Contracts

In some transactions, such as those involving the acquisition of a business, the deal may be documented through a primary contract and subsidiary agreements that are referenced in, or even attached as Exhibits to, the primary. While there is nothing inherently good or bad about papering a transaction this way, it is important to keep in mind that doing so may mean that the dispute resolution provisions of the primary contract do not apply if litigation arises and only involves a claimed breach of a subsidiary contract. Indeed, that is the hard lesson that was learned by the defendant in National Dentix, LLC v. Gold.

In 2000, National Dentix acquired Phillip Gold’s business, and the transaction was documented with three agreements: a Stock Purchase Agreement (“SPA”), an Employment Agreement (“EA”) and a Non-Compete Agreement (“NCA”). While executing the EA and NCA were conditions precedent to – and even were attached to – the SPA, the EA and NCA contained standard integration clauses, which essentially said that each contract set forth the entire understanding between the parties with respect to the subject matter thereof. Further, while the SPA contained an arbitration clause, and the EA and NCA did not, … Keep reading

It is not uncommon for parties entering into an agreement to transfer an asset to seek the input of an independent, third-party appraiser. Plainly, the parties to any such transaction desire an appraiser who will be unbiased and will not have any conflicts of interest. Further, one would assume that if such an appraiser’s company had a relationship with the opposing party, a court would step in to invalidate the appraisal. That assumption is not always correct, however­–especially if the appraisal agreement does not specify what will disqualify the appraiser. Indeed, a Massachusetts Supreme Judicial Court judge recently confirmed this in Buffalo-Water 1, LLC v. Fidelity Real Estate Company, LLC.

In Buffalo-Water, an Appraisal Agreement only required the individual appraiser to disclose any prior appraisal services he rendered for either of the parties. The appraiser’s employer, Cushman & Wakefield, was not required to make any such disclosure, nor was it required to disclose conflicts of interest or relationships that could deem it to be biased. Further, and unbeknownst to Buffalo-Water, Cushman had previously been engaged by Fidelity to represent it in connection with a national contract.

Once Buffalo-Water became aware of the Fidelity-appraiser relationship, it filed suit, seeking … Keep reading

Companies often use written Employment Agreements to set out the duties/responsibilities of, and the compensation/benefits to, some or all of their employees. The most obvious reasons for doing so are to ensure clarity and limit the chance that either might misunderstand the other’s expectations. While using such documents is all well and good, what happens when an employee takes on responsibilities that go beyond the scope of what is covered by a written agreement? As one Massachusetts company recently learned, the answer to this question can be unpredictable and expensive.

In 1988, Ronald Nardone began working for LVI Services, and he eventually rose to become corporate vice-president of business development. At various times from 1997-2005 LVI was searching for investors, and Nardone became part of the “roadshow presentation” team that sought such investments. In that regard, LVI’s one-time President, Burton Fried, testified:

I asked [Nardone] if he wanted to appear and give the presentation on behalf of the business development aspect of the business and he said yes. … I didn’t require him, he just accepted the invitation.

After one of the roadshows in 2005, Nardone learned that a large investment was going to be made, and all of … Keep reading

As I discussed in a blog post several years ago, even an informal email can constitute acceptance of a contractual offer. Moreover, just a few months ago, Judge Timothy Hillman took this principle one step further by ruling, in Witt v. American Airlines, that an exchange of emails can form a binding settlement agreement, even if the parties have not agreed to all of the terms of that settlement.

In 2014, Diane Witt sued American Airlines for injuries she claimed to have sustained while on a flight. After litigating that case for more than three years, the parties finally engaged in serious settlement discussions. Ultimately, American Airlines’ counsel sent the following email to Witt’s counsel:

I have been informed $15,000 is firm (together with acceptable release) and that the settlement must happen promptly before more costs are incurred. This really needs to get done this week and certainly before any further hearing for the experts have to spend any more time preparing for deposition.

Witt’s counsel eventually responded: “Thanks for getting back to me. Ms. Witt accepts the settlement offer of $15,000. Please send the proposed release when you can.”

Less than one month later, however, Witt’s counsel … Keep reading

Electronic agreements have become a staple of today’s e-commerce world, and such agreements generally are as enforceable as those written on parchment and signed with a quill pen. One notable exception, however, is where the proponent of such an agreement seeks to enforce an arbitration provision. In that case, more may be required than simply having a clause stating that all disputes must be resolved through arbitration at the AAA, JAMS, or some other organization. Indeed, that is the hard lesson the defendants in Cruz v. Jump City Everett LLC (34 Mass.L.Rep. 586) learned earlier this year.

In 2015, after visiting the defendants’ recreational trampoline facility with his two minor children, Elmer Cruz filed suit in Suffolk Superior Court, claiming that he suffered an injury at the establishment. The defendants moved to dismiss that claim, contending that Mr. Cruz had affixed his electronic signature to a “Participant Agreement” that included a clause requiring all disputes to be resolved via arbitration. Mr. Cruz countered by submitting an affidavit in which he asserted that (i) he does not speak English; (ii) his son, who does speak English, led Mr. Cruz to a computer screen, where the son entered various information and … Keep reading

As I noted in a prior post, the differences between arbitration and litigation go well beyond the fact that arbitration generally is a quicker and less expensive process. As such, there are a host of reasons why a company may want certain disputes – including, but not limited to, those brought by its own employees – resolved through arbitration. Similarly, companies almost always want to avoid the risk of being sued in a class action. Recently, the U.S. Supreme Court, in its consolidated decision in Epic Systems Corp. v. Lewis; Ernst & Young LLP v. Morris; and NLRB v. Murphy Oil USA, Inc., ruled that class action waivers are enforceable.

As Justice Gorsuch noted at the outset, while the three consolidated cases had different facts, they each essentially revolved around the same related questions:

Should employees and employers be allowed to agree that any disputes between them will be resolved through one-on-one arbitration? Or should employees always be permitted to bring their claims in class or collective ac­tions, no matter what they agreed with their employers?

In the Ernst & Young case, Stephen Morris entered into an employment agreement with E&Y, stating that (i) all … Keep reading

 

We all learned pretty early on in law school that for a contract to be formed, there has to be an offer and acceptance. We also were taught that if, in responding to an offer, a party accepted some terms and proposed additional ones, that party was making a counter-offer, was deemed to have rejected the original offer, and no contract was formed. In the real world, it usually is clear whether an offer is being accepted or a counter-offer is being made. Nevertheless, and as the defendant in APB Realty, Inc. v. Georgia-Pacific LLC recently learned, a lack of precision in responding to an offer can lead to confusion as to whether or not a contract has been formed.

In APB Realty, Georgia-Pacific was offering 88 rails cares for sale, “where is, as is.” APB was interested in buying those rails cars, and it made the following offer to Georgia-Pacific’s broker:

     Total for all 88 x Log Stake Railcars $1,636,000 (Including 16% Buyer’s Premium).

Shortly thereafter, the broker responded as follows:

Here are the two options that [Georgia-Pacific] has brought back for us to close the deal on.

Option 1, basically states that for $61K, you

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It is not unusual for business people and/or in-house counsel to consult with accountants or other non-party experts when contemplating a potential business transaction. As the defendants in The C Company, Inc. v. Hackel recently learned, however, trying to protect such communications from disclosure based on the attorney-client privilege can be difficult, if not impossible.

In The C Company, attorney Todd Goldberg represented Michael Hackel and Dining-In, Inc. in connection with a 2008 transaction with The C Company and Nicholas Cercone. During negotiations, an employee of The C Company emailed a draft agreement to the company’s outside accountant, and asked him to evaluate the tax implications of the contemplated transaction. The accountant provided that advice, after which Attorney Goldberg and the accountant exchanged their own emails so that Attorney Goldberg could better understand the accountant’s viewpoint. After litigation related to the transaction was filed by The C Company and Cercone, they sought to discover all of the foregoing communications, and the defendants took the position that such communications were protected by the attorney-client privilege. In analyzing the matter, the Superior Court Judge began by stating that:

Massachusetts recognized the so-called “derivative” attorney-client privilege. Under this doctrine, the attorney-client

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Often, when settling a dispute, I include a general release that goes something like this:

Releasors hereby forever release and discharge Releasees from, and/or based on, any and all suits, etc. which Releasors ever had, now have or may in the future claim to have against Releasees, arising out of any acts or conduct that occurred from the beginning of time to the date of this Agreement.

Plainly, such a release is intended to “wipe the slate clean” and give the parties the comfort of knowing that neither can be sued by the other for any conduct that occurred up to that point in time – whether the other party knows about the conduct/claim or not.  As a recent case from the Superior Court, Fratea v. Unitrends, Inc., reminds us, however, a general release of this sort will not bar a former employee from pursuing a claim under the Massachusetts Wage Act.

When Michael Fratea left the employment of Unitrends, he executed a release in exchange for the payment of $1,875. Thereafter, Fratea filed suit against the company and two individuals, alleging a violation of the Wage Act because he was not paid overtime compensation. The defendants … Keep reading

In a recent blog post, I discussed how all-encompassing a fiduciary duty can be and how in-house counsel in closely held businesses might want to advise insiders about measures that could curb or even eliminate some of those duties. A new case from the Massachusetts Superior Court, Christensen v. Cox, highlights some other need-to-know aspects of fiduciary duties.

Clayton Christensen is a leader in the field of “disruptive innovation,” and he and his brother, Mathew, are involved in at least two companies working in that area, Disruptive Innovation GP, LLC and Rose Park Advisors, LLC. In 2010, Shawn Cox was hired as an employee at will of Rose Park, although he ended up providing various services to both companies. In April of 2013, Cox notified the Christensens that he would be taking a new job, and his last day of employment with Rose Park was at the end of May.

Shortly after Cox left, he asserted that he had been given equity in Disruptive Innovation and demanded a distribution based on that equity. While the Christensens disputed that Cox had been given any equity in Disruptive Innovation, Cox pointed to an April 2013 memo (signed by … Keep reading