Opinion
11-P-978
04-06-2012
DIANE SAIA v. BAY STATE GAS COMPANY.
NOTICE: Decisions issued by the Appeals Court pursuant to its rule 1:28 are primarily addressed to the parties and, therefore, may not fully address the facts of the case or the panel's decisional rationale. Moreover, rule 1:28 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.
MEMORANDUM AND ORDER PURSUANT TO RULE 1:28
The plaintiff (Saia) appeals from the dismissal, pursuant to Mass.R.Civ.P. 12(b)(6), 365 Mass. 754 (1974), of her class action complaint, which asserted claims of misrepresentation, violation of G. L. c. 93A, unjust enrichment, and sought rescission. We reverse the dismissal of the misrepresentation and chapter 93A claims, but otherwise affirm.
Background. Accepting as true (as we must), the factual allegations in the complaint, as well as the reasonable inferences that may be drawn from them, and also considering the exhibits attached to the complaint, Schaer v. Brandeis Univ., 432 Mass. 474, 477 (2000), we here summarize some of the facts, reserving others for later discussion. The defendant (Bay State) advertised an offer to lease water heaters to residential consumers. The advertisement stated that there would be 'no up-front cost for a standard installation' and 'no repair charges.' Saia, relying on the advertisement and needing a new hot water heater, contacted Bay State, who sent a sales agent to her home. The agent essentially repeated the representations in the advertisement and Saia signed an agreement to lease a water heater for three years.
The agreement requires the plaintiff to pay $220 at installation and $28.16 each month, for a total payment of $1,233.76 at the end of three years. The agreement provides that monthly payments will continue thereafter until either party elects to terminate the lease. The agreement also provides that the plaintiff 'has an option to purchase the Appliance by paying to the Company the greater of $75 or an amount equal to the Total Installed Price set out in Item 1, less 50% of the total Monthly Lease Payments paid through the purchase date.' The agreement gives the 'Total Installed Price,' as $1,510.87 but does not explain how that figure is calculated or what it represents. Further, the term 'Total Installed Price,' although giving the appearance of a defined term by virtue of being capitalized, is nowhere defined. Finally, whatever the 'Total Installed Price' might be, it is not the actual cost to the consumer.
The agreement also allowed Saia to 'cancel this transaction at any time prior to midnight of the third business day after the date of this transaction, see the notice of cancellation form attached for an explanation of this right. You may waive this statutory right to cancel for an emergency installation. Any waiver must be in writing.' Saia never received the explanatory form. Moreover, the 'Emergency Waiver Statement' she signed was blank on the lines indicating 'description of emergency' and requiring a 'personal statement describing the situation requiring immediate remedy.' After Saia signed the form, someone else wrote 'no hot water' under 'description of emergency' and 'replace heater' as the personal statement.
Discussion. We review the grant of a motion to dismiss de novo. Curtis v. Herb Chambers I-95, Inc., 458 Mass. 674, 676 (2011). ''While a complaint attacked by a motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the 'grounds' of his 'entitle[ment] to relief' requires more than labels and conclusions. Factual allegations must be enough to raise a right to relief above the speculative level [based] on the assumption that all the allegations in the complaint are true (even if doubtful in fact).' What is required at the pleading stage are factual 'allegations plausibly suggesting (not merely consistent with)' an entitlement to relief.' Iannacchino v. Ford Motor Co., 451 Mass. 623, 636 (2008), quoting from Bell Atl. Corp. v. Twombly, 550 U.S. 544, 557 (2007) (ellipses and internal citations omitted).
1. Misrepresentation. Allegations of fraud must be pleaded with particularity. Mass.R.Civ.P. 9(b), 365 Mass. 751 (1974). 'To recover for fraudulent misrepresentation, a plaintiff 'must allege and prove that the defendant made a false representation of a material fact with knowledge of its falsity for the purpose of inducing the plaintiff to act thereon, and that the plaintiff relied upon the representation as true and acted upon it to [her] damage.'. . . Such reliance by the plaintiff must be reasonable.' Masingill v. EMC Corp., 449 Mass. 532, 540 (2007), quoting from Kilroy v. Barron, 326 Mass. 464, 465 (1950).
We agree with the motion judge that the complaint fails to state a misrepresentation claim based on the statement that there would be 'no up-front costs' for the heater. Saia is not entitled to maintain her claim by truncating the actual text of the advertisement, which stated instead that there would be 'no up-front cost for standard installation.' The lease also clearly specified that there would be no up-front costs for standard installations; it did not state that there would be no up-front costs of any sort. Moreover, the lease plainly disclosed that an additional $220 would be due at signing/installation, which would not be included in the monthly lease payment.
Nor is Saia entitled to maintain a misrepresentation claim based on the statement that 'repairs are covered' during the lease period. Saia concedes that the statement is true, but argues that it is meaningless because -- had she bought the water heater from any other source -- repairs would have been covered under the standard manufacturer's warranty. Even assuming arguendo that a true (but meaningless) representation is actionable, it could not be the basis of Saia's misrepresentation claim because she does not allege that any harm flowed from it.
Saia's third argument, however, has more traction. The crux of the complaint is Saia's allegation that Bay State made a misrepresentation of law by calling the water heater arrangement a lease when it was in fact a credit sale. A 'credit sale' is:
'[A]ny sale in which the seller is a creditor. The term includes any contract in the form of a bailment or lease if the bailee or lessee contracts to pay as compensation for use a sum substantially equivalent to or in excess of the aggregate value of the property and services involved and it is agreed that the bailee or lessee will become, or for no other or a nominal consideration has the option to become, the owner of the property upon full compliance with his obligations under the contract.'G. L. c. 140D, § 1.
Bay State contends that, as a matter of law, the arrangement was not a credit sale because the agreement did not permit Saia to purchase the water heater for less than nominal consideration in that she was required to pay at least $1,003.99 (exclusive of sales tax) to purchase the unit at the end of the lease. This argument ignores the fact that the terms of the contract appear to make it possible for Saia (depending on how long she continues to make lease payments after the end of the minimum lease term) to purchase the water heater for as little as $75. The longer Saia continues to make payments, the lower the buyout price becomes. The contract nowhere discloses or requires in all circumstances a purchase price of $1,003.99. Instead, that figure appears to be the buyout price for Saia were she to exercise the option to purchase at the end of the three-year term. Bay State, as the party moving to dismiss, is certainly not entitled to the best possible construction of the terms of the contract. We are of the view that a buyout price of $75 (and perhaps even more) could be considered nominal, at least for purposes of surviving a motion to dismiss, given the context of the overall amounts paid under the lease, and the value of the water heater (which is a major appliance).
The buyout provision set out a formula by which the purchase price would be determined: 'OPTIONS TO PURCHASE: The customer has an option to purchase the Appliance by paying to the Company the greater of $75 or an amount equal to the Total Installed Price set out in Item 1, less 50% of the total Monthly Lease Payments paid through the purchase date for the particular Appliance actually being purchased by the Customer, plus any sales tax (the ' Buyout Price').'
Moreover, we must keep in mind the standard for determining whether an alleged misrepresentation of law contained in a form contract between a consumer and a company whose form it is may be ground for judicial relief:
'A misrepresentation of law, particularly as to the private right or interests of a party under a written instrument, made by one possessed of superior knowledge to take advantage of the relative ignorance of another, may be ground for judicial relief. Such superior knowledge must be imputed to a representative of a commercial company with respect to the legal effect of the standard form agreements which are used by the company and which it is the job of the representative to induce third persons to sign. Such persons, even if they read the standard form agreement, cannot typically be expected to be so familiar with the legal effect of its provisions as the company and its representatives. Representations by the latter as to the legal effect of such agreements are often justifiably relied on by those whom they invite to sign them. In these circumstances a false representation made for the purpose of inducing such a person to do an act for the benefit of the company or to refrain from doing an act to the detriment of the company warrants appropriate judicial relief if, in reliance on the misrepresentation, the action intended to be induced does in fact result.'
Cellucci v. Sun Oil Co., 2 Mass. App. Ct. 722, 731-732 (1974) (citations omitted). Against this standard, the motion to dismiss should have been denied. The complaint specifically alleges that Bay State obscured the realities of the agreement in order to deceive Saia into signing it, and that she was prevented from making a reasoned and economically sensible choice because of the absence of the disclosures she would have been entitled to receive had the arrangement been properly disclosed as a credit sale.
2. Chapter 93A. General Laws c. 93A, § 9, provides a right of action to a consumer 'who has been injured by another person's use or employment of any method, act or practice declared to be unlawful by section two [of chapter 93A] or any rule or regulation issued thereunder.' A business practice is deceptive for purposes of chapter 93A if it 'has the capacity to mislead consumers, acting reasonably under the circumstances, to act differently from the way they otherwise would have acted.' Aspinall v. Philip Morris Co., 442 Mass. 381, 396 (2004). Citing Hershenow v. Enterprise Rent-A-Car Co., 445 Mass. 790 (2006), the Superior Court judge concluded that the plaintiff had not sufficiently pleaded any injury or demonstrated the necessary causal connection between the alleged unfair or deceptive acts and the loss she suffered. We think that conclusion rested on an overly restricted reading of the complaint. '[T]o recover under c. 93A, § 9, a plaintiff must prove causation -- that is, the plaintiff is required to prove that the defendant's unfair or deceptive act caused an adverse consequence or loss.' Rhodes v. AIG Domestic Claims, Inc., 461 Mass. 486, 496 (2012). Injury for purposes of chapter 93A includes 'loss of money, loss of property, or personal injury,' and also 'the invasion of any legally protected interest of another.' Hershenow v. Enterprise Rent-A-Car Co., 445 Mass. at 799-800, quoting from Leardi v. Brown, 394 Mass. 151, 159 (1985).
The facts underlying, and controlling, the outcome in Hershenow were markedly different from those alleged in Saia's complaint. As the Supreme Judicial Court has explained, '[t]he Hershenow plaintiffs would have been harmed only had two sequential events occurred: car damage during the rental period, followed by Enterprise's attempt to enforce against them a contract containing terms disallowed under Massachusetts law. Although the Hershenow plaintiffs had purchased a product that offered less protection than statutorily required, the unlawful contract terms 'did not and could not' cause any harm to the plaintiffs after they had returned their vehicles undamaged at the end of their rental periods.' Iannacchino, 451 Mass. at 630, quoting from Hershenow, 445 Mass. at 800.
The complaint alleges that the defendant deliberately mischaracterized the contract as a lease in order to avoid having to make the disclosures required for a credit sale. See G. L. c. 140D, and 209 Code Mass. Regs. §§ 32.15(5) & 32.23(5) (2010). The complaint also alleges that, had those disclosures been made, Saia would not have entered into the contract, which was economically unfair and extremely disadvantageous. In addition, the complaint alleges that, but for Bay State's deception and misrepresentations, Saia could have bought a cheaper heater or financed one at a better rate while getting the benefit of a better warranty. Saia was not required to actually buy a different water heater in order to maintain her claim; it was enough to allege that she entered into an economically disadvantageous arrangement based on Bay State's misrepresentations and omissions.
3. Unjust enrichment. Saia alleges that, because the transaction conferred a financial benefit on Bay State, it was unjustly enriched at her expense. We treat a claim for unjust enrichment as one for quantum meruit. See Salamon v. Terra, 394 Mass. 857, 859 (1985); Mike Glynn & Co. v. Hy-Brasil Restaurants, Inc., 75 Mass. App. Ct. 322, 326 (2009). 'Recovery in quantum meruit presupposes that no valid contract covers the subject matter of a dispute.' Boswell v. Zephyr Lines, Inc., 414 Mass. 241, 250 (1993). Because Saia has affirmatively pleaded the existence of a contract (which she does not contend is invalid as a matter of law), the motion judge correctly determined that she cannot maintain her unjust enrichment claim.
4. Rescission. The complaint seeks rescission of the agreement because Bay State violated G. L. c. 93, § 48, by failing to give her the required form detailing her right to rescind the contract within three days and by failing to obtain a valid waiver of that right. Saia's claim fails because she does not allege that she would have exercised the right had she been properly informed of it.
So much of the judgment as dismisses counts 1 and 2 of the complaint is reversed. So much of the judgment as dismisses counts 3 and 4 of the complaint is affirmed.
So ordered.
By the Court (Cypher, Cohen & Wolohojian, JJ.),