The Massachusetts Consumer Protection Act, Massachusetts General Laws chapter 93A (a/k/a Regulation of Business Practices for Consumers Protection), enacted in 1969, provides two varieties of private right of action. The first, in section 9, concerns unfair and deceptive business practices that harm consumers. The second, in section 11 (added in 1972), concerns unfair and deceptive practices inflicted by a business upon another business. One or the other cause of action is frequently invoked in litigation (and arbitrations) filed in Massachusetts. Chapter 93A, and in particular the two private rights of action, have been the subject of many appellate decisions over the years, as the courts have struggled to give definition and structure to the statute’s broad terms. One would be tempted to think that, after more than fifty years, all conceivable issues would have been resolved by now.
Massachusetts’s highest appellate court, the Supreme Judicial Court (“SJC”), recently engaged in some rethinking on a Chapter 93A wrinkle: the extent to which Chapter 93A liability may be limited or excluded by means of a contractual provision. Before explicating that decision, another aspect of Chapter 93A private rights of action should be explained: Pursuant to section 9(3), a court must award “up to three but not less than two times [the amount of actual damages] if the court finds that the use or employment of the act or practice was a willful or knowing violation of . . . section two [which declares unlawful 'unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce'] or that the [defendant’s] refusal to grant relief upon [plaintiff’s statutorily required] demand was made in bad faith with knowledge or reason to know that the act or practice complained of violated said section two”—unless the violative “method, act or practice . . . [was] with regard to any security or any contract of sale of a commodity for future delivery,” in which case multiple damages may not be awarded regardless of whether the violation was willful or knowing or a reasonable demand was refused by defendant in bad faith.
The same rules apply to actions under section 11, except that (i) pre-suit demand is not required—a defendant may make an offer of settlement accompanying its answer; if the plaintiff rejects such an offer the court later finds to have been reasonable the plaintiff may not be awarded multiple damages, and (ii) actions involving securities or commodities are not excluded from multiple damages. So under both sections, “willful or knowing” defendants risk an award of multiple damages; defendants whose state of mind is not found to rise to the level of “willful or knowing” do not.
In H1 Lincoln, Inc. v. South Washington Street, LLC, No. SJC-13088 (Jan. 24, 2022), the SJC was asked to decide whether a limitation of liability provision in a commercial lease that excluded recovery for “any speculative or consequential damages” precluded recovery of multiple damages in a Chapter 93A section 11 case. The court quickly disposed of the “speculative” part of that provision as superfluous--speculative damages are not recoverable under Massachusetts law. As to the other half of the exclusion, the court observed that the “actual damages” to which a successful Chapter 93A plaintiff is entitled include consequential damages, that is, “all losses which were the foreseeable consequence of the defendant’s unfair or deceptive act or practice,” corresponding to what would in a breach of contract case constitute “items of loss other than loss in value of the other party’s performance.”
Willful or knowing violations. The court reached back to a 1990 section 11 decision holding that a “statutory right or remedy may be waived when the waiver would not frustrate the public policies of the statutes,” noting that it had observed in the same decision that “the consensual allocation of risk among ‘commercially sophisticated’ parties does not generally raise public policy concerns.” Noting the legislature’s punitive and deterrence public policy objectives in providing for Chapter 93A multiple damages, the court held that those legislative objectives may not be overridden by private contractual arrangements. The court likened this result to the established principle that exculpatory contractual clauses covering intentional and reckless misconduct in the context of tort liability will not be enforced under Massachusetts law.
“Relatively innocent” Chapter 93A violations. So a contractual limitation of liability provision will not preclude an award of multiple damages in a business-to-business dispute under Chapter 93A section 11 against a defendant which is found to have willfully or knowingly engaged in unfair or deceptive conduct. On the other hand, the court pointed out, “[e]nforcement of limitation of liability provisions for so-called relatively innocent violations of the statute does not raise the same public policy concerns,” and, presumably, it follows that such provisions would be enforceable in that circumstance. What are “relatively innocent” Chapter 93A violations in the section 11, business-to-business context? Those not done willfully or knowingly.
The implication of all this was that, since the SJC upheld the trial court’s finding that defendants’ Chapter 93A violations were willful and knowing, the trial court’s award of double damages was upheld. Had the SJC not been convinced to uphold the trial court’s finding that the defendants had acted willfully or knowingly, then, by operation of the lease’s limitation of liability clause, the plaintiff would not have been entitled to any award of damages (under either its breach of contract count or its Chapter 93A count—the plaintiff was awarded only delay damages, which, the SJC noted, are consequential damages). Double or nothing.
“Relatively innocent” Chapter 93A violations are distinct from conduct that does not constitute a Chapter 93A violation at all. In other words, the legislature’s design to punish and deter willful and knowing conduct does not reach willful or knowing conduct that is not deemed unfair or deceptive. The H1 Lincoln decision provides a couple examples of conduct that does not constitute unfair or deceptive acts or practices—that is, Chapter 93A violations--in the business-to-business context: breach of contract alone, even if intentional or knowing, and a subspecies of breach of contract: breach of warranty. How broadly, or narrowly, the concept of “relatively innocent” violations extends has been and will continue to be fodder for future trial court and appellate activity. Compare, e.g., Feeney Bros. Excavation LLC v. Morgan Stanley & Co., 2020 WL 2527851, at *9 (D. Mass. May 18, 2020) (“liability under Chapter 93A need not based on extreme or egregious behavior but may instead be based on other causes of action, such as a breach of the covenant of good faith and fair dealing or negligent misrepresentation”; citing Brewster Wallcovering Co. v. Blue Mt. Wallcoverings, Inc., 68 Mass. App. Ct. 582, 605-06 & n.55 (Mass. App. 2007)), with Cance v. Carbone, 97 Mass. App. Ct. 1122 (2020) (unpub.) (“a violation of G. L. c. 93A requires, at the very least, more than a finding of mere negligence,” quoting Darviris v. Petros, 442 Mass. 274, 278 (2004)).
Section 9, consumer claims. What about the enforceability of contractual limitation of liability provisions in the consumer context, that is, as to section 9 liability? Does the consensual allocation of risk among parties one or more of which is not “commercially sophisticated” give rise to public policy concerns? Does it matter if the conduct at issue in that context is willful or knowing, or rather is “relatively innocent”? These issues were not before the SJC in H1 Lincoln, and the court did not address them, other than to note as an aside that it “ordinarily would not effectuate a consumer’s waiver of rights under” section 9. A District of Massachusetts judge has recently noted that disinclination of Massachusetts courts to apply contractual limitation of liability provisions to preclude section 9 claims: “Although Massachusetts courts have applied limitation of liability provisions in contracts to waive claims between business entities brought pursuant to section 11 of Chapter 93A, they have ‘more than suggested that enforcing a waiver of a consumer plaintiff's claim under a statute such as [Chapter 93A] would be contrary to public policy.’” Hebert v. Vantage Travel Service, Inc., 444 F.Supp.3d 233, 250 (D. Mass. 2020), quoting Doe v. Cultural Care, Inc., No. 10-cv-11426-DJC, 2011 WL 1048624, at *7-8 (D. Mass. Mar. 17, 2011) (noting that “there is no steadfast rule with respect to enforceability of such waivers”), and citing Anderson v. Comcast, Corp., 500 F.3d 66, 76-77 (1st Cir. 2007); Kristian v. Comcast Corp., 446 F.3d 25, 50 (1st Cir. 2006); Canal Electric Co. v. Westinghouse Electric Corp., 406 Mass. 369, 378 (1990); Feeney v. Dell Inc., 454 Mass. 192, 193 (2009), abrogated in part by Feeney v. Dell Inc., 466 Mass. 1001 (2013).