Opinion
18-P-784
05-13-2019
JOEL B. MILLER & another v. AMERICAN PRIDE SEAFOODS, LLC, & others.
NOTICE: Summary decisions issued by the Appeals Court pursuant to its rule 1:28, as amended by 73 Mass. App. Ct. 1001 (2009), are primarily directed to the parties and, therefore, may not fully address the facts of the case or the panel's decisional rationale. Moreover, such decisions are not circulated to the entire court and, therefore, represent only the views of the panel that decided the case. A summary decision pursuant to rule 1:28 issued after February 25, 2008, may be cited for its persuasive value but, because of the limitations noted above, not as binding precedent. See Chace v. Curran, 71 Mass. App. Ct. 258, 260 n.4 (2008).
MEMORANDUM AND ORDER PURSUANT TO RULE 1:28
Following a jury trial, the defendants appeal from an amended judgment in favor of the plaintiffs, two real estate brokers, on the plaintiffs' claims for breach of the implied covenant of good faith and fair dealing, quantum meruit, and violation of G. L. c. 93A, § 11. While the plaintiffs also alleged breach of contract, the jury found in favor of the defendants on that claim. The defendants argue that the judge erred in denying their motion for judgment notwithstanding the verdict (judgment n.o.v.), their motion for a new trial on damages, and their motion for a new trial on the plaintiffs' G. L. c. 93A claim. We affirm.
1. Background. In 2012, American Pride Seafoods, LLC (American Pride) retained the plaintiffs, Joel B. Miller and Transwestern RBJ, LLC (collectively, brokers), to help American Pride's parent company, American Seafoods Group, LLC (American Seafoods), extract itself from an above-market, long-term lease of a fish processing facility (property). Pursuant to the brokerage agreement, the brokers would receive a commission if the property was sold during the agreement's term or if a purchase and sale agreement was signed within 120 days of the expiration or termination of the agreement (tail period). The brokerage agreement had a term of ninety days, although that term could be extended for four additional ninety-day periods. David Feller, who was working for American Pride and American Seafoods, negotiated this agreement on behalf of American Pride and was the brokers' main point of contact.
Previously, another company had been leasing the property. However, when that company was sold to American Seafoods, American Seafoods assumed the lease. From the outset, American Pride and American Seafoods always intended to shut down processing at the property and find a way out of the lease.
As part of their marketing efforts, the brokers prepared a listing for the property. Mazzetta Company, LLC (Mazzetta) saw the listing and reached out to American Pride to express interest. Mazzetta's inquiry was forwarded to the brokers, who met with Mazzetta approximately a dozen times and communicated with Mazzetta on a near daily basis. During Mazzetta's discussions with the brokers, the brokerage agreement was extended three times. The last extension was dated August 9, 2013.
Meanwhile, American Seafoods had been involved in negotiations with another company, High Liner Foods (USA), Inc. (High Liner), regarding the sale of American Pride's assets. This sale to High Liner was finalized by October 1, 2013. Pursuant to the terms of that sale, High Liner agreed to reimburse American Seafoods for its costs related to the lease of the property but did not assume the lease. Nonetheless, due to a public announcement that High Liner had assumed some lease obligations, Feller was under the assumption that High Liner had assumed the lease. Thus, Feller reached out to High Liner instead of American Seafoods when it was time to extend the brokerage agreement for the fourth time. That final extension was never executed, and the brokerage agreement thus expired on November 13, 2013, although the tail period remained in effect for the following 120 days.
In January 2014, during the 120-day tail period of the brokerage agreement, American Seafoods, High Liner, and Mazzetta reached a tentative agreement with the owner of the property whereby Mazzetta would assume the existing $5 million mortgage on the property and High Liner would pay $5 million to terminate the lease. This agreement was memorialized in a term sheet that was not forwarded to Feller or the brokers. In fact, while there were various drafts of the term sheet, the later drafts all indicated that none of the parties had been working with a broker in connection with the transaction. Around the time that the term sheet was signed, one of the brokers reached out to High Liner and was told that High Liner would not recognize the brokers on any transaction with Mazzetta.
During February 2014, still during the tail period, Mazzetta and the owner of the property were exchanging draft purchase and sale agreements. However, they did not sign a purchase and sale agreement until April 29, 2014 (April purchase and sale agreement), after the tail period had expired. Under the April purchase and sale agreement, the plan was for Mazzetta to assume the property owner's outstanding mortgage of approximately $5 million. Ultimately, because the owner's mortgagor would not consent to Mazzetta's assumption of the mortgage, Mazzetta instead agreed to pay $5 million. While the April purchase and sale agreement could have been amended to reflect this change, Mazzetta and the owner instead signed a new purchase and sale agreement on the same day that the transaction finally closed. As originally agreed, High Liner also paid $5 million to terminate the lease.
2. Judgment n.o.v. The defendants claim that the judge should have granted a judgment n.o.v. in their favor on all of the plaintiffs' claims. In reviewing the judge's ruling on the defendants' motion for judgment n.o.v., the question before us is "whether 'anywhere in the evidence, from whatever source derived, any combination of circumstances could be found from which a reasonable inference could be drawn in favor of the plaintiff.'" Masingill v. EMC Corp., 449 Mass. 532, 543 (2007), quoting Raunela v. Hertz Corp., 361 Mass. 341, 343 (1972).
a. Breach of the implied covenant of good faith and fair dealing. The jury found American Pride and American Seafoods liable on the brokers' claim for breach of the implied covenant of good faith and fair dealing. This covenant is implied in every contract in Massachusetts and "exists so that the objectives of the contract may be realized." Ayash v. Dana-Farber Cancer Inst., 443 Mass. 367, 385 (2005). It "provides 'that neither party [to a contract] shall do anything that will have the effect of destroying or injuring the right of the other party to receive the fruits of the contract . . . .'" Anthony's Pier Four, Inc. v. HBC Assocs., 411 Mass. 451, 471-472 (1991), quoting Drucker v. Roland Wm. Jutras Assocs., 370 Mass. 383, 385 (1976). The plaintiff must prove the lack of good faith, not necessarily the existence of bad faith. Nile v. Nile, 432 Mass. 390, 398-399 (2000). We also bear in mind that the implied covenant "may not . . . be invoked to create rights and duties not otherwise provided for in the existing contractual relationship." Uno Restaurants, Inc. v. Boston Kenmore Realty Corp., 441 Mass. 376, 385 (2004).
The defendants claim that American Seafoods cannot be liable on this because it was not a signatory on the brokerage agreement. However, the brokerage agreement was binding on all of American Pride's successors and assigns. Where there was testimony that American Pride merged into American Seafoods after the sale of American Pride's assets to High Liner, the jury could have concluded that American Seafoods was American Pride's successor.
The defendants claim that, where the final purchase and sale agreement was signed well after the 120-day tail period had expired, the jury verdict impermissibly expanded the brokers' rights under the brokerage agreement. We disagree. The brokers' theory of the case was that the defendants decided amongst themselves to avoid paying the brokers, and there was ample evidence to support this theory. For example, neither American Seafoods nor High Liner told Feller or the brokers who was responsible for the lease after High Liner purchased American Pride's assets. From this, the jury could have inferred that the defendants were trying to obscure which entity had the authority to extend the brokerage agreement. In addition, a purchase and sale agreement was drafted by the end of February 2014, well within the tail period, but was not signed until after the tail period had expired. The lack of an explanation for the delay in signing goes directly to whether the defendants were trying to avoid paying the brokers. The fact that American Seafoods signed a term sheet indicating that it had not been working with a broker further supports the brokers' theory of the case. This evidence supports the conclusion that the defendants did not conduct themselves in good faith but instead tried to structure the transaction in such a way to avoid paying the brokers.
By comparison, it is well established that "[w]here the principal seeks to deprive the agent of all compensation by terminating [an at will contract] when the agent is on the brink of successfully completing the sale, the principal has acted in bad faith and the ensuing transaction between the principal and the buyer is to be regarded as having been accomplished by the agent." Fortune v. National Cash Register Co., 373 Mass. 96, 104-105 (1977). We see little difference between terminating an at will contract to avoid paying a commission and purposefully delaying a sale until the expiration of a tail period to avoid paying a commission.
While High Liner was not found liable on the brokers' claim for breach of the implied covenant of good faith and fair dealing, we note that its position, as far back as January 2014, that the brokers would not be recognized on a transaction with Mazzetta also supports the brokers' theory of the case.
The defendants respond that it would have made no sense for them to delay closing the deal because they were meanwhile obligated under the lease and, thus, paying rent. This argument misses the mark. The brokers do not suggest that the defendants delayed closing the deal. Rather, the brokers suggest that the defendants delayed signing a purchase and sale agreement.
Put simply, despite the defendants' arguments to the contrary, this is not a case where, through no fault of the defendants, the purchase and sale agreement could not be signed during the tail period. While the defendants certainly have made that argument, first at trial and now on appeal, there was sufficient evidence for the jury to conclude otherwise. In these circumstances, we see no error in the judge's refusal to set aside this jury verdict. See Robert & Ardis James Found. v. Meyers, 474 Mass. 181, 191 (2016) (rejecting argument that implied covenant was invoked to impose new duty on defendant and instead concluding that defendant breached implied covenant by refusing to engage with plaintiff's efforts to effectuate sale).
For example, the defendants have argued that the April purchase and sale agreement did not even culminate in a closing due to complications with Mazzetta assuming the mortgage. However, there was evidence that the April purchase and sale agreement could have been amended to reflect the restructured deal and that there was no reason to execute a new purchase and sale agreement on the date of the closing. The defendants have also argued that any statements they made indicating that the brokers would not receive a commission if a purchase and sale agreement was signed within the tail period were "mistakes." The jury were free to discredit this testimony.
b. Quantum meruit. Because High Liner was not a party to the brokerage agreement, the jury did not find it liable for breach of the implied covenant of good faith and fair dealing and instead found it liable on the brokers' claim for quantum meruit. The defendants argue that, regardless of whether High Liner was a party to the brokerage agreement, this verdict cannot stand because there can be no claim for quantum meruit where a contract governs the subject matter of the dispute. The problem with the defendants' argument is that no contract governs the subject matter of the brokers' dispute with High Liner.
The defendants rely extensively on Boswell v. Zephyr Lines, Inc., 414 Mass. 241 (1993), but that reliance is misplaced. Boswell, supra at 242-243, involved a professional relationship among two attorneys, Shulman and DiLoreto, and a contingency fee agreement between Shulman and a client named Boswell. When Shulman refused to pay DiLoreto for work related to Boswell's case, a dispute arose as to whether DiLoreto, who was not a party to the contingency fee agreement, could enforce an attorney's lien against Boswell. Id. at 243. The Supreme Judicial Court concluded that "the oral agreement between DiLoreto and Shulman preclude[d] DiLoreto from recovering in quantum meruit against Boswell." Id. at 250. In other words, while DiLoreto performed work that benefited Boswell, DiLoreto's oral agreement with Shulman governed his ability to recover payment for that work. Here, in contrast, the defendants have not pointed to any contract that governs the brokers' ability to recover payment for work that benefited High Liner. The defendants point to the brokerage agreement, but that agreement governs only the brokers' ability to recover payment for work that benefited American Pride and American Seafoods, not High Liner. For example, the brokerage agreement might have included language providing that American Pride and American Seafoods would pay the brokers for services rendered to third parties, but it does not. Accordingly, the judge did not err in refusing to set aside this jury verdict.
The defendants alternatively argue that the brokers' claim for quantum meruit against High Liner must fail because the brokers could not have had a reasonable expectation of recovering a commission on a transaction that occurred after the brokerage agreement's tail period had expired. However, as already discussed, the brokerage agreement does not govern the subject matter of the dispute between the brokers and High Liner. Even if it did, the brokers would have had a reasonable expectation of recovering in the circumstances here, for the reasons outlined in section 2.a., supra.
c. G. L. c. 93A, § 11. The jury also found in favor of the brokers on their G. L. c. 93A claim and, pursuant to that statute, awarded double damages against all of the defendants. The defendants argue that this verdict, too, should have been set aside. We disagree. The defendants first contend that this case involves a good faith dispute as to whether the brokers are entitled to a commission and that the defendants' refusal to pay that commission does not amount to the sort of immoral, unethical, oppressive, or unscrupulous conduct required to support a G. L. c. 93A claim. See Datacomm Interface, Inc. v. Computerworld, Inc., 396 Mass. 760, 778 (1986) (describing standard). The defendants also contend that, in the absence of a willful or knowing violation, multiple damages were improperly awarded under the statute. See G. L. c. 93A, § 11 ("recovery shall be in the amount of actual damages; or up to three, but not less than two, times such amount if the court finds that the use or employment of the method of competition or the act or practice was a willful or knowing violation"). These arguments do not construe the evidence in the light most favorable to the brokers, who proceeded on a theory that the defendants decided amongst themselves to avoid paying the brokers. As discussed in section 2.a., supra, there was ample evidence to support this theory.
The defendants further argue that any damages against High Liner were equitable in nature, arising out of the brokers' quantum meruit claim and that only actual damages may be multiplied. See G. L. c. 93A, § 11 (discussing "amount of actual damages to be multiplied"). However, the damages awarded under the brokers' quantum meruit claim were actual damages that were properly doubled. See Hug v. Gargano & Assocs., P.C., 76 Mass. App. Ct. 520, 529 (2010) (affirming actual damages awarded under quantum meruit claim and affirming trial judge's decision to double those damages under G. L. c. 93A, § 11).
3. Motion for a new trial. The defendants moved for a new trial on damages and on the brokers' G. L. c. 93A claim. We review the judge's denial of this motion for abuse of discretion. See Kassis v. Lease & Rental Mgmt. Corp., 79 Mass. App. Ct. 784, 787-788 (2011); W. Oliver Tripp Co. v. American Hoeschst Corp., 34 Mass. App. Ct. 744, 747-748 (1993).
a. Damages. The jury awarded $440,000 in actual damages. The defendants contend that this amount reflects what the brokers' commission would have been on a $10 million sale. The defendants argue the jury award is thus a miscarriage of justice because Mazzetta paid $5 million for the property. The defendants further contend that the jury must have included High Liner's $5 million payment to terminate the lease as part of the sale price. We assume for purposes of addressing the defendants' argument that the defendants are correct regarding how the jury calculated damages. Nonetheless, even making that assumption, we cannot conclude that the judge abused his discretion in denying the defendants' motion for a new trial on damages.
While the jury were not asked to explain how they calculated damages, the brokers do not dispute that the jury appear to have calculated what the commission would have been on a $10 million sale.
Whether the sale was a $5 million sale or a $10 million sale was disputed throughout trial, with both parties presenting evidence on and arguing their respective views. The jury appear to have accepted the brokers' view, and there was ample evidence to support that view. The brokerage agreement provides that the commission shall be based on the "Gross Sales Price," which is defined as "all consideration payable on account of the sale of the Property . . . including, without limitation, a purchase price, a contribution price, assumption or prepayment of debt, ground rent or other form of payment or consideration." Based on this language, and in light of the fact that High Liner's $5 million payment was negotiated in tandem with the sale to Mazzetta, the jury could have concluded that High Liner's $5 million payment was part of the "Gross Sales Price." This was not a situation where Mazzetta paid $5 million for the property and, coincidentally around the same time, High Liner also paid $5 million to terminate the lease. American Seafoods, High Liner, Mazzetta, and the owner of the property were all working together to finalize the same deal, and the sale would not have happened without High Liner's $5 million payment. We are thus unpersuaded by the defendants' argument that it is absurd for them to pay a commission on their own payment, as they derived no benefit from that payment. They derived the very benefit they sought -- the end of their obligations under the lease. The fact that they had to contribute some money to the $10 million deal to make that happen does not mean that, under the terms of the brokerage agreement, the brokers are not entitled to a commission on the full $10 million. Based on this record, the judge was well within his discretion to deny the motion for a new trial on damages.
The defendants also claim that they are entitled to a new trial on damages due to the erroneous admission of information showing that Mazzetta listed the property for sale in 2017 for $11 million. The defendants argue that the asking price for the property in 2017 has little bearing on what the property was worth when Mazzetta purchased it in 2014. They further claim that any probative value was outweighed by the danger of unfair prejudice and confusion given the increase in property values between 2014 and 2017. We discern no abuse of discretion given the context in which this evidence was admitted. The brokers' position at trial was that the property was worth $10 million in 2014. Mazzetta's general counsel repeatedly testified that the property was worth $5 million in 2014, and the 2017 real estate listing was introduced during his cross-examination to cast doubt upon that testimony. See Lally v. Volkswagen Aktiengesellschaft, 45 Mass. App. Ct. 317, 332-333 (1998) (rejecting argument that simulated accident was not sufficiently similar to actual accident to be relevant and would instead confuse jury).
b. G. L. c. 93A, § 11. The defendants also argue that they are entitled to a new trial on the brokers' G. L. c. 93A claim due to errors with the jury instructions and the verdict form. Turning first to the jury instructions, the defendants contend that the judge erroneously instructed the jury that any misrepresentation, including even a negligent misrepresentation, is an unfair or deceptive act or practice in violation of G. L. c. 93A, § 11. As an initial matter, we note that a "negligent misrepresentation may be so extreme or egregious as to constitute a violation of G. L. c. 93A, § 11." Marram v. Kobrick Offshore Fund, Ltd., 442 Mass. 43, 62 (2004). Moreover, in making their argument, the defendants point to fragments of the jury instructions, but we read jury instructions as a whole. See O'Connor v. Raymark Indus., Inc., 401 Mass. 586, 592 (1988). Thus, we note that the judge also instructed the jury that if "a reasonable businessperson would find [the conduct] reprehensible, you may find that such conduct constitutes behavior that is unfair or deceptive" and that "[a]n act that might be unfair in a business transaction with an unsophisticated consumer may not be unfair when it takes place in a transaction involving two sophisticated businesspersons." Reading the jury instructions as a whole, we discern no error and thus no abuse of discretion in the denial of the defendants' motion for a new trial. See Kassis, 79 Mass. App. Ct. at 787-788.
Turning next to the verdict form, the defendants claim that the jury should have been asked to identify, specifically, which of the defendants they found liable on the brokers' G. L. c. 93A claim, when instead the jury were asked only whether "the defendants," without differentiation, were liable. The defendants argue that, consequently, all of the defendants have been made jointly and severally liable, even though the jury may have concluded that only one of the defendants was liable. However, the defendants never objected to the verdict form on this basis below and instead raise this argument for the first time on appeal. The argument is thus waived. See Neagle v. Massachusetts Bay Transp. Auth., 45 Mass. App. Ct. 345, 348-349 (1998).
The waiver is especially egregious where the judge, after receiving the verdict and conferring with counsel, sent the jury back out to specify which defendant or defendants the unjust enrichment award pertained to.
4. Conclusion. The amended judgment in favor of the plaintiffs on their claims for breach of the implied covenant of good faith and fair dealing, quantum meruit, and violation of G. L. c. 93A, § 11, is affirmed. The plaintiffs further request appellate attorney's fees and costs. They are entitled to those fees and costs pursuant to G. L. c. 93A, § 11, and may, within fourteen days of the rescript, submit a detailed and supported submission of the fees and costs sought, in accordance with the procedures set forth in Fabre v. Walton, 441 Mass. 9, 10 (2004). The defendants may file a response within fourteen days thereafter.
Amended judgment affirmed.
By the Court (Meade, Massing & Lemire, JJ.),
The panelists are listed in order of seniority.
/s/
Clerk Entered: May 13, 2019.