Opinion ID: 449457
Heading Depth: 2
Heading Rank: 2

Heading: Breach of Mass.Gen.Laws Ann. ch. 93A

Text: 15 Mass.Gen.Laws Ann. ch. 93A generally prohibits unfair or deceptive acts or practices in business. 3 When it was first enacted in 1967, its primary goal was protection of consumers, Manning v. Zuckerman, 388 Mass. 8, 12, 444 N.E.2d 1262 (1983), but the addition of section 11 in 1972 extended chapter 93A's coverage to business persons involved in transactions with other business persons. Id. Chapter 93A has been interpreted to be  'a statute of broad impact which creates new substantive rights and provides new procedural devices for the enforcement of those rights' , id., (quoting Slaney v. Westwood Auto, Inc., 366 Mass. 688, 693, 322 N.E.2d 768 (1975)). This act is one of several legislative attempts in recent years to regulate business activities with the view to providing proper disclosure of information ..., Commonwealth v. DeCotis, 366 Mass. 234, 316 N.E.2d 748 (1974). 16 Chapter 93A Sec. 2 provides no definition of an unfair or deceptive act or practice, and instead directs our attention to interpretations of unfair acts and practices under the Federal Trade Commission Act as construed by the Commission and the federal courts. Commonwealth v. DeCotis, 366 Mass. at 241, 316 N.E.2d 748; PMP Associates, Inc. v. Globe Newspaper Co., 366 Mass. 593, 595, 321 N.E.2d 915 (1975). The section also empowers the Attorney General to make rules and regulations interpreting Sec. 2(a). See Sec. 2(c). V.S.H. relies heavily on one such regulation to support its allegation that Texaco violated chapter 93A. 17 The Attorney General's regulation in Mass.Admin.Code tit. 20, Sec. 3.16(2) states that an act or practice violates chapter 93A if: 18 Any person or other legal entity subject to this act fails to disclose to a buyer or prospective buyer any fact, the disclosure of which may have influenced the buyer or prospective buyer not to enter into the transaction. 19 V.S.H.'s complaint appears to state a claim under this regulation and, in fact, mirrors its language. V.S.H. alleged in paragraph 19 of its complaint that Texaco's failure to disclose the oil leaks that V.S.H. representatives discovered in October 1983 are facts the disclosure of which may have influenced V.S.H. not to enter into the transaction and agree to pay the sum of $2,800,000 for the premises or to pay a deposit in connection therewith of $280,000. 20 The district court found an inadequacy in the complaint by concluding that the disclosure language of regulation Sec. 3.16 is incomplete. 4 The court decided that unless a defendant has a duty to speak, his nondisclosure of a defect does not constitute a violation of chapter 93A even if the information may have influenced the buyer not to enter into the contract. The court then went on to hold that Texaco did not have a duty to disclose the oil leaks to V.S.H. We disagree for two reasons. First, even if we were to accept the court's premise that nondisclosure is a violation of chapter 93A only when there is a duty to disclose, we would find that V.S.H. has met its burden of establishing a duty by alleging that Texaco made partial or incomplete statements regarding the oil leaks on the property. See Restatement of Torts (Second) Secs. 551, 529. See supra p. 415. 21 We are not convinced, however, that V.S.H. needs to allege more than a failure to disclose a material fact to state a cause of action under chapter 93A. In Slaney v. Westwood Auto, Inc., 366 Mass. 688, 322 N.E.2d 768 (1975), the Massachusetts Supreme Judicial Court examined chapter 93A at length, and emphasized the distinction between that statutory cause of action and the common law action for fraud and deceit, which would require a duty to disclose. It pointed out that the definition of an actionable 'unfair or deceptive act or practice' goes far beyond the scope of the common law action for fraud and deceit.... [A] Sec. 9 [or Sec. 11] claim for relief ... is not subject to the traditional limitations of preexisting causes of action such as tort for fraud and deceit. Id., at 703-04, 322 N.E.2d 768. Massachusetts case law suggests that one difference between a fraud claim and the more liberal 93A is allowance of a cause of action even in the absence of a duty to disclose. See Nei v. Boston Survey Consultants, Inc., 388 Mass. 320, 323-24, 446 N.E.2d 681 (1983), where the court appeared ready to find chapter 93A liability even though it found no duty to speak. 5 See also Nei v. Burley, 388 Mass. 307, 316, 446 N.E.2d 674 (1983). 22 The district court, however, had another reason for dismissing the claim. It concluded that chapter 93A liability was precluded because V.S.H. is a sophisticated buyer who had the opportunity to inspect the property and who agreed to purchase the property as is. The court noted that this type of contractual arrangement is expressly permitted under the Uniform Commercial Code, M.G.L. c. 106, Sec. 2-316, in non-consumer sales of goods, and it thus would be anomalous to hold that 'as is' contracts are permissible in sales of goods cases but not in commercial sales of land cases. It concluded: 23 Absent allegations of the non-detectability of defects on inspection or their fraudulent concealment by a defendant, a plaintiff who has inspected the premises to be purchased and has agreed to purchase the land 'as is' cannot rely on Sec. 3.16(2) to establish a defendant's violation of chapter 93A. 24 We believe the district court's view of the law regarding as is clauses is incorrect. Although the Uniform Commercial Code does expressly permit disclaimers in the sale of goods between merchants, Sec. 2-316 refers specifically to disclaimers of implied warranties, suggesting to us that it was intended only to permit a seller to limit or modify the contractual bases of liability which the Code would otherwise impose on the transaction. The section does not appear to preclude claims based on fraud or other deceptive conduct. Section 1-102(3) of Mass.Gen.Laws ch. 106 lends support to this interpretation of Sec. 2-316. It states: 25 The effect of provisions of this chapter may be varied by agreement, except as otherwise provided in this chapter and except that the obligations of good faith, diligence, reasonableness and care prescribed by this chapter may not be disclaimed by agreement ... (emphasis added). 26 We find further support for our view implicit in Marcil v. John Deere Industrial Equipment Co., 9 Mass.App. 625, 403 N.E.2d 430, app. denied, 380 Mass. 940 (1980). The court in that case upheld a disclaimer of all express and implied warranties other than the warranty specified on the purchase order, finding that there was no indication that the disclaimer was unconscionable. The court went on to note that the vaguely worded allegations of the plaintiff's complaint may have stated claims for deceit or violation of chapter 93A, but the plaintiff failed to characterize them as such to the trial judge, and so he was not allowed to do so for the first time on appeal. Our reading of Marcil is that even if a disclaimer on its face is not unconscionable, it is subject to challenge if a plaintiff, as in this case, properly raises allegations of deceit and violation of chapter 93A. 27 Our conclusion here does not mean that an as is clause would never be given effect in real estate transactions where the buyer alleged the seller's failure to disclose a material defect in the property. The Supreme Judicial Court has held that Sec. 3.16(2) imposes liability only when the defendant had knowledge, or should have known of the defect, and where a direct relationship existed between the parties. See Lawton v. Dracousis, 14 Mass.App. 164, 171, 437 N.E.2d 543, 547, app. denied, 387 Mass. 1103, 440 N.E.2d 1177 (1982) (failure to disclose building code violations not actionable where seller did not know or have reason to know of violations); Nei v. Boston Survey Consultants, Inc., 388 Mass. 320, 324, 446 N.E.2d 681 (1983). It is possible that Sec. 3.16(2) will be found inapplicable in other situations involving as is clauses. 28 Even more persuasive than this inferential reasoning based on the Uniform Commercial Code is the fact that Massachusetts case law unequivocally rejects assertion of an as is clause as an automatic defense against allegations of fraud: 29 The same public policy that in general sanctions the avoidance of a promise obtained by deceit strikes down all attempts to circumvent the policy by means of contractual devices. In the realm of fact it is entirely possible for a party knowingly to agree that no representations have been made to him, while at the same time believing and relying upon representations which in fact have been made and in fact are false but for which he would not have made the agreement. Bates v. Southgate, 308 Mass. 170, 182, 31 N.E.2d 551 (1941). 30 See also Schell v. Ford Motor Company, 270 F.2d 384, 386 (1st Cir.1959) (under the law of Massachusetts ... in the absence of fraud a person may make a valid contract exempting himself from any liability to another which he may in the future incur as a result of his negligence....) (emphasis added). 31 Texaco acknowledges that a party may not contract out of liability for fraud. It argues instead that the specific language of the disclaimer in this case precludes recovery by V.S.H., (i.e., that V.S.H. did not rely on any representations); Texaco relies heavily, however, on a case from another jurisdiction to support this proposition, Landale Enterprises, Inc. v. Berry, 676 F.2d 506 (11th Cir.1982). Bates v. Southgate, 308 Mass. 170, 31 N.E.2d 551 (1941), is the controlling precedent on this issue in Massachusetts, not Landale. 6 Texaco also implies that the disclaimer must be given full effect because V.S.H. is a sophisticated purchaser, experienced in real estate transactions. 32 Although we agree that V.S.H.'s experience in the real estate business, along with the presence of an as is clause, is relevant to the ultimate disposition of the chapter 93A claim, we do not find that either factor makes V.S.H.'s claim insufficient as a matter of law. Sophistication of the parties is not mentioned in chapter 93A and the amendment of chapter 93A to cover business entities did not limit the statute's protection to small, unsophisticated businesses. It may be that the Massachusetts Supreme Judicial Court ultimately should decide the question of whether an as is clause ever should be ignored in a transaction between two sophisticated businesses and, thus, whether the existence of one should preclude a chapter 93A cause of action. We do not believe, however, that it would, or could, do so without development of a factual record. 7 For that reason, and the absence of any contrary precedent in Massachusetts law, we conclude that the district court erred in dismissing the chapter 93A claim. 8