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June 4, 2013

Legal Update
William L. Boesch

Massachusetts court rules on regulatory violations and Chapter 93A

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The Massachusetts Supreme Judicial Court has decided an important case on liability under the state’s consumer-protection statute, Chapter 93A. In Klairmont v. Gainsboro Restaurant, Inc., which involved the death of a college student after he fell down a flight of stairs at a bar, the court upheld a trial judge’s finding of Chapter 93A liability, even though her finding on causation conflicted with that of the jury in the same case. But the SJC but reversed most of the trial judge’s damages award, and made clear that the case was exceptional in that “not all building code violations—indeed very few—will give rise to violations of ch. 93A,” a clarification of the law that may prove to be the decision’s most important feature.

The Case

The plaintiffs in Klairmont sued the owners of the bar and building where the accident occurred under the Massachusetts wrongful-death statute and Chapter 93A. The stairway violated the building code in several respects, and a regulation issued by the state attorney general provides that any failure to comply with a regulation “meant for the protection of the public’s health, safety or welfare” is a violation of Chapter 93A.

The jury, asked to resolve the wrongful-death claim, agreed that the owners violated the building code and were negligent, but found no causation. No one had witnessed the accident, and the jury apparently concluded that it was impossible to know whether the condition of the stairway caused the student’s fall.

It was then left to the trial judge to decide the Chapter 93A claim. In Massachusetts state court, the judge has discretion in choosing whether to submit the Chapter 93A claim to the jury for findings of fact, to submit the claim to the jury for a non-binding advisory decision, or to reserve for herself all aspects of the claim.

The Klairmont judge reserved the Chapter 93A claim for herself. She issued a decision in which she agreed with the jury on the building-code infractions, and held that they constituted violations of Chapter 93A. But the judge rejected the jury’s finding on causation: she concluded that the connection between the condition of the stairs and the accident had indeed been established.

The judge awarded approximately $2.2 million in actual damages, which she then trebled based on her finding that the violations of Chapter 93A were willful and knowing. She added attorneys’ fees and costs, for a total award of approximately $9 million. The owners appealed.

Not All Code Infractions Violate Chapter 93A

The SJC upheld the trial judge’s finding that the owners violated Chapter 93A. They had owned the building for more than twenty years, had constructed the stairway without a permit and with its multiple code violations (absence of an entry door, proper lighting, or adequate handrails), and over the ensuing years had repeatedly and consciously avoided further permitting obligations and ignored complaints that the stairway was unsafe.

The court made clear that it was this conduct, which clearly qualified as “unfair or deceptive” and occurring in “trade or commerce” as required by Chapter 93A, that made imposition of liability appropriate. A defendant’s violation of the building code by itself— even violation of provisions meant for the protection of public health or safety, in the words of the attorney general’s regulation—would be insufficient for 93A liability unless “the conduct leading to the violation is both unfair or deceptive and occurs in trade or commerce,” something that must be determined based on the circumstances of an individual case. A merely negligent infraction of the code would not violate Chapter 93A. And indeed, in the court’s view, “very few” code infractions would qualify, because most “would lack the unfairness or deceptiveness present in this case,” or would not occur in “trade or commerce.”

Trial Judge’s Independent Finding on Causation Upheld; Damages Calculus Reversed

The SJC agreed with the trial judge that under the established principles governing a judge’s discretion in deciding Chapter 93A claims, she was entitled to make an independent finding on causation, and to reach a conclusion opposite to the jury’s. The court also agreed that the plaintiffs (the parents of the deceased student) were in theory entitled to damages under Chapter 93A—but only as representatives of their son’s estate.

Since the son died two days after the accident without regaining consciousness, since the trial judge had found the evidence of conscious pain and suffering during the fall too speculative, and since, the SJC held, allowing the parents to recover for loss of the son’s consortium and future earnings would be inconsistent with the jury’s denial of the parents’ wrongful-death claim, the recoverable damages (and the basis for treble damages under Chapter 93A) would be limited to medical and funeral expenses.

Defendant Liable for Attorneys’ Fees Despite Debatable Causation

While Chapter 93A entitles a successful plaintiff to recover his attorneys’ fees, a timely and reasonable written settlement offer by the defendant will cut off the right to fees. The owners had offered $75,000, but the trial judge found the offer unreasonable in light of their knowledge of the seriousness of the case and of their code violations. The SJC upheld this finding—without addressing the fact that, given the jury’s unchallenged subsequent finding on causation, it was surely reasonable for the owners to conclude that they would win the case on this basis, and that a minimal settlement offer was appropriate. The SJC did, however, note that the amount of the fee award ($2.1 million) would likely have to be reduced on remand to correlate to the revised recovery.

Significance

The SJC’s clarification of the law on the effect of regulatory violations in Chapter 93A cases is significant beyond the context of the building code. In product liability cases, for example, plaintiffs frequently invoke Chapter 93A based on another regulation stating that a breach of warranty, including the implied warranty of merchantability which is the basis for all product-defect claims in Massachusetts, is an automatic violation of Chapter 93A. Defendants in such cases, and in other analogous matters, will now have reason to argue that more is required—a showing that their particular conduct was actually unfair or deceptive.

For more information, please contact William L. Boesch or your attorney contact at SRBC.

This Alert was prepared for the clients and friends of Sugarman, Rogers, Barshak & Cohen, P.C. It is provided for educational and informational purposes only and is not a substitute for professional advice on your specific legal situation.

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