sole beneficiary.

Finally, as she was leaving Frosty Favorites after consuming her daily soft serve cone (chocolate-vanilla swirl as always), Alice remembered that she had not yet signed the trust’s schedule of beneficiaries listing Honoria.  Unfortunately, while still basking in the glow of her retrieved memory, Alice was struck and killed by a snowplow.

When her sons discovered that Alice had largely omitted them from her estate plan, they brought suit, arguing that the trust was void because Alice had not executed the schedule of beneficiaries.  As a result, they claimed, all of Alice’s real estate was held by her, individually and not as trustee, at the time of her death, and passed by the residuary clause of her will, which distributed Alice’s assets to all eight of her children in equal shares.

In response, Honoria argued that the schedule of beneficiaries was a mere technicality and she should inherit all of the real estate, as Alice intended.  On these facts, however, Honoria will have to settle for her one-eighth share.

A settlor declaring a trust and naming him or herself as trustee will often provide that the beneficiaries of the trust are shown on a Schedule of Beneficiaries executed by the settlor and filed with the trustee.  But what happens when the settlor fails to execute the schedule and thereby fails to identify those who hold a beneficial interest in the trust property?  In such circumstances, the trust is void and incapable of receiving the conveyance of any property transferred to it by the settlor.

In Arlington Trust Co. v. Caimi, 414 Mass. 839 (1993), the Supreme Judicial Court stated,

“Where the owner of property declares himself trustee for persons to be selected by him, the selection to be wholly within his control, no trust is created and the settlor continues to hold the property for his own benefit.” 2A Scott, Trusts § 112, at 157 (4th ed. 1987). As Caimi never designated a beneficiary as required by the declaration of trust, the JDC Realty Trust never came into existence ….

Id. at 848.  (Emphasis added, footnote reference omitted).  Similarly, in In re Callahan, 419 B.R. 109 (Bankr. D. Mass. 2009) decision clarified, 425 B.R. 728 (Bankr. D. Mass. 2010), the Court stated,

The United States argues that the marital presumption is inapplicable in the present case because the Debtor took title to the Falmouth Property as trustee of the 121 Westwood Road Realty Trust and not in her individual capacity. That would be true but for her failure to prepare a schedule of beneficiaries. In Arlington Trust Co. v. Caimi, the Supreme Judicial Court of Massachusetts held that where a settlor deeds property to himself as trustee and fails to designate a list of beneficiaries in the manner described in the trust instrument, the conveyance is a nullity and the trust never comes into existence. “Where the owner of property declares himself trustee for persons to be selected by him, the selection to be wholly within his control, no trust is created and the settlor continues to hold the property for his own benefit.”

419 B.R. at 127.  (Footnote reference omitted).  See also Dowd v. Johnson, 78 Mass. App. Ct. 1117, 2010 WL 5464854, *2 n.6 (2010) (unpublished Rule 1:28 opinion) (citing Arlington for proposition that “[T]he conveyance is a nullity as the receptor trust never came into existence for want of a beneficiary.”); Bongaards v. Millen, 55 Mass. App. Ct. 51, 53-54 (2002) (citing but distinguishing holding in Arlington that “where the settlor never identified any beneficiary in writing, as required by the declaration of trust, the trust ‘never came into existence and the attempted conveyance fail[ed] for lack of a cognizable recipient’”); United States v. Kattar, 81 F. Supp. 2d 262, 273 (D.N.H. 1999) (citing Arlington and also noting that “Under Massachusetts law, where the trust does not establish a definite, limited class of beneficiaries such that the beneficiaries are ascertainable and capable of enforcing the trust, the trust fails”).  See also Massachusetts G.L. c. 203E, § 402 (stating that a “trust shall be created only if … (3) the trust has a definite beneficiary….”  (Emphasis added).

The forgoing case law supports the conclusion that the settlor’s failure to properly identify the beneficiaries of a trust renders the trust void, and incapable of receiving a conveyance of property, whether that conveyance is from the settlor or from a third party.  While in Arlington the conveyance was from the settlor to himself as trustee, the circumstances were different in Callahan. In Callahan, the issue was whether certain property (121 Westwood Road) held by the debtor wife as trustee of the 121 Westwood Road Realty Trust was subject to a tax lien filed by the United States against her husband.  The wife had created the trust first and then received a conveyance as trustee from a third party, for valid consideration.  However, the wife, as trustee, had failed to prepare and execute the schedule of beneficiaries referred to in the trust.  Citing Arlington, the Bankruptcy Court held that failure to identify beneficiaries rendered the trust void.  419 B.R. at 127.  The District court affirmed.  In re: Callahan, 442 B.R. 1, 9-10 (D. Mass. 2010).

Accordingly, Alice’s failure to execute a schedule of beneficiaries renders her trust void and incapable of receiving a conveyance of her real estate pursuant to her will.  Instead, the real estate will pass via the will’s residuary clause to all of her children equally.

Common sense indicates that when the Statute of Frauds requires a contract to be in writing, any modification of that contract must also be written.  Yet, that is not always true.  Under the so-called “Cummings rule,” an oral modification of a contract governed by the Statute of Frauds, affecting only the manner of performance, not the contract’s substance, is enforceable.

A classic application of the Cummings rule allows an oral modification of a written real estate purchase and sale agreement (“P&S”) to extend the closing date.  Assume, for example, that on February 3, 2017, the seller and buyer of real property enter into a written P&S which requires that the closing of the sale be completed, at the registry of deeds, on or before March 1, 2017.  Prior to expiration of the March 1 deadline for performance, at the buyer’s request, the parties orally agree to extend the closing date to March 8, 2017.

On that date, the buyer appears at the registry of deeds, ready, willing and able to complete the purchase.  The seller refuses to perform, arguing that buyer’s right under the P&S to purchase the property expired on March 1, 2017, and that the extension was ineffective because it was not in writing.  On these facts, the buyer is entitled to specifically enforce the P&S.

A modification of a contract within the Statute of Frauds must usually be in writing.

The Massachusetts Statute of Frauds, G.L. c. 259, §1, states, in relevant part,

No action shall be brought:

***

Fourth, Upon a contract for the sale of lands, tenements or hereditaments or of any interest in or concerning them; or,

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Unless the promise, contract or agreement upon which such action is brought, or some memorandum or note thereof, is in writing and signed by the party to be charged therewith or by some person thereunto by him lawfully authorized.

In the hypothetical above, the P&S clearly related to the sale of land or an interest therein, and was subject to the Statute of Frauds.  It satisfied the Statute of Frauds because it was in writing and signed by the parties.  The extension agreement was not in writing and so did not satisfy the Statute of Frauds.

The general rule is that where a contract is subject to the Statute of Frauds, a modification or amendment of such contract is also within the Statute of Frauds and must be in writing.  Rex Lumber Co. v. Acton Block Co., 29 Mass. App. Ct. 510, 515 (1990), citing Cummings v. Arnold, 3 Met. 486, 489-92 (1842); Whittier v. Dana, 10 Allen 326 (1865); Rosenfeld v. Standard Bottling and Extracts Co., 232 Mass. 239, 245 (1919); Johnston v. Holiday Inns, Inc., 565 F.2d 790,-793-96 (1st Cir. 1977).  See also Croft v. National Bedding Co., 2006 WL 1716754, *2 (D. Mass. 6/20/06) (“amendments to a contract that is within the Statute of Frauds are themselves within the Statute of Frauds.”); Lydon v. Nationwide Mut. Ins. Co., 1997 WL 260064, *8 (D. Mass. 5/9/97) (“The general rule [in Massachusetts] is that an oral modification … of a written contract which originally was and as modified is within the statute of frauds cannot be wholly or in part the foundation of an action” (internal quotation marks omitted)); Field v. Riesman, 2001 WL 35937358 (Mass. Super. 3/27/01) (“Modifications or amendments to a contract that is within the Statute of Frauds are themselves within the Statute of Frauds.”)

The Cummings rule.

There is, however, and exception to the general rule, where a contract within the Statute of Frauds is orally modified only with regard to the time or manner of performance, not the substance of the contract.  In Cummings v. Arnold, 3 Met. 486, 489-92 (1842), the Court held that a defendant who had been sued for breach of a written contract could raise in defense his compliance with an oral modification to that contract which extended the time to perform.  See also Johnston v. Holiday Inns, Inc., 565 F.2d 790, 793-96 (1st Cir. 1977).  In Stearns v. Hall, 9 Cush. 31 (1851), the Supreme Judicial Court extended the so-called “Cummings rule” to allow a plaintiff, who is suing on a written contract within the Statute of Frauds, to rely on an oral modification which extends the time for performance in order to prove the plaintiff’s own compliance with the contract.  Whether raised by the defendant or the plaintiff, the oral modification can escape the Statute of Frauds only if it concerns the time or manner of performance and does not work so great a change as to effectively rewrite the contract.

In McKinley Investments, Inc. v. Middleborough Land, LLC, 62 Mass. App. Ct. 616, 619 (2004), an oral modification to a real estate P&S affected the time of performance, tolling and the price to be paid. The Court held that the modification established only a substitute performance, not a substitute contract, and therefore the Statute of Frauds did not render the modification unenforceable.  The Court made clear that an enforceable modification might involve more than just the time for performance, stating,

We hold that the judge was correct in characterizing the modifications, as pressed by McKinley, as affecting time, tolling, and price. However, the changes did not rewrite the contract. Their effect was to establish a substitute performance, rather than a substitute contract. See Johnston v. Holiday Inns, Inc., 565 F.2d 790, 796 (1st Cir.1977) (after review of Massachusetts cases, concluding that the test is whether “the parol modification becomes so extensive and significant that it is not a mere substituted performance,” but rather “[i]t becomes a new contract and that new contract must be proved by a writing”). Compare Rosenfeld v. Standard Bottling & Extracts Co., 232 Mass. 239, 244–245, 122 N.E. 299 (1919) (finding substituted contract, rather than substituted performance, where modified agreement had “nothing in common” with original agreement and obligations of plaintiff were “utterly different”). The decision was also incorrect to restrict allowable modifications solely to those “simply extend[ing] the time of performance,” despite McKinley’s claim that the modifications all boiled down to an extension of time for performance. Here, McKinley’s performance obligations and conditions were, in part, moveable, dependent upon due diligence, and not simply a fixed closing date. The timing and mode of performance were rather typical of a modern Massachusetts land transaction that requires, for accomplishment, governmental permits. At first blush, the bulk of the text defining the performance requirements suggests such complexity that any modification would be other than simple. However, upon closer examination, the identified modifications are, as matter of law, most fairly described as “mode[s] of performance … varied by a subsequent oral agreement based upon a valid consideration,” which our cases have permitted.  Cambridgeport Sav. Bank v. Boersner, 413 Mass. 432, 439, 597 N.E.2d 1017 (1992), quoting from Siegel v. Knott, 316 Mass. 526, 528, 55 N.E.2d 889 (1944).

While it is true that the court in Rex Lumber Co. v. Acton Block Co., 29 Mass.App.Ct. at 515–516, 562 N.E.2d 845, spoke of a line of cases instructing that a plaintiff may enforce a contract which has been modified by an oral agreement to extend the time for performance, several cases cited by the court did not limit the possibility of oral modification only to time for performance. The Rex court cited Moskow v. Burke, 255 Mass. 563, 567, 152 N.E. 321 (1926) (“[t]he parties could at any time before breach orally modify the time and manner of performance fixed by the contract” [emphasis supplied] ); Siegel v. Knott, 316 Mass. at 528, 55 N.E.2d 889 (the oral agreement “changed the method by which the plaintiffs had undertaken to pay their mortgage indebtedness” [emphasis supplied] ); Wesley v. Marsman, 393 Mass. 1003, 1004, 471 N.E.2d 51 (1984) (the parties had “orally modified the terms of the original agreement concerning the return of the deposit ” [emphasis supplied]).

In this case the modifications regard both the time for performance (the twelve-month extension and the substitution of a definite time period for a tolling period) and the payment of additional money. While the payment appears to us, in the circumstances, as consideration for the contract modification, we do not consider it relevant on summary judgment that the parties contest whether the additional payment is consideration or an increase in the sale price. In either case, the fact of payment is not sufficient to render the oral modification invalid. We hold that it was error for the judge to have ruled that the identified modifications rendered the contract, as amended, unenforceable. Summary judgment was improperly granted.

Id. at 619-20.  (Emphasis added).  According to the Court in Lydon,

The general rule [in Massachusetts] is that an oral modification … of a written contract which originally was and as modified is within the statute of frauds cannot be wholly or in part the foundation of an action. There are, no doubt, exceptions to the general rule, most notably the “Cummings rule,” described in Johnston as “a doctrine accepted in Massachusetts under which ‘in defence to an action on the written contract [within the Statute of Frauds], the defendant may show that he has performed it according to an oral agreement for a substituted performance.’” The First Circuit went on to explain the Cummings rule as one under which a plaintiff could not sue upon the oral modification, but a defendant was entitled to set it up as a defense….

Massachusetts does, however, recognize a narrow exception to the rule that oral amendments to contracts within the statute of frauds may be used as shields but not as swords. That narrow exception deals with the case in which a plaintiff attempts to sue on a contract within the statute of frauds and is met with the defense that the defendant’s obligation was discharged by plaintiff’s own failure to perform within the time requirements set forth in the written agreement. When met by such a defense, plaintiff is permitted to claim in rebuttal that its time for performance was extended by an oral agreement.

1997 WL 260064, *8.  (Emphasis added, internal quotation marks, citations and footnote reference omitted).

And in Kelly v. Dolben, 12 Mass. L. Rptr. 509, 2000 WL 33170862 (Mass. Super. 10/4/00), the Court summarized the enforceability of oral modifications to contracts within the Statute of Frauds as follows,

Although the Statute of Frauds generally bars a plaintiff from suing upon an oral modification of a written contract, it does not bar a defendant from showing that he has performed the contract according to an oral agreement for substitute performance.

The Supreme Judicial Court has limited what may constitute an oral agreement for a substitute performance. In Cummings, the plaintiff sued for breach of contract after the defendants failed to deliver a quantity of goods at a price stipulated in the written contract. The defendants argued that the plaintiff had not complied with oral agreements calling for the plaintiff to pay cash for the goods. The Court held that the Statute of Frauds did not bar the defense because the oral agreement did not vary the terms of the written contract as to the defendant’s performance, and only altered the time of payment by the plaintiffs.  In Stearns v. Hall, 9 Cush. 31, 33-34 (1851), the Court extended this rule to allow a plaintiff suing on a written contract for the sale of land to prove satisfaction of a substituted performance concerning the time of payment. Although the defendant argued that Cummings was inapplicable since the party relying on the parol agreements seeks to charge the defendant upon it, the Court held that the Statute of Frauds did not bar the suit. This rule is now well settled; only the manner of, or time for, performance of a written contract within the Statute of Frauds may be modified orally.

To determine whether an oral agreement falls within the holding of Cummings, the court must compare it against the written contract. If the modification is so material and so extensive that the original contract has disappeared, and differs so much from the original contract that it constitutes not a mere substituted performance, but a new contract that must be proved by writing, the defense is not available.

Id. at *2-3.  (Emphasis added, internal quotation marks and citations omitted).  See also Aragao v. MERS, Inc., 22 F.Supp.3d 133, 139 n.6 (D. Mass. 2014); Akar v. FNMA, 845 F.Supp.2d 381, 397 (D. Mass. 2012); Rex Lumber Co. v. Acton Block Co., 29 Mass. App. Ct. 510, 515 (1990); Mack v. Wells Fargo Bank, N.A., 29 Mass. L. Rptr. 14, 2011 WL 4837261, *6 (Mass. Super. 8/31/11); Deluca v. U.S. Bank National Assoc., 25 Mass. L. Rptr. 252, 2009 WL 839098, *3 (Mass. Super. 3/13/09) (recognizing rule but holding it inapplicable to the facts); Humbert v. Dworman, 2005 WL 2461969, * 3 (Mass. Super. 7/22/05) (in action to enforce P&S, court recognizes rule but holds it inapplicable to the facts); Jonaitis v. Robbins, 2005 WL 14736, *3-5 (Mass. Land Ct. 1/3/05) (relying on Cummings rule to enforce oral modification to P&S); First General Realty Corp. v. Carppinteri, 13 Mass. L. Rptr. 39, 2001 WL 417274, *8-9 (2/7/01) (recognizing Cummings rule but holding that oral modification in case before it was too extensive); Brown v. Smith, 1999 WL 1318987, * 3 (Mass. Super. 3/11/99) (the Statute of Frauds “does not prohibit an oral modification to a purchase and sale agreement.  The manner of, or time for, performance of a written contract within the statute of frauds may be modified orally).

The foregoing case law indicates that an oral modification to a written contract within the Statute of Frauds can be relied upon so long as the modification establishes only a substitute performance, and is not so great a change as to create an entirely new contract.  Courts have allowed parties to rely on such oral modifications for defensive purposes only, and have not allowed claims which seek to enforce the terms of an oral modification.  Johnston, 565 F.2d at 793-96; Croft, 2006 WL 1716754, *2-3.  Thus, while a party cannot sue to enforce the terms of an oral modification, that party may sue to enforce the terms of the written contract and may rely on the oral modification defensively to establish his own compliance with the contract.

In our hypothetical, although the P&S was a written contract subject to the Statute of Frauds, the parties’ agreement extending the closing date was not required to be in writing.  That agreement was a modification to the P&S, but concerned only the time for performance.  Field, 2001 WL 35937358 (“Modifications or amendments to a contract that is within the Statute of Frauds are themselves within the Statute of Frauds. This rule, however, is subject to the exception that a contract within the statute may be modified by oral agreement to extend the time or mode of performance.  Accordingly, an oral extension of a closing date may be valid, notwithstanding a requirement in the purchase and sale agreement that such extension be in writing, provided the parties orally waive the requirement of a writing.” (Emphasis added, citations omitted)).

The buyer’s action to enforce the P&S falls within the Cummings rule because the buyer brings a claim to enforce the written contract, but the seller raises the defense that the buyer did not itself comply with contract, by failing to close the deal by the original March 1, 2017, deadline.  Under these circumstances, the buyer can rely on the oral modification to show that the closing date was extended, thus establishing the buyer’s own compliance.

In summary, while it is always better practice to memorialize any legal agreement in writing, in limited circumstances the parties may orally modify even a contract subject to the Statute of Frauds.

Your appeal of a civil judgment can be derailed by a simple mistake.  A motion under Mass. R. Civ. P. 59, for a new trial or to alter or amend judgment, filed more than 10 days after the judgment, does not extend the 30-day time period for appeal.[1]  Therefore, a notice of appeal from an order denying such a Rule 59 motion, filed within 30 days of that denial but more than 30 days after the underlying judgment, is not a timely appeal of the judgment itself.  It only perfects an appeal from the denial of the Rule 59 motion.

Consider an example.  On June 1, 2017, the Superior Court enters judgment for the defendant in a contract dispute.  On June 15, 2017, the Plaintiff files Rule 59 motions for new trial and to alter or amend judgment.  The Court denies both post-trial motions on July 29, 2017, and on August 14, 2017, the plaintiff files a notice of appeal from the judgment and from denial of the Rule 59 motions.  On appeal, the plaintiff argues that the trial court’s judgment was based on clearly erroneous findings of facts and that the court’s interpretation of the terms of the contract was legally wrong.  Even though the appeal was filed within 30 days after the Rule 59 motions were denied, it did not extend the time for appeal from the underlying judgment and that appeal is untimely.

Mass. R. App. P. 4(a) states, in relevant part,

In a civil case … the notice of appeal required by Rule 3 shall be filed with the clerk of the lower court within thirty days of the date of the entry of the judgment appealed from.

If a timely motion under the Massachusetts Rules of Civil Procedure is filed in the lower court by any party: (1) for judgment under Rule 50(b); (2) under Rule 52(b) to amend or make additional findings of fact, whether or not an alteration of the judgment would be required if the motion is granted; (3) to alter or amend a judgment under Rule 59 or for relief from judgment under Rule 60, however titled, if either motion is served within ten days after entry of judgment; or (4) under Rule 59 for a new trial, the time for appeal for all parties shall run from the entry of the order denying a new trial or granting or denying any other such motion.  (Emphasis added).

A Rule 59(e) motion filed more than 10 days after the judgment is treated as a Rule 60(b) motion for relief from judgment and does not toll the running of the 30 day appeal period.  Piedra v. Mercy Hosp., Inc., 39 Mass. App. Ct. 184, 187-77 (1995).  See also Pereira v. Lowes Home Centers, Inc., 84 Mass. App. Ct. 1130, 2014 WL 223013, *1 n.2 (1/22/14) (unpublished Rule 1:28 pinion).

It is well established that an appeal from a trial court’s denial of a Rule 60(b) motion for relief from judgment raises only the propriety of that denial and does not effectively appeal the underlying judgment.  In Piedra, the trial court entered summary judgment for the defendant employer in the plaintiff’s wrongful termination case on November 3, 1993.  39 Mass. App. Ct. at 186.  Nearly five months later, on March 31, 1994, the plaintiff filed a motion for reconsideration, which the trial court denied on April 4, 1994.  Id.  The plaintiff filed a notice of appeal from that denial on April 19, 1994, less than 30 days after the denial of the motion to reconsider.  Id.  The Appeals Court held that the appeal raised only the issue whether the judge had abused his discretion in denying reconsideration, and did not raise any issue as to the underlying judgment.  According to the Appeals Court,

While the appeal from the denial of the plaintiff’s motion for reconsideration was timely as to the order denying the motion, the “appeal does not necessarily bring up the underlying judgment [for defendant] which was entered on [November 3, 1993].”  To “bring up” the November 3 judgment, the plaintiff must comply with Mass.R.A.P. 4, as amended, 395 Mass. 1110 (1985).

Rule 4 provides that a party must file an appeal from a judgment within thirty days of entry of the judgment appealed from, “unless a timely motion is filed in the lower court under any of the rules referred to in the second paragraph of rule 4(a), or unless the lower court, upon a showing of excusable neglect, grants an extension of time, not exceeding thirty days, for filing a notice of appeal either before or after the expiration of the time otherwise prescribed by rule 4. Mass.R.A.P. 4(c), [as amended,] 378 Mass. 929 (1979)” (emphasis original).

Plaintiff’s motion to reconsider, while ordinarily treated as a motion under Mass.R.Civ.P. 59(e), 365 Mass. 828 (1974), does not fall within the second paragraph of rule 4(a), because it was not served within ten days of the judgment as required by rule 59(e), and thus was not “timely.” Indeed, it was served almost five months (November 3 to March 31) after the entry of judgment of which it complains, and no enlargement of time was ever requested or granted under either Mass.R.A.P. 4(c) or Mass.R.A.P. 14(b), as amended, 378 Mass. 939 (1979).

It would provide no help to the plaintiff to treat her motion as one falling within Mass.R.Civ.P. 60(b), 365 Mass. 828 1974), and therefore timely filed, because rule 60(b) motions do not toll the running of the thirty-day appeal period. The rule cannot be used as a substitute for the regular appeal procedure. Muir v. Hall, supra at 41, 636 N.E.2d 312. See Smith & Zobel, Rules Practice § 60.3, at 472 (1977) (“[a]n order denying Rule 60(b) relief is appealable; but the appeal raises only the correctness of the order itself, not the purported defects in the underlying judgment”).

Id. at 186-88.  (Emphasis added, citations and footnote references omitted).

Similarly, in Muir v. Hall, 37 Mass. App. Ct. 38 (1994), the trial court entered judgment for the defendant in a medical malpractice case and entered a separate judgment assessing costs on September 1, 1992.  Id. at 39.  The plaintiff did not file a notice of appeal within the 30 day time for appeal after that judgment.  Id.  Instead, on December 4, 1992, the plaintiff filed a motion to strike or modify the September 1 order for costs.  Id.  That motion was denied on December 8, 1992 and the plaintiff filed a notice of appeal on December 14, 1992.  Id. at 39-40.  The Appeals Court held that the appeal raised only the propriety of the denial of the motion to strike and could not be used to challenge the underlying judgment assessing costs, even where the error of that judgment was clearly apparent.  The Appeals Court stated,

While the appeal from the denial of the motion to strike or modify was timely as to the order denying the motion, that appeal did not necessarily bring up the underlying judgment for costs which was entered on September 1, 1992. To bring up the September 1 judgment, the plaintiff must comply with the provisions of Mass.R.A.P. 4, as amended, 395 Mass. 1110 (1985). Rule 4 provides that appeals from a judgment must be filed within thirty days of the entry of the judgment appealed from unless a timely motion is filed in the lower court under any of the rules referred to in the second paragraph of rule 4(a), or unless the lower court, upon a showing of excusable neglect, grants an extension of time, not exceeding thirty days, for filing a notice of appeal either before or after the expiration of the time otherwise prescribed by rule 4. Mass.R.A.P. 4(c), 378 Mass. 929 (1979). As no extension of time for filing a notice of appeal from the September 1 judgment was allowed, the question is whether the plaintiff’s motion to strike or modify the judgment falls within the second paragraph of rule 4.

A motion to “strike” a judgment is not contemplated in our rules of procedure, but Mass.R.Civ.P. 59(e), 365 Mass. 828 (1974), provides that a motion to alter or amend a judgment may be made, and Mass.R.Civ.P. 60, 365 Mass. 828–829 (1974), permits a motion for relief from a judgment. The critical difference between the two rules is that a timely motion under rule 59(e) tolls the running of the thirty-day appeal period, see subsection (3) of the second paragraph of rule 4(a), while a motion under rule 60 does not. ….

The difficulty in this case is that the plaintiff’s motion to alter the judgment of September 1 was not timely, for it was not served within ten days after the entry of the judgment as required by rule 59(e). Indeed, it was served almost four months after the judgment of which it complains, and no enlargement of time was ever granted either under Mass.R.A.P. 4(c) or Mass.R.A.P. 14(b), as amended, 378 Mass. 939 (1979).

It would provide no help to the plaintiff to say that his motion should be treated as one falling within rule 60(b), and therefore timely filed, because, as noted earlier, rule 60(b) motions do not toll the running of the thirty-day appeal period, nor can the rule be used as a substitute for the regular appeal procedure. See … Smith & Zobel, Rules Practice § 60.3, at 472 (1977) (“An order denying Rule 60(b) relief is appealable; but the appeal raises only the correctness of the order itself, not the purported defects in the underlying judgment”).

We conclude that the appeal must be dismissed, even though the error of the September 1 judgment is plain on its face.

Id. at 40-42.  (Emphasis added, footnote references and citations omitted).  See also Pereira, 2014 WL 223013, at *1 and n.2 (“To the extent that the notice of appeal may be viewed as purporting to appeal partly or solely from the underlying judgment, it is untimely. The motion to vacate did not extend the original appeal period of thirty days. … As such, an appeal from the judgment is not properly before this court.”); Crosby v. O’Shea, 83 Mass. App. Ct. 1114, 2013 WL 656320, *1 (2/25/13) (unpublished Rule 1:28 pinion).

In our example, the plaintiff filed Rule 59 motions more than 10 days after the June 1 judgment.  Therefore, those post-trial motions were treated as Rule 60(b) motions to vacate judgment and did not extend the 30 day time for appeal of the June 1 judgment, which expired July 1, 2017.  Accordingly, the plaintiff’s notice of appeal, filed on August 14, 2017, was not timely to appeal the June 1 Judgment.

Although the notice of appeal was filed within 30 days after the trial court’s July 29, 2017, denials of the post-trial motions, and timely appealed those denials, the issues on appeal are severely limited.  Because the late filed Rule 59 motions are treated as Rule 60(b) motions to vacate, the only issues on appeal are whether the plaintiff has satisfied the grounds for vacating a judgment listed in Rule 60(b) (excusable neglect, newly discovered evidence, fraud, etc.).[2]  The plaintiff is precluded from arguing more generally on appeal that the judgment was legally or factually wrong.

As the foregoing example illustrates, when calculating the time period within which a notice of appeal must be filed, you should take care to determine whether any of the post-trial motions listed in Rule 4(a) were filed within 10 days of the judgment.  If they were filed more than 10 days after judgment, then you must file a notice of appeal from the judgment itself within 30 days of the judgment, regardless of when the trial court rules on the post-trial motions.  Failure to keep this rule in mind may result in loss of your appellate rights.

———

[1] Time periods other than 30 days apply to certain appeals (e.g. appeals in cases to which the Commonwealth is a party).

[2] Rule 60(b) lists the following grounds for vacating a judgment: “(1) mistake, inadvertence, surprise, or excusable neglect; (2) newly discovered evidence which by due diligence could not have been discovered in time to move for a new trial under Rule 59(b) , (3) fraud (whether heretofore denominated intrinsic or extrinsic), misrepresentation, or other misconduct of an adverse party; (4) the judgment is void; (5) the judgment has been satisfied, released, or discharged, or a prior judgment upon which it is based has been reversed or otherwise vacated, or it is no longer equitable that the judgment should have prospective application; or (6) any other reason justifying relief from the operation of the judgment.”

 

When Jim woke one morning to find his prize winning lamas at the bottom of a 20 foot sinkhole, he suspected something was wrong.  He had spent the previous evening sitting on his back porch, watching his lamas and enjoying the lengthening shadows the setting sun cast over his idyllic property.  Little remained of that vista come morning, when the majority of Jim’s backyard has subsided into the deep sinkhole.  The lamas, while unhurt, were complaining loudly.

After rescuing his lamas, Jim makes some calls and arranges to have his property inspected by a number of civil engineers.  They all agree that the sinkhole has been caused by a lowering of the groundwater table under Jim’s property due to excessive pumping from wells on adjacent property owned by ACME Water Products, Inc.  When Jim politely asks ACME to stop destroying his land, ACME responds by increasing its pumping, bulldozing a fence on the property line, and installing a new well, located entirely on Jim’s land.

Jim sues ACME, asserting various tort claims and one for unfair or deceptive trade practices under Massachusetts G.L. c. 93A, §§2, 9, seeking treble damages and attorney’s fees.  ACME moves to dismiss the c. 93A claim, arguing that no matter how egregious its conduct may have been, c. 93A simply does not apply because ACME and Jim have no business relationship with each other.  Moreover, ACME asserts that such a business relationship requirement applies not only to claims by one business against another under c. 93A, §11, but also to consumer claims under §9.  ACME is probably right.

The business relationship requirement.

It is well established that a viable c. 93A claim must allege that the plaintiff and defendant have a preexisting business relationship.  In Breneman v. Wolfson, 62 Mass. App. Ct. 1115, 2004 WL 2902454 (12/15/04) (unpublished Rule 1:28 opinion), a case involving claims between neighboring landowners, the Massachusetts Appeals Court stated,

The plaintiffs may invoke c. 93A as a general consumer or business protection statute only if the underlying tort arose in a business context, that is, if the parties were “engaged in more than a minor or insignificant business relationship.” Standard Register Co. v. Bolton-Emerson, Inc., 38 Mass.App.Ct. 545, 551 (1995). See also Linkage Corp. v. Trustees of Boston Univ., 425 Mass. 1, 22-23 & n. 33, cert. denied, 522 U.S. 1015 (1997). But here the defendants had “no contractual or business relationship with the plaintiffs.” Nei v. Boston Survey Consultants, Inc., 388 Mass. 320, 324 (1983). Indeed, insofar as the record shows, other than being abutting landowners the parties had no relationship whatsoever, the underlying tortious conduct was not related to any mutual business concern, and the plaintiffs’ c. 93A claims may be disregarded. See L.B. Corp. v. Schweitzer-Mauduit Intl., Inc., 121 F.Supp.2d 147, 152 (D.Mass.2000) (where abutting landowners both operated businesses on their respective properties but had no business or commercial relationship, the plaintiff could not maintain c. 93A claim against neighbor premised on injuries caused by neighbor’s subterranean water pumping).

Id. at *2.  (Emphasis added).  Similarly, in L.B. Corporation v. Schweitzer-Mauduit Intern., Inc., 121 F.Supp.2d 147 (D. Mass. 2000), another case involving neighboring landowners, the United States District Court for the District of Massachusetts explained,

Defendants have moved for summary judgment on Count VII of plaintiff’s Amended Complaint, which alleges that the conduct of defendants in their operation of Well # 5 constituted an “unfair or deceptive” business act or practice prohibited by Mass.Gen.Laws ch. 93A §§ 2 and 11. Defendants contend that for Chapter 93A liability to attach, there must be some business relationship between the parties. Here, although both companies were “engaged in trade or commerce” under the statute, they were not engaged in business transactions with each other. Mass.Gen.Laws. ch. 93A § 11. The parties’ only relationship, defendants contend, was as abutting landowners, so the statute is inapplicable. …

… Chapter 93A is a consumer protection law that also encompasses business transactions. It is intended to protect against unfair and deceptive practices in trade, not unfair practices in general. Apart from claims of unfair competition, a plaintiff must allege some sort of transaction between the parties for liability to attach under sections two and eleven…. This is the “common thread” of 93A cases. Plaintiff’s position, if accepted, would run the danger of converting any tort claim against a business into a Chapter 93A claim, because all torts encompass “acts or practices” that could arguably be considered “unfair.” As Judge Keeton noted, this position tests the limits of common sense.

Id. at 151-52.  (Emphasis added, citations and internal quotation marks omitted).

And in Steinmetz v. Coyle & Caron, Inc., 2016 WL 4074135 (D. Mass. 7/29/16), the Court stated,

Apart from claims of unfair competition, a plaintiff must allege some sort of transaction between the parties for liability to attach. Where there [is] no relationship between the plaintiffs and the defendants at all prior to the accident … it is axiomatic that the alleged wrongful conduct did not arise in a business context between them.’ While Plaintiffs correctly note that the absence of privity of contract is not an automatic bar to a Mass. Gen. L. c. 93A claim, [t]he lack of any business relationship between [Plaintiffs] and [Coyle & Caron] is fatal to the 93A claim.

Id. at *11.  (Internal citations and quotation marks omitted).

Numerous other Massachusetts and federal cases support the conclusion that a plaintiff has no c. 93A claim where the parties had no pre-litigation business relationship.  Milliken & Co. v. Duro Textiles, LLC, 451 Mass. 547, 564 (2008) (“A commercial transaction need not occur in the ordinary course of a person’s trade or business before liability under G.L. c. 93A will be imposed. However, we have held that the mere filing of litigation does not of itself constitute trade or commerce. In the circumstances here, even if we were to assume that Milliken’s efforts to secure the repayment of its trade debt were commercial in nature, Milliken and the defendants were not engaged in trade or commerce with each other and therefore acting in a business context.” (Emphasis added, citations and internal quotation marks omitted)); Chervin v. The Travelers Ins. Co., 448 Mass. 95, 112-13 (2006) (“While the plaintiff correctly maintains that part of the defendant’s business is litigating subrogation claims, he cannot establish that he had any relevant business transaction with the defendant which would serve as a predicate for liability under G.L. c. 93A, §§ 2 and 11.”); Giuffrida v. High Country Investor, Inc., 73 Mass. App. Ct. 225, 238 (2008) (“Privity is not required to maintain an action under c. 93A, § 11, so long as the parties are engaged in more than a minor or insignificant business relationship.” (internal quotation marks omitted)); Foreign Car Center, Inc. v. Essex Process Service, Inc., 62 Mass. App. Ct. 806, 814-15 (2005) (“Foreign Car’s G.L. c. 93A claim against Essex and Curran is disposed of by Cady v. Marcella …, holding there was no conduct of trade or commerce between the plaintiffs and the deputy sheriff who seized the property. Accordingly, the motion judge did not err in granting summary judgment on the claim.”); Cady v. Marcella, 49 Mass. App. Ct. 334, 343 (2000) (“While the Cadys justifiably feel that the seizure of half of their house to satisfy another’s debt was unfair, this statute remains unavailable: There was no conduct of trade or commerce between the Cadys and Adams or Marcella…. This claim was properly dismissed.”); Standard Register Co. v. Bolton-Emerson, Inc., 38 Mass. App. Ct. 545, 551 (1995) (similar to Giuffrida, above); Arthur D. Little, Inc. v. East Cambridge Sav. Bank, 35 Mass. App. Ct. 734, 743 (1994) (“The Superior Court judge correctly determined that the acts complained of did not occur while the parties were engaged in the conduct of trade or commerce…. No commercial relationship ever existed between the parties; their only contact occurred in the context of this litigation.”); Knapp v. Powicki, 2012 WL 11975703, * 2 (Mass. Super. 1/30/12) (“no viable c.93A claim where plaintiff and defendant had no relationship other than that they were abutting landowners”); Mitzan v. Medview Services, Inc., 1999 WL 33105613, *9 (Mass. Super. 1/16/99) (“[T]he history and development of Chapter 93A suggest that it was enacted to protect consumers and business entities against unfair acts and practices in transactions between them. Thus, numerous courts have held that there must be some transactional relationship between the parties in order to sustain a claim under Chapter 93A.” (Citations omitted)); Joe Hand Promotions, Inc. v. Rajan, 2011 WL 3295424, *7 (D. Mass. 7/28/11) (“Plaintiff’s Complaint states that both parties ‘engaged in trade or commerce’ … but does not state that parties engaged in business practice together. Plaintiff’s Ch. 93A claim fails for failing to state a claim” (citations and footnote references omitted)); John Boyd Co. v. Boston Gas Co., 775 F.Supp. 435, 440 (D. Mass. 1991) (“Taken together, these cases demonstrate that, although the Supreme Judicial Court has yet to define the outer limits of the relationship required under Chapter 93A, some business connection between the parties is an essential element of liability under the statute.”).

A pre-existing business relationship is required for both §9 and §11 claims.

Although ACME argued that the business relationship requirement applies only in business v. business §11 claims, a review of Massachusetts case law leads to the opposite conclusion.  In a number of Massachusetts cases, courts have applied the business relationship requirement to §9 claims.  In Swenson v. Yellow Transportation, Inc., 317 F. Supp.2d 51 (D. Mass. 2004), the plaintiff was injured in an automobile accident with one of defendant’s trucks.  She brought a claim under c. 93A, §9.  The Court dismissed the c. 93A claim, noting that, “While 93A is a statute of broad impact, it was not intended to augment every other legal or equitable remedy available to parties injured in automobile accidents.”  Id. at 55.  The Court held that the c. 93A claim failed because the plaintiff had no business relationship with the defendant.  According to the Court,

Plaintiffs’ claim under ch. 93A fails for the additional reason that the conduct complained of was not undertaken in a business context or as part of a business transaction between Yellow (or Thing) and the plaintiffs. Thus, while Yellow, as a business, is itself engaged in trade or commerce, it did not have any commercial dealings involving the plaintiffs and, therefore, ch. 93A is inapplicable.

It is well-established that “the proscription in § 2 of ‘unfair or deceptive acts or practices …’ must be read to apply to those acts or practices which are perpetrated in a business context.Poznik v. Mass. Med. Prof’l Ins. Assoc., 417 Mass. at 52, 628 N.E.2d at 3 (internal citation omitted, emphasis in original). Thus, ch. 93A “is intended to protect against unfair and deceptive practices in trade, not unfair practices in general. Apart from claims of unfair competition, a plaintiff must allege some sort of transaction between the parties for liability to attach under sections two and eleven.” L.B. Corp. v. Schweitzer–Mauduit Intern., Inc., 121 F.Supp.2d 147, 152 (D.Mass.2000) (summary judgment granted on ch. 93A claim where there was no business relationship between the parties), and cases cited. Accord Miller v. Mooney, 431 Mass. 57, 64–65, 725 N.E.2d 545, 551 (2000) (heirs of deceased client could not maintain a claim under ch. 93A against decedent’s attorney as “[t]he defendant was not engaged in trade or commerce with the plaintiffs within the meaning of G.L. c. 93A.”) (emphasis added). In the instant case, there was no relationship between the plaintiffs and the defendants at all prior to the accident, thus it is axiomatic that the alleged wrongful conduct did not arise in a business context between them (or even between Yellow and any other travelers on the road). Therefore, the claim under ch. 93A fails.

Id. at 56-57. (Emphasis added, footnote references omitted).

Similarly, in Girard v. Triumph Leasing Corp., 2005 WL 48266872 (Mass. Super. 7/1/05), another auto accident case, the plaintiff brought a §9 claim against the defendant.  Rejecting that claim, the Court stated,

In Count V, the plaintiff asserts that the defendant has committed unfair and deceptive acts or practices in violation of G.L. c. 93A, §2. That statute reads, in pertinent part, “Unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce are hereby declared unlawful.”(Emphasis supplied). Section 9 of c. 93A provides a civil remedy for any person injured by another’s use of any act or practice declared to be unlawful by §2 or any regulation issued thereunder. The Supreme Judicial Court has stated that “[t]he purpose of c. 93A is to improve the commercial relationship between consumers and business persons and to encourage more equitable behavior in the marketplace.” Poznik v. Massachusetts Med. Professional Ins. Ass’n, 417 Mass. 48, 53 (1994). To determine whether a business context is implicated here, the underlying nature of the plaintiff’s claims must be examined. Darviris v. Petros, 442 Mass. 274, 280 (2004). It is clear that the underlying nature of the plaintiff’s claim is in negligence and is unrelated to any business context. Here, there was no business relationship, indeed no relationship at all, between the parties before the accident. Without a business context to the relationship between the parties, c. 93A is inapplicable.

Id.  (Emphasis in last two sentences added).  See Morrissey v. New England Deaconess Association-Abundant Life Communities, Inc., 90 Mass. App. Ct. 1105, 2016 WL 4723459, *3-4 (9/9/16) (unpublished Rule 1:28 opinion).

In other cases, the plaintiff’s claims obviously were brought under §9, but there is no express reference to that section.  In Miller v. Mooney, 431 Mass. 57 (2000), a testatrix’s children sued the attorney who drafted her estate documents for, among other claims, negligence and violations of c. 93A.  Their c. 93A claims must have been brought under §9 as they were not engaged in business.  There is no reference to §11.  The Supreme Judicial Court affirmed the trial court’s entry of summary judgment for the attorney on the c. 93A claim, noting that, “The defendant was not engaged in trade or commerce with the plaintiffs within the meaning of G.L. c. 93A.”  Id. at 63-64.

In Breneman, 2004 WL 2902454, the plaintiffs were owners of property abutting the defendant’s airport.  They sued after the defendant entered their land and damaged it in the course of extending the airport’s runway.  Clearly, the plaintiffs were not suing under §11 as persons in business, but were instead individuals suing under §9.  The Breneman Court recognized the business relationship requirement applies in consumer actions, stating,

The plaintiffs may invoke c. 93A as a general consumer or business protection statute only if the underlying tort arose in a business context, that is, if the parties were “engaged in more than a minor or insignificant business relationship.” … But here the defendants had “no contractual or business relationship with the plaintiffs.” Nei v. Boston Survey Consultants, Inc., 388 Mass. 320, 324 (1983). Indeed, insofar as the record shows, other than being abutting landowners the parties had no relationship whatsoever, the underlying tortious conduct was not related to any mutual business concern, and the plaintiffs’ c. 93A claims may be disregarded….

Id. at *2.  (Emphasis added).

In Cady, the plaintiffs were property owners.  They had contracted for installation of a modular home by a contractor, but the contractor’s judgment creditor, with whom the plaintiffs had no relationship, seized a portion of the home with the assistance of a deputy sheriff.  Plaintiff property owners sued both the judgment creditor and the deputy sheriff.  Again, those claims must have been bought under §9.  There is no reference to §11.  The Court rejected the c.93A claim due to the lack of any business relationship between the plaintiff and defendant.  49 Mass. app. Ct. at 343.

In Knapp v. Powicki, 2012 WL 11975703 (Mass. Super. 1/30/12), the plaintiff property owners sued neighboring owners.  Following Breneman, the Court dismissed the claims, which must have been §9 claims, because the parties had no business relationship.

The business relationship requirement was again applied to a §9 claim in Camacho v. Basteri, 1995 WL 1688631 (Mass. Super. 12/28/95), where the plaintiff homeowners sued their neighbor for, among other things, nuisance, based on the neighbor’s illegal operation of a dog kennel in a residential neighborhood.  The Court dismissed the c. 93A claim due to the absence of any business relationship between the parties.  Id. at *1-2.

And in Steinmetz, the plaintiff property owners, who were seeking conservation commission approval to build a home, sued a company hired by opponents of the project for allegedly preparing false renderings of the proposed home.  Again, the plaintiffs’ claim must have been brought under §9 as they were not engaged in any business.  The Court dismissed the c. 93A claim due to the absence of any business relationship between the parties.  2016 WL 4074135 at *11.

More generally, Courts have recognized that, “[t]he purpose of c. 93A is to improve the commercial relationship between consumers and business persons and to encourage more equitable behavior in the marketplace.” Poznik v. Massachusetts Med. Professional Ins. Ass’n, 417 Mass. 48, 53 (1994) (Emphasis added).  See also Morrissey, 2016 WL 4723459, *3; Girard, 2005 WL 48266872; Swenson, 317 F. Supp.2d at 57.  Similarly, in Mitzan, the Court pointed out that, “the history and development of Chapter 93A suggest that it was enacted to protect consumers and business entities against unfair acts and practices in transactions between them.”  1999 WL 33105613, *9.  Thus, the underlying purpose of c. 93A supports the statute’s application only where a commercial relationship exists between the plaintiff and defendant.

The same conclusion follows from the structure of c. 93A.  In order to have a viable claim under either §9 or §11, a plaintiff must establish that the defendant engaged in an unfair or deceptive act or practice “in the conduct of any trade or commerce” under §2.  The requirement that the claim arise from trade or commerce or in a business context is based in §2 of the statute.  And a court determines whether a claim arises from trade or commerce or in a business context by requiring that the parties have a business relationship with each other.  See First Enterprises, Ltd. v. Cooper, 425 Mass. 344, 347 (1997); Cady, 49 Mass. App. Ct. at 343; Arthur D. Little, 35 Mass. App. Ct. at 743. Accordingly, the business relationship requirement is not limited to §11 cases, but applies to all c. 93A claims.

Conclusion.

The lesson to be drawn from the foregoing discussion is that while c. 93A offers a broad and powerful remedy for many wrongs, it is not a replacement for common law tort claims.  Not every form of harmful conduct, no matter how outrageous, falls under c. 93A.  At a minimum, c. 93A applies only where the wrongful conduct occurs in the context of a business relationship between the plaintiff and defendant.

When the retaining wall separating his property from Jerry’s abutting land began to collapse onto Bob’s land, Bob suggested that Jerry repair the wall.  Jerry, in turn, thought it would be far better if Bob paid the $50,000 repair cost, and made this clear in a certified letter from his attorney.  It is unclear whether the wall is located on Bob or Jerry’s land.  Which of the owner’s must repair the wall?  Or must they both?  The answer depends on the history of the wall more than on its location.

Bob’s and Jerry’s respective lots are located on a hill, with Jerry’s land higher on the slope than Bob’s.  Neither Bob nor Jerry has erected any structures on their lots.  Many years ago, the portion of Bob’s property nearest Jerry’s land was at a higher elevation than the remainder of Bob’s land.  Wishing to create a level lot, a prior owner of Bob’s land excavated the portion near Jerry’s land, to lower its grade to that of the remainder of the lot.  Because this excavation left Jerry’s property at a much higher elevation than Bob’s excavated lot, and in danger of collapse, Bob’s predecessor build the retaining wall to provide adequate lateral support to Jerry’s land.  There is some evidence that some or all of the wall is actually on Jerry’s land.  Neither Jerry nor any of his predecessors played any part in building the wall.

The rule of lateral support.

Under the rule of lateral support, a landowner has an absolute right to the continued stability of the land in its natural condition and if a neighboring owner alters his or her land so as to remove the lateral support for the landowner’s land, that neighbor is liable for any harm caused to the landowner’s land. To prevent such damage, the neighbor responsible for making alterations which deprive the landowner’s land of support may build a retaining wall.  In such a case, the neighbor and all of the neighbor’s successors in title, have a continuing duty to maintain that wall.  A party who interferes with an owner’s right to lateral support is strictly liable for resulting harm to the owner’s land, without proof of negligence.  Although strict liability does not apply to harm to structures on the land[1], that exception is irrelevant to Bob and Jerry because they placed no structures on their lots.

The duty to maintain or repair a retaining wall.

In Gorton v. Schofield, 311 Mass. 352 (1942), the Massachusetts Supreme Judicial Court considered the right to lateral support as it applies to retaining walls.  In that case, a wall on the defendant’s land provided support for the plaintiff’s land which was at a higher elevation.  Although there was no direct evidence as to who had built the wall, the SJC affirmed the trial court’s conclusion that the evidence supported an inference that the defendant’s predecessor had made the excavation and that the same person had built the retaining wall.  Id. at 355.  Regarding the duty to repair the wall, the Court stated,

The decisive question is what are the legal duties and responsibilities of the defendant with relation to the maintenance of the retaining wall built by a predecessor in title in the circumstances before set forth. The law with relation to lateral support is of ancient origin and is firmly established. The right of an owner of land to the support of the land adjoining is jure naturae, like the right in a flowing stream. Every owner of land is entitled, as against his neighbor, to have the earth stand and the water flow in its natural condition * * * [and] in the case of land, which is fixed in its place, each owner has the absolute right to have his land remain in its natural condition, unaffected by any act of his neighbor; and, if the neighbor digs upon or improves his own land so as to injure this right, may maintain an action against him, without proof of negligence.

This being the basic law, the question in the case at bar is whether the defendant, the present owner of the land upon which the excavation was made and the wall built by a predecessor in title, is bound to maintain the wall in such condition as to prevent damage to the plaintiff’s land….  The plaintiff has cited in support of her position … Foster v. Brown, 48 Ont.Law Rep. 1. In the last case cited it appeared that an excavation had been made upon land by the predecessor in title of the defendant, and that the former had built a retaining wall for the purpose of providing support to the plaintiff’s adjoining land; that this wall ‘got out of repair and failed to answer the purpose for which it was built’ … The court held, in substance, that the defendant was responsible for the damage that the plaintiff had sustained, saying, at pages 5, 6, that it saw ‘no reason why, if a person who is in possession of land in which there is an excavation which is a source of danger to the public, although the excavation was not made by him but by a predecessor in title, is liable for the consequences of his permitting the dangerous condition to continue, the same rule should not be applied where a lateral support has been withdrawn by a predecessor in title, and the condition so caused has been permitted to remain and to cause injury to his neighbor, the owner of the land at the time the injury occurs should not be answerable for it.’ … And at page 6, Fry, L. J., expressing his concurrence said, in part: ‘I am unable to understand why the failure of a subsequent owner to provide the necessary support, and a fortiori where he suffers a retaining wall to decay, is not equally a continual or continued withdrawal of support * * *.’ See 10 B.R.C. 918, and annotation.

***

We have already said, in substance … that the right to lateral support of soil in its natural state is a property right which naturally attaches to and passes with the soil without any grant thereof. We concur in the reasoning in Foster v. Brown, … and are of opinion that the burden of providing lateral support to the plaintiff’s land in its natural condition is one of continued support running against the servient land.

Id. at 356-58.  (Emphasis added, citations and internal quotation marks omitted).

This rule is in accordance with the Restatement (second) of Torts, §817(1), which states, “One who withdraws the naturally necessary lateral support of land in another’s possession or support that has been substituted for the naturally necessary support, is subject to liability for a subsidence of the land of the other that was naturally dependent upon the support withdrawn.”

In Rubin v. Walpate Const. Mgmt., Inc., 10 Mass. L. Rptr. 377, 1999 WL 706710 (Mass. Super. 8/24/99), the Superior Court quoted Gorton and made clear that the duty to repair a wall falls on the person who altered the grade of his land, and later owners of the same property.  According to the Court,

The Rubins invoke the obligation to provide “lateral support” as the basis for their claim with respect to defendants’ duty to repair and maintain the allegedly collapsing retaining wall. A landowner is entitled to “the support of the land adjoining,” and therefore excavations on adjoining property that would undermine a plaintiff’s land or cause it to collapse give rise to a claim for damages and/or injunctive relief. See Gorton v. Schofield, 311 Mass. 352, 356-59, 41 N.E.2d 12 (1942); Gilmore v. Driscoll, 122 Mass. 199, 201 (1877); Ahern v. Warner, 16 Mass.App.Ct. 223, 226, 450 N.E.2d 662 (1983). The obligation to provide lateral support is imposed not only on the party that performed the excavations undermining a plaintiff’s land, but on subsequent owners of the property, who have an ongoing obligation to maintain and repair the retaining walls or other structures that provide the necessary support following the excavations. Gorton, supra.

Id. at *1.  (Emphasis added, footnote reference omitted).

In a footnote, the Court explained that the duty of repair is born by the person who altered the natural topography, regardless of on whose property the wall is located.

The complaint also does not specify when the retaining wall was constructed or who constructed it. By implication from the allegation that the wall is entirely on the Sandjajas’ property, one would infer that the alteration in the land that necessitated the construction of the retaining wall was done by some prior owner of the Sandjajas’ parcel. If, however, the need for the retaining wall was created by excavation performed by some predecessor in title to the Rubins, then it would be the Rubins’ obligation to provide lateral support to the Sandjajas’ property and the Rubins’ duty to maintain the wall, not vice versa. The doctrine of lateral support imposes an obligation on the party that has altered the land in the first place, requiring that the party doing the alteration provide some adequate alternative to maintaining appropriate support for any land that has been destabilized by the alteration.

Id. at *2 n.2.  See also Feinzig v. Ficksman, 42 Mass. App. Ct. 113 (1997), where although the retaining wall at issue was located partially on defendant’s property, the Court declined to impose a duty to maintain the wall, noting that,

For all that appears, it was the owner of the [plaintiff’s] lot who altered the natural topography and built the retaining wall.  The right to lateral support, classically, is the right of a neighbor to have land remain in its natural condition and is maintained against the person who digs upon or improves his own land so as injure [sic] that right.

Id. at 119.  The same right to lateral support may be invoked where the defendant has filled his land to a higher elevation rather than excavating his land to a lower grade.  Rubin, 1999 WL 706710, *1-2.

Bob and Jerry’s case.

In the scenario outlined above, the retaining wall was originally constructed by Bob’s predecessor in title, in connection with an alteration of the grade of Bob’s property.  Accordingly, as the party who altered the natural topography, the past owner of Bob’s property had the duty to maintain the retaining wall so as to protect the right of Jerry’s property to lateral support.  That duty ran with the land and was imposed by all successive owners, including Bob.  Moreover, successive owners of Bob’s property had the duty to maintain the wall regardless of whether the wall was located entirely on Bob’s property.

—————-

[1] The right to lateral support discussed above pertains only to the land itself, not to any buildings or improvements thereon.  Where a defendant’s excavation or other alteration of the land removes support from the plaintiff’s land, causing damage to the land and buildings, the plaintiff can recover in strict liability only for the injury to the land itself, not for any injury to the buildings.  Moreover, the plaintiff must prove that the alteration made by the defendant would have caused damage to the plaintiff’s land (i.e., caused it to subside) even if the land had not born the extra weight of the buildings thereon.  To recover for damage to structures, the plaintiff must prove that the defendant was negligent.  Gilmore v. Driscoll, 122 Mass. 199, 201 (1876).  See also New York Central R. Co. v. Marinucci Bros. & Co., 337 Mass. 469, 472 (1958); Kronberg v. Bulle, 247 Mass. 325, 328 (1924); Triulzi v. Costa, 296 Mass. 24, 27 (1936); Rubin, 1999 WL 706710, *1 n.1; LB Corp. v. Schweitzer-Mauduit Intern., Inc., 121 F.Supp.2d 147, 153 (D. Mass. 2000) .

When water began dripping from the ceiling of her unit in the Desert Pines Condominium, Amy immediately contacted the condominium’s board of trustees.  The board, in turn, called Fixit, Inc., a company employed by the board to manage the condominium.  An inspection revealed that a portion of the condominium’s roof had deteriorated, allowing water to pool above the ceiling of Amy’s unit.  Pursuant to its contract with the condominium, Fixit repaired the roof and declared the problem solved.  Amy was overjoyed, until her kitchen ceiling collapsed and mold blossomed on walls throughout her unit.

Amy sued Fixit for breach of its contract with the condominium, which required that all repairs be completed in a workmanlike manner. Although she was not a party to the contract, Amy claimed to be a third-party beneficiary of the agreement because she would have benefited if the repairs had been done properly.  On these facts, a Massachusetts court would very likely dismiss her contract claim.

Massachusetts courts have adopted Restatement (second) of Contracts, §302 and related sections, governing the rights of third-party beneficiaries.  James Family Charitable Foundation v. State Street Bank & Trust Co., 80 Mass. App. Ct. 720, 723 (2011), citing Rae v. Air–Speed, Inc. 386 Mass. 187, 195–196 (1982).  Section 302 states,

(1) Unless otherwise agreed between promisor and promisee, a beneficiary of a promise is an intended beneficiary if recognition of a right to performance in the beneficiary is appropriate to effectuate the intention of the parties and either

(a) the performance of the promise will satisfy an obligation of the promisee to pay money to the beneficiary; or

(b) the circumstances indicate that the promisee intends to give the beneficiary the benefit of the promised performance.

Restatement (Second) of Contracts § 302.  As Amy was not a creditor of either party to the management contract, she must satisfy subsection (b) by establishing that the contracting parties intended the contract to benefit her.  “In order to recover as a third-party beneficiary, the plaintiffs must show that they were intended beneficiaries of the contract….” Cumis Ins. Society, Inc. v. BJ’s Wholesale Club, Inc., 455 Mass. 458, 464 (2009), quoting Spinner v. Nutt, 417 Mass. 549, 555 (1994).

“Under Massachusetts law, a contract does not confer third-party beneficiary status unless the ‘language and circumstances of the contract’ show that the parties to the contract ‘clear[ly] and definite[ly]’ intended the beneficiary to benefit from the promised performance.”  Cumis, 455 Mass. at 466, quoting Anderson v. Fox Hill Village Homeowners Corp., 424 Mass. 365, 366–367 (1997).  See also Go-Best Assets, Ltd. v. Citizens Bank of Massachusetts, 463 Mass. 50, 61 n.12 (2012); Alford v. Capitol Realty Group, Inc., 88 Mass. App. Ct. 1106, 2015 WL 5602608, * 2 (9/24/15); Try Switch. Ltd. v. Endurance Intern. Group, 83 Mass. App. Ct. 1131, 2013 WL 2096605, *1 (5/16/13) (unpublished Rule 1:28 opinion); James Family, 80 Mass. App. Ct. at 724.

It is not enough that the plaintiff receives an incidental benefit from the contract.  The parties to the contract must have intended such benefit.  “That the plaintiffs derive a benefit from a contract between others does not make them intended third-party beneficiaries and does not give them the right to enforce that agreement.”  Cumis, 455 Mass. at 464.  See also James Family, 80 Mass. App. Ct. at 724 (“In contrast to an intended beneficiary, an incidental beneficiary obtains no right to enforce the contract.”); Restatement (second) of Contracts, §315.

As there is no evidence that either the condominium or Fixit intended their contract to benefit Amy or other unit owners, Amy is not a third-party beneficiary and cannot enforce the contract.

When litigation involves a claim of title to real estate, the claimant may obtain judicial approval to record a lis pendens against the property, notifying potential purchasers that litigation affecting the property is pending.  See Massachusetts G.L. c. 184, §15.  Real estate subject to a lis pendens may be virtually unmarketable.  While a lis pendens serves an important purpose when there is a genuine dispute as to title, when the underlying claim is weak or frivolous the recording of a lis pendens unjustly restricts the owner’s right to sell the property.  To protect owners from lis pendens based on frivolous claims, G.L. c. 184, §15(c) allows an owner to file a special motion to dismiss the underlying action, thereby also dissolving the lis pendens.

Under section 15(c), a special motion to dismiss,

shall be granted if the court finds that the action or claim is frivolous because (1) it is devoid of any reasonable factual support; or (2) it is devoid of any arguable basis in law; or (3) the action or claim is subject to dismissal based on a valid legal defense such as the statute of frauds. In ruling on the special motion to dismiss the court shall consider verified pleadings and affidavits, if any, meeting the requirements of the Massachusetts rules of civil procedure.

(Emphasis added).  See also Galipault v. Wash Rock Investments, LLC, 65 Mass. App. Ct. 73, 81 (2005).  As the statute’s use of the disjunctive “or” indicates, a court must grant the special motion and dismiss the plaintiff’s complaint if it is frivolous for any of the three listed reasons.

A court hearing a special motion to dismiss applies essentially the same standard as governs summary judgment.  Donius v. Milligan, 2016 WL 3926577, *3 (Mass. Land Ct. 7/25/16); St. John’s Holdings, LLC v. Two Electronics, LLC, 2016 WL 1460477, *2 (Mass. Land Ct. 4/14/16); Gould v. Lancaster Technology Park Limited Partnership, 2006 WL 700884, *1 (Mass. Super. 2/17/06), aff’d 69 Mass. App. Ct. 1109 (2007); Waters v. Cook, 2005 WL 2864806, *3 (Mass. Land Ct. 11/2/05).  In St. John’s, the Court stated,

The standard of review for a special motion to dismiss is the functional equivalent of a motion for summary judgment; it requires the court to assess the plaintiff’s claim in light of the record before the court. The court does not weigh evidence, assess credibility, or find facts; it may only consider undisputed material facts and apply them to the law. In viewing the factual record presented as part of the motion, the court is to draw “all logically permissible inferences” from the facts in favor of the non-moving party. The judge must consider the verified pleadings and affidavits in ruling on the special motion and, if the motion is granted, award costs and attorney’s fees to the aggrieved party.

2016 WL 1460477, at *2 (citations omitted).  In accordance with the summary judgment standard, a party filing a special motion to dismiss, “in a case in which the opposing party will have the burden of proof at trial is entitled to [dismissal] if he demonstrates … by reference to material described in Mass.R.Civ.P. 56(c), unmet by countervailing materials, that the party opposing the motion has no reasonable expectation of proving an essential element of that party’s case.” Kourouvacilis v. General Motors Corp., 410 Mass. 706, 716 (1991).

Even without concluding that the underlying claim lacks reasonable factual support, arguable basis in law or is subject to a valid legal defense, a court may grant a special motion to dismiss where the plaintiff’s complaint does not, “include a certification by the claimant made under the penalties of perjury that the complainant has read the complaint, that the facts stated therein are true and that no material facts have been omitted therefrom.” G.L. c. 184, §15(b) (emphasis added).  In DeCroteau v. DeCroteau, 90 Mass. App. Ct. 903 (2016), the Massachusetts Appeals Court stated,

The complaint must include a certification by the claimant made under the penalties of perjury that “no material facts have been omitted therefrom.” No such certification was made in the instant case. This requirement is not one of mere form. In view of the serious consequences that may arise from the recording of a memorandum of lis pendens, strict compliance with the statutory prerequisites is required. The omission of the certification constituted a material deficiency. Accordingly, the orders denying the plaintiff’s motion for a preliminary injunction and motion for approval of a memorandum of lis pendens are affirmed.

Id. at 906. (Emphasis added, citations omitted).  See also Haley v. Welch, 84 Mass. App. Ct. 1104, 2013 WL 3820680, *2 (7/25/13) (unpublished Rule 1:28 opinion) (affirming trial judge’s refusal to allow late or retroactive verification where complaint, as filed, failed to certify that no material facts had been omitted).

Moreover, even where the required certification is made, a court should grant a special motion to dismiss where the complaint actually omits material facts. “A party’s failure to include all material facts may result in the dismissal of that party’s claims where the omitted facts establish that those claims are devoid of reasonable factual support or arguable basis in law.” McMann v. McGowan, 71 Mass. App. Ct. 513, 519-20 (2008).  “A material fact is one that is ‘significant or essential to the issue or matter at hand.’ ” Id. at 520, quoting Black’s Law Dictionary 629 (8th ed. 2004).  This makes sense because the lis pendens statute assumes that a court endorsing a lis pendens has considered all relevant and material facts.

Accordingly, where a lis pendens is recorded in connection with claims which arguably are frivolous, or where the compliant fails to certify that it contains all material facts or in fact omits material facts, the property owner should consider filing a special motion to dismiss.

In a tragic accident, a doctor negligently administers radiation treatments to his patient’s leg, resulting in serious burns.  The patient is immediately aware of the burns, but does not know that her doctor was negligent.  The doctor continues to treat the patient for four more years, making various unsuccessful attempts to heal the burn.  Throughout this time, the patient never learns of her doctor’s negligence.  Eventually, the patient’s leg must be amputated.  After the amputation, the negligent doctor plays no further role in caring for the patient, who is treated by others.

Six years after her injury, having learned from her new physicians that her burns were caused by her former doctor’s negligent administration of the radiation treatments, the patient sues the negligent doctor for malpractice.  Is her claim barred by the three-year statute of limitations applicable to medical malpractice actions?  Probably not.

In Parr v. Rosenthal, 475 Mass. 368 (2016), the Massachusetts Supreme Judicial Court adopted the continuing treatment doctrine, under which the statute of limitations for a medical malpractice claim does not begin to run while the patient continues to be treated by the allegedly negligent doctor, unless the patient obtains actual knowledge not just that she has been injured by the doctor’s treatment but that the doctor’s conduct was negligent.

The statute of limitations and statute of repose.

Massachusetts G.L. c. 231, § 60D, provides that a claim for medical malpractice, “shall be commenced within three years from the date the cause of action accrues …, but in no event shall such action be commenced more than seven years after occurrence of the act or omission which is the alleged cause of the injury upon which such action is based ….”  Thus, an action for medical malpractice is subject to a three-year statute of limitations and a seven-year statute of repose.  In the factual scenario described above, the patient commences her action within seven years, so the statute of repose does not bar her claim.  The question is whether the patient’s claim is barred by the three-year statute of limitations.

The discovery rule.

“A statute of limitations typically prescribes the time period when an action must be commenced after the cause of action ‘accrues.’ ”  Parr, 475 Mass. at 377.  “Under the discovery rule, medical malpractice claims accrue when the plaintiff learns, or reasonably should have learned, that he has been harmed by the defendant’s conduct.”  Id. at 377-78.  (Internal quotation marks omitted).  However, the plaintiff need not know that the defendant was negligent.  “[U]nder our common law, once a patient knows or reasonably should know that he or she has suffered harm and that the harm was caused by the physician’s conduct, the statute of limitations clock starts to run, and the patient then has three years to discover whether the physician committed a breach of the standard of care and whether the theory of causation is supported by the evidence, and, if so, to commence a civil suit.”  Id. at 378.

The continuing treatment doctrine.

The continuing treatment doctrine is an exception to the discovery rule.  While under the discovery rule, the patient’s cause of action accrues, and the limitation period begins to run, as soon as the patient learns that she has been injured as a result of the physician’s conduct, under the continuing treatment doctrine, while the negligent doctor continues to treat the patient, the limitation period begins to run only when the plaintiff learns not just that she has been injured by the doctor’s conduct, but also that the doctor was negligent.

In Parr the Supreme Judicial Court explained,

We … hold that the statute of limitations for a medical malpractice claim generally does not begin to run while the plaintiff and the defendant physician continue to have a doctor-patient relationship and the plaintiff continues to receive treatment from the physician for the same or a related condition. We also hold that the continuing treatment exception to the discovery rule terminates once a patient … learns that the physician’s negligence was the cause of his or her injury.

475 Mass. at 369.  According to the Court,

[W]hile [a] physician continues to treat the patient for the same or related injury or illness, the physician’s patient, like an attorney’s client, “realistically cannot be expected to question and assess the techniques employed or the manner in which the services are rendered.” Just as we recognize that a represented party is entitled to retain confidence in his or her legal counsel’s “ability and good faith” while the representation continues, so, too, do we recognize that a patient is entitled to retain confidence in his or her physician’s ability and good faith while continuing treatment with that physician. The legal client is disadvantaged in learning whether his or her attorney has committed a breach of the standard of care while that attorney continues to represent the client, and so, too, is a patient disadvantaged in learning whether a physician has committed a breach of the standard of care while the physician continues to treat the patient. And just as a wronged client is permitted to benefit from his or her attorney’s efforts to correct a problem without the disruption of exploring the viability of a legal malpractice action, so, too, is a patient permitted that same benefit without the disruption of exploring the viability of a medical malpractice action.

***

Effect of actual knowledge on continuing treatment doctrine. … Thus, we conclude that the continuing treatment exception to the discovery rule terminates only when the plaintiff has actual knowledge that his or her treating physician’s negligence has caused the patient’s appreciable harm, because it is only then that there can no longer be the kind of “innocent reliance” that the continuing treatment doctrine seeks to protect. Once a patient learns that the physician’s negligence was the cause of his or her injury, the patient has acquired sufficient information to initiate litigation, and there is no longer adequate reason to continue to toll the statute of limitations.

Id. at 383-84.  (Emphasis in original, citations and footnote references omitted).

In this case.

In the scenario outlined above, the patient commences her malpractice action six years after her injury, rendering her claim potentially untimely under the three-year statute of limitations.  The discovery rule offers no assistance to the patient because she knew from the beginning that her injury was caused by the defendant doctor’s conduct (enough to start the clock running under the discovery rule).

However, the continuing treatment doctrine should apply.  The doctor-patient relationship between the patient and the negligent doctor continued for four years after the injury.  While that relationship continued, the malpractice claim could accrue, and the limitations period could begin to run, only if the patient obtained actual knowledge that her doctor had acted negligently.  As she never knew of her doctor’s negligence while their relationship continued, the limitations period was tolled during the entire four years of the relationship and began to run only after the patient’s leg was amputated and the defendant doctor ceased to be involved in her treatment.  She brought suit six years after her injury, but only two years after the end of her doctor-patient relationship with the defendant.  Therefore, the three-year statute of limitations does not bar the patient’s malpractice action.

 

After years of work, and in total disregard of the laws of physics, Buoyant, Inc. has invented “Floatzar,” a material stronger than steel but lighter than air.  An object of any size made from Floatzar effortlessly rises skyward.   Aware of the potential value of this discovery, Buoyant’s officers and employees treat all information about the development of Floatzar as a trade secret.   Buoyant intends to market Floatzar to military and aerospace clients.

Unfortunately, across town, Jimmy Jo Bob, CEO of Bob’s Big Balloons, Inc., hears of the new miracle material and envisions limitless balloon-related opportunities.  A former NSA operative and direct mail marketer, Bob hacks Buoyant’s computers and steals Floatzar’s secret formula.  Buoyant executives suspect a security breach when they see a child holding a string tethered to a large, very solid, floating taxi cab.

Buoyant successfully sues Bob’s Big Balloons for misappropriation of trade secrets, obtaining a $10 million judgment against the company.  Unfortunately, Bob’s Big Balloons is “judgment proof,” having only $12.50 in assets.  Bob, on the other hand, has significant personal wealth, as does the company’s other shareholder, Peggy Sue Rob, a chemical engineer who also heads the company’s balloon animal division.  But Buoyant failed to name Bob or Peggy, individually, as a defendants in its lawsuit, even though their personal involvement in the trade secret theft would have made them individually liable for the corporation’s misdeeds.  Buoyant can’t file a new, separate action against Bob or Peggy because the statute of limitations for a trade secret claim has long since expired.

In a last ditch effort, Buoyant brings a second lawsuit, this time against Bob and Peggy, personally.  In this case, Buoyant does not seek a new judgment against Bob or Peggy for theft of trade secrets.  Instead, it seeks to hold them personally liable on the judgment already obtained against Bob’s Big Balloons, arguing that the court should disregard the company’s corporate identity and “pierce the corporate veil” so as to rule that a judgment against the company is really a judgment against Bob and Peggy, individually.

In support of its effort to pierce the veil, Buoyant argues that it would be inequitable to allow Bob and Peggy to escape liability for company misconduct which they orchestrated.  Buoyant claims that the court should ignore the corporate structure of Bob’s Big Balloons because: (1) Bob and Peggy were in total control of the company; (2) the company was insolvent when Buoyant sued it for theft of trade secrets, (3) Bob and Peggy under-capitalized Bob’s Big Balloons because their initial investments in the company were not enough to cover both operating expenses and any judgment Bob’s Big Balloons was likely to have to pay after stealing Buoyant’s trade secrets, and (4) they used the company to promote fraud (i.e., to steal trade secrets).  Can Buoyant recover its judgment against Bob’s Big Balloons from Bob and Peggy, personally?  Probably not.

Factors relevant to piercing the corporate veil under Massachusetts law.

Generally, a corporation is a separate legal entity from its shareholder and the shareholder is not liable for corporate debts, including judgments against the corporation.  However, under Massachusetts law, a court may disregard the corporate form only in very limited circumstances.  Evans v. Multicon Const. Corp., 30 Mass. App. Ct. 728, 732 (1991).  A plaintiff seeking to pierce the veil “must meet a very high standard.”  The George Hyman Construction Company v. Gateman, 16 F.Supp.2d 129, 157 (D. Mass. 1998).  Such piercing of the corporate veil,

arises when (1) there is active and pervasive control of related business entities by the same controlling persons and there is a fraudulent or injurious consequence by reason of the relationship among those business entities; or (2) there is “a confused intermingling of activity of two or more corporations engaged in a common enterprise with substantial disregard of the separate nature of the corporate entities, or serious ambiguity about the manner and capacity in which the various corporations and their respective representatives are acting.”

Id. at 732-33, quoting My Bread Baking Co. v. Cumberland Farms, Inc., 353 Mass. 614, 620 (1968) (Emphasis in original).  See also Lipsitt v. Plaud, 466 Mass. 240, 252-53 (2013).

In Pepsi–Cola Metropolitan Bottling Co. v. Checkers, Inc., 754 F.2d 10 (1st Cir. 1985), the United States Court of Appeals for the First Circuit used the rules stated in My Bread to derive twelve factors which should be considered in deciding whether to pierce the corporate veil:

(1) common ownership; (2) pervasive control; (3) confused intermingling of business activity assets, or management; (4) thin capitalization; (5) nonobservance of corporate formalities; (6) absence of corporate records; (7) no payment of dividends; (8) insolvency at the time of the litigated transaction; (9) siphoning away of corporate assets by the dominant shareholders; (10) nonfunctioning of officers and directors; (11) use of the corporation for transactions of the dominant shareholders; (12) use of the corporation in promoting fraud.

Id. at 14–16.  (Emphasis added).  The Massachusetts Appeals Court in Evans adopted the Pepsi-Cola factors as Massachusetts law.  Massachusetts courts apply a more stringent standard for veil piercing than is applied by federal courts and those of many other states.  Newman v. European Aeronautic Defence and Space Company EADS N.V., 70 F.Supp.2d 156, 166 (D. Mass. 2010) (Massachusetts standard more stringent than federal).  Platten v. HG Bermuda Exempted Ltd., 437 F.3d 118, 127 (1st Cir. 2006) (“Massachusetts Courts have been somewhat more ‘strict’ than other jurisdictions in respecting the separate entities of different corporations”); Noonan v. The Winston Company, 135 F.3d 85, 94 (1st Cir. 1998) (describing Massachusetts standard as “stringent”); Salvail v. Relocation Advisors, Inc., 2011 WL 1883861, *1 (D. Mass. 5/17/11) (“especially strict”); Rondout Valley Central School District v. Coneco Corp., 339 F.Supp.2d 425, 441 (N.D.N.Y. 2004) (evidence must be “compelling” to pierce veil under Massachusetts law).

Although the 12 Pepsi-Cola factors need not all be satisfied in order to justify piercing the corporate veil, Buoyant is unlikely to succeed in its action against Bob and Peggy because it bases its claim on only four factors and will have difficulty proving even those.

Pervasive control.

With regard to the second factor, while Buoyant may be able to show that Bob and Peggy had full control over Bob’s Big Balloon’s, “control, even pervasive control, without more, is not a sufficient basis for a court to ignore corporate formalities.” OMV Associates, L.P. v. Clearway Acquisition, Inc., 82 Mass. App. Ct. 561, 566 (2012), citing Scott v. NG U.S. 1, Inc., 450 Mass. 760, 768, (2008).  Further, “The ownership of all the stock and the absolute control of the affairs of a corporation do not make that corporation and the individual owner identical, in the absence of a fraudulent purpose in the organization of the corporation.”  Gordon Chem. Co. v. Aetna Cas. & Sur. Co., 358 Mass. 632, 638 (1971).  Although Buoyant might claim that Bob’s Big Balloons was formed for the fraudulent purpose of stealing trade secrets, Bob and Peggy can convincingly refute this contention by showing that their company existed, and provided real services to real clients, for many years.

Thin capitalization.

The fourth factor, “thin capitalization,” also is not present in this case.  Buoyant acknowledges that Bob and Peggy funded Bob’s Big Balloons sufficiently to cover the company’s relatively low everyday operating expenses.  Buoyant contends, however, that Bob and Peggy were also required to capitalize Bob’s Big Balloons to the extent required to defend a lawsuit and pay a judgment for theft of trade secrets, because Bob and Peggy should have anticipated that Bob’s Big Balloons would be sued if it stole trade secrets.

However, even if Bob and Peggy had reason when they first capitalized their company to expect it to be sued for theft of trade secrets, itself a debatable proposition, Buoyant’s argument will likely fail because, as a matter of law, the incorporators of a business are not required to capitalize it sufficiently to cover any potential litigation and adverse judgment.  So long as a business is provided sufficient capital so that it can meet the ordinary expenses which arise in the normal operation of its business, it is not undercapitalized.  According to one commentator:

Are the risks to be perceived only those that are normal for a business, or do they include a highly unusual tort claim that greatly exceeds the firm’s liability insurance? Does the test demand that the total amount the shareholders invest must literally equal the present value of all future liabilities of the firm or does it entail some lesser amount that is simply necessary to launch the firm such that its future cash flows will meet its normal operating expenses? The former is clearly an unreasonable demand because no company can be expected to endow its future operating expenses and liabilities as a precondition to opening its doors. …It would therefore appear that inadequate capitalization has correctly assumed a limited role in veil-piercing cases, that of being a surrogate for the probable bad faith of the firm’s promoters.

James D. Cox and Thomas Lee Hazen, Inadequate Capitalization as a Factor for Piercing the Veil, 1 Treatise on the law of Corporations §7.11 (3d) (2011) (Emphasis added).

In Gottlin v. Herzig, 40 Mass App. Ct. 163 (1996), the Appeals Court noted that it would be unreasonable to require a business to capitalize to the extent necessary to cover potential tort judgments:

In their reply brief, the plaintiffs, without citation to any authority, argue that the corporation “had a duty either to maintain adequate capitalization or in the alternative to maintain liquor liability insurance.” In this case, the corporation-a neighborhood tavern-would have had to maintain an unlikely net worth in the range of three million dollars to cover the judgment rendered against the corporation, and continue in business. Thus the question comes down to the issue of the absence of insurance coverage.

Id. at 169 n.11.  The court went on to rule that failure to maintain adequate liability insurance was not grounds for piercing the corporate veil.

Courts from other jurisdictions agree that the incorporators of a business need not consider potential tort judgments when determining the adequacy of capitalization.  In In re: Hydroxycut Marketing and Sales Practices Litigation, 810 F.Supp.2d 1100 (S.D. Cal. 2011), the court stated:

The Court also does not find that Iovate USA was inadequately capitalized…. Although Iovate USA’s capital may not have been enough to satisfy multimillion dollar judgments, the capital was sufficient for Iovate USA to operate its normal business. See Laborers Clean–Up Contract Admin. Trust Fund. v. Uriarte Clean–Up Service, Inc., 736 F.2d 516, 524 (9th Cir.1984) (explaining that a corporation is undercapitalized when it is unable to meet debts that may reasonably be expected to arise in the normal course of business); Sheppard v. River Valley Fitness One, L.P., 2002 WL 197976, at *12 (D.N.H.2002) (“But the proper measure of the sufficiency of a corporate entity’s capitalization is not whether it can pay a potential judgment in a lawsuit but, rather, whether it had sufficient assets to meet the obligations incurred by conducting ordinary business in the industry in which it operates.”).

Id. at 1122-23.  (Footnote reference omitted).

In like manner, the court in Arch v. American Tobacco Co., Inc., 984 F.Supp. 830 (E.D.Pa. 1997), said:

[T]he possibility that a plaintiff may have difficulty enforcing a judgment against a defendant is not enough to justify piercing the corporate veil. Courts do not pierce the corporate veil unless the corporation is so undercapitalized that it is unable to meet debts that may reasonably be expected to arise in the normal course of business.

Id. at 840.  (Citations and internal quotation marks omitted).  See also Laborers Clean-Up Contract Admin. Trust Fund v. Uriarte Clean-Up Service, 736 F.2d 516, 524 (9th Cir. 1984); Sheppard v. River Valley Fitness One, L.P., 2002 WL 197976, at *12 (D.N.H.2002); ___ Assist LLC v. East Coast Lot & Pavement Maintenance Corp., 913 F.supp.2d 612, 631 (N.D. Ill. 2012); Bank of Montreal v. S.K. Foods, LLC, 476 B.R. 588, 598-99 (N.D. Cal. 2012).

Thus, a court will probably not be convinced that Bob’s Big Balloons was undercapitalized.

Bob’s Big Balloons was not insolvent at the time of the litigated transaction.

The eighth Pepsi-Cola factor focuses on whether the corporation was insolvent “at the time of the litigated transaction.”  In Buoyant’s case against Bob and Peggy, the “litigated transaction” must be Bob’s Big Balloons’ theft of trade secrets.  However Buoyant has only asserted that Bob’s Big Balloons was insolvent when it, Buoyant, obtained its judgment in the trade secrets case.  Buoyant cannot prove that Bob’s Big Balloons was insolvent at the time of the theft.  In fact, as discussed above, Bob’s Big Balloons was adequately capitalized to meet its normal operating expenses.

Was Bob’s Big Balloons used “in promoting fraud?”

Buoyant contends that by causing Bob’s Big Balloons to steal trade secrets, Bob and Peggy used Bob’s Big Balloons “in promoting fraud” for purposes of the veil piercing analysis.  However, the mere fact that Bob’s Big Balloons acted wrongfully under Bob and Peggy’s direction does not, by itself, establish that it was used “in promoting fraud.”  The twelve factors identified by the First Circuit in Pepsi Cola, and adopted by the Massachusetts courts in Evans and Lipsitt, are considered in order,

to form an opinion whether the overall structure and operation misleads.  There is present in the cases which have looked through the corporate form an element of dubious manipulation and contrivance, finagling, such that corporate identities are confused and third parties cannot be quite certain with what they are dealing.

Evans, 30 Mass. App. Ct. at 736.  Thus, the focus of the twelve factors is on the misleading or confusing nature of the corporate form or structure, not on whether the corporation itself has committed a fraud or wrong.  In Evans, the court found that piercing the corporate veil was not appropriate because the corporation, “did not masquerade as something it was not” and there was no evidence that the corporation was established or operated “so as to misrepresent or divert assets.”  Id.  See also Lothian v. Mumford, 2006 WL 1745064, *7 (Mass. Super. 6/9/06) (“This doctrine was devised to assist those who are confused about which corporation they are dealing with”).

Consistent with the focus on use of the corporate form to deceive, misrepresent or confuse, courts have made clear that in order to have “use[d] the corporation to promote fraud” or to satisfy the first prong of the My Bread formulation (“active and pervasive control of related business entities by the same controlling persons and there is a fraudulent or injurious consequence by reason of the relationship among those business entities”), it is not enough that the corporation commit a fraud.  That fraud must be accomplished by using the corporate form; the confusing or deceptive inter-corporate relationship must be an essential part of the fraud.

In Adelphia Agios Demetrios LLC v. Arista Dev., LLC, 2013 WL 936608 (D. Mass. 3/12/13), the court explained:

Adelphia argues that disregarding the corporate form is appropriate here because the Members used Arista to commit a fraud. See Att’y Gen. v. M.C.K., Inc., 432 Mass. 546, 736 N.E.2d 373, 380 n. 19 (Mass.2000) (listing “use of the corporation in promoting fraud” as one of twelve factors that favor piercing the corporate veil).  But the mere fact that Arista is a corporate person accused of fraud does not justify piercing the veil. Adelphia does not allege any facts showing that the Members fraudulently abused Arista’s corporate form or its limited liability.

Id. at *3.  (Emphasis added).

Similarly, in Tech Target, Inc. v. Spark Design, LLC, 746 F.Supp.2d 353 (D. Mass. 2010), the court declined to pierce the corporate veil because the plaintiff did not allege any “fraudulent or improper use of Spark Design’s corporate form relevant to the contractual relationship at issue here.”  Id. at 357.  The court noted that the only fraud alleged was Spark Design’s issuance of a check drawn on an account with insufficient funds.  “This fraud, however, was not related to any corporate manipulation.  Moreover, Tech Target has not – and cannot – allege that it was deceived or misled about Spark Design’s corporate posture at the time it entered into the contract.”  Id.  (Emphasis added).

In The George Hyman Construction Company v. Gateman, 16 F.Supp.2d 129 (D. Mass. 1998), the court also declined to disregard the corporate form.  In that case, the plaintiff construction company brought suit against two corporations, Jackson and Calvesco, and their principals, Gateman and Moretto.  The court held that “use of the corporation in promoting fraud” meant that a corporation “was established or operated so as to misrepresent or divert assets.”  Id. at 156.  (Emphasis on “or operated” removed).  The court found no evidence that the corporation was established or operated as a fraudulent enterprise, or was “the kind of inherent sham suggested by the cases.  [It] did not masquerade as something it was not….”  Id.  Notably, the court added that “the fact that something went wrong with this deal, and even the fact that Gateman and Moretto may have caused it, does not mean that Jackson was a fraudulent enterprise for the purposes of the law of corporate veil piercing.”

Cases interpreting the fraud aspect of the first prong of the My Bread formulation also require that the fraud be accomplished by, or flow from, the corporate form.  In Birbara v. Locke, 99 F.3d 1233 (1st Cir. 1996), the Court of Appeals held that even if statements by a corporation’s management constituted fraud, that was not sufficient to justify piercing the corporate veil where the fraud did not involve the corporate form.  The court stated:

Moreover, plaintiffs have failed to show any “fraudulent or injurious consequence of the intercorporate relationship.” Plaintiffs argue that the settlement offers were misleading and fraudulent, because defendants attributed the decision to retain investment returns to TFG’s prior management, when it had been the decision of the new management to continue the policy of violating investment contracts.

Even assuming this misrepresentation might have supported fraud or unfair practices claims against the defendants (claims the jury and court here rejected), we think plaintiffs’ argument misses the point of the corporate disregard doctrine. The phrase “fraudulent or injurious consequence” is limited in My Bread by the phrase “of the intercorporate relationship.” There was no failure to “make clear which corporation [was] taking action” or “to observe with care” the corporate form. My Bread, 233 N.E.2d at 752. The Massachusetts Appeals Court has put this point well: “There is present in the cases which have looked through the corporate form an element of dubious manipulation and contrivance, finagling, such that corporate identities are confused and third parties cannot be quite certain with what they are dealing.” Evans, 574 N.E.2d at 400; cf. Oman Int’l Fin. Ltd. v. Hoiyong Gems Corp., 616 F.Supp. 351, 364 (D.R.I.1985) (noting that the better reasoned cases under Rhode Island law only pierce the corporate veil when the injurious consequences are a direct result of the misuse of the corporate form). Plaintiffs were never misled about which corporate entity-CRI or TFG-was obligated to them or was dealing with them.

Id. at 1240.  (Emphasis added).

To the same effect is Hiller Cranberry Products, Inc. v. Koplovsky Foods, Inc., 2 F.Supp.2d 157 (D. Mass. 1998), where the court, applying the first prong of the My Bread formulation, said:

Plaintiff contends that Edward M. Koplovsky’s statements to plaintiff with respect to KFI’s intention to pay its outstanding invoices constituted misrepresentation and unfair trade practices. The alleged fraud must pertain to the intercorporate relationship, however, Birbara, 99 F.3d at 1240.

Id. at 162.  (Emphasis added).  In like manner, the court in Giuliano v. Nations Title, Inc., 938 F.Supp. 78, 82 (D. Mass. 1996), a case in which the plaintiff sought to hold a corporate parent liable for the debts of its subsidiary, held that the first prong of the My Bread formulation is not satisfied simply by the occurrence of fraud.  Rather, the relationship between the two corporations (the corporate form or structure) must be an integral part of accomplishing the fraud.

If buoyant could establish that Bob and Peggy used Bob’s Big Balloons to promote fraud simply because they caused the company to steal trade secrets, then the promoting fraud factor of the veil piercing analysis could be established in almost any case, because cases where veil piercing is an issue commonly involve wrongful conduct of the corporation for which the plaintiff seeks to hold an individual shareholder liable.

Because any alleged wrongdoing on the part of Bob’s Big Balloons or Bob and Peggy did not rely upon, and was not facilitated or made more successful by, any misuse of the company’s corporate form, Buoyant will not be able to establish that Bob and Peggy used Bob’s Big Balloons in promoting fraud.

Bob and Peggy’s personal wrongdoing is irrelevant to piercing the corporate veil.

While Bob and Peggy’s personal wrongdoing, in causing Bob’s Big Balloons to steal Buoyant’s trade secrets, would have been enough to render them liable had they been named defendants in Buoyant’s original lawsuit against Bob’s Big Balloons, it is not relevant to the veil piercing analysis.  There are two entirely separate approaches to holding a corporate officer individually liable for wrongs committed by his or her corporation.  One such approach is to pierce the corporate veil.  Separate and apart from piercing, a corporate officer may sometimes be held personally liable for corporate torts in which the officer was personally involved.  Townsends, Inc. v. Beaupre, 47 Mass. App. Ct. 747, 751-52 (1999).

However, a claim against Bob and Peggy based on their personal participation in their company’s theft of trade secrets should have been asserted in Buoyant’s earlier action against Bob’s Big Balloons.  Such a claim cannot be made in Buoyant’s second lawsuit seeking to pierce the corporate veil. The only issue in that case is whether Bob and Peggy, individually, should be held responsible for the corporate judgment debt of Bob’s Big Balloons.  The courts have made clear that the piercing and personal involvement approaches to imposing personal liability on a corporate officer are separate.  In Alves v. Daly, the court pointed out that a “plaintiff does not need to pierce the corporate veil to hold an officer of a corporation personally liable for a tort committed by the corporation that employs him, if he personally participated in the tort ….”  2013 WL 1330010, *8 (D. Mass. 3/29/13).  (Internal quotation marks omitted).  See also Ray-Tek Services, Inc. v. Parker, 64 Mass. App. Ct. 165, 177-78 (2005) (holding that plaintiff has not satisfied requirements for piercing the veil but could still hold corporate officer liable due to his personal involvement in tortious conduct); Townsends, 47 Mass. App. Ct. at 751-52 (similar to Ray-Tek); McCarthy v. Slade Assoc., Inc., 24 Mass. L. Rptr. 603, 2004 WL 4739775, *4 (Mass. Super. 8/21/08) (citing Cash Energy, Inc. v. Weiner, 768 F.Supp. 892, 895 (D. Mass. 1991), for the proposition that personal liability is usually precluded unless “grounds are shown either for piercing the corporate veil or finding active personal involvement in a tortious act.”).

Piercing the veil is highly fact-dependent.

As the foregoing discussion indicates, a Massachusetts court will pierce the corporate veil only in rare cases.  The 12 factor analysis is highly fact-dependent and requires a detailed examination of the evidence.

In Iannacchino v. Ford Motor Company, 451 Mass. 623 (2008), the Massachusetts Supreme Judicial Court, refined the standard for granting a motion to dismiss.  It retired the familiar directive that “a complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief,” Nader v. Citron, 372 Mass. 96, 98 (1977) (quoting Conley v. Gibson, 355 U.S. 41, 45-46 (1957)), instead adopting a new federal approach under which a complaint must contain, “factual ‘allegations plausibly suggesting (not merely consistent with)’ an entitlement to relief.” Iannacchino, 451 Mass. at 636, quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 557, 127 S.Ct. 1955, 1966, 167 L.Ed.2d 929 (2007).  See also Galiastro v. Mortgage Electronic Registration Systems, Inc., 467 Mass. 160, 165 (2014); Lopez v. Com., 463 Mass. 696, 700-01 (2012).

While the “plausibility” requirement is easily stated, its practical application is less obvious than the prior “prove no set of facts” standard.  Indeed, “the precise parameters of the plausibility standard are still a work in progress.”  Gianfrancesco v. Town of Wrentham, 712 F.3d 634, 638-39 (1st Cir. 2013) (internal quotation marks omitted).  Just how much factual detail is required to make a claim plausible?  What separates a valid factual allegation from a mere legal conclusion insufficient to withstand a motion to dismiss?  This article considers those questions, among others.  Because Iannacchino adopted the federal standard, and because Massachusetts courts interpreting the Massachusetts Rules of Civil Procedure routinely look to, “the construction given to the cognate Federal rules,” Chavoor v. Lewis, 383 Mass. 801, 806 n.5 (1981), I refer to both federal and Massachusetts case law.

In order to determine whether a complaint states a plausible claim for relief, which will survive a motion to dismiss, a court must apply a two-stage test.  First, although all factual allegations contained in the complaint must be assumed to be true for purposes of a motion to dismiss, this tenet does not apply to legal conclusions.  Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009).  Therefore, the court must begin by, “identifying the allegations of the complaint that are not entitled to the assumption of truth” because they are merely legal conclusions.  Id. at 1951.  Second, the court must, “consider the [remaining] factual allegations in [the] complaint to determine if they plausibly suggest an entitlement to relief.”  Id.  See also Cardigan Mountain School v. New Hampshire Ins. Co., 787 F.3d 82, 84 (1st Cir. 2015).

Distinguishing factual allegations from mere legal conclusions.

A court determining whether a complaint states a plausible claim to relief must ignore allegations which are not factual but, instead, amount to mere legal conclusions.  Such conclusory allegations include both rote recitation of the elements of a cause of action and allegations which, while clothed as factual statements, are really just unsupported speculation by the plaintiff.  In A.G. ex rel. Maddox v. v. Elsevier, Inc., 732 F.3d 77 (1st Cir. 2013), the Court of Appeals for the First Circuit explained,

We follow this unbroken line of cases and hold that the rote recital of the elements of a cause of action is not enough, by itself, to nudge a case past the plausibility threshold.

This remains true even where, as here, plaintiffs attempt to camouflage conclusory statements as allegations of fact. When allegations, though disguised as factual, are so threadbare that they omit any meaningful factual content, we will treat them as what they are: naked conclusions.

Id. at 80-81, citing Iqbal, 129 S.Ct. at 1949; Artuso v. Vertex Pharm., Inc., 637 F.3d 1, 9 (1st Cir.2011) (explaining that even though an averment may be couched as a factual allegation, it can be “so subjective that it fails to cross ‘the line between the conclusory and the factual’ ”).  Similarly the court in Rodriguez-Vives v. Puerto Rico Firefighters Corps of Puerto Rico, 743 F.3d 278, 286 (1st Cir. 2014) stated,

A conclusory allegation, however, is one which simply asserts a legal conclusion, such as “I was retaliated against,” not a specific factual allegation, such as “my supervisor threw a book at me,” that merely lacks some surrounding context. We have held that some factual allegations may be so “threadbare” that they are in essence conclusory even if they include more than an assertion that an element of a cause of action was satisfied. But this is only the case where the bareness of the factual allegations makes clear that the plaintiff is merely speculating about the fact alleged and therefore has not shown that it is plausible that the allegation is true.

Id. at 286. (Internal citations omitted).

The distinction between factual allegations and legal conclusions was discussed in detail in Cardigan Mountain School, where the issue was whether the plaintiff had alleged a plausible claim that the defendant insurer had issued an insurance policy to the plaintiff school.  The court looked to the Supreme Court’s opinions in Twombly and Iqbal for guidance.  In Iqbal, the plaintiff, who had been arrested and detained after the 9/11 attacks but was eventually released, brought civil rights claims against federal officials including John Ashcroft, who had been the United States Attorney General at the time, and Robert Mueller, then the Director of the FBI.  The court found that although the complaint contained some factual assertions which were entitled to an assumption of truth, it was also rife with legal conclusions.

The Supreme Court explained that the complaint’s “bald allegations” that Ashcroft and Mueller were personally involved in unconstitutional conduct were “conclusory” and thus should have been disregarded by the district court. Id. at 681, 129 S.Ct. 1937. In particular, the Supreme Court held that statements that Ashcroft and Mueller “ ‘knew of, condoned, and willfully and maliciously agreed to subject [the plaintiff]’ to harsh conditions of confinement” based on his “ ‘religion, race, and/or national origin’ ” were not factual allegations that must be taken as true. Id. at 680, 129 S.Ct. 1937. And the Court ruled the same with respect to Iqbal’s allegations that “Ashcroft was the ‘principal architect’ ” of the policy and that “Mueller was ‘instrumental’ in adopting and executing it.” Id. at 680–81, 129 S.Ct. 1937.

These sorts of allegations, the Court explained, were “nothing more than a ‘formulaic recitation of the elements’ of a constitutional discrimination claim.” Id. at 681, 129 S.Ct. 1937 (quoting Twombly, 550 U.S. at 555, 127 S.Ct. 1955). In contrast, Iqbal did credit as factual those allegations in the complaint that made reference to specific events. See id. (crediting allegations including “that ‘the [FBI], under the direction of Defendant MUELLER, arrested and detained thousands of Arab Muslim men’ ”).

Cardigan Mountain School, 787 F.3d at 86, quoting Iqbal.

In Twombly, an antitrust case alleging price fixing, the Supreme Court held that allegations that the defendants had engaged in parallel conduct were factual and entitled to an assumption of truth, while also ruling that the portions of the complaint which directly alleged a conspiratorial agreement among the defendants were nothing more than legal conclusions.

In particular, the allegation that the defendants “have entered into a contract, combination or conspiracy … and have agreed not to compete with one another” was, the Supreme Court held, no more than a legal conclusion based on the allegations of parallel conduct. Id. at 564–65, 127 S.Ct. 1955. And thus, the Supreme Court held that this direct allegation of agreement did not need to be taken as true. See id.

Cardigan Mountain School, 787 F.3d at 86, quoting Twombly.

Based on its reading of Iqbal and Twombly, the Cardigan Mountain School court held that the school’s complaint set forth valid factual allegations concerning the existence of the insurance policy and was not based solely on legal conclusions.  It stressed that the complaint alleged specific events based on the personal knowledge of specific individuals, who plausibly could have known of those events.  According to the court,

The allegations in the school’s complaint described above are specific and factual. The complaint refers to individuals with relevant knowledge who are recalling facts plausibly known to them. Those allegations are thus like the allegations of actual events in Iqbal and of parallel conduct in Twombly that the Supreme Court took as true; they are specific and appear to be based on the knowledge of particular individuals. They are not bare recitations of the legal conclusion the suit seeks to prove. We thus conclude that the school’s allegations set forth above are entitled to the presumption of truth at the motion to dismiss stage.

Cardigan Mountain School, 787 F.3d at 87.  See also Rodriguez-Vives, 743 F.3d at 286 (“Here, in contrast, Rodríguez–Vives’s complaint described actions of which she had personal knowledge in sufficient detail to make them plausible.”).

Do the factual allegations suggest a plausible entitlement to relief?

After separating the true factual allegations from mere legal conclusions, the court must determine whether those allegations suggest a plausible claim to relief.  In conducting this “context specific” inquiry, “the reviewing court [must] draw on its judicial experience and common sense.” Garcia-Catalan v. United States, 734 F.3d 100, 103 (1st Cir. 2013), quoting Iqbal,129 S.Ct. 1940.  See also Schatz v. Republican State Leadership Comm., 669 F.3d 50, 55 (1st Cir. 2012).  “In performing [its] review, [the court] … can consider (a) implications from documents attached to or fairly incorporated into the complaint, (b) facts susceptible to judicial notice, and (c) concessions in plaintiff’s response to the motion to dismiss.”  Schatz, 669 F.3d at 55-56.  (Internal quotation marks and footnotes omitted).

“Plausible … means something more than merely possible.”  Schatz, 669 F.3d at 55.  See also Carrero-Ojeda v. Autoridad de Energia Electrica, 755 F.3d 711, 717 (1st Cir. 2014).  “And a complaint that ‘pleads facts that are “merely consistent with” a defendant’s liability … “stops short of the line between possibility and plausibility.” ’ ” Ocasio–Hernández, 640 F.3d at 12, quoting Iqbal, 129 S.Ct. at 1949.  “The factual allegations must ‘raise a right to relief above the speculative level … [based] on the assumption that all the allegations in the complaint are true….’ ” Galiastro, 467 Mass. at 165.

However, although the plausibility standard is more demanding than the former “prove no set of facts” approach, the bar remains fairly low.  All that is required is that the, “plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 129 S. Ct. at 1949.  Even if such an inference is “plausible but inconclusive,” the claim survives.  Rodriguez-Vives, 743 F.3d at 286.  See also Decotiis v. Whittemore, 635 F.3d 22, 35 (1st Cir. 2011).

The plausibility standard “does not demand a high degree of factual specificity.”  Garcia-Catalan, 734 F.3d 100, 103 (1st Cir. 2013).  The “plaintiff need not show that its allegations … are more likely than not true.”  Evergreen Partnering Grp., Inc. v. Pactiv Corp., 720 F.3d 33, 46 (1st Cir. 2013).  See also Sepulveda-Villarini v. Dep’t of Educ. of Puerto Rico, 628 F.3d 25, 30 (1st Cir. 2010) (“Twombly cautioned against thinking of plausibility as a standard of likely success on the merits”).

The plaintiff also need not establish a prima facie case.  According to the court in Carrero-Ojeda,

[A] complaint need not plead facts sufficient to establish a prima facie case or “allege every fact necessary to win at trial to make out a plausible claim. The prima facie standard is an evidentiary standard, not a pleading standard, and there is no need to set forth a detailed evidentiary proffer in a complaint.

755 F.3d at 718.  (Internal quotation marks and citations omitted).  However, the “elements of a prima face case remain relevant to [the] plausibility assessment, as [those] elements are part of the background against which a plausibility determination should be made.” Id.  (Internal quotation marks omitted).  “[R]eference to the prima facie elements can help a court determine whether the “cumulative effect of the complaint’s factual allegations” is a plausible claim for relief. Id.

Nor may the court disregard a properly pled factual allegation merely because the court disbelieves it, finds it doubtful or unlikely to be supported by evidence at trial.  The court must assume factual allegations to be true “even if doubtful in fact” Galiastro, 467 Mass. at 165.  “[T]he court may not disregard properly pled factual allegations, even if it strikes a savvy judge that actual proof of those facts is improbable.  Indeed, a well-pleaded complaint may proceed even if … a recovery is very remote and unlikely. Ultimately, [t]he relevant inquiry focuses on the reasonableness of the inference of liability that the plaintiff is asking the court to draw from the facts alleged in the complaint.  Medina-Velazquez v. Hernandez-Gregorat, 767 F.3d 103, 109 (1st Cir. 2014).  (Internal quotation marks and citations omitted).  See also Twombly, 127 S.Ct. at 1965 (“Rule 12(b)(6) does not countenance … dismissals based on a judge’s disbelief of a complaint’s factual allegations.” (Internal quotation marks omitted)); Evergreen, 720 F.3d 33, 45 (1st Cir. 2013).

Moreover, the court may not conclude that a plaintiff’s factual allegations fail to establish a plausible claim simply because the court deems a different factual scenario more plausible.

The question at the pleading stage is not whether there is a plausible alternative to the plaintiff’s theory; the question is whether there are sufficient factual allegations to make the complaint’s claim plausible…. [T]here may … be more than one plausible interpretation of the defendant’s words, gestures, or conduct. Consequently, although an innocuous interpretation of the defendants’ conduct may be plausible, that does not mean that the plaintiff’s allegation that that conduct was culpable is not also plausible…. [O]n a Rule 12(b)(6) motion it is not the province of the court to dismiss the complaint on the basis of the court’s choice among plausible alternatives. Assuming that [plaintiff] can adduce sufficient evidence to support its factual allegations, the choice between or among plausible interpretations of the evidence will be a task for the factfinder.

Evergreen, 720 F.3d at 45-46, quoting  Anderson News, LLC v. American Media, Inc., 680 F.3d 162, 189-90 (2d Cir.2012).

Also relevant is whether, in the court’s view, any factual shortcomings of the complaint are reasonably likely to be remedied through discovery.  An important purpose of a motion to dismiss is to save the defendant from incurring the costs of discovery before being able to dispose of the matter.  The plausibility test “helps keep defendants from wasting time and money in discovery on largely groundless claims.” Schatz, 669 F.3d at 56.  (Internal quotation marks omitted).

“[T]he plausibility inquiry properly takes into account whether discovery can reasonably be expected to fill any holes in the pleader’s case.” García–Catalán v. United States, 734 F.3d 100, 104 (1st Cir.2013). To clear the plausibility hurdle, a complaint must contain “enough fact[s] to raise a reasonable expectation that discovery will reveal evidence” sufficient to flesh out a viable claim. Twombly, 550 U.S. at 556, 127 S.Ct. 1955.

Butler v. Balolia, 736 F.3d 609, 617-18 (1st Cir. 2013).  Accordingly, the plausibility test may be applied less rigorously in certain cases where, “a material part of the information needed is likely to be within the defendant’s control” and can therefore be obtained only via discovery.  Garcia-Catalan, 734 F.3d 100, 104 (1st Cir. 2013).

While the plausibility standard undoubtedly requires plaintiffs to offer greater factual support for their claims than was necessary under the prior standard, and while the concept of “plausibility” continues to evolve, it is clear that the bar remains relatively low.  Nevertheless, plaintiffs would be well advised to state their claims with as much factual detail as possible and to avoid reliance on conclusory legal allegations.

In reviewing a motion for summary judgment, the Superior Court must construe all evidence in the light most favorable to the non-moving party and draw all reasonable inferences in favor of the opposing party.  Moreover, any doubt about the existence of a genuine issue of material fact must be resolved against the movant.

The court does not pass upon the credibility of witnesses or the weight of the evidence or make its own findings of facts.  A court should not grant a party’s motion for summary judgment merely because the facts he offers appear more plausible than those tendered in the opposition, or because it appears that the adversary is unlikely to prevail at trial.  Instead, the court should only determine whether a genuine issue of material fact exists.  The moving party’s failure to establish the absence of a genuine issue of material fact must, without more from his opponent, defeat his motion.

Under Massachusetts Rule of Civil Procedure 56(c), summary judgment, “may be rendered on the issue of liability alone although there is a genuine issue as to the amount of damages.” In addition, summary judgment need not resolve all claims against all parties in the case.  Rule 56(d) provides,

If on motion under this rule judgment is not rendered upon the whole case or for all the relief asked and a trial is necessary, the court at the hearing of the motion, by examining the pleadings and the evidence before it and by interrogating counsel, shall if practicable ascertain what material facts exist without substantial controversy and what material facts are actually and in good faith controverted. It shall thereupon make an order specifying the facts that appear without substantial controversy, including the extent to which the amount of damages or other relief is not in controversy, and directing such further proceedings in the action as are just. Upon the trial of the action the facts so specified shall be deemed established, and the trial shall be conducted accordingly.

Note, however, that the Massachusetts Superior Court’s Business Litigation Session (“BLS”) has issued a procedural order limiting the use of partial dispositive motions, including partial summary judgment.

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A motion for summary judgment in the Massachusetts Superior Court is governed by Superior Court Rule 9A.  A party seeking summary judgment must file at least the following documents:

  • The motion for summary judgment;
  • A separate memorandum stating the reasons, including supporting authorities, why the motion should be granted. Rule 9A(a)(1);
  • A statement of material facts as to which the moving party contends there is no genuine issue to be tried (“Statement of Facts”). Rule 9A(b)(5)(ii – iv);
  • A joint appendix of exhibits (“Joint Appendix”) supporting the motion and any opposition. Rule 9A(b)(5)(vi);
  • An affidavit authenticating the exhibits in the Joint Appendix on which the moving party is relying;
  • Certificates of service should appear on the last page of each document. Rule 9B;
  • Any documents served on the moving party by the opposing party;
  • Rule 9A Notice of Filing Documents;
  • Rule 9A Listing of Documents;
  • Rule 9A Affidavit of Counsel (but only if the party opposing the motion fails to serve an opposition on the moving party).

A party opposing a motion for summary judgment may serve on the moving party:

  • A memorandum in opposition to the motion;
  • Responses to the moving party’s Statement of Facts;
  • A statement of additional undisputed material facts, added as a continuation of the Statement of Facts;
  • Any additional exhibits referred to in the opposing party’s papers, and an index thereto, for inclusion in the parties’ Joint Appendix.

Either party may file Motion to Strike and the opposing party may file a cross-motion with the opposition.

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Massachusetts Superior Court Rule 9A sets forth detailed requirements governing the format of summary judgment documents.

Separate memorandum.  A motion for summary judgment must be accompanied by a separate memorandum of law “stating the reasons, including supporting authorities, why the motion should be granted.”  Rule 9A(a)(1).

Format.  All summary judgment papers (motions, memoranda, oppositions, etc.), except for exhibits, must be filed on 8.5″ x 11″ paper, must be typed in at least 12-point type and must be double spaced.  Although the title of the case, footnotes and quotations may be single spaced, they still must be in 12-point type.

Titles.  The title of each document must appear on the first page thereof.

Length.  Memoranda of law supporting or opposing the motion are limited to 20 pages unless leave of court is obtained.  Reply memoranda are limited to 10 pages.  Note, however, that a reply memorandum, filed pursuant to Rule 9A(a)(3) without leave of court, is limited to five pages.  The length limits do not apply to either the parties’ consolidated Statement of Material Facts or the Joint Appendix of Exhibits.  Leave of court to exceed length limits may be obtained as provided in Rule 9A(a)(5), and any expanded page limit allowed by the court will apply to all parties.

Email addresses.  A party or attorney who has an email address must include the address on all papers filed.  Rule 9A(a)(6).

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How soon a motion for summary judgment may be filed depends on whether the plaintiff or defendant is the moving party.  The plaintiff may not move for summary judgment until after: (1) 20 days have elapsed after the commencement of the action or (2) service of a motion summary judgment by the defendant.  Mass. R. civ. P. 56(a).

The Defendant may file a motion for summary judgment at any time, as may any defendant-in-counterclaim or defendant-in-crossclaim.  Mass. R. Civ. P. 56(b).

Both plaintiffs and defendants must also file their motions not later than 10 days before the date on which the motion will be heard.  The Tracking Order applicable to a Superior Court case will also specify the date by which motions for summary judgment must be filed.

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Massachusetts Rule of Civil Procedure 56(c) lists the type of evidence on which a party seeking summary judgment may rely:

The judgment sought shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and responses to requests for admission under Rule 36, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.

With regard to pleadings, the moving party may not rely on the allegations of his or her own pleadings.  However a party seeking summary judgment may rely on allegations contained in the opposing party’s pleadings G.L. c. 231, § 87 (“In any civil action pleadings shall not be evidence on the trial, but the allegations therein shall bind the party making them.”).  A motion for summary judgment may also be based on facts set forth in the moving party’s pleadings and conceded in the opposing party’s pleadings.  In the Superior Court, the court will also take as admitted facts which are set forth in the moving party’s statement of material facts (“Statement of Facts”) and which the opposing party has not adequately denied.

The court may also consider matters subject to judicial notice, concessions made by counsel on the record, testimony received in court (whether in the case at issue or in a former trial), and, if appropriate, facts gleaned from the documents relied on by the parties.  This list is not exhaustive.

Mass. R. Civ. P. 56(e) sets forth the requirements for affidavits:

Supporting and opposing affidavits shall be made on personal knowledge, shall set forth such facts as would be admissible in evidence, and shall show affirmatively that the affiant is competent to testify to the matters stated therein.

Bare assertions of belief are inadequate for summary judgment purposes. So are bare assertions, conclusions, and assumptions of unobserved facts.  Expressions of belief do not rise to the personal knowledge required by Rule 56(e).  Accordingly, affidavits or portions thereof made on information and belief, as opposed to personal knowledge, are to be disregarded in considering a motion for summary judgment.

Affidavit information must embody admissible evidence.  Therefore, affidavits are not competent evidence to prove the truth of the hearsay statements they contain unless they come within some established exception to the hearsay rule or come within some statutory provision.  Any documents attached to and incorporated in an affidavit must also be admissible.

If an affidavit refers to another document or some portion thereof, sworn or certified copies of the document must be submitted with the affidavit.  Rule 56(e).

A motion to strike is the proper procedural device for raising the insufficiency in an affidavit submitted in opposition to a motion for summary judgment. Where no such motion is filed, the court retains discretion to ignore any deficiency and consider the affidavit.

It should be noted that a party cannot defeat a motion for summary judgment by submitting an affidavit which contradicts that party’s own earlier sworn statements (e.g. at a deposition).

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A memorandum in support of, or in opposition to, a motion for summary judgment should be drafted to convey to a busy judge, in the most efficient and convincing way possible, why the motion should be granted or denied.

Know your audience

A motion for summary judgment is directed to a special audience (the judge) and must present both the facts and the law in a manner calculated to satisfy the needs and expectations of that audience.

Keep in mind that the judge may know relatively little about the facts of your case until he or she reads your memorandum and related summary judgment papers.  This is especially true where the judge has not had occasion to make other substantive rulings in the case (e.g. on a motion to dismiss) before the motion for summary judgment is filed.  In any case, the judge certainly knows less about the case than you do.

Similarly, because most judges deal with cases of many kinds, they are often generalists, rather than experts in the applicable law.   Your summary judgment memorandum must educate the judge about both the facts and the law.

Judges are also overworked.  As a result, the judge may have little patience with a memorandum that makes his or her job more difficult or wastes precious time.  Your memorandum, and each argument within it, should be as clear and concise as possible and should “get to the point” quickly, rather than forcing the judge to wade through irrelevant facts or boilerplate law.  You must do everything possible to make your memorandum easy to read and your arguments easily understood.  This places a premium on careful organization and the use of “roadmap” paragraphs.

Throughout your memorandum, focus on the primary question before the court on summary judgment: whether there exists any genuine issue of material fact.  The judge will be most interested in whether such a factual issue exists. Therefore, whether seeking or opposing summary judgment, your memorandum should stress the facts.  Keep in mind the court’s limited function when deciding a motion for summary judgment.  The court does not weigh the evidence or decide disputed issues.  Accordingly, there is little point in the moving party arguing, as one might at trial, that one version of the facts is more plausible than another.  The motion can be granted only if there is no dispute as to any material fact.

A judge is more likely to grant summary judgment in a case with common facts and established law, than in a case with complex or unusual facts and unfamiliar or undecided law.  Thus, if you are moving for summary judgment, emphasize the simplicity and everyday nature of the case.  Conversely, the opposing party should cast the case as a complex situation requiring the application of new or uncertain legal principals.

Before drafting the memorandum.

In order to draft an effective summary judgment memorandum, you must become intimately familiar with the case, mastering both the facts and the applicable law.  At least the following steps should be completed before drafting the memorandum.

Structure discovery with summary judgment in mind.  Your summary judgment memorandum can only be as effective as the evidence you have to work with.  Accordingly, have the need to seek or oppose a motion for summary judgment firmly in mind when taking depositions, drafting interrogatories or requests for admissions, conducting other discovery and obtaining expert opinions.

Study the record.  Review the entire record in detail, including all of the relevant documentary evidence, deposition transcripts, answers to interrogatories, affidavits and other summary judgment material.

Obviously, parties seeking or opposing summary judgment cannot intelligently decide which arguments to make in their memoranda, unless both have become familiar with the record.

While reviewing the record, summarize the relevant facts, noting any legal issues raised by those facts.  Omit from your summary any facts which are clearly irrelevant.  Your summary of the record can serve as a draft of the Rule 9A(b)(5) statement of material facts (“Statement of Facts”).

Be sure to include in your summary detailed citations to record, as every paragraph of the Statement of Facts must be supported by citations to the record.

Research.  Research all of the legal issues.  A thorough understanding of the law will help determine which facts in the record are material.

Outline your argument.  Based on your research, create an outline of the headings and sub-headings for your argument on each legal issue.  This outline will later help you organize the argument section of your memorandum.

Choosing your issues

Serious thought should be given to which arguments should be included in your memorandum seeking or opposing summary judgment.  You should limit your arguments to those that offer your client a realistic chance of success.

Be selective.  Consider the strength of your argument on each issue, both factually and legally.  Including too many arguments can be detrimental.  You should not waste the limited pages of a summary judgment memorandum making arguments which are predestined to fail.  Further, pursuing weak arguments undermines your credibility and may reduce the effectiveness of an otherwise strong memorandum.

The facts

How you present the facts in your summary judgment memorandum can be at least as important as your legal analysis.  A skillfully drafted factual section will both establish your credibility in the eyes of the court and tell a compelling story, leading the judge to view the case from the perspective most favorable to your client and be more receptive to your legal arguments.

Citations to the record.  Every factual statement in your facts section, and throughout your summary judgment memorandum, should be followed by a citation to the paragraph of the Statement of Facts which, in turn, cites to the portion of the record which supports the factual proposition.  Thus, if the fact is that plaintiff was an employee of the defendant, the relevant paragraph of the Statement of Facts would cite directly to the record (e.g. to an employment contract or affidavit) while the citation in the memorandum would simply cite to “SOF ¶__.”

State the general nature of the case.  Start with the general nature of the case, just one or two paragraphs, offering the judge a very short, general description of the dispute between the parties and your view of why summary judgment is/is not appropriate.  This background provides the necessary context for the more detailed facts which follow.  There is no need to give any detailed procedural background, unless such a background is relevant to one or more of your arguments.

Base the fact section of your memorandum on the Statement of Facts.  Drafting the Statement of Facts and drafting the factual section of the memorandum are highly interrelated.  You might have a first draft of a Statement of Facts based on the summary of the record you prepared.  The same facts, with the paragraph numbers and some of the paragraph breaks removed, provide a good starting point for the factual section of the memorandum.  However, as you draft the memorandum’s legal arguments, it will likely become apparent that certain additional facts are necessary to support those arguments.  These should then be added not only to the memorandum’s fact section, but also to the Statement of Facts.  Conversely, it may become clear that certain facts are not relevant to any of your arguments.  These might be removed from both the memorandum and the Statement of Facts, although some facts which are not technically relevant will still contribute to the “story” you are trying to tell.

Your fact section should achieve two goals.  In the facts section of your memorandum, you should present, in a neutral, non-argumentative tone, all of the facts relevant to your arguments.  Your facts section has two primary goals: (1) to develop and maintain your credibility; and (2) to present the facts in such a way that the judge finishes reading them with the sense, if you represent the moving party, that there are no disputed material facts and that the undisputed facts entitle your client to judgment as a matter of law.  If you represent the opposing party, your memorandum should convince the judge either that the material facts are genuinely disputed or that, even if the facts are clear, they do not warrant a judgment for the moving party.  In the latter instance, the court may, in fact, enter summary judgment for the opposing party.

Maintaining credibility.  If the judge concludes that your presentation of the facts cannot be trusted, he or she will also be much less likely to trust the law you present and the arguments you make.  To build credibility in your facts section:

  • Maintain a neutral tone and avoid presenting the facts in an overtly argumentative manner;
  • Include only facts that are in the record and cite meticulously to the record. Every factual statement in your memorandum should be followed by a citation to the Statement of Facts and the cited paragraph of the Statement of Facts must cite to a portion of the record which truly supports the facts asserted. A judge who is convinced that your citations are reliable is more likely to use your memorandum as a reference document and, accordingly, to view the facts in a manner favorable to your client;
  • If you represent the party seeking summary judgment, include only facts that are undisputed. Relying on facts as to which there is a genuine dispute can harm your case by allowing the opposing party to point out a genuine issue of material fact, thereby defeating summary judgment.
  • Be honest and complete. Include all relevant facts, whether they help your case or damage it.  In addition to ethical concerns, omitting negative facts is counterproductive as it offers the opposing party an opportunity to attack your honesty.

Structure you factual presentation so as to persuade judge.  The second purpose of your fact section is to persuade the judge to rule in your client’s favor.  Use this section to tell the judge a story, explaining the case from your client’s perspective and personalizing your client where possible.  Usually, a chronological structure will work best for this narrative.

While maintaining a neutral tone, you should craft the facts section of your summary judgment memorandum to stress facts favorable to your case and diminish facts which harm it.   Ways in which this can be accomplished include:

  • Placing positive facts near the beginning or end of paragraphs and sentences within paragraphs, while burying negative facts in the middle of paragraphs and sentences;
  • Linking any negative facts to the circumstances which explain them;
  • Placing paragraphs containing negative facts between paragraphs containing positive facts;
  • Using active voice for positive facts (“Jones applied the brakes”) and passive voice for negative facts (“the brakes were applied by Jones”);
  • Placing negative facts in subordinate clauses of sentences.

I sometimes use the following additional techniques:

  • Use specific dates only where they are relevant (e.g. to a statute of limitations issue). Unnecessary dates distract the reader;
  • Use subheadings within your facts section. They help the reader navigate complex facts.  In addition, the judge may review the headings in your memorandum before (or occasionally instead of) reading it in detail.  Detailed subheadings serve as a summary of the facts and argument;
  • Do not refer to the parties as plaintiff and defendant. Instead, use names that help the reader remember who is who (e.g. “Employee” and “the Company”);
  • Use short quotations from the record, but avoid long quotes that will lose the reader’s attention;
  • Revisit your facts section after you finish drafting the argument section of your summary judgment memorandum. Often, as the Argument section becomes more developed, it may come to rely on facts which you did not initially include.

Devote the time necessary to drafting an effective facts section.  As noted above, a judge considering a motion for summary judgment will be primarily interested in whether any material fact is disputed.  By presenting the judge with a compelling story, and offering facts in the form most favorable to your client, you increase the likelihood that the judge will be receptive to your legal arguments.

Argument

It is in the argument section that the party moving for summary judgment explains the law and shows how that law, applied to the undisputed material facts, entitles that party to judgment.  The opposing party may agree that the facts asserted by the moving party are undisputed but argue that the applicable law is different from that relied upon by the moving party and does not entitle the moving party to judgment.  The opposing party may file a cross-motion for summary judgment based on the same facts asserted by the moving party but a different interpretation of the applicable law.  Or the opposing party may agree as to the applicable law, but argue that the facts relied upon by the moving party are disputed.  In addition, the opposing party, having stated additional undisputed material facts in the Statement of Facts, may argue that the applicable law warrants entry of summary judgment in its own favor based on those additional facts.

Be methodical and organized.  In determining how to draft the argument section, keep in mind that your audience is a judge who does not know the facts of your case as well as you do.  Further, because the judge may be a generalist, you should not assume that he or she has expertise in the legal subject matter of your case.  Do not skip steps in your legal analysis, assuming that the judge will follow along.  If your argument has multiple conceptual steps, clearly lay out every one leading to your ultimate conclusion.

Because you need to methodically lay out your legal analysis, your memorandum’s argument section should be highly structured.  Each major argument within the argument section should have its own roadmap paragraph.

Use headings and sub-headings.  You should also use headings and sub-headings to help the reader keep track of complex arguments.  Each major heading in your argument section should state one reason why the court should rule in your client’s favor.  A major heading might read,

Jones is liable to Brown for negligently entrusting her vehicle to Smith because: (1) Jones gave Smith specific or general permission to drive the vehicle; (2) Smith was incompetent or unfit to drive the vehicle; (3) that unfitness was the proximate cause of Brown’s injuries; and (4) Jones had actual knowledge of Smith’s incompetence or unfitness to drive the vehicle.

Sub-headings should track the subsidiary propositions which, together, lead to the conclusions stated in each major heading in your argument section.  Under the negligent entrustment heading, sub-headings might include: “Jones gave Smith specific or general permission to drive the vehicle,” “Smith was incompetent or unfit to drive the vehicle,” “Smith’s unfitness was the proximate cause of Brown’s injuries,” and “Jones had actual knowledge of Smith’s incompetence or unfitness to drive the vehicle.”

Because a judge may first read only the headings and sub-headings, they should be written to provide a stand-alone explanation of your argument.  It follows that instead of simply stating legal conclusions, your headings and sub-headings should contain sufficient facts to support the conclusion.  Compare, for example, “Jones gave Smith specific or general permission to drive the vehicle” with “By handing her car keys to Smith, Jones gave Smith specific or general permission to drive the vehicle.”

Order your arguments for maximum effect.  Keeping in mind your overall objective (to convince the judge to rule for your client) also helps determine the order in which to present your arguments.  If there is a natural, logical order in which the arguments should appear, use it.  For example, a threshold argument, such as lack of standing, that will enable the judge to rule in your client’s favor without considering the other potential issues, should be addressed first.  I find that there is often a logical order in which even non-threshold issues should appear.

In the absence of a logical order, present your best argument first. You must do this because the judge will probably assume that your strongest argument appears first (absent some logical order as discussed above).  There are two ways to deal with weaker arguments.   You might place your arguments in order of strength, leaving the weakest for last.  This approach takes into account that judges are very busy and want to see your best arguments as soon as possible.  This approach may also be consistent with the judge’s assumption that your arguments appear in order of strength.  On the other hand, just as you can minimize weak facts by burying them in the middle of paragraphs, between stronger facts, you might profit from burying weaker arguments in the middle of your memorandum.

If you represent the party opposing summary judgment, you must decide whether to follow the order of argument in the moving party’s memorandum.  Doing so makes it easier for the judge to compare your arguments with the moving party’s arguments on the same issue.  However, following the order of argument in the moving party’s memorandum may result in your strongest argument not appearing first.  I recommend using the most effective order for the arguments in your memorandum, even if it differs from the order used by the moving party.

The order of arguments is also an issue when there are cross-motions for summary judgment.  Although the initial opposing party must file a separate “Cross-Motion for Summary Judgment,” the arguments opposing the moving party’s motion and in support of the cross-motion should appear in the same memorandum.  It makes sense to divide the argument into major sections, the first containing arguments opposing the motion and the second setting forth arguments in favor of the cross-motion.  Within each section, however, you can order the arguments based on the considerations outlined above.

Keep the focus on your client’s arguments.  Within each division of the argument section and within individual paragraphs and sentences, maintain a focus on your client’s position and view of the case.  Refer to your opponent’s position in subordinate clauses or buried in the middle of sentences and paragraphs.

Keep your arguments short.  Keep arguments as short as possible.  Each legal argument should focus on the specific issue in controversy.  Avoid wasting precious space, and losing the reader’s attention, by including pages of boilerplate law on undisputed background issues.

Be honest and do not ignore opposing arguments.  Be honest and accurate about the law.  Don’t ignore contrary authority (aside from the ethical implications of doing so, the court or your opponent will find it, anyway).  Be sure that the cases you rely on fully support the legal propositions for which you cite them.  Your credibility and the persuasiveness of your memorandum will be seriously damaged if the judge concludes that your version of the law cannot be trusted.

Similarly, do not ignore the opposing party’s arguments, even if you represent the moving party and the opposing party has yet to file a memorandum.  If the opposing party made an argument earlier in the same case (e.g. at the preliminary injunction stage), the same argument will likely be made again in opposition to summary judgment.  Even if the opposing party has not discovered the best argument against your position, the court probably will.  It is best to deal with the opposing party’s likely arguments as best you can in your primary brief, especially since Rule 9A(a)(3) allows reply briefs without leave of court only, “where the opposition raises matters that were not and could not reasonably have been addressed in the moving party’s initial memorandum.”

Choose your authority carefully.  As part of keeping your arguments simple and short, carefully consider your use of citations.

  • Stress binding authority. Absent that, look for the most authoritative, persuasive authority (e.g. cite to a persuasive federal case from the First Circuit instead of one from a different circuit);
  • Choose authority in which the court was applying the same standard of review or was deciding the same or similar procedural motion (e.g., prefer cases deciding motions for summary judgment to cases involving motions to dismiss);
  • Unless it is absolutely clear, use parentheticals to show the reader why you are citing to a particular case;
  • Limit string cites. The judge does not want to read ten cases when one or two would prove your point.  String cites are proper, however, when the number of courts on each side of an issue is actually relevant, as in a split of authority or when asking the court to rule on an issue of first impression.
  • Citing trial court opinions. Trial court opinions have become much more accessible in recent years via Westlaw, Lexis and similar resources.  However such opinions are, at most, persuasive.  Nevertheless, I believe that it is useful to cite trial court opinions when no other authority is available, when they present your position particularly forcefully, or when they involve facts very similar to your case.

Maintain the reader’s interest.

Your brief will be more effective if it holds the judge’s interest.  Simple steps you can take to hold the reader’s interest include:

  • Avoiding long quotations. Short quotations, on the other hand, enhance the power of your argument.  Introduce any quotation by explaining why you are including it and what legal proposition it supports.  Doing so ensures that the reader understands your argument even if he or she skips over the quoted material;
  • Using short paragraphs;
  • Varying sentence length. A paragraph will also flow better if the sentences differ in length.  In addition, although short sentences are powerful, they lose their effectiveness if overused;
  • Repeating words and sentence structure to increase effect. We’ve all heard this technique used in speeches.  It also works in briefs.

In addition to the foregoing, you should also consider the following when drafting your argument section:

  • Because any judge worries about the wider implications of a ruling, and no judge likes being reversed on appeal, try to show that the result you seek can be accomplished by applying a rule with limits. If you are opposing the application of such a rule, argue that it will lead to unforeseen, highly detrimental consequences;
  • Judges want to reach decisions which are just, not merely technically correct. Your argument should not only identify the rule of law you want the court to apply, but also explain why the purposes and policies underlying the law support its application to the facts of the present case;
  • Avoid emotional presentation and attacks on the opposing party or counsel. For example, while asserting that your opponent’s reliance on a case is “misplaced” is acceptable, you should avoid stating that your opponent is “misrepresenting” the law;
  • Do not use jargon. Use simple, clear language.  A busy judge will not appreciate your making an argument any more complicated than necessary;
  • Avoid excessive use of bold print, underlining or italics. Used sparingly, emphasis stresses your most important points.  However it quickly loses its effect if overused;
  • Avoid using footnotes for substantive content. As a general rule, if an argument is important enough to appear in your brief, put it in the text. You might consider placing all of your citations in footnotes, however.  Doing so will improve the readability of your brief.

The argument section of your summary judgment memorandum is your best opportunity to persuade the judge to rule in your client’s favor.  A well-crafted argument will frame the facts and legal issues of a case in the manner most favorable to your client, will educate the justices about the relevant facts and law, and will lead them, inexorably, step by step, to the desired result.  The foregoing suggestions should help you take advantage of this golden opportunity.

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Superior Court Rule 9A(b)(5) requires that any motion for summary judgment be accompanied by a “statement of the material facts as to which the moving party contends there is no genuine issue to be tried” (“Statement of Facts”).  Failure to provide a Statement of Facts constitutes grounds for denial of the motion.

The Statement of Facts consists of consecutively numbered paragraphs, each of which asserts such a material fact.  Rule 9A(b)(5)(i). Each such statement must be supported by citations to the record (“pleadings, depositions, answers to interrogatories, responses to requests for admissions, affidavits or other evidentiary documents”).  Id.  There is no page limit for the Statement of Facts.  Rule 9A(b)(5)(iii).

The moving party must serve the Statement of Facts on the opposing party with the motion papers.  In addition, the moving party must, contemporaneously with service, email a copy of the Statement of Facts to the opposing party, in Rich Text Format (RTF), unless the parties otherwise agree on another word processing format.  The Rule excuses email service in limited circumstances.  Rule 9A(b)(5)(i).

The opposing party is required to respond to each of the facts stated in the moving party’s Statement of Facts.  Rule 9A(b)(5)(ii). The responses must be inserted into the Statement of Facts so that each of the moving party’s statements is followed directly by the opposing party’s response.  Id.  Each such response must either admit the fact stated or dispute it.  For each fact disputed, the opposing party must provide citations to the record.  Id.  It should be noted that any fact which the opposing party does not dispute will be deemed admitted for purposes of the motion for summary judgment.  Id.

In addition to responding to the moving party’s statements of fact, the opposing party may “assert an additional statement of material facts with respect to the claims on which the moving party seeks summary judgment.”  Rule 9A(b)(5)(iv). The opposing party’s additional statement of facts should be added to the Statement of Facts, following the moving party’s facts and the opposing party’s responses thereto, with an appropriate heading such as “Opposing Party’s Additional Statement of Undisputed Material Facts.” Id.  The additional facts should appear in consecutively numbered paragraphs, with numbers starting where the moving party’s statement ended.  Id.  Like the moving party’s facts, the opposing party’s additional facts must be supported by citations to the record.  Id.  Where the opposing party states additional facts, the opposing party must, in addition to serving the Statement of Facts on the moving party, contemporaneously email it to the opposing party, in Rich Text Format (RTF), unless the parties otherwise agree on another word processing format. Id.

The moving party then has an opportunity to respond to the additional facts stated by the opposing party.   Rule 9A(b)(5)(iv).  The moving party’s responses must be inserted into the Statement of Facts so that each of the opposing party’s statements of additional fact is followed directly by the moving party’s response.  Id.  Each such response must either admit the fact stated or dispute it.  For each fact disputed, the moving party must provide citations to the record.  Id.  Any fact which the moving party does not controvert will be deemed admitted for purposes of the motion for summary judgment.  Id.

The foregoing rules apply equally to cross-motions for summary judgment.  Rule 9A(b)(5)(v).  When there are cross-motions, the party who serves a motion for summary judgment first is regarded as the moving party, while the other party is regarded as the opposing party.  That opposing party should respond to the moving party’s facts, as described above, and then, as a continuation of the Statement of Facts, state additional facts both in opposition to the moving party’s motion and in support of the opposing party’s cross-motion.

Ultimately, the moving party files the consolidated Statements of Facts with the court as part of the Rule 9A package.  Any earlier statement of facts made by the moving party or response made by the opposing party, which has been incorporated into the final, consolidated Statement of Facts, should not be filed.  Rule 9A(b)(5)(ii).

For suggestions concerning the drafting of an effective Statement of Facts, click here.

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