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Massachusetts’ Highest Court Affirms Ruling Against Restaurants Seeking Insurance Coverage for Losses Arising from COVID-19 Dining Restrictions

In Verveine Corp., et al., v. Strathmore Insurance Company, et al., the Massachusetts Supreme Judicial Court (SJC) held that claims for business losses made by three restaurants arising from COVID-19 dining restrictions were not covered by “all-risk” property insurance policies because the losses were not “direct physical loss or damage” under those policies.

In spring 2020, Governor Baker issued an emergency order prohibiting in-person dining at restaurants and bars in the Commonwealth. Two of the plaintiffs responded by offering takeout and delivery services, while the third plaintiff suspended operations. Though limited in-person dining resumed in June 2020, the plaintiffs continued to lose revenue due to the restrictions. The restaurants filed insurance claims for the lost income. Strathmore Insurance Company denied the claims. The restaurants then brought a declaratory judgment action against Strathmore and asserted claims for breach of contract and violation of G. L. c. 93A and G. L. c. 176D. Superior Court Judge Sanders dismissed the claims, ruling that the restaurants did not suffer “direct physical loss or damage,” as required by the policies.

Massachusetts Court Bars “Reasonable Royalty” Evidence Based on Law of the Case Doctrine

After successfully appealing a judgment and obtaining a remand of its Chapter 93A claim to the Massachusetts BLS, the Governo Law Firm moved to admit expert testimony about a “reasonable royalty” measure of damages. Governo had sued six former nonequity partners whom the law firm alleged had misappropriated proprietary databases and electronic files. Deciding Governo’s motion, Judge Salinger ruled that Governo had waived its right to challenge the admission of the damages testimony because Governo had failed to raise the argument on appeal.

Judge Salinger’s decision turned on the procedural history of the case.

Massachusetts Court Rejects Attorney General Healey’s Attempt to Shield Identities of Uber and Lyft Drivers Under Investigatory Privilege

Judge Krupp, sitting in the Massachusetts Business Litigation Session, granted Uber’s motion to compel documents containing the identities of drivers who shared information with the Attorney General about their work for Uber and Lyft.

In Healey v. Uber Technologies (see our prior update here), the AG invoked the investigatory privilege to resist production. The purposes of the investigatory privilege, according to the Supreme Judicial Court in Bougas v. Chief of Police of Lexington, include:

Justice: Justice Krupp
BLS April 2022 Detailed 42-Page Practice Guide

In conjunction with the Massachusetts Bar Association, the current BLS judges prepared personalized responses to practice-related questions. Those questions and answers were then turned into a practice guide, which you can link to here. The guide, presented in question-and-answer format, has a wealth of information on topics of interest to practitioners and clients alike.

Judge Strikes Fiduciary Duty Claims Asserted by FTI Against Former Employees, But Not Aiding and Abetting Claim Asserted by FTI Against Berkeley Research Group

FTI sued three of its former employees who went to work for Berkeley Research Group (Berkeley), an FTI competitor. The former employees, FTI alleged, breached their FTI employment contracts and their fiduciary duty of loyalty owed to FTI. FTI also sued Berkeley, alleging that Berkeley aided and abetted the former employees’ breach of their fiduciary duties.

The defendants moved to strike the fiduciary-duty claims. Judge Salinger allowed the motion in part, striking the claim for breach of fiduciary duty against the former employees. But Judge Salinger denied the motion to the extent that it aimed to strike the aiding and abetting claim against Berkeley.

Judge Salinger Dismisses "Conclusory Assertions" Against Project Manager in Commercial Real Estate Dispute

Judge Salinger dismissed a real estate developer’s counterclaims against a project manager, ruling that the counterclaim allegations did not “plausibly suggest that [project manager] [wa]s liable for the contractor’s missteps.”

In Gerhardt v. Burr, the developer hired a project manager to oversee construction of a commercial property. According to the developer, a contractor defectively installed flooring during construction. The project manager filed suit, alleging insufficient payment. The developer, in turn, counterclaimed that the project manager “‘failed to perform his duties and fulfill his obligations’ because he was ‘responsible for ensuring that the Project was completed properly’ and the project was completed improperly.”

In COVID-19 Trip Cancellation Dispute, Judge Ricciuti Allows Massachusetts Consumer Protection Claim to Proceed

Judge Ricciuti ruled that the plaintiff, whose educational-travel trip was cancelled because of the COVID-19 pandemic, stated a viable Chapter 93A claim that the contractual remedy provided by the tour operator improperly limited available regulatory remedies.

In Godines, et al. v. EF Explore America, Inc., the contract permitted the tour operator to cancel the plaintiff’s trip due to an “Extraordinary Event.” There was no dispute that the COVID-19 pandemic was such an event. The contract further provided that, in the event of cancellation, customers would receive a voucher for future travel, less non-refundable fees. But the applicable consumer-protection regulation,  940 CMR 15.06, provides that if a trip is cancelled, a travel company must offer a full refund, a substitution travel service of equal value, or a lower-valued travel service and refund the difference. The contract, in other words, offered “more limited relief,” and the tour operator issued only a partial refund.

BLS 2022 Preferences for Hearings, Conferences, Trials, and Filings

The judges sitting in the BLS during calendar year 2022 recently adopted and published guidance about their preferences and practices on court proceedings and filings. These preferences and practices include:

  • encouraging the active participation in court proceedings by junior attorneys;
  • asking parties to include in motion papers a brief explanation of their preference between in-person versus virtual proceedings;
  • promoting in-person trials and evidentiary hearings; and
  • explaining the circumstances where paper or digital copies should accompany electronic filings.

The complete guidance can be found here.

Advice of Counsel Defense Ruled Not Applicable in MA Securities Fraud Action

In Bertolino v. Fracassa, Judge Salinger ruled that the advice-of-counsel defense did not insulate Frederick McDonald, a defendant in the case, from liability under the Massachusetts Uniform Securities Act (MUSA), G.L. c. 110A, § 410. McDonald claimed that because he relied on his counsel’s advice to determine what he needed to disclose when soliciting investors, he could not be held liable for failing to disclose material facts to potential investors when he offered and sold membership units in his LLC. Rejecting McDonald’s argument, Judge Salinger reasoned that, because the advice-of-counsel defense is available only “to rebut the scienter element of a crime or civil charge requiring a willful or intentional violation of the law” and “willful or intentional misconduct is not an element of liability under MUSA,” McDonald couldn’t rely on that defense. Judge Salinger also reasoned that, even if the advice-of-counsel defense were viable under MUSA, McDonald proffered no evidence that “he made [a] complete disclosure to counsel, sought advice as to the legality of his conduct, received advice that his conduct was legal, [or] relied on that advice in good faith.” 

Notes on BLS/Social Law Program and 2021 BLS Decisions—Including AG Healy v. Uber Technologies

Last month, the Social Law Library sponsored the Business Litigation Session 2021 Year in Review. The panel included Judge Kenneth Salinger, the BLS Administrative Justice, as well as Michael Tuteur and Andrew Yost, attorneys at Foley & Lardner LLP.

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