Chutzpah Fails To Persuade Massachusetts Appeals Court

It’s been about two months since I last posted. Just when I was beginning to think that the courts were never going to offer up anything of interest (at least of interest to me), along came the Massachusetts Appeals Court this week with its decision in Celco Construction Corp. v. Town of Avon, No. 13-P-1880, to remind us that parties who create their own messes usually don’t get relief from the courts.

In 2008, the Town of Avon solicited bids to perform work on a water main extension project. Celco Construction’s bid assigned a unit price of $0.01 as its charge to remove each cubic yard of rock from the site despite the fact that its actual cost to remove the rock was much higher. Celco based its bid on its belief that the amount of rock on site would be far less than the expressly unverified estimate contained in the bid documents and that its low unit price would give it a competitive advantage versus bidders assigning unit prices approximating their actual costs.

Initially, the gamble appeared to pay off – Celco was the successful bidder. Unfortunately, for Celco, the amount of rock on site ended up exceeding the estimate by over 1,500 cubic yards. When the Town rejected its request that the unit price for rock removal be increased from $0.01 to $220 per cubic yard, Celco sued.

Celco’s claim was for “equitable adjustment.” Under Mass. Gen. Laws ch. 30, § 39N, every public construction contract must include a provision allowing either party to request an adjustment in the contract price if, during the course of the work, it is discovered that “the actual subsurface or latent physical conditions encountered at the site differ substantially or materially from those shown on the plans or indicated in the contract documents.” Such a provision allows the contracting authority to obtain bids stripped of risk premiums used as hedges, while assuring bidders that they will be compensated in the event that subsurface or latent conditions impose greater costs than reflected in the bid documents.

Like the Superior Court, the Appeals Court had little difficulty sending Celco packing. The bid documents specifically stated that the amount of rock on site was “indeterminate,” and that the unverified estimate contained therein was solely for the purpose of allowing comparison of the submitted bids. Nor did Celco even suggest that the nature of the rock or the means and cost to remove it differed in any way from what as anticipated in the contract documents.

Most importantly, the court took Celco to task for the chutzpah of its argument, noting that it “defie[d] logic” for Celco to invoke equity as the basis for an adjustment to the contract price when its purported need for an adjustment was the product of its own conscious decision to bid a unit price having no basis in reality in its (ultimately successful) effort to be the low bidder. Celco’s argument was akin to the Melendez brothers seeking leniency for the murders of their parents because they were orphans. Thankfully, common sense prevailed and the court held Celco to the consequences of its own decisions.

Is It Time For The Law Court To Stop Treating The Untimely Filing Of An Appeal As A Jurisdictional Defect?

Last week, the Law Court issued its decision in Beckford v. Town of Clifton, 2014 ME 156, which involved a proposal under a local land use ordinance to build and operate a five-turbine commercial wind energy project.  Although the Clifton Zoning Board of Appeals (ZBA) affirmed the Planning Board’s grant of the permit, the Superior Court vacated, and an appeal by the developer to the Law Court followed.

The only matter addressed by the Law Court was whether the opponents of the project had timely appealed the ZBA’s decision to the Superior Court.  The controlling statute, 30-A M.R.S. § 2691(3)(G), provides:  “Any party may take an appeal within 45 days of the date of the vote on the original decision ….”  The question before the Court was whether the 45-day period began on January 25, 2012, when the ZBA voted to deny the opponents’ appeal, or on January 30, 2012, when the ZBA voted to adopt its written decision.  If the period began to run on January 30, the opponents’ appeal to the Superior Court was timely; if it began to run on January 25, their appeal was five days late.

The Court held that the appeal period began to run on January 25, and, therefore, the opponents’ appeal was late.  Citing its longstanding rule that the failure to timely file an appeal is a fatal jurisdictional defect, the Court vacated the Superior Court’s decision and remanded the case to the Superior Court for the entry of an order dismissing the case.  The majority opinion was written by Justice Hjelm, who was joined by Chief Justice Saufley and Justices Mead and Gorman; Justices Silver, Jabar, and Alexander dissented.

Given the language of Section 2691(3)(G), I believe the Court was correct in its conclusion that the opponents’ appeal was untimely.  “So,” you might ask, “if you think the Court got it right, why do you care enough to write about the case?”  My answer is simple – while I think the Court correctly determined that the appeal was untimely, I’m not so sure that the result is the “right” one.

Not to put too fine a point on it, but the current state of the law regarding the time limits applicable to administrative appeals in Maine is a mess.  In her concurrence, the Chief Justice does an excellent job detailing all of the differing time frames applicable to administrative appeals as well as the many variations in the language used to trigger them.  The result is considerable confusion and too many traps for the unwary to count.  Although the recent amendment to the M.R.Civ.P. 80B should help eliminate some of the confusion, it does not fix every problem and it wasn’t even applicable to the situation in Beckford.  The Chief Justice summed up the confusion thusly, “When even those jurists who regularly apply and interpret the time frames set by the Legislature or by local ordinances cannot agree on their meaning or applicability, it is undoubtedly also difficult for the public and the Bar to do so.”  I agree wholeheartedly, but my question is if the members of the Law Court can’t even agree on how to apply the deadlines in administrative appeals, why send appellants packing without any consideration of the merits of their appeals simply because they calculated the deadline incorrectly?

The Chief Justice ended her concurrence by noting that it would be a great benefit to the people of Maine if the Legislature were to undertake “a thorough review of the events that trigger the running of the time for appellate review for both state and municipal appeals to establish a single, consistent, and understandable triggering event and time frame for seeking appellate review.”  That would certainly be an ideal solution, but I have another idea for the Law Court to consider – stop treating the untimely filing of a notice of appeal as depriving the courts of the jurisdiction to hear the appeals.  The Indiana Supreme Court did just that only a couple of months ago in In re Adoption of O.R., 16 N.E.3d 965 (Ind. 2014), in which the court noted the unfortunate tendency of courts (including itself) to mischaracterize procedural errors as defects in subject matter jurisdiction.  

While I am mindful that the courts’ appellate jurisdiction is limited by statute, there is nothing in 4 M.R.S. § 105(3) (conferring limited appellate jurisdiction on the Superior Court) or in 4 M.R.S. § 57 (conferring jurisdiction on the Law Court) that says that appellate jurisdiction is conferred only to the extent that a party files its appeal on time.  In fact, 4 M.R.S. § 57, itself directs the Law Court to eschew over-reliance on procedural niceties by providing that when the issues of law can be “clearly understood, they must be decided, and a case may not be dismissed by the Law Court for technical errors in pleading alone or for want of proper procedure if the record of the case presents the merits of the controversy between the parties.”  Why treat the failure to file an appeal on time differently from other procedural errors?

By not treating an untimely appeal as depriving the court of subject matter jurisdiction, there would be room for Maine courts to address the merits of untimely appeals in certain cases.  Clearly, given the interests of finality and the courts’ own institutional and other interests, limitations would have to be placed on the courts’ discretion in this regard – but that is something that could be handled through the promulgation of a new rule or two, possibly along the lines of the good cause and excusable neglect standards contained in M.R.Civ.P. 55(c) and 60(b).  This would provide Maine courts with some needed flexibility and is consistent with both 4 M.R.S. § 57 and the Law Court’s oft-stated preference for cases to be decided on the merits.

The Law Court Throws A Lifeline To Kennebunkport

At long last the Maine Law Court has issued its decision after reconsideration and reargument in the Goose Rocks Beach case, Almeder v. Town of Kennebunkport, 2014 ME 139.  As you may recall, the Court’s original decision, back in February, 2014 ME 12, vacated a Superior Court decision that had, among other things, awarded the public a recreational easement by prescription over Goose Rocks Beach.

As it had noted as an alternate holding in its original decision, the Law Court held that the public use supporting the claimed prescriptive easement had to be established on a parcel-by-parcel basis, rather than by examining public use of the beach as a whole as the Superior Court had done.  The Court further noted, as it had before, that the lack of analysis or findings of public use on a parcel-by-parcel basis required the Superior Court’s judgment to be vacated.

What happened next is truly remarkable.  After pointing out that the Town had “steadfastly” (and successfully) opposed the plaintiffs’ argument that a determination of any easement by prescription had to involve parcel-by-parcel findings, the Court remanded the case to the Superior Court to allow the Town to relitigate its case (albeit without the right to introduce new evidence) on the very parcel-by-parcel basis it had fought for years! 

While it frankly acknowledged that it wouldn’t ordinarily allow a litigant get away with such a reversal of course, the Court offered this justification:

"We recognize, however, that the public’s access to scarce resources such as sandy beaches in Maine is a matter of great importance and extraordinary public interest.  The public is obliged to rely on legal representatives to assert that interest.  In this singular case, in which those representatives chose a litigation strategy that had a substantial gap, equity demands that the matter should be remanded to allow the parties to present evidence as to the location of each Beachfront Owner’s specific parcel, and to give the court an opportunity to consider the factual record of public use already developed, so that the court can determine whether the Town established—as to each of those specific parcels of property—the elements necessary to support a declaration of a public prescriptive easement."

In addition, the Court stated that if the Town were to seek a parcel-by-parcel reanalysis on remand, the Superior Court may (not shall) require the Town to reimburse the plaintiffs for the attorney’s fees and costs they incur as a result on remand (but not the fees and costs incurred over the last several years).

Strategic choices get made in litigation every day – some pan out and others … not so much – but generally litigants (even government agencies, like the Town, charged with working in the public’s interest) are held to the choices they and their counsel make.  One could, without too much work, come up with a string cite as long as a beach towel for the proposition that even constitutional arguments can be irretrievably lost if not properly raised and/or preserved; yet, here, the Law Court threw the Town a lifeline based on a subjective judgment that sandy beaches are really important.

We all like sandy beaches, but there are important institutional considerations embodied in the Court’s long-standing rules of waiver and judicial estoppel that were too easily cast aside in Almeder for a public interest in beaches.  It will be interesting to see what next gets offered up by a litigant as a public interest of corresponding societal import in an attempt to gain relief from the operation of the rules of appellate practice.

No Section Is An Island: The Law Court Illustrates The Application Of The Construction Of The Whole Statutory Scheme Maxim

No man is an island, entire of itself; every man is a piece of the continent, a part of the main.

                                     - John Donne, Meditation XVII

Donne’s seventeenth century wisdom is encapsulated in one of the fundamental principles of statutory construction – the maxim that statutory language is not to be interpreted in isolation, but in the context to the statutory scheme as a whole.  I’ve been looking for a nice illustration of the application of this principle in practice, and the Law Court filled the void yesterday with its decision in Beaudry v. Harding, 2014 ME 126.

The central issue in Beaudry was whether an administratively dissolved LLC – one dissolved by the Secretary of State for failure to comply with certain statutory requirements, such as filing annual reports – has the legal capacity to prosecute a lawsuit.  The Plaintiff pointed to 31 M.R.S. § 1596(2)(B), as supporting his claim that Maine law has answered that question in the affirmative.  That section, entitled “Effect of dissolution,” expressly provides that dissolution does not
“[p]revent the commencement of a proceeding by or against the limited liability company in its limited liability name.” (Emphasis added).

The Law Court, though, pointed out that the Legislature had also included within the Limited Liability Company Act provisions dealing specifically with the effects of administrative dissolution.   In this regard, the Court noted that 31 M.R.S. § 1592(4)(C) provides that the administrative dissolution of an LLC “does not impair … [t]he right of the limited liability company to defend any action, suit, or proceeding in any court of this State.”  The Court reasoned that Section 1592(4)(C), which deals specifically with administrative dissolution, not Section 1596(2)(B), which deals with dissolution generally, controls (another canon of construction – the specific prevails over the general – as a bonus). 

The fact that Section 1592(4)(C) was found to control, however, did not end the matter.  Standing alone, that section does not ambiguously resolve the issue in question because it does not necessarily follow from the fact that administrative dissolution does not impair an LLC’s right to defend a suit brought against it that administrative dissolution does impair an LLC’s right to prosecute a suit against someone else.  At best, there is only a negative implication to that effect.  Ultimately, it was the guidance gleaned from its contrast with Section 1596(2)(B)’s language expressly permitting post-dissolution actions by LLCs that led to the Court to conclude that Section 1592(4)(C)’s silence on the matter means that administratively dissolved LLCs lack the capacity to bring suit. 

The Court actually appears to have provided a “two-fer” in Beaudry.  Not only did it provide the illustration of the maxim in practice that I had been looking for, it actually employed that maxim twice – once to look beyond the text of a statutory section that would, in isolation, appear to be controlling, and again to use the contrast provided by that very same section to resolve the ambiguity inherent in what it found to be the controlling section.

An Appellate Court Reminds Us That Rules Of Contract Interpretation Do Not Trump Evidence Of The Parties’ Intent

For as long as there have been contracts, there have been judges, lawyers, and parties who have struggled to divine the meaning of documents that were – shall we say – “inartfully” drafted.  To address ambiguities in such documents, common law courts have developed a host of rules of interpretation to assist in the quest for elucidation.  With its recent decision in Lynch v. Town of Pelham, No. 2013-064, the New Hampshire Supreme Court reminds us of the proper role of such rules in the interpretive process.

The dispute at issue in Lynch finds its genesis in a 1985 deed by which a trust sold land to the Town of Pelham for the development of municipal buildings.  That deed contained several restrictive covenants, including restrictions on the architectural style of the buildings to be built, but did not specify whether those covenants were appurtenant (tied to the ownership or occupancy of a particular parcel of land) or in gross (not tied to the ownership or occupancy of a particular parcel of land).
 
Years later, the Trustee took issue with the design of a proposed fire station and sought to enforce the covenants in the Superior Court.  The Town moved to dismiss the Trustee’s complaint.  According to the Town, the restrictions were appurtenant, and, because the Trust owned no land in the Town benefiting from the covenants, the Trustee lacked standing to enforce them.  The Superior Court agreed, reasoning that any deeded covenant not expressly identified as “in gross” is, under New Hampshire’s rules of interpretation, an appurtenant covenant.

The New Hampshire Supreme Court reversed, concluding that the covenants were in gross.  In doing so, the Court noted that the touchstone in interpreting contracts, including deeds, is to ascertain the intention of the parties, and that the rules of interpretation are merely aids employed by the courts when there is little or no evidence of that intention.  It concluded that the Superior Court went astray when it gave dispositive significance to New Hampshire’s preference for appurtenant covenants over covenants in gross.  In other words, the Superior Court erroneously treated an interpretive aid as establishing a per se rule.
 
The Court observed that Lynch was not a case where evidence of the parties’ intent was entirely lacking.  To the contrary, the Court pointed out that the parties’ intent could be discerned both from the language of the deed itself and the circumstances surrounding its execution; most notably, the fact that by the time the deed was signed, the Trust owned no other land in the Town to which the covenants could possibly be appurtenant.  The Court had little trouble dispensing with the notion that the parties intended a situation where the restrictive covenants would have been unenforceable from the moment they were created.
 
With determining the parties’ intent as the ultimate goal in contract interpretation, the Court in Lynch was justifiably unwilling to give primacy to a rule of interpretation favoring appurtenant covenants over evidence that the parties actually intended to create covenants in gross.  At times it is easy to seize upon a rule of interpretation as the be-all and end-all in a case involving an ambiguous contract.  What Lynch reminds us is that the rules of interpretation are merely aids used to discern the parties’ intent – they do not trump the evidence of what the parties actually intended.

Recent Amendments To Rule 80B Should Provide Needed Clarity

In case you missed it over the summer, the Supreme Judicial Court approved a couple of amendments to M.R.Civ.P. 80B effective September 1, 2014, that are of interest to those handling appeals from decisions of municipal agencies.  The first amendment clarifies when the clock begins to run on the deadline for filing a petition for review in the Superior Court.  The new amendment establishes that the general rule is that the time for filing a petition for review begins to run on the date of the public vote or announcement of a final decision by the municipal agency.  There are, however, two exceptions – when a statute, ordinance, or rule requires the action at issue to be made or evidenced by a written decision, the clock starts when the written decision is adopted; when a written decision is required by a statute, ordinance, or rule to be delivered to a person or persons, the clock starts upon delivery.  The new amendment should go a long way toward eliminating the uncertainty caused when, for example, a planning board votes to deny an application on September 5, but issues a written decision on September 19.

The second amendment makes clear in a re-written subsection (m) that when the Superior Court remands a case to a municipal agency for further action or proceedings, the Superior Court’s decision is not a final judgment – so, if you want to get to the Law Court immediately, you’d better be able to bring the case within one of the exceptions to the final judgment rule.   Although this amendment simply codifies the holdings of several recent Law Court decisions, it is helpful to have this rule set forth in the text of Rule 80B, particularly for those who may not practice extensively in this area.

Sometimes Trial Courts Really Get It Wrong; Or, That’s Why We Have Appellate Courts

I am now comfortably settled into my new professional home and, with the onset of fall, the appellate courts are back in the business of providing me with blog fodder – also known, more formally, as issuing written decisions in furtherance of their constitutional and statutory obligations to decide cases.  So, let’s get to it with a decision that has me wondering how the trial court could have possibly reached the decision it did.

The subject of today’s post comes to us courtesy of the Massachusetts Appeals Court in the form of Rodman v. Commonwealth, No. 12-P-223, an eminent domain case decided last week.  In Rodman, the Commonwealth’s Department of Highways took by eminent domain a portion of the plaintiffs’ land in 2001 in order to complete an elevated vehicle/pedestrian ramp extending from the large complex then being constructed across U.S. Route 1.  At the time of the taking, a portion of the property had been used for many years as a temporary parking lot, but the remainder was undeveloped.  Dissatisfied with the amount of the Commonwealth’s pro tanto award, the plaintiffs filed suit seeking more, but were ultimately awarded less.

The appeal centered on the Superior Court’s exclusion of evidence offered by the plaintiffs on the issue of fair market value, which consisted of plans for the potential development of the property for hotel, manufacturing, and warehouse uses.  Two of the Commonwealth’s arguments, accepted by the Superior Court, were that:  (1) since the property was essentially vacant and there were no pre-taking plans to develop it, the property had to be valued consistently with comparable sales of similar, large undeveloped parcels; and (2) the potential hotel, manufacturing, and warehouse uses were not permitted as of right in the applicable zoning district. 

In its decision, the Appeals Court provided a nice synopsis of Massachusetts law regarding the determination of fair market value in eminent domain cases.  The court noted that fair market value is based on “the highest price that a hypothetical arm’s-length willing buyer would pay to a hypothetical willing seller in a free and open market, based on the highest and best use of the property.”  It then followed up by pointing out that the concept of “highest and best use” is not limited to consideration of the then-current use, but also takes into account “potential uses [] that a reasonable buyer would consider significant in deciding how much to pay.”1

Having established that the concept of fair market valuation is based on a hypothetical transaction giving due regard to potential uses that could reasonably be made of the property, it should come as no surprise that the Appeal Court rejected the Superior Court’s analysis – or what I will call the “of course you should ignore the construction of the gigantic, half-billion dollar stadium across the street” method of valuation. Indeed, the court had little trouble concluding that a reasonable buyer interested in purchasing property across the street from Gillette Stadium would have explored the property’s development potential in determining how much to pay for it, particularly where that the zoning district’s stated goal was to “allow[] flexibility in facilitating economic development of the ‘Route One corridor.’”

The court had only slightly more difficulty dispatching the notion that only uses allowed as of right in the zone could be considered. The court stated that the hotel, manufacturing, and warehouse uses contemplated the by the plaintiffs were allowed in the zone by special permit and that there was testimony in the record to the effect that a request for such a permit would likely be granted since no waivers or other zoning relief would be necessary. The court further noted that a reasonable buyer would account for the uncertainty of obtaining such a permit by discounting for what it called “futurity and likelihood” in determining the amount it is willing to pay and that the jury could account for this in arriving at a valuation.

Frankly, given the state of Massachusetts law regarding “fair market value” and “highest and best use,” I don’t see how the Appeals Court could have done anything other than vacate the Superior Court’s decision, which effectively prevented any consideration of the property’s development potential on the question of its value. So, my friends, Rodman is as good an example as any why we have (and need) appellate courts; it will be interesting to see how it all plays out on remand.

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1 Maine law appears to be in accord.  See Curtis v. Maine State Highway Comm’n, 160 Me. 262, 266-68, 203 A.2d 451, 453-54 (1964).