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Psychemedics Corporation v. City of Boston

Superior Court of Massachusetts, Suffolk, Business Litigation Session

May 22, 2019

Psychemedics Corporation
v.
City of Boston

          Judge (with first initial, no space for Sullivan, Dorsey, and Walsh): Kaplan, Mitchell H., J.

          MEMORANDUM OF DECISION AND ORDER ON PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT

          Mitchell H. Kaplan Justice of the Superior Court

          Plaintiff Psychemedics Corporation (Psychemedics) developed a hair follicle test designed to detect illicit drug use. Beginning in 1998, the defendant City of Boston (City) and Psychemedics entered into a series of contracts pursuant to which the City purchased follicle testing services from Psychemedics for use by the Boston Police Department (BPD). The most recent of these contracts is still in force. The test is administered to BPD officers and recruits. Beginning in 2001, several BPD officers who tested positive for drugs and were terminated by the BPD challenged their termination in appeals to the Massachusetts Civil Service Commission (CSC) and in court. Six officers were successful before the CSC, and its decision was affirmed by the Superior Court and then the Appeals Court. In 2017, the City demanded indemnification from Psychemedics for the damages awarded these officers and the costs that the City incurred defending their claims under a provision that appears in all of the contracts. In response, Psychemedics filed this action seeking a declaration that the City is not entitled to indemnification with respect to damages or defense costs incurred as a result of the proceedings before the CSC or in court. The case is presently before the court on Psychemedics’ motion for summary judgment. For the reasons that follow, the motion is ALLOWED .

          BACKGROUND

          The following relevant facts are taken from the summary judgment record, read in the light most favorable to the City.

          The first contract between Psychemedics and the City was executed in December 1998. Part of the contract was entitled "Amendment to Standard Contract." Article 7.3 of the Amendment provided:

The Contractor [Psychemedics] shall assume the defense of and hold the City, its officers, agents or employees, harmless from all suits and claims against them or any of them arising from any wrongful or negligent act or omission of [Psychemedics], its agents or employees in any way connected with performance under this Contract.

          That provision appears in all of the contracts at issue in this action.[1]

          Between 2001 and 2006, ten BPD officers were terminated after the hair samples that they submitted to Psychemedics tested positive for cocaine.[2] They appealed their terminations to the CSC asserting that the hair test was not based on scientifically sound and generally accepted methodology, that the process used to collect and test their samples was flawed, and that therefore they were not properly terminated. Eight of these officers eventually joined in a separate civil-rights lawsuit against the City and the BPD, which alleged that the test had a disparate impact on people of color. This action was filed in the Superior Court in July 2005, but removed to federal court. See Jones et al. v. City of Boston et al., No. 1:05-cv-11832 (Jones ).

          The first evidence of any request by the City for financial assistance in defending these claims appears in early 2006. The BPD, apparently orally, asked Psychemedics to share in the out-of-pocket costs to hire outside counsel to represent the City in Jones . Psychemedics declined to do that but offered to provide, at no charge, the services of its scientific personnel and in house legal staff.

          Several months later, in June 2006, the City’s Corporate Counsel, William F. Sinnott, sent a letter to Psychemedics that stated in part:

Article 7.3 of the contract between the City of Boston and Psychemedics Corporation provides that Psychemedics "shall assume the defense of and hold the City ... harmless from all suits and claims against [it] arising from the wrongful or negligent act or omission of [Psychemedics]." The conduct alleged in the Plaintiffs’ Complaint is wrongful or negligent conduct on the part of Psychemedics Corporation. The City’s request 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 [i.e., defense/indemnification]. I hope you will reconsider your position.

          Letter dated June 9, 2006 (emphasis added). Psychemedics again refused to share defense costs. As to Article 7.3, Psychemedics stated:

As a matter of course, plaintiffs typically allege negligence when their drug test result demonstrates the presence of an illegal substance. However, no reasonable interpretation of the Article 7.3 language would sweep in any allegation of negligence or wrongful act with respect to our drug tests ... [The] language [of the provision] only applies to instances in which an act or ...

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