The Exhibit Source, Inc. v. Wells Avenue Business Center, LLC

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17-P-1611 Appeals Court

THE EXHIBIT SOURCE, INC. vs. WELLS AVENUE BUSINESS CENTER,
LLC.

No. 17-P-1611.

Suffolk. September 13, 2018. - November 20, 2018.

Present: Wolohojian, Lemire, & Englander, JJ.

Landlord and Tenant, Security deposit, Consumer protection,
Attorney's fees, Multiple damages. Consumer Protection
Act, Landlord and tenant, Damages, Attorney's fees, Unfair
or deceptive act, Offer of settlement. Damages, Consumer
protection case, Attorney's fees.

Complaint received and sworn to in the Central Division of
the Boston Municipal Court Department on May 6, 2014.

The case was tried before Myong J. Joun, J.

Evan M. Fray-Witzer for the defendant.
David C. Aisenberg for the plaintiff.

ENGLANDER, J. The defendant commercial landlord Wells

Avenue Business Center, LLC (Wells), failed to return the

$15,982 security deposit of the plaintiff tenant, The Exhibit

Source, Inc. (Exhibit Source). Exhibit Source sued, asserting

various common-law claims, as well as a claim under G. L.
2

c. 93A, § 11. The jury found for the plaintiff on the common-

law claims, and the judge separately found for the plaintiff

under c. 93A, and awarded treble damages and attorney's fees.

The Appellate Division affirmed. On further appeal to this

court, the defendant argues that (1) the trial judge improperly

adjusted the jury's damages award, (2) the facts did not support

a c. 93A violation, (3) language in the commercial lease

prohibited the award of multiple damages, and (4) it made a

reasonable offer of settlement, which pretermitted an award of

multiple damages and attorney's fees. We affirm.

Background. Exhibit Source and Wells entered into a

commercial lease (lease) pursuant to which Exhibit Source

provided a security deposit of $15,982. The lease terminated

August 31, 2013. The lease expressly required the defendant

landlord to return the security deposit "[w]ithin thirty (30)

days" of lease termination, except that the landlord could

"apply" the security deposit to compensate for damages suffered

as a result of a "Tenant Default." "Tenant Default," in turn,

was a defined term; as discussed below, the only "tenant

default" that could possibly apply to the facts here was in

lease section 16.1(d) -- "failure by Tenant to fulfill any other

obligation under this lease, if such failure is not cured within

twenty (20) days of notice from Landlord to Tenant . . ."

(emphasis supplied).
3

As the trial judge found, the defendant landlord failed to

fulfill its obligations with respect to the security deposit.

The plaintiff tenant vacated the premises as of August 31, 2013.

Representatives of the landlord and the tenant walked through

the premises on September 4, 2013. The landlord's

representative did not raise any issue as to the condition of

the premises at that time, or indeed for the next seven months.

Starting in October of 2013 the plaintiff repeatedly requested

the return of the security deposit. A representative of the

landlord represented several times that the full amount would be

forthcoming. That did not happen.

Eventually, on April 1, 2014, the landlord returned

$1,202.28 of the deposit, and retained $14,780. The landlord

claimed the $14,780 was for damage to the property, allegedly

caused when the tenant removed certain shelving and signage upon

leaving in August of 2013. The alleged damage would have been

visible during the September 4, 2013, walk-through. At no time

prior to April 1, 2014, did the landlord provide notice to the

tenant of any damage, and the landlord never provided an

opportunity to cure as contemplated by the lease.

The plaintiff filed suit on May 6, 2014, and asserted

claims for breach of contract, breach of the implied covenant of

good faith, conversion, misrepresentation, and violations of

G. L. c. 93A, § 11. The landlord did not make a settlement
4

offer when it filed its answer on May 30, 2014, although it had

offered $6,000 around the time that the tenant filed suit.1

The jury returned verdicts for the tenant on each of the

common-law claims, in response to special verdict questions. It

awarded damages of $25,366.70, which it listed on its special

verdict form thusly:

"$20,000.00 damages
$ 5,366.70 security balance
$25,366.70 plaintiff to receive"

The trial judge reserved the c. 93A claim for himself and

on June 10, 2015, heard additional arguments on the issue. The

landlord filed posttrial motions directed at the jury verdict,

including a motion under Mass. R. Civ. P. 59, 365 Mass. 827

(1974), to remit the jury's damages award. The judge entered a

combined order on the posttrial motions and the c. 93A claim, in

which he (1) allowed the motion for remittitur and reduced the

jury's damages award to $14,780, and (2) found for the plaintiff

on the c. 93A claim, trebled the plaintiff's "actual damages" to

$44,340, and awarded attorney's fees and costs, later determined

to be $60,511.74. The judge's c. 93A findings bear setting

forth here:

"Here, [landlord] had absolutely no intention of returning
the security deposit to plaintiff. After months of
stringing plaintiff along under false representations that

1 As discussed infra, the landlord did increase its
settlement offers as the litigation proceeded.
5

the security deposit will be paid to plaintiff, [landlord]
manufactured a reason to keep the security deposit by
claiming damage to the property -- a reason that did not
exist when [landlord's representative] conducted the walk-
through inspection on September 4, 2013 . . . ."

On the parties' cross appeals, the Appellate Division of

the Boston Municipal Court affirmed in a unanimous and well-

reasoned opinion. That court also awarded $30,100 in additional

attorney's fees, incurred by the tenant in responding to the

defendant's appeal. The defendant now appeals to this court.

Discussion. 1. The damages award. The defendant first

argues that the judge erred in his handling of the jury verdict

on damages. It contends that the only valid damages award was

the $5,366.70 identified on the verdict form as "security

balance," and that the $20,000 designated by the jury as

"damages" was "wholly unsupported by any evidence."

We need not decide whether the judge's remittitur was

proper here, because we affirm the $14,780 damages award that

the judge made under c. 93A. The c. 93A claim was tried to the

judge, not the jury; the c. 93A award was separate from the

jury's verdict. The judge found that the defendant violated

c. 93A, that the violation was knowing or willful, and that "the

appropriate disposition is to treble plaintiff's actual

damages." The judge was charged with setting damages on the

c. 93A claim, and was not required to follow the jury's damages

award. See Klairmont v. Gainsboro Restaurant, Inc., 465 Mass.
6

165, 186 (2013) (noting the "well-established principle" that a

judge may deviate from the jury's factual findings when

determining c. 93A liability). The trial judge's order sets

forth his reasoning that $14,780 -- the unreimbursed portion of

the security deposit -- was the proper amount of damages.

Indeed, in his order the judge stated that the case was tried on

the theory that damages were a "sum certain" of $14,780, and the

judge also held as a matter of law that the damages amount could

not be reduced based upon any damage that the tenant allegedly

caused to the leased property, because the landlord had not

complied with the terms of the lease as to any such reduction.

Furthermore, a damages award of $14,780 is plainly valid under

c. 93A, and well supported by the record.2

2. The finding of c. 93A liability.3 In its reply brief,

the defendant argues that the conduct at issue could not violate

c. 93A, as a matter of law. According to the defendant, this

2 The defendant argues that the trial judge never made a
damages award under c. 93A, and instead "was trebling the actual
damages awarded by the jury (as 'remitted')." That is not a
reasonable reading of the judge's findings and order. As noted,
the judge concluded his c. 93A discussion by stating, "[T]he
appropriate disposition is to treble plaintiff's actual damages"
(emphasis added). The judge then awarded $44,340, meaning that
the judge's award of "actual damages" was $14,780.

3 We accept the trial judge's findings of fact on the c. 93A
issue absent clear error, but review his applications of law de
novo. Kuwaiti Danish Computer Co. v. Digital Equip. Corp., 438
Mass. 459, 470 (2003).
7

case presents "nothing more than a good faith dispute . . . over

the amount due under a commercial lease." The defendant posits

that any misrepresentations it may have made about the return of

the security deposit are irrelevant, because they were not used

to try to extort "some concession from [Exhibit Source]."

This argument was not made in the defendant's opening

brief, and accordingly we need not consider it. See Mass.

R. A. P. 16 (a) (4), as amended, 367 Mass. 921 (1975); Fafard v.

Conservation Comm'n of Barnstable, 432 Mass. 194, 195-196

(2000). Nevertheless, it is worth noting that the argument is

well wide of the mark. The defendant does not challenge any of

the trial judge's factual findings. Those findings include (1)

that the defendant deliberately strung the plaintiff along for

seven months, representing that it would return the security

deposit when it had "no intention" of doing so; (2) that the

reasons the defendant ultimately gave for not returning the

deposit were "manufactured" -- that is, a pretext, and (3) that

the defendant knew that, as a result of its actions, the

plaintiff would need to hire a lawyer and to incur legal fees,

and that such was part of the defendant's strategy to "wear out"

the plaintiff, in hopes that it would cease its pursuit of the

deposit or accept less in settlement.

These factual findings comfortably establish a violation of

c. 93A. That statute makes unlawful "[u]nfair methods of
8

competition and unfair or deceptive acts or practices in the

conduct of any trade or commerce." G. L. c. 93A, § 2 (a). The

statute does not define "unfair or deceptive acts or practices."

While a breach of contract alone does not qualify, we have said

that "[t]o be held unfair or deceptive under c. 93A, practices

involving even worldly-wise business people do not have to

attain the antiheroic proportions of immoral, unethical,

oppressive, or unscrupulous conduct, but need only be within any

recognized or established common law or statutory concept of

unfairness." VMark Software, Inc. v. EMC Corp., 37 Mass. App.

Ct. 610, 620 (1994).

The trial judge's findings here went well beyond

"recognized" "concept[s] of unfairness." This was not a dispute

over the application of a contract, but rather was a considered

and intentional exercise of control over the plaintiff's

property -- a strategy employed in the hope that the property

could be, ultimately, taken by the defendant without right to do

so.

3. The award of treble damages and attorney's fees. The

defendant also mounts two arguments directed against the trial

judge's award of treble damages and attorney's fees. First, the

defendant argues that treble damages are precluded by a

limitation of liability clause in section 17.2 of the lease,

which states:
9

"In no event will Landlord be liable for punitive damages,
lost profits, business interruption, speculative
consequential or other such damages."4

The limitation of liability clause does not aid the

defendant here. In Standard Register Co. v. Bolton-Emerson,

Inc., 38 Mass. App. Ct. 545 (1995), this court similarly

considered whether a limitation of remedies clause in a

commercial contract applied so as to preclude remedies otherwise

available under c. 93A. We held that the applicability of such

a contract provision depends upon whether the c. 93A claim

sounds more in contract, or in tort: "[A] chapter 93A claim

analogous to a tort-based recovery overrides any contractual

defenses, whereas a § 11 claim founded on a contract theory is

subject to a contractual limitation of remedies provision." Id.

at 549. We went on to hold in Standard Register that the "core"

of the plaintiff's claim was based upon misrepresentations the

defendant made as to its ability to provide the product it was

offering. Id. at 550. We concluded that this conduct sounded

in tort; it was "deceitful," and "distinct" from the facts

underlying the plaintiff's contract claim. Id.

4 There is a threshold issue whether multiple damages under
c. 93A would qualify as "punitive damages . . . [or]
consequential or other such damages." We assume that they do,
without deciding.
10

Applying the Standard Register test, we have no difficulty

concluding that the plaintiff's c. 93A claim here sounds

predominantly in tort. As described above, the judge's

uncontested findings are that the defendant undertook a course

of action (and inaction) designed to result in the wrongful

conversion of the plaintiff's property.5 Those actions violate

well established legal norms that are independent of the

parties' contract.

The defendant's second argument for avoiding the treble

damages award, as well as the award of attorney's fees, is that

it made "reasonable offers of settlement," which the plaintiff

rejected. Specifically, the defendant points to (1) an offer of

$6,000, which it made around the time the complaint was filed on

May 6, 2014; (2) an offer of $14,780, which it made on June 20,

2014, some twenty days after it filed its answer; and (3) an

offer of $22,000, which it made on August 7, 2014. The trial

judge rejected the defendant's argument that it made a

reasonable offer of settlement, and we agree.

Chapter 93A, § 11, provides, in pertinent part:

"The respondent may tender with his answer in any such
action a written offer of settlement for single damages.

5 Although our conclusion that the plaintiff's c. 93A claim
sounds in tort is supported by the jury's verdicts on the
common-law claims of misrepresentation and conversion, it is not
dependent upon, or dictated by, those findings. Rather, we
review the trial judge's decision as to the gravamen of the
c. 93A claim in light of the trial judge's findings.
11

If such tender or settlement is rejected by the petitioner,
and if the court finds that the relief tendered was
reasonable in relation to the injury actually suffered by
the petitioner, then the court shall not award more than
single damages." (Emphasis added.)

The defendant did not tender any offer of settlement with

its answer. Leaving aside the $6,000 offer (which the trial

judge found was not reasonable), the other two offers were made

well after the answer was filed, and after the plaintiff had

engaged in additional litigation. The defendant's latter two

offers did not comply with the statute's plain language. See

Auto Flat Car Crushers, Inc. v. Hanover Ins. Co., 469 Mass. 813,

825 (2014).

The defendant ignores this noncompliance and argues, in

essence, that at least the $22,000 offer of settlement was

reasonable as a matter of law, thereby precluding a treble

damages award. The defendant argues that the $22,000 offer

exceeded the total of the plaintiff's damages and costs incurred

at the time that the offer was made. And although the plaintiff

by that time had also incurred attorney's fees that likely would

not be reimbursed in full by the $22,000 offer, the defendant

argues that under the case law such incurred attorney's fees

cannot be considered when evaluating the reasonableness of a

c. 93A settlement offer, relying in particular on Kohl v. Silver

Lake Motors, Inc., 369 Mass. 795 (1976).
12

The defendant cites no case holding that a court is

required to limit a c. 93A award to single damages based upon a

settlement offer that was not made until after the defendant

filed its answer. Such an argument is inconsistent with the

statute's plain language. The judge no doubt can consider a

settlement offer made post-answer when exercising his discretion

as to whether to award multiple damages.6 International Fid.

Ins. Co. v. Wilson, 387 Mass. 841, 857 (1983) (noting that "the

conduct proscribed by the statute is as much the failure to make

a reasonable settlement offer as it is the substantive violation

of c. 93A"). In that context, however, the judge's decisions as

to whether a violation was "willful or knowing" and whether to

award multiple damages may take into account a variety of

relevant facts, including in particular the degree of the

defendant's culpability as well as what settlement offers were

made. See id. at 856-857.

Here the trial judge did not abuse his discretion in

awarding treble damages and in refusing to reduce such damages

due to the defendant's settlement offers. He concluded that

none of the offers was reasonable at the time it was made, as

the offers, while increasing, always fell short of providing the

6 Under c. 93A, § 11, if the court finds a "willful or
knowing violation," it "shall" award "up to three, but not less
than two . . . times" the actual damages.
13

plaintiff with the relief it was reasonably likely to achieve by

continuing on with the litigation it had been forced to bring,

and had tried to avoid. In this context, once litigation had

commenced in earnest and the plaintiff had been forced to incur

significant attorney's fees, there was no error in considering

that the settlement offers did not provide for reimbursement of

attorney's fees incurred as a result of the defendant's unfair

practices.7 Nothing in the Kohl decision is to the contrary.

The November 21, 2017, amended judgment of the Appellate

Division is affirmed.

So ordered.

7 The plaintiff has requested reasonable attorney's fees
incurred on this appeal. Such an award is appropriate in this
case under c. 93A. Twin Fires Inv., LLC v. Morgan Stanley Dean
Witter & Co., 445 Mass. 411, 433 (2005). The plaintiff may file
with this court an application for fees and costs, together with
supporting materials, within fourteen days of the date of the
rescript of this opinion. See Fabre v. Walton, 441 Mass. 9, 10
(2004). The defendant shall have fourteen days thereafter to
respond. The plaintiff's request for double costs is denied.