

                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  &amp;  Leahy,  P.C., were  on  brief,  for plaintiff-                                       
appellant NASCO, Inc.
          James E. Carroll, with whom Kristen M. Lacovara and                                                                     
Cetrulo &amp; Capone were on brief, for defendant-appellee Public                            
Storage, Inc.

                                         
                       October 8, 1997
                                        

                             -2-                                          2

          LYNCH,  Circuit Judge.  One novel issue under Mass.                      LYNCH,  Circuit Judge.                                           

Gen. Laws ch. 93A  is presented by this appeal: May a chapter

93A   11  claimant be awarded attorney's fees  where the only

"adverse  effects"  it  suffers from  the  violation  are the

incurring of valid bills which it  does not pay because it is

unable to do so?  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,  Inc.,  a   family  business  in   financial

trouble,  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  a jury did  not.  Both  the

trial  judge and the  jury (in an  advisory capacity) thought

that  PSI nonetheless  had engaged  in  unfair and  deceptive

business  practices in the  course of its  dealings, although

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

          PSI escaped an award of significant damages against

it when the  judge found that, while NASCO  had suffered harm

during  this limited  period, NASCO  had  not shown  monetary

damages.  The judge did award NASCO attorney's fees and costs

on that basis.   But the  award was only  a fraction of  what

NASCO  had sought, because  NASCO had failed  to document the

                             -3-                                          3

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  PSI violated chapter 93A for a

longer  period, that  NASCO  suffered  damages  of  at  least

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

fees.  PSI  also appeals, arguing that the  evidence does not

show any violation of chapter 93A at all.  We affirm.

                              I.

          NASCO,  Inc.  manufactured  bedding products  at  a

factory  located  in  a  large  brick  building  in  Chelsea.

NASCO's  financial difficulties convinced the owners by early

1987 to  wind down  the business by  selling off  the assets,

paying  creditors,  and  distributing the  remainder  to  the

shareholders.    NASCO's  principal  asset  was  the  Chelsea

property, which an appraiser then  valued at $4 million.  The

property was subject to a  $40,000 first mortgage held by the

Small  Business  Administration  and  to  an  $800,000 second

mortgage held by Shawmut Bank.

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

corporation that operates  self-storage facilities throughout

the United States.  In  February 1987, NASCO and PSI executed

a purchase  and sale agreement  for the property,  reciting a

price of $3.6 million.  The parties terminated that agreement

by mutual consent  after learning that Chelsea's  zoning laws

                             -4-                                          4

did not permit  the use of the property  as a mini-warehouse.

PSI  remained interested in  the project, and  pursued relief

from  the  zoning restriction  at  its own  expense,  both in

administrative appeals and ultimately in the courts.

          During  this  time,  NASCO  actively  sought  other

buyers for  the property  while continuing negotiations  with

PSI.  In  September 1988, Cambridge Investment  Group offered

$4  million.   In February  1989, Rauseo  &amp; Co.  offered $3.4

million.  PSI was kept informed of the offers.  PSI continued

to  express its  interest in  the  property, contingent  on a

favorable  outcome of its  zoning litigation, and  offered to

increase its offering price to  $3.8 million.  Neither of the

other offers resulted in a sale.

          Throughout this period, NASCO had difficulty making

its payments  on the Shawmut  loan.  By  the summer of  1989,

shareholders had loaned  the corporation a total  of $268,000

in personal funds and could  no longer afford to keep current

on the loan  payments.  Anticipating  a favorable outcome  in

the  pending  land   court  litigation,  PSI  representatives

persuaded Shawmut not to foreclose on the property.

          In November 1989, the land court ruled in favor  of

PSI  on the  zoning issue.   NASCO  and PSI  began exchanging

drafts of  a second purchase  and sale  agreement (the  "1990

P&amp;S").     On   January   31,   1990,   all   necessary   PSI

representatives  signed the  new  agreement; on  February  2,

                             -5-                                          5

1990,  NASCO representatives  counter-signed.   The agreement

contained an "expiration  clause" which PSI had  demanded and

which the parties had negotiated.  The clause provided:

          11.  Expiration.   This  Agreement  shall be  of no                                     
               force or effect unless,  within seven (7) days
               after  the   date  this  Agreement   has  been
               executed  by Seller  and  Buyer's Real  Estate
               Representative, an  Officer, the  Secretary or
               Assistant  Secretary of  Buyer, executes  this
               Agreement on  behalf of Buyer and  delivers to
               Seller  an  executed  copy  of this  Agreement
               signed on  behalf of  Buyer by  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&amp;S on January 31, but PSI never paid the

required deposit.

          Between early  February  1990 and  March 19,  1990,

NASCO inquired about  the deposit several times,  both orally

and by letter.   PSI did not respond by stating that the 1990

P&amp;S had  expired because the  deposit had not been  paid, but

instead  claimed that  the  funds  were tied  up  in its  own

internal bureaucracy.   The trial  judge found that  in other

respects PSI continued to act  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.   However,  in  the  meantime PSI

continued  refining  its  own   economic  forecasts  of   the

viability  of   the  Chelsea   property  as   a  self-storage

warehouse.   PSI's  statistical analysis  indicated that  the

                             -6-                                          6

project would  only be viable  at a price between  $1 million

and $2 million lower than the 1990 P&amp;S provided.  PSI decided

to  abandon the  project.   On March  19, 1990,  PSI informed

NASCO, by  letter, that  PSI had  "decided to  terminate" the

1990 P&amp;S.  The letter did not refer to the expiration clause.

NASCO   informed  its  bank  that   the  deal  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.   The district court  initially granted PSI's

summary  judgment motion on  both counts, reasoning  that the

expiration clause was unambiguous,  requiring the payment  of

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

violation of  chapter 93A  in the  absence of an  enforceable

agreement.    This  Court  reversed, finding  the  expiration

clause ambiguous, and remanded for trial.  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  faith and fair  dealing and  for estoppel.

Before trial,  PSI changed  its legal  theory, admitting  the

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

day period,  and the  parties dismissed  the estoppel  claim.

Following   a  fourteen-day  trial,  a  jury  ruled  for  the

                             -7-                                          7

defendant on the  contract claim and on the  implied covenant

of  good faith claim.  Serving as  an advisory jury only, the

jury  answered interrogatories finding  in favor of  NASCO on

the chapter 93A  claim, and recommended damages  of $700,000.

Judge  Lindsay, not  accepting the advisory  jury's findings,

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

execution of the  1990 P&amp;S on February 2  because the parties

did not  consider the  sale to  be a  "firm deal"  until that

document was signed.

          The district court  did find that PSI  had violated

chapter  93A  through  its  deceptive  conduct  following the

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

open, but  ruled originally that  NASCO had not  been damaged

thereby.  The district court amended its judgment  to reflect

"adverse    effects"    from   PSI's    deceptive    conduct.

Specifically, it found that PSI's conduct led  NASCO to incur

additional  legal  expenses  and  the  expense  of  restoring

electricity to the  facility following the expiration  of the

contract.  The district court ruled that NASCO had not proven

the amount  of these damages  and so could not  recover them,

but  that the existence  of these "adverse  effects" entitled

NASCO  to an  award of  attorney's fees  for the  chapter 93A

claim only.  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

                             -8-                                          8

it considered related to the unsuccessful contract claim.

                             III.

          Both  sides appeal.   NASCO does not  challenge the

jury's finding on  the contract and implied  covenant of good

faith claims,  but rather  appeals the  judge's finding  that

PSI's  conduct  prior to  February  2, 1990  did  not violate

chapter 93A.    NASCO argues  that the  judge's finding  goes

against  the  weight  of  the  evidence  and  disregards  the

advisory jury's findings.   NASCO also  claims the amount  of

the  attorney's fees awarded  was "arbitrary and capricious."

PSI  challenges  the   judge's  finding  of  a   chapter  93A

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

and  challenges the  judge's  finding  of  "adverse  effects"

supporting the attorney's fee award.  PSI does  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,  we

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  $20,000.00 deposit,  knowing
          full well  that NASCO was  in no position
          to repudiate the  Agreement on the  basis

                             -9-                                          9

          of PSI's non-payment of the deposit; 

          (3)  used  the period  of time  after the
          signing of  the Agreement  to investigate
          the  property  further and  to  determine
          whether  it should  honor the  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  basic chapter 93A  law.  A party  is not

exonerated  from chapter 93A liability because there has been

no breach  of contract.   The law  of Massachusetts  has been

clear  on this  point  since  at least  the  decision of  the

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

Employers Ins. Co.,  537 N.E.2d 107 (Mass. 1989).   The court                              

in  Jet  Line held  that  there  was  no coverage  under  the                         

contract  of  insurance  between  plaintiff  and   defendant.

Nonetheless,  the conduct of the insurance company in leading

the  insured to  believe there  was  coverage constituted  an

unfair and  deceptive trade  practice.   Accord Massachusetts                                                                         

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

Inc., 532 N.E.2d  660, 664 (Mass. 1989)(violation  of chapter                

93A     11  need  not  be  premised  on  a  violation  of  an

independent common law or statutory duty).  The fact that the

jury  found no breach  of contract does  not preclude NASCO's

chapter 93A claim.

          While  the rubric  of "rascality"  as  the test  of

                             -10-                                          10

whether  something is  "unfair or  deceptive"  has been  oft-

recited, both the Supreme Judicial  Court and this court have

noted  that such rhetoric  is "uninstructive."  See Cambridge                                                                         

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

1996);  Massachusetts Employees  Ins.  Exch. v.  Propac-Mass,                                                                         

Inc.,  648  N.E.2d 435,  438  (Mass.  1995).   We  apply  the                

standards of  Propac and  Jet Line and  easily hold  that the                                              

evidence was  not so  overwhelming as  to  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  absence of  a signed P&amp;S  with PSI,  it could  not be

assured  of a  sale of  the  Chelsea property.   Thus,  under

Pappas Indus.  Parks, Inc.  v. Psarros,  511 N.E.2d 621,  623                                                  

(Mass. App. Ct. 1987), the judge could  readily conclude that

it   was  not   reasonable  for   NASCO  to  rely   on  PSI's

representations before  February 2.   While  the judge  could

have reached  the opposite  conclusion, as  did the  advisory

jury, he was not required to do so.1

          PSI in  turn argues that there was  no violation of

chapter 93A after February 2, 1990.  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.  See                                                                         
Wyler v. Bonnell Motors, Inc.,  624 N.E.2d 116, 118-19 (Mass.                                         
App. 1993).

                             -11-                                          11

"the nature of the challenged  conduct and on the purpose and

effect of  the conduct."   As in  Propac, the  defendant here                                                    

continued to act as though a legal relationship were in place

when  it was  not and  the conduct  was unilateral  and self-

serving.   In both cases,  some harm  was also done  to third

parties --  in this  instance, the  closing attorney and  the

electric  company.   In  each  instance,  the  plaintiff  was

particularly vulnerable  and the  defendant's unfair  conduct

gave it greater leverage.

          The  record also easily  supports the trial judge's

findings that after February 2,  1990 NASCO believed it had a

firm deal with PSI and that such a belief was reasonable  and

induced by  PSI's actions.   Cf.  Greenstein v.  Flatley, 474                                                                    

N.E.2d 1130 (Mass. App. Ct. 1985).  As the trial judge found:

          PSI used the  period between February  2,
          1990 and March  19, 1990 to  complete its
          assessment of  the economic  soundness of
          the purchase of the Chelsea Property.  To
          keep  all   of  its  options   open,  PSI
          unfairly  and  deceptively led  NASCO  to
          believe that the parties had entered into
          a binding  agreement and the  deposit was
          delayed merely because  of administrative
          inefficiencies.    All   the  while,  PSI
          actually withheld the  deposit because it
          reasoned  that  the  failure to  pay  the
          deposit would permit PSI to repudiate the
          agreement if, after  review, the purchase
          of the Chelsea Property  seemed not be an
          economically   advantageous  transaction.
          Thus   when  PSI   determined  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

                             -12-                                          12

broker made  several inquiries  concerning the  late deposit.

They testified that  PSI reassured them that  the delays were

simply  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  whether   NASCO

suffered any adverse effects sufficient  to trigger liability

for  attorney's fees  under chapter  93A.   In Jet  Line, the                                                                    

court held that "Under   11, a  plaintiff must be entitled to

relief in some other  respect in order  to be entitled to  an

award of  attorneys' fees. . . . Under    11, [the] unfair or

deceptive conduct must have had some adverse effect  upon the

plaintiff, even if  it is not quantifiable in  dollars."  Jet                                                                         

Line,  537 N.E.2d at  115.  Because  this is a    11 business                

case, and not a   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

                             -13-                                          13

of  PSI.    Such  effects  would indeed  meet  the  Jet  Line                                                                         

requirement  of "adverse effects."   See also  Star Financial                                                                         

Services, Inc. v. AA Star Mortgage Corp., 89  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  N.E.2d 635, 638                                                   

(Mass.  App. Ct.  1993) (where  no damages awarded,  value of

what  was taken  or start  up  costs, which  might have  been

quantifiable,  are sufficient to  support award of attorney's

fees).

          PSI argues that  the record does not  support these

conclusions for  two reasons.   First,  while NASCO  incurred

legal fees for work by  counsel in anticipation of a closing,

there  is no evidence that  it ever paid  those bills, and is

not now obligated  to pay as any claim for  legal services is

barred by the statute of  limitations.  Second, NASCO did not

reactivate electricity  at PSI's request  during the  Chapter

93A  violation period  and it  did not  pay for  the electric

expenses   because  it  took   the  position  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  to  the property.    In

                             -14-                                          14

response,  NASCO's attorney,  Thomas  Bennet,  sent a  letter

dated  February 12,  1990 to  Boston  Edison requesting  that

power be restored to the  property.  Mr. Bennet sent copy  of

this letter to Mr. Kinneavy.   Witnesses testified that power

was   subsequently  restored  to  the  property,  and  Harvey

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

billed  NASCO after February  of 1990,  but that  these bills

were  not paid.   Attorney  Bennet's  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  implicit

finding that the bills were in fact incurred,  PSI's argument

evolves to a contention that  because NASCO did not pay these

bills,  it has suffered  no "adverse effects"  under Jet Line                                                                         

and  is not entitled to damages.   NASCO's failure to pay the

bills  means  that  it  did  not recover  damages  for  those

liabilities, but it  does not mean that NASCO  did not suffer

adverse effects.  To the  extent that PSI's objection is that

the bills were  not valid or the debts were not validly owed,

the trial judge  implicitly found against PSI.   It would, of

course, be a  different matter if the bills  were inflated or

fictitious.  To the extent that PSI's objection is that there

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

                             -15-                                          15

the Supreme Judicial  Court in DiMarzo v. American  Mut. Ins.                                                                         

Co., 449 N.E.2d  1189 (Mass. 1983) is  instructive.  Although               

DiMarzo  dealt with  a  judgment  and not  a  mere bill,  the                   

Supreme   Judicial  Court  held  that  entry  of  a  judgment

constitutes a loss of money for  purposes of chapter 93A.  In

addition, DiMarzo said,  "[t]he loss does not turn on whether                             

the  judgment has  been satisfied."  Id.  at 1196.   While  a                                                    

judgment is  admittedly different than  a bill, that  a valid

debt (evidenced by  a bill) has  not been paid does  not mean

that there has been no adverse effect.

          PSI's unfair  and deceptive practices  caused NASCO

to  incur these  legal and electrical  bills.   This worsened

NASCO's  financial position  and put  it at  risk of  suit on

these bills.   PSI should  not avoid attorney's fees  for its

behavior because NASCO could not  pay bills it would not have

incurred  had  PSI  not  violated  the  law.   Indeed,  PSI's

position  seems  contrary  to  the  intent  of  chapter  93A.

Vulnerable, struggling companies in  bad bargaining positions

are more  likely to need  the protection of chapter  93A than

robust,  successful companies.   If we adopt  PSI's position,

impecunious  businesses, unable to pay their bills and trying

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

different  footing  under  chapter  93A   than  more  solvent

plaintiffs.  The  purpose of the chapter 93A    11 attorney's

fees provision is to deter businesses from engaging in unfair

                             -16-                                          16

and  deceptive trade  practices  where  those practices  have

adverse effects.  See Commonwealth v. Fall River Motor Sales,                                                                         

Inc.,   565  N.E.2d  1205,  1214  (Mass.  1991);  Manning  v.                                                                     

Zuckerman, 444 N.E.2d  1262, 1266 (Mass. 1983)  ("Through the                     

imposition of penalties for specific unfair or deceptive acts

or  practices  between  particular  individuals, the  statute

seeks to  deter  these practices  and to  reduce the  general

danger to  the public  arising from  the  potential for  such

unscrupulous  behavior  in the  marketplace.").   We conclude

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

          NASCO argues  that the district  court's fee  award

was  too small.   But Jet Line,  537 N.E.2d at  114-15, holds                                          

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

any  award for  legal services  rendered  in connection  with

unsuccessful  claims.  The  district court acted  well within

its discretion  when it decided  to award NASCO only  part of

the  attorney's fees  and  costs NASCO  had  incurred in  the

course of this  litigation.  See DiMarzo, 449  N.E.2d at 1202                                                    

("The amount  of reasonable  attorney's fees  under c.93A  is

within  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

                             -17-                                          17

correctly applied the  law of chapter 93A to  this case.  The

record  clearly  supports the  district court's  finding that

PSI's actions  from February 2  to March 19 of  1990 violated

chapter  93A's  prohibition  of  unfair  and  deceptive trade

practices.   The district court was  also correct to conclude

that  NASCO suffered adverse  effects during this  period for

which attorney's fees could be  awarded.  The judgment of the

district court is therefore  affirmed.  Costs are awarded  to                                                 

NASCO.

                             -18-                                          18
