Synopsis: The six year statute of repose barring negligent construction and design claims applies even in cases involving damages arising from diseases with extended latency periods such as mesothelioma. A recent decision from the Massachusetts Supreme Judicial Court (“SJC”) affirms the legislative intent and comprehensive reach of the statute of repose, G.L. c. 260, § 2B (“§ 2B”). The decision highlights the importance and need for certain defendants entrenched in personal injury asbestos litigation within Massachusetts to evaluate their potential standing under the statute.

Overview: In Stearns v. Metropolitan Life Ins. Co, SJC-12544 (March 1, 2018), the SJC was tasked with answering a certified question for the United States District Court for the District of Massachusetts. The federal district court initially denied a defendant’s motion for summary judgment based on the statute of repose in a sweeping opinion that sought to address a matter of first impression under state law. Following a motion for reconsideration and a request for certification pursuant to 28 U.S.C. § 1292(b), the federal district court appropriately yielded to the Commonwealth’s highest court and certified the question of whether § 2B “can be applied to bar personal injury claims arising from diseases with extended latency periods, such as those associated with asbestos exposure, where defendants had knowing control of the instrumentality of injury at the time of exposure.” Stearns v. Metropolitan Life Ins. Co., No. 15-13490 RWZ, 2018 WL 2227991 (D. Mass. May 12, 2018).

In response, the SJC issued a well-reasoned opinion drawing from past precedent and legislative intent of § 2B in concluding that the plain and unambiguous statutory language means what it says. Although the SJC recognized “the regrettable effect of barring all or nearly all tort claims arising from negligence in the use or handling of asbestos in construction-related suits,” the SJC nonetheless upheld the viability of § 2B in finding that the statute “completely eliminates all tort claims arising out of any deficiency or neglect in the design, planning, construction, or general administration of an improvement to real property after the established time period has run, even if the cause of action arises from a disease with an extended latency period and even if a defendant had knowing control of the instrumentality of injury at the time of exposure.” Continue Reading Massachusetts Statute of Repose Means What it Says–Unequivocal Statutory Language Bars Asbestos Tort Claims

In a recent decision, the Massachusetts Supreme Judicial Court (SJC) clarified the scope of personal liability for investors and board members under the Commonwealth’s Wage Act, as codified at G.L. c. 149, §§148-150.  The SJC held that investors and board members could not be held personally liable solely by virtue of their investment activity or acts performed in their official capacity as board members.  While the case involved a nuanced set of facts aptly described as “unusual and removed from the core concerns of the Wage Act,” its holding is nonetheless significant, and provides guidance for personal liability under the Wage Act for individuals other than a company’s president or treasurer.

In Segal v. Genitrix, LLC, 478 Mass. 551 (2017), H. Fisk Johnson and Stephen Rose, two former board members of Genitrix, LLC, sought direct appellate review of an adverse jury verdict that found them personally liable for failing to pay wages owed to the company’s former president and CEO, Andrew Segal.  Johnson, Rose, and Segal founded the biotech company, originally a Maryland LLC, in 1997.  Johnson briefly served as a board member during Genitrix’s opening year, but continued to invest in the company until its dissolution in 2007.  Johnson designated Rose as his appointee to the board and advised Segal that Rose was to be his contact for any financial matters.

As a condition to Johnson’s initial investment, he required Segal to execute an employment agreement with Genitrix.  The agreement stipulated that Segal would receive a fixed salary in consideration for his service as the company’s president and CEO, including managing the day-to-day financial and administrative affairs of the company.  Segal, the company’s sole officer, supervised the laboratory, managed all human resource functions, including payroll, and was the only individual authorized to issue wage checks.

The company began to experience financial difficulties in 2006, which led to Segal’s recommendation that the company lay off its at-will employees in order to meet payroll obligations.  In turn, the two defendants invested additional money in the company; however, they earmarked the investment for specific purposes such as funding payroll and replacing lab equipment.  The company’s financial condition worsened in 2007, and Segal unilaterally decided to stop taking his salary.  By mid-2007, the company was unable to make payroll and its board voted to lay off the other remaining employee.  The defendants made a final investment to pay off that employee’s remaining salary obligations and then shuttered the company’s doors.

The company ultimately filed a petition for judicial dissolution.  During those proceedings, Segal filed an array of claims against the company, and also attempted unsuccessfully to block the dissolution of Genitrix, a Delaware LLC.  See Fisk Ventures, LLC v. Segal, et al., C.A. No. 3017-CC (Del. Ch. Jan. 13, 2009).However, Segal did not assert a claim under the Massachusetts Wage Act.  Notably, Segal continued in his role as president while the dissolution proceedings were ongoing, despite continuing to decline a salary.  Segal’s belief that he eventually would get paid for the work did not come to fruition, and he filed a Wage Act claim in 2009.

The defendants were awarded summary judgment on the grounds that they did not “have the management” of the company, as required by the Wage Act.  That victory was fleeting, as the Massachusetts Appeals Court  reversed summary judgment on the grounds that a genuine issue of material fact existed as to whether the defendants managed the company.

On remand, the case went to trial, where the judge instructed the jury, in part, that “a person qualifies as an agent having the management of such corporation if he…controls, directs, and participates to a substantial degree in formulating and determining policy of the corporation.”  The jury went on to find both defendants personally liable based upon the given instruction.  The defendants then moved for direct appellate review on the grounds that there was insufficient evidence at trial to find personal liability, and that the above-referenced jury instruction was erroneous.

In a straightforward reading of the Wage Act, the SJC noted that the omission of investors and board members from the statute was significant.  Thus, the defendants could be personally liable only if they were deemed “agents having management of the company.”  This was the first time the SJC had been tasked with interpreting that language.

In doing so, the Court looked at whether the defendants were agents as a result of their board participation, and whether the restrictions placed on new investments constituted “management” activities.

Segal argued that the defendants exercised sufficient agency authority through their investment influence and board voting rights.  The SJC rejected this argument, and concluded that while “boards are regularly required to make difficult decisions that have an impact on the company’s finances,” such decisions are not acts of individual board members as “agents.”  The SJC also disagreed with Segal’s argument that placing conditions and other restrictions on incoming investments constituted management of the company.  On that point, the SJC held “[i]nvestment restrictions limited to the use of new monies are not management direction and control over existing resources,” and “exercising one’s rights and leverage over infusions of new money are separate and distinct from being an agent have the management of the corporation.”  The SJC also noted that as the only officer of Genitrix, Segal was “the only person expressly identified by virtue of his title as responsible for Wage Act violations,” and that Segal “made the decision not to pay himself.”

Segal is significant as it limits the circumstances in which a corporate director, board member or investor can be found individually liable under the Wage Act.  While personal liability for directors and investors is not entirely foreclosed, it cannot result solely on account of an individual’s position as board member or investor.  According to the SJC, the Wage Act continues to impose personal liability on those assuming individual responsibility as an officer or agent of a company, but it “does not impose individual liability on board members, acting as board members, or outside investors overseeing their investments.”  Given the rapidly expanding startup industry in Massachusetts, Segal provides some comfort that board members and investors will not face exposure to the draconian consequences of the Wage Act, provided that they do not participate in the management of a company to a greater extent than the defendants in Segal.

 

 (AP Photo/The Boston Globe, Frank O’Brien) 

In a unanimous decision, a three-judge panel of the Massachusetts Appeals Court affirmed summary judgment against the estate of former Detroit Tigers’ pitcher, Mark Fidrych, in Pantazis v. Mack Trucks, Inc., Mass. App. Ct., No. 16-P-1497 (Nov. 27, 2017).  On appeal, the Court rejected the Estate’s argument that a component part manufacturer had a duty to warn end-users of foreseeable hazards and risks associated with a non-defective component part installed into a completed end product.

 

In April of 2009, approximately 30 years after throwing his last pitch in Major League Baseball, Fidrych’s lifeless body was found under a dump truck at his farm in Massachusetts. A witness had observed Fidrych working under the truck, and a medical examiner later determined the cause of death to be accidental asphyxiation.

 

Mack Trucks, Inc. (“Mack”) had manufactured an incomplete vehicle, consisting only of a chassis, cab, and engine. Fidrych purchased that incomplete vehicle and later converted it into a dump truck by installing a piece of equipment manufactured by a co-defendant. That second piece drew power from the vehicle’s power system to raise and lower the truck bed.

 

Ann Pantazis, executrix of Firdych’s estate, filed a wrongful death lawsuit against the two entities, among others, alleging that both entities failed to adequately warn end-users about foreseeable risks posed by certain components. She argued that both defendants knew of the dangers posed by unguarded drive shifts, but failed to provide adequate warnings to end users.

 

Both defendants conceded that the truck’s power system could have been designed and installed differently to avoid certain potential dangers. Nevertheless, the Court held that the “potential dangers…arose from the assembly of the component parts into the finished auxiliary power system. As the manufacturers of mere components that were not themselves defective, the defendants had no duty to warn assemblers or end users of the risks presented by such systems.” In citing the seminal case of Mitchell v. Sky Climber, Inc., 396 Mass. 629 (1986) (adopting the component parts doctrine), the Court expressly rejected the plaintiff’s foreseeability argument and held that the validity of the component part doctrine does not turn “on the factual unforeseeability of such harms.”

 

In summary, the Court declined to read a foreseeability exception into the component parts doctrine and affirmed the vitality of the doctrines efficacy as a defense for manufacturers of non-defective component parts.  As stated by the Pantazis Court, there is “no underlying duty to warn of risks posed by the assembled product that arose out of the addition of other components and the decisions made, and actions taken, by downstream actors.”  While Pantazis breathes fresh air into the component parts doctrine, the Court left future challenges open by noting, in dicta, “[n]one of this is to say that appellate courts should never recognize exceptions to the component parts doctrine.”