United States District Court holds that the reference proceeding statute is constitutional

I've been discussing in my last two posts Bearbones, Inc. d/b/a Morningside Bakery v. Peerless Indem. Ins. Co., 2016 WL 5928799 (D. Mass.) (unpublished), a federal court case alleging bad faith practices by an insurer, Peerless, before and during a reference proceeding.

The plaintiffs sought a declaration that the reference proceeding statute, Mass. Gen. Laws ch. 175 §99, ¶Twelvth, violates Article 11 of the Declaration of Rights of the Massachusetts Constitution, which guarantees the right "to obtain right and justice freely, and without being obliged to purchase it, completely, and without any denial, promptly, and without delay; conformably to the laws."  Specifically they alleged that the reference proceeding statute violates Article 11 because it requires that insureds pay for referees and because referees, rather than judges determine the amount of the loss. 

The court noted that the free access to courts clause of Article 11 "requires that all cases be decided by a judge, and that litigants need not 'purchase' access to justice."

Using logic that strikes me as disingenuous, the court held that, unlike a probate court matter in which the court appointed a parent coordinator with binding authority to resolve conflicts between divorcing parents, the reference proceeding did not take place over the objection of either party.  Rather, the plaintiffs made a business decision to purchase casualty insurance.  Pursuant to the policy both parties agreed to submit disputes over the amount of loss to a reference proceeding.

While it is true that parties can agree to alternative dispute resolution clauses in a contract, that is not quite what happened here.  Rather, the reference proceeding statute requires that disputes over the amount of loss under certain insurance policies must be determined by a reference proceeding.  That is why the requirement is in the property policies.  The parties are not allowed to negotiate over it. 

While it may be true that the plaintiffs did not have to purchase property insurance -- and that is probably not the case, as mortgages require property insurance -- it is not true that the parties included the reference proceeding clause by their own free will.

The court also notes in a footnote that the plaintiffs failed to allege that they incurred any costs in connection with the reference proceeding.  In their motion to amend the complaint they argued that the reference proceeding statute requires an insured to expend significant sums of money to pay for referees and that the plaintiffs paid over $30,000 in fees to the referees.  The court asserts that there were no supporting allegations in the supplemental complaint. 

That seems overly harsh to me.  The reference proceedings statute provides that of the three referees, the insureds will pay the fee of the first, the insurer will pay the fee of the second, and they will split the fee of the third.

The court then held that the "no purchase of justice" provision of Article 11 is to guarantee that "all litigants similarly situated may appeal to the courts both for relief and for defense under like conditions and with like protection and without discrimination."  A statute that "does not pertain to a suspect class, . . . involves a right . . . that is not fundamental, . . . and is rationally related to achieving its purpose . . . passes constitutional muster."

The court noted that the plaintiffs have not alleged that they are being treated differently than any other class of insureds under policies issued with the same mandatory language, or that they are part of a suspect class.  It also noted that free access to courts is not a fundamental right.  Therefore, the reference proceeding statute need only be rationally related to achieving its purpose.  The plaintiffs did not allege that the requirement of a reference proceeding is not rationally related to achieving the purpose of establishing a summary method of establishing the amount of loss.

I agree that the reference proceeding statute is rationally related to the purpose of having a summary method of establishing the amount of a property loss.  I nevertheless am trouble by the decision -- or perhaps by the earlier decision quoted by the court holding that access to courts is not a fundamental right.  If that's the case, then why is it part of the Massachusetts Declaration of Rights?  I'm not a constitutional law scholar, but it seems to me that the legislature should not be able to take away a right protected by the constitution.  Moreover, does this mean that the legislature can decide that parties to a tort case don't have  a right to a judicial hearing?  How about contract cases?