
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                                ____________________                                         -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  & 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&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&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&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&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&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&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&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&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
