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Posts Tagged ‘Massachusetts’

In Attorney Malpractice Suit Alleging “Negligent Settlement,” Massachusetts Appeals Court Holds No Expert Testimony Is Needed to Show “Fair Settlement Value” of the Underlying Claim

Posted on: July 10th, 2019

By: Ben Dunlap

The Massachusetts Appeals Court recently addressed the requirements for expert testimony in an attorney malpractice suit, concluding lack of an expert opinion on “fair settlement value” was not fatal to the plaintiff’s case.

Marston v. Orlando, 95 Mass. App. Ct. 526 (2019) arose from injuries sustained by a worker on an offshore light tower. The injured worker retained counsel to pursue a workers’ compensation claim and also federal law claims against his employer and other parties. His attorneys negotiated a $7,500 lump-sum workers’ compensation settlement and a $200,000 settlement of the federal claims.

Following the settlement, the injured worker’s conservator brought an attorney malpractice action against the attorneys, alleging the settlement was inadequate in light of the severe injuries sustained, and that the attorneys “pressured” their client to accept an inadequate settlement to “disguise” their negligent handling of the case. Among other issues, the plaintiff contended the attorneys took certain positions in the workers’ compensation case that may have precluded recovery in the federal claims.  The plaintiff proffered expert testimony regarding the requisite standard of care applicable to an attorney practicing in Massachusetts but no expert testimony on the issue of what a “fair settlement value” would have been in the underlying case.  The trial court dismissed the case on the eve of trial, ruling the plaintiff was required to show the settlement was “unreasonable” and failed to do so because he lacked expert testimony regarding the “fair settlement value” of the claim.

On appeal, the plaintiff argued, among other things, that the trial judge misapplied the law as to the requirement for expert testimony.  The Appeals Court, revisiting the standards set forth in Fishman v. Brooks, 396 Mass. 643 (1986), agreed with the plaintiff and vacated the trial court’s dismissal, concluding that “[t]he absence of an expert opinion on fair settlement value was not fatal to the conservator’s legal malpractice case.”

The Appeals Court explained there are two ways to establish attorney malpractice based on a “negligent settlement.” One method rests on proving the “case within the case.”  Using this method, the plaintiff must show first that the attorneys breached the standard of care in their settlement of the underlying claims, and second, that if the claims had not been settled, the client would have recovered more than he received in the negligently-obtained settlement.  As in most jurisdictions, Massachusetts law requires expert testimony to prove the attorneys breached the standard of care (except where a breach is “obvious”), but using the “case within the case” method, an expert is not needed to prove what a fair settlement would have been. Instead, a jury could determine what the plaintiff would have recovered in the absence of a settlement – with or without expert testimony.

The second method of proving attorney malpractice relies on the “fair settlement value” of the underlying case. To prevail using this method, a plaintiff shows that absent the attorney’s negligence, he would have obtained a more favorable settlement. The damages are the difference between the settlement obtained and what the fair settlement value would have been in the absence of any malpractice.  This method requires an expert to show what the fair settlement value would have been.

Because the plaintiff in Marston sought to prove malpractice using the first method – the “case within the case,” he was not required to present expert testimony to show the “fair settlement value.”

The Appeals Court’s decision brings into focus two distinct methods for proving an attorney malpractice case under Massachusetts law and clarifies the differing requirements for expert testimony with each method. It also highlights an issue that in many other jurisdictions is unsettled. Although most jurisdictions recognize some form of the “case within the case” method for proving an attorney malpractice claim, the treatment of the “fair settlement value” method varies widely. Some, like California, New Jersey, and New York, permit the use of the “fair settlement value” method but caution against damages that are too “speculative,” suggesting expert testimony may be needed establish the claim. Others, like Pennsylvania and Georgia, generally disfavor claims for “negligent settlement,” regardless of the theory pursued. Florida law permits recovery for “negligent settlement” but appears to favor the “case within the case” method of proof. The Marston case is a significant addition to this developing area of the law.

If you have questions or would like more information, please contact Ben Dunlap at [email protected].

About Accounting Malpractice

Posted on: July 9th, 2019

By: Eric Martignetti

Today, Massachusetts’ highest court did away with an important defense for an accountant who faces a claim of accounting malpractice brought by a client who has committed fraud. In Chelsea Housing Authority v. Michael E. McLaughlin et al., the Supreme Judicial Court held that Mass. Gen. Laws c. 112, § 87A ¾ pre-empts the common law doctrine of in pari delcito. Accordingly, as the SJC held, “where a plaintiff sues an accountant for negligently failing to detect the fraudulent conduct of the plaintiff, the plaintiff may recover damages from the accountant, but only for the percentage of fault attributed to the accountant (as compared to the fault of all others whose fraudulent conduct contributed to causing the plaintiff’s damages).”

After a lengthy examination of the legislative history of § 87A ¾, the SJC concluded that “the Legislature sought to remedy… not only the potential unfairness to accountants of joint and several liability, but also the need to hold accountants accountable for negligently failing to detect and reveal financial fraud committed by their client and its officers.”

Before today’s decision, in pari delicto was a powerful defense because it generally prevented an accountant from being held liable for accounting malpractice where a client committed fraud and was at least “in equal fault” with the accountant. After today’s decision, however, the in pari delicto defense is no longer available to an accountant where a client has committed fraud.

Importantly, because § 87A ¾ applies to all individuals or firms licensed to practice pubic accountancy in Massachusetts, accountants performing any level of services—whether compilation, review, or audit—face potential liability where a client has committed fraud. Although an accountant’s liability is limited to “the percentage of [its] fault in contributing to the plaintiff’s damages,” its liability cannot be eliminated altogether by in pari delicto.

If you have questions or would like more information, please contact Eric Martignetti at [email protected].

Employers Beware: Payroll Mistakes Are Costly and Self-Audits Will Help Minimize Risk

Posted on: July 1st, 2019

By: Janet Barringer

A six-figure fine recently imposed on an employer by the Massachusetts Attorney General’s Office for wage & hour violation is an eye-opener for a few reasons. First, the financial penalty underscores employers must regularly examine their payroll systems to ensure all employees are coded with the correct rate of pay. Second, employers must communicate with their payroll providers on a regular basis to ensure all employees are coded with the correct rate of pay in compliance with all federal and state wage & hour laws. Third, errors by a payroll company are not necessarily defenses to the employer for inaccurate pay. Regularly conducting a self-audit is an important measure for the employer to help eliminate the risk of a wage & hour violation. A summary of the circumstances leading to one employer’s recent six-figure fine for wage & hour violation is as follows.

On May 23, 2019, Massachusetts Attorney General’s Office (the Commonwealth) imposed a fine of $250,000 on Eversource Energy Service Co. (“Eversource”) after concluding the company violated Massachusetts’ Wage & Hour Law. The Commonwealth determined Eversource underpaid approximately 3,000 of its workers. The Commonwealth’s investigation revealed Eversource paid many workers the incorrect rates for hourly, overtime, Sunday, nighttime, and emergency work. Eversource failed to enter codes for the differing rates in its payroll system, resulting in errors in processing the various hour and pay rates. Eversource discovered issues with its payroll system prior to the start of the Commonwealth’s investigation and had already undertaken efforts to fully compensate its employees when the investigation began. Such corrective measures did not absolve Eversource of liability.

Moreover, as a result of the Commonwealth’s investigation, Eversource conducted a comprehensive self-audit to determine the amount of underpayment, the number of employees impacted and whether wages remained outstanding. The audit revealed Eversource underpaid workers at least $828,000 from June to December 2016. The company paid back all amounts owed and allowed workers overpaid as a result of the payroll system errors to keep those funds. Eversource also agreed to pay the $250,000 fine to resolve the Commonwealth’s investigation.

Eversource’s implemented what turned out to be a faulty payroll system in 2016. The company claimed complexities of the software’s coding system caused errors in assigning rates of pay. Though Eversource made efforts to swiftly compensate employees incorrectly paid and cooperated with the Commonwealth’s investigation, Eversource nonetheless incurred a hefty fine. Moving forward, Eversource will work with its payroll technology provider to prevent this issue from reoccurring.

The recent investigation of Eversource and resulting financial penalty reveal employers must regularly examine their payroll systems to ensure all employees are coded with the correct rate of pay.  Even if employees are coded incorrectly due to an error on the part of the payroll provider, the employer is not necessarily shielded from liability. Accordingly, employers must communicate with their payroll providers on a regular basis in order to remain compliant with all federal and state wage & hour laws. Conducting regular self-audits should help the employer eliminate wage and hour violations.

If you have any questions or would like more information, please contact Janet Barringer in the National Labor & Employment Practice Section at [email protected].

Currently pending in the Massachusetts legislature is Bill S.120 entitled “An Act Relative to Consumer Data Privacy”

Posted on: April 25th, 2019

By: Eric Martignetti

The proposed bill defines “personal information” as “information that identifies, relates to, describes, is capable of being associated with, or could reasonably be linked, directly or indirectly, with a particular consumer or the consumer’s device.” “Personal information” includes “biometric information.” “Biometric information” is “an individual’s physiological, biological or behavioral characteristics, including an individual’s DNA, that can be used, singly or in combination with each other or with other identifying data, to establish individual identity,” including “imagery of the iris, retina, fingerprint, face, hand, palm, vein patterns, and voice recordings, from which an identifier template, such as a faceprint, a minutiae template, or a voiceprint, can be extracted, and keystroke patterns or rhythms, gait patterns or rhythms, and sleep, health, or exercise data that contain identifying information.”

Under the proposed bill, a business that collects a consumer’s personal information shall, at or before the point of collection, notify a consumer of: (1) the categories of personal information it will collect; (2) the business purpose for which their personal information will be used; (3) the categories of third parties to whom the business discloses their personal information; (4) the business purpose for the third-party disclosure; and (5) the consumer’s right to request a copy of their personal information, the deletion of their personal information, and the right to opt out of the disclosure of their personal information to third parties. Also, a business must include these five items either in its online privacy policy or on its website.

Under the proposed bill, a business shall also make reasonably available to consumers two or more methods, including a link on the home page of its website, for submitting a consumer verified request. Through a consumer verified request, a consumer can request: (1) the specific pieces of personal information the business has collected about them; (2) the sources from which their personal information was collected; (3) the names of third parties to whom the business disclosed their personal information; and (4) the business purpose for third-party disclosure.

The proposed bill applies to a “business” that: (1) “is organized or operated for the profit or financial benefit of its shareholders or other owners”; (2) “collects Massachusetts consumers’ personal information”; and (3) “has annual gross revenues in excess of $10,000,000” or “derives 50 percent or more of its annual revenues from third party disclosure of consumers’ personal information.”

The proposed bill carves out an exception for “a business collecting or disclosing personal information of the business’s employees so long as the business is collecting or disclosing such information within the scope of its role as an employer.” This exception would, in most cases, protect employers from lawsuits brought by employees under the Act.

The proposed bill creates a private right of action for consumers. In a private right of action, a consumer need not suffer a loss of money or property, and they may recover $750 in statutory damages of their actual damages, whichever is greater. A consumer may also recover costs and attorneys’ fees.

If you have any questions or would like more information, please contact Eric Martignetti at [email protected].

Massachusetts’ Will-o’-the-WISP

Posted on: April 24th, 2019

By: Zach Moura

Massachusetts revised its data breach notification law, effective April 10, 2019, to change the minimum standards for what companies should include in a Written Information Security Plan, or WISP. Companies that experience a data breach incident must now confirm in their breach notice to the Massachusetts Attorney General whether the company maintains a WISP and identify any steps taken or planned to take relating to the incident, including updating the WISP. The requirements apply to companies that handle personal information belonging to Massachusetts’ residents no matter where the company itself is located.

The revisions also reshape the requirements for notifications to impacted individuals. In data breach incidents in which Massachusetts residents’ Social Security numbers are exposed, Massachusetts now requires companies to offer 18 months of free credit monitoring services to impacted individuals. Entities must also now certify to the state’s Attorney General and Office of Consumer Affairs and Business Regulation (“OCABR”) that the credit monitoring services comply with the statute, and provide the name of the person responsible for the breach of security, if known. The revisions also obligate the OCABR to publicly post the sample notice on its website within one business day.

The new statute calls for rolling and continuous notifications to all impacted individuals as they are identified, rather than allowing a business to first determine the total number of impacted individuals before notifying them all at the same time. And if an investigation reveals more information on the data breach that, if known, would have been provided to the impacted individuals in the original notice, additional notices must be sent. Entities must also now identify any parent or affiliated corporation in the notification letter.

For any questions about the above, or whether a WISP complies with Massachusetts law, please contact Zach Moura at [email protected].