USCA1 Opinion

United States Court of Appeals

United States Court of Appeals
For the First Circuit
For the First Circuit

____________________

No.

97-1340
NASCO, INC.,

Plaintiff, Appellant,

v.

PUBLIC STORAGE, INC.,

Defendant, Appellee.

____________________

No.

97-1457
PUBLIC STORAGE, INC.,

Defendant, Cross-Appellant,

v.

NASCO, INC.,

Plaintiff, Cross-Appellee.

____________________

APPEALS FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF MASSACHUSETTS

[Hon. Reginald C. Lindsay, U.S. District Judge]

___________________
____________________

Before

Torruella, Chief Judge,

___________
Lynch, Circuit Judge,
_____________

and Keeton,* District Judge.

______________

____________________

Joseph G. Abromovitz, with whom John G. Balzer and

_____________________
______________

____________________

* Of the District of Massachusetts, sitting by designation.

Abromovitz & Leahy, P.C., were

___________________________

on

brief,

for plaintiff-

appellant NASCO, Inc.

James E. Carroll, with whom Kristen M. Lacovara and
________________
___________________
Cetrulo & Capone were on brief, for defendant-appellee Public
________________
Storage, Inc.

____________________
October 8, 1997
____________________

-22

LYNCH,
LYNCH,

Gen. Laws ch. 93A

93A

11

"adverse

Circuit Judge.
Circuit Judge.
_____________

One novel issue under Mass.

is presented by this appeal: May a chapter

claimant be awarded attorney's fees

effects"

it

suffers from

incurring of valid bills which it

unable to do so?

the

where the only

violation

are the

does not pay because it is

We answer this question

in the affirmative

in light of Massachusetts precedent and the policy behind the

attorney's fees provisions of chapter 93A.

NASCO,

trouble,

Inc.,

family

business

in

financial

attempted to sell its principal asset, an old brick

warehouse in

Chelsea, Massachusetts.

Lengthy

negotiations

with Public Storage Inc. ("PSI"), a California-based company,

produced a

purchase and sale

agreement in February

of 1990

which NASCO thought constituted an effective contract for the

sale of the

building, but which

trial

judge and the

that

PSI nonetheless

business

jury (in an

had engaged

practices in the

a jury did

not.

Both

the

advisory capacity) thought

in

unfair and

course of its

deceptive

dealings, although

the judge found so for only a limited period of time.

PSI escaped an award of significant damages against

it when the

during

judge found that, while NASCO

this limited

damages.

had

not shown

monetary

The judge did award NASCO attorney's fees and costs

on that basis.

NASCO

period, NASCO

had suffered harm

But the

had sought, because

award was only

a fraction of

NASCO had failed

-33

what

to document the

fees

for its successful

claim under chapter

93A separately

from the fees for its unsuccessful contract claim.

Conceding

the jury verdict on the contract claim, NASCO appeals, saying

that the evidence showed that

longer

period, that

NASCO

PSI violated chapter 93A for a

suffered

damages

of

at

least

$700,000, and that it should have received more in attorney's

fees.

PSI

also appeals, arguing that the

show any violation of chapter 93A at all.

evidence does not

We affirm.

I.

NASCO,

Inc.

in

manufactured

large

brick

bedding products

located

NASCO's

financial difficulties convinced the owners by early

1987 to

wind down

selling off

in

factory

the business by

building

at

Chelsea.

the assets,

paying

creditors,

shareholders.

and

distributing the

NASCO's

principal

property, which an appraiser then

property was subject to a

Small

Business

remainder

asset

was

the

to

the

Chelsea

valued at $4 million.

The

$40,000 first mortgage held by the

Administration

and

to

an

$800,000 second

mortgage held by Shawmut Bank.

NASCO's property interested Public Storage, Inc., a

corporation that operates

the United States.

a purchase

In

self-storage facilities throughout

February 1987, NASCO and PSI executed

and sale agreement

price of $3.6 million.

by mutual consent

for the property,

reciting a

The parties terminated that agreement

after learning that Chelsea's

-4-

zoning laws

did not permit

PSI

from

the use of the property

remained interested in

the

zoning restriction

as a mini-warehouse.

the project, and

at

its own

pursued relief

expense,

both in

administrative appeals and ultimately in the courts.

During

buyers for

this

the property

time,

NASCO

actively

sought

while continuing negotiations

other

with

PSI.

$4

In

million.

million.

to

September 1988, Cambridge Investment

In February

1989, Rauseo

Group offered

& Co.

offered $3.4

PSI was kept informed of the offers.

express its

favorable

interest in

outcome of its

the

PSI continued

property, contingent

zoning litigation, and

increase its offering price to

$3.8 million.

on a

offered to

Neither of the

other offers resulted in a sale.

Throughout this period, NASCO had difficulty making

its payments

on the Shawmut

shareholders had loaned

the

pending

payments.

land

By

the summer of

the corporation a total

in personal funds and could

on the loan

loan.

of $268,000

no longer afford to keep current

Anticipating

court

1989,

a favorable outcome

litigation,

PSI

in

representatives

persuaded Shawmut not to foreclose on the property.

In November 1989, the land court ruled in favor

PSI

on the

zoning issue.

NASCO

drafts of

a second purchase

P&S").

On

representatives

January

and sale

31,

signed the

and PSI

1990,

new

-55

began exchanging

agreement (the

all

of

"1990

necessary

agreement; on

February

PSI

2,

1990,

NASCO representatives

contained an "expiration

counter-signed.

clause" which PSI had

which the parties had negotiated.

11.

The agreement

Expiration.
__________

demanded and

The clause provided:

This

Agreement

shall be

of no

force or effect unless,

within seven (7) days

after

Agreement

the

executed

date

this

by Seller

Representative, an
Assistant

an

signed on

Buyer's Real

Officer, the

Secretary of

Agreement on
Seller

and

has

behalf of

Estate

Secretary or

Buyer, executes

behalf of Buyer and

executed

copy

this

delivers to

of this

Buyer by

been

Agreement

both its

Real

Estate Representative and either the Secretary

or an Assistant

Secretary of Buyer,

together

with the Deposit.

Both PSI's local real estate representative and its secretary

had signed the 1990 P&S on January 31, but PSI never paid the

required deposit.

Between early

NASCO inquired about

and by letter.

February

1990 and

March 19,

the deposit several times,

1990,

both orally

PSI did not respond by stating that the 1990

P&S had

expired because the

instead

claimed that

the

internal bureaucracy.

deposit had not been

funds

The trial

respects PSI continued to act

were tied

up

paid, but

in its

judge found that

own

in other

as though it still intended to

purchase the property under the agreement.

Specifically, PSI

employees requested access to the facility and asked NASCO to

restore

electrical

power.

continued

refining

its

viability

of

Chelsea

warehouse.

the

PSI's

own

However,

economic

property

statistical analysis

in

the

meantime PSI

forecasts

as

of

the

self-storage

indicated that

the

-66

project would

only be viable

at a price between

and $2 million lower than the 1990 P&S provided.

to

abandon the

project.

On March

PSI informed

letter, that

1990 P&S.

The letter did not refer to the expiration clause.

informed

its

bank

that

"decided to

PSI decided

NASCO, by

NASCO

PSI had

19, 1990,

$1 million

the

deal

terminate" the

with

PSI

had

evaporated, and within two months

the property was sold at a

foreclosure sale for $852,000.

II.

NASCO sued PSI for breach of contract and violation

of chapter 93A.

summary

The district court

judgment motion on

initially granted PSI's

both counts, reasoning

expiration clause was unambiguous,

that the

requiring the payment

of

the deposit to bind PSI, and that NASCO could not establish a

violation of

chapter 93A

in the

agreement.

This

reversed, finding

Court

absence of an

clause ambiguous, and remanded for trial.

the

enforceable

expiration

See NASCO, Inc. v.

___ ___________

Public Storage, Inc. (NASCO I), 29 F.3d 28 (1st Cir. 1994).

____________________ _______

The case was tried before a different judge.

NASCO

amended its complaint to add claims for breach of the implied

covenant

of good

Before trial,

faith and fair

PSI changed

dealing and

its legal

for estoppel.

theory, admitting

the

existence of a contract prior to the expiration of the seven-

day period,

Following

and the

parties dismissed

fourteen-day

trial,

-77

the estoppel

jury

ruled

claim.

for

the

defendant on the

of

contract claim and on the

good faith claim.

jury

Serving as

an advisory jury only, the

answered interrogatories finding

the chapter 93A

Judge

implied covenant

in favor of

claim, and recommended damages

Lindsay, not

accepting the advisory

NASCO on

of $700,000.

jury's findings,

ruled that there was no violation of chapter 93A prior to the

execution of the

did not

1990 P&S on February 2

consider the

sale to

be a

because the parties

"firm deal"

until that

document was signed.

The district court

chapter

93A

through

its

did find that PSI

deceptive

conduct

had violated

following the

expiration of the 1990 P&S in an attempt to keep its

options

open, but

thereby.

ruled originally that

NASCO had not

The district court amended its judgment

"adverse

effects"

from

PSI's

additional

legal

expenses

electricity to the

contract.

NASCO to incur

expense

of

restoring

facility following the expiration

of these damages

that the existence

to an

claim only.

the

conduct.

of the

The district court ruled that NASCO had not proven

the amount

NASCO

and

to reflect

deceptive

Specifically, it found that PSI's conduct led

but

been damaged

award of

and so could not

of these "adverse

attorney's fees

recover them,

effects" entitled

for the

chapter 93A

The district court awarded $35,000 in attorney's

fees and $4,097

in costs, one-fifth of what NASCO requested,

after discounting the portion of plaintiff's fee request that

-88

it considered related to the unsuccessful contract claim.

III.

Both

sides appeal.

jury's finding on

faith claims,

PSI's

conduct

NASCO does not

the contract and implied

but rather

prior to

appeals the

February

challenge the

covenant of good

judge's finding

2, 1990

did

that

not violate

chapter 93A.

against

the

NASCO argues

weight

of

the

advisory jury's findings.

the

attorney's fees awarded

PSI

challenges

the

that the

judge's finding

evidence

NASCO also

and

disregards

claims the amount

goes

the

of

was "arbitrary and capricious."

judge's

finding

of

chapter

93A

violation, claiming it is against the weight of the evidence,

and

challenges the

judge's

finding

supporting the attorney's fee award.

of

"adverse

PSI does

effects"

not challenge

the amount of attorney's fees awarded.

IV.

The Chapter 93A Violation

_________________________

When this case was previously before this court, we

reversed

summary judgment for defendant on both the contract

and the chapter 93A claim.

As to the chapter 93A claim,

noted that the evidence could be read to infer that PSI:

(1)

signed

the

Agreement in

order

to

obligate NASCO to deliver the property to

it for $3,575,000.00, if PSI so chose;

(2) intentionally breached its obligation

to

pay the

full well

$20,000.00 deposit,
that NASCO was

to repudiate the

in no position

Agreement on the

-99

knowing

basis

we

of PSI's non-payment of the deposit;

(3)

used

the period

signing of
the

the Agreement

property

whether

of time

to investigate

further and

it should

after the

to

honor the

determine
Agreement;

and
(4) then used its wrongful non-payment of
the

deposit

in

order

to

avoid

its

obligations under the Agreement.

NASCO I, 29 F.3d at 34 (footnote omitted).

_______

That evidence and

more was introduced at trial.

We review

exonerated

no breach

clear

basic chapter 93A

law.

A party

is not

from chapter 93A liability because there has been

of contract.

on this

point

The law

since

of Massachusetts

at least

the

has been

decision of

the

Supreme Judicial Court in Jet Line Services, Inc. v. American

_______________________
________

Employers Ins. Co.,

__________________

in

Jet Line held

_________

contract

of

Nonetheless,

the

that

insurance

there

between

was

no coverage

plaintiff

and

The court

under

the

defendant.

the conduct of the insurance company in leading

insured to

unfair and

537 N.E.2d 107 (Mass. 1989).

believe there

deceptive trade

was

coverage constituted

practice.

an

Accord Massachusetts
______ _____________

Farm Bureau Federation, Inc. v. Blue Cross of Massachusetts,

_____________________________
____________________________

Inc., 532 N.E.2d

____

660, 664 (Mass. 1989)(violation

93A

not

11

need

be

premised

on

independent common law or statutory duty).

jury

found no breach

of contract does

of chapter

violation

of

an

The fact that the

not preclude NASCO's

chapter 93A claim.

While

the rubric

of "rascality"

as

the test

of

-1010

whether

something is

"unfair or

recited, both the Supreme Judicial

noted

that such rhetoric

deceptive"

has been

oft-

Court and this court have

is "uninstructive."

See Cambridge
___ _________

Plating Co., Inc. v. Napco, Inc., 85 F.3d 752, 768 (1st Cir.
__________________
___________

1996);

Inc.,
____

Massachusetts Employees Ins. Exch. v.

____________________________________

648

N.E.2d 435,

standards of

Propac and
______

evidence was

not so

438

(Mass.

1995).

Jet Line and

________

overwhelming as

Propac-Mass,
____________

We

apply

easily hold

to

the

that the

require the

trial

court to find that PSI acted in an unfair or deceptive manner

before February 2, 1990.

The evidence adequately supports the trial

judge's

conclusion that before February 2, 1990 NASCO was aware that,

in the

assured

absence of

of a

a signed P&S

sale of

the

Pappas Indus. Parks, Inc.

__________________________

with PSI,

it could

Chelsea property.

v. Psarros,
_______

(Mass. App. Ct. 1987), the judge could

not be

Thus,

511 N.E.2d 621,

under

623

readily conclude that

it

was

not

reasonable

representations before

have reached

for

NASCO

February 2.

the opposite

to

While

conclusion, as

rely

on

PSI's

the judge

could

did the

advisory

jury, he was not required to do so.1

PSI in

turn argues that there was

chapter 93A after February 2, 1990.

no violation of

In Propac, 648 N.E.2d at

______

438, the Supreme Judicial Court directed that the focus be on

____________________

1.

The advisory jury's opinion does not bind the court.

Wyler v. Bonnell Motors, Inc.,

_____
____________________

See
___

624 N.E.2d 116, 118-19 (Mass.

App. 1993).

-1111

"the nature of the challenged

effect of

the conduct."

conduct and on the purpose and

As in

Propac, the
______

defendant here

continued to act as though a legal relationship were in place

when

it was

serving.

parties --

electric

not and

the conduct

In both cases,

in this

company.

some harm

instance, the

In

particularly vulnerable

was unilateral

each

was also done

to third

closing attorney and

instance,

and the

and self-

the

plaintiff

defendant's unfair

the

was

conduct

gave it greater leverage.

The

record also easily

findings that after February 2,

supports the trial judge's

1990 NASCO believed it had a

firm deal with PSI and that such a belief was reasonable

induced by

PSI's actions.

Cf.
___

Greenstein v.
__________

N.E.2d 1130 (Mass. App. Ct. 1985).

PSI used the

Flatley, 474
_______

As the trial judge found:

period between February

2,

1990 and March

19, 1990 to

complete its

assessment of

the economic

soundness of

the purchase of the Chelsea Property.

keep

all

unfairly

of
and

its

options

open,

deceptively led

NASCO

To
PSI
to

believe that the parties had entered into

a binding

agreement and the

delayed merely because

inefficiencies.

All

actually withheld the

reasoned

that

the

and

deposit was

of administrative
the

while,

PSI

deposit because it
failure to

pay

the

deposit would permit PSI to repudiate the

agreement if, after

review, the purchase

of the Chelsea Property

economically
Thus

when

seemed not be an

advantageous
PSI

determined

transaction.
that

the

purchase was indeed economically unsound,

it instructed its lawyer

to advise NASCO

that the deal was off.

During

February

and March,

NASCO's

attorney and

-1212

broker made

several inquiries

concerning the

late deposit.

They testified that

simply

PSI reassured them that

the delays were

the result of PSI's bureaucratic procedures, and that

PSI never

indicated that the

contract had expired.

It was

only after the filing of NASCO's lawsuit that PSI claimed the

contract had expired because of the unpaid deposit.

Attorney's Fees
_______________

The

more

difficult

question

is

suffered any adverse effects sufficient

for

attorney's fees

court held that "Under

relief in some other

award of

under chapter

11, a

whether

NASCO

to trigger liability

93A.

In Jet Line, the

_________

plaintiff must be entitled to

respect in order

attorneys' fees. . . . Under

to be entitled to

an

11, [the] unfair or

deceptive conduct must have had some adverse effect

upon the

plaintiff, even if

Line,
____

it is not quantifiable in

537 N.E.2d at

case, and not a

115.

Because

dollars."

this is a

Jet
___

11 business

9 consumer case, the Jet Line rule applies.

________

The trial judge found that NASCO had not shown that

there were

any other

potential buyers for

the building

in

this February/March 1990 time frame, so NASCO could not claim

the

sale value

of the

building as

damages.

The district

court found two elements of damage: NASCO, believing it had a

contract, incurred legal

fees in anticipation of

a closing,

and NASCO suffered losses in the form of the costs associated

with restoring power to the

Chelsea property at the

request

-1313

of

PSI.

Such

requirement

effects

would indeed

of "adverse effects."

meet

See also
________

Services, Inc. v. AA Star Mortgage Corp., 89

______________
______________________

the

Jet Line
_________

Star Financial
______________

F.3d 5, 15 (1st

Cir.

1996) (award of injunctive relief based on demonstrated

risk

of

future actual

loss

constitutes an

unquantifiable

"adverse

effect" under Jet Line); Jillian's Billiard Club of

________
__________________________

America, Inc. v. Beloff Billiards, Inc., 619

_____________
______________________

(Mass.

what

App. Ct.

was taken

quantifiable,

1993) (where

or start

up

N.E.2d 635, 638

no damages awarded,

costs, which

are sufficient to

value of

might have

been

support award of attorney's

fees).

PSI argues that

conclusions for

two reasons.

legal fees for work by

there

First,

while NASCO

it ever paid

reactivate electricity

incurred

those bills, and is

to pay as any claim for

barred by the statute of

support these

counsel in anticipation of a closing,

is no evidence that

not now obligated

the record does not

limitations.

at PSI's request

legal services is

Second, NASCO did not

during the

Chapter

93A

violation period

expenses

because

it

and it

took

did not

the

pay for

position

the electric

that

PSI

was

responsible to pay those costs and because NASCO had no money

to pay these bills.

The record shows that Peter

Cooney, NASCO's broker

for the property, was contacted by Kevin Kinneavy of PSI, who

requested

that

power

be

restored

-1414

to

the property.

In

response,

dated

NASCO's attorney,

February 12,

1990 to

power be restored to the

Thomas

Bennet,

Boston

Edison requesting

property.

this letter to Mr. Kinneavy.

was

subsequently

restored

sent a

letter

that

Mr. Bennet sent copy

of

Witnesses testified that power

to

the

property,

and

Harvey

Shapiro, NASCO's vice president, testified that Boston Edison

billed

were

NASCO after February

not paid.

Attorney

of 1990,

Bennet's

but that

these bills

billing records,

which

listed several entries connected with the sale of the Chelsea

property between February 2 and

March 19, 1990, were also in

evidence.

In

light of this evidence that NASCO incurred both

legal and

electrical bills

and the

trial judge's

finding that the bills were in fact incurred,

evolves to a contention that

bills,

and

bills

it has suffered

that

it

liabilities, but it

adverse effects.

the bills were

no "adverse effects"

fictitious.

did

under Jet Line

________

NASCO's failure to pay the

not recover

damages

does not mean that NASCO

To the

for

those

did not suffer

extent that PSI's objection is that

not valid or the debts were not validly owed,

the trial judge

course, be a

PSI's argument

because NASCO did not pay these

is not entitled to damages.

means

implicit

implicitly found against PSI.

different matter if the bills

It would, of

were inflated or

To the extent that PSI's objection is that there

were valid debts, but NASCO did not pay them, the decision of

-1515

the Supreme Judicial

Co., 449 N.E.2d

___

Court in DiMarzo v. American Mut. Ins.

_______
___________________

1189 (Mass. 1983) is

DiMarzo
_______

dealt with

Supreme

Judicial

judgment

Court

held

instructive.

and not

that

entry

Although

mere bill,

of

the

judgment

constitutes a loss of money for

addition, DiMarzo said,

_______

the

judgment has

judgment is

purposes of chapter 93A.

"[t]he loss does not turn on whether

been satisfied."

Id.
___

admittedly different than

debt (evidenced by

In

a bill) has

at 1196.

While

a bill, that

not been paid does

a valid

not mean

that there has been no adverse effect.

PSI's unfair

to

incur these

NASCO's

and deceptive practices

legal and electrical

financial position

these bills.

PSI should

and put

had

position

seems

PSI

not

suit on

not avoid attorney's fees

for its

contrary

violated

to

the

it at

This worsened

risk of

behavior because NASCO could not

incurred

bills.

caused NASCO

pay bills it would not have

the

law.

intent

Indeed,

of

chapter

PSI's

93A.

Vulnerable, struggling companies in

are more

robust,

likely to need

the protection of chapter

successful companies.

impecunious

bad bargaining positions

If we adopt

93A than

PSI's position,

businesses, unable to pay their bills and trying

to sell their assets in order to do so, would be placed

different

plaintiffs.

footing

The

under

chapter

93A

than

purpose of the chapter 93A

more

on a

solvent

11 attorney's

fees provision is to deter businesses from engaging in unfair

-1616

and

deceptive trade

adverse effects.

Inc.,
____

565

practices

where

those practices

have

See Commonwealth v. Fall River Motor Sales,

___ ____________
_______________________

N.E.2d

1205,

Zuckerman, 444 N.E.2d

_________

1214

(Mass.

1991);

1262, 1266 (Mass. 1983)

Manning
_______

v.

("Through the

imposition of penalties for specific unfair or deceptive acts

or

practices

seeks to

danger to

between

deter

these practices

the public

unscrupulous

particular

behavior

individuals, the

and to

arising from

in the

the

reduce the

statute

general

potential for

marketplace.").

such

We conclude

that NASCO was eligible for an award of attorney's fees.

NASCO argues

was

too small.

that the district

But Jet Line,

________

court's fee

537 N.E.2d at

award

114-15, holds

that an attorney's fees award should be adjusted to eliminate

any

award for

unsuccessful

its discretion

the

legal services

claims.

("The amount

within

and

litigation.

of reasonable

in connection

district court acted

when it decided

attorney's fees

course of this

The

rendered

well within

to award NASCO only

costs NASCO

had

See DiMarzo, 449

___ _______

attorney's fees

with

part of

incurred in

the

N.E.2d at 1202

under c.93A

is

the broad discretion of the trial judge."); Linthicum

_________

v. Archambault, 398
___________

N.E.2d 482, 488 (Mass.

1979), overruled
_________

in part on other grounds by Knapp Shoes, Inc.

_____________________________ __________________

v. Sylvania
________

Shoe Mfg. Corp., 640 N.E.2d 1101, 1105 (Mass. 1994).

_______________

V.

To

conclude,

we

hold

that

the

district

court

-1717

correctly applied the

law of chapter 93A to

this case.

The

record

clearly

PSI's actions

chapter

93A's

practices.

that

supports the

district court's

finding that

from February 2

to March 19 of

1990 violated

prohibition

of

The district court was

NASCO suffered adverse

district court is therefore

and

deceptive trade

also correct to conclude

effects during this

which attorney's fees could be

NASCO.

unfair

awarded.

affirmed.
________

period for

The judgment of the

Costs are awarded

to

-1818