BLS Blog

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.

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:

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 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.”

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.

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.” 

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.

Three new judges have joined the BLS rotation.

Judge Peter Krupp replaced Judge Karen Green for the January-June rotation period of BLS1. In 2013, Governor Deval Patrick appointed Judge Krupp to the Superior Court. Before his appointment, Judge Krupp founded Lurie & Krupp (n/k/a Lurie Friedman); worked for the Committee for Public Counsel Services; and served as an Assistant Federal Public Defender in the District of Massachusetts. Judge Krupp began his career as an Associate at Mintz, Levin, Cohn, Ferris, Glovsky & Popeo. You can find more information about Judge Krupp’s background at Massachusetts Lawyers Weekly.

It was another eventful year at the BLS, which included Judge Green replacing Judge Kaplan in the BLS1. As 2020 concludes, check out our top five widely read posts:

• Facebook Ordered to Turn Over Internal Investigation Documents to Massachusetts Attorney General: Judge Davis of the BLS ordered Facebook to produce documents to Massachusetts Attorney General Maura Healey (AG). The AG obtained the order while investigating Facebook’s policies and protections related to user data.
• Community Health Systems Affiliate Found Subject to Personal Jurisdiction in Massachusetts: In Steward Health Care System v. CHSPSC, Judge Sanders found that CHSPSC, an affiliate of Community Health Systems (CHS), is subject to personal jurisdiction in Massachusetts for claims made under transition-services agreement (TSAs) signed along with an asset-purchase agreement (APA).
• lululemon’s Motion to Dismiss Eviction Case Denied: In CWB Retail Limited Partnership v. Lululemon USA, Inc., lululemon moved to dismiss a summary-process action brought by its landlord, CWB Retail Limited Partnership.
• Comcast Prevails in Dispute over Interpretation of Commercial Lease: Maynard Industrial Properties Associates Trust (MIPA), a commercial landlord, sued Comcast of Massachusetts III, Inc. (Comcast). The dispute focused on the amount Comcast would owe under an extension of the amended lease.
• John J. Donovan Loses Again: Court Rules that Award in Derivative Action be Distributed Based on Shareholders’ Investment to Avoid Windfall to Disloyal Fiduciary: In Brining v. Donovan, the latest blow to former MIT business professor, John J. Donovan, Judge Davis held that shareholders in Donovan’s failed internet start-up, SendItLater (SIL), could recover more than $700,000 in attorneys’ fees in addition to a December 2019 award of $1.57 million in damages.

In Hershey v. Mount Vernon Partners, LLC, Judge Green faced dueling motions to dismiss in a dispute arising from the purchase of an “ultra-luxury” condominium in Beacon Hill. Judge Green granted Brett Hershey’s motion, in part, dismissing counterclaims for interference with business relations and violation of the Massachusetts Wiretap Act brought by the defendants, Mount Vernon Partners, LLC, Marcel D. Safar, Chevron Partners, LLC and Chevron Builders, LLC. Judge Green also denied most of the defendants’ motion to dismiss, allowing all but one of Hershey’s claims (a claim against Safar in his individual capacity) to proceed.