Psy–ed Corp.. & Another 1 v. Stanley Klein & Another 2

• Decision Date: 12 May 2011
• Docket Number: SJC–10722.
• Citation: 459 Mass. 697,24 A.D. Cases 1291,947 N.E.2d 520
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court
• Parties: PSY–ED CORPORATION & another 1v.Stanley KLEIN & another 2; David Hirsch & others,3 third-party defendants (and a companion case 4).

459 Mass. 697

947 N.E.2d 520

94 Empl. Prac. Dec. P 44,181

161 Lab.Cas. P 61,143

24 A.D. Cases 1291

PSY–ED CORPORATION & another 1

v.Stanley KLEIN & another 2; David Hirsch & others,3 third-party defendants (and a companion case 4).

SJC–10722.

Supreme Judicial Court of Massachusetts, Middlesex.

Submitted Jan. 3, 2011.Decided May 12, 2011.

Jeffrey S. Robbins (A.W. Phinney, III, with him), Boston, for Psy–Ed Corporation & another.Donna M. Brewer, Boston, for David Hirsch & others.Kurt S. Kusiak (A. Hether Cahill with him), Boston, for C. Kenneth Mehrling.George P. Field, Boston, for Stanley D. Klein.Dahlia C. Rudavsky, Boston (Kevin C. Merritt with her) for Kimberly Schive.The following submitted briefs for amici curiae:Jack F. St. Clair for International Committee Against Mental Illness & others.Anne L. Josephson, Heidi S. Alexander, & Nina Joan Kimball, Boston, for Charles Hamilton Houston Institute for Race and Justice & others.Robert S. Mantell, Elizabeth A. Rodgers, Sara Smolik, & Tara M. Swartz, Boston, for Massachusetts Employment Lawyers Association.Simone R. Liebman & Catherine Ziehl, Boston, for Massachusetts Commission Against Discrimination.

Present: IRELAND, C.J., SPINA, CORDY, & BOTSFORD, JJ.

BOTSFORD, J.

This case involves bitter litigation spanning more than a decade. It raises the question, among others, whether actions taken by an employer against a former employee may violate G.L. c. 151B, § 4(4) and (4A), sections of the antidiscrimination law that respectively prohibit retaliation and interference with a protected right. On this question, we conclude that an employer or other person may be liable to a former employee under these sections for retaliatory or interfering conduct that occurs after the employment relationship has terminated. We defer all discussion of the additional issues raised until later in this opinion.⁵

1. Background. a. Introduction. Before us are cross appeals from judgments in two actions in the Superior Court. The first was brought in 1999 by Psy–Ed Corporation (Psy–Ed, or company) and Joseph Valenzano, Jr., against Dr. Stanley Klein and Kimberly Schive. Klein brought the second action in 2002 against Valenzano and Psy–Ed, setting out a claim of retaliation. The two actions were consolidated prior to trial, which took place in 2006. We summarize first the facts as the trial judge found them, followed by a summary of the procedural history of the two actions. We reserve for later discussion the posttrial proceedings.

b. Facts. Klein, Maxwell Schleifer, and a third man founded Psy–Ed in 1969. In 1971, Psy–Ed began publishing Exceptional Parent (EP), a magazine for families of children with disabilities and special health care needs; Klein and Schleifer served as copublishers. In the early 1990s, Psy–Ed began to have financial problems, and in 1993, Valenzano was approached to evaluate Psy–Ed as an investment opportunity. He decided to invest, and brought in about forty other investors. In the resulting restructuring of the company, Psy–Ed bought Schleifer's shares, Klein remained with the company and became editor-in-chief of EP, Valenzano joined Psy–Ed as president, chief executive officer, a member of the company's board of directors (board), and publisher, and the company opened a second office in New Jersey in addition to its original Massachusetts office. At various times after 1993, the third-party defendants, Kenneth Rossano, Dr. David Hirsch, Robert Striano, Donald S. Chadwick, and Robert K. Hopkins, served as members of the board. During Klein's employment as editor-in-chief, there were disagreements between him and the board.

From 1993 until 1996, Schive worked for Psy–Ed in the Massachusetts office, first as an assistant editor of EP and later as associate editor. Schive, who is deaf, required certain accommodations to be provided by her employer, including an interpreter at meetings. On several occasions, she was not provided an interpreter at meetings, and she perceived Valenzano to be impatient and angry at questions she asked while attempting to follow the discussion. In the summer of 1996, during the restructuring process initiated by Valenzano's new management team, certain functions were moved to New Jersey, and Schive was told she would continue to have a role at Psy–Ed. However, she was offered only a three-month position as a part-time consultant, and thereafter she no longer worked for the company.⁶ On February 13, 1997, Schive filed a charge of discrimination with the Massachusetts Commission Against Discrimination (MCAD). On June 13, 1997, at Valenzano's request and despite misgivings of which Valenzano was aware, Klein signed an affidavit generally supportive of Psy–Ed's position in Schive's MCAD matter.

Klein was informed in June, 1997, that his employment contract with Psy–Ed was due to expire on June 30, and that it would not be renewed.⁷ Klein still held a twenty-one per cent interest in the company, however, and he proposed an alternative slate of Psy–Ed directors for election at a shareholders' meeting September 30, 1997. Valenzano, meanwhile, promoted the election of his own preferred slate. Klein's attempt to have Psy–Ed shareholders elect his slate of directors failed at the September shareholder meeting.

His proxy fight lost, Klein entered into negotiations with representatives of Psy–Ed for a complete and permanent separation from the company. Valenzano began negotiating with third-party defendant C. Kenneth Mehrling to arrange financing for the acquisition of Klein's shares. On March 27, 1998, Klein, Psy–Ed, and Valenzano executed a settlement agreement that included a mutual release of all claims (settlement agreement). Under the terms of the settlement agreement, Klein received an initial payment of $45,000, and a promissory note specifying sixteen quarterly payments of $13,797.19, for a total of $265,755, while Psy–Ed reacquired all of Klein's shares in the company.⁸

On October 6, 1997, without Valenzano's knowledge and while the negotiations over buying out Klein's Psy–Ed shares were in process, Klein signed a second affidavit in connection with Schive's MCAD charge against Valenzano and Psy–Ed. In his second affidavit, which was filed with the MCAD, Klein stated that after preparing his June, 1997, affidavit, he had become aware of and dissatisfied with the company's response to Schive's charge, as well as the manner in which his earlier affidavit had been characterized in that response. Klein also stated in the second affidavit that after completing the first affidavit, he had been reminded of certain incidents by former members of the Massachusetts staff.⁹

In September, 1999, Valenzano became aware of Klein's second affidavit in the Schive MCAD matter. He became aware as well that a former Psy–Ed sales and marketing contractor, Lawrence Qualiano, also had signed an affidavit in support of Schive's claim. At the next formal meeting of Psy–Ed's board of directors, held on September 30, 1999, the directors ¹⁰ addressed the affidavits of Klein and Qualiano. They decided to terminate the company's involvement in an ongoing mediation of Schive's discrimination complaint before the MCAD, and agreed to “litigate this matter aggressively.”

On December 2, 1999, the MCAD issued a probable cause determination in Schive's favor on her complaint.¹¹ On December 17, 1999, Psy–Ed and Valenzano filed a complaint against Klein and Schive in which they alleged defamation, violation of G.L. c. 93A, § 11, civil conspiracy, and tortious interference with contractual and business relations (1999 action). ¹² Before serving either defendant, the board met on December 23, 1999, and voted five-to-one to discontinue further payments to Klein under the promissory note attached to the settlement agreement until Klein signed a settlement agreement between Psy–Ed and Qualiano,¹³ and until authorized by the board “based on the opinion of Boston counsel and their assessment and evaluation of alternative scenarios and their estimate of legal costs associated with the litigation the company has filed against Stan Klein and Kim Schive.” ¹⁴ Rossano's was the sole dissenting vote.

c. Prior proceedings. As just stated, Psy–Ed and Valenzano filed their action against Klein and Schive in December, 1999. In response, Klein counterclaimed against Psy–Ed and Valenzano and brought a third-party complaint against Rossano and the other members of the board.¹⁵ In his counterclaim and third-party complaint, Klein alleged interference with contractual relations by Valenzano, Rossano, and the other board members. He also alleged abuse of process by Psy–Ed and Valenzano, and violations of G.L. c. 93A, § 11, by Psy–Ed, Valenzano, and the board members.¹⁶ On account of Psy–Ed's 1999 action, Schive filed another complaint with the MCAD on February 17, 2000, asserting a claim of retaliation in violation of G.L. c. 151B against Psy–Ed and Valenzano. Thereafter, as authorized by G.L. c. 151B, § 9, she brought this retaliation claim in the Superior Court as a counterclaim in the 1999 action. At the same time, Schive counterclaimed against Psy–Ed and Valenzano for abuse of process. Psy–Ed and Valenzano moved to amend their complaint in November, 2000, to add an allegation that by executing the settlement agreement without disclosing his second affidavit, Klein fraudulently induced them to enter the settlement agreement. A Superior Court judge (the eventual trial judge) denied Psy–Ed's and Valenzano's motion as untimely under the tracking order applicable to the case.

In 2002, Klein filed a separate complaint against Psy–Ed and Valenzano alleging retaliation in violation of G.L. c. 151B, § 4(4) and (4A) (§ 4 [4] and [4A] ) (2002 action). In response, Psy–Ed and Valenzano counterclaimed, alleging breach of contract and fraud. On December 1, 2003, a Superior Court judge allowed Klein's motion to dismiss the counterclaims because in the 1999 action, Psy–Ed and...