Arcidi v. National Ass'n of Govt. Employees

• Decision Date: 07 November 2006
• Citation: 447 Mass. 616,856 N.E.2d 167
• Parties: Alfred L. ARCIDI v. NATIONAL ASSOCIATION OF GOVERNMENT EMPLOYEES, INC.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

856 N.E.2d 167

447 Mass. 616

Alfred L. ARCIDI v. NATIONAL ASSOCIATION OF GOVERNMENT EMPLOYEES, INC.

Supreme Judicial Court of Massachusetts, Essex.

Argued October 3, 2006.

Decided November 7, 2006.

Robert L. Sheketoff, Boston, for the plaintiff.

W. Gary Kohlman, of the District of Columbia, for the defendant.

Present: MARSHALL, C.J., GREANEY, IRELAND, SPINA, COWIN, SOSMAN, & CORDY, JJ.

COWIN, J.

Alfred Arcidi and the National Association of Government Employees, Inc. (NAGE), entered into a "consulting agreement" whereby Arcidi was to secure the approval of a proposed real estate development by the Massachusetts Turnpike Authority (MTA). The agreement provided that Arcidi would receive $250,000 provided that the development was "approved and built." Arcidi received $200,000 after the project was approved by MTA but was never paid the $50,000 balance, and sued NAGE.¹ NAGE defended on the ground that the contract was unenforceable because G.L. c. 3, § 42,² prohibits contracts in which compensation is contingent on a decision of a government authority. NAGE also counterclaimed for the money it had already paid Arcidi, alleging that NAGE's president, Kenneth T. Lyons, had violated his fiduciary duty to NAGE by entering into the agreement, and that Arcidi was liable for aiding and abetting that breach of fiduciary duty.

NAGE moved for summary judgment on both Arcidi's contract claim and its own counterclaim for the $200,000. A judge of the Superior Court granted summary judgment for NAGE on its counterclaim as well as on Arcidi's claim. Arcidi appealed the ensuing final judgment for NAGE to the Appeals Court, which affirmed in an unpublished memorandum and order, Arcidi v. National Ass'n of Gov't Employees, Inc., 64 Mass.App.Ct. 1110, 835 N.E.2d 323 (2005). The Appeals Court concluded that the consulting agreement was unlawful and that Arcidi could not recover on it, but that NAGE could recover the $200,000 paid to Arcidi because it was not equally at fault for the contract's illegality. We granted Arcidi's application for further appellate review.

Facts. We summarize the undisputed material facts. NAGE is a labor organization whose membership is comprised of Federal, State, and municipal workers. Lyons was at all relevant times the president of NAGE.³ NAGE Housing, Inc. (NHI), is a subsidiary of NAGE that engages in real estate development activities for the union. In 1998, MTA issued a request for proposals for development of several parcels of land in the Central Artery North Area in Charlestown. NHI submitted a proposal to build a luxury condominium development to be known as "Nautica" on one of these parcels.

At some point, Lyons became concerned that MTA was being subjected to political pressure to award the project to a developer other than NHI. A decision was made to enlist the services of Arcidi, who is described by himself and Lyons as an individual with experience and "credibility" in dealing with State and local government officials. Ultimately, Arcidi and NAGE entered into a one-page, undated "consulting agreement" on NAGE letterhead, signed only by Lyons and not by Arcidi. Lyons signed the agreement on NAGE's behalf in his capacity as its "National President." The agreement stated, in part:

"The National Association of Government Employees retains the services of Dr. Alfred L. Arcidi as a Consultant specifically for the proposed development of condominiums called Nautica on Parcel 1 of the Central Artery North Area.... It is hereby proposed [⁴]to grant Dr. Alfred Arcidi $250,000 for his services providing said development is approved and built."

The agreement did not specify what "services" Arcidi was to perform, but Arcidi understood his role as securing MTA's approval of the Nautica project for NAGE.

MTA eventually approved NHI's proposal for development of the Nautica project. Some time thereafter, Arcidi received a check for $200,000 drawn on NHI's account and signed by Lyons. Arcidi's understanding was that he would receive the balance when the project was completed. When this did not occur, Arcidi filed the instant suit.

Discussion. On appeal, Arcidi does not argue that he is entitled to the additional $50,000 on the contract. Rather, he contends that NAGE cannot recover the $200,000 already paid to him under any theory of relief. Arcidi maintains that it is he and not NAGE, who is entitled to summary judgment on NAGE's counterclaim. We agree.

1. Standard of review. Summary judgment is appropriate where there is no genuine issue as to any material fact and the moving party is entitled to a judgment as a matter of law. Mass. R. Civ. P. 56(c), 365 Mass. 824 (1974). Ng Brothers Constr., Inc. v. Cranney, 436 Mass. 638, 643-644, 766 N.E.2d 864 (2002). The moving party has the burden of demonstrating affirmatively the absence of a genuine issue of material fact on every relevant issue, regardless of who would have the burden on that issue at trial. Sullivan v. Liberty Mut. Ins. Co., 444 Mass. 34, 39, 825 N.E.2d 522 (2005).

2. Legality of the consulting agreement. General Laws c. 3, § 42, provides, in part:

"No person shall make any agreement whereby any compensation or thing of value is to be paid to any person contingent upon a decision as described in the definition of `executive agent' ..."⁵

The statute makes unlawful any agreement in which compensation is made "contingent upon a decision" of a Commonwealth authority. Id. Because one contingency of the consulting agreement between NAGE and Arcidi was that NAGE's proposed development be approved by MTA, the agreement violates G.L. c. 3, § 42. It is immaterial that there was an additional contingency that the project eventually be built; so long as a favorable government decision was one of the express conditions to payment, the agreement violates both the letter and spirit of the statute.

3. Recovery of money paid pursuant to an illegal agreement.

a. The general rule. "[I]t has ... long been settled that the law will not aid either party to an illegal contract to enforce it against the other, neither will it relieve a party to such a contract ... who seeks to reclaim his money or whatever article of property he may have applied to such a purpose." Atwood v. Fisk, 101 Mass. 363, 364 (1869). See Council v. Cohen, 303 Mass. 348, 354, 21 N.E.2d 967 (1939), quoting Berman v. Coakley, 243 Mass. 348, 350, 137 N.E. 667 (1923) ("courts will not aid in the enforcement, nor afford relief against the evil consequences, of an illegal or immoral contract"). The policy underlying this rule is that "[t]he suppression of illegal contracts is far more likely in general to be accomplished, by leaving the parties without remedy against each other." Atwood v. Fisk, supra. Accordingly, the general rule is that a court leaves parties to an illegal contract in the same position as it finds them. See Duane v. Merchants' Legal Stamp Co., 227 Mass. 466, 468-469, 116 N.E. 873 (1917); Huckins v. Hunt, 138 Mass. 366, 366-367 (1885); Atwood v. Fisk, supra.

b. Recovery by NAGE on the ground that it was not equally at fault with Arcidi. The general rule that courts will not grant relief to parties to an illegal contract is subject to an exception:

"where the parties are not in equal fault as to the illegal element of the contract, or, to use the phrase of the maxim, are not in pari delicto, and where there are elements of public policy more outraged by the conduct of one than of the other, then relief in equity may be granted to the less guilty."

Berman v. Coakley, supra. The Appeals Court concluded that Arcidi and NAGE were "not in equal fault as to the illegal element" of the consulting agreement, and thus that NAGE was entitled to return of the $200,000 paid to Arcidi. The Appeals Court stated: "Because there is no evidence in this record that Lyons acted with authorization from NAGE, we view NAGE as not chargeable with any misconduct, and, therefore, as the clearly `less guilty' party, NAGE is entitled to relief." We disagree with the Appeals Court that the exception of Berman v. Coakley, supra, applies, and we rely instead on the general rule that a court will not aid either party to an illegal contract.

In concluding that NAGE and Arcidi were not equally at fault, the Appeals Court relied on the absence of any specific authorization for Lyons to enter into the consulting agreement. However, Lyons testified at his deposition that he had authority under NAGE's "constitution of [sic] bylaws" to contract with Arcidi on NAGE's behalf, without needing board approval or ratification. See White v. Beacon Trust Co., 277 Mass. 75, 82, 177 N.E. 853 (1931) (agents may testify as to their authority). In addition, Arcidi introduced evidence tending to show that at least some members of NAGE's board knew about, and approved of, the proposed agreement. Thus, at a minimum, there were outstanding factual questions regarding Lyons's authority to enter into the agreement that precluded summary judgment for NAGE.

However, we need not decide whether Lyons was authorized to enter into the agreement, because NAGE would not be entitled to relief even if he were not. We have required more than a slight difference in culpability before we will grant equitable relief to a party to an illegal contract. The cases where we have done so generally fall into two categories.⁶ The first comprises cases "in which one of the parties has, by an illegal act, taken advantage of and oppressed the other." Berman v. Coakley, supra at 351, 137 N.E. 667, quoting Inhabitants of Worcester v. Eaton, 11 Mass. 368, 376 (1814) (allowing plaintiff equitable relief where defendant fraudulently coerced him into unlawful agreement to suppress criminal prosecution). The second involves cases where the provision of law rendering the contract illegal was clearly intended to benefit one party over the other, i.e., the public policy is intended to protect persons of the class to which one party belongs....