Opinion ID: 198029
Heading Depth: 2
Heading Rank: 2

Heading: The Chapter 93A Violation

Text: 31 Dooyang's second claim of error is that the district court misapplied the law of Chapter 93A. Dooyang's argument has two components: first, that its actions were not unfair or deceptive, and second, that those actions did not, in any event, cause a loss of money or property. We review the district court's findings of fact for clear error and its conclusions of law de novo. See Cambridge Plating Co., 85 F.3d at 769. Although whether a particular set of acts, in their factual setting, is unfair or deceptive is a question of fact, the boundaries of what may qualify for consideration as a [Chapter] 93A violation is a question of law. Ahern v. Scholz, 85 F.3d 774, 797 (1st Cir.1996) (citation and internal quotation marks omitted). 32 Our review is of the district court's finding that the second act of deception, Dooyang's continual promises to pay ADL when it had no intent to do so as part of a strategy to force its creditors to accept discounted settlements, constituted a violation of Chapter 93A. Under Chapter 93A, the act or practice must be unfair or deceptive, must occur primarily and substantially in Massachusetts, and must cause a loss of money or property. Based on our review of the evidence, we find that the district court's findings of fact are not clearly erroneous and we will not disturb them. We agree with the district court that Dooyang's second act of deception qualifies as a Chapter 93A violation.
33 Under §§ 2 and 11 of Chapter 93A, it is unlawful for those engaged in trade or commerce to employ unfair methods of competition and unfair or deceptive acts or practices in business transactions with others engaged in trade or commerce. Chapter 93A was designed to encourage more equitable behavior in the marketplace and impose liability on persons seeking to profit from unfair practices. Linkage Corp. v. Trustees of Boston Univ., 425 Mass. 1, 679 N.E.2d 191, 208 (1997) (citation, internal quotation marks and alterations omitted). The statute does not specifically define unfair or deceptive. See Ahern, 85 F.3d at 798 ([T]he statute does not contemplate an overly precise standard of ethical or moral behavior. It is the standard of the commercial marketplace. (citation and internal quotation marks omitted)); Linkage Corp., 679 N.E.2d at 209 (A practice is unfair if it is within the penumbra of some common-law, statutory, or other established concept of unfairness; is immoral, unethical, oppressive, or unscrupulous; and causes substantial injury to other businessmen. (citation, internal quotation marks and alterations omitted)). 34 The courts of Massachusetts have consistently held that conduct in disregard of known contractual arrangements and intended to secure benefits for the breaching party constitutes an unfair act or practice for c. 93A purposes. Anthony's Pier Four, Inc. v. HBC Assocs., 411 Mass. 451, 583 N.E.2d 806, 821 (1991) (citation and internal quotation marks omitted). See Pepsi-Cola Metro. Bottling Co. v. Checkers, Inc., 754 F.2d 10, 17-19 (1st Cir.1985) (Chapter 93A violation found where payment withheld as a wedge to enhance bargaining power); Wang Labs., Inc. v. Business Incentives, Inc., 398 Mass. 854, 501 N.E.2d 1163 (1986). Where one party to an agreement employs a breach of contract to gain an unfair advantage over the other, the breach has an extortionate quality that gives it the rancid flavor of unfairness. Atkinson v. Rosenthal, 33 Mass.App.Ct. 219, 598 N.E.2d 666, 670 (1992) (citation omitted). Indeed, conduct largely equivalent to Dooyang's second act of deception has recently been held to violate Chapter 93A. See Community Builders, Inc. v. Indian Motocycle Assocs., Inc., 44 Mass.App.Ct. 537, 692 N.E.2d 964, 978 (1998) (defendants withheld payment unconscionably, stringing [plaintiff] along ... with a purpose of coercing [plaintiff] to settle for substantially less compensation than the parties had agreed to before the services were performed). 35 The district court's factual finding of unfair practices is clearly supported by the evidence. The court based its Chapter 93A ruling both on testimony that Dooyang did not intend to pay ADL for the work it performed and on documents which stated that Dooyang was avoiding paying its creditors by all possible means and which created a mechanism for measuring the success of its strategy by listing the reductions that resulted from Dooyang's deceptive tactics. As the district court found, Dooyang intended to force ADL into an unfavorable settlement by threatening litigation. There was no error in the court's finding that the second act of deception amounted to an unfair or deceptive act or practice under Chapter 93A. 36 Chapter 93A liability is decided case-by-case, and Massachusetts courts have consistently emphasized the fact-specific nature of the inquiry. Linkage Corp., 679 N.E.2d at 209. We emphasize that this case did not involve a good faith dispute over billing or a simple breach of contract, each of which is an insufficient basis for 93A liability. See, e.g., Pepsi-Cola Metro. Bottling Co., 754 F.2d at 18 (stating that mere breaches of contract, without more, do not violate [C]hapter 93A); Whitinsville Plaza, Inc. v. Kotseas, 378 Mass. 85, 390 N.E.2d 243, 251 (1979). This case is not like Quaker State Oil Refining Corp. v. Garrity Oil Co., 884 F.2d 1510, 1513-14 (1st Cir.1989), which held that refusal to pay an invoice without more was not enough to constitute a 93A violation. Here, Dooyang's wrongful purpose was to extract a favorable settlement from ADL for less than the amount Dooyang knew that it owed by repeatedly promising to pay, not doing so, stringing out the process, and forcing ADL to sue. 37 These developments in Massachusetts law will require the Massachusetts courts to give greater definition and clarity to the parameters of § 11 liability for those who do business in Massachusetts. Mere failure to pay a bill, standing alone, does not, it appears, give rise to such liability. See id. Where there is a good faith dispute over whether payment is actually owed, and that dispute is clearly articulated, it also appears there is no Chapter 93A liability. See id.; Levings v. Forbes & Wallace, Inc., 8 Mass.App.Ct. 498, 396 N.E.2d 149, 153 (1979). Of course, due to the fact-specific nature of the Chapter 93A inquiry, generalizations are always somewhat indeterminate. See Cambridge Plating Co., 85 F.3d at 769 (Perhaps by design, the dimensions of Chapter 93A liability are difficult to discern with precision.). This case does not involve a mere failure to pay a bill, and the facts are sufficiently strong that we easily conclude they are actionable as unfair or deceptive under Chapter 93A. We leave to the development of state law where the lines will be drawn in these the check is in the mail type cases.
38 ADL had the burden of showing not only that the acts were unfair or deceptive, but also that it suffered a loss of money or property under Mass. Gen. Laws ch. 93A, § 11.  '[M]oney' means money, not time, and ... 'property' means the kind of property that is purchased or leased, not such intangibles as a right to a sense of security, to peace of mind, or to personal liberty. Baldassari v. Public Fin. Trust, 369 Mass. 33, 337 N.E.2d 701, 709 (1975). And that loss of money or property must stem from Dooyang's misrepresentations regarding payment. See Lyle Richards Int'l, Ltd. v. Ashworth, 132 F.3d 111, 114-15 (1st Cir.1997) (loss of money or property required under § 11 must stem from deceptive act). It is the misrepresentations about payment which must have caused the loss because those misrepresentations, not the formation of the contract extension itself, took place in Massachusetts and so are subject to Chapter 93A. [W]hether the requisite causal connection has been proven is one of fact that will not be set aside unless clearly erroneous. DiMarzo v. American Mut. Ins. Co., 389 Mass. 85, 449 N.E.2d 1189, 1199 (1983) (citation omitted). 39 This requirement is satisfied by the combination of ADL's loss of the use of the money owed by Dooyang together with ADL's expenses incurred attempting to collect Dooyang's debt. While we have found no § 11 cases directly on point, a number of cases under § 9 are helpful in the analysis. The closest § 11 case is Community Builders, in which false promises to pay and delay caused a loss of use of money, attendant expenses, and caused plaintiff to continue to do work. Here plaintiff did not continue to do work and so the Appeals Court did not face the precise issue that we face. 40 Massachusetts courts have held in § 9 cases against insurers under Chapter 93A and Mass. Gen. Laws ch. 176D that the loss of the use of money owed to a plaintiff, once liability is reasonably clear, is a form of damage compensable by Chapter 93A. See Clegg v. Butler, 424 Mass. 413, 676 N.E.2d 1134, 1139 (1997) (stating that when an insurer wrongfully withholds funds from a claimant, it is depriving the claimant of the use of those funds and so constitutes injury cognizable under Chapter 93A though the insurer eventually pays). Clegg reiterated the rule announced in Schwartz v. Rose, 418 Mass. 41, 634 N.E.2d 105, 109 (1994), that the loss of the use of money is precisely the type of damage we have described as appropriately being subject to multiplication ... under c. 93A. Schwartz was not a claim against an insurer under Chapter 176D, and so we take it that the Schwartz rule has general application, at least under § 9. 41 In 1979 the Massachusetts legislature amended Chapter 93A to eliminate the requirement of pleading a loss of money or property under § 9. See Smith v. Caggiano, 12 Mass.App.Ct. 41, 421 N.E.2d 473, 475 (1981). Now, under § 9, a plaintiff must prove that he or she has been injured by the defendant's unfair or deceptive practices. Mass Gen. Laws. ch. 93A, § 9. One question is whether the cases under § 9, which requires only a showing that plaintiff has been injured, provide guidance on what is meant by loss of money or property under § 11. The two phrases are not coextensive. Injury is a broader term, and includes, for example, emotional distress. See Leardi v. Brown, 394 Mass. 151, 474 N.E.2d 1094, 1101 (1985) (interpreting injury under § 9 to include an invasion of a legally protected interest, but no harm for which actual damages can be awarded). But loss of money or property is certainly one form of injury. 42 We think the § 9 cases provide guidance. In these § 9 cases, the court rejected arguments that the plaintiff suffered no injury because he suffered only a delay in payment rather than an absolute loss. Certainly, the loss of use of money, along with attendant collection and other expenses would seem to be both an injury under § 9 and a loss of money or property under § 11. Cf. Caggiano, 421 N.E.2d at 476 ( 'Money' means ... 'money,' but its loss may occur short of physical transfer of legal tender.). 43 In addition to the loss of the use of the money, Dooyang's unfair withholding of payment caused ADL to make expenditures to recover the money owed: long-distance phone calls and faxes to South Korea, and meetings with Dooyang executives. Such expenditures have been found to satisfy the loss of money or property requirement. See Alcan Aluminum Corp. v. Carlton Aluminum of New England, 35 Mass.App.Ct. 161, 617 N.E.2d 1005, 1013 (1993) (Carlton did suffer an actual loss of money or property--by responding to customer complaints and lawsuits about the defective siding....); Bump v. Robbins, 24 Mass.App.Ct. 296, 509 N.E.2d 12, 22 (1987) (There is evidence of out-of-pocket expenditures for travel and long-distance telephone calls, time spent at meetings and in other related activities, and the usual charges Bump made for his time.); see also Baldassari, 337 N.E.2d at 709 (when plaintiffs suffered only emotional distress, no loss of money or property, but a different question would have been presented had plaintiffs suffered expenses). 11 This combination of expenses and loss of use of money meant that ADL suffered a loss of money or property caused by Dooyang's second act of deception. 44 A question remains about the proper measure of damages in this case. The district court doubled the breach of contract damages, but also ruled that Dooyang's initial act of deception was not covered by Chapter 93A. This theoretically could raise the issue of whether damages should be limited to only those damages caused by the second act of deception or whether § 11 precludes such a measure of damages. Dooyang does not argue in its brief that the court's doubling of the entire amount of the underlying contract damages was error, but maintains only that there was no loss of money or property caused by the second deceptive act as required by § 11. Dooyang's brief perfunctorily challenges the district court's decision to award double damages, but does not address the proper amount to be doubled. Dooyang has thus conceded the issue of the amount to be doubled, and we do not reach the theoretical issue. See King v. Town of Hanover, 116 F.3d 965, 970 (1st Cir.1997) (claims not argued on appeal are deemed waived). 45 The district court awarded ADL double damages on the ground that Dooyang's misconduct was willful and knowing. The district court clearly articulated its reasons for levying multiple damages, and we agree. See ADL II, 979 F.Supp. at 926-28. For the reasons stated in the opinion of the district court, we do not find the award of double damages based on Dooyang's willful deceptive acts to be excessive in this case. 46 The judgment of the district court is affirmed. Costs are awarded to ADL.