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Firm obtains MA Appeals Court win affirming dismissal of $20M real estate contract claim

Tyler E. Chapman and Christian G. Kiely persuaded a Massachusetts Appeals Court panel to uphold a Superior Court judge’s dismissal of a $20 million real estate contract claim. 

The Appeals Court panel agreed with the trial court judge’s determination that the express language of the contract barred the property seller’s claim that it was entitled to compensation for the subsequent development of commercial property in the Assembly Square area of Somerville.

The property contains two parcels that the seller sold to the firm’s client separately in 2018 and 2019.

The 2019 sale agreement for the undeveloped portion obligated the firm’s client to pay a certain amount to the seller if building permits were issued for the development of commercial space exceeding a certain amount of square footage within a designated period.

The panel rejected the seller’s claim that the “earnout” provision in the purchase and sale agreement for the undeveloped portion of the property was also triggered by any development of the second portion of the property containing an existing office building.

“The complaint does not show that [the firm’s client] breached the earnout provision because the supporting documents show the earnout provision applied only to the unimproved parcel,” the panel wrote.

The plaintiff, according to the panel, is “a sophisticated business organization [that] missed a significant opportunity to expressly include a reference to the improved parcel in an amended earnout provision.”

The panel separately held that the firm’s client did not violate the implied covenant of good faith and fair dealing when it revised the existing master plans for the property to relocate new development from the unimproved parcel (to which the earnout applied) to the improved parcel (to which the earnout did not apply), given that the contract granted to the firm’s client “the sole right to determine what and when to develop” and the “sole discretion” to “change or withdraw” the master plans.