Narrator: SJC-12903 Psychemedics Corporation
v City of Boston.
-: And we'll hear from Mr. Biagetti, please.
-: Thank you, may it please the court.
I'm Peter Biagetti on behalf of the-
-: (mumbles)
If I may.
The city is the Apollon.
-: Oh, I have that completely.
(Frank laughs)
I apologize. I think I had conflated on my paper.
Thank you for that.
And we'll hear from Mr. Fitzpatrick
-: May it please the court, I'm Tom Fitzpatrick
with me this morning is
although socially distant my colleague Courtney Simmons.
It's our privilege to represent
the city of Boston in this matter,
which is a lawsuit that was brought
by a vendor to the city Psychemedics,
seeking to avoid its contractual obligations to the city,
including its obligation,
to indemnify the city for claims
arising from negligence of Psychemedics.
Now, a common thread runs through Psychemedics contentions.
In theory of its case,
it can be found in it's motion for summary judgment below.
And in its brief to this court is the contention.
For example, in the motion that the city breached
indemnification clause
by not allowing Psychemedics to assume the defense
of the lawsuits that's asserted again
in its brief and in their brief,
they go so far as to say,
that the city prevented Psychemedics
from assuming control of the defense of those cases.
Although assertions have no record sites
because there is nowhere in the record that can be found.
That is not the case.
-: Counsel, may I interrupt you for a moment.
Tom: Of course.
-: Bearing that in mind,
Psychemedics says that if it wins it's first issue,
the rest of the case is moot.
Do you agree with that?
-: I do not for the reason around the claims,
the counterclaim and the affirmative defense
that the city had under article 8.2 of the contract.
I'll touch on that issue
since you've asked about it your honor.
-: Well, and do you dispute it in your brief?
Is it argued in your brief?
-: Oh yes.
Cypher: The mootness issue.
Okay, thank you.
-: Yes, and I will come back to that.
I do wanna touch on that, but the issue
that was to dealt with by Judge Kaplan was 7.3
indemnification provision.
And what happened is that the city in 2006,
goes to Psychemedics and says,
"Look, we've been sued,
"we want you to share in the costs of defending the city."
Psychemedics writes a letter and says,
" No, we're not gonna do that."
Then the corporation counsel bill senate writes a letter
and he says, he quotes section 7.3,
the indemnification provision says,
"Look, you have this obligation under this.
"I want you to reconsider.
"I want you to provide financial support
"for the defense of the city."
And then in house counsel,
Mr. Thistle for Psychemedics (mumbles).
(Cypher coughs)
He says, "No,"
but he goes beyond that.
He says, "That under 7.3, Psychemedics has no obligation
"whatsoever, unless and until there's been an adjudication
"that Psychemedics was negligent or responsible."
That's wrong, but that was the position of Psychemedics.
The question then becomes under this court's decisions,
is there interaction between the parties
relieve Psychemedics--
-: Can I ask you a question kind of question,
doesn't the first question become,
what does the contract provide and is there some ambiguity
in what the contract provides?
And if there is ambiguity,
why is there no discussion about who is that was responsible
for drafting this language,
the history of this our position,
but there's nothing in any of the briefs about this,
I don't understand that.
-: I didn't quite hear all that.
I don't know if my sound is-
-: Okay, I'm on audio.
I am on phone audio,
for technical reasons. Tom: I'm sorry.
Anyway, let me get really close to my phone.
When I talk to you, can you hear me now?
Tom: Yes, I can.
-: Okay, so the question I was asking has to do with
the first question, what is 7.3 provide?
And even the judge was a little confused about it was,
the language in there was.
And if that's true,
if it's that particularly unambiguous
don't we have to look to something outside of it?
Like, the history of drafting
and what it was the parties intended?
And all that stuff doesn't seem to be in its speed.
-: Well, I would submit your honor,
that it's not ambiguous,
that it's an indemnification provision.
It says that, "Psychemedics shall assume the defense
"and hold the city harmless
"from any claims, asserted,
"arising from the negligent or wrongful conduct."
So I don't see any ambiguity in that.
The issue that was joined below was,
was there interaction that I just described
most of which is in writing.
Did it relieve Psychemedics of that contractual obligation
to indemnify?
-: Well, did that constitute our demands under
the cause under the 7.8 constitute demand
for the assumption of the defense.
When we ask somebody to pay for part of the defense,
it's not the same thing, is it?
-: Again, as we state in our brief,
no demand or request is required,
that trustees of New York case are explosive about that.
-: If you wanna call for somebody to defend,
under the provisions of 7.8 constitute,
with 7.2 that you provide
doesn't take, it gotta take over the defense?
Not to take over part of paying for you to do the defense.
(mumbles)
-: I'm struggling with your audio judge.
The short answer, your honor,
is that under trustees of New York,
which is the most recent case,
there is no requirement of demand or requests.
What is required is merely,
that's a word this court use
merely notice and the opportunity to defend.
There's no dispute about,
notice about these claims.
(mumbles)
-: Get off of it, we're gonna do this.
Issue demand?
-: I apologize.
I don't know if anyone else can hear justice Lenk,
but I can't.
-: I'm sorry, can you hear me?
Can anyone else hear me?
-: You're hard to hear.
You're talking very quickly and far from the microphone,
so a little closer.
-: Okay, I'm not far from the microphone.
I just don't have a...
I have to talk into the focus of my phone.
I've got no audio according to the technical people here.
Can you hear me now?
Tom: Yes.
-: Can you hear me?
Mr. Fitzpatrick can you hear me?
Tom: Yes.
-: Okay, my question really had to do with whether or not,
what was it that Psychemedics
was supposed to do at that point?
You send, tell notice, and you say,
"Pay for part of it"
they say, "No."
What were they supposed to do then?
They supposed to say, yes,
they suppose to take over the defense
and tell you to get off of it.
-: That's precisely right?
The language is Psychemedics shall assume the defense.
Psychemedics chose a different path.
It chose to say (mumbles)
-: I guess the question is,
did they know the path that you're
suggesting was open to them?
Did they even know that, that path was open?
Did you never asked them to do that?
You asked him to pay for products you send.
You never asked them to take over the defense.
-: No, and we're not required to,
that's what the trustees of New York as all that's required.
-: Don't you go one step further
Mr. Fitzpatrick, can I read you exactly what
Mr. Sennett wrote?
"The city requests that you share in the cost of defending
"this suit is a reasonable one in light of the alternative
"remedy provided for in the contract."
So is the city expressly taking itself outside
the contractual remedy?
When it asks them to take a different approach?
-: I don't think they are,
with the city it's very clear
the request that was made was
the Psychemedics consistent with its duty to defend,
provide financial support
for an attorney to represent the city.
And Psychemedics response was consistently,
no, no, no.
No attempt to take over the defense.
No attempt to say, look, it's our obligation.
We're gonna pick the attorney.
And what I would submit is that
if you compare it with
trustees of New York, the most recent case,
all that happened in trustees of New York is that
the indemnity said, we believe the circumstances
would make you liable under the contract.
That's what Senate said.
And then requested that they refer
to their insurance carrier.
There was no request, no demand, none of these things
that a Psychemedics insist that we had to do.
And yet this court said that provided the opportunity to
defend and (mumbles)
Pasquali and Boutagy to tell us,
that the opportunity to defend is implied.
Whereas here, the contractual obligation to indemnify
is explicit.
And the obligation to indemnify in 7.3 is explicit.
You shall do it.
And the other thing I would say about these cases,
that's very important.
I submit is that the response of the indemnitor
is very relevant to analyze
and whether the opportunity to defend was present.
And in both for Pasquali and Boutagy,
the indemnitor responded much like Psychemedics
by saying, "Not our problem.
We're gonna step up.
And what this court said in those cases is that,
that response implies that
the indemnitor received all of the notice
and opportunity to defend that is required.
So I would submit,
-: Can I just go back to your more straightforward
argument that you touched on for a moment at the beginning
of your argument,
which you said, Independent of the indemnification
clause that you believe that under 8.2,
once the general counsel for the city wrote the letter,
they share the expenses that there was a duty to do so?
-: Yeah, the issue about 8.2.
So 7.3 is an indemnification provision.
8.2 is a broader contractual provision,
which makes Psychemedics contractually responsible for any
damages incurred by the city as a consequence
of their negligent or wrongful conduct.
Now, in our answering counterclaim,
we separately referenced 8.2 nine times.
It appears in two block quotes,
but the whole section quoted it appears
it is the basis of our ninth affirmative defense.
And the counterclaims specifically alleges
that Psychemedics had breached article 8.2,
in addition to the allegation that they breached 7.3.
And when we got to the summary judgment stage,
the motion for summary judgment of Psychemedics
completely ignored a point to focus solely
on the indemnification provision,
in our opposition, which is in the record.
We again, cited with specific reference to 8.2,
quoting the language of 8.2
and specifically said that,
the city's rights and claim under 8.2 quote,
preclude summary judgment for Psychemedics,
that was in our opposition to summary judgment.
And when judge Kaplan, who was an excellent
and very thoughtful judge,
for whatever reason, simply missed that.
And basically said, I resolved 7.3,
that moves everything else.
Well, it didn't move everything else.
The suggestion has been made by
my brother that somehow we're raising this
for the first time on appeal.
It's nine times in the answer and counterclaim.
It's in the summary judgment opposition.
It was error for judge Kaplan to simply say that
that claim is gone.
There was never any analysis by him,
or even an argument by the other side that,
that claim wasn't valid.
So--
-: Let me interrupt you here for a second if I could.
Mr Fitzpatrick can you hear me now?
Tom: I can.
-: Can you hear me?
Tom: Yes.
-: Okay, Mr. Fitzpatrick, let me ask you this,
if...
Where do you think you're wrong about 7.3
or the indemnification clause,
you think you might be right about eight point something
or rather,
having to do with not having been properly thrown out.
What will you do then?
What is the solution then?
-: Well, if you can conclude that the case have--
-: Do we do that as a question (mumbles)
or we do that as the question of fact?
Is that a question of law?
Is that a question in fact,
afterwards, it can resolved by the trial court
or do we resolve that?
-: Well, I think it will
remain it to the trial court for trial
on the issue of whether they've reached that provision
and whether we've incurred damages, proximately prior
as you know, Psychemedics, we disagree,
but Psychemedics thinks
there's approximate clause issue in this case.
So I would think this would be remanded
for trial on a claim that was pled adequately pled,
and it has a sound basis in the facts of the case.
Lenk: Okay.
-: So just to touch upon the proximate clause issue,
there were three grounds for summary judgment
raised below that the superior court never reached.
They've been brought up again here.
I'll just touch on them very quickly.
There's this theory of what we call
an imagined original cooperation agreement.
It cannot be found in the record.
It didn't happen, it didn't exist.
It fails for a whole host of reasons.
One is there was no consideration for this
two is, it's not in writing,
contract to the city, have to be in writing.
And the clause was no intentional waiver of the city's
contractual rights,
approximate cause they do not dispute negligence.
And they're stating that there's some intervening event
that caused proximate clause.
These people were hired because.
has a drug policy--
-: Mr.Biagetti is gonna get up there and say that
they can test negligence, right?
I mean, are you really arguing that
they're not gonna contest negligence?
-: I'm arguing that they did not contest it
in the summary judgment proceedings.
They can contest it if we remand for a trial,
they haven't waived that.
But at summary judgment,
they did not contest it.
And they don't contest it in their brief here.
And we've said before, why they were negligent.
And lastly, if I may, I know I'm over,
but judicial estoppel does not apply
unless the party has succeeded in persuading,
a tribunal of its position.
The city has yet to do that.
We lost as to those six officers
in the civil service commission and the Ronnie Jones,
title seven case is still pending in the district of mass.
And we have yet to convince we're hopeful that we can,
but we've yet to convince judge Woodlock that
there are no false positives
that have a disparity impact on rates.
So there's no application of judicial estoppel here.
Thank you very much.
Unless you have anymore questions.
-: Thank you, Mr. Fitzpatrick.
I was trying to speech (mumbles)
-: Good morning, may I please the court,
I'm Peter Biagetti for Psychemedics
with me on the brief is my colleague Joel Rothman.
And I respectfully submit that
the summary that you just heard from Mr. Fitzpatrick
on the controlling law with regard to notice
and opportunity to defend
defies over a hundred years of passionate.
He said that there is quote no demand
or request to defend required.
And this court, since Bradley in 1898
has said precisely the opposite.
It is said that the prospective indemnity
cannot insist upon retaining control of the defense,
instead--
-: Why did they insist on retaining control of the defense?
Why did they insist on that?
Peter: They insisted on that--
-: Why did they insist on defending?
-: Well they insisted on it from the outset
in what must have been oral communications
with the chief fox, but clearly affirmed it
when the city's corporation counsel writes that letter
in June of 2006 and as judge Kaplan spot on noted,
not only does the city raise
they shall assume the defense of language,
it calculatedly leverages that right.
And instead says--
-: Wait a second. I know historically,
historically it was your side,
put up this defense for saying,
we're not bound by this indemnification of clause
because after all, they only would come
and take account after we've in fact found negligent.
We haven't been found negligent,
so it doesn't apply to us.
So you're taking that position,
and they come back with this
view of, okay, well, let's put the cost to this then.
And then you maybe say like,
this is not really any of these cases.
It's not really any of the cases that you're citing to us.
It's really sort of like everybody's being very cute here.
-: Oh no, I think that the action by the city
fall squarely within the ambit of
these cases your honor because--
-: Which case controls do you think?
-: Bradley, Bowditch, Pasquali all of them.
What they all say is that the words of the prospective
indemnity must make clear implicitly or by the words
that they are allowing the opportunity to defend.
They are calling upon the indemnitor to defend.
And most importantly,
that second requirement is
that the prospective indemnity
must surrender control of the defense
that never happened here.
Even by the time of the letter,
even by the time of the letter in 2006,
the city already had retained outside counsel
answered the complaint, removed to federal court.
It's due to a motion to this mess,
asserted 20 affirmative defenses, admitted to 25 facts,
what really retaining control.
If you read the letter from Psychemedics in response,
Psychemedics acknowledges.
Psychemedics has already been assisting the city since 2004,
with regard to these kinds of claims
by meeting with the cities outside counsel.
And if that works--
-: How would you already, at this point though, in 2006,
how did you already, those tolls,
the other side that told the city that you're in fact,
not bound by this indemnification agreement,
because the preconditions have not been met.
Haven't you already told them that.
I know it's not a position you take now,
but at the time, historically, you did.
-: Psychemedics in house counsel read with I agree,
your honor, is an unclear provision.
He read it in a very aggressive way.
He said that because it applied only to claims arising
out of wrongful act or negligence,
that the wrongful act or negligence
had to be first established.
-: Right, that's right.
And so if he's taking a view of the contract
that was different than the view the city took
and you're saying
now we don't have an obligation to defend you, right?
-: Very much so and what was the city's response?
Because it's telling, if the city for example,
sue, because Psychemedics allegedly had breached in 2006
it's obligation to assume the defense, no.
What the city did instead,
was accept 20 years worth of assistance,
legal and technical from Psychemedics.
And in fact, by 2009, the outside lawyer for the city
in an affidavit to the federal district court
on an issue of privilege,
affirmed that assistance was in her words
pursuing to a continuing agreement between Psychemedics
in the city.
Finally, very telling.
In 2007, the city chooses to attempt to pertain leave
to assert a third party complaint
against Psychemedics in the federal case.
And if you look at that pleading it's in the appendix,
the city acknowledges there that the Psychemedics
knows it's a science and (mumbles)
to have the opportunity to participate in this case quote,
as a party.
So the city is affirming time and time again
by its calculated strategy
and by its acceptance of 20 years worth of assistance,
that it is--
(mumbles)
-: Just trying to figure out what's going on
in terms of the clause itself.
I mean, are you agreeing with me
that it's unambiguous clause?
-: Well, I think that ultimately judge Kaplan's reading
was correct that because even though it does say,
claims arising from any wrongful and negligent act,
it does make clear that its claims as well as suits.
And so they would be obligation,
if the prerequisites of Bradley and it's Litany
were met to assume, but only--
-: Who drafted this language?
Do you know who drafted this language?
-: Well, the language is part of a...
It derives from a boilerplate contract of the city.
There were was an amendment to it which added wrongful
or negligent acts or emissions,
but it was bargained for between--
-: But that doesn't affect this analysis, right?
The letter amendment does not affect this analysis, right?
-: It doesn't at all.
What's important to the analysis is
whether or not the city by its words
called upon Psychemedics to come in and defend.
And the Ravi case is the most recent 2013,
federal district court case in Massachusetts.
But it's a very apt summary
of the Bradley Boutage and Pasquali line.
And what Ravi said was failure to allow the indemnitor,
to take charge of the defense,
relieves the indemnitor of its obligation to indemnify.
Here--
-: What does it mean?
So what the indemnitor indemnity has to do in order to get
that going,
what do you have to do?
Do you have to say, I'm sorry,
we're gonna keep the defense here and together...
I would want you to pay for it.
And so it's all your fault.
And later on, you can pay for it all.
If we lose a trial or is it something more than that?
Is it something that they have to say, no, no.
We're perfectly willing to hand it over to you,
but if they ask you to do this
you didn't do anything affirmative,
as the case is required them
to do anything affirmative in that regard,
what is the case require them to do?
-: The indemnity.
Lenk: Yeah.
-: Well, I think--
-: I' sorry (mumbles) I hate those language.
I hate the key intone.
Let's just first major and the city,
what do the city have to do?
What do the city have to do in these circumstances?
What the case the city has to do in this circumstances?
-: The city has to do three things.
The city has to give notice,
to the Psychemedics -: Okay that happened
-: That happened.
The city then has to in some form of words,
call upon Psychemedics to come in and defend.
And finally, the city must and the words of the cases
surrender control of the defense,
it must allow Psychemedics to--
-: Okay, let me interrupt you.
Surrender control of the defense.
Okay, let me ask you the question.
Suppose it's the city has just said
before 7.3, you have an obligation.
You have an hour...
Okay, how about this,
city says to Phsychemedics,
you have an obligation under 7.3, please do it.
Please do the necessary, is that enough?
-: I missed the end.
Please, do you have an obligation, please do what?
Lenk: The necessary, the necessary.
-: Please do what's necessary?
Lenk: Yes,
-: Please do what's necessary.
Yes, if there was a specific invocation of 7.3
and they said, please do what's necessary.
That would be closer, at least.
judge Kaplan was right when he said the Pasquali case
is a great illustration of what the bare minimum is
that the indemnity the city would have to do--
-: You shift to the second provision,
cause I don't understand what the...
Why the judge dismissed the second provision.
It's gotta provide something addition.
So tell me 8.2 says if the damages sustained by the city
resulting from Psychemedics wrongful or negligence acts
or mission exceeds some do would become do,
Psychemedics shall pay the difference to the city.
That is still remain in the case.
I don't understand why that goes away.
-: Two reasons your honor.
The first one is the one that judge Kaplan cited,
which was that the city never disputed our position.
That if we won unnoticed, then the counterclaim was mooted.
And just very briefly on that.
And then I'll turn to the side.
-: I'm confused by that.
That just makes no sense to me.
So better flush that out a bit,
because I personally agree with your argument
on the first issue that the city wanted its cake
and wanted to eat it too.
They want to defend it.
They want to control it.
And then they...
And particularly,
although I understand why they do that particularly
cause your assistant general counsel tells them,
we don't have to indemntify you until the case is over,
which seems to me as you put it aggressive,
I would put wrong.
But then I see that, okay.
So they took over now they've lost
and they may have lost big here.
Or they ...
I don't know if negligence or wrongful stuff
has been proven yet.
Although our own decision raises some question about that,
our own previous decision involving this testing.
So why isn't the second provision out there?
And if they prove that you were negligent,
they get to recover
the difference between what they paid you
and the damages or whatever the calculation.
Just Kaplan was very sophisticated.
I understand the first part,
but I don't understand the second part.
And it was just a footnote, right?
-: In the opinion, yes.
Although what we argued below
and what I would turn to now, your honor,
is that not only was it not raised below
and again, just briefly on that.
I do respectfully urge you to read the passage
that Mr. Fitzpatrick talked about.
When 8.2 was raised in below,
it was only in the context of whether or not
the city had waived such a right,
not with regard to its counterclaim.
And in fact, in that passage, it ends with,
with that reason that argument precludes
summary judgment for Psychemedics.
So it was raised with regard to
why Psychemedics should lose,
not with regard to why counterclaims should endure,
but more specifically to your point, your honor,
section 8.2 can be read in harmony with section 7.3,
which is far more specific.
So 8.2 to take care of claims directly by the city
against Psychemedics.
Or for example, late delivery of tests,
or an incomplete delivery of tests.
And that's why you see that language about
if that late delivery causes damages that exceed
the sum due order become due.
-: That's a really narrow reading in that provision.
Why isn't the reading is if your tests are negligent
and we get sued by a bunch of officers
and we have to pay them more than,
whatever the differential is, you gotta pick this up.
Now, maybe the answer is, if you defended in loss,
meaning you didn't let us do it and you blew it,
maybe we don't have to do it,
but that's not the argument from what I understand,
or isn't that the argument.
-: Very briefly, cause I know I'm coming up on time.
Two things there, first of all--
-: Just as God was very generous on time
you will be (mumbles).
-: Thank you. Thank you.
And I am gonna get to bid on the merits of the test,
which I know you're particularly interested in,
but back to back to contractual construction,
the broader phrase in 8.2 has to give way
to the narrower and more specific 7.3
in the instance of claims brought by third parties.
That's why 7.3 is there.
If you read 8.2, which my brother rightly describes as
broader provision.
If you read it to swallow up 7.3,
then you're rendering useless 7.3
in the very specific instance
that it's meant to control line.
Finally, that provision you're right.
Only kicks in if there are wrongful and negligent acts
by Psychemedics that cause injury to the city,
and that has not happened here.
The city prevailed in the federal court,
wise on summary judgment.
There's a remand,
but it's only on the question of whether or not
using the hair test plus a followup urine test
is a less discriminatory alternative.
As the city's lawyer just 15 months ago,
argued to this court.
In the Ghanan case, the first circuit has affirmed
the reliability of the test.
It's the city's council's words.
And as she also made clear at the time, and we agree
in the civil service commission,
the civil service commission affirmed
that the test may be used
to create a rebuttable presumption of ingestion.
And so the Psychmedics test has prevailed
in terms of delivering what the city bargained for
in every single litigation.
-: I know I said that, but I was all alone.
(Frank laughs)
I'm not sure the majority will agree with you on that,
but I leave that for another day.
-: Any further questions?
-: Thank you Mr Biagetti.
-: Than you.
-: I'm sorry, justice Lenk, did you have a question?
You're mute.
There you go.
-: Technology, can you hear me now?
Frank: Yes
-: Okay, good.
Now her's my question?
(Lenk laughs)
Okay, Mr. Biagetti I want to ask you the same question
I asked your brother before,
which was supposed we agree with you on 7.7
the indemnification provision,
but we disagree that it dealt with 8.2.
What do we have?
What happens now?
Are we supposed to construe the meaning
of that paragraph and say, okay,
on the facts here you win,
or are we supposed to send it back to the court
for further proceedings?
Cause it seems to me that, you know,
there two, we don't have any information
about whether it was the history of this clause
that account you're disagreeing about what it means 8.2
and we don't have anything in there
about the history of the negotiations with the parties
or who drafted it or anything like that.
And we don't have any information about what,
of course,
that's also true that I don't see anything in the briefs
about any outside of Massachusetts cases on these subjects,
but that's another story.
That's another point entirely.
But I mean, I really was curious about
what you think should happen
if we disagree with you about whether or not
necessarily they waived at.
-: Well, you,
as your honor knows that this court may have affirm
on any ground that was raised below.
So even if you were to find that 8.2
applies in that broadway,
and again, we say that 7.3 trumps it.
You still have two other grounds on which to
affirm the summary judgment
and namely that by its conduct,
the city waived any right to indemnification-
-: Totally we don't buy your other reasons.
I guess that's what I'm saying.
If we don't buy those reasons
about estoppel and so forth and so on.
And we just say, no,
it just got a long way because
in fact they never waived this point two argument
and it's still before,
do we have to send it back to the judicial trial?
-: I still don't believe so respectfully, your honor
because if I hear you correctly,
if you agree that judge Kaplan was correct with regard to
the section 7.3 failure on city's behalf,
then the city has forfeited its right
to indemnification under a more specific
and more squarely applicable class of the contract.
And so, Psychemedics is still entitled to summary judgment.
-: Thanks
Frank: Everything okay.
-: Hey, that's it.
Frank: Thank you, counsel.
Peter: Thank you.