JANUARY 2018
The United States Supreme Court holds time to appeal under appellate Rule 4(a)(5)(c) subject to waiver and forfeiture.
The Massachusetts Supreme Judicial Court finished out December, 2017 with two notable decisions involving spoliation and liability under the Wage Payment Act.
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THE UNITED STATES SUPREME COURT HOLDS TIME TO APPEAL UNDER RULE 4 TO BE CLAIM PROCESSING RULE SUBJECT TO WAIVER AND FORFEITURE
Hamer v. Neighborhood Hous. Servs. of Chicago, No. 16-659 (November 8, 2017)
The Supreme Court has a resolved any dispute as to whether the thirty (30) day appeal period set forth in Rule 4(a)(5)(c) of the Federal Rules of Appellate Procedure is jurisdictional or not holding that the time period is a claim processing rule and not jurisdictional. The distinction is important as jurisdictional rules cannot be waived or forfeited and can be raised at any time.
In Hamer, an employment discrimination action was resolved at summary judgment by the District Court. Following the entry of judgment, the claimant’s attorney filed a motion to withdraw and a motion for an extension of time to file an appeal in order to allow the claimant to obtain successor counsel. Under Rule 4(a)(5)(c), extensions of time to file an appeal are confined to 30 days upon a showing of excusable neglect or good cause. The District Court granted the extension for sixty days and on appeal, the Seventh Circuit, sua sponte, held that the thirty (30) time period under Rule 4(a)(5)(c) was jurisdictional thereby rendering ineffectual the 60 enlargement.
Justice Ginsburg, writing for the Court, reversed the Seventh Circuit finding that only those time periods governing the time for appeals established by Congress are jurisdictional. She noted that the Seventh Circuit as well as other courts have “tripped over” the Court’s prior statement that “the taking of an appeal within the prescribed time is mandatory and jurisdictional.” It remains that the jurisdictional consequence only applies if the time period was Congress created. Since the time period set out Rule 4(a)(5)(c) was not jurisdictional but a claims processing rule governing the length of extensions of time based on excusable neglect or good cause, it was subject to waiver and forfeiture. The Court remanded the matter back to the District Court for further proceedings including addressing whether the lack of timeliness contention was waived and whether equitable considerations may provide for exception from the time limits set forth in Rule 4(a)(5)(c).
The decision reflects the Court’s effort to more rigidly use and define “jurisdiction” and delineate the distinction between a jurisdictional time period and a claim processing rule. The result is that time periods set out in Rule 4(a)(5)(c) are subject to forfeiture and waiver as well as the potential for further exception based on equitable considerations.
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SUPREME JUDICIAL COURT
SUPREME JUDICIAL COURT REJECTS CLAIM OF ERROR AT TRIAL IN REFUSAL TO GIVE SPOLIATION INSTRUCTION
Santiago v. Rich Products Corp., 16-P-504 (December 28, 2017)
The Supreme Judicial Court closed out 2017 with a ruling affirming the decision of the trial court refusing to issue a spoliation instruction. The claim involved a first grade student who suffered traumatic brain injury after choking on a meatball at school during lunch. Claims of negligence and warranty liability were brought against the city and the manufacturer of the meatballs involved in the choking incident. As to the manufacturer, it was claimed that use of Profam 974 in the meatball formula caused the meatball to have an unreasonably dangerous texture. After trial, a jury found the manufacturer negligent but that the negligence was not a substantial contributing factor to the plaintiffs’ injuries. The jury further found that the manufacturer did not breach the implied warranty of merchantability by selling meatballs that were unreasonably dangerous. On appeal, the claimant asserted that the Court erred in granting summary judgment for the City and in refusing to issue a spoliation instruction for alleged destruction of documentary evidence.
The SJC found no abuse of discretion by the trial court in refusing to give a spoliation instruction as the claimant failed to establish the necessary factual predicate that the manufacturer lost or destroyed the missing evidence when it knew or should have known of a potential lawsuit. The claimant had asserted, shortly before trial, that there had been spoliation of (1) laboratory notebooks and production records from 2004 relating to the development of the formula for the meatball and (2) the results of product development and production testing from 2004.
The SJC held that the claimant had failed to offer any evidence to establish the basic threshold fact of when the documents at issue went missing. “Without establishing this threshold fact, the plaintiffs necessarily could not show that [the manufacturer] lost or destroyed the documents when it knew or should have known of their potential significance. Even if the documents were discarded contrary to the manufacturer’s three year record retention policy, there remained no evidence that the manufacturer lost or destroyed the documents after receiving notice of the lawsuit. Further, there was no showing of prejudice as claimants were allowed to thoroughly explore at trial the theory that the manufacturer had changed the formula.
As to the absence of testing documents, the Court found the assertion of prejudice to be “speculative” as the evidence established testing was done for quality assurance purposes not choking concerns. The Court noted that claimants counsel made the most of the opportunity, referring to the loss of relevant evidence in his opening statement, questioning the manufacturer’s employees at-length about the missing documents, and arguing in closing that the jury should find the employees not credible because they had lost the documents.”
As to the negligence theory against the City—i.e. that it negligently provided a food product that was dangerous to young children and otherwise provided negligent supervision, it agreed with the trial court that “the plaintiffs had no reasonable expectation of proving negligence on either of these grounds.” Claimants conceded that the PA announcement during lunch that the children had four minutes to finish and the purported insufficiency of staff as to supervision fell under the discretionary function exemption to the MTCA. As to the assertion that the City employees improperly administered the Heimlich maneuver and “back blows” during the chocking episode, it was an issue of medical causation requiring expert testimony which was absent.
The decision is significant in that the spoliation rule was reaffirmed and that it remains a fundamental necessity to show prejudice on appeal. Identifying and articulating error alone is never usually sufficient absent a showing and demonstration of palpable prejudice as a result of the error. Here, the trial judge, although refusing to give the spoliation instruction, allowed the claimants to assert and argue that the material documents were lost with no showing of identifiable prejudice on appeal in the failing to give the requested instruction and in light of the leeway the trial court allowed as to argument and presentation.
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SUPREME JUDICIAL COURT REVERSES VERDICT IMPOSING INDIVIDUAL LIABILITY UNDER WAGE PAYMENT ACT AGAINST CORPORATE BOARD MEMBERS
Segal v. Genitrix LLC., SJC-12291 (December 28, 2017)
The SJC reversed a verdict awarding damages under the Massachusetts Wage Payment Act against two former corporate board members. The former president of the company had brought suit asserting that he was owed back wages and that such wages could be sought under the Wage Payment Act against officers or agents of the company who had managed the company. The circumstances presented were unique in that the company had otherwise dissolved and the claimant was the president and sole officer of the corporation and thus the only person expressly identified by virtue of his title as responsible for Wage Act violations.
The SJC reviewed the Wage Payment Act which imposes liability upon an “employer” and which includes a “person having employees in his [or her] service” and that for corporations, such persons are the “president and treasurer of [the] corporation and any officers or agents having the management of such corporation,” in addition to the corporation itself. It noted that the Act does not include board of directors or investors in its definition of “employer.” The SJC, in turn, found that the reference to “officers or agents having the management of the company” means that such officers or agents have assumed and accepted individual responsibility for the management of the corporation, justifying the imposition of personal liability for Wage Act violations. Neither defendant was ever the president, treasurer or an officer leaving only the issue of whether they were “agents having the management” of the company.
Looking at both the plain language and history of the Act, the SJC found that personal liability for Wage Act violations was intended to be imposed on the president and treasurer of the corporation and on other officers or agents who may not hold these titles, but who have assumed and accepted as individuals significant management responsibilities over the corporation similar to those performed by a corporate president or treasurer, particularly in regard to the control of finances or payment of wages. It further acknowledged that how the statutory definition of “agents having the management of such corporation” would apply to board members and investors is by no means obvious. It went on to conclude that neither the common understanding of the word “agent,” nor its use in the Wage Act, encompasses ordinary investors or investment activity. The defendants were found to have very limited agency powers as to the company which powers were insufficient to make the defendants individually or collectively “agents having the management of such corporation.” The statute specifically imposes personal liability on those who have assumed individual responsibility as officers or agents. It does not impose individual liability on board members, acting as board members, or outside investors overseeing their investments. The Court noted that “this distinction reflects the Legislature’s intention to exclude the ordinary performance of board or investor responsibilities, including board or investor oversight of management and the policymaking and financial controls associated therewith, from personal liability under the Wage Act. Personal liability, particularly for board members, in corporate law is the exception, not the rule.”
The SJC went on to identify proper instructions to be used when there is a claim that a defendant is personally responsible under the Wage Payment Act by virtue of being “an agent having management of [the company].” The jury should have been instructed that there are two important requirements to being an officer or agent having the management of the company. The defendant must be an agent or officer, and must have the management of the company. To further define the meaning of “officers or agents having the management” of the company, the jury should be instructed that the Wage Act imposes liability on the president and treasurer of the corporation and on other officers or agents who may not hold these titles but whose significant management responsibilities over the corporation are similar to those performed by a corporate president or treasurer, particularly in regard to the control of finances or the payment of wages. Where board members are involved, the jury should also be instructed that “[n]either the board of directors nor an individual director . . . is, as such, an agent of the corporation.” An individual director may become an agent if he or she is also appointed as an agent, but no agency relationship arises from his or her position as a director, in and of itself. Further, the jury should be instructed that the collective powers of the board to control management or set policy are separate and distinct from the powers of individual board members.
Although a somewhat unique circumstance, the case sets out a text-book and cogent approach to statutory interpretation. It reviews and relies upon the plain terms and purposes of the Act including its history with reluctance to judicially expand through interpretation the plain terms and ordinary meaning of the terms used by the Legislature in the enactment. It likewise sets out a helpful and informative discussion of the powers and purposes of investors and board members under the circumstances.
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