On December 14th, the Supreme Judicial Court (“SJC”) issued its decision in Marengi v. 6 Forest Road, LLC (SJC-13316), holding that the bond provision of General Law Chapter 40A, Section 17 (“Section 17”) applies to affordable housing developments created under Chapter 40B. While the subject of Marengi was the appeal of a comprehensive permit, the SJC’s analysis provides some clarity to the newer bond provision of Section 17.
The recent decision in Marengi makes clear that a developer that successfully defends an appeal will still need to satisfy the higher standard of bad faith or malice to be awarded costs from the bond.
On January 14, 2021, Governor Baker signed the Act Enabling Partnerships for Growth, which, in part, amended Section 17, to include a bond provision as a tool to help curb frivolous appeals. The relevant portion of Section 17 provides that the court may require a plaintiff appealing a decision to approve a special permit, variance or site plan “to post a surety or cash bond in an amount of not more than $50,000 to secure the payment of costs if the court finds that the harm to the defendant or to the public interest resulting from delays caused by the appeal outweighs the financial burden of the surety or cash bond on the plaintiffs.” G.L. c. 40A, § 17.
In Marengi, a group of abutters and nearby homeowners (the “Plaintiffs”) filed suit appealing the issuance of a comprehensive permit to a Developer (the “Developer”) for a 56-unit condominium development. The Developer filed a motion for the Plaintiffs to post a $50,000 surety or cash bond, pursuant to the bond provision of Section 17. In support of its motion, the Developer maintained that the maximum bond was necessary to protect the public interest in additional affordable housing in the town and to counterbalance the costs that the Developer would incur in connection with the appeal. The Developer estimated its costs at $250,000, which included price increases for lumber and framing materials; attorneys’ fees estimated at $75,000 or more; the costs of traffic, engineering, and environmental experts; and interest rate increases raising the costs of financing. The Developer further maintained that a $50,000 bond would not pose a significant financial burden to the Plaintiffs who owned, collectively, property with an assessed value of approximately $2.3 million.
The Plaintiffs opposed the motion, contending that the bond provision does not apply to appeals of comprehensive permits. The Plaintiffs further argued that even if the bond provision applied, they did not bring the appeal in bad faith or with malice, any harm to the developer or the public interest was not outweighed by the financial burden on the Plaintiffs to post bond, and, alternatively, the $50,000 bond as sought by the Developer was unreasonable.
On March 17, 2022, the Superior Court judge granted the Developer’s motion, in part, reducing the requested bond from $50,000 to $35,000. A single justice of the Appeals Court granted the Plaintiffs leave to file an interlocutory appeal to seek review of the bond order. The SJC, sua sponte, transferred the case from the Appeals Court to address whether the bond provision of Section 17 applies to appeals of comprehensive permits issued pursuant to G.L. c. 40B, § 21. In addition to concluding that the bond provision of Section 17 applies to appeals of comprehensive permits, the SJC also analyzed the bad faith/malice requirement of Section 17 and the costs that may be secured by the bond provision, which is pertinent to all appeals brought under Chapter 40A, Section 17.Bad faith or malice requirement
The SJC concluded that because the purpose of the bond provision is “to secure the payment of costs,” and costs can only be awarded if a plaintiff “acted in bad faith or with malice in making the appeal,” there is a close correlation between the bond requirement and a finding of bad faith or malice. The SJC ultimately held that unless a Section 17 appeal is brought or pursued maliciously or in bad faith, no costs may be awarded. The SJC also raised the concern that if bonds up to $50,000 could be required in close cases, then plaintiffs could be deterred from appealing by the possibility of the imposition of a bond even when they have legitimate claims. The court noted that “[c]osts are meant to be an exceptional award at the tail end of the appellate process for meritless claims brought in bad faith or with malice; they are not meant to be a means of short-circuiting that process. The tail cannot be allowed to wag the dog.” Id. at 21. The court ultimately held that bonds should only be ordered if the judge finds that an appeal appears “so devoid of merit that it may be reasonably inferred to have been brought in bad faith.” Id. at 20.Costs that may be secured
In Marengi, the Plaintiffs also maintained that the word “costs” as employed by Section 17 simply refers to the default rule that a prevailing litigant ordinarily may recover “taxable costs” as defined in other statutes, which include filing fees, certain small daily fees, travel by the plaintiff or defendants, and witness fees. On the other hand, the Developer maintained that “costs” under Section 17 should be read broadly to include the costs of experts, attorneys’ fees, and damages caused by delay pending the outcome of the appeal. The Court, however, concluded that neither party was fully correct, and held that the use of the term “costs” in Section 17 allows for bond securing of taxable costs and certain nontaxable costs akin to those recoverable under G.L. c. 93A, which include the costs of experts, but does not include attorneys’ fees, delay damages, or carrying costs. With respect to the specific costs claimed by the Developer, the SJC held that the Developer’s fees claimed relative to the costs of traffic, engineering, and environmental experts are reasonable recoverable costs.
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While the SJC found that the bond provisions of G.L. c. 40A, § 17 apply to appeals of comprehensive permits, it did not rule on the specific bond determination in this case, but remanded the matter to the lower court to determine the application of the standard established by the SJC for imposing a bond. Since the bond provision was added to Section 17 in 2021, it has been unclear how the provision interacts with the existing provision within Section 17, which provides that “[c]osts shall not be allowed against the party appealing from the decision of the board or special permit granting authority unless it shall appear to the court that said appellant or appellants acted in bad faith or with malice in making the appeal to the court.” The recent decision in Marengi makes clear that a developer that successfully defends an appeal will still need to satisfy the higher standard of bad faith or malice to be awarded costs from the bond. If the Courts are willing to impose a significant bond or surety in appropriate cases, such as appeals brought by business competitors or appeals with little merit instituted solely to delay a project, the bond provision may be an effective tool to help curb frivolous appeals.