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“This is very bad news,” thought Jim Buttermilk, CEO of Low Kelvin Ice Cream, makers of “the iciest ice cream on earth.” He had just received notice that Low Kelvin’s landlord, All Smiles Property Investors, had terminated its commercial lease for the property, where Low Kelvin’s cryogenic ice cream tasting bar was located, and commenced a summary process action based on alleged non-payment of rent. This was more than a little surprising as Low Kelvin had paid all amounts due. As Jim looked into the matter, it became apparent that All Smiles was basing the termination on Low Kelvin’s inadvertent late payment of certain real estate taxes, a breach of the lease but one which Low Kelvin had cured months earlier.

The lease contained a default provision allowing All Smiles to terminate the tenancy if Low Kelvin defaulted in the payment of any rent for 10 days after written notice. Low Kelvin had always paid its rent on time. Under the lease, Low Kelvin was to pay, in addition to base rent, its proportionate share of real estate taxes on the property. The payment of additional rent was due within 30 days after written notice from the landlord as to the amount of the taxes. For more than three years, Low Kelvin received no such notice and made no additional rent payments. Then, on March 5, All Smiles had delivered a notice seeking payment of $30,000 for real estate taxes within 30 days, i.e., by April 4. Low Kelvin intended to comply, but due to a clerical error (its accountant entered the due date as April 8 rather than April 4), the payment was made four days late.

All Smiles now relies on that late payment of additional rent as the basis for terminating the lease and evicting Low Kelvin. However, Massachusetts law arguably provides Low Kelvin with a good defense because either: (1) Any breach of the Lease resulting from failure to pay real estate taxes was insignificant and Low Kelvin acted in good faith at all times, or (2) Even if Low Kelvin’s breach in failing to pay real estate taxes was not insignificant, equitable considerations, including the fact that the parties continued good faith negotiations concerning the amount and method of payment of the real estate taxes until after the deadline for payment, together with the established rule disfavoring forfeiture, require a court to deny All Smiles possession of the premises.

The breach was insignificant.

Low Kelvin can argue that the breach was insignificant and cannot form the basis for eviction/forfeiture, and the default provision of the Lease is unenforceable to the extent it would allow termination for such a breach. Not all breaches of commercial leases justify termination and eviction. This is true even when the lease contains a default provision which, on its face, allows termination and eviction. In DiBella v. Fiumara, 63 Mass. App. Ct. 640 (2005), the Appeals Court identified three classes of breach of commercial leases, each of which must be treated differently. According to the Court,

General rules governing breaches of a lease and default clauses. Before discussing the trial judge’s findings in more detail, we turn to the general rules governing the right of a landlord to terminate a lease for breaches by a tenant.

a. Material breaches. In the absence of a clause similar to paragraph 17 (hereafter called a default clause), a landlord may only terminate a lease if the tenant commits a material breach, defined in our cases as a breach of an “essential and inducing feature of the contract [ ].”…. See Restatement (Second) of Property (Landlord & Tenant) § 13.1 (1977). Thus, where the breach is material, it is unnecessary to discuss a default clause, even if contained in a lease or license; the landlord or licensor may terminate even without such a clause….

b. Insignificant breaches. If the breach is insignificant or accidental, even if there is a default clause, our courts will not allow termination. See, e.g., Mactier v. Osborn, 146 Mass. 399, 402, 15 N.E. 641 (1888) (accidental breach of an obligation to insure); Judkins v. Charette, 255 Mass. 76, 82–83, 151 N.E. 81 (1926) (accidental failure to pay rent on time); Kaplan v. Flynn, 255 Mass. 127, 129–131, 150 N.E. 872 (1926) (failure to paint); Howard D. Johnson Co. v. Madigan, 361 Mass. 454, 457–459, 280 N.E.2d 689 (1972) (failure to submit gross sales figures, and when such figures were finally produced, failure to have them signed by a responsible financial officer of lessee). See also Restatement (Second) of Property (Landlord & Tenant) § 13.1 Reporter’s note 9, at 507.

c. Breaches that are neither material nor insignificant. Where the lease contains a default clause, but the breach, while not insignificant, is also not material (that is, it is not a breach of an “essential and inducing feature” of the agreement, … the default clause will in most cases be controlling….

Id. at 643-45. See also Maniff v. Town of Saugus, 85 Mass. App. Ct. 1118, 2014 WL 1758213, *2 (5/5/14) (unpublished Rule 1:28 decision) (“Where a breach is so immaterial that it is insignificant or accidental, the breach may not serve as grounds for termination, regardless of whether the contract contains a default clause…. Where a breach is immaterial but not insignificant, the default clause will generally control, unless strong equitable considerations do not support or permit termination.” (Internal quotation marks omitted)).

Low Kelvin’s breach of the lease was its accidental failure to pay real estate taxes for only four days after the date set in the notice of default. Low Kelvin can argue that this is not a significant breach. A material breach is a breach of an “essential and inducing feature of the contract.” DiBella, 63 Mass. App. Ct. at 644. Factors considered in determining whether a breach is material include, “(a) the extent to which the injured party will be deprived of the benefit which he reasonably expected; (b) the extent to which the injured party can be adequately compensated for the part of that benefit of which he will be deprived; (c) the extent to which the party failing to perform or to offer to perform will suffer forfeiture; (d) the likelihood that the party failing to perform or to offer to perform will cure his failure, taking account of all the circumstances including any reasonable assurances; (e) the extent to which the behavior of the party failing to perform or to offer to perform comports with standards of good faith and fair dealing.” Id., quoting Restatement (second) of Contracts, §241 (1981). Those factors weigh heavily against materiality of Low Kelvin’s accidental, temporary and now cured breach.

In cases where a failure to pay rent was inadvertent, Massachusetts courts have held that the breach was insignificant and that leases could not be terminated on that basis. The Court in DiBella cited Judkins v. Charette, 255 Mass. 76, 82-83 (1926), for the proposition that “accidental failure to pay rent on time is an insignificant breach.” Moreover, the United States District Court for the District of Massachusetts, in Banco do Brasil, S.A. v. 275 Washington Street Corp., 750 F.Supp.2d 279 (D. Mass. 2010), states, “the ‘accidental failure to pay rent on time’ is such an insignificant or accidental breach that it will not support the termination of a lease.” Id. at 292. The Court further stated, “Massachusetts joins with nearly all courts [which] hold that, regardless of the language of the lease, to justify forfeiture, the breach must be “material,” “serious,” or [“]substantial”… Forfeiture for a trivial or immaterial breach of a commercial lease should not be enforced.” Id. (Internal quotation marks omitted). As Low Kelvin’s breach was accidental and insignificant, termination of its lease would be improper, regardless of what is set forth in the lease’s default provision.

Equitable considerations.

Even if a court were to conclude that the late payment of real estate taxes by Low Kelvin was not insignificant, Low Kelvin can argue that equitable considerations still require denial of All Smiles’ claim to possession of the premises. In DiBella, the Court noted that even when a breach is not insignificant, and the default clause would otherwise apply, a court must consider whether equity and fairness require that the Lease not be terminated. The Court stated,

Even if a default clause would otherwise be effective, our courts “do not look with favor upon penalties and forfeitures.” Judkins v. Charette, 255 Mass. at 83, 151 N.E. 81. See Howard D. Johnson Co. v. Madigan, 361 Mass. at 456, 280 N.E.2d 689. … Thus, even when there is a default clause, “[e]quitable considerations, … if present, may entitle the tenant to relief against the forfeiture of his lease for a mere failure to perform his promise.” Restatement (Second) of Property (Landlord & Tenant) § 13.1 comment j.

63 Mass. App. Ct. at 645-46. In JonJame Realty Trust v. Ryan, the Court explained,

we point out that “[e]ven if a default clause would otherwise be effective, our courts ‘do not look with favor upon penalties and forfeitures.’ “ Id., quoting Judkins v. Charette, 255 Mass. 76, 83, 151 N.E. 81 (1926). “Thus, even when there is a default clause, ‘[e]quitable considerations … if present, may entitle the tenant to relief against the forfeiture of [its] lease for a mere failure to perform [its] promise.’ ” Id. at 646, 151 N.E. 81, quoting Restatement (Second) of Property (Landlord & Tenant) § 13.1 comment j (1977). Among such considerations are “the extent to which the injured party will be deprived of benefit, whether that party will suffer loss, and the extent to which the party failing to perform will suffer forfeiture.” Id. at 646 n. 7, 151 N.E. 81. A court will “look to whether ‘on the whole it is just and right’ that relief from forfeiture of the lease should be granted,” id., quoting Lundin v. Schoeffer, 167 Mass. 465, 469, 45 N.E. 933 (1897), and “will also consider whether the injured party can be adequately compensated, or has changed its position.” Id.

2011 Mass. App. Div. 16, 2011 WL 1346922, *2 (2/7/11).

Low Kelvin can argue that in its case, the equities weigh strongly against the termination of the lease. Notably, the Court in Banco do Brasil refused to enforce a lease termination provision where the breach at issue was the tenant’s accidental non-payment of rent, which it later cured, causing no harm to the landlord. Here, Low Kelvin’s late payment of the real estate taxes was accidental. Moreover, Low Kelvin fully cured the breach by its payment of the full amount due on April 18. In addition, the lessor, All Smiles, would suffer no loss if the lease were allowed to continue. It has been fully compensated and has not changed its position. Conversely, a termination of the lease would impose a serious forfeiture on Low Kelvin, as it will lose its place of business and its investment therein.

Accordingly, in light of the fact that Low Kelvin paid all amounts due, that its alleged late payment was accidental, that Low Kelvin acted in good faith, and that the lessor failed to even notify Low Kelvin that real estate taxes were owed for more than three years, a Massachusetts court is likely to conclude that “‘on the whole it is just and right’ that relief from forfeiture of the lease should be granted.” DiBella, 63 Mass. App. Ct. at 646 n.7.

A tort plaintiff may sue multiple defendants, alleging that each of them played a role in causing the plaintiff’s injury and that the defendants are, therefore, joint tortfeasors. Upon reaching a settlement with one of the joint tortfeasors, the plaintiff releases that defendant from liability in return for payment of the agreed settlement. Does such a release of the settling defendant also release any non-settling defendants?

The answer is clearly “no,” a release of one joint tortfeasor does not release other jointly liable defendants, unless it is the plaintiff’s intention to do so. However, under some circumstances, releasing one defendant may release other defendants whose liability is other than joint.

Massachusetts G.L. c. 231B, §4 provides,

When a release or covenant not to sue or not to enforce judgment is given in good faith to one of two or more persons liable in tort for the same injury:

(a) It shall not discharge any of the other tortfeasors from liability for the injury unless its terms so provide; but it shall reduce the claim against the others to the extent of any amount stipulated by the release or the covenant, or in the amount of the consideration paid for it, whichever is the greater; and

(b) It shall discharge the tortfeasor to whom it is given from all liability for contribution to any other tortfeasor.

(Emphasis added). See also Cram v. Town of Northbridge, 410 Mass. 800, 804 (1991) (“We hold that a plaintiff who signs a general release form does not discharge all potential joint tortfeasors who are not specifically mentioned in the release unless the plaintiff intended to do so.”); New Hampshire Ins. Co. v. McCann, 429 Mass. 202, 204 n.2 (1999); Lopez Torres v. Cornu Management Co., Inc., 86 Mass. App. Ct. 1120, 2014 WL 6090309, * 1 (11/14/14) (unpublished Rule 1:28 decision).

However, this rule applies only where the settling defendant and a non-settling defendants are jointly liable. It does not apply where the non-settling defendant is liable only vicariously on the basis of respondeat superior. Elias v. Unisys Corp., 410 Mass. 479, 482 (1991), James-Brown v. Commerce Ins. Co., 85 Mass. App. Ct. 1111, 2014 WL 1325663, * 1 (4/4/14) (unpublished Rule 1:28 decision); Baily v. Town of Bourne, 38 Mass. App. Ct. 70, 72, 76 (1995). Nor does it apply where the defendants are not jointly liable because, “neither … participated in the other’s breach.” Reilly v. Local 589, Amalgamated Transit Union, 31 Mass. App. Ct. 633, 639 (1991).

Ellen was thrilled to finally be adding to her house a sun room overlooking the pond. Her excitement turned to horror, however, when she came home one afternoon to find her home in flames. A contractor’s negligence had caused an electrical fire which burned Ellen’s home to the ground as she watched. For months after the fire, Ellen suffered from sleeplessness, haunted by the trauma she had suffered. She consulted her doctor who diagnosed her insomnia and prescribed medications to treat it.

In Ellen’s lawsuit against the contractor, she includes a count for negligent infliction of emotional distress (“NIED”). The contractor files a motion to dismiss, arguing that mere insomnia is not an injury which can form the basis an NIED claim. The Court should deny the motion to dismiss because sleeplessness and/or insomnia, if adequately corroborated, are the types of physical harm which can serve as the basis for a viable NIED claim.

In Gutierrez v. MBTA, 437 Mass. 396 (2002), the Supreme Judicial Court summarized the present requirements for an NIED claim, as follows:

Prior to Sullivan, our case law had required that a plaintiff demonstrate: “(1) negligence; (2) emotional distress; (3) causation; (4) physical harm manifested by objective symptomatology; and (5) that a reasonable person would have suffered emotional distress under the circumstances of the case.” Sullivan v. Boston Gas Co., supra at 132, 605 N.E.2d 805, quoting Payton v. Abbott Labs, 386 Mass. 540, 557, 437 N.E.2d 171 (1982). Under the former rule, the plaintiffs had to substantiate the objective symptomatology with “expert medical testimony.” Payton v. Abbott Labs, supra at 556, 437 N.E.2d 171. We then relaxed this requirement, holding instead that plaintiffs must “corroborate their mental distress claims with enough objective evidence of harm to convince a judge that their claims present a sufficient likelihood of genuineness to go to trial.” Sullivan v. Boston Gas Co., supra at 137–138, 605 N.E.2d 805. We did not eliminate the physical harm requirement, but merely expanded the range of symptoms that may provide the type of objective evidence to prove physical harm to include symptoms that could be classified as more “mental” than “physical.” Id. at 135–139, 605 N.E.2d 805 (“we hold that both plaintiffs produced sufficient objective evidence of physical manifestation of mental distress to survive a summary judgment motion” [emphasis supplied]). In addition, we explicitly stated that “[a] successful negligent infliction of emotional distress claim … must do more than allege ‘mere upset, dismay, humiliation, grief and anger.’ ” Id. at 137, 605 N.E.2d 805, quoting Corso v. Merrill, 119 N.H. 647, 653, 406 A.2d 300 (1979).

Id. at 412.

Expert testimony is not required. Rodriguez v. Cambridge Hous. Auth., 443 Mass. 697, 702 (2005). See also Peters v. Burns, 95 Mass. App. Ct. 1114, 2019 WL 2172790, *4 (5/20/19) (unpublished Rule 1:28 decision). However, plaintiffs must, “corroborate their mental distress claims with enough objective evidence of harm to convince a judge that their claims present a sufficient likelihood of genuineness to go to trial.” Rodriguez, 443 Mass. at 702; Peters, 2019 WL 2172790, *4. For some claims, “medical testimony may be needed to make this showing.” Sullivan v. Boston Gas Co., 414 Mass. 129, 137-38 (1993). However, the expert “need not have observed an actual, external sign of physical deterioration. They may consider, in the exercise of their professional judgment, the plaintiffs’ description of the symptoms they experience.” Id. at 138. (Internal citation omitted).

“The length of time that plaintiffs experienced particular symptoms could be one reliable indicator of the sufficiency of their evidence.” Rodriguez, 443 Mass. at 702. See also O’Neil v. Daimlerchrysler Corp., 538 F. Supp.2d 304, 321 (D. Mass. 2008).

The nature of the incident alleged to have given rise to NIED is also relevant. Where a plaintiff has witnessed her own home burning down, that “might be sufficient, in and of itself, to corroborate the physical manifestations of emotional distress.” Gardner v. Simpson Financing Ltd. Partnership, 963 F.Supp.2d 72, 83 (D. Mass. 2013), citing Sullivan (where the court held that plaintiffs had suffered compensable negligent infliction of emotional distress watching their house burn down after a gas explosion).

Difficulty sleeping, insomnia or sleep disorders, if adequately corroborated, can satisfy the physical harm element of an NIED claim. Sullivan, 414 Mass. at 131-32, 139-40 (noting that sleeplessness is a common manifestation of PTSD). See also Rodriguez, 443 Mass. at 705 (finding that plaintiff had presented sufficient objective evidence to enable jury to rule for her on NIED claim, where her doctor had noted that she, “was suffering from an increase in posttraumatic stress disorder, nightmares, insomnia, and dissociative episodes.” (Emphasis added)); Calderon v. Royal Park, LLC, ___ Mass. App. Ct. ___, 2019 WL 4266099, *5 (9/10/19) (“objective manifestations of her emotional distress include anxiety, depression, sleeplessness, night terrors, nightmares, diminished appetite and food intake, bouts of extreme anger, behavioral problems at home and school, poor educational performance, and self-harm. Nothing more was required at the pleading stage.” (Internal quotation marks omitted)); Adams v. Congress Auto Ins. Agency, Inc., 90 Mass. App. Ct. 761, 770 (2016); Marinova v. Boston Herald, Inc., 2016 WL 7637805, *3 (Mass. Super. 8/3/16) (“The plaintiff testified to her fear, paranoia, depression, anxiety, and sleeplessness. Others testified to the apparent impact that the publication had had upon the plaintiff, including a multi-faceted lethargy, crying jags, and the like. That evidence was sufficient….” (Emphasis added)); Palano v. Bellagio Corp., 2009 Mass. App. Div. 125, 2009 WL 1846347, *3 (3/6/09) (plaintiff stated in her affidavit that “she was “feeling upset, frustrated, helpless and depressed…. [She] continued to suffer stress headaches, sleeplessness and crying fits.” (Emphasis added)); McCrohan v. Uxbridge Police Assoc. Local #123, MCOP, AFL-CIO, 2014 WL 12769267, *11 (D. Mass. 11/12/14) (“Therefore, a plaintiff’s claim may go forward upon production of sufficient objective evidence that they suffer from PTSD, tension headaches, sleeplessness, nightmares, depression, or other symptoms of emotional distress.” (Emphasis added)); O’Neil, 538 F. Supp.2d at 321.

Accordingly, the mere fact that Ellen’s NIED claim is based on difficulty sleeping do not render it inadequate as a matter of law. If Ellen provides adequate proof of her insomnia, and its connection to the trauma of watching the destruction of her home, her NIED claim is viable.

As a prerequisite to filing a court action against the United States under the Federal Tort Claims Act (“FTCA”), a “claimant must have first presented the claim to the appropriate federal agency and the claim must have been denied.” Corte-Real v. United States, 949 F.2d 484, 485 (1^st Cir. 1991); 28 U.S.C. § 2675(a). That claim must make a demand for money damages in a “sum certain.” Holloway v. United States, 845 F.3d 487, 489 (1st Cir. 2017).

While the damages a plaintiff may recover in such a judicial action are usually limited to those identified in the administrative claim, additional damages may be sought if the plaintiff shows that such damages are: (1) based on newly discovered evidence or (2) arise from intervening facts, occurring after the administrative claim was filed. The test is strictly applied and depends on whether the additional damages could reasonably have been foreseen by the plaintiff at the time the administrative claim was filed.

Section 2675(b) of the FTCA provides,

(b) Action under this section shall not be instituted for any sum in excess of the amount of the claim presented to the federal agency, except where the increased amount is based upon newly discovered evidence not reasonably discoverable at the time of presenting the claim to the federal agency, or upon allegation and proof of intervening facts, relating to the amount of the claim. (Emphasis added).

Accordingly, “a plaintiff has to meet only one of the two tests to increase the ad damnum; it is not required that the plaintiff meet both tests.” Lowry v. U.S., 958 F.Supp. 704, 710 (D. Mass. 1997).

Although the phrase “not reasonably discoverable at the time of presenting the claim” modifies only the “newly discovered evidence” exception, First Circuit courts appear to require that any “intervening facts” also be unforeseeable. In Reilly v. United States, 863 F2d 149 (1^st Cir. 1988), the Court addressed both the newly discovered evidence and the intervening facts prongs of §2675(b). It held that the worsening of plaintiff’s medical condition did not constitute “newly discovered evidence” or “intervening facts” such as to justify an increase in damages above what was stated in the administrative claim, because the deterioration of plaintiff’s condition was a worst case scenario which plaintiff could reasonably have foreseen at the time the administrative claim was filed.

At trial, plaintiffs sought to recover more than the upper limit of the claim. The district court honored their entreaty, setting damages in the aggregate amount of $11,037,964. The court rested disregard of the Form 95 ceiling on its finding that:

Only after May 1985 did it become medically apparent that Heather would never be able to walk or talk, and that she would be able to see only enough to distinguish light from dark…. Given the undisputed medical impossibility of knowing the extent of Heather’s multiple disabilities at the time the administrative claim was filed, I find the experts’ subsequent confirmation that the worst possibilities had materialized to constitute “newly discovered evidence not reasonably discoverable at the time of presenting the claim to the federal agency …,” 28 U.S.C. subsection 2675(b).

Reilly I, 665 F.Supp. at 1011. Although we start with the premise that a determination of what constitutes “newly discovered evidence not reasonably discoverable” in any particular case is the sort of fact-specific conclusion which demands a substantial degree of deference to the trial court, we believe that the determination here was plainly erroneous.

Because the statute itself renders the state of a claimant’s knowledge (actual or constructive) at the time of presentment of the claim of decretory significance, the mechanics of a § 2675(b) inquiry must be double-barrelled: What should the party have known? When should she have known it? To be binding in this context, knowledge need not be certain. In the same vein, intelligence which serves only to bear out earlier suspicions cannot unlock the FTCA’s narrow escape hatch. Diagnoses which are no more than cumulative and confirmatory of earlier diagnoses are neither “newly discovered evidence” nor “intervening facts” for the purposes of § 2675(b). See Kielwien v. United States, 540 F.2d 676, 680–81 (4th Cir.), cert. denied, 429 U.S. 979, 97 S.Ct. 491, 50 L.Ed.2d 588 (1976); Powers v. United States, 589 F.Supp. 1084, 1110 (D.Conn.1984). We agree with the Second Circuit that the statute demands a showing that “some new and previously unforeseen information came to light” between the time of filing the administrative claim and the trial on damages. O’Rourke v. Eastern Air Lines, Inc., 730 F.2d 842, 856 (2d Cir.1984). And, the newly-emergent datum must be material.

On this occasion, the information in question was neither sufficiently new, nor sufficiently unforeseen, nor sufficiently material. By the time the claim was filed, the Reillys were on notice of the global extent of Heather’s injuries and disabilities. The evidence upon which the district court relied to lift the cap was, at bottom, nothing more than “the experts’ subsequent confirmation that the worst possibilities had materialized.” Reilly I, 665 F.Supp. at 1011. Yet these very same “worst possibilities,” i.e., “that Heather would never be able to walk or talk, and that she would be able to see only enough to distinguish light from dark,” id., were present from the start. Indeed, they were at the core of appellees’ administrative claim, which alleged “seizures, blindness, profound neurological deficit” and the like as the sequelae of the harm. The mere fact that these dread consequences, feared from the beginning, had become more certain does not suffice to brand them “newly discovered.”

In this regard, the instant case bears an uncanny resemblance to Low v. United States, 795 F.2d 466 (5th Cir.1986)….

In its pertinent parameters, Low is on all fours with the case at bar. Here, as in Low, the basic severity of the child’s condition was known and recited in the claim form….

This, we think, was more than enough to put the parents on fair notice to guard against the worst-case scenario when preparing their claim. As in Low, the fact that the degree of disability was uncertain was, in and of itself, inadequate to trigger the exception to § 2675(b). To use the district court’s terminology, “[c]onfirmation that the worst possibilities had materialized,” Reilly I, 665 F.Supp. at 1011, came no closer to constituting “newly discovered evidence” than did realization of “the worst-case prognosis.” Low, 795 F.2d at 471. Like the Low court, we cannot subscribe to such a nanization of the administrative ad damnum. To so hold would be to eviscerate the statute and reduce the insertion of a monetary limit to an empty formality.

We do not categorize such a construction of the law as unduly harsh. The goal of the administrative claim requirement is to let the government know what it is likely up against…. As between prospective defendant and prospective plaintiff, the latter is in by far the better position to determine the worst-case scenario or, if uncertain, to paint the picture as bleakly as reason permits and conscience allows. If a plaintiff misjudges, as to matters known or easily deducible when her claim is filed, it seems more equitable for her to bear the burden of miscalculation than to impose it on the sovereign.…

***

We conclude that the district court erred in allowing plaintiffs to recover damages in excess of the cap established in their administrative claim.

863 F.2d at 171-73. (Emphasis added, footnote references omitted).

Summarizing First Circuit law, a Magistrate Judge explained,

[T]he following principles are applicable:

1. The burden of proving “newly discovered evidence” and/or “intervening facts” rests with the plaintiff.

2. The claimant is not required to be clairvoyant and is not to be charged with knowledge which neither the claimant nor medical professionals are able to discover. [See Poirier v. U.S., 745 F. Supp.23, 32 (D. Me. 1990)]

3. However, the claimant is required to use due diligence to discover those facts which are capable of ascertainment prior to filing the claim.

4. Information which is confirmatory and/or cumulative of previous diagnoses is not a basis for an increase in damages.

5. Information going to the exact nature, extent and duration of a previous diagnosis is not a basis for an increase in damages.

6. Information which “… serves only to bear out earlier suspicions” does not entitle the plaintiff to an increase in damages. Neither does the doctors’ later “confirmation that the worst possibilities had materialized.” Reilly, 863 F.2d at 172….

7. If there is evidence “to put [the claimant] on fair notice to guard against the worst-case scenario,” the claimant has the obligation, before filing a claim, to “… determine the worst case scenario, or if uncertain, to paint the picture as bleakly as reason and conscience permits.” Id. at 173.

8. If the claimant misjudges, the claimant, not the United States, bears the consequences. Id.

Lowry, 958 F.Supp.at 719 (Collings, M.J.) (Emphasis in original).

Thus, in order to justify an increase in damages above the amount stated in the administrative claim, a plaintiff must show that the deterioration in his or her medical condition could not reasonably have been anticipated, even as part of a possible worst case scenario. In a number of cases, courts in the First Circuit have held that plaintiff’s met this burden.

The Court in Del Valle Cruz v. U.S., 2017 WL 1207512, * 5 (D.P.R. 3/31/17), held that the decedent’s death, after the administrative claim was filed, constituted an intervening fact satisfying §2675(b). According to the Court,

On January 12, 2012, … Otero-Ortíz was diagnosed with Non-Hodgkin Lymphoma. Otero-Ortíz received chemotherapy and radiotherapy, but died on October 25, 2012. The immediate cause of death was advanced-stage Non-Hodgkin Lymphoma and cardiac complications caused by the chemotherapy.

On June 29, 2012, Otero-Ortíz, his wife Doris Del Valle-Cruz, and his sons—Angel Otero-Del Valle and Randy Otero-Del Valle—filed administrative claims….

In this case, defendants argue that plaintiffs have not shown any newly discovered evidence or intervening fact to justify increasing the sums they claim. In other words, they argue that Otero-Ortíz’s death was foreseeable when plaintiffs filed their administrative claims, or, in the alternative, that his death is merely cumulative or confirmatory of their original claim, the alleged cancer misdiagnosis.

The Court rejects the government’s argument. In this case, Otero-Ortíz’s death is precisely the type of “new evidence” or “intervening circumstance” that justifies a suit for an amount in excess of the sum plaintiffs claimed before the VA.

Id. at *2, 5. (Emphasis added, citations omitted).

In Kenney v. U.S. Postal Service, 298 F.Supp.2d 139 (D. Me. 2003), the Court held that an increase in damages was justified where the plaintiff did not know or have reason to know when he submitted his administrative claim that he would need surgery and ongoing physical therapy. The Court stated,

Here, the information available to the plaintiff by June 21, 2002 was not enough to “put [the plaintiff] on fair notice to guard against the worst-case scenario when preparing [his] claim,”; less than a month after the accident, he had been told only that he had a contusion and had noticed pain and swelling. He stated that he could develop arthritis or tendonitis in the area; there has been no showing that either of these conditions necessarily requires surgery or extensive physical therapy or that the plaintiff should have known that such consequences might ensue. The remaining evidence on which the defendant relies arose after the notice of claim was filed: Dr. Crute’s order of an MRI on August 30, 2002, “which led inevitably to the ultimate later surgical decision.” The defendant contends that the plaintiff was required to “suggest[ ] he was surprised by his medical course of treatment” and to amend “has administrative claim of $12,500 to permit the Postal Service to consider the now certain greater resultant injury.” None of the case law cited by the government requires a claimant relying on the exceptions provided in section 2675(b) to demonstrate that he was “surprised” in order to be entitled to the exception, and there is no reason to require such a showing. The actual information available to the claimant at the relevant time and the possible inferences to be drawn from that information are the test, not how the claimant may have reacted to subsequently-provided information.

(Citations and footnote references omitted). And in Poirier v. U.S., the Court held that §2675(b) was satisfied where “[T]he plaintiffs would have been hard pressed unless they were clairvoyant to foresee the resulting mental anguish, economic loss, and the reasonable probability of future surgical procedures resulting from the foibles of the defendant.” 745 F. Supp. 23, 32 (D. Me. 1990).

In sum, although an FTCA plaintiff usually cannot recover damages in excess of the amount stated in the administrative claim, additional damages may be sought in those few uncommon cases where the plaintiff can show that the deterioration in his or her medical condition could not reasonably have been anticipated, even as part of a possible worst case scenario.

Updated July 23, 2019

Among the most common motions filed with the Massachusetts Appeals Court are those seeking additional time to file briefs. Under Mass. R. App. P. 19(a), the appellant must file a brief within 40 days after the date on which the appeal is docketed. The appellee’s brief must be filed within 30 days after service of the brief of the appellant. Thereafter, a reply brief for the appellant may be filed within 14 days after service of the brief of the appellee or 7 days prior to oral argument, whichever is earlier.

A party needing additional time to file a brief or reply brief must seek an extension from the Appeals Court. Mass. R. App. P. 14(b) provides that, upon motion and for good cause shown, the Appeals Court may enlarge the time for doing any act prescribed by the rules. A party seeking an extension of time for an appellate brief should file a motion, supported by an affidavit, which establishes good cause for the extension. The Appeals Court’s guide to “Frequent Appellate Process Questions,” https://www.mass.gov/guides/appeals-court-frequent-appellate-process-questions, states that such a motion, “must explain your reasons for the requested extension, provide a date certain by which the brief will be filed, and be accompanied by a certificate of service….” It further warns that, “[i]t is the policy of the Court to grant no more than one motion for enlargement of time per side, the enlargement sought not to exceed 120 days…. Further enlargements of time will ordinarily not be granted absent genuine emergency, such as a death, illness, or serious injury.”

The Appeals Court has indicated that such motions should be filed at least one week before the brief’s due date.

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 Appeals 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 brief will be seriously damaged if the judges conclude that your version of the law cannot be trusted.

Similarly, do not ignore the opposing party’s arguments, even if you represent the appellant and the appellee has yet to file a brief. If the appellee made arguments before the trial court, they will certainly be made again on appeal. If the opposing party has not discovered the best argument against your position, the Appeals Court probably will. It is best to deal with the argument as best you can in your primary brief.

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 1st 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;
Unless it is absolutely clear, use parentheticals to show the reader why you are citing to a particular case;
Limit string cites. The judges and their clerks don’t want to read 10 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 Appeals Court to rule on an issue of first impression;
Limit citations to 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 interest of those who must read it. Simple steps you can take to hold readers’ 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 also will 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 also should consider the following when drafting your Argument section:

Because Appeals Court judges worry about the precedent a ruling will set for future cases, 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;
Appeals Court judges want to reach decisions that 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. Judges and clerks who have to read many briefs each day will not appreciate you 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 brief is your best — and perhaps your only — opportunity to persuade the Appeals Court judges 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.

Read other parts of the Appellate Brief Series:

In Drafting Appellate Briefs, Step 1 is Know the Audience (Appellate Brief Series, Part 1), Massachusetts Lawyers Weekly (2014). Learn how to draft a more effective and successful appellate brief by keeping in mind the unique concerns and expectations of Appeals Court justices.
Steps to Take Before You Write (Appellate Brief Series, Part 2), Massachusetts Lawyers Weekly (2014). Learn how advance preparation pays big dividends when drafting an appellate brief.
Writing a Brief? Know the Technical Requirements (Appellate Brief Series, Part 3), Massachusetts Lawyers Weekly (2014). Learn about the technical requirements for a Massachusetts appellate brief, including required sections, certifications, organization, formatting and filing.
Get Off to a Good Start With a Strong Statement of Issues (Appellate Brief Series, part 4), Massachusetts Lawyers Weekly (2014). A carefully drafted statement of issues is critical to the success of your appellate brief.
Follow the Statement of Issues With a Strong Statement of the Case (Appellate Brief Series Part 5), Massachusetts Lawyers Weekly (2015). Your Massachusetts appellate brief should have a strong Statement of the Case, establishing your credibility, telling a compelling story, and supporting your legal positions.
A Persuasive Argument Requires an Effective Argument Section (Appellate Brief Series Part 6), Massachusetts Lawyers Weekly (2015). Learn how to draft a convincing and persuasive argument section for your Massachusetts appellate brief. It may be your only chance to present your legal positions.

Issue preclusion, generally.

“The doctrine of issue preclusion provides that when an issue has been ‘actually litigated and determined by a valid and final judgment, and the determination is essential to the judgment, the determination is conclusive in a subsequent action between the parties whether on the same or different claim.’” Jarosz v. Palmer, 436 Mass. 526, 530-31 (2002), quoting Cousineau v. Laramee, 388 Mass. 859, 863 n.4 (1983), quoting Restatement (Second) of Judgments §27 (1982). For issue preclusion to apply, there must be proof that:

(1) there was a final judgment on the merits in the prior adjudication; (2) the party against whom estoppel is asserted was a party (or in privity with a party) to the prior adjudication; (3) the issue in the prior adjudication is identical to the issue in the current adjudication; and (4) the issue decided in the prior adjudication was essential to the earlier judgment…. Collateral estoppel should only apply to issues actually litigated. (Internal quotation marks omitted).

Callender v. Suffolk County, 57 Mass. App. Ct. 361, 365 (2003), quoting Green v. Brookline, 53 Mass. App. Ct. 120, 123 (2001) and citing Treglia v. MacDonald, 430 Mass. 237, 241 (1999). See also Pierce v. Morrison Mahoney LLP, 452 Mass. 718, 729-30 (2008); Supeno v. Equity Office Properties Management LLC, 70 Mass. App. Ct. 470, 473-74 (2007).

The Estate’s case against Tom.

Tom’s criminal conviction will estop him in the civil case from denying that his conduct towards Bob was intentional. It is well established that, “a party to a civil action against a former criminal defendant may invoke the doctrine of collateral estoppel to preclude the criminal defendant from relitigating an issue decided in the criminal prosecution.” Jones v. Maloney, 74 Mass. App. Ct. 745, 748 (2009), quoting Aetna Cas. & Sur. Co. v. Niziolek, 395 Mass. 737, 742 (1985). Thus, “[a] finding of guilt by trial is conclusive of the same factual issues in any later civil litigation.” Costa v. Fall River Housing Authority, 71 Mass. App. Ct. 269, 283 (2008). See also FSL Assoc., Inc. v. Goldberg, 87 Mass. App. Ct. 1117, 2015 WL 1945472, *2 (5/1/15) (unpublished Rule 1:28 decision); Roux v. Sadeghi, 83 Mass. App. Ct. 1134, 2013 WL 2395165, *2 (6/4/13) (unpublished Rule 1:28 decision); Restatement (second) of Judgments, §85(2).

The Aetna case concerned an insurer who filed suit against an insured who had pled guilty to arson charges, in order to recover proceeds of a fire policy paid to the insured. Id. at 738. The Court noted that the plaintiff insurer could not have joined the criminal prosecution, so “cannot properly be charged with sitting back and avoiding the costs of participation in on-going litigation, and then reaping a benefit from the resulting judgment.” Id. at 745 (further citations omitted). The Court also noted that “in light of the criminal sanctions that he faced, [the insured] had every incentive to defend the prosecution vigorously … and to take an appeal, which he did.” Id.

Where a defendant, like Tom, is collaterally estopped in a civil case from relitigating the issues decided in his criminal prosecution, it is proper for the trial judge to grant summary judgment in favor of the plaintiff. Fidelity Management & Research Co. v. Ostrander, 40 Mass. App. Ct. 195 (1996). In Fidelity, an investment firm sued a former employee to compel the employee to disgorge profits from an illegal investment she made while employed by the firm. 40 Mass. App. Ct. 195, 196 (1996). Count I of the investment firm’s complaint alleged that the employee violated her common law fiduciary duty of loyalty to the investment firm, and Counts II and III alleged violations of the Investment Company Act (ICA). Id. After the employee was convicted, the employer filed a motion for partial summary judgment on Counts I, II and III. Id. at 196-7.

The civil trial judge granted partial summary judgment on Count I (breach of fiduciary duty), holding that the employee was collaterally estopped from relitigating the facts which were proved at her criminal trial, and ruled that there was no need to decide counts II and III (violations of the ICA) because they were duplicative of count I. Fidelity, 40 Mass. App. Ct. at 197. The employee appealed the summary judgment ruling. Id. at 198.

Affirming, the Appeals Court restated the rule outlined in Aetna and found that it was appropriate to apply collateral estoppel because the employee, “was convicted of a crime that was directly related to the controversy in issue.” Fidelity, 40 Mass. App. Ct. at 199. The Appeals Court noted that the investment firm could not have joined the criminal prosecution of the employee, that the employee had every incentive to vigorously defend her prosecution, and that the employee had appealed her conviction. Id.

Like the employee in Fidelity, Tom was convicted of offenses, “directly related to the controversy in issue” in the civil matter. In order to find Tom guilty of first degree murder, the jury in his criminal trial had to find, among other things, that he intentionally assaulted Bob. Com. v. LaCava, 438 Mass. 708, 718 (2003) (“The nature of malice necessary to a conviction of murder in the first degree is a ‘specific intent to kill’ ”). The Estate’s wrongful death claim alleges that Tom intended to kill Bob. Moreover, Bob’s Estate could not have joined the criminal prosecution of Tom and thus, “cannot properly be charged with sitting back and avoiding the costs of participation in on-going litigation, and then reaping a benefit from the resulting judgment.” Aetna, 395 Mass. at 745. In light of the criminal sanctions he faced, Tom, “had every incentive to defend the prosecution vigorously … and to take an appeal, which he did.” Id. Furthermore, Tom’s intent was actually litigated and determined in his criminal trial, was essential to the criminal judgment, and Tom had ample incentive to defend himself.

Accordingly, issue preclusion will apply and Tom will be precluded in the civil trial from introducing evidence that he killed Bob other than intentionally.[1]

The Estate’s case against the homeowner’s insurer.

In the insurance action, Bob’s Estate sues the insurance company, alleging that Bob’s death was the result of Tom’s negligence, gross negligence or reckless conduct. The insurer argues that Tom’s criminal conviction conclusively establishes that he intentionally killed Bob, and that the Estate is precluded from relitigating the issue of intent.

Despite the facial similarity of the Estate’s action against the insurance company to its action against Tom, issue preclusion will not apply in the insurance case. The critical difference between the two cases is that the party precluded in the wrongful death case (Tom) was a party to the criminal trial, while the insurance company seeks to preclude the Estate, which was not a party to the criminal case.

As noted above, in order for issue preclusion to apply, “the party against whom estoppel is asserted was a party (or in privity with a party) to the prior adjudication….” Callender, 57 Mass. App. Ct. at 365. In the Estate’s case against the insurance company, even assuming that the other requirements for issue preclusion were satisfied, the party against whom estoppel is asserted, the Estate, was not “a party (or in privity with a party) to the prior adjudication.” The decision of the Massachusetts Supreme Judicial Court in Massachusetts Property Insurance Underwriting Assoc. v. Norrington, 395 Mass. 751 (1985), is controlling.

In Norrington, the MPIUA issued a homeowner’s insurance policy to Thomas and Person. That policy excluded coverage for, “bodily injury or property damage … which is expected or intended by the insured.” Person shot and killed Thomas and was convicted of murder in the second degree. Norrington, Thomas’ next of kin, sole heir and administrator of her estate, brought a wrongful death action claiming that Person had negligently, or willfully, wantonly and recklessly, or by gross negligence, shot Thomas. The MPIUA intervened and asserted that there was no coverage because Person had acted intentionally. It invoked issue preclusion based on the criminal conviction to prevent Norrington from relitigating the issue whether Person had intended to shoot and kill Thomas.

The Supreme Judicial Court held that issue preclusion did not apply to Norrington because he had not been a party to the criminal case and had not been adequately represented by any party to that case:

We hold that, although the doctrine of collateral estoppel could be applied to preclude Person from relitigating issues decided in his criminal trial, collateral estoppel cannot be applied so as to preclude Norrington from litigating such issues. Therefore, MPIUA’s motion for summary judgment must be denied.

… [I]n civil litigation between MPIUA and Person, collateral estoppel could be applied to preclude Person from relitigating issues decided in his criminal trial. It does not follow, however, that Norrington’s position is no better than Person’s.

… We assume, without deciding, that, for collateral estoppel purposes, the issue decided by the jury in the criminal case was identical to the issue on which the existence of insurance coverage depends…. We also assume, again without deciding, that, … Person’s conviction constitutes a final judgment for collateral estoppel purposes. Thus, all the requirements for issue preclusion against Person, and the first two requirements for issue preclusion against Norrington, have been met. We conclude, however, that issue preclusion cannot be applied against Norrington, because he was neither a party nor in privity with a party to the criminal case.

… At Person’s criminal trial, Person in no sense represented the interests of Norrington (or of Thomas, with whom Norrington was in privity). “[I]t creates no privity between two parties that, as litigants in two different suits, they happen to be interested in proving or disproving the same facts.” Sturbridge v. Franklin, 160 Mass. 149, 151, 35 N.E. 669 (1893). Nor did the prosecution represent Norrington’s interests. Furthermore, Norrington had no opportunity to participate in the criminal case. See McCarthy v. Daggett, 344 Mass. 577, 580, 183 N.E.2d 502 (1962).

Clearly, then, Norrington should not be precluded from attempting to show in his wrongful death action against Person that Person did not expect or intend the shooting and the resultant death….

395 Mass. at 753-55. (Emphasis added).

The Restatement Illustration cited by the Court states:

D inflicts a blow on X as a result of which X dies. D is convicted of intentional homicide. P, administrator of X’s estate, brings an action against D for wrongful death, alleging D’s act was negligent. I had previously issued a policy of liability insurance to D, insuring liability for D’s negligent acts but excluding intentional acts. In P’s action against D, P is not precluded by the criminal conviction from showing that D’s act was negligent rather than intentional. …

Restatement (Second) of Judgments § 85 illustration 10 (1982).

The Norrington Court noted that its ruling did not give the crime victim (represented by Norrington) a greater right to indemnity than the insured party, Person, and was not unfair to the insurer:

Neither Norrington nor Person has a right to indemnity if Person expected or intended Thomas’s injury. But that does not mean that, because MPIUA could invoke issue preclusion against Person, it can also invoke issue preclusion against Norrington…. Allowing the application of issue preclusion against the insured, but not against the injured person, does no violence to the substantive principle that an injured party succeeds only to the insured’s rights against the insurer. In the criminal case, Person had his day in court. Norrington, however, has had no opportunity to litigate the question whether Person expected or intended to shoot Thomas. Fairness requires that he be given that opportunity. By not applying issue preclusion to Norrington, we place no undue burden on MPIUA. MPIUA has not previously been required to litigate the critical coverage question. It seeks only to enjoy the benefit of a finding in a case to which it was not a party.

Id. at 756.

Other Massachusetts cases have followed Norrington, holding that a third party suing a criminal’s insurer is not subject to issue preclusion based on the criminal conviction. In Bourque v. Cape Southport Assoc., LLC, 60 Mass. App. Ct. 271, 275 (2004), the Court cited Norrington for the proposition that the, “finding in a criminal case that the insured intended to cause the victim’s death did not preclude a nonparty’s right to prove in a later coverage action that the insured did not intend the victim’s death.” In Worcester Ins. Co. v. Fells Acre Day School, Inc., 408 Mass. 393, 401 n.9 (1990), the Court stated in a footnote, “although under Norrington, the tort plaintiffs are not precluded from relitigating the tort defendant’s ability to form an intent to injure….” (Emphasis in original). And the Court of Appeals for the First Circuit, in Kowalski v. Gagne, 914 F.2d 299, 304 n. 4 (1^st Cir. 1990), recognized that different issues are raised by an attempt to use a defendant insured’s criminal conviction to estop the victim than are raised by an attempt to estop the insured. See also Illinois Farmers Ins. Co. v. Reed, 662 N.W.2d 529 (Minn. 2003) (citing and following Norrington); 25 No. 13 Ins. Litig. Rep. 380, “Daycare Operator’s Conviction Did Not Bar Assaulted Child’s Parent’s From Litigating Applicability of Policy’s Intentional Acts Exclusion” (2003).

Accordingly, while Tom’s conviction precludes him from relitigating the issue of intent, it will not preclude Bob’s Estate from showing, in its civil case against the insurer, that Tom did not kill Bob intentionally.

What if Tom’s conviction were based on a guilty plea?

A guilty plea cannot give rise to issue preclusion / collateral estoppel. Metropolitan Property and Casualty Ins. Co. v. Morrison, 460 Mass. 352, 364 (2011); Niziolek, 395 Mass. at 747-48. Instead, a guilty plea, “may be offered as evidence of a defendant’s guilt in subsequent civil litigation but is not given preclusive effect.” Morrison, 460 Mass. at 364. See also Niziolek, 395 Mass. at 748. This rule is explained by the fact that no issue is “actually litigated” when a defendant enters a guilty plea. In Niziolek, the Court explained,

Collateral estoppel “can be used only to prevent ‘relitigation of issues actually litigated’ in a prior lawsuit.” Nevada v. United States, 463 U.S. 110, 130 n. 11, 103 S.Ct. 2906, 2918 n. 11, 77 L.Ed.2d 509 (1983), quoting from Parklane Hosiery Co. v. Shore, 439 U.S. 322, 326 n. 5, 99 S.Ct. 645, 649 n. 5, 58 L.Ed.2d 552 (1979). See also Home Owners Fed. Sav. & Loan Ass’n v. Northwestern Fire & Marine Ins. Co., 354 Mass. 448, 455, 238 N.E.2d 55 (1968) (findings may provide basis for collateral estoppel only if “the product of full litigation and careful decision”). When a conviction is entered after a plea of guilty, “no issue [is] ‘actually litigated’ … since [the defendant] decline[s] to contest his guilt in any way.” Haring v. Prosise, 462 U.S. 306, 316, 103 S.Ct. 2368, 2374, 76 L.Ed.2d 595 (1983). Therefore, the doctrine of collateral estoppel does not apply to preclude the former criminal defendant from litigating in subsequent civil litigation issues involved in the criminal proceeding in which he pleaded guilty. See Restatement (Second) of Judgments § 85 comment b (1982); 1B Moore’s Federal Practice par. 0.418[1] (1984); C.A. Wright, A.R. Miller & E.H. Cooper, Federal Practice and Procedure § 4474 (1981).

***

… It is true … that, before accepting a guilty plea, judges in this Commonwealth must take great pains to ensure that the plea has a basis in fact. Mass.R.Crim.P. 12(c)(5)(A)…. Nevertheless, “the taking of a guilty plea is not the same as an adjudication on the merits after full trial.” Ohio v. Johnson, –––U.S. ––––, 104 S.Ct. 2536, 2541–2542 n. 9, 81 L.Ed.2d 425 (1984)…. While the judge taking the plea must satisfy himself that there is a factual basis for a charge, he need not find that the defendant actually committed the crime to which he is pleading guilty…. Furthermore, because there have been no findings, a conviction after a plea of guilty does not present the possibility of inconsistent factual determinations. For collateral estoppel purposes, those factors justify treating a conviction after a guilty plea differently from a conviction after a trial.

We emphasize that a defendant’s guilty plea is not without consequence in subsequent civil litigation. The defendant’s guilty plea and any other admissions made during the plea-taking colloquy with the judge are admissible as evidence in the civil litigation.

395 Mass. at 747-48. (Emphasis added, footnotes references omitted).

It follows that if Tom’s criminal conviction resulted from a guilty plea, neither he (in the Estate’s action against him) nor the Estate (in its case against the insurer) will be precluded from relitigating the issue of Tom’s intent.

[1] The result would, of course, be different if the crime of which Tom was convicted did not require proof of his intent to harm Bob (e.g. a conviction of assault and battery with a dangerous weapon, which requires only that the defendant intentionally and unjustifiably use force, however slight, upon the person of another by means of an instrumentality capable of causing bodily injury, not an intent to cause injury). In such a situation, there would be no identity of the issues in the criminal and civil cases and issue preclusion would not apply.

Judicial estoppel provides litigants with a useful tool to prevent their opponent from taking contradictory positions for tactical advantage. Once a party successfully asserts a factual or legal position, it is “stuck” with it and may not take a contrary position in a later proceeding simply because it would be advantageous to do so.

For example, in Otis v. Arbella Mut. Ins. Co., 443 Mass. 634, 639–640 (2005), the Supreme Judicial Court affirmed a trial court’s use of judicial estoppel to prevent a pedestrian hit by a car from taking a position in his action against the driver’s insurer which was exactly the opposite of the position he took in his claim against the driver. In his action against the driver, Cusick, the pedestrian, Otis, “took the position that he [Otis] was not negligent, based on the factual assertion that he had yielded the right of way when he … stopped a few feet shy of the dividing center line of the highway. That position was successful, as the jury found no comparative negligence on Otis’s part, and thus awarded him the full amount of damages for his injuries.”[1] Later, in his action as Cusick’s assignee against Cusick’s insurance company, Otis contended “not only that he [Otis] was negligent, but that his negligence was even greater than Cusick’s, such that it should have operated to deny him any recovery against Cusick.”[2] The SJC concluded that judicial estoppel properly applied because “[t]he factual premise now advanced in support of that comparative negligence theory is directly contrary to the facts Otis put forward in the prior suit—Otis now contends that he … had crossed several feet over the dividing center line and stopped in the direct path of an oncoming vehicle.”[3]

“Judicial estoppel is an equitable doctrine that precludes a party from asserting a position in one legal proceeding that is contrary to a position it had previously asserted in another proceeding.”[4] “In some instances, judicial estoppel is appropriate where litigants have asserted inconsistent positions in successive stages of the same litigation.”[5]

“The purpose of the doctrine is to prevent the manipulation of the judicial process by litigants.”[6] Judicial estoppel, “is properly invoked whenever a party is seeking to use the judicial process in an inconsistent way that courts should not tolerate.”[7] The doctrine also protects public confidence in the courts. “Allowing a party to seek advantage from taking, “mutually exclusive” positions in different court proceedings would create[ ] the appearance that either the first court has been misled or the second court will be misled, thus raising the specter of inconsistent determinations and endangering the integrity of the judicial process.”[8]

“Judicial estoppel ‘is an equitable doctrine, calling for the exercise of discretion in its application to particular facts.’”[9] As such, the Massachusetts courts have made clear that “[J]udicial estoppel is not to be defined with reference to ‘inflexible prerequisites or an exhaustive formula for determining [its] applicability’”[10] and that “the application of judicial estoppel must be decided on a case-by-case basis.”[11] Whether to apply judicial estoppel is a matter within the trial court’s discretion.[12] According to the Otis Court,

Like other courts that have grappled with the “hazy” contours of the doctrine, we decline to construct a categorical list of requirements or to delineate each and every possible exception. Rather, judges should use their discretion, and their weighing of the equities, and apply judicial estoppel where appropriate to serve its over-all purpose. That purpose is to safeguard the integrity of the courts by preventing parties from improperly manipulating the machinery of the judicial system, and judicial estoppel may therefore be applied when a litigant is playing fast and loose with the courts.[13]

“The application of judicial estoppel requires both that ‘the position being asserted … [is] directly contrary to the position previously asserted,’ and that ‘the party must have succeeded in convincing the court to accept its prior position.’”[14] The inconsistent position may be either factual or legal.[15] Positions which are “directly inconsistent” are those which are “mutually exclusive.”[16]

Even when a party has taken inconsistent positions, the court may, in its discretion, decline to apply judicial estoppel. The Supreme Judicial Court has noted that because judicial estoppel is an equitable doctrine,

there may arise certain instances where the party’s prior position was asserted in good faith, and where the circumstances provide a legitimate reason—other than sheer tactical gain—for the subsequent change in that party’s position. For example, “it may be appropriate to resist application of judicial estoppel ‘when a party’s prior position was based on inadvertence or mistake,’ ” New Hampshire v. Maine, supra at 753, 121 S.Ct. 1808, quoting John S. Clark Co. v. Faggert & Frieden, P.C., 65 F.3d 26, 29 (4th Cir.1995), or where “the position adopted in the first suit was clearly wrong yet had been advanced in good faith by the party now sought to be estopped,” Chaveriat v. Williams Pipe Line Co., 11 F.3d 1420, 1428 (7th Cir.1993). Strict application of the doctrine might not be called for if “the new, inconsistent position is the product of information neither known nor readily available to [the party] at the time the initial position was taken.” Alternative Sys. Concepts, Inc. v. Synopsys, Inc., supra at 35. Again, judicial estoppel is an equitable doctrine, calling for the exercise of discretion in its application to particular facts.[17]

Although the doctrine of judicial estoppel applies only when necessary to prevent inequitable manipulation of the judicial process which undermines confidence in the courts, it is a powerful tool to force litigants to remain consistent in their factual and legal positions.

______

[1] Otis, 443 Mass. at 642-43.

[2] Id. at 643.

[3] Id.

[4] Sandman v. McGrath, 78 Mass. App. Ct. 800, 801 (2011), quoting Otis, 443 Mass. at 639–640, quoting from Blanchette v. School Comm. of Westwood, 427 Mass. 176, 184 (1998). See also Turnpike Commercial Real Estate, Inc. v. B.C. Executive Realty, Inc., 92 Mass. app. Ct. 1130, 2018 WL 1145714, *2 (3/5/18) (unpublished Rule 1:28 decision).

[5] Turnpike, 2018 WL 1145714, *2.

[6] Commonwealth v. Middlemiss, 465 Mass. 627, 637 (2017). See also Sandman, 78 Mass. App. Ct. at 801, quoting Otis, 443 Mass at 640.

[7] Middlemiss, 465 Mass. at 637; Otis, 443 Mass. at 640.

[8] Otis, 443 Mass. at 639, 643. (Internal quotation marks omitted).

[9] Sandman, 78 Mass. App. Ct. at 802, quoting Otis, 443 Mass. at 642.

[10] Middlemiss, 465 Mass. at 637; Otis, 443 Mass. at 640

[11] Sandman, 78 Mass. App. Ct. at 802.

[12] Otis, 443 Mass. at 642.

[13] 443 Mass. at 642.

[14] Sandman, 78 Mass. App. Ct. at 801-02, quoting Otis, 443 Mass. at 640–641.

[15] Faigin v. Kelly, 184 F.3d 67, 82 (1^st Cir. 1999).

[16] Bay State Gas Co. v. Dept. of Public Utilities, 459 Mass. 807, 818 (2011); Johenning v. Town of Milton, 92 Mass. App. Ct. 1102, 2017 WL 3371725, *6 (8/7/17) (unpublished Rule 1:28 decision).

[17] Id. at 642. See also Holland v. Kantrovitz & Kantrovitz, LLP, 92 Mass. App. Ct. 66, 74 (2017).

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 (3^rd 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….

***

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,

***

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 (1^st 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 (1^st 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.”

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 built 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 (8^th 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.

Updated November 6, 2017

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). See also Genentech, Inc. v. Arendal Mgmt., Inc., 92 Mass. App. Ct. 1108, 2017 WL 4507538, *3 (2017) (“Massachusetts has been somewhat stricter than other jurisdictions in maintaining the settled expectations about corporate separation.”); ARE-Tech Square, LLC v. Galenea Corp., 91 Mass. App. Ct. 1106, 2017 WL 634771, *3 (2017) (“That doctrine is rarely, if ever, applied in contractual disputes.”); Medici v. Lifespan Corp., 239 F.Supp.3d 355, 372 (D. Mass. 2017) (“The corporate veil may be pierced only with reluctance and in extreme circumstances when compelled by reasons of equity.” (Internal quotation marks omitted)). 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.

Updated August 3, 2020.

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 (1^st 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.