State Room, Inc. v. MA-60 State Associates, L.L.C., 995 N.E.2d 807

State Room, Inc. succeeded to a long-term lease (combined 1990 and 1994 leases) for premises on the 33rd–34th floors of 60 State Street used as a restaurant and later exclusively as an event venue.
The lease granted two successive ten-year extension options and required disputed extension rent to be fixed by a three-appraiser process: each appraiser gives a value, discard the value farthest from the three-member average, average the remaining two.
The lease instructed appraisers to consider, among other things, inflation data, fair market rents for comparable first-class Boston restaurants (comparable sales per sq ft and billing per person), and the premises’ special location/ambience; the clause allowed consideration beyond listed factors.
In 2009 the appraisers produced extension rents ($39/ft² first five years; $43.50/ft² second five years). State Room paid the new rent starting May 1, 2010, but later alleged the appraisers materially erred (used the 1990 lease area of 19,126 sq ft instead of the combined 32,792 sq ft; relied on first-class restaurants as comparables rather than event venues).
State Room sought judicial relief in 2011 asking the Superior Court to invalidate the appraisal and compel a new appraisal; the Superior Court dismissed the complaint. This appeal followed.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Reviewability of appraisal determination	Appraisal exceeded authority because appraisers used fundamentally wrong comparables and erroneous area, so court should review and set aside.	Appraisal is final and not judicially reviewable absent fraud, corruption, dishonesty, or bad faith.	Appraisal decision is unreviewable here because alleged errors were within the appraisal criteria; dismissal affirmed.
Use of first-class restaurants as "comparables"	Using more profitable first-class restaurants (not event venues) was not comparable and skewed rent upward.	Lease expressly referenced first-class restaurants and allowed broader considerations; appraisers complied with the clause.	Use of restaurants complied with lease language; not ultra vires.
Miscalculation of rentable area	Appraisers used 19,126 sq ft instead of 32,792 sq ft, artificially inflating sales per sq ft and rent.	Any area calculation is part of appraisers' fact-finding within their authority.	Area miscalculation, if true, is a mistake within the appraisers' remit and not a basis for review.
Waiver by payment of the challenged rent	State Room contends it could not safely withhold rent and relied on lease nonwaiver clause; thus payment did not waive rights.	Payment of the appraised rent for months without timely objection amounted to waiver of challenge.	Court declined to affirm dismissal on waiver ground (fact-dependent); affirmed dismissal solely on unreviewability.

Eliot v. Coulter, 322 Mass. 86 (1947) (articulates rule that courts will review an agreed appraisal only for fraud, corruption, dishonesty, or bad faith)
Cambridge St. Metal Co. v. Corrao, 30 Mass. App. Ct. 150 (1991) (appraiser exceeds authority when valuation departs from parties' agreed submission; court may invalidate unauthorized components)
Alperin v. Eastern Smelting & Refining Corp., 32 Mass. App. Ct. 539 (1992) (voiding appraiser adjustments that were outside contractual pricing formula)
Krauss v. Kuechler, 300 Mass. 346 (1938) (recognizing enforceability of price fixed by others absent fraud or bad faith)