Today’s installment comes to us courtesy of the First Circuit. Last week, the court issued its decision in Sparkle Hill, Inc. v. Interstate Mat Corp., No. 14-1618. The case itself is an action seeking statutory damages of $500 (to be trebled, of course) for the sending of an unsolicited fax advertisement in May of 2006 in violation of the federal Telephone Consumer Protection Act. I confess that I had no idea that: (a) Congress had created such a federal cause of action; or (b) anyone was really making much use of fax machines in 2006. What caught my attention about this case is that the opinion centers on one of the scourges of litigation practice – the practice by some lawyers of saving arguments for their reply briefs.
In Sparkle Hill, the plaintiff did not respond to the statute of limitations defense raised by the defendant’s summary judgment motion. The District Court took the plaintiff’s failure to respond as a concession, and entered summary judgment in the defendant’s favor, though not without also addressing the merits of the summary judgment defense.
On appeal, the plaintiff’s opening brief was devoted exclusively to the merits of the statute of limitations defense. The plaintiff did not address the District Court’s decision to hold it accountable for its lack of opposition to the defendant’s limitations defense – the actual, procedural basis for the ruling below – until its reply brief, when the defendant would not have an opportunity to respond.
Suffice it to say, the First Circuit was not impressed. After noting the court’s clear precedent that issues raised for the first time in an appellant’s reply brief are deemed waived, Judge Kayatta offered the following refreshingly blunt assessment: “Sandbagging of this type deprives the appellee of an opportunity to respond in writing on the issue. And any attempt to remedy that unfairness by allowing a second opposition, or sur-reply, brief can both increase costs for the appellee and result in considerable delay.” Amen, Judge.
The First Circuit clearly has no patience for sandbagging, and in Sparkle Hill basically told the Bar to “knock it off.” Ignore the lesson at your peril.
Monday, June 8, 2015
Wednesday, May 6, 2015
A Study In Judicial Restraint – The Maine Law Court’s Decision In Hartwell v. Town of Ogunquit
It took a while, but a court finally gave me something to write about today. What struck my fancy is the Law Court’s decision yesterday in Hartwell v. Town of Ogunquit, 2015 ME 51, a case involving an appeal from the Ogunquit Planning Board’s site plan and design review approval of an application to convert a garage into a lobster pound. The Planning Board approved the application. As aggrieved neighbors are wont to do, some abutting landowners sought judicial review.
Two facts are noteworthy for our purposes: (1) not all of the information required by the Ogunquit Zoning Ordinance to be submitted for design review was provided by the applicant; and (2) the Ogunquit Zoning Ordinance does not authorize the Planning Board to waive any of the design review submission standards. The Superior Court, however, noted that Ogunquit had a longstanding practice of not enforcing every submission requirement listed in its Zoning Ordinance (and my experience is that this is by no means unique to Ogunquit). The Superior Court, however, vacated the Planning Board’s approval and was affirmed by the Law Court.
While cognizant of limited municipal resources and the difficulties often encountered by volunteer boards, the Law Court noted that the plain language of the Ordinance could not be ignored: “When a municipal ordinance requires an applicant to submit specific information, and the ordinance neither allows for the submission of written waiver requests nor includes a provision allowing a planning board to determine that certain requirements are not applicable, the planning board has no authority to disregard or waive the requirements of the ordinance.” Nor, it continued, do the courts have the authority to determine that the failure to submit required material is de minimis or harmless error. If towns do not wish to require strict compliance with every design review criterion in all cases, the Court noted that they should revisit their ordinances, and it provided a handful of examples of what could be done in that regard.
It is rather clear from Hartwell that the Law Court believes that there are some significant problems with our current system of administrative and judicial review of municipal land use decisions. It is equally clear that the Court is not about to rush into the breach, and is instead comfortable with leaving it to the political branches to work towards a solution.
Two facts are noteworthy for our purposes: (1) not all of the information required by the Ogunquit Zoning Ordinance to be submitted for design review was provided by the applicant; and (2) the Ogunquit Zoning Ordinance does not authorize the Planning Board to waive any of the design review submission standards. The Superior Court, however, noted that Ogunquit had a longstanding practice of not enforcing every submission requirement listed in its Zoning Ordinance (and my experience is that this is by no means unique to Ogunquit). The Superior Court, however, vacated the Planning Board’s approval and was affirmed by the Law Court.
While cognizant of limited municipal resources and the difficulties often encountered by volunteer boards, the Law Court noted that the plain language of the Ordinance could not be ignored: “When a municipal ordinance requires an applicant to submit specific information, and the ordinance neither allows for the submission of written waiver requests nor includes a provision allowing a planning board to determine that certain requirements are not applicable, the planning board has no authority to disregard or waive the requirements of the ordinance.” Nor, it continued, do the courts have the authority to determine that the failure to submit required material is de minimis or harmless error. If towns do not wish to require strict compliance with every design review criterion in all cases, the Court noted that they should revisit their ordinances, and it provided a handful of examples of what could be done in that regard.
It is rather clear from Hartwell that the Law Court believes that there are some significant problems with our current system of administrative and judicial review of municipal land use decisions. It is equally clear that the Court is not about to rush into the breach, and is instead comfortable with leaving it to the political branches to work towards a solution.
Wednesday, March 4, 2015
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.
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.
Monday, January 5, 2015
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 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.
Thursday, December 11, 2014
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.
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.
Friday, November 14, 2014
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.
Wednesday, October 29, 2014
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.
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.
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