Zoning Appeal Plaintiff Must Prove Standing, Even if Defendant Town Does Not Contest Issue at Trial

Posted on July 27, 2018 by David McCay

On Tuesday, the Appeals Court issued its opinion in Talmo v. Zoning Board of Appeals of Framingham.  Massachusetts suffers no shortage of case law on standing (the right to file suit) in zoning appeals.  In this case, the issue was whether the abutter’s “injury” was sufficient to create “standing” to appeal Framingham’s issuance of a building permit to his neighbor to convert a barn into “additional” living space.  This otherwise routine standing case is notable for two reasons.

First, it’s a useful reminder that a fatally flawed case can remain fatally flawed, even if the opponent doesn’t press the issue at trial. Here, Land Court Judge Howard Speicher found sua sponte (without being asked to do so by the parties) that Talmo lacked standing to bring his appeal.  Although Framingham had asserted a lack of standing as an affirmative defense, it never contested Talmo’s standing at trial.  Nevertheless, Judge Speicher found Talmo had no injury sufficient to confer standing.  Concluding that standing was a “jurisdictional prerequisite” to proceeding with the case, the Appeals Court affirmed.

Second, Talmo’s “presumptive” standing as an abutter was just that, a presumption. To have standing, the abutter’s injury must be more than speculative, and it must be different than the concerns of the rest of the community.  In this instance, Talmo’s home was more than 250 feet from the offending barn and buffered by trees, boulders and other landscaping.  The Court also rejected Talmo’s suggestion that his drinking water well was contaminated by the barn’s septic system.  Based on those facts, Judge Speicher concluded, and the Appeals Court affirmed, that Talmo’s presumptive standing was rebutted by the facts, including Talmo’s own testimony.

Now, if I could only get Elton John’s “I’m Still Standing” from replaying in my head. Over and over again…

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(Reluctantly) Open for Business: Momentum Gathering for Expanded Use of Continuous Operations Clauses

Posted on June 15, 2018 by Spencer Holland

Two recent court decisions may embolden commercial landlords to use a familiar lease provision in an unusual way when responding to tenants seeking to close their business operations before the end of the lease term.

Continuous operations clauses are common features of commercial leases. Such a provision will often require a tenant to operate its business on certain days and during certain hours. Landlords use these clauses as a means of ensuring that their properties stay active, attractive, and profitable. Landlords do not, with rare exceptions relating to “anchor tenants,” use these clauses as the basis of a suit for injunctive relief to compel a tenant to operate a failing store throughout the remainder of the lease term, at a loss, and against its will.

But that’s just what two landlords have successfully done.

In Simon Property Group L.P. v. Starbucks Corporation, Case No. 49D01-1708-PL-032170 (Indiana Superior Court), the tenant, Starbucks Corporation, announced that it intended to close all of its Teavana stores across the country, including seventy-seven mall locations leased from Simon. The leases at issue contained various forms of continuous operations clauses, many of which expressly provided that Simon could seek specific performance to require Starbucks to continuously operate its Teavana stores. So instead of taking the well-worn path to remedies — recovering future rent and finding new tenants — Simon went to court demanding that Starbucks stay put. An Indiana judge issued a preliminary injunction preventing the closures despite conceding that “no court has ever entered preliminary or permanent injunctive relief to specifically enforce a continuous operations covenant against a non-anchor tenant extending nationwide.” Just a month later, in Bellevue Square, LLC v. Whole Foods Market Pacific Northwest, Inc., Case No. 17-2-27617-1 SEA (Washington Superior Court), a Washington judge granted the landlord’s request for a preliminary injunction requiring a Whole Foods concept grocery store branded “365 by Whole Foods Market” to remain open after Whole Foods announced that the store would close.

In the Whole Foods case, as in the Starbucks case, not at issue was whether the tenant would be breaching the lease by closing — that much was clear. The question in both cases, rather, was whether the landlord had available to it an adequate legal remedy, namely the recovery of monetary damages, that made the issuance of injunctive relief inappropriate. The judge in the Whole Foods case found that the grocery store’s closure would cause irreparable harm to the landlord, including negative effects on the landlord’s ability to secure financing on the property, on its lease negotiations with other tenants, and on the general reputation of the shopping center.

The limits of this reasoning — how small can the ripple effect of a closure be to justify an injunction? — remain unclear, but these two decisions represent a striking sensitivity to landlords’ efforts to create balanced, successful commercial centers. Just take the following excerpt in the Starbucks decision, in which the judge approvingly cites Simon’s expert witness as explaining, “[A] mall is not a random collection of stores, but rather is a co-dependent ecosystem that derives its success from the curation of a particular tenant mix, commonalities, externalities and cross-promotion.” Think about that the next time you’re trying to orient yourself on a mall directory map.

For tenants, these decisions should serve as a cautionary tale. If a tenant expects that it will be allowed to perform an “efficient breach” of the lease to close a failing location, that expectation should be factored into the drafting of any continuous operations clause.

Landlords should also give additional attention to the wording of these clauses. To improve its chances of succeeding in an action for injunctive relief, a landlord should include in the lease a right to obtain specific performance for breach of the clause and an acknowledgment by tenant that such a breach would cause the landlord irreparable harm that makes the right of specific performance necessary.

But before respectively fretting and celebrating over these two decisions, tenants and landlords should consider some matters of context. Starbucks and Whole Foods are especially large and financially strong companies, ones able to survive the requirement to keep open unprofitable locations. Prior to succeeding against Starbucks, Simon had failed in its attempts for injunctive relief to keep open Kenneth Cole stores as well as stores owned by Wolverine World Wide (including Stride Rite and Sperry) because the harm to the tenants of continuing to operate was deemed more detrimental than the imbalance that would befall the landlord’s “ecosystem” due to the tenants leaving.

Regardless of whether or not the Starbucks and Whole Foods decisions portend a larger shift in the courts, landlords and tenants should give continuous operations clauses careful consideration.

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Construction Defect Claims and the Often Misunderstood Application of Express and Implied Warranties

Posted on April 26, 2018 by David Fine

excavators-800996_1920A claim for breach of construction warranty must be filed within the time allowed by the applicable statutes of limitation or repose.  Most jurisdictions, including Massachusetts, allow parties to modify that period by agreement.  The agreement must be particular and leave no question as to the intent of the parties to alter the period of limitations for breach of warranty claims.  A poorly drafted or ambiguous provision is likely to be construed as a separate promise by a contractor to return and address defective workmanship, in addition to other warranty obligations.  The owner and contractor equally benefit from clarity in understanding their respective rights and obligations when it comes to warranty requirements.

The statute of limitations for a breach of express warranty claim is generally determined by the statute of limitations for breach of contract.  The time of accrual of the statute of limitations will vary depending on the state.  For example, some states’ statutes of limitations accrue at substantial completion, while others accrue upon discovery of the disputed defect.  A breach of implied warranty claim is generally regarded as a claim sounding in negligence, and is therefore subject to state statutes of limitations for negligence.  In most jurisdictions, including Massachusetts, this means that implied warranty claims must be brought within three years of the time that the claim was discovered or reasonably should have been discovered.

For breach of warranty claims involving the sale of goods, the UCC provides a four-year statute of limitations.  The UCC allows parties to reduce the period to no less than one year, but the period may not be extended.  Subject to certain exceptions, UCC warranties, express or implied, commence upon the tender of the goods, without regard to whether the tender was of conforming or conforming goods.  This is a drastic limitation because the breach is deemed to occur at the tender of delivery and not when the defect is discovered.  This concept excludes claims for latent defects and claims under warranties that are by their nature explicitly extend to future performance.

Regardless of the time of discovery of the breach of warranty, a statute of repose may well prevent an untimely claim.  In Massachusetts, M.G.L. c. 260, § 2B contains a six-year statute of repose in which time any action of tort for damages arising out of any deficiency or neglect in the design, planning construction or general administration of an improvement to real property.  Unlike a statute of limitations, a statute of repose is inflexible, regardless of the date of discovery.

Contract language is paramount and will in most instances, dictate the extent of warranty obligations.  The relevant language in the American Institute of Architects (AIA) A201 General Conditions of the Contract for Construction, commonly referred to as the “quality standard,” reads as follows:

A claim for breach of construction warranty must be filed within the time allowed by the applicable statutes of limitation or repose.  Most jurisdictions, including Massachusetts, allow parties to modify that period by agreement.  The agreement must be particular and leave no question as to the intent of the parties to alter the period of limitations for breach of warranty claims.  A poorly drafted or ambiguous provision is likely to be construed as a separate promise by a contractor to return and address defective workmanship, in addition to other warranty obligations.  The owner and contractor equally benefit from clarity in understanding their respective rights and obligations when it comes to warranty requirements.

The statute of limitations for a breach of express warranty claim is generally determined by the statute of limitations for breach of contract.  The time of accrual of the statute of limitations will vary depending on the state.  For example, some states’ statutes of limitations accrue at substantial completion, while others accrue upon discovery of the disputed defect.  A breach of implied warranty claim is generally regarded as a claim sounding in negligence, and is therefore subject to state statutes of limitations for negligence.  In most jurisdictions, including Massachusetts, this means that implied warranty claims must be brought within three years of the time that the claim was discovered or reasonably should have been discovered.

For breach of warranty claims involving the sale of goods, the UCC provides a four-year statute of limitations.  The UCC allows parties to reduce the period to no less than one year, but the period may not be extended.  Subject to certain exceptions, UCC warranties, express or implied, commence upon the tender of the goods, without regard to whether the tender was of conforming or conforming goods.  This is a drastic limitation because the breach is deemed to occur at the tender of delivery and not when the defect is discovered.  This concept excludes claims for latent defects and claims under warranties that are by their nature explicitly extend to future performance.

Regardless of the time of discovery of the breach of warranty, a statute of repose may well prevent an untimely claim.  In Massachusetts, M.G.L. c. 260, § 2B contains a six-year statute of repose in which time any action of tort for damages arising out of any deficiency or neglect in the design, planning construction or general administration of an improvement to real property.  Unlike a statute of limitations, a statute of repose is inflexible, regardless of the date of discovery.

Contract language is paramount and will in most instances, dictate the extent of warranty obligations.  The relevant language in the American Institute of Architects (AIA) A201 General Conditions of the Contract for Construction, commonly referred to as the “quality standard,” reads as follows:

§3.5 WARRANTY

The Contractor warrants to the Owner and Architect that materials and equipment furnished under the Contract will be of good quality and new unless the Contract Documents require or permit otherwise. The Contractor further warrants that the Work will conform to the requirements of the Contract Documents and will be free from defects, except for those inherent in the quality of the Work the Contract Documents require or permit. Work, materials, or equipment not conforming to these requirements may be considered defective. The Contractor’s warranty excludes remedy for damage or defect caused by abuse, alterations to the Work not executed by the Contractor, improper or insufficient maintenance, improper operation, or normal wear and tear and normal usage. If required by the Architect, the Contractor shall furnish satisfactory evidence as to the kind and quality of materials and equipment.

The contractor therefore warrants (1) that materials and equipment used by the contractor will be new and of good quality unless otherwise required; (2) the work will be free from defects other than those inherent in the work as specified; and (3) the work will conform to the requirements of the contract documents.  This is a relatively unremarkable, vanilla promise on the part of the contractor.  Notably, there is no time limitation.

The A201 also contains a one-year “call-back period,” which reads as follows:

§12.2.2.1 In addition to the Contractor’s obligations under Section 3.5, if, within one year after the date of Substantial Completion of the Work or designated portion thereof or after the date for commencement of warranties established under Section 9.9.1, or by terms of an applicable special warranty required by the Contract Documents, any of the Work is found to be not in accordance with the requirements of the Contract Documents, the Contractor shall correct it promptly after receipt of written notice from the Owner to do so unless the Owner has previously given the Contractor a written acceptance of such condition.

This language is generally construed by the courts as a separate promise by the contractor to return and address defects when properly notified by the owner, for a one-year period following substantial completion.  Therefore, it does not represent or constitute a one-year contractual warranty period.

A contractor wishing to eliminate warranty obligations beyond a designated, contractual period must clearly state as much in its written contract with the owner.  The written term must explicitly state the intent of the parties is to limit all warranty obligations, express or implied, except for that which is specifically contained in the subject clause.  Any language that falls short of this standard may well fail to accomplish the type and extent of limitation intended or expected by the contractor.

In this author’s experience, most contractual warranties fall short of this standard, and therefore most contractors operate under a false sense of security that their warranty obligations are so limited.  In fact, these obligations can extend for several years out, depending on the nature of the defect and how and when the defect is ultimately discovered.  As a result, the contractor (and the surety) may well be exposed to extended liability until the state statute of limitations or statute of repose has run.  The risk to the contractor is substantial.  Large-scale construction defect claims often lay hidden in the weeds for years before the true extent of the damage manifests.  When the risk does occur, years have passed making investigatory and analysis functions more difficult and sometimes impossible, if witnesses have died, companies have folded, or landscapes have changed.  Front-end due diligence and contract preparedness will go a long way towards mitigating against this risk.

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

Posted on July 18, 2017 by David McCay

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!

offtheclockemploymentblog

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.

Background
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?

Posted on July 14, 2017 by David Fine

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

Posted on April 11, 2017 by David Fine

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

Posted on February 27, 2017 by Mirick O'Connell

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?

Posted on February 8, 2017 by Mirick O'Connell

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

Posted on January 30, 2017 by Mirick O'Connell

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

Posted on December 22, 2016 by Corporate Environmental Advisors, Inc.

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

Posted on December 14, 2016 by Jessica Murphy

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

Posted on December 8, 2016 by David McCay

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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