A Win and a Warning

The Massachusetts Appeals Court recently found for the Hull Redevelopment Authority in a failed redevelopment project involving a private developer. But, the win came with a warning (of sorts). Quasi-public organizations with board members who pursue self-interest instead of the interests of the organization are leaving themselves and the organization open to liability.

In Nantasket Beachfront Condominiums, LLC v. Hull Redevelopment Authority (Massachusetts Appeals Court, June 5, 2015), the court was confronted with a failed real estate deal.  Both parties alleged that the other had breached the purchase agreement (in this case a Land Disposition Agreement).  The project involved the sale of land owned by the Hull Redevelopment Authority to Nantasket Beachfront Condominiums for a residential development.  The project was vehemently opposed by some residents of Hull who appealed a special permit for the project.  While the litigation was pending, two of the most vocal opponents ran for and were elected to the Hull Redevelopment Authority.  An important issue in the case was whether the participation of opponents of the project on the redevelopment authority constituted such a serious conflict of interest that it amounted to bad faith.  The Appeals Court held that because the developer had failed to file a complaint with the state ethics commission regarding the conflict of interest of the members in question, it was precluded from asking the court to invalidate the Land Disposition Agreement for breach of the covenant of good faith and fair dealing.

But here is the warning:  the Appeals Court was plainly troubled by the stratagem of the opponents of the project in getting elected to the redevelopment authority as a device to kill or impede the development.  The court noted that if the ethics commission had become involved and determined that members “ethical breaches ‘substantially influenced the action taken by [the] municipality,'” the commission could order that the actions of the redevelopment authority be “‘avoided, rescinded or cancelled.'”  In this case, the developer had not filed a complaint with the state ethics commission but, had it done so, the outcome might well have been different.  Those who oppose the actions of a municipal board who choose to get elected to that board must be careful that, once elected, their actions are consistent with the best interest of the board on which they serve.