Season 1 Episode 6. Release Date January 15, 2022
The first in a two-part episode about Sullivan v. Gagliardi. Peter McGlynn talks to Bob about what happens when your client’s home turns into a nightmare. This is a must-listen for all home owners and real estate attorneys.
“What we were able to do is to create this picture in the jury’s mind that these were not simply individual homeowners, buyers and sellers that were selling a home, that this was part of their business model. This was part of the way that they had acquired and generated wealth. And coupled with that, we had other additional facts that we thought were quite helpful as well, namely that Mr. Gagliardi was in the construction business.”
“There are a lot of similarities between what occurred here and the Great Molasses Flood. Fortunately, not the tragic circumstances and consequences that resulted from the Great Molasses Flood. People lost their lives, there were, I believe, criminal charges asserted against the owners of the plant, so on. Fortunately, we did not have any of those tragic circumstances in our case, although it was clear based upon the expert witness testimony at trial that what had happened here, what had been constructed by the Gagliardi is knowingly so, weakened the structure of both the so-called Tuscan room as well as the kitchen. And the experts told the jury that these, both of these rooms, were in danger of collapse without notice.”
“I remember at the earliest stages of…long before we’d filed any litigation, the question was just what was done here so that the Town of Dover building inspector could actually issue building permits for the work that was performed and so there wouldn’t be any, you know, insurance issues with the home, et cetera, and so forth. The Sullivans were just looking for information. And not only did The Gagliardis refuse to provide that information, but they also actually destroyed a good portion of that information..”
“In Massachusetts, the statute of repose basically bars all tort claims related to construction work six years after that work is performed. And so the fact that we didn’t have all of the names, even though there was a court order in place requiring The Gagliardis to produce those names, even though we weren’t able to get the information from The Gagliardis… about all of the renovations that were performed because the vast majority of those documents were destroyed by The Gagliardis. The court, at trial, ultimately dismissed those defenses because The Gagliardis had violated a court order.”
Bob Stetson: In 2013, Ted and Connie Sullivan sought to move from New Jersey to Massachusetts to be closer to their special needs child’s Boston hospitals. They found a beautiful home on five acres of land in Dover, Massachusetts. The sellers, Giuseppe and Rosalie Gagliardi, had lived at the home for a number of years and substantially renovated the home.
Specifically, the kitchen in Tuscan style three season room. These renovations figured prominently in the marketing materials and also during the inspection and home showing. What the Gagliardis failed to disclose was that they did not pull building permits for the renovation work, nor did they have the work inspected by the town building inspector.
The Sullivans bought the house using a purchase and sale agreement containing various quote unquote, “as is provisions.” These standard provisions are more or less meant to impose as a matter of contract law the ancient doctrine of Caveat Emptor or Let the Buyer Beware.
Shortly after The Sullivans moved in, they discovered substantial laten defects in the renovation work, not just technical building code violations, legitimate structural problems that posed a substantial risk of collapse if not repaired. The repairs cost hundreds of thousands of dollars.
When The Sullivans asked the Gagliardis for information about the renovations, information that was requested by the town of Dover building inspector, the Gagliardi refused to provide any information at all and instead destroyed virtually all of their records related to the renovations.
The Sullivans filed suit. After four years of litigation, the case went to trial on claims for breach of the implied warranty of habitability, a relatively new cause of action in Massachusetts, and for violations of Chapter 93 by the Massachusetts Consumer Protection Act.
After a two-week jury trial, the jury came back with a verdict in less than two hours. This case pits consumer rights and safety and habitability of homes against the ancient doctrine of Caveat Emptor. This is Sullivan v. Gagliardi.
Bob: Welcome to Legal Judg(e)ments, where we tackle litigation and trial strategy by analyzing and talking about real legal cases. I’m Bob Stetson, a Boston based trial lawyer at Bernkopf Goodman. Today, we’re looking at a case involving one of the most important transactions most people will ever make in their lives, the purchase of a home. In particular, what happens when your dream home becomes a nightmare? With me today is Peter McGlynn, the director of our litigation department here at Bernkopf. Peter also happens to be my personal mentor and was gracious enough to have me with him on the Sullivan case.
Peter and I represented The Sullivans in this case. Welcome, Peter. Thanks for joining.
Peter McGlynn: Well, Bob, it’s a pleasure to be here. I look forward to this, thank you very much for inviting me.
Bob: So, Peter, as you know, this show is going to proceed in two parts because the issues are so important and the case was so interesting on so many levels. For this episode, we’re going to focus on the trial court proceedings and on the next episode, we’ll talk about the appeal.
So, let’s start with the jury verdict. As I mentioned in the open, after a two-week trial, the jury comes back in less than two hours. The jury found in favor of The Sullivans on both claims for the breach of the implied warranty of habitability and for violations of Chapter 93 A.
The jury also awarded double damages on the Chapter 93 A claim because they found that The Gagliardis had acted knowingly and intentionally with respect to their unfair and deceptive conduct in this case. As we know, this result was not a foregone conclusion.
In order to prove the implied warranty claim, we had to prove that the sellers the Gagliardis were “builder vendors.” And in order to prove the Chapter 93 A claim, we had to prove that the sale occurred in the course of “trade or commerce.” In other words, in the business context. On its face, this looks like the private sale of a home between private homeowners. How did you overcome these hurdles in this case, Peter?
Peter: Well, Bob, you’re right on its face. When we first assessed the merits of this case, it did look like a private sale between individual sellers and individual buyers. But when you peel back the onion skin and you looked at what had transpired not only with respect to this particular transaction, but also the transactions dating back for decades that had been involving the Gagliardi we saw. And we argued in front of the jury that the Gagliardi had a business model. This business model that spanned 40 years involved the purchase, the sale, the renovation, the leasing of a number of different properties. As I recall, six separate properties where The Gagliardi would take a house or two-family building, renovate it, improve the value, increase the rental value, then eventually leverage that equity that they had built up in that house to buy another building. At least one commercial building, the rest of them were multifamily residences, except for one involving this house at Dover and another one in Weston. So, they were able to use this business model to expand their wealth. They became quite wealthy as a result. And the vast majority of their income on an annual basis was not from working in the construction business, which is what Mr. Gagliardi did with assistance from Mrs. Gagliardi. But the rental income that was generated from all of these rental properties that they had acquired over the past 40 years.
So that was the narrative that we were going to argue in front of the jury. And not only did the jury agree with us, but the judge did as well. He used that term “business model” when he denied the defendants motions for directed verdict at the close of our evidence, as well as at the close of the trial. So, at these activities, when we get into the appellate portion of this podcast, these activities were certainly noted quite clearly in the SJC’s memorandum of decision. So that’s what we were able to do is to create this picture in the jury’s mind that these were not simply individual homeowners, buyers and sellers that were selling a home, that this was part of their business model. This was part of the way that they had acquired and generated wealth. And coupled with that, we had other additional facts that we thought were quite helpful as well, namely that Mr. Gagliardi was in the construction business.
A lot of the renovations that were done that which were at issue in the lawsuit were done by Mr. Gagliardi and his son. Certainly, at their direction, they were responsible for the design of the renovations. And of course, Mr. Gagliardi was not only licensed as a… licensed as a builder in Massachusetts, but he also had a certificate as a home renovator. So, he knew what he was doing. This is not somebody that was just going to Home Depot or Lowe’s, like perhaps you or I would do on a weekend and renovate a bathroom. This was something that was part of their business for well over 40 years.
Bob: And one of the one of the significant facts when you look back at that 40-year history, one of the significant facts that comes out of it is that each time, almost each time, almost every time that The Gagliardi is redeveloped the home, they lived in it while they were doing the renovation work.
And so, correct me if I’m wrong. But that was one of the reasons why we certainly believe the trial judge believed, and ultimately, the jury believed that this home, even though The Gagliardis had lived at it for a number of years, was more than just the private sale of a home. It was actually part of this… as you came up with this during the trial, it was part of their business model.
Peter: Correct. The Dover home was, as I recall, carried no debt. They actually obtained the money for the purchase of the Dover home by refinancing other rental properties that they had acquired, renovated and, of course, built up considerable equity in.
What they also did is about four years before they ultimately sold the property to The Sullivans. They had embarked on a rather extensive renovation campaign to the kitchen, removing a load bearing wall, which is one of the reasons that The Sullivans discovered these problems because of sagging floor, floor and ceiling choice, as well as a conversion of a sunroom made what they call the so-called Tuscan Room into a three- or four-season room. But and they touted these as part of their marketing campaign when they put the house on the market.
So, this was part and parcel with what they were doing. They were improving this to improve the value to make the house more marketable. They use the proceeds from other rental properties that they had acquired over the past previous four decades to acquire this.
And then ultimately, they took and refinanced the Dover home and paid cash of approximately $1 million for another home in Weston, which they then rented out for a period of years for approximately $38,000 per year.
Bob: So, you touched on the experience that The Gagliardis has had, and in fact, Giuseppe Gagliardi, how he was a licensed builder. He was obviously in order to obtain those licenses, you have to be knowledgeable about the building code.
And so, I want to set the stage here for this next question, Peter. I want to go back in time to 1919 and talk about the great molasses flood here in Boston. In 1919 –
Peter: I wasn’t there then.
Bob: I didn’t think you were. In 1919, along Boston’s North End set a 50-foot-tall tank of molasses. The owner used the molasses to make alcohol and the tank, held more than 2 million gallons of molasses. In mid-January of 1919, the tank exploded, unleashing a, as many observers said, a tidal wave of molasses which toppled buildings, destroyed cars, killed 21 people and injured many more. To prevent this catastrophe from happening again in the future, governments proliferated some of the earliest building codes and inspectional programs to ensure the safety and importantly, the structural integrity of buildings. In this way, all modern building codes and inspectional departments originated from the great molasses flood.
So, this episode is going to be released on January 15th of 2020 to the 102nd anniversary of the Great Molasses Flood. What role did the Great Molasses Flood and perhaps more specifically, the building code, play in the Sullivan litigation?
Peter: Well, there are a lot of similarities between what occurred here and the Great Molasses Flood. Fortunately, not the tragic circumstances and consequences that resulted from the Great Molasses Flood. People lost their lives, there were, I believe, criminal charges asserted against the owners of the plant, so on.
Fortunately, we did not have any of those tragic circumstances in our case, although it was clear based upon the expert witness testimony at trial that what had happened here, what had been constructed by the Gagliardi is knowingly so, weakened the structure of both the so-called Tuscan room as well as the kitchen. And the experts told the jury that these, both of these rooms, were in danger of collapse without notice. As I indicated earlier, Bob The Sullivans found out about the problems in the kitchen when they were renovating bathrooms on the second floor and their builder noticed these sagging joists. And of course, they looked into it a little bit further and found out that a load bearing wall had been removed in order to expand the size of the kitchen. This situation could have been far more tragic.
Fortunately for the three members of the Sullivan family, Ted, Connie, and their daughter Christine, it was not, but unfortunately and I, if I can get on the soapbox very briefly, this seems to be what happens. You have a horrible tragedy like the great molasses flood. And then there’s a flurry of activity and there’s an enactment of changes to the building code. The same thing happened in 1942, as a result of the infamous Coconut Grove fire, where hundreds of people lost their lives because of improper life safety protections that should have been installed in that building as a matter of a code requirement and new life safety regulations were implemented and code provisions implemented as a result of that. So, but the similarities were that there were corners cut with the owners of the molasses factory over in the North End, and those corners resulted in the collapse of the tank and of course, the tragic aftermath. So, in this particular instance, The Gagliardis acknowledged during depositions, and they admitted at trial that they did not obtain the necessary building permits for this work, which is required by law. And why is it required?
Because it mandates that the building inspector go in and inspect to make sure that the work has been done in compliance with the building code. This work was clearly not in compliance. It was downright dangerous, and they admitted that that they knew about the building code. Mr. Gagliardi, as a licensed builder, was duty bound to know the provisions of the code, and he admitted that he did know the provisions of the code and apparently decided to sidestep them to save a few dollars. So those were things that we had going into this trial that we thought were very potent evidence of willful and knowing misconduct by The Gagliardis. And obviously, the jury agreed.
Bob: Anyone that I have ever talked to about this case for those very reasons that you just pointed out, would tell you that there was – there was an injustice here that these knowing violations of the building code was a wrong that that it’s a wrong that required some sort of remedy.
But, on the flip side, you have a residential purchase and sale agreement. And as a matter of contract law. You have provisions in the purchase and sale agreement in this particular case that basically exculpated or exonerated the seller for practically anything. You know, these are there are few of them.
There are no representations, warranties, merger clauses, as is clauses I always sort of include them under the umbrella of an as is clause. Most residential conveyancers that draft these on a daily basis would probably tell you that those are good enough in the absence of intentional fraud to exonerate a seller from the type of litigation that we had here in The Sullivan case. But, in fact, those provisions did not exonerate The Gagliardis in this case. How did you get around these quotes unquote, as his provisions in this litigation, Peter?
Peter: Well, in the first instance, the count that we relied on to get around those, and I don’t want to say that we got around them in some unseemly way, but the breach of the implied warranty of habitability.
The case law specifically holds that one cannot waive the implied warranty of habitability. You can’t put 16 exculpatory provisions they purchase and sales agreement, and it’s not going to exculpate sellers that are that are subject to the implied warranties of habitability to being subject to liability if that implied warranty is breached.
The second thing is that this particular purchase and sales agreement did have a rather extensive exculpation clause, I believe it was paragraph 34 and it went almost 30 lines of text. But when we parsed through, and you were so effective on that when you cross examined the council for The Gagliardis is on the stand during the trial that the language that was purportedly exculpatory really didn’t say what the defendants believe that language said it was not at all clear, and of course, in that particular instance, we were able to argue obviously successfully in front of this jury that what they claimed was exculpatory language was not… was in fact not exculpatory.
Bob: This case has so many different components to it, and one of which that I mentioned in the open was that, you know, when The Sullivans first discovered these issues, you know, all they were trying to do was get information.
I remember at the earliest stages of…long before we’d filed any litigation, you know, the question was just what was done here so that the town of Dover building inspector could actually issue building permits for the work that was performed and so there wouldn’t be any, you know, insurance issues with the home, et cetera, and so forth. The Sullivans were just looking for information. And not only did The Gagliardis refuse to provide that information, but they also actually destroyed a good portion of that information.
And so, my question to you is, you know, anybody that hears that destruction of evidence, you know, spoliation, as is the term of art that we deal with in litigation. You know, it’s just an unqualified wrong. How was that addressed in this litigation and what did you do?
Peter: It was a lot of hard work, but we also had, as you will recall, no doubt a little bit of luck. Yes. When you deposed Mrs. Gagliardi before the trial, of course, she acknowledged that yes, broker, her broker had reached out at the Sullivan’s request for information about what was done. What type of renovation work was done in order for The Sullivans to determine what needed to be done to fix it. And she was advised by her counsel, and this is on the record that she should not talk to The Sullivans or the broker anymore and would not provide any of the documentation or information. Despite it later on arguing that all of this was time barred under the six-year statute of repose. But she also admitted during the deposition, as you’ll also recall, that she, at shortly after this inquiry was, was made that she destroyed most of the records.
All that was left that we were able to obtain on discovery was a small handful of invoices from the kitchen equipment vendor for, you know, the refrigerator and so on. So, it was very powerful. But still, even though we tried to get the statute proposed defense removed pre-trial, the judge wanted to hear more evidence. And that’s where the luck came and when I was cross-examining Mrs. Gagliardi on the stand. She had let me back up. One of the things that we were trying to do. Not only at the time of the 93 A demand letters, but also during discovery was to obtain the names of the contractors who did the work because we needed them to come back and apply for the building permits and so on, as required by the building inspector for the town of Dover. They refused. We had to go in to get a court order and they were ordered to produce the names and addresses of the individuals who performed the renovation work, along with Mr. Gagliardi, Mrs. Gagliardi, and their son. So, we got that information and we deposed them. Obviously, we found out that not only did they not perform work in accordance with the building code, as well as obtain the requisite building permits, but they were told not to by Mr. Gagliardi, as I recall.
Now back to the… back to my cross-examination of Mrs. Gagliardi in the stand, and I went through the names of the individuals that had performed the work. And unexpectedly, she also announced that she had failed to disclose a fourth contract of the kitchen cabinet contractor from Central Mass that had performed that work that came out on cross-examination. And it was really at that point that I think we had turned the corner on our efforts to get the statute of repose tossed because it was at that point when we filed a an amended motion in limine that the judge granted it was, as I say, a little bit of luck, but a lot of hard work, a lot of skill to get there.
Bob: Just to orient the listeners. In Massachusetts, the statute of repose basically bars all tort claims related to construction work six years after that work is performed. And so the fact that we didn’t have all of the names, even though there was a court order in place requiring The Gagliardis to produce those names, even though we weren’t able to get the information from The Gagliardis is because, you know about all of the renovations that were performed because the vast majority of those documents were destroyed by The Gagliardis. The court, you know, at trial, ultimately dismissed those defenses because The Gagliardis had violated a court order.
Peter: That’s correct.
Bob: So, when people have asked about, you know, what’s this, what was this verdict actually worth? You know, I know based on our calculations, I generally say it was it was north of $2 million and it comes as sort of a surprise to people are they raise their eyebrow because, you know, when they ask, “Well, how much did it cost to repair?” The actual cost of repairs was closer to $211,000. So, The Gagliardis obviously believed it was much lower than $2 million. Obviously, even in their interpretation, it was much higher than $211,000. What was the actual value of this jury verdict, Peter? And why was there such a discrepancy between what we thought it was worth and what The Gagliardis thought it was worth?
Peter: Well, all in my memory was that the total amount of the judgment would have, as entered, would have been somewhere around $2.5 million because, of course, you had almost 50% interest on this case, this was an old case as well as $500 plus thousand dollars in attorney’s fees that we were awarded by the court on our Chapter 93 A count. But the principal difference, as I recall between the plaintiff’s judgment position and the defendant’s judgment position, was that when you have multiple damage awards under Chapter 93 A, the question is whether or not you take the compensatory amount and then you add on the interest and then you double it. In this case, the jury found double held determined that we were entitled to double damages or is it done on the on the judgment after all of the calculations are done? And then, of course, then you have post judgment interest once the judgment is entered and again, that that is accruing at 12% per annum.
So, I don’t think that there was that much of a discrepancy, maybe a half a million dollars between the plaintiff and the defendant’s position. But what it was a result is a lack of very specific, very clear statutory guidance and case law guidance as to how these damages are computed.
It was a bit of an eye opener to me because normally what you do is you get your judgment that the clerk’s office, not even the judge, then that does the conducts the calculations in this particular instance, because of this issue about when does interest get tacked on before or after the multiplier is conducted.
That was probably the main reason for the discrepancy, but it still was a big number by virtue of the fact that it was doubled, as well as a separate count, as I recall, $350,000 for the breach of the implied warranty of habitability. And then, of course, 50% of the interest factor would then be added on to the judgment. It was a bug number.
Bob: Yeah, as you say, either way, it was a big number far, far greater than the $211,000-dollar repair work.
Peter: That’s correct. And but keep in mind, The Sullivans stayed in this game for almost six years. They spent a tremendous amount of money to pursue this particular claim. Not everybody has the financial wherewithal of Sullivans to do something like this. But they did, and ultimately, they prevailed, at least at the trial court level.
Bob: And one of the, one of the… actually the last question that I want to ask you on the on the trial sort of relates to that. And it’s about jury consultants. You decided to retain a jury consultant on this case. And I want you to tell the listeners why you decided to use a jury consultant for this case and what that process looked like for a trial like this.
Peter: Well, I’ve been a big fan of jury consultants for many, many years, maybe going back 30 years. And obviously this was no different. We wanted to be educated as to what the best possible juror would be for this particular case.
And we hired a firm out of North Dakota who I had used in a prior case out there. We, as you know, we spent a considerable amount of time on mock jury voir dire, which of course, given the fairly recent change in the law in Massachusetts, allows attorneys to engage and handle voir dire. Obviously, the court allows it, but it hasn’t been done other than maybe it’s criminal cases prior to that. We also wanted to get our assistant, our jury consultant, to assist us in better understanding what our typical juror would be.
I also was very impressed with what our jury consultant was able to do. We filed a motion in advance of the trial to get the seventy plus members of the venire. I think we were going to start a trial on a Monday, and we got the list on Friday. And over the weekend, our jury consultant compiled almost a 400-page dossier of all of the information that they could get via social media on each of these jurors. So, we knew probably a lot more than the jurors knew about themselves in terms of what they were putting on social media in terms of who they donated to, how they voted, what types of materials they were reading, what they did for work, so on and so forth. And then what we were able to do is color code each of these, these potential jurors, prospective jurors in terms of, you know, red, green, yellow, red being let’s not have them on our jury, green being meaning yes and then yellow a bit of a coin flip. And our jury consultant was in the courtroom that day when we conducted the voir dire and it was very, very good in helping us pick this jury. As those who were in the audience that are trial lawyers know that oftentimes cases are won and won or lost by what the evidence shows, but how the jury, how the jury has been selected in the jury makeup.
Bob: And one of the one of the anecdotes that I always share with people about our use of the jury consultant in the courtroom was that he was giving us hand signals.
Peter: That’s correct.
Bob: When we were up at sidebar with the judge in the jurors and it was quite effective, and it was helpful.
Peter: Well, it was also effective in the sense that we compared what we were getting from our jury consultant in terms of the juror intel with what the jurors have put down on their juror questionnaire, including their prior contacts with the law in know lawsuits, criminal cases and so on. We found in several instances that the information on the juror questionnaire was inaccurate.
Bob: Peter, thank you for your time today. We’ll see you on the next episode. That’s our show. Check out our show notes for more information on today’s case. Don’t forget to subscribe to this podcast and of course, if you like what you heard. Please leave us a positive review. Thanks for listening!