EVERETT TOWN TAXI, INC. & others vs. BOARD OF ALDERMEN OF EVERETT & others.

EVERETT TOWN TAXI, INC. & others vs. BOARD OF ALDERMEN OF EVERETT & others.

366 Mass. 534

October 9, 1974 - December 23, 1974

Middlesex County

Present: REARDON, QUIRICO, HENNESSEY, & KAPLAN, JJ.

Taxicab companies, operating in a regulated industry, were proper parties to bring a suit in equity under G. L. c. 268A, Section 21 (a), against business competitors and officials alleging conflict of interest in violation of c. 268A and seeking revocation of certain taxicab licenses. [535-539]

BILL IN EQUITY filed in the Superior Court on December 1, 1972.

The suit was reported by Rutledge, J.

Vincent Galvin for the plaintiffs.

Edward J. Bushell (John A Brennan, Jr., with him) for Leo J. Barrett, Henry F. Fitzgerald, & Hortense Fitzgerald, individually, and Everett Courtesy Cab, Inc. & Union Street Cab Co., Inc.

REARDON, J. This case, reported by a judge of the Superior Court to the Appeals Court, is here from that court on order of transfer. The issue is presented by the action of the trial judge in sustaining the defendants' plea in bar to a bill of complaint and amendment thereto. The bill was brought by corporations operating taxicab companies in the city of Everett which are in competition with certain corporations also operating taxicab companies in that city. Joined as defendants were the latter corporations, the city of Everett, the individual members of the board of aldermen of the city, one of whom was named as an officer of the defendant corporations, and the chief of police of Everett and his wife, also named as officers of one of the defendant corporations. The plaintiffs' bill alleged violation of G. L. c. 268A, inserted by St. 1962, c. 779, Section 1 (the conflict of interest statute), and sought revocation of

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licenses obtained by the defendant corporations from the Everett board of aldermen to operate taxicabs and taxi stands in Everett. The sole issue raised by the pleadings is whether the corporate plaintiffs are the proper parties to bring an action under G. L. c. 268A. The pertinent section reads as follows: [Note 1]

Section 21. (a) In addition to any other remedies provided by law, any violation of section two, three, eight, or sections fifteen to twenty, inclusive, which has substantially influenced the action taken by any municipal agency in any particular matter shall be grounds for avoiding, rescinding or cancelling the action on such terms as the interest of the municipality and innocent third persons require.

"(b) The city or town may bring a civil action against any person who has acted to his economic advantage in violation of said sections two, three, eight and fifteen to twenty, inclusive, and may recover damages in the amount of such economic advantage or five hundred dollars, whichever is greater. If there has been no final criminal judgment of conviction or acquittal of the same violation, the city or town may in the discretion of the court recover additional damages in an amount not exceeding twice the amount of the economic advantage or five hundred dollars, whichever is greater, and a judgment for such damages shall bar any criminal prosecution for the same violation."

The important question whether the civil remedy provided by Section 21 (a) may be invoked by a private party as well as by a municipality has been before this court twice and in each instance we expressly reserved the question for later decision. Moskow v. Boston Redevelopment Authy. 349 Mass. 553 , 571 (1965), cert. den. 382 U.S. 983 (1966). Crall v. Leominster, 362 Mass. 95 , 106-107 (1972). Today we answer that question in the affirmative.

The language of Section 21 (a) is neutral on the matter, simply setting out the remedy without describing those to whom it

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is available. At the least there is nothing in the language to preclude a private action; if anything, the specific reference to actions by the city or town for restitution in Section 21 (b) leads to the inference that no such limitation is present in Section 21 (a). We are impelled to this conclusion by our obligation to construe a legislative act so as to effectuate fully the statutory purpose. Foley v. Lawrence, 336 Mass. 60 , 65 (1957). New York Cent. R.R. v. New England Merchs. Natl. Bank, 344 Mass. 709 , 713 (1962). United States Trust Co. v. Commonwealth, 348 Mass. 378 , 383 (1965). Boston v. Massachusetts Port Authy. 364 Mass. 639 , 647 (1974). There can be no doubt about the purpose of this statute, enacted as part of "comprehensive legislation . . . [to] strike at corruption in public office, inequality of treatment of citizens and the use of public office for private gain." Report of the Special Commission on Code of Ethics, 1962 House Doc. No. 3650, p.18. See Buss, The Massachusetts Conflict-of-Interest Statute: An Analysis, 45 B.U.L. Rev. 297, 301-302 (1965). In light of these objectives it is apparent that, if a right of action is denied to all private parties, there would be a frustration of the statute. See J.I. Case Co. v. Borak, 377 U.S. 426, 433 (1964); Allen v. State Bd. of Elections, 393 U.S. 544, 556-557 (1969). Cf. Commonwealth v. Haddad, 364 Mass. 795 , 799 (1974). Compare National R.R. Passenger Corp. v. National Assn. of R.R. Passengers, 414 U.S. 453 (1974). Were we to construe Section 21 (a) as providing an exclusively public remedy so that the sole parties eligible to move under Section 21 (a) were municipal authorities, the result would be that in a municipality where those authorities were the principal parties in interest there would be no movement at all. Thus to deny a private right of action under the statute would in some cases be to deprive the public of the protection conferred on it by the Legislature.

Examination of the legislative history confirms the view that the Legislature did not intend so to limit Section 21 (a). The conflict of interest statute was the product of extensive study and proposals by a Special Commission on Code of Ethics. 1962 House Doc. No. 3650. In drafting the legislation

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the commission consciously chose as its model the Federal conflict of interest provisions proposed by H. R. 8140, 87th Cong., 1st Sess. (1961), subsequently enacted as 18 U. S. C. Sections 201-218 (1970). See 1962 House Doc. No. 3650, p. 8. Significantly, the Federal provisions allowing rescission of governmental action taken in violation of the conflict of interest rules expressly named the President and agency heads as the proper parties to invoke the remedy. 18 U.S.C. Section 218 (1970). In addition, the special commission had before it a model statute drafted by the Association of the Bar of the City of New York (special committee on the Federal conflict of interest laws, "Conflict of Interest and Federal Service" [1960]), and two bills filed in the Legislature in 1961 (Senate Nos. 54 and 492). See Braucher (now Justice Braucher), Conflict of Interest in Massachusetts, in Perspectives of Law, Essays for Austin Wakeman Scott, 4-5 (1964). Each of these statutes, like the Federal statute, provided for rescission of the governmental action only at the instance of specified public officials. By contrast the commission's proposal, which was adopted by the Legislature, contained the present language of Section 21 (a), devoid of any reference to specific officials authorized to invoke the remedy. This background leads to a very strong inference that the legislative intent was to broaden the remedy to include private as well as public actions. Compare National R.R. Passenger Corp. v. National Assn. of R.R. Passengers, 414 U.S. 453, 458-461 (1974).

In reaching this conclusion we emphasize that rescission of governmental action pursuant to Section 21 (a) is not an automatic proposition; rather it must be "on such terms as the interest of the municipality and innocent third persons require." G. L. c. 268A, Section 21 (a). See Braucher, Conflict of Interest in Massachusetts, supra, at 34-35. For example, in a suit by a private citizen, the fact that the municipal authorities were aware of the conflict of interest but chose to ratify the action may be entitled to some weight where the action cannot be rescinded without detriment to the municipality. Compare Sylvester v. Webb, 179 Mass. 236 , 241 (1901), with Barrett v. Medford, 254 Mass. 384 , 387

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(1926), and Albano v. Selectmen of South Hadley, 341 Mass. 494 , 496-497 (1960). Likewise the possibly harsh effect of rescission on innocent third parties who dealt with the municipality should be considered. See Massachusetts Legislative Research Council Report Relative to Conflict of Interest, 1961 Senate Doc. No. 650, p.22; Manning, Federal Conflict of Interest Law, 270-271 (1964). But see United States v. Mississippi Valley Generating Co. 364 U.S. 520, 565 (1961). In so stating we express no view on the merits of the plaintiffs' action in the instant case.

It remains to consider whether these particular plaintiffs, business competitors of the defendant corporations, have standing to invoke the private remedy which we have concluded is provided by Section 21 (a). As a general rule the mere fact that a plaintiff may suffer from business competition is not a sufficient injury to give him standing to sue. Circle Lounge & Grille, Inc. v. Board of Appeal of Boston, 324 Mass. 427 , 429 (1949). Colantuoni v. Selectmen of Belmont, 326 Mass. 778 , 779-780 (1951). Springfield Hotel Assn. Inc. v. Alcoholic Beverages Control Commn. 338 Mass. 699 , 703 (1959). This rule does not apply, however, to competitors in a regulated industry such as the one here [Note 2] who are attempting to challenge governmental action threatening their competitive position. A.B. & C. Motor Transp. Co. Inc. vs. Department of Pub. Util. 327 Mass. 550 , 551-552 (1951). Bay State Harness Horse Racing & Breeding Assn. Inc. v. State Racing Commn. 342 Mass. 694 , 702 (1961). South Shore Natl. Bank v. Board of Bank Incorporation, 351 Mass. 363 , 367 (1966). Furthermore, the plaintiffs bring this suit under a statute designed to protect interests which we believe include those asserted by them. This is not to say that the conflict of interest provisions were aimed at protecting private parties from legitimate competition. But the expressed goal of guarding against "inequality of treatment of citizens," discussed above, does

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indicate that competitors of those receiving favored treatment ought to be within the class of persons protected and thereby have standing to sue under the statute. See Hardin v. Kentucky Util. Co. 390 U.S. 1, 6-7 (1968); Association of Data Processing Serv. Organizations, Inc. v. Camp, 397 U.S. 150, 153 (1970); Westland Housing Corp. v. Commissioner of Ins. 352 Mass. 374 , 383-384 (1967), and cases cited. In fact it may well be that parties such as the plaintiffs have the greatest incentive to uncover conflicts of interest and bring suit under Section 21 (a) to enforce the statute. See Federal Communications Commn. v. Sanders Bros. Radio Station, 309 U.S. 470, 477 (1940). It follows from this that the defendants' plea in bar should not have been sustained.

Decree of the Superior Court reversed.

FOOTNOTES

[Note 1] See also Section 9, providing parallel remedies for actions by State agencies, and Section 15, providing for actions by county agencies.

[Note 2] Pursuant to G. L. c. 40, Section 22, municipalities may regulate taxicabs operating within their boundaries through conditional licenses and by designation of specific cab stands according to public convenience. Morley v. Police Commr. of Boston, 261 Mass. 269 (1927), cert. den. 276 U.S. 625 (1928).