Opinion
21-P-507
04-22-2022
THOMAS F. WELCH & ASSOCIATES, INC., & another [1] v. BARRY E. FELDMAN & others. [2]
Summary decisions issued by the Appeals Court pursuant to M.A.C. Rule 23.0, as appearing in 97 Mass.App.Ct. 1017 (2020) (formerly known as 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 23.0 or 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 23.0
The plaintiffs -- through their principals, Thomas F. Welch and Dennis R. Tourse -- spent years working on a planned mixed-use development that was intended to house a museum operated by the National Center of Afro-American Artists, Inc. (National Center). When the plaintiffs were not paid consulting fees to which they were entitled by contract, they brought this action asserting claims for (1) breach of contract and breach of the implied covenant of good faith and fair dealing against defendant P-3 Partners, LLC (P-3), and (2) violation of G. L. c. 93A and unjust enrichment against P-3 and the other defendants, Barry E. Feldman, Feldco Development Corp. (Feldco Development), and Feldco Boston, LLC (Feldco Boston). On the defendants' motions to dismiss, a Superior Court judge (first motion judge) concluded that the plaintiffs' complaint failed to state a claim for violation of c. 93A or for unjust enrichment, and those claims were dismissed. The plaintiffs then submitted a motion arguing that the dismissal order effectively barred them from pursuing their contract claims against P-3. Another Superior Court judge (second motion judge) agreed and ordered that a final judgment enter in favor of the defendants. The plaintiffs appeal. The judgment is affirmed except as to the dismissal of the plaintiffs' claims against P-3 for breach of contract and breach of the implied covenant of good faith and fair dealing, as to which the judgment is vacated, and the matter is remanded.
The plaintiffs also asserted a claim for reach and apply, which we discuss in note 5, infra.
Background.
As alleged in the complaint, Elma Lewis, who founded the National Center, approached the plaintiffs in or around 2000 and asked them to work on a mixed-use development to house the National Center's museum. The plaintiffs agreed to do so, and they also agreed to defer receiving compensation for their work until the project was closer to fruition. The plaintiffs' work included extensive outreach efforts -- meeting with community members, public officials, and professionals such as architects and engineers -- to generate support for and advance the project. The plaintiffs also provided ongoing advice to the National Center regarding the project.
Where this appeal involves a review of the defendants' motions to dismiss, we accept the factual allegations in the complaint as true. See Iannacchino v. Ford Motor Co., 451 Mass. 623, 625 n.7 (2008). We review those allegations to determine whether they plausibly show an entitlement to relief. See J_d. at 636.
By 2006, the plaintiffs and the National Center had identified a parcel of vacant, publicly owned land as a potential site for the project. As alleged, the parcel was being "disposed of through established . . . procedures," which required interested parties to submit proposals for the parcel's redevelopment. For the purpose of submitting such a proposal, the National Center formed Elma Lewis Partners, LLC (ELP); the expectation was that if ELP's proposal was successful, ELP would partner with an experienced developer to work on the project. The plaintiffs provided advice on the formation of ELP, helped prepare ELP's proposal, and "worked tirelessly" to provide necessary follow-up information to the government agency in charge of reviewing proposals for the parcel's redevelopment. "[I]n large part due to the [plaintiffs'] work," ELP was designated the tentative redeveloper of the parcel.
Next, the plaintiffs and the National Center sought potential development partners. In 2010, the plaintiffs had promising discussions with Feldman, who promoted his company, Feldco Development, as an experienced developer. As a result of those discussions, Feldman and Feldco Development formed Feldco Boston for the purpose of partnering with ELP. Once Feldco Boston was established, it and ELP formed P-3 for the purpose of developing and operating the project.
With the project closer to fruition, the plaintiffs entered into separate consulting agreements with P-3 that were intended to compensate the plaintiffs "for services they had already rendered to [t]he [p]roject." The agreements required P-3 to pay the plaintiffs a combined total of approximately $6 million. None of the defendants, other than P-3, were party to the consulting agreements. Under each consulting agreement (1) the first installment was due the earlier of May 1, 2014, or on the satisfaction of certain conditions, including the closing of a construction loan, and (2) the second installment was due the earlier of the fourth anniversary of the first installment due date (i.e., no later than May 1, 2018) or on the satisfaction of certain conditions, including the closing of a permanent loan or the conversion of a "[m]ini [p]ermanent [l]oan." In October 2010, the plaintiffs agreed to amend the consulting agreements to, inter alia, remove a mortgage security provision.
The project did not proceed as hoped, and P-3 did not obtain financing or pay the plaintiffs. The plaintiffs, however, did not want to take any actions that would have adversely affected the project; therefore, instead of filing a lawsuit, they agreed to amend the consulting agreements to extend the installment due dates. In addition, Feldman provided a limited personal guarantee, which applied if and only if certain conditions were met, including the closing of not less than $28 million in financing. Even given the additional time, P-3 did not obtain financing or pay the plaintiffs; this lawsuit followed.
Discussion.
1. General Laws c. 93A.
The plaintiffs' complaint included a claim for violation of G. L. c. 93A that was based on allegations of misrepresentation. The plaintiffs alleged that Feldman, individually and as an agent of Feldco Development, Feldo Boston, and P-3, induced the plaintiffs to enter into the consulting agreements with P-3 and, later, to forgo the mortgage security by (1) promising that the plaintiffs would be paid, unconditionally, and (2) failing to disclose that P-3 had no intention of paying the plaintiffs unless P-3 obtained financing. For the following reasons, we agree with the first motion judge that the plaintiffs failed to state a claim for violation of c. 93A.
The plaintiffs also claimed that, to the extent Feldman was liable for violation of c. 93A, they could reach and apply Feldman's interests in Feldco Development, Feldco Boston, and P-3. Where we conclude that the plaintiffs failed to state a claim for violation of c. 93A, we need not separately address the reach and apply claim.
A c. 93A claim may be based on allegations of a misrepresentation, including a promise made with no intention of following through on performance. See Kitner v. CTW Transp., Inc., 53 Mass.App.Ct. 741, 747 (2002). See, e.g., Exhibit Source, Inc. v. Wells Ave Business Ctr., LLC, 94 Mass.App.Ct. 497, 501 (2018) (defendant promised to return security deposit but had no intention of doing so). See also Cumis Ins. Soc'y, Inc. v. BJ's Wholesale Club, Inc., 455 Mass. 458, 474 (2009) (promise to perform act may support claim for misrepresentation if "promisor had no intention to perform the promise at the time it was made"); Brewster Wallcovering Co. v. Blue Mountain Wallcoverings, Inc., 68 Mass.App.Ct. 582, 601 n.45 (2007) (plaintiff must show that "at the time [defendant] made the statements . . . relie[d] on, [defendant] had no intention of following through on them; mere nonperformance would not be enough"). However, a plaintiff who bases a c. 93A claim on a misrepresentation must allege facts showing a causal connection between the misrepresentation and the loss. See Hershenow v. Enterprise Rent-A-Car Co. of Boston, Inc., 445 Mass. 790, 797 (2006). This element may be satisfied where, for example, a misrepresentation "could reasonably be found to have caused a person to act differently from the way he [or she] otherwise would have acted" (citation omitted) . I_d. at 801.
Here, while the plaintiffs alleged that a promise of unconditional payment caused them to act differently from the way they otherwise would have acted by inducing them to enter into the consulting agreements, on the facts alleged such a conclusion would not be reasonable as a matter of law. First of all, there is no allegation that Feldman's promises induced the plaintiffs to provide additional services; the promised payments were for services already performed. Moreover, the factual allegations show that the consulting agreements -- which were "[e]xtensively negotiated by highly sophisticated parties represented by experienced counsel of their choosing" --obligated P-3, and no other individual or entity, to pay the plaintiffs. Yet the factual allegations establish that P-3 was formed specifically for the purpose of developing and operating the project, and that the plan was for P-3 to obtain financing to do so. In other words, P-3 was not an already existing company that had an established source of income or a reservoir of funds, so a reasonable person (including the plaintiffs) should have understood that there was inherently a very high risk that if P-3 did not obtain financing, P-3 would lack the funds necessary to make the payments. Put another way, the alleged false promise was a bare, unsupported promise that P-3 would make payments that it would not have the ability to make unless it obtained financing. In these circumstances, and under the facts as alleged, the alleged false promise cannot reasonably be found to have caused the plaintiffs to act differently from the way they otherwise would have acted..
As noted, Feldman did provide a limited personal guarantee, which applied only if certain conditions were met, including the closing of not less than $28 million in financing. Because that financing was not obtained, Feldman was not personally obligated under the consulting agreements to pay the plaintiffs.
Moreover, the plaintiffs' argument threatens to turn every breach of contract based on a failure to pay into a violation of c. 93A. In any contract where an obligor agrees to make a payment, a plaintiff could similarly argue that there is an implicit promise that the obligor will be able to make the payment. Our case law is clear, however, that a simple breach of contract is not the basis for c. 93A liability. See Motsis v. Ming's Supermkt., Inc., 96 Mass.App.Ct. 371, 380 (2019).
We note that, while not stated explicitly in the complaint, the plaintiffs seem to imply that Feldman, either himself or through Feldco Development or Feldco Boston, should have funded P-3 for the purpose of paying the plaintiffs. For example, the plaintiffs alleged that they were led to believe that "Feldman would ensure that P-3 . . . had the funding to make the agreed upon payments." However, there are no allegations that Feldman represented that he, Feldco Development, or Feldco Boston promised to contribute any money to P-3 for the purpose of paying the plaintiffs, and the limited personal guarantee that Feldman provided, which was dependent on P-3 obtaining financing, contradicts any such notion.
2. Unjust enrichment.
The plaintiffs also brought a claim for unjust enrichment, which they argue should not have been dismissed because they (1) were induced by the defendants to contribute work to the project and (2) performed work that benefited the defendants. As a preliminary matter, we note that the first motion judge concluded that the plaintiffs' claim for unjust enrichment failed where there was a valid contract between the plaintiffs and P-3 that covered the subject matter of the dispute. See Boswell v. Zephyr Lines, Inc., 414 Mass. 241, 250 (1993). The plaintiffs do not challenge this conclusion and, therefore, have waived any argument that their unjust enrichment claim was dismissed in error. Nonetheless, we briefly explain why we are not persuaded by the plaintiffs' arguments.
As alleged, the plaintiffs began working on the project in 2000 and spent a decade engaging in extensive outreach efforts, providing advice to the National Center, and working on ELP's proposal to redevelop a parcel of vacant, publicly owned land. In 2010, after all that work was completed, the plaintiffs helped the National Center pursue a partnership with the defendants. Where the plaintiffs' involvement with the project significantly predated that of the defendants, there is no support for the plaintiffs' contention that they were induced by the defendants to contribute work to the project. Contrast Douillette v. Parmenter, 335 Mass. 305, 307 (1957) (defendant induced plaintiff to build house by "promis[ing] to deed him a 'piece' of land and later selected a 'spot' on her farm" where he could build). Moreover, unlike in Anisgard v. Bray, 11 Mass.App.Ct. 726, 727-730 (1981), the project ultimately failed, and the allegations do not show how the defendants benefitted from the work that the plaintiffs completed prior to the defendants' involvement.
The plaintiffs alleged in passing that they "continued to advise and support P-3" following execution of the consulting agreements, but the plaintiffs provided no further detail regarding what that advice and support entailed. Moreover, the plaintiffs do not make any separate arguments regarding any specific post-2010 work that they performed or how any such work benefited the defendants.
3. Contract claims.
Once the plaintiffs' c. 93A and unjust enrichment claims were dismissed, all that remained were the plaintiffs' contract claims against P-3. A second motion judge interpreted the first motion judge's dismissal order as concluding that the consulting agreements, and amendments thereto, did not require P-3 to pay the plaintiffs unless P-3 obtained financing. Because the plaintiffs conceded that P-3 never obtained financing, the second motion judge ruled that the plaintiffs' contract claims also had to be dismissed. However, we interpret the first motion judge's dismissal order differently, and we further conclude that the consulting agreements required P-3 to pay the plaintiffs even if P-3 did not obtain financing.
In ruling on the plaintiffs' c. 93A claim, the first motion judge noted that the claim was "directly contrary to the express terms of the parties' written agreements," because those terms made "clear that [the] [p]laintiffs were fully aware of the risk that P-3 . . . might not obtain financing" and because "such a failure would make it difficult, if not impossible, for P-3 . . . to honor its commitments to [the] [p]laintiffs." This language addressed whether the plaintiffs, as a result of the express terms to which they agreed, knew or should have known that there was an inherently high risk that P-3 would be unable to make the payments, and thus whether there was anything unfair or deceptive about Feldman's failure to disclose that fact. The dismissal order did not address the circumstances in which the express terms required P-3 to pay the plaintiffs, which the first motion judge noted was "not presently at issue."
In fact, there is no dispute that the consulting agreements required P-3 to pay the plaintiffs even if P-3 did not obtain financing. Under the consulting agreements, the installments were due "the earlier of" set dates or on the satisfaction of certain conditions, which included that P-3 obtain financing. The amendments to the consulting agreements modified when the installments were due but again required P-3 to pay the plaintiffs "the earlier" of set dates or on the satisfaction of certain conditions. As a result of the amendments to the consulting agreements, each plaintiff's first installment was due no later than October 2, 2018, and each plaintiff's second installment was due no later than thirty-one months from when his first installment was due. This language unambiguously required P-3 to pay the plaintiffs regardless of whether P-3 ever obtained financing. See, e.g., Lieber v. President & Fellows of Harvard College, 488 Mass. 816, 823 (2002) ("When the words of a contract are clear, they control, and we must construe them according to their plain meaning, in the context of the contract as a whole").
P-3 conceded the point on appeal and even argued that the plaintiffs' contract claims should be remanded.
Conclusion.
So much of the judgment dismissing the plaintiffs' claims against P-3 for breach of contract and breach of the implied covenant of good faith and fair dealing is vacated and the matter is remanded for further proceedings consistent with this memorandum and order. In all other respects, the judgment is affirmed.
So ordered.
Kinder, Englander & Walsh, JJ.
The panelists are listed in order of seniority.