Massachusetts High Court Recognizes Employee Right of Qualified Medical Marijuana Users To Allege Handicap Discrimination For Off-Site Use of Medicinal Marijuana

This is an important update from my partner, Bob Kilroy and our OfftheClockEmployment Blog, for all employers, including contractors, subcontractors and developers. Note the important distinction between safety and non-safety sensitive positions. Clear take-away: get good advice!


In a long-awaited decision, the highest court in Massachusetts – the Supreme Judicial Court (“SJC”) – ruled today in Cristina Barbuto v. Advantage Sales & Marketing, LLC, et al. that an employee who used medical marijuana to treat a debilitating medical condition may proceed with a claim of handicap discrimination after being terminated from employment based on her testing positive for her off-site use of physician-prescribed marijuana.

The facts in Barbuto were straightforward.  Ms. Barbuto was hired into an entry-level position by Advantage Sales & Marketing, where she would be assigned to supermarkets to set up and hand out food samples to supermarket customers.  After having accepted an offer of employment, Ms. Barbuto was informed that she would be required to submit to a mandatory drug test.  Ms. Barbuto immediately informed her supervisor that she would test positive for marijuana because she suffers from Crohn’s disease – a debilitating…

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New 2017 AIA Documents Released – Are You Prepared?

Construction Contract

The construction contracts created by American Institute of Architects (“AIA”) have, for several decades, been established as the industry standard for contract forms.  There exist AIA forms for every imaginable project relationship and delivery method.  Every ten years or so, the AIA releases revised documents, in order to keep the terms current with industry norms and trends.

This year, the AIA has released several new 2017 editions, including the A201 family of documents, the flagship documents, developed for the design-bid-build delivery model.  New forms were also released for cost-plus contracts, with and without a guaranteed maximum price, abbreviated and short form owner-contractor agreements, contractor-subcontractor agreements, owner-architect agreements, and architect-consultant agreements.

Some of the major changes that require immediate attention include the following:

  • A single sustainable project to address the risks and obligations generally associated with sustainable design and construction services;
  • Agreements now include a prompter for parties to negotiate and insert a “termination fee” in the event of an owner’s termination for convenience;
  • The architect is now entitled to additional compensation for re-design services, so long as the architect could not have reasonably anticipated market conditions that caused bids to exceed the owner’s budget;
  • A new category of design services has been introduced – any services beyond basic services identified at the time of agreement are now termed “supplemental services,” to avoid confusion with “additional services” that may arise during the project;
  • A new exhibit with comprehensive insurance and bonds provisions that can be attached to many of the owner-contractor agreements;
  • New provisions relating to direct communications between the owner and contractor; and
  • Revised provisions related to the owner’s obligation to provide proof of financial arrangements to pay for the project;
  • Simplified provisions for the contractor to apply for and receive payments.

Many of these forms have been released, and more are scheduled for release throughout 2017.  As of October 2017, the prior (2007) versions of the AIA family of documents will no longer be available. Our Construction Group has been and continues to stay very much at the forefront of these changes.  If you have questions, or if you would like to discuss these changes and what you should be doing to protect your company’s interests, please contact our Construction Group directly.

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Enforcing “No-Damage-for-Delay” Clauses: A Potential Landmark Construction Law Decision from the Massachusetts Appeals Court

A recent decision from the Massachusetts Appeals Court is likely to have a substantial impact on construction contract and claims practice in the Commonwealth.  The Massachusetts State College Building Authority (“MSCBA”) hired Suffolk Construction Company, Inc. (“Suffolk”) to serve as general contractor on a dormitory project at Westfield State University (the “Project”).  Central Ceilings, Inc. (“Central”) submitted a bid to serve as the subcontractor for exterior heavy metal gauge framing and sheathing, interior light gauge framing, drywall, and hollow metal door frames.  The Project was plagued with scheduling difficulties, and Central asked Suffolk for extensions of time on several occasions, while its workforce sat idle, unable to perform its work as a consequence of certain delays, principally caused by Suffolk’s inability to manage and coordinate the project.  Suffolk rejected these requests, apparently out of concern about a substantial liquidated damages assessment from MSCBA, if the Project missed its completion date.  Central accelerated its performance, and completed its work on a compressed schedule.  Central brought a lawsuit against Suffolk for breach of contract, seeking loss of productivity damages in the amount of $321,315, as well as payment of $82,538 for unpaid change orders.

Suffolk argued that a “No-damages-for-delay” clause barred Central’s claim for loss of productivity damages.  The clause provided, in pertinent part, that the subcontractor “shall have no claim for money damages or additional compensation for delay no matter how caused” but “shall be entitled only to an extension of time for performance of its [work].”  The Court rejected Suffolk’s argument on two grounds.  First, Suffolk was precluded from invoking the clause because it had materially breached the contract by refusing to allow Central’s requests for extensions of time, thereby depriving Central of its sole contractual remedy. Second, the loss of productivity damages were not “delay” damages, but rather they were project costs incurred by Central as a result of a compressed schedule.

Suffolk also challenged the trial judge’s adoption of the “total cost” method for calculating damages, which had been advocated at trial by Central’s expert witness.  This method takes as a measure of damages the difference between the subcontractor’s bid and its ultimate costs.  It has been historically disfavored, because it tends to ignore several mitigating factors, such as unrealistic subcontractor bids, and the subcontractor’s own participation in the delay.  Here, the Court determined that the “total cost” method was appropriate, largely because the nature of Central’s loss made it impossible or highly impracticable to determine its damages using more traditional methods.  Rather, as opined by Central’s expert, the loss was best quantified through the impact it had on manpower, and he reviewed Central’s original estimate for labor costs and compared that against the actual labor costs incurred.

This decision, unless or until reversed or modified by the Massachusetts SJC, will have significant and immediate impact on construction law risk management in Massachusetts.  Look for an increase in “total cost” claims, and a corresponding adjustment in drafting “No-damage-for-delay” clauses, including expanding the definition of “delay” damages, and potentially eliminating the right of subcontractors to request additional contract time.

The decision is Central Ceilings, Inc. v. Suffolk Construction Company, Inc., et al., No. 15-P-1117 (Mass. App. Ct., March 29, 2017).

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A Modern Take on the Antiquities Act of 1906

mountain-1462655_1280During the waning days of his administration, President Obama used the Antiquities Act of 1906 (16 USC 431-433) (“Act”) to create expansive national monuments on land and at sea.  According to the National Park Service, he established 34 national monuments during his administration totaling over 550 million acres. One of these monuments is located in Maine, and another is situated off the coast of Massachusetts.  While environmentalists have enthusiastically supported the designations, critics have raised concerns about their potential economic impacts and new limitations on resource area use.

Congress passed the Act in 1906 as a means of halting the destruction of archaeological sites, particularly those of the Southwest.  While only Congress can establish national parks, Section 2 of the Act authorizes a president “to declare by public proclamation historic landmarks, historic and prehistoric structures, and other objects of historic or scientific interest . . .  to be national monuments.” After signing the bill into law, President Theodore Roosevelt quickly designated Devils Tower in Wyoming as the first national monument. This designation proved to be one of many for Roosevelt and set a lasting precedent for his successors.

As part of his late-term designations, President Obama created the Katahdin Woods and Water National Monument in Maine on August 24, 2016.  According to his presidential proclamation, this monument is approximately 87,500 acres and borders Baxter State Park, home to Mount Katahdin.  Elliotsville Plantation Inc., run by Burt’s Bees founder Roxanne Quimby, donated the land to the federal government, along with a pledge of $40 million for infrastructure improvements.  In his proclamation, President Obama cited to the land’s biodiversity, recreational opportunities, geography, and rich history as justifying the designation.

Subsequently, President Obama created the first marine national monument in the Atlantic Ocean on September 15, 2016: the Northeast Canyons and Seamounts Marine National Monument. As set forth in his presidential proclamation, the Northeast Canyons and Seamounts Marine National Monument is located 130 miles off the southeast coast of Cape Cod and consists of 4,913 square miles.  The proclamation indicates the presence of significant underwater canyons, seamounts and abundant biodiversity.  Pursuant to the designation, commercial fishing, mining and drilling are banned within the monument area; fishing for lobster and red crab will be phased out over a seven-year period.  Recreational fishing, however, is permitted within the monument area.

President Obama’s use of the Act to create these national monuments has stirred much debate, and encountered some resistance from industry groups and local residents and officials.  In the West, concerns often include loss of mining, grazing, oil, gas and forestry rights.  In New England ports, the fishing industry has raised concerns over the impact of the Northeast Canyons and Seamounts Marine National Monument on the local fishing industry.  Specifically, fishing associations have argued that sufficient regulatory safeguards already exist, and that the loss of fishing grounds will cause further economic hardship to struggling fleets.

In Maine, some members of the state legislature and the governor have opposed the Katahdin Woods and Water National Monument.  Similarly, some local residents have feared that the new monument will curtail historical land uses such as logging, hunting and snowmobiling.  Additionally, opponents have claimed the designation will diminish the logging and paper industries.   But supporters point to recent media reports of visitor increases to the monument area since the designation and the corresponding benefits to local businesses.

On February 14, 2017, Maine Governor Paul LePage took the unprecedented step of sending a letter to President Trump requesting a reversal of the Katahdin Woods and Water National Monument designation. Some western congressional delegations, including those from Utah, have also sought to unwind certain designations and to restrain presidential authority under the Act.

In the history of the Act, however, no president has reversed the designation of a national monument.  In fact, there is no language in the Act that authorizes a president to reverse a designation, and such action would likely be met with a swift legal response.   Similarly, any attempts by Congress to curtail presidential use of the Act would likely generate spirited debate.   For the time being, however, designations under the Act remain a powerful and unusually swift vehicle of resource conservation.

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What Does It Mean To Purchase An Additional Insured Endorsement?

Scissor lift platform with hydraulic system at maximum height range painted in orange and beige colors, large construction machine, heavy industry, white clouds and blue sky on backgroundIn the construction industry, it is standard for ‘upstream’ parties to require ‘downstream’ parties to purchase and maintain general liability insurance coverage, at varying limits, and to obtain an endorsement adding all or most ‘upstream’ parties as ‘additional insureds’ under that policy.  A recent decision from the Massachusetts Superior Court serves as a reminder that not all additional insured endorsements are created equal and that attention ought to be paid to the language that addresses the scope of coverage.

The facts in NES Equip. Servs. Corp. v. Acadia Ins. Co., 2016 WL 6988708 (2016) are commonplace.  A contractor rented a scissor lift under a rental agreement, which required, among other terms, additional insured status for the supplier.  Two workers were injured when the lift collapsed.  They sued the supplier and other parties, but not the contractor.  The supplier tendered the claim to the contractor’s carrier, since it enjoyed additional insured status.  The carrier, however, denied defense and indemnity, taking the position that it had no obligation because there were no claims against the contractor.  The Court disagreed.  The policy stated that the supplier was covered for claims caused by contractor’s “use, operation or maintenance” of the equipment. As such, the contractor’s negligence was not a prerequisite to a duty to defend.  The Court stated “the fact that an accident is not attributable to the named insurance’s negligence is irrelevant when the additional insured endorsement does not purport to allocate or restrict coverage according to fault.” The Court pointed out that the carrier could have included such limiting language, but chose not to, and so coverage was triggered merely by the use of the equipment.

This decision is notable for several reasons.  First, businesses that work in construction are well advised to review additional insured endorsements on each project because the language and scope of coverage often changes.  Second, the Court found that the contractor had an obligation to indemnify the supplier by virtue of looking at not only the rental agreement but also other business records and prior dealings of the parties.  This exercise is notable in that construction contracting is oftentimes fast dealing, and businesses must take caution that the compilation of business records, including everything from formal contracts to purchase orders and even electronic and verbal communications, might well create binding contractual rights, remedies and obligations.

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Update on St. John’s Holdings, LLC.  v. Two Electronics, LLC

telephone-586268_640On October 24th, 2016, the Massachusetts Land Court revised its ruling in St. John’s Holdings, LLC. v. Two Electronics, LLC  (2016 WL 1460477 (2016).  The underlying case (the subject of a prior blog article) involved electronic communication and the Statute of Frauds (G.L. c. 259 Section 1). In its updated ruling, the Court analyzed whether the seller gave his real estate broker decision-making authority.

The Court previously held that a text message from the broker, signed with his name and incorporating an unsigned letter of intent, satisfied the Statute of Frauds.  As part of its analysis, the Court reviewed the Massachusetts Uniform Electronic Transactions Act  (G.L. c. 110G), which applies when parties have agreed to conduct transactions by electronic means. Under the Act, if a law requires a signature, an electronic one will suffice.

In this instance, the Court asked whether the seller gave decision-making authority to its broker.  To answer this question, the Court examined the following: the seller’s actions; the broker’s understanding of his decision-making authority; prior dealings between the seller and broker; and communication and agreements between the seller and broker.  Based on this investigation, the Court ruled the broker had no actual authority to bind the seller.

The Court also rejected the buyer’s theory of implied authority.  In doing so, the Court concluded that the seller made no express or implied manifestations of authority which the buyer could have relied upon; the buyer had no reasonable basis to assume the seller vested decision-making authority in the broker.

Despite the reversal in fortunes, this updated ruling does not alter the original takeaway: electronic communication may satisfy the requirements of the Statute of Frauds and create binding agreements.  In this case the communication was just sent by the wrong person – a broker with no decision-making authority.  As a result, continue to exercise caution when using electronic communication to negotiate real estate transactions.

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Deadline for Owners of Single Wall Steel Tanks Looming

by Joseph S. Campisi, President, Corporate Environmental Advisors, Inc.

The Massachusetts Department of Environmental Protection (“MassDEP”) promulgated underground storage tank (UST) regulations on January 2, 2015 that replaced the Massachusetts Department of Fire Service (“DFS”) regulations at 527 CMR 9.00. These new regulations (310 CMR 80.15) require that all single-walled steel (“SWS”) tanks must be removed or permanently closed-in-place by August 7, 2017. This requirement was carried over from the DFS regulation at 527 CMR 9.05(G)(10), and has been in effect since March 21, 2008. This new regulation impacts over 300 UST owners or operators in Massachusetts.

MassDEP’s UST Regulation allows tanks to be permanently closed-in-place only if they cannot be removed from the ground without removing a building, or the removal would endanger the structural integrity of another UST, structure, underground piping or underground utilities. In addition, the following requirements must be completed by UST systems owners by January 2, 2017:

  • All spill buckets have to be tested and, if necessary, repaired or replaced in accordance with 310 CMR 80.21(1)(a) and 28(2)(g);
  • All turbine, intermediate and dispenser sumps have to be tested and, if necessary, repaired in accordance with 310 CMR 80.27(7) and (8);
  • All Stage II vapor recovery systems have to be decommissioned in accordance with 310 CMR 7.24(6)(l), if applicable; and
  • New Stage I vapor recovery requirements have to be met in accordance with 310 CMR 7.26(3)(b), if applicable.

These new regulations are intended to remove these SWS USTs from service because they have a higher likelihood of leaking and releasing petroleum products into the environment.

If the Owner intends to remove or permanently close the SWS UST in place before January 2, 2017, the owner will not need to comply with requirements for testing spill buckets and sumps (and repairing or replacing them if they do not pass the tests). If a SWS tank supports a Stage II system that has not yet been decommissioned, the Stage II system can be decommissioned when the tank is removed, and there would be no need to implement Stage I requirements for the SWS tank. The following types of tanks are exempt from this requirement: consumptive use tanks, tanks relined prior to August 8, 2007 in accordance with applicable requirements, and “wrapped” tanks (fiberglass, carbon fiber or plastic compounds).

MassDEP has established three alternatives in which SWS UST owners can meet the removal/permanent closure-in-place requirement for a SWS tank:

  1. Pass the tests required for spill buckets and sumps by January 2, 2017 and remove or close-in-place your SWS USTs by August 7, 2017.
  2. Take your SWS tanks “Temporarily Out-of-Service” (“TOS”) in accordance with 310 CMR 80.42 by January 2, 2017, and permanently close in place or remove the tank(s) by August 7, 2017. If you take your SWS tanks TOS before January 2, 2017, MassDEP will not require you to:
  • Test the spill buckets or sumps that support the UST system,
  • Operate and maintain cathodic protection,
  • Perform third-party inspections, or
  • Submit compliance certifications.
  1. Pass the requirements for spill bucket and sump testing by January 2, 2017, take the tanks TOS by August 7, 2017, notify MassDEP that you have done that before August 7, 2017, and remove or permanently close-in-place the tank(s) by a specific date, but no later than July 1, 2018.

With the notification of taking the tank TOS, the Owner or Operator would submit a signed contract to MassDEP specifying the date on which the tank would be removed or closed-in-place. If your tank supports a Stage II system, that system would be decommissioned when the tank is removed; the January 2, 2017 deadline for this action would be waived.

There are a number of provisions that the UST owners must keep in mind:

  • The owner must maintain Financial Responsibility (310 CMR 80.51 et. seq.) for the SWS tank until it is removed or closed-in-place.
  • If you take your SWS tanks TOS, these tanks will not be allowed to be brought back into service.
  • If the SWS tanks support a Stage II system, the Stage II system must be decommissioned when the SWS tanks are permanently closed or removed (if the Stage II system has not been decommissioned by that time).
  • If installing a new UST or above-ground storage tank (“AST”) to replace the SWS tank, the new Stage I requirements must be implemented when the new UST or AST is installed.

SWS UST owners are encouraged to make arrangements to remove these tanks, permanently close them in place, or meet the testing and Stage II decommissioning requirements described above as soon as possible. As the above noted deadlines get closer, it may be difficult to find an available contractor, as their services will be in high demand.

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A Turn of Events for Worcester’s Former County Courthouse

The former Worcester County Courthouse at 2 Main Street was supposed to be converted into residential housing units and retail space after the City reached an agreement in March 2015 to sell it to Brady Sullivan Properties, LLC, a New Hampshire real estate development company.  Some signs of progress have occurred since then, including $2 million in environmental remediation work.  But as of last week, the City was informed that the developer was not moving forward with the project and Brady Sullivan Properties, LLC terminated the sales agreement.

For the time being, the City remains the owner of 2 Main Street.  It will be responsible for the maintenance and upkeep on the building until a new buyer/developer can be found.  The property will be put back out for bid and City Manager Edward M. Augustus Jr. said in a statement that he is confident a qualified developer can be found.

What does this mean for contractors who worked on the former Courthouse while it was under agreement with Brady Sullivan Properties, LLC?  This turn of events makes no difference for contractors who performed work and were paid in full.  For contractors that have not been paid for work they performed, they should review their contracts to determine who agreed to pay for their services and what recourse they have against that party.  Unfortunately, the property falls outside of the scope of the mechanic’s lien law and unpaid contractors, subcontractors and suppliers are not entitled to initiate a lien against the property for work they performed under contracts with Brady Sullivan Properties, LLC.  Section 6 of Massachusetts General Laws chapter 254 provides that land, building or any structure on them owned by the Commonwealth or a municipality are exempt from mechanic’s liens.  Even though the former Courthouse was under agreement to be sold to a private developer, the sale had not closed and the property remains owned by the City.

If you are contemplating working for or providing materials for the next developer interested in the former Courthouse project, plan ahead.  Find out who will be paying for your work and who owns the project at that time.  Since you will be excluded from asserting a mechanic’s lien on the property while it is owed by the City, if you will be working on the project prior to the developer taking ownership of the property ask about other options to secure payment for your work, such as a payment bond, personal guaranty or escrowing funds to pay for your services or materials.  Once the property is sold to a developer, the project becomes like any other private project, subject to mechanic’s liens by unpaid contractors, subcontractors and suppliers as permitted under Massachusetts General Laws chapter 254.  (Not familiar with mechanic’s liens? Review my earlier post on the basics of Massachusetts’ mechanic’s lien law).

The mechanic’s lien process is complex and prevailing on claims for payment of construction services and materials can be difficult without a solid understanding of the law.  For questions or assistance with Massachusetts mechanic’s liens or recovery of payment for construction services or materials, contact Jessica Murphy at (508) 791-8500 or another member of Mirick O’Connell’s experienced Construction Group.

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Trump’s Pruitt Pick for EPA Signals Greater Predictability in Environmental Rulemaking, Enforcement

President-elect Donald Trump’s team announced yesterday his selection of Oklahoma Attorney General Scott Pruitt to head the U.S. Environmental Protection Agency. The Pruitt pick is nearly as polarizing as the election itself. Pruitt describes himself as a “leading advocate against the EPA’s activist agenda.” The Wall Street Journal applauded Pruitt calling him “A Lawyer for a Lawless EPA.” Democrats are attacking Trump’s pick calling him a “climate denier” and otherwise unfit to head the agency tasked with enforcing the nation’s environmental laws. Incoming Senate Minority Leader Chuck Schumer (D-NY) blasted Pruitt on Twitter saying he “stands with big oil & climate deniers, not American families.”

Regardless of one’s political leanings, one good thing that should come out of the Pruitt pick, assuming he is confirmed by the Senate, is a more predictable application of federal environmental laws and regulations. Recent environmental rulemaking under President Obama’s Administration has been met with mixed success before the courts. The EPA’s 2015 Clean Power Plan was promptly challenged by 27 states, including Pruitt’s Oklahoma. On February 9, 2016, the U.S. Supreme Court took the unprecedented step of staying enforcement of the regulation pending an appeal before the D.C. Circuit. The appeal is still pending. The EPA and Army Corps of Engineers’ new and more expansive “Waters of the U.S.” rule is subject to a similar appeal and has been stayed by the Sixth Circuit. Both rules face an uncertain fate, although their life expectancy is undoubtedly reduced in the wake of the election.

What is sometimes missed is the cost, economic and otherwise, of on-again, off-again regulation. Ultimately, taxpayers and consumers shoulder the expense of the rush to comply with new rules. The uncertainty of whether the rules will survive increases the cost. Put simply, predictability and durability are underappreciated qualities in environmental regulation. Pruitt, it would seem, is less likely to send the EPA on new rulemaking efforts that are later undone by the courts. Call that a silver lining for those not otherwise supporting the Pruitt nomination.

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What Massachusetts Employers Should Know About Recreational Marijuana

Here’s what the construction industry needs to know about recreational marijuana in the workplace and on the jobsite from my colleague, Amanda Baer:


On November 8, 2016, Massachusetts voters approved a ballot question legalizing marijuana for recreational and commercial use. The Regulation and Taxation of Marijuana Act (the “Act”) provides that – as of December 15, 2016 – persons at least 21 years of age may possess, use, purchase, process, and/or manufacture 1 ounce or less of marijuana outside their residence and up to 10 ounces of marijuana within their residence.

As relevant to employers, the Act provides that property owners may prohibit or otherwise regulate the consumption, display, production, processing, manufacturing or sale of marijuana and marijuana accessories on or in their property.  Importantly, the Act further provides that it does not require employers to permit or otherwise accommodate conduct allowed by the Act in the workplace and does not affect the authority of employers to enact and enforce workplace policies restricting the consumption of marijuana by employees.

Employers should act fast…

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SEC Hoping to Increase Policing of Climate Change Disclosures

Penguin IslandThese pages rarely comment on Securities and Exchange Commission matters, but a recent article in Corporate Counsel Weekly captured our attention – “SEC Policing of Climate Disclosure May Pick Back Up.”

The 2010 SEC climate change guidance required companies to disclose the business risks of climate change to investors. Corporate Counsel Weekly notes that most companies made only boilerplate disclosures or none at all. The article quotes Mary Shapiro, the former chair of the SEC, “I sense today a strong interest in this issue again at the SEC,” suggesting that the Commission may begin requiring better and more detailed disclosures.

Count this author among those not surprised that companies remained at a loss as to how to characterize the risks of climate change. Under longstanding SEC regulations, companies are already required to disclose material business risks, trends and uncertainties to their investors. For many companies, forcing enhanced disclosures on climate change is at best an invitation to speculate. As Ms. Shapiro reportedly admitted, climate change is “highly politicized.” A recent opinion piece in Monday’s Wall Street Journal titled “The Phony War Against CO2” illustrates the complex politics and differing views on the topic.

Forcing climate change disclosures from companies with no apparent connection to climate change issues invites non-experts to speculate about the range of potential climate outcomes and their associated, potential business risks. Isn’t there already enough non-expert speculation on climate change? Investors, and the SEC, are better served by resisting the temptation to force public company speculation and commentary on climate change, unless the company has a specific, good-faith basis for including climate change among those material business risks it is already required to disclose.

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The Perils of Mobile Communication and Real Estate Negotiation

phone-158086_1280The rapid expansion in mobile communication has stretched the limits of many longstanding legal frameworks, including the Statute of Frauds (“SOF”) (G.L. c. 259 § 1).  This is certainly the case with respect to real estate transactions.  In fact, 97% of respondents to a recent Pew Research Center survey indicated they use a smartphone for text messaging.  This same survey indicated that 44% of respondents utilize their phone to look up real estate listings and property information.  As a recent land court case reminds us, however, the use of text messaging and email when negotiating real estate transactions can bring unintended legal consequences.

In St. John’s Holdings, LLC v. Two Electronics, LLC (2016 WL 1460477 (2016)), the Land Court addressed a novel concept: whether a text message can satisfy the requirements of the SOF.  The SOF is a legal doctrine requiring contracts for the sale of land to include all essential terms and be in writing signed by the party against whom enforcement is sought.

The controversy in St. John’s centered on communications between two real estate brokers negotiating the sale of a commercial office building.  After negotiating the terms for the sale and receiving a final letter of intent (“LOI”), the seller’s broker sent the buyer’s broker the following text message:

“Steve. It [Two Electronics] wants you [SJH] to sign first, with a check, and then he will sign.  Normally, the seller signs last or second. Not trying to be stupid or contrary, but that is the way it normally works.  Can Rick [McDonald] sign today and get it to me today? Tim.”

The buyer’s broker responded with the following:

“Tim, I have the signed LOI and check it is 424 [PM] where can I meet you?”

Subsequently, the seller refused to execute the LOI and sell the building to the buyer.  In response, the buyer filed suit for specific performance claiming the exchange of emails and text messages, in conjunction with the final LOI, resulted in an agreement of all essential terms. The seller countered that the exchange did not satisfy the SOF.

Analyzing the buyer’s claims, the Court revisited the decision in Feldberg v. Coxall (2012 WL 3854947) that emails between a buyer’s attorney and seller’s attorney (one of which included an unsigned offer to purchase) created a binding agreement.  Additionally, the Court reviewed the Massachusetts Uniform Electronic Transactions Act (“Act”) (G.L. c. 110G).  The Act applies when parties have agreed to conduct transactions by electronic means.   Under the Act, if a law requires a signature, an electronic one will suffice. Parties may also switch between electronic means and hard copy when conducting transactions.

The Court ultimately concluded that the text message, in concert with the buyer broker’s email of the final LOI and the conduct of the parties, satisfied the SOF.  The Court further held that the final text messages made no changes to the essential terms of the agreement and “implicitly incorporated” the final LOI.  This final LOI, the Court explained, contained all of the specific terms of a purchase and sale agreement.  Interestingly, the Court also noted that the use of the seller broker’s signature at the end of the last text message was evidence of his intent to have the writing be legally binding.  The Court differentiated it from previous texts of a “more informal nature.”

The decision in St. John’s Holdings, LLC is thus a good reminder to exercise caution when using electronic communications to negotiate real estate transactions.  One of the primary takeaways from this case is that the informality of email and text messaging is no elixir to a bad deal.  Additionally, this case illustrates the importance during negotiations of careful consideration and review of structure and content before sending email and text messages.  As that well-known idiom states, “measure twice, cut once.”

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