Title: Buffalo-Water 1, LLC v. Fidelity Real Estate Company, LLC

State: massachusetts

Issuer: Massachusetts Supreme Court

Document:

NOTICE:  All slip opinions and orders are subject to formal 
revision and are superseded by the advance sheets and bound 
volumes of the Official Reports.  If you find a typographical 
error or other formal error, please notify the Reporter of 
Decisions, Supreme Judicial Court, John Adams Courthouse, 1 
Pemberton Square, Suite 2500, Boston, MA, 02108-1750; (617) 557-
1030; SJCReporter@sjc.state.ma.us 
 
SJC-12487 
 
BUFFALO-WATER 1, LLC  vs.  FIDELITY REAL ESTATE COMPANY, LLC. 
 
 
 
Suffolk.     October 4, 2018. - November 26, 2018. 
 
Present:  Gants, C.J., Lenk, Gaziano, Lowy, Budd, Cypher, & 
Kafker, JJ. 
 
 
Appraisal.  Declaratory Relief.  Practice, Civil, Declaratory 
proceeding, Motion to dismiss.  Contract, Implied covenant 
of good faith and fair dealing. 
 
 
 
 
Civil action commenced in the Superior Court Department on 
May 23, 2017. 
 
 
A motion to dismiss was heard by Janet L. Sanders, J. 
 
 
The Supreme Judicial Court on its own initiative 
transferred the case from the Appeals Court. 
 
 
 
Richard E. Briansky for the plaintiff. 
 
David J. Apfel for the defendant. 
 
Timothy P. Burke & Nathaniel P. Bruhn, for Greater Boston 
Real Estate Board, amicus curiae, submitted a brief. 
 
Dawn Mertineit & Katherine E. Perrelli, for Appraisal 
Institute & another, amici curiae, submitted a brief. 
 
 
 
GANTS, C.J.  In Eliot v. Coulter, 322 Mass. 86, 91 (1947), 
this court held that, where parties agree that the fair value of 
2 
 
a property shall be determined by an appraiser, "the correctness 
of the principles and methods of valuation adopted by [an] 
appraiser[] cannot be inquired into by the courts, in the 
absence of fraud, corruption, dishonesty or bad faith."  Under 
this common-law rule, a judge may not invalidate "the 
determination of appraisers selected by agreement to resolve a 
dispute" unless the appraisal process or decision was tainted on 
one of these four grounds.  Nelson v. Maiorana, 395 Mass. 87, 89 
(1985).  The issue on appeal is whether we should modify this 
common-law rule and allow a judge to invalidate an appraisal 
intended by the parties to provide a final, binding valuation of 
a property where there is the appearance of bias, not on the 
part of the individual who conducted the appraisal, but on the 
part of the entity that employed the individual appraiser.  We 
conclude that the common-law rule established in Eliot properly 
balances the need for fair valuations with the need for finality 
in the appraisal process, and that an appearance of bias alone 
is insufficient to invalidate an appraisal.  Because the 
allegations in the complaint, if proved, do not warrant a 
finding of any violation of the agreements setting forth the 
terms of the appraisal, or a finding of fraud, corruption, 
dishonesty, or bad faith by the individual appraiser, or a 
finding of breach of the implied covenant of good faith and fair 
3 
 
dealing by the defendant, we affirm the Superior Court judge's 
order allowing the defendant's motion to dismiss.1 
 
Background.  When reviewing a motion to dismiss, we accept 
as true all facts alleged in the plaintiff's verified complaint 
and accompanying exhibits.  See Revere v. Massachusetts Gaming 
Comm'n, 476 Mass. 591, 595 (2017).  The following facts are 
drawn from that complaint and those documents. 
 
In October 2004, the defendant, Fidelity Real Estate 
Company, LLC (Fidelity), sold the Winthrop Building, a 
commercial property located in Boston (property), to the 
plaintiff, Buffalo-Water 1, LLC (Buffalo-Water), a subsidiary of 
a national real estate company.  Buffalo-Water then leased the 
property back to Fidelity, and the parties entered into an 
option to purchase agreement (option agreement) granting 
Fidelity the option to buy the building back in the final year 
of its lease.  The option agreement stated that, if Fidelity 
chose to exercise its option, the purchase price would be 
$16,275,000 or ninety-five percent of the property's fair market 
value, whichever is greater.  The fair market value would be 
determined by agreement of the parties, or by the following 
appraisal process outlined in the option agreement:  (1) each 
                                                          
 
 
1 We acknowledge the amicus briefs submitted by the 
Appraisal Institute and Massachusetts Board of Real Estate 
Appraisers, and by the Greater Boston Real Estate Board. 
4 
 
party appoints an appraiser who has at least ten years of 
experience appraising Greater Boston property and is an MAI-
designated member of the Appraisal Institute2 or a member of the 
American Society of Real Estate Counselors3 (or their successor 
organizations); (2) if the two appointed appraisers cannot agree 
on the fair market value but their appraisals fall within five 
percent of one another, the fair market value shall be deemed to 
be the average of the two appraisals; (3) if the difference 
between the appraisals is greater than five percent, the two 
appraisers shall appoint a third appraiser to decide the fair 
market value.  The option agreement provides that this final 
valuation may not be greater than the higher or less than the 
lower of the two previous appraisals. 
 
In August 2016, Fidelity exercised its right under the 
option agreement to purchase the property.  Fidelity and 
                                                          
 
 
2 The Appraisal Institute, a professional association of 
real estate appraisers, designates certain qualified 
professionals as MAI-designated members.  "MAI" is not 
technically an acronym, but one of several designations used to 
identify certain professionals as members of the Appraisal 
Institute.  To become an MAI-designated member, an appraiser 
must have good moral character, receive credit for specialized 
experience, pass an examination, and meet various other 
requirements. 
 
 
3 The Counselors of Real Estate is an international 
organization of property professionals.  It was formerly known 
as the American Society of Real Estate Counselors.  An 
individual may become a member by invitation, or may apply for 
membership after meeting certain experience requirements. 
5 
 
Buffalo-Water were unable to agree upon the property's fair 
market value, and each retained an independent appraiser to 
determine the appropriate purchase price.  Buffalo-Water's 
appraiser valued the property at $36 million; Fidelity's 
appraiser valued it at $17 million.4  Because the two appraisals 
differed by more than five percent, the parties agreed to retain 
Cushman & Wakefield (Cushman), a real estate services company, 
as a third appraiser. 
 
Cushman outlined the terms of its appraisal services in a 
letter of engagement (engagement agreement) signed by the 
parties and by Robert Skinner, the Cushman professional selected 
to perform the independent appraisal.5  On April 18, 2017, 
Skinner submitted an appraisal valuing the property at $22.9 
million.  The valuation was accompanied by a "Certification of 
Appraisal" signed by Skinner, which stated, "We have no present 
or prospective interest in the property that is the subject of 
this report, . . . no personal interest with respect to the 
                                                          
 
 
4 According to the complaint, Buffalo-Water's appraiser 
evaluated the fair market value of the property as occupied, but 
Fidelity's appraiser evaluated it as vacant.  Because neither 
party disputes the validity of these two initial appraisals, we 
do not address this discrepancy here. 
 
 
5 Robert Skinner may have had assistance in valuing the 
property -- the engagement agreement retaining Cushman to 
conduct the valuation lists a $475 hourly fee for Skinner, and a 
$250 hourly fee for "Analysts/Appraisers."  Skinner alone, 
however, signed the engagement agreement and the certification 
of appraisal attached to the final appraisal report.   
6 
 
parties involved," and "no bias with respect to the property 
that is the subject of this report or to the parties involved 
with this assignment." 
 
Soon after receiving the valuation, Buffalo-Water asked 
Skinner to reconsider the appraisal in light of certain "factual 
errors."6  In response, Cushman offered to meet with Buffalo-
Water and Fidelity to discuss the appraisal.  Fidelity declined 
this offer to meet in a letter that noted that neither the 
option agreement nor the engagement agreement "contemplates 
reconsideration of the appraisal at any time."  Fidelity also 
stated that Buffalo-Water was obliged under the option agreement 
to honor the third appraiser's valuation and deed the property 
to Fidelity. 
 
After receiving Fidelity's letter, Buffalo-Water learned 
that in December 2016, before Cushman was engaged to conduct the 
appraisal, Fidelity had retained Cushman for a national 
representation contract.7  Buffalo-Water communicated this 
                                                          
 
 
6 In an electronic mail message sent on April 21, 2017, 
Stephen Scalione -- Buffalo-Water's executive director of 
finance -- summarized the alleged factual errors.  Scalione 
claimed that Skinner had misreported the purchase price and net 
rentable area of the property, that a certain deduction was 
improper, that the building should not have been valued as 
vacant, and that the over-all valuation was inaccurate. 
 
 
7 Fidelity asserts that the national representation contract 
was with Cushman & Wakefield U.S., Inc., not Cushman & Wakefield 
of Massachusetts, Inc., which employed the appraiser who 
performed the valuation.  Because the complaint identifies only 
7 
 
information to Fidelity, claiming that Fidelity's preexisting 
relationship with Cushman created an impermissible conflict of 
interest.  Fidelity declined to retain a new appraiser or to 
extend the closing date in light of this alleged conflict. 
 
The following week, Buffalo-Water filed a two-count 
verified complaint against Fidelity in the Superior Court.  The 
first count seeks a judgment declaring that the appraisal is 
invalid and nonbinding; the second count alleges a breach of the 
covenant of good faith and fair dealing.  Fidelity moved to 
dismiss the complaint for failure to state a claim upon which 
relief can be granted.  Mass. R. Civ. P. 12 (b) (6), 365 Mass. 
754 (1974).  The judge allowed Fidelity's motion and dismissed 
the complaint, concluding that the facts alleged by Buffalo-
Water did "not amount to the kind of bad faith, fraud or 
corruption required for a court to invalidate an independent 
appraisal agreed to by the parties."  Buffalo-Water appealed, 
and we transferred the case to this court on our own motion.  
 
Discussion.  We review the allowance of a motion to dismiss 
de novo.  Galiastro v. Mortgage Elec. Registration Sys., Inc., 
467 Mass. 160, 164 (2014).  In considering whether a count in a 
complaint survives a motion to dismiss under Mass. R. Civ. P. 
12 (b) (6), we accept as true the factual allegations in the 
                                                          
 
one Cushman entity, and because our decision does not rest on 
the distinction, we refer to Cushman as a single entity. 
8 
 
complaint and the attached exhibits, draw all reasonable 
inferences in the plaintiff's favor, and determine whether the 
allegations "plausibly suggest" that the plaintiff is entitled 
to relief on that legal claim (citation omitted).  Id.  The 
allegations must be more than "mere labels and conclusions," and 
must "raise a right to relief above the speculative level" 
(quotations and citations omitted).  Id. at 165. 
 
Buffalo-Water raises three arguments on appeal.  First, it 
claims that the judge improperly dismissed its claim for 
declaratory judgment under rule 12 (b) (6) because courts are 
obligated to declare the rights of the parties in every properly 
brought action for declaratory relief.  Second, it claims that 
the appraisal should be invalidated due to Cushman's failure to 
disclose its preexisting contractual relationship with Fidelity.  
Third, Buffalo-Water claims that Fidelity committed a breach of 
the covenant of good faith and fair dealing by taking advantage 
of an appraisal process it knew to be biased.  We address each 
of these arguments in turn. 
 
1.  Declaratory relief.  Buffalo-Water contends that the 
judge erred in dismissing its claim for declaratory relief under 
G. L. c. 231A, § 1, because, where the claim was properly 
brought, Buffalo-Water is entitled to a declaration of the 
rights of the parties.  We hold that, where a party moves to 
dismiss a properly brought declaratory judgment claim under rule 
9 
 
12 (b) (6) and where the judge concludes that the facts alleged 
in the complaint fail to state a claim upon which relief can be 
granted, the judge has the option of dismissing the claim or of 
declaring that, based on the facts alleged in the complaint, the 
plaintiff is not entitled to the declaratory relief sought. 
 
When evaluating a motion to dismiss a claim for declaratory 
relief under rule 12 (b) (6), a judge must proceed in two steps.  
First, the judge must determine whether the claim was "properly 
brought."  See Mscisz v. Kashner Davidson Sec. Corp., 446 Mass. 
1008, 1010 (2006).  A claim for declaratory relief is "properly 
brought" where the plaintiff demonstrates that an actual 
controversy exists, see G. L. c. 231A, § 1 (courts may issue 
declaratory judgments where "an actual controversy has arisen 
and is specifically set forth in the pleadings"); that the 
plaintiff has legal standing to sue, see Massachusetts Ass'n of 
Indep. Ins. Agents & Brokers, Inc. v. Commissioner of Ins., 373 
Mass. 290, 292-293 (1977) (explaining standing requirement); and 
that all necessary parties have been joined, see G. L. c. 231A, 
§ 8 ("When declaratory relief is sought, all persons shall be 
made parties who have or claim any interest which would be 
affected by the declaration . . ."); Service Employees Int'l 
Union, Local 509 v. Department of Mental Health, 469 Mass. 323, 
338 (2014) (failure to join necessary parties under G. L. c. 
231A, § 8, and Mass. R. Civ. P. 19, 365 Mass. 765 [1974] "may be 
10 
 
jurisdictional in a declaratory judgment action, thereby 
precluding the court's consideration of the issue").8 
 
Where the claim is "properly brought," as it is here, the 
judge must proceed to the second step:  determining whether the 
facts alleged by the plaintiff in the complaint, if true, state 
a claim for declaratory relief that can survive a defendant's 
motion to dismiss. 
 
Buffalo-Water contends that, even if the facts alleged in 
its complaint fail to state a claim for declaratory relief, the 
judge may not dismiss its properly brought claim but must 
instead declare the rights of the parties.  Buffalo-Water's 
contention has considerable support in our case law.  See Lynn 
v. Lynn Police Ass'n, 455 Mass. 590, 599 (2010) ("In a properly 
brought action for declaratory relief, there must be a 
declaration of the rights of the parties even though relief is 
denied to a plaintiff"); Cherkes v. Westport, 393 Mass. 9, 12 
(1984) (same); Attorney Gen. v. Kenco Optics, Inc., 369 Mass. 
412, 418 (1976) ("When an action for declaratory relief is 
properly brought and relief is denied on the merits, the action 
should not be dismissed. . . .  The rights of the parties should 
                                                          
 
 
8 Where the relief sought through a declaratory judgment 
claim involves administrative action, we further require the 
plaintiff to show that all available administrative remedies 
have been exhausted.  See Villages Dev. Co. v. Secretary of the 
Executive Office of Envtl. Affairs, 410 Mass. 100, 106 (1991). 
11 
 
be declared" [citation omitted]); Jewel Cos. v. Burlington, 365 
Mass. 274, 277 (1974) ("a demurrer will not be sustained . . . 
merely because the court is convinced the plaintiff will fail on 
the merits but only where the bill on its face fails to state a 
controversy proper for determination under the declaratory 
procedure" [quotation and citation omitted]); Connery v. 
Commissioner of Correction, 33 Mass. App. Ct. 253, 254 n.4 
(1992), S.C., 414 Mass. 1009 (1993) ("Irrespective of the merits 
of the case, dismissal of the case under Mass. R. Civ. P. 
12 [b] [6] was not a correct disposition" because "[i]n an 
action for declaratory relief . . . the court ought to declare 
the rights of the parties").  But Massachusetts appellate courts 
have also affirmed orders allowing motions to dismiss in 
properly brought claims for declaratory relief.  See State Room, 
Inc. v. MA-60 State Assocs., L.L.C., 84 Mass. App. Ct. 244, 252 
(2013) (affirming judgment dismissing claim for declaratory 
relief under rule 12 [b] [6]).  See also Harvard Crimson, Inc. 
v. President & Fellows of Harvard College, 445 Mass. 745 (2006); 
Wallerstein v. Board of Bar Examiners, 414 Mass. 1008 (1993).9  
                                                          
 
 
9 In Harvard Crimson, Inc. v. President & Fellows of Harvard 
College, 445 Mass. 745, 748 n.5 (2006), and Wallerstein v. Board 
of Bar Examiners, 414 Mass. 1008, 1009 (1993), this court 
acknowledged that when "an action for declaratory relief is 
properly brought and relief is denied on the merits, the action 
should not be dismissed" (citation omitted) and the rights of 
the parties should be declared.  In both cases, however, the 
court went on to affirm judgments granting motions to dismiss, 
12 
 
Our case law regarding whether courts may dismiss properly 
brought claims for declaratory relief under rule 12 (b) (6) 
therefore requires clarification. 
 
Where a defendant has filed a motion to dismiss and the 
judge concludes that the plaintiff has failed to state a claim 
upon which relief can be granted, the claim is ripe for 
disposition.  If the plaintiff is not entitled to the 
declaratory judgment sought even if all of the factual 
allegations in the complaint are true, there can be no 
justification for allowing the claim to proceed or for 
permitting further discovery.  If the judge were to declare the 
rights of the parties, the declaration should simply be that the 
plaintiff is not entitled to the declaratory relief sought based 
                                                          
 
on the ground that dismissal of a complaint under Mass. R. Civ. 
P. 12 (b) (6), 365 Mass. 754 (1974), is not a decision on the 
merits.  See Harvard Crimson, Inc., supra; Wallerstein, supra.  
At least for res judicata purposes, however, a dismissal under 
Mass. R. Civ. P. 12 (b) (6) is considered an adjudication on the 
merits.  See Mass. R. Civ. P. 41 (b) (3), as amended, 454 Mass. 
1403 (2009) ("any dismissal not provided for in this rule, other 
than a dismissal for lack of jurisdiction, for improper venue, 
or for failure to join a party . . . operates as an adjudication 
upon the merits"); Mestek, Inc. v. United Pac. Ins. Co., 40 
Mass. App. Ct. 729, 731 (1996) ("under Massachusetts law, as 
elsewhere, a dismissal for failure to state a claim . . . 
operates as a dismissal on the merits" [citation and alteration 
omitted]).  See also Federated Dep't Stores, Inc. v. Moitie, 452 
U.S. 394, 399 n.3 (1981) (dismissal for failure to state claim 
under Fed. R. Civ. P. 12 [b] [6], which is identical to Mass. R. 
Civ. P. 12 [b] [6], is judgment on merits).  We therefore find 
the reasoning in support of the dismissals in the Harvard 
Crimson, Inc. and Wallerstein cases to be unpersuasive. 
13 
 
on the allegations in the complaint.  Such a declaration, 
however, is implicit in a judge's order to dismiss a declaratory 
judgment claim under rule 12 (b) (6).  Here, for instance, the 
judge's allowance of the motion to dismiss implicitly declares 
that, based on the allegations in its complaint, Buffalo-Water 
is not entitled to the declaration that Skinner's appraisal is 
invalid.  Therefore, we see no convincing reason to prohibit a 
judge from dismissing a properly brought declaratory judgment 
count where it fails to state a claim under rule 12 (b) (6).  We 
also see no convincing reason to prohibit a judge from making 
explicit through a declaration of rights what would be implicit 
in a dismissal.  To the extent that previous cases have held 
that a judge may not dismiss a properly brought declaratory 
judgment claim where it fails to state a claim under rule 12 (b) 
(6), those cases are overruled. 
 
2.  Validity of appraisal.  Parties that agree to be bound 
by an appraisal are free to set forth contractual terms 
regarding the appraiser's obligations and the grounds for 
invalidating the appraisal.  Therefore, in deciding whether to 
invalidate an appraisal, we look first to determine whether 
there are allegations that would support a finding of a material 
breach of the contract terms governing the appraisal.  Where 
there is no such material breach, we then look to the common law 
14 
 
to determine whether the appraisal is invalid due to "fraud, 
corruption, dishonesty or bad faith."  Eliot, 322 Mass. at 91. 
 
a.  Contract terms.  Because the engagement agreement 
retaining Cushman to perform an appraisal for Buffalo-Water and 
Fidelity sets forth the terms of the appraisal at issue here, we 
look to its contents to determine whether the appraiser was 
contractually obligated to disclose Cushman's contract with 
Fidelity.  Three provisions of the engagement agreement are 
relevant:  the discussion of conflicts of interest, the 
requirement that the appraiser's prior services be disclosed, 
and the commitment to "develop an appraisal in accordance with 
[the Uniform Standards of Professional Appraisal Practice 
(USPAP)10] and the Code of Ethics and Certification Standards of 
the Appraisal Institute." 
 
i.  Conflicts of interest.  The "Conflicts of Interest" 
section of the engagement agreement states that "[Cushman] 
adheres to a strict internal conflict of interest policy.  If we 
discover in the preparation of our appraisal a conflict with 
this assignment we reserve the right to withdraw from the 
assignment without penalty."  This provision does not obligate 
Cushman or its appraisers to disclose any conflicts or 
                                                          
 
 
10 The Uniform Standards of Professional Appraisal Practice 
(USPAP) are published by the Appraisal Foundation, which sets 
standards and qualifications for real estate appraisers. 
15 
 
relationships.  Instead, it exists to protect Cushman should it 
choose to withdraw from an assignment to perform an appraisal 
because of a conflict of interest.  The provision is therefore 
not applicable where, as here, the appraiser completed a 
valuation without exercising the right to withdraw. 
 
ii.  Disclosure requirement.  In a section entitled "Prior 
Services Disclosure," the engagement agreement states that the 
"USPAP requires disclosure of prior services performed by the 
individual appraiser within the three years prior to this 
assignment."  The section goes on to affirm that the 
"undersigned appraiser has not provided prior services within 
the designated time frame."  The relevant USPAP section is an 
"Ethics Rule" explaining that "[i]f known prior to accepting an 
assignment, and/or if discovered at any time during the 
assignment, an appraiser must disclose to the client . . . any 
current or prospective interest in the subject property or 
parties involved; and any services regarding the subject 
property performed by the appraiser within the three year period 
immediately preceding acceptance of the assignment, as an 
appraiser or in any other capacity."  Appraisal Foundation, 
USPAP 9 (2016-2017) (USPAP). 
 
The relevant appraiser for the purposes of the contract is 
Skinner, who signed the engagement agreement and went on to 
perform the valuation at issue.  Buffalo-Water's argument -- 
16 
 
that Cushman is the relevant appraiser -- is belied not only by 
the text of the engagement agreement, which clearly refers to 
the "individual" and "undersigned" appraiser, but also by an 
Ethics Rule comment clarifying that the Ethics Rule "specifies 
the personal obligations and responsibilities of the individual 
appraiser."  Id. at 8.  This is consistent with the "Assumptions 
and Limiting Conditions" section of Skinner's completed 
appraisal report, which explicitly defines "[a]ppraiser(s)" to 
mean "the employee(s) of [Cushman] who prepared and signed the 
Report" (emphasis added).  Buffalo-Water's focus on Skinner's 
employer is further refuted by the answer to one of the 
"Frequently Asked Questions" that provide guidance regarding the 
interpretation of the USPAP.  The relevant question asks, "If 
the firm that employs me as an appraiser has provided leasing or 
property management services in the past three years for the 
subject property, must this be disclosed?"  Id. at 219.  The 
Appraisal Foundation responds, "[n]ot necessarily," as the 
Ethics Rule only "requires disclosure of services provided by 
the appraiser.  However, if an appraiser believes that the 
provision of a service by the appraiser's firm or other related 
entity may be relevant, he or she should disclose that 
information to a potential client" (quotation omitted).11  Id. 
                                                          
 
 
11 We note that there is no allegation in the complaint that 
Cushman provided any services for the Winthrop Building. 
17 
 
 
Buffalo-Water's complaint alleges no facts suggesting that 
Skinner had any interest in the Winthrop Building or that he had 
performed an appraisal of the Winthrop Building in the three 
years prior to his acceptance of the assignment (or at any other 
time).  Nor does the complaint allege that Skinner even knew of 
Fidelity's national representation contract with Cushman.  
Without such knowledge, Skinner cannot be expected to have 
disclosed that information to Buffalo-Water.  Nor, for that 
matter, could he have been influenced in his valuation of the 
property by a Cushman contract with Fidelity that he is not 
alleged to have known anything about.  The "Prior Services 
Disclosure" section of the engagement agreement therefore did 
not require the disclosure of Cushman's contract with Fidelity. 
 
iii.  Incorporation of USPAP and Code of Ethics.  In an 
engagement agreement section entitled "USPAP Compliance," 
Skinner agreed to "develop an appraisal in accordance with USPAP 
and the Code of Ethics and Certification Standards of the 
Appraisal Institute."  Here, the relevant incorporated standard 
is rule 3-6 of the Code of Ethics, which provides that in the 
absence of disclosure, "[i]t is unethical to provide a Service 
if a valuer has any direct or indirect, current, or prospective 
personal interest in the subject or outcome of the Service or 
with respect to the parties involved in the Service." 
18 
 
 
The Code of Ethics specifically defines a "valuer" as 
"[o]ne who is expected to provide Services in an unbiased and 
competent manner" (emphasis added).  Appraisal Institute, Code 
of Professional Ethics and Explanatory Comments 6 (2015).  In 
this case, where Skinner was the "valuer," the relevant inquiry 
is whether Skinner's actions violated rule 3-6 of the Code of 
Ethics.  The complaint alleges no facts tending to show that 
Skinner had any personal interest in the Winthrop Building or in 
the outcome of his valuation, or knew of the national 
representation contract between Fidelity and Cushman.  Code of 
Ethics rule 3-6, as incorporated by the engagement agreement, 
therefore created no obligation to disclose the existence of 
that contract. 
 
b.  Common law.  Finding no contractual breach, we move on 
to consider whether the appraisal was invalid under 
Massachusetts common law.  Our common law has recognized that, 
when parties enter into a contract providing that the valuation 
established by an independent appraiser shall determine the 
value of a property or business, they express their "shared 
desire for finality" through a means other than adjudication by 
a court or an arbitrator.  State Room, Inc., 84 Mass. App. Ct. 
at 249.  See Eliot, 322 Mass. at 89 (parties agreed to valuation 
"that would in the future prevent a resort to the courts or to 
technical arbitration").  The common law also recognizes that 
19 
 
the need for finality does not override the need for the 
appraisal process to be untainted by "fraud, corruption, 
dishonesty or bad faith."  See Eliot, supra at 91.  By allowing 
courts to invalidate appraisals only in these narrow 
circumstances, the common-law test established in Eliot balances 
the desire for finality with the need for integrity in the 
appraisal process. 
 
Buffalo-Water claims that the appearance of bias arising 
from Cushman's national representation contract with Fidelity 
suffices to invalidate Skinner's appraisal.  In evaluating this 
claim, we first consider whether the appearance of bias falls 
within the existing rubric of "fraud, corruption, dishonesty or 
bad faith."  Because we find that it does not, we then consider 
whether we should revise our common law to include it. 
 
We begin by noting that, in determining whether to 
invalidate an appraisal, we look to the conduct of the 
individual appraiser or appraisers responsible for the 
valuation, not to the conduct of their employer.  This rule is 
in keeping with the USPAP and the Code of Ethics.  See USPAP, 
supra at 1 (defining "appraiser" as "one who is expected to 
perform valuation services competently and in a manner that is 
independent, impartial, and objective" [emphasis added]); id. at 
8 ("This [Ethics] Rule specifies the personal obligations and 
responsibilities of the individual appraiser"); Appraisal 
20 
 
Institute, Code of Professional Ethics and Explanatory Comments 
6 (2015) (defining "valuer" as "[o]ne who is expected to provide 
Services in an unbiased and competent manner" [emphasis added]). 
 
In arguing for the adoption of an "appearance of bias" 
standard, Buffalo-Water relies in large part on the statement in 
the United States Supreme Court's opinion in Commonwealth 
Coatings Corp. v. Continental Cas. Co., 393 U.S. 145, 150 (1968) 
that, under the Federal Arbitration Act, "any tribunal permitted 
by law to try cases and controversies not only must be unbiased 
but also must avoid even the appearance of bias."  Putting aside 
that this decision involved an arbitration rather than an 
appraisal and that it interpreted a Federal arbitration statute, 
the appearance of bias in Commonwealth Coatings Corp. arose from 
the fact that the "third arbitrator, the supposedly neutral 
member of the panel, conducted a large business . . . in which 
he served as an engineering consultant" and one of the "regular 
customers" of that business was a litigant in the arbitration.  
Id. at 146.  Thus, "the appearance of bias" arose from his 
personal, "repeated and significant" business relationship with 
the defendant, not simply the business relationship of his 
employer.12  Id.  Even the cases from other jurisdictions that 
                                                          
 
 
12 We note that the two concurring Justices sought to limit 
the breadth of the holding, stating that "it is enough for 
present purposes to hold, as the Court does, that where the 
arbitrator has a substantial interest in a firm which has done 
21 
 
were cited by Buffalo-Water in its discussion of appraiser bias 
focus on the bias of individual appraisers, not their employer.  
See, e.g., Gebers v. State Farm Gen. Ins. Co., 38 Cal. App. 4th 
1648, 1652 (1995) (appraiser was separately retained by party as 
expert witness in two pending court cases); Central Life Ins. 
Co. v. Aetna Cas. & Sur. Co., 466 N.W.2d 257, 261 (Iowa 1991) 
("appraiser was interested because he had a direct financial 
interest in the dispute"). 
 
Buffalo-Water alleges that there is an appearance of bias 
in Skinner's appraisal because of a business relationship that 
his employer, Cushman, has with Fidelity.  Skinner is not 
alleged to have known about this business relationship when he 
made the valuation.  The alleged appearance of bias does not 
qualify as "fraud, corruption, dishonesty or bad faith."  Eliot, 
322 Mass. at 91. 
 
At a minimum, a claim of fraud sufficient to invalidate an 
appraisal must allege a misrepresentation, and there are no 
allegations in the complaint tending to show that Skinner made, 
or was even aware of, a false representation to Buffalo-Water.  
See Balles v. Babcock Power Inc., 476 Mass. 565, 573 (2017) 
(describing elements of fraud).  To the extent that Buffalo-
                                                          
 
more than trivial business with a party, that fact must be 
disclosed."  Commonwealth Coatings Corp. v. Continental Cas. 
Co., 393 U.S. 145, 151-152 (1968) (White, J., concurring, joined 
by Marshall, J.). 
22 
 
Water alleges that Cushman committed fraud by omission because 
Buffalo-Water relied to its detriment upon a "material omission 
by Cushman (i.e. its failure to disclose its relationship with 
Fidelity)," this allegation also fails.  To show fraud by 
omission, the plaintiff must allege "both concealment of 
material information and a duty requiring disclosure."  Sahin v. 
Sahin, 435 Mass. 396, 402 n.9 (2001).  Here, Buffalo-Water has 
not shown that Skinner concealed (or even knew of) the national 
contract between Fidelity and Cushman, nor has it shown any duty 
to disclose that contract.13 
 
"Dishonesty" is a broader term than fraud, encompassing all 
"behavior that deceives or cheats people," "untruthfulness," and 
"untrustworthiness."  Black's Law Dictionary 568 (10th ed. 
2014).  We need not decide here whether a dishonest act that 
falls short of fraud will suffice under our common law to 
invalidate an appraisal, because an appearance of bias alone 
cannot reasonably be deemed an act of dishonesty where, as here, 
the appearance of bias arises from a business relationship of 
Cushman that Skinner is not alleged to have known existed. 
 
A finding of "corruption" might be warranted where the 
individual appraiser had an undisclosed personal interest -- 
                                                          
 
 
13 In view of this conclusion, we need not decide whether a 
complaint seeking to invalidate an appraisal on the ground of 
fraud must plead the allegation of fraud with "particularity."  
See Mass. R. Civ. P. 9 (b), 365 Mass. 751 (1974). 
23 
 
financial or otherwise -- in the outcome of his or her 
valuation.  As earlier noted, rule 3-6 of the Code of Ethics 
provides that it is unethical to provide services without 
disclosure if the valuer has any "personal interest" in the 
subject or outcome of the service or "with respect to the 
parties involved."  But we decline to characterize as 
"corruption" the mere appearance of bias based on a business 
relationship of the appraisal company rather than of the 
individual appraiser, especially where there is no allegation 
that the individual appraiser knew of that relationship. 
 
Bad faith is a "general and somewhat indefinite term" that 
goes beyond "bad judgment" or "negligence," suggesting "a 
dishonest purpose or some moral obliquity," a "conscious doing 
of wrong," or a "breach of a known duty through some motive of 
interest or ill will."  Spiegel v. Beacon Participations, Inc., 
297 Mass. 398, 416 (1937).  See Commonwealth v. Frith, 458 Mass. 
434, 441 (2010).  Bad faith is not a statutory ground for 
invalidating arbitrations under the Massachusetts Uniform 
Arbitration Act for Commercial Disputes, G. L. c. 251, § 12 (a) 
(MAA), but the MAA does require courts to vacate arbitration 
awards where "there was evident partiality by an arbitrator 
appointed as a neutral."  G. L. c. 251, § 12 (a) (2).  
"[E]vident partiality means a situation in which a reasonable 
person would have to conclude that an arbitrator was partial to 
24 
 
one party to an arbitration" (quotation and citation omitted).  
JCI Communications, Inc. v. Int'l Bhd. of Elec. Workers, Local 
103, 324 F.3d 42, 51 (1st Cir. 2003).  We recognize that 
partiality, where it exists, is more likely to be evident in an 
arbitration than in an appraisal because an arbitrator generally 
conducts a hearing where evidence is offered, while an appraiser 
generally renders a valuation without a hearing or the 
presentation of evidence.  See Palmer v. Clark, 106 Mass. 373, 
389 (1871) (appraisal decision, unlike arbitration decision, 
"may be made without notice to or hearing of the parties").  But 
if evident partiality were proved in the context of an 
appraisal, it would be sufficient to establish bad faith and to 
invalidate an appraisal under our common law, much as it would 
invalidate an arbitration award under the MAA.  Evident 
partiality, however, means "more than just the appearance of 
possible bias," JCI Communications, Inc., supra, and therefore 
cannot be established based on the allegations in Buffalo-
Water's complaint. 
 
Arguably, an appraiser may also act in "bad faith" where he 
or she acts in any other way that would justify vacating an 
arbitration award under the MAA.  See, e.g., G. L. c. 251, 
§ 12 (a) (1) (arbitration award shall be vacated if procured by 
undue means); G. L. c. 251, § 12 (a) (2) (arbitration award 
shall be vacated if there was "misconduct prejudicing the rights 
25 
 
of any party").  Buffalo-Water, however, has alleged no facts 
showing that Skinner's actions, if committed in an arbitral 
context, might have been impermissible under the MAA.  We 
therefore need not address here to what extent "bad faith" under 
our common law might encompass the various grounds for 
invalidating an arbitration award under the MAA. 
 
Having determined that the appearance of bias alone does 
not support a finding of "fraud, corruption, dishonesty or bad 
faith," Eliot, 322 Mass. at 91, we consider whether to add 
"appearance of bias" as a separate common-law ground for 
invalidating an appraisal.  We decline to do so.  For more than 
seventy years, the common-law standard established in Eliot has 
provided an appropriate balance between parties' desire for 
finality and the need for integrity in the appraisal process.  
Allowing appraisals to be invalidated based on the appearance of 
bias alone would considerably diminish the finality of 
appraisals without significantly improving their over-all 
integrity.  Cf. Katz, Nannis & Solomon, P.C. v. Levine, 473 
Mass. 784, 794 (2016) ("[a]llowing parties to expand the grounds 
for judicial review would undermine the predictability, 
certainty, and effectiveness of the arbitral forum that has been 
voluntarily chosen by the parties" [quotation and citation 
omitted]). 
26 
 
 
When parties negotiate a contract that provides for a 
binding appraisal, they are free to include provisions that 
establish more stringent impartiality requirements than those in 
our common law and specify that the appraisal will be invalid 
where those requirements are not met.  Here, just as the parties 
required that the individual appraisers have at least ten years 
of experience valuing Greater Boston property, they could have 
required disclosure of any information concerning Cushman's 
business dealings with Buffalo-Water or Fidelity that might 
create an "appearance of bias," and agreed to invalidate the 
appraisal if such a disclosure was not made.  Where they did 
not, we decline to expand our common law to require invalidation 
on this ground alone. 
 
Because the allegations in Buffalo-Water's verified 
complaint, taken as true, do not "plausibly suggest" that the 
appraisal was tainted by fraud, corruption, dishonesty, or bad 
faith, and because the appearance of bias alone is not 
sufficient to invalidate an appraisal, the motion to dismiss the 
count of the complaint seeking invalidation of the appraisal was 
properly allowed under Mass. R. Civ. P. 12 (b) (6). 
 
3.  Covenant of good faith and fair dealing.  In a separate 
count of the complaint, Buffalo-Water alleges that the defendant 
violated the covenant of good faith and fair dealing by 
insisting that Buffalo-Water sell the Winthrop Building despite 
27 
 
knowing that the valuation was tainted by Cushman's potential 
conflict of interest with Fidelity. 
 
The covenant of good faith and fair dealing "requires that 
neither party shall do anything that will have the effect of 
destroying or injuring the right of the other party to the 
fruits of the contract" (quotation and citation omitted).  T.W. 
Nickerson, Inc. v. Fleet Nat'l Bank, 456 Mass. 562, 570 (2010).  
Although "[e]very contract implies good faith and fair dealing 
between the parties to it," the "scope of the covenant is only 
as broad as the contract that governs the particular 
relationship" (quotations and citations omitted).  Id. at 569-
570.  In other words, the covenant of good faith and fair 
dealing "cannot create rights and duties not otherwise provided 
for in the existing contractual relationship" (quotation and 
citation omitted).  Id. at 570. 
 
Nothing in the contractual agreements entered into by 
Buffalo-Water and Fidelity prohibits Fidelity from demanding a 
sale based on the price established in Skinner's appraisal.  The 
option agreement clearly states that the property's value would 
be determined through an appraisal process, every step of which 
was followed here.  It does not require the parties to refrain 
from selecting an appraiser whose company had previously 
contracted with one of the parties.  Nor does the option 
agreement or the engagement agreement require disclosure of 
28 
 
potential conflicts of interest that could create the appearance 
of bias.  Buffalo-Water may not insert these conditions into its 
contract with Fidelity through the side door of the covenant of 
good faith and fair dealing.  Because Buffalo-Water has alleged 
no facts tending to show that Fidelity injured its rights under 
the option agreement or the engagement agreement, we conclude 
that the judge properly dismissed the claim for breach of the 
implied covenant of good faith and fair dealing.14 
 
Conclusion.  For the reasons stated above, we affirm the 
order allowing the defendant's motion to dismiss the complaint. 
 
 
 
 
 
 
 
So ordered. 
                                                          
 
 
14 Buffalo-Water contends that it was error for the judge to 
dismiss its claim for breach of the covenant of good faith and 
fair dealing without specifically referencing this claim or 
providing a basis for the dismissal.  "Findings of facts and 
conclusions of law," however, "are unnecessary on decisions of 
motions under Rule[] 12 . . . ."  Mass. R. Civ. P. 52 (a), as 
amended, 423 Mass. 1402 (1996).  Furthermore, because we review 
decisions on motions to dismiss de novo, our analysis is not 
affected by the judge's lack of explanation.  See Gabbidon v. 
King, 414 Mass. 685, 686 (1993) ("on appeal, we may consider any 
ground apparent on the record that supports the result reached 
in the lower court").