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Archive for March, 2011

Season Ticket Holder Sacked by Patriots’ Enforcement of Contractual Obligation in Ticket License Agreement

Posted on: March 23rd, 2011 by admin No Comments

If you sign a contract in Massachusetts, the New England Patriots may be largely responsible for the enforceability of certain damages provisions set forth in the agreement, known as a “liquidated damages clause.”

Liquidated damages clauses are designed to represent a reasonable forecast of damages expected to occur in the event of a breach, particularly where actual damages are difficult to ascertain. For example, in nearly every real estate purchase and sales agreement, there is a liquidated damages provision, providing that in the event the buyer backs out of the deal, the seller’s remedy is to retain the deposit as “liquidated damages.” These types of liquidated damages clauses are also commonly found in commercial lease contracts and… yes, even in contracts for the purchase of professional football tickets, including New England Patriots’ season ticket license agreements.

In the Massachusetts Supreme Judicial Court case entitled NPS, LLC v. Minihane, 451 Mass. 417, 886 N.E.2d 670 (2008), the developer of Gillette Stadium entered into an agreement with the Defendant, Paul Minihane, for the purchase of a 10 year license for two luxury Club level seats. The agreement included a liquidated damages provision, which provided that in the event of a default, including failure to pay any amount due under the license agreement, all payments due throughout the contract term would be “accelerated,” so that the defendant would be required to immediately pay the entire balance for all years remaining on the contract.

Mr. Minihane paid a security deposit and paid for the first year’s worth of tickets, but made no further payments. The Patriots sought to enforce the liquidated damages provision in the ticket license agreement, which required Mr. Minihane to pay for the remainder of the 9 years that he initially promised to pay.

A liquidated damages provision in a contract will usually be enforced provided two criteria are satisfied: 1) at the time of contracting, the actual damages flowing from a breach were difficult to ascertain, and 2) the sum agreed on as liquidated damages represents a reasonable forecast of damages expected to occur in the event of a breach. NPS, LLC v. Minihane, 451 Mass. 417, 886 N.E.2d 670 (2008); Cummings Properties, LLC v. National Communications Corp., 449 Mass 490 (2007). However, where damages are easily ascertainable or calculable, and the liquidated damages amount is grossly disproportionate to the actual damages or unconscionably excessive, a court will award the aggrieved party no more than its actual damages.

Although Mr. Minihane argued that the liquidated damages clause in the agreement with the Patriots was overly harsh and excessive, and that the Patriots could simply re-sell Mr. Minihane’s tickets to someone else, the Court disagreed and held that the Patriots’ damages were difficult to ascertain. In its holding, the Court found that the Patriots’ damages would vary depending on the consumer demand for tickets at the time of breach. The Court also found that consumer demand was dependent upon on a variety of factors such as current performance of the team; popularity of the team’s players; and relative popularity of other sports. Consequently, the Court held that it was difficult to predict, at time the contract was entered into, how long it would take the Patriots to re-sell Mr. Minihane’s seat license and at what cost it would potentially be re-sold.

While the Court focused on the sophistication of both of the parties in enforcing the terms of the contract (Mr. Minihane was a licensed real estate broker, had experience as a general contractor and real estate developer, and had entered into numerous commercial contracts, including institutional loan agreements), this case seems to apply to a wide array of contracts.

Interestingly, while liquidated damages provisions like the one used by the Patriots have been applied in commercial contracts (most notably in commercial lease agreements), the case involving the Patriots was a consumer contract. Accordingly, the importance of carefully considering the terms of every contract one signs-including what damages may result in the event a breach or breakdown in the agreement- cannot be understated.

So, whether you are a football fan or not, next time you see a liquidated damages clause, you might consider how the New England Patriots have impacted contract law in Massachusetts.

OOOPS! Court Cautions that Accidentally Disclosed Emails May be Admissible

Posted on: March 10th, 2011 by admin No Comments

In a Massachusetts Superior Court decision, issued at the end of 2010, Charm v. Kohn, 27 Mass. L. Rptr. 421, 2010 WL 3816716 (Mass. Super. 2010), the Court ruled that an email that a client intended to send only to his lawyer, but which was accidentally sent to opposing counsel, was not admissible evidence.  However, the Court warned that such accidental communications could lead to this type of evidence being admissible evidence in the future. 

Counsel for Mr. Kohn emailed Charm’s attorney, with a carbon copy (cc) to Kohn’s co-counsel, and a blind copy (bcc) to his client, Mr. Kohn.  Upon receiving the email, Kohn inadvertently selected the “reply all” feature to respond, intending only to communicate to his own attorneys, but accidentally copied opposing (Charm’s) counsel as well.  Less than a half-hour later, Kohn’s counsel emailed Charm’s attorney, requesting that he delete Kohn’s email.  Charm’s attorney refused to do so. 

Generally, communications between attorneys and their clients are privileged and cannot be admitted into evidence.  The purpose of the privilege is “to encourage full and frank communication between attorneys and their clients and thereby promote broader public interests in the observance of law and administration of justice.  The privilege recognizes that sound legal advice or advocacy serves public ends and that such advice or advocacy depends upon lawyers being fully informed by the client.” Upjohn Co. v. United States, 449 US 383, 389 (1981).

However, communications that are intended to be shared with third parties are not protected by the  attorney-client  privilege.  Commonwealth v. Noxon, 319 Mass 495, 543-544 (1946).  A difficulty arises when these communications are accidentally revealed to an opposing party who is clearly not an intended recipient.  In accidental disclosure cases, the information is only privileged if the client and attorney took reasonable steps to preserve confidentiality.  Therefore,  the issue for the Court in the Charm case was whether or not Kohn and his attorney took reasonable steps to preserve the confidentiality of their email communications.

There was some evidence that Kohn and his attorney did not act reasonably.  Several months earlier, Kohn had communicated to opposing counsel in the same, accidental manner.  Arguably, Kohn should have been more careful given his prior slip ups.  Additionally, given Kohn’s prior “reply all” mistake, Kohn’s counsel might have known that there was a foreseeable risk that Kohn would again hit the “reply all” feature.  Lastly, Kohn apparently did not attempt to resolve the dispute-, perhaps through a motion for protective order-, until Charm attempted to introduce the email into evidence in support of its motion for summary judgment. 

Judge Fabricant appeared to recognize how commonly such a mistake occurs and instead, focused on the obvious unintentional nature of the communication with Charm’s counsel in excluding the evidence.  Furthermore, the Court found it compelling that Kohn’s counsel wasted little time in immediately informing Charm’s counsel of the mistake. 

The opinion indulged “human fallibility” in this instance, but cautioned that Kohn “should not expect similar indulgence again.”  The court warned that  the parties “and others, should take note: Reply all is risky.  So is bcc.  Further carelessness may compel a finding of waiver.” 

Clients and attorneys alike should be cautious when communicating electronically to avoid carelessness that can result in disclosure of confidential information.  Some information technology professionals advise that the BCC option be ‘hidden’ in e-mail software and, instead, copies get forwarded separately.  While sending multiple emails takes a bit more time, it can prevent a recipient from accidentally selecting the ‘reply all’ feature and unintentionally communicating sensitive information to unauthorized individuals.  As e-mail dissemination glitches are increasingly publicized through reported cases, other  courts may, in the future, be far less understanding and may ultimately find waiver of this long-established privilege.

* Bennett & Belfort, P.C., wishes to thank our intern, David J. Mattern, for his work on this entry.

Court Narrows Homeowners’ Ability to Obtain Relief Under Home Improvement Contractor Statute

Posted on: March 1st, 2011 by admin No Comments

Due to a recent shift in the judicial interpretation of the Massachusetts Home Improvement Contractor law, M.G.L. c. 142A (“the Act”), homeowners will no longer be able to recover triple damages and attorney’s fees for mere technical violations of the Act by a contractor, where those technical violations do not cause harm to the homeowner.

The Act was designed to protect homeowners, and to give them a remedy to address unscrupulous practices by home improvement contractors.  The Act places numerous requirements upon the contractor.  For example, agreements between contractors and homeowners must contain the contractor’s social security number, a time schedule of payments, the date for the completion of the work, the total cost of the work, and other consumer protection-oriented disclosures.  The Act also requires that the material terms of the agreement and any change orders must be in writing for contracts over $1,000.  As a remedy for violations of the Act, homeowners are able to obtain orders from the court requiring the contractor to complete work under the contract or damages for violations of the Act.  Violations of the Act constitute almost automatic (per se) violations of Chapter 93A, Massachusetts’ consumer protection statute, permitting the homeowner to seek multiple damages (up to triple damages) and reimbursement of their attorneys’ fees.

Historically, homeowners could avail themselves of these powerful damages and attorney’s fees, even for a relatively innocuous, technical violation of the Act, such as the contractor’s failure to include his/her social security number on the contract.  Because of the threat of significant damages and the potential to have to pay the homeowner’s attorney’s fees arising from a technical violation of the Act, contractors were at a disadvantage.  A contractor who substantially completed a project may have been forced to waive all or a portion of monies owed by a homeowner due to an inconsequential oversight.  In certain cases, the threat of triple damages and attorney’s fees may have resulted in a windfall to a homeowner, who otherwise had received the benefit of her bargain.

In the recent case of  DeBettencourt v. Aronson,  the homeowner alleged that the contractor violated the Act by failing to include in the contract between the parties the contractor’s social security number, the date for completion of the work, the total cost of the work, a schedule of payments, and a recitation of the homeowners’ three-day right of rescission (cancellation).  Although the appellate court recognized that the contractor had committed numerous violations of Chapter 142A, the court also observed that none of those statutory violations caused any harm to the Aronsons.  Therefore, the court reversed the award of statutory damages and attorneys’ fees to the homeowner.

In doing so, the Court appears to have sent a message that, although the Home Improvement Contractor law is a powerful remedy for consumers who are harmed by unscrupulous contractors, Chapter 142A cannot be used by homeowners to avoid paying their contractor where no harm is caused by the contractor’s technical violations of the statute.  To obtain relief under Chapter 142A, homeowners will need to identify how a violation of the statute harmed them or caused them specific financial injury.  Contractors and consumers alike are strongly advised to have their contracts and procedures reviewed by a capable attorney to ensure compliance with Chapter 142A before problems arise.