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Civil Litigants Beware, Recorded Conversations Are Coming in as Evidence

George Barclay

Because of a loophole in the Massachusetts Wiretap Statute, also known as G.L. c. 272, § 99, a recording of another person, even one alleged as illegal, is

admissible evidence in a civil case. While G.L. c. 272, § 99 contains penalties such as up to five years in state prison, up to two and a half years in jail, a fine of up to $10,000, or a combination of a fine and incarceration, the statute is silent on evidentiary exclusions in civil matters. 

A recent employment case has brought the Massachusetts Wiretap Statute, which coincides with organized crime, back into public discourse. In a recent Suffolk Superior Court case, Nicole Simpson v. Boston Public Health Commission, a workplace altercation boiled over into an incident captured on a smartphone.

Simpson, an African American woman and former Boston Public Health Commission (BPHC) employee, believed that her subordinate was acting in a racially insensitive manner towards her. In 2017, Simpson and her subordinate got into a verbal altercation where Simpson claimed her subordinate recorded the incident without her consent on a smartphone. 

The subordinate reported the incident to HR, submitted the recording to HR, and claimed the plaintiff verbally assaulted them and used a racial slur. The Boston Public Health Commission (which claims it did not view the recording) conducted interviews, investigated the incident, and held a meeting with the plaintiff, where she was given the option of resigning or being terminated. 

The plaintiff resigned and sued BPHC for discrimination, retaliation, and two counts of violating the Wiretap Statute. The plaintiff claims that the BPHC illegally used the recording in its investigation and response to her lawsuit. Simpson argued that the basis of BPHC’s employment decision could only have come from information obtained from using the recording.

BHPC filed a motion requesting that the recording be deemed admissible before a hearing on their Motion for Summary Judgment because of the plaintiff’s verbal assault. The plaintiff argued that the recording was inadmissible because it violated G.L. c. 272, § 99.

In ruling on the defendant’s motion, the judge held that the Wiretap Statute does not bar the use of allegedly illegal recordings in civil cases. “Indeed, the Wiretap Statute contains explicit provisions about the use of illegally obtained communications in evidence, but those limitations are limited to criminal trials; there are no provisions limiting the use of such communications in civil trials.”

The judge elected to rule on whether the plaintiff consented to the recording during the hearing on the motion for summary judgment. Additionally, the judge noted that the use of the recording could also be protected by the litigation privilege, an established rule of law.

This ruling raises multiple policy questions. Will employers now be incentivized to record employees? What about instances where an individual is trying to protect themselves from abuse? Smartphones are easily obtainable devices. Legislative reform is likely needed. Otherwise, similar cases will likely fill courtrooms across the state.

George is an associate attorney at Rudolph Friedman LLP.  He counsels and represents individuals and businesses in commercial litigation matters in state and federal court. He litigates complex commercial disputes, employment disputes, and shareholder disputes. George can be contacted at gbarclay@rudophfriedman.com

 

Does a General Contractor’s Commercial General Liability Insurance Provide Coverage Against Damage Caused by a Subcontractor’s Defective Work?

Sean B. Cullen

Construction projects often involve work performed by subcontractors. While this makes sense given the varying expertise

and equipment required, it can create some difficult issues from an insurance perspective when things go awry. Imagine, for example, a general contractor who performs non-defective work on one part of a construction project while a subcontractor performs defective work on another part of the project. What happens if the general contractor’s work is damaged by the subcontractor’s defective work? Is the general contractor covered under its commercial general liability (“CGL”) insurance policy for this type of damage? The United States Court of Appeals for the First Circuit recently said no and held that the insurance company had no duty under the CGL insurance policy to indemnify or defend the general contractor against this type of claim.

The controversy arose when the property owner filed a state court action against the general contractor and others alleging property damage caused by defective work (“State Court Action”). The property owner did not allege, however, that the general contractor was negligent or that the general contractor caused the property damage. The parties determined through the discovery process that a subcontractor’s defective work caused the property damage.

In response to the State Court Action, the general contractor sought defense and indemnity under its CGL insurance policy. The insurance company denied coverage, however, concluding the property owner’s allegations did not constitute an “occurrence” under the policy. The insurance company also concluded that, even if it did, an exclusion to coverage would apply. After “some back and forth letters,” the insurance company filed a separate action in the United States Federal District Court for the District of Massachusetts to determine whether it had a duty to defend or indemnify the general contractor in the State Court Action (“Federal Court Action”).

There are three steps to this analysis. The court first determines whether the damages alleged are caused by an “occurrence” and therefore fall within the scope of coverage provided under the insurance policy.  If so, the court must then determine whether any exclusions to coverage apply. Finally, if an exclusion to coverage does apply, then the court must determine whether any exceptions to the exclusions apply. Interestingly, the burden of proof shifts between the insured and the insurer at each of these stages.

Ultimately, the First Circuit bypassed the initial step and thornier question as to whether negligent work performed by a subcontractor constitutes an “occurrence” under the general contractor’s CGL insurance policy. The First Circuit acknowledged that there is sharp split of authority on this question, and were hesitant to predict which way the Massachusetts Supreme Judicial Court would decide the issue. Instead, the First Circuit determined that there was an applicable exclusion regardless. The First Circuit reasoned that “the purpose of a general liability insurance policy is for tort liability to physical damages to others and not for contractual liability of the insured for economic loss because the product or completed work is not that for which the damaged person bargained.” In other words, the purpose of a general liability policy is to protect against unforeseeable and accidental damage, not to protect against inherent business risks. 

An Associate in the Boston law firm of Rudolph Friedman LLP, Sean is a seasoned litigator with nearly twenty years of experience. He has a successful track record in state and federal court defending against claims for alleged violations of the Massachusetts Consumer Credit Cost Disclosure Act (MCCCDA), the Fair Debt Collections Practice Act (FDCPA), and the Real Estate Settlement Procedures Act (RESPA). Sean can be emailed at scullen@rudolphfriedman.com

 

Massachusetts Noncompetition Agreement Act Ruled Not Applicable to Non-Solicitation Agreement with Forfeiture Clause

 Robert P. Rudolph

The SJC recently clarified that the Massachusetts Noncompetition Agreement

Act (“Act”) does not apply to a non-solicitation agreement incorporated into a termination agreement even if the termination agreement includes a forfeiture provision if the employee breaches the non-solicitation agreement. In the matter of

Susan Miele v. Foundation Medicine, Inc., Susan Miele (“Miele”) signed a transition agreement that included: (i) a non-solicitation provision barring Miele from directly or indirectly soliciting, enticing or attempting to persuade any other employee or consultant of Foundation Medicine, Inc. (“FMI”) to leave FMI during her employment and for one year thereafter and (ii) a forfeiture clause providing that if Miele committed a breach of the transition agreement, any unpaid benefits she was entitled to would be forfeited and any previously paid benefits must be immediately repaid to FMI.

FMI alleged the Miele improperly solicited employees to work for her new employer in breach of the transition agreement. FMI demanded repayment of benefits disbursed to her (valued at $1.2 million) and ceased future payments based on the forfeiture clause. Miele sued FMI alleging that FMI breached the transition agreement by withholding payment of her transition benefits. FMI counterclaimed for breach of the non-solicitation provision of the transition agreement and sought a ruling that it was not obligated to pay Miele any remaining transition benefits.

Miele contented the FMI’s counterclaims were unenforceable under the Act, claiming that the requirement that she forfeit her remaining severance benefits in the event of a breach made the covenant not to solicit subject to the Act. The lower court judge noted that the Act defined “noncompetition agreement” to include “forfeiture for competition agreement[]” – one that “imposes adverse financial consequences on a former employee” for engaging in competitive activity following termination and concluded that the transition agreement qualified as a “forfeiture for competition agreement” and was subject to the Act. The judge concluded that non-solicitation agreements are only excluded from the Act if they do not impose forfeiture of benefits upon a breach.

On FMI’s application for direct appellate review, the SJC clarified that because the plain language of the Act states (i) noncompetition agreements do not include non-solicitation agreements and (ii) forfeiture for competition agreements are a subset of noncompetition agreements, it follows by implication that forfeiture for competition agreements also exclude non-solicitation agreements. As a result, a forfeiture clause triggered by a breach of a non-solicitation agreement does not constitute a “forfeiture for competition agreement” subject to the Act, and is enforceable. This is an important clarification provided by the SJC which allows employers to continue to enforce non-solicitation agreements with forfeiture clauses without being subject to counterclaims for violation of the Act. We recommend that employers consult with employment counsel prior to presenting non-competition, non-solicitation and non-disclosure agreements to employees to ensure compliance with Massachusetts law. 

A frequent contributor to REBA New and a partner at Rudolph Friedman LLP, Bobby Rudolph represents individuals and businesses in complex commercial litigation. His cases involve issues related to business, employment, real estate and construction. Bobby is a trusted advisor on pre-litigation issues, regularly appears in court and has successfully resolved a range of matters through alternative dispute resolution.  He can be contacted at rrudolph@rudolphfriedman.com

Three Small Housing Reforms with Outsized Potential in Mass.

Daniel Dain, Douglas Troyer and NicholasShapiro

Bill H.2317

Solving the major housing crisis confronting the commonwealth will require bold and big solutions. Some good ones have been discussed and debated to

try to spur housing production – should multifamily housing be allowed in every zoning district? Should minimum lot size requirements be capped, allowing the development of smaller lots which can support more overall units?

The challenge of potentially transformative ideas, of course, is they often face entrenched and widespread resistance.

How about looking for seemingly minor ideas that could have an outsized effect on housing production? Maybe instead of focusing on substantive impediments to housing production, we should examine procedural impediments. 

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Are Boston Assessors Penalizing Property Owners? (Video)