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TRILLIUM, INC. vs. KENT CHEUNG; EDWARD FOLEY, third-party defendant. 11-P-727 APPEALS COURT OF MASSACHUSETTS 81 Mass. App. Ct. 1115; 961 N.E.2d 622; 2012 Mass. App. Unpub. LEXIS 195

February 21, 2012, Entered NOTICE: DECISIONS ISSUED BY THE APPEALS COURT PURSUANT TO ITS RULE 1:28 ARE PRIMARILY ADDRESSED TO THE PARTIES AND, THEREFORE, MAY NOT FULLY ADDRESS THE FACTS OF THE CASE OR THE PANEL'S DECISIONAL RATIONALE. MOREOVER, RULE 1:28 DECISIONS ARE NOT CIRCULATED TO THE ENTIRE COURT AND, THEREFORE, REPRESENT ONLY THE VIEWS OF THE PANEL THAT DECIDED THE CASE. A SUMMARY DECISION PURSUANT TO RULE 1:28, ISSUED AFTER FEBRUARY 25, 2008, MAY BE CITED FOR ITS PERSUASIVE VALUE BUT, BECAUSE OF THE LIMITATIONS NOTED ABOVE, NOT AS BINDING PRECEDENT. PUBLISHED IN TABLE FORMAT IN THE MASSACHUSETTS APPEALS COURT REPORTS. PUBLISHED IN TABLE FORMAT IN THE NORTH EASTERN REPORTER. JUDGES: [*1] Kafker, Fecteau & Wolohojian, JJ. OPINION MEMORANDUM AND ORDER PURSUANT TO RULE 1:28 The plaintiff, Trillium, Inc., and its owner, third-party defendant Edward Foley (collectively Trillium), appeal from a judgment in favor of the defendant, Kent Cheung. Trillium brought suit against Cheung for breach of fiduciary duty and fraudulent concealment arising from Cheung's unilateral release of a former employee from a noncompetition agreement (agreement). Upon Cheung's motion for judgment notwithstanding the verdict (JNOV), the judge entered judgment finding that the agreement was unenforceable and dismissing the complaint. Trillium appeals, contending the judgment was contrary to the law and clear weight of the evidence and asserting that the judge's decision as to the validity of the agreement constituted an abuse of discretion.1 We hold that it was error for the judge to utilize the motion for JNOV to determine, as a matter of law, that the agreement was unenforceable and to allow the motion on that ground. The motion was premature and JNOV could not be allowed either at the time the motion was made or decided because the trial was not yet complete. We also hold that the judge failed to sufficiently [*2] set forth a clear legal standard against which he analyzed the issue and rendered his decision.2 We vacate the final judgment dated June 29, 2009, and remand for a new trial on damages, including the issue of enforceability of the agreement.3 1 We agree with Trillium that, ordinarily, review of a motion for JNOV is for an abuse of discretion. In the present case, however, the judge treated the motion as an opportunity to rule on the issue of enforceability of the agreement, a legal issue the judge, during trial, explicitly reserved for later determination. In light of the unusual procedural posture and factual background underlying the judge's decision on enforceability, we construe Trillium's objection broadly to also challenge the appropriateness and adequacy of the judge's ruling. 2 As such, we decline to make a determination as to the substance of the judge's decision on enforceability as represented in his memorandum and order of December 29, 2008. 3 We are satisfied that the judge properly considered enforceability to be relevant to damages as an aspect of causation. Both parties agreed to a bifurcated trial whereby a jury would decide the issue of liability, followed by a bench trial [*3] whereby the judge would decide the issue of damages. At several points during the jury portion of the trial, the judge informed the parties that the enforceability of the agreement was an issue to be decided by the judge as a matter of law. In his memorandum of decision on the motion for JNOV, he stated that "it is clear to me that the motion to bifurcate the trial was agreed upon by both counsel and that this agreement includ[ed] reserving the issue of damages for a bench trial, [and] I cannot rule on damages without addressing the legal issue of the enforceability of the Non-Compete Agreement at the heart of this dispute." Consistent with

Page 2 81 Mass. App. Ct. 1115; 961 N.E.2d 622; 2012 Mass. App. Unpub. LEXIS 195, * that approach, the judge had prohibited the parties from presenting evidence that bore on the enforceability issue during the liability portion of the bifurcated trial. At the conclusion of the liability stage, the jury returned a verdict in favor of Trillium. Cheung thereafter filed a motion for JNOV, generally arguing that the agreement signed by a former Trillium employee was unenforceable and, therefore, no damages had accrued to Trillium as a result of Cheung's execution of the release. Trillium opposed the motion on several grounds, including [*4] that enforceability was a legal issue that should have been raised by Cheung prior to trial.4 The judge utilized the motion to determine, at this juncture of the trial, and based in part upon facts he found from having presided at the liability phase of the trial, that the agreement was unenforceable. 4 Trillium contends that Cheung effectively waived the issue of enforceability of the agreement by failing to place Trillium on notice of this argument prior to raising the issue in the motion for JNOV. As we are satisfied that the judge properly considered enforceability to be relevant to damages, we need not reach the issue of waiver. To the extent that the judge, sua sponte, treated the motion for JNOV as a substitute for a bench trial on damages, similar to a motion for summary judgment, the absence of the standards he applied to the issue render it impossible for us to reconstruct or review his decision. His action was also undertaken without any notice to the parties, a practice that should be avoided. "[T]o ensure that the ultimate findings and conclusions are consistent with the law, we scrutinize without deference the legal standard which the judge applied to the facts." Kendall v. Selvaggio, 413 Mass. 619, 621, 602 N.E.2d 206 (1992), [*5] citing Marlow v New Bedford, 369 Mass. 501, 508, 340 N.E.2d 494 (1976). The value of this practice is paramount; "[o]ur review is greatly hampered by the fact that the court below . . . did not specify the grounds for . . . granting the motion for a new trial." Turnpike Motors, Inc. v. Newbury Group, Inc., 413 Mass. 119, 128, 596 N.E.2d 989 (1992), quoting from Powell v. Lititz Mut. Ins. Co., 419 F.2d 62, 65 (5th Cir. 1969). Given the essentiality of a legal standard to a decision of law, appellate courts in Massachusetts hold broad power to review whether proper legal standards were applied. See, e.g., Commonwealth v. Brusgulis, 398 Mass. 325, 330, 496 N.E.2d 652 (1986) (decision of motion judge may be reversed where judge applied incorrect legal standard); Planned Parenthood League of Mass., Inc. v. Operation Rescue, 406 Mass. 701, 710, 550 N.E.2d 1361 (1990)("An appellate court's role is to decide whether the [trial] court applied proper legal standards and whether there was reasonable support for its evaluation of factual questions"); Van Christo Advertising, Inc. v. M/A-COM/LCS, 426 Mass. 410, 417, 688 N.E.2d 985 (1998) ("our [*6] function is to determine whether the judge abused that discretion, which includes considering whether proper legal standards were applied"). As noted, the judge did not purport to make a traditional JNOV determination, since no decision had yet been made regarding the enforceability issue. That issue was resolved only when the judge granted the motion. While a pure question of law, such as interpretation of contract, may be resolved by summary judgment, and the judge's discussion included legal standards by which enforceability of noncompetition agreements are usually tested, consideration of such an issue on summary judgment would be precluded if genuine issues of material fact existed. Indeed, the judge's decision suggests he engaged in fact-finding. He stated, however, that he found facts developed at the first phase of the trial, in which the issue of enforceability of the agreement was expressly reserved.5 5 Although enforceability of a contract is an issue to be determined by the judge as a matter of law, its resolution in this case appears to be dependent upon the length of time or geographic scope that would be reasonable for a successful hairdresser on Newbury Street, facts that [*7] were excluded during the liability trial, and not otherwise in the record before the trial judge or this court. As is required by section 5(c)(i) of the agreement, the judge is required to reform the agreement down to its maximum enforceability (in terms of duration and geographic scope); this is consistent with Massachusetts law. See All Stainless, Inc. v. Colby, 364 Mass. 773, 778, 308 N.E.2d 481 (1974) ("[i]f the covenant is too broad in time, in space or in any other respect, it will be enforced only to the extent that is reasonable and to the extent that it is severable for the purposes of enforcement"). Nonetheless, the judge did not identify the legal lens or procedural standard by which he intended to review and analyze this reserved issue. By its nature, this lack failed to include any assignment of burden either of going forward or of proof for his "legal" analysis. Nor did either party have notice of the standard the judge sought to apply prior to or during the JNOV hearing, a practice that should be avoided in the interest of justice. Lacking any statement from the judge below providing a clear legal standard, we are unable to render a conclusion regarding the validity of the decision below. [*8] See Turnpike Motors, Inc. v. Newbury Group, Inc., 413 Mass.

Page 3 81 Mass. App. Ct. 1115; 961 N.E.2d 622; 2012 Mass. App. Unpub. LEXIS 195, * at 128 ("Similarly, the requirement that a judge specify the grounds for a conditional ruling on a motion for a new trial is important in order to allow a reviewing court knowingly to rule on the question before it, and to allow the opposing party an opportunity to rectify any deficiencies in its case before retrial"). A judge's obligation to articulate the legal standards and processes he or she applies falls well within the scope of duties articulated by the Massachusetts Rules of Civil Procedure. Notably, the atypical posture of the case, whereby the motion judge seemingly made findings of fact, and with the power to nullify a prior jury verdict, invites comparison to Mass.R.Civ.P. 52, as amended, 423 Mass. 1408 (1996), and Mass.R.Civ.P. 59, 365 Mass. 827 (1974), regarding the findings of the court and a grant of new trial, respectively. Notable in the instant case, the judge had the responsibility of conducting a bench trial on the outstanding issues after the jury returned their verdict. To this end, Mass.R.Civ.P. 52(a), governing decisions and factual determinations rendered by a judge in a jury-waived proceeding, is [*9] instructive. Rule 52(a) requires that "[i]n all actions tried upon the facts without a jury, the court shall find the facts specially and state separately its conclusions of law thereon." This rule of procedure "does not require extensive detail, but does impose on the judge an independent duty to articulate the essential grounds of his decision." Schrottman v. Barnicle, 386 Mass. 627, 638, 437 N.E.2d 205 (1982). Moreover, it ensures that "the parties involved and this court on appeal may be fully informed as to the bases of [the judge's] decision." Id. at 639, quoting from Markell v. Sidney B. Pfeifer Foundation, Inc., 9 Mass. App. Ct. 412, 416, 402 N.E.2d 76 (1980). Our analysis is also consistent with the rules pertaining to motions for a new trial, as in both instances the judge is cloaked with the power to effectively preclude or overturn a jury verdict. In a grant of new trial pursuant to Mass.R.Civ.P. 59, the judge is required to file a statement fully setting forth the grounds upon which the motion is granted. In particular, this rule requires such a statement where the judge orders a new trial sua sponte, or where he or she orders a new trial on motion of a party for a reason not stated in the motion. See Mass.R.Civ.P. 59(d).6 [*10] Although Cheung moved for JNOV rather than a new trial, the underlying principle that a judge must set forth the legal grounds on which he makes his legal determination is a generally applicable proposition. See Anti v. Boston Elev. Ry. Co., 247 Mass. 1, 5, 141 N.E. 598 (1923) ("[A]mong the reasons alleged in the motion the court shall specify with particularity the grounds on which his mind rests in reaching his conclusion. The parties thus are advised of the exact foundation for the action taken by the judge"). 6 Both factual scenarios set forth in Mass.R.Civ.P. 59(d) are applicable to the instant case. On the one hand, the defendant brought a motion for JNOV to decide the dispute as a matter of law and contrary to an existing jury verdict, and the judge made decisions of law about enforceability, an issue not previously decided at the jury trial but raised nevertheless in the motion. On the other hand, the judge articulated in his decision that the issue of enforceability was reserved for the judge, and thereafter by his own initiative utilized the JNOV motion as an opportunity by which he could decide the enforceability of the agreement. Consequently, the judge having utilized a flawed process, [*11] and without having provided a clear indication to the parties and to this court as to the standards and burdens against which he intended to decide this issue, we are constrained to vacate the judgment. We remand the matter for a new trial on the issue of damages, which shall include determination of the predicate issue of enforceability of the agreement.7 7 To the extent that the judgment had vacated the jury's verdict on liability, it is ordered reinstated. So ordered. By the Court (Kafker, Fecteau & Wolohojian, JJ.), Entered: February 21, 2012.