Rudolph Friedmann LLP Newsletter – Winter 2011
RECENT CASE CLARIFIES LIABILITY OF CONTRACTORS UNDER CHAPTER 93A IN MASSACHUSETTS
By Anthony L. Leccese, Esq.
By statute in Massachusetts, a negligence or other tort action for damages arising out of any deficiency or neglect in the design or construction of an improvement to real property must be commenced within three (3) years after the cause of action accrues (that is, when the property owner discovers or has sufficient notice of the damages and the cause of the damages), provided that no such action can be commenced more than six (6) years after the substantial completion of the improvement and the taking of possession for occupancy by the owner. M.G.L. Chapter 260, Section 2B. This six-year limitation is known as the statute of repose and the period is absolute and is not extended by virtue of the so-called discovery rule applicable in other contexts, including with the three-year statute of limitations mentioned in the first part of the statute.
The Massachusetts Appeals Court recently considered the issue of whether this six-year statute of repose applied to a claim brought under M.G.L. Chapter 93A, the Massachusetts statute prohibiting unfair and deceptive practices in the conduct of a trade or business. The case is Kelley v. Iantosca, decided by the Appeals Court on October 21, 2010.
In Kelley, the plaintiff had purchased a newly constructed house from Belair Construction Company in 1973 pursuant to a purchase and sale agreement entered into by the parties about nine months before the closing. Belair agreed to build the house on a lot Belair then owned in accordance with plans and specifications referenced in the agreement. In 2002, Kelley started to notice cracks in the foundation. He hired an engineer, who determined that the house was settling and cracking because the foundation had been built on unsuitable subsurface fill. Apparently, instead of removing trees that had been cut down in clearing the lot, the builder buried them among some boulders on the site and then poured the concrete for the foundation over the mixture. Over time as this organic material began to rot, the foundation began to settle unevenly, cracking in the process. In a report dated February 17, 2002, the engineer determined that further settling and cracking would occur unless intervention occurred involving significant expense.
On January 12, 2006, Kelley brought suit against Belair and its principal, Joseph Iantosca, for the repair costs alleging negligence, misrepresentation, breach of contract, and unfair business practice in violation of Chapter 93A. The Court determined that the negligence claim was barred by the statute of repose because it was commenced more than six years (actually, nearly 33 years) after the completion of construction. Recognizing that the misrepresentation claim might not be governed by the statute of repose, the Court determined that such claim was barred by the general three-year statute of limitations on tort actions. Although that three-year period is subject to the discovery rule, the Court found that Kelley was on notice of the alleged misrepresentations not later than February 17, 2002, when he received the engineer’s report and he commenced the action more than three years after such date.
The breach of contract claim was based upon the failure of Belair to construct the house in accordance with the agreed-upon specifications in the purchase and sale agreement, which specifications required the removal of all trees that interfered with construction. Belair argued that whatever contractual obligations it may have undertaken in the purchase and sale agreement had merged in the deed Kelley accepted from Belair at the closing, citing to a provision in the agreement that “acceptance of a deed by the Buyer shall be deemed to be a full performance and discharge hereof.” The Court determined, however, that this provision addressed defects in title and in the conveyance itself and not construction terms. Therefore, merger did not bar an action for breach of the construction contact in this case. Yet it was clear that a more comprehensively drafted provision would have resulted in merger and a finding in favor of the builder. The parties did not raise, and so the Court did not address, whether the contract claim was barred by the six-year statute of limitations applicable to contract actions. Generally, that six-year period begins to run from the date of the breach even though damages may not be sustained until later.
With respect to the Chapter 93A claim, the Court differentiated between those allegations relating to acts or omissions occurring during the construction process, which are barred by the statute of repose, and those occurring outside of the construction process, which are not. In other words, the Court differentiated between what Belair and its principal, Iantosca, did when they built the house and what they said about what they did, highlighting the often-encountered result that the cover-up of a mistake or breach is more harshly treated than the mistake or breach itself. The Court concluded that the statute of repose did not bar claims under Chapter 93A arising out of misrepresentations by Belair and Iantosca about how they built the house or deceit by them in the sale of the house. Note that claims under Chapter 93A are subject to a four-year statute of limitations, which, unlike the general three-year statute of limitations on tort actions discussed above, had not yet run out in this case.
The message to contractors, architects, and other building professionals is clear: you can be exposed to claims of unfair and deceptive business practices filed more than six years after completion of construction.
CHANGES IN HUMAN RESOURCES LAWS COULD THEY AFFECT YOU?
By Richard Mucci, Esq.
There have been several noteworthy changes to Human Resources laws in Massachusetts in 2010. All employers should be sure they are up-to-date and educated on the recent changes in the laws. The following are highlights of the important changes in Human Resources laws over the last year.
In August, 2010, Governor Patrick signed the CORI Reform Bill. This statute prohibits employers of six or more employees from asking about a job applicant’s criminal conviction history on a job application. The law, appropriately coined the “ban the box” law, requires employers of six or more employees to remove any questions regarding an applicant’s criminal history from the initial job application. It does not prohibit employers from asking a job applicant’s criminal conviction history at a later stage of the job application process such as during an interview. However, employers seeking to use such information to make an adverse decision or question an applicant about his/her criminal history will be required to provide a copy to the applicant prior to questioning him/her about it.
Significantly, in 2012, employers will be able to obtain conviction information from the newly formed Department of Criminal Justice Information Services (“DCJIS”). This will likely be a fee based login system for employers. Employers will benefit by using DCJIS because they will be immune from liability if they decide not to hire an applicant based on information in the conviction report that is erroneous or for claims of negligent hiring.
In addition, there is an amendment to the existing law regarding personnel records in recent economic development legislation. The amendment requires employers to notify an employee within 10 days of placing information into his/her personnel record that may negatively affect the employee’s compensation, promotion, transfer or the possibility of disciplinary action. Noteworthy, is the use of the term “personnel record.” Personnel record encompasses more than simply an employee’s personnel file. A personnel record is broader and by way of example, includes documents in sub-files kept by managers. The consequences for failing to comply with the new legislation could result in the exclusion of important evidence if a former employee files suit.
Finally, on September 30, 2010, Massachusetts’ ban on texting while driving went into effect. There was much media coverage regarding the new law and how it would impinge on individual drivers. Significantly, this new texting ban affects employers as well. Employers should revise Employee Handbooks to include this new texting ban. In addition, employers should inform employees about distracted driving. Employers may want to suggest to their employees to only make emergency calls when driving and to pull over when reading/composing emails. Such written enforced policies could potentially limit future employer liability.
Congratulations to Rudolph Friedmann LLP attorneys named to the 2010 Boston Magazine list of Super Lawyers: James S. Singer, James L. Rudolph, Robert H. Shaer and Jonathon D. Friedmann.
Condo Documents Amended
Jay Worthen of Rudolph Friedmann recently amended condominium documents for a commercial condominium in Boston to allow the separation of the parking spaces from the condominium units. In this particular case, the condominium units were created with parking rights that the law refers to as “easements appurtenant” to the related condominium units. That is, each Unit has an appurtenant easement to use a parking space. Generally, such “appurtenant easements”, be they for parking spaces or some other use, cannot be separated or “severed” from the Unit to which they relate. Thus, for example, the owner of Unit X cannot sell Unit X while retaining the parking rights because the appurtenant easement must remain with Unit X. The owner of Unit X could not lease the parking space to a third party on a long-term basis without also leasing Unit X to the lessee because, a long term lease can be deemed to be an attempt to sever the appurtenant easement from its associated unit.
The creative solution that Jay came up with involved three major changes: (1) Modify the Condominium documents to terminate the appurtenant parking easements and create a new Unit comprised of only the parking lot; (2) Create a new limited liability company to own the parking lot; and (3) Convey the newly created Parking Lot Unit to the new LLC. Each member of the LLC is then given the right to use a parking space. Thus, instead of having the parking rights that are appurtenant to the condominium units, the parking spaces are membership rights that go with membership in the new LLC, and because membership interests are fully transferrable, a member of the LLC has the ability to sell his or her parking space simply by selling his or her membership interest in the LLC. This creative approach essentially separated the parking rights and the unit ownership into two separate and distinct properties that can be separately transferred.
$1.7 Million Settlement
Jim Singer of our litigation department recently settled a claim for one of our client’s for over $1.7 million which represented the full amount due for labor and materials supplied to a construction project. RF filed a mechanic’s lien regarding the project, and after 1 1/2 years of litigation, a settlement was finally reached.
We remind our clients as to the value of filing mechanic’s liens early in the construction process given that there are limitations as to what amounts the lien will cover. Generally, liens are limited by the amount due or to become due from owner to general contractor, and in the case of the lower tier subcontractors or suppliers, also the amount due or to be due the general contractor to its first tier subcontractor. Contact Jim Rudolph or Jim Singer if you have any questions about the mechanic’s lien process as it can be a very important tool regarding collections involving construction projects.
RF Files $10 Million Lawsuit
RF has filed a $10 million civil lawsuit in Suffolk Superior Court against the town of Hingham and a handful of its municipal officials, claiming our client was the victim of years of obstruction and fraud in its efforts to gain approval for numerous development projects in the community.
The lawsuit, filed on behalf of a longtime Hingham developer alleges over the last few years that the town conducted an ongoing campaign against his company, in which it repeatedly obstructed his development initiatives in a fraudulent and discriminating manner. The lawsuit names as defendants the Town of Hingham, a former Town Administrator, current members of the Board of Selectmen and Planning Board, a former Building Commissioner, and former Town Harbormaster. The lawsuit details scores of what it calls illegal, arbitrary or discriminatory rulings and decisions taken by town officials against Hastings’ numerous development projects in Hingham over the last few years.
Last year Celtics President, Rich Gotham, spoke to a number of RF clients that we have identified as avid Celtics fans. We intend to have another breakfast this year and have a sports editor from a Boston newspaper speak about the Celtics. Please let us know, by emailing reception@RFlawyers.com if you would like to be invited this year.