Decisions, Decisions

Here’s a link to my article in Business West about three recent decisions from the Massachusetts Commissions Against Discrimination (MCAD).

Do MCAD decisions really matter? You bet. When the full Commission interprets our commonwealth’s anti-discrimination law, Chapter 151B, judges generally defer to the MCAD’s interpretation. So take a look. And if you spot the typographical error in the second paragraph, just send me an email identifying the mistake and you might win a prize.*

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* Disclaimer: No, you won’t win a prize. But I promise to hold you in high esteem for your proofreading prowess.

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New Gas Pipeline Decision

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Leverage requires a place to stand

Three environmental groups lost their case against the Federal Energy Regulatory Commission (FERC) because they lacked standing. As Archimedes noted, you can move the world with a long enough lever and a fulcrum, but only so long as you have a place to stand. Without standing, not only will you fail to move the world, but — as the three groups learned too late — you will also fail to move the United States Court of Appeals for the D.C. Circuit.

The story began when Spectra Energy applied to FERC for a certificate of public convenience and necessity (a permit) to build a natural gas pipeline to New York City via Jersey City. The Atlantic Chapter of the Sierra Club, Food & Water Watch, and NO Gas Pipeline intervened in the FERC proceedings and opposed the issuance of a certificate for several reasons, notably the increased likelihood that the gas in the pipeline would cause the homes of their Jersey City members to suffer from increased levels of radon. FERC did not fnd the objections persuasive and on May 2012 issued the certificate. The three organizations and the City of Jersey petitioned the Court of Appeals to review the decision.

On July 1, 2014, the court dismissed the petition for want of jurisdiction. It had other reasons for dismissing Jersey City’s petition, but for the environmental coalition the fatal issue was standing: the court held that each group had failed to show “injury in fact,” meaning “the invasion of a legally protected interest which is (a) concrete and particularized… and (b) actual or imminent, not conjectural or hypothetical.” In trying to demonstrate standing, the groups alleged that the pipeline would raise the risk of radon and terrorism, both of which could injure their Jersey City membership.

These risks were too speculative, the court decided. The supposedly heightened radon risk depended on energy companies choosing to (1) extract high-radon gas and (2) transport it without taking steps to reduce the radon levels. There was no evidence that Spectra would make these choices.

As for the terrorism threat, the court observed that the commission of an act of terrorism depends on the “intervening acts of third parties,” i.e. terrorists.  Perhaps the court had in mind the perverse incentive that would result from forbidding construction of a pipeline because of the chance that terrorists might try to blow it up. If acts of violent sabotage could serve as the basis for denying permits, some pipeline opponents might find themselves unable to resist the temptation to engage in them. And, besides, there is precious little that al Qaeda et al will not target or weaponize in the realm of infrastructure (or anything else, for that matter).

Here, however, I am speculating. But if I were trying to persuade a judge to deep six a project, I would keep this public policy issue in mind and refrain from relying on the target-for-terrorism argument. The main point for readers with an interest in the Northeast Expansion Project is that for standing purposes, organizations and the individuals that they consist of must demonstrate facts that establish “actual and imminent” injury. Harms that are too contingent and attenuated will not suffice. That remains true even if the organizations intervened at the FERC stage.

The take-away: In and of itself intervening in FERC proceedings is no guarantee that the intervenor will have standing to challenge FERC’s decision in court.

Court engages in time inflation and creates the 395-day year

How long is a year? That was the essence of the question the Supreme Judicial Court (SJC) answered on September 11 when it issued its decision in Brigade Leveraged Capital Structures, Inc. v. Pimco Income Strategy Fund, holding that the phrase “on at least an annual basis” means 395 days. Not as odd as it sounds, the decision represents a win for shareholder democracy and provides a reminder to attorneys who draft corporate bylaws to choose their words very carefully.

The dispute revolved around a bid to increase shareholder power. Pimco, the defendant investment management firm, managed two funds in which Brigade, the plaintiff, held shares. Brigade decided to nominate one of its partners to serve as a trustee on the boards of the two funds. Shareholders were set to elect the trustees at the funds’ next annual meeting. When it learned of the nomination, Pimco rescheduled the annual meeting from October 11, 2011, to July 31, 2012.

Brigade went to Superior Court asking for an order to make Pimco hold the 2011 shareholder meeting sooner. Pimco contended that under the terms of the bylaws it was entitled to reschedule the meeting even though the new date of July 31, 2012, was 19 months after the last shareholder meeting. In dispute was a provision in the trust’s bylaws which requires that regular meetings of shareholders “shall be held, so long as Common Shares are listed on the New York Stock Exchange, on at least an annual basis.” But what did that phrase — “on at least an annual basis” — mean?

Pimco said it could mean at any time during a fiscal year. With this approach, the management could conceivably hold one meeting in January 2013, but then not convene another one until December 2014, almost two years after the previous meeting. Rejecting Pimco’s interpretation, and siding with the shareholders, the SJC held that the phrase meant “no later than one year and thirty days (395 days) after the last annual shareholders meeting.” How and why did the court reach this conclusion?

Treating the bylaws the way it would a contract, the court construed the ambiguous provision against the party that drafted the document, namely Pimco.  In addition, it read the words in the context of another section of the bylaws that referred to an “annual period,” which ended 30 days after the anniversary of the last annual meeting. But there was also an important principle at stake: the shareholders’ right to meaningful corporate democracy. “Delay in holding a shareholder election diminishes electoral rights by allowing [the] trustees to become more deeply entrenched and to continue to harm the interests of shareholders.”

What makes this case important rather than simply intriguing? The fact that other trusts and corporations in Massachusetts have bylaws that contain the same terms as the bylaws at the center of Brigade v. Pimco, such as the “annual period” provision and the requirement for shareholder meetings “on at least an annual basis.” This is not because of lazy lawyering and a fondness for copy-and-paste. Even the most diligent, detail-oriented attorneys rely on previous examples because familiarity and predictability are valuable assets in corporate governance and law, and because those older bylaws have stood the test of time. Of course, at the heart of the Brigade v Pimco case was the very meaning of time.

So what should small business owners do? First, it is worth checking their company’s bylaws to learn whether they require shareholder meetings “on at least an annual basis.” Then they should decide whether the annual-meeting provisions, as a court would likely interpret them, will work in practice. If the bylaws need changing, they can amend them by following the steps laid out in the bylaws. Without question, this involves time and other valuable resources that owners would prefer to devote to growing the business. On the other hand, it can stop misunderstandings before they start, and (no matter what your attorney charges per hour) it will prove much less expensive than litigation.

Attorney Peter Vickery practices in Amherst, Western Massachusetts.

Right’s attack on NLRB continues

Employees and small business owners alike in Western Massachusetts need to know whether the current controversy around the National Labor Relations Board (NLRB) will affect their legal rights. The source of the uncertainty is the recent decision in Noel Canning v. NLRB, which involved a dispute between a Pepsi-Cola bottling and distribution company and the union representing the plant employees, Teamsters Local 760. Filing amicus briefs in support of the company were House Speaker John Boehner, Senate Republican Leader Mitch McConnell, and the Landmark Legal Foundation.

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Speaker Boehner and Leader McConnell

The NLRB ruled in favor of the union, but on appeal United States Court of Appeals reversed the decision. Why? The court said that the NLRB’s order was void because it had no quorum. And why did the court say there was no quorum? Because it held that President Obama’s three recess appointments to the NLRB were invalid. The court agreed with the Republicans leaders who had argued that when President Obama made the appointments the Senate was in session rather than in recess.

Somewhat more absorbing than the recondite issue of when a recess is not really a recess is the question of how this became a contested issue in the first place. Spoiler alert: The answer involves large amounts of money.

Many of the people who are going after the NLRB are also attacking climate science. It’s no secret that ultra-conservatives fund climate-change denialists. To its credit, the Landmark Legal Foundation is quite candid about its opposition to the “extreme environmental groups” that spread “global warming hype” and receive Environmental Protection Agency (EPA) grants. Under the moniker Greenwatch, the foundation provides a handy database for concerned conservatives that “identifies the location, leadership and membership of each profiled group.”

But if you happen to be an anti-green sleuth trying to follow the money from the EPA to the Vast Climate Change Conspiracy, don’t pin your hopes on the Greenwatch database. Its keyword search couldn’t even locate any EPA grantees with the words “green” or “climate” in their names. You’d be better offer using the EPA’s own grant site or (almost needless to say) Google.

Greenwatch’s funders include the Charles G. Koch Charitable Foundation and the Scaife Family Foundations. I learned this from Right Wing Watch, a project of People for the American Way. Presumably I could turn to Left Wing Watch or Secular Humanist Watch if I wanted to uncover the names and faces behind People for the American Way. Alternatively I could just read the organization’s Form 990, which it posts online.

But why are the Charles G. Koch Charitable Foundation and the Scaife Family Foundation helping pay for the courtroom assault on the NLRB?

Irking the people who write the checks for the Landmark Legal Foundation are decisions like Hispanics United of Buffalo. In that case, the employer fired workers who had engaged in an online discussion about their job performances. One worker had been critical, and others responded. The NLRB sided with the employees. It ruled that the workers were “taking group action to defend themselves against the  accusations they could reasonably believe [the critical employee] was going to make to management.” So in preparing to engage in mutual aid and protection, their Facebook comments constituted “concerted activity” within the meaning of the National Labor Relations Act, Section 7.

The NLRB’s Hispanics United decision set “a low threshold” for concerted activity, to the chagrin of attorneys who work on the employer side of the aisle. So the company, with help from the Republican congressional leadership plus the Koch and Scaife foundations, challenged the legitimacy of the NLRB itself. Now they and their allies contend that the Court of Appeals decision in Noel Canning casts doubt on all the NLRB’s recent decisions, which they characterize as “pro-Bog Labor rulings,” e.g. Hispanics United.

So what does all this mean for workers and small business owners in Western Massachusetts? First, it’s important to bear in mind that the National Labor Relations Act (NLRA) does not cover all workers. Non-federal public employees in Massachusetts are covered by the state equivalent of the NLRA (M.G.L. c. 150E), as are some unionized employees in the private sector (M.G.L. c. 150A). So the Hispanics United and Noel Canning decisions, which interpret federal law, do not have a direct effect on these workers.

Second, most private-sector employees in this part of the world are at-will. Union members are in the minority. Employers can fire at-will employees for no reason, so long as the underlying purpose is not discriminatory or retaliatory. For my short video on this subject, just click here.

Third, focusing on situations like Hispanics United where employees are communicating online about their rights at work, several different state laws may offer varying degrees of protection. For example, the Right-to-Know Law (M.G.L. c. 111F) protects workers who work with toxic or hazardous substances. Employers that punish employees for exercising their rights under this statute could face suit in Superior Court. If workers use Facebook to discuss whether they should refuse to work unless the employer complies with the applicable regulations (450 CMR 21.00) would the employer be free to terminate them? That would be a very risky decision on the employer’s part.

Similarly, the state’s whistleblower law (M.G.L. c. 149, S. 185) is supposed to safeguard any employee who “discloses, or threatens to disclose to a supervisor or to a public body an activity, policy or practice of the employer, or of another employer with whom the employee’s employer has a business relationship, that the employee reasonably believes is in violation of a law, or a rule or regulation promulgated pursuant to law, or which the employee reasonably believes poses a risk to public health, safety or the environment.” The statute also protects employees who object to policies and practices of that kind. If at-will employees organized their whistleblowing via Facebook, could their employer fire them? Again, that would be a very risky decision.

While keeping in mind that we should never post online anything we would not be happy reading on the front page of the newspaper, we should not let the Noel Canning case chill legitimate online discussions about workplace health and safety and the environment. After all, that is precisely what the people behind the Landmark Legal Foundation and Greenwatch would like.