Supreme Judicial Court Holds Limitation Of Liability Provisions Unenforceable For Willful Or Knowing Violations Of Consumer Protection Act

Issue May/June 2022 June 2022 By Robert F. Callahan Jr. and Jeremiah E. Light
Complex Commercial Litigation Section Review
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From left: Robert F. Callahan Jr. and Jeremiah E. Light

In H1 Lincoln, Inc. v. South Washington Street, LLC, 489 Mass. 1 (2022), the Supreme Judicial Court (SJC) of Massachusetts made it clear that defendants who willfully or knowingly violate Massachusetts General Laws Chapter 93A will find no protection in limitation of liability provisions. The ruling clarifies the law on when limitation of liability provisions are enforceable to preclude damages for violations of Chapter 93A.

H1 Lincoln involved a commercial lease agreement where the tenant sought to build and operate a car dealership. Tensions between the parties escalated after the tenant purchased an adjacent parcel that the landlord also sought to acquire. When the tenant sought to develop the parcel, the landlord threatened to withhold approval for the site plan and prematurely terminate the lease to coerce the tenant into selling the parcel to the landlord. This conduct prompted the tenant to sue the landlord for breach of contract and violations of Chapter 93A. The trial court found the landlord liable for several willful and knowing violations of Chapter 93A and awarded the tenant double damages.

On appeal before the SJC, the landlord asserted that the limitation of liability provision in the lease agreement shielded it from “any speculative or consequential damages,” including Chapter 93A damages. The SJC rejected the landlord’s argument, unanimously holding that limitation of liability provisions “will not be enforced to protect defendants who willfully or knowingly engage in the unfair or deceptive conduct prohibited by the statute.”

In holding that limitation of liability provisions are unenforceable where defendants act willfully or knowingly, the SJC departed from the standard previously employed by Massachusetts courts. In the seminal 1990 decision, Canal Electric Co. v. Westinghouse Electric Corp., 406 Mass. 369 (1990), the SJC held that a party could contractually waive Chapter 93A remedies where a Chapter 93A claim is merely duplicative or an alternative theory of recovery for the same wrong underlying a breach of contract claim. In Canal, which involved a breach of warranty claim that also served as the predicate wrong for the Chapter 93A claim, the SJC also found that the commercial nature of the particular dispute did not affect the public interest and public policies of Chapter 93A.

In a 1995 decision, Standard Register Co. v. Bolton-Emerson, Inc., 38 Mass. App. Ct. 545 (1995), the Appeals Court developed a bright-line test for enforcing limitation of liability provisions in the Chapter 93A context. Drawing on Canal and its own precedent, the Appeals Court held that limitation of liability provisions were unenforceable against Chapter 93A claims “analogous to a tort-based recovery,” but enforceable as to Chapter 93A claims “founded on a contract theory.” In Standard Register, the Appeals Court refused to enforce a limitation of liability provision against a Chapter 93A claim founded on misrepresentations separate from the breach of contract claim.

With this backdrop, the SJC in H1 Lincoln “refocused” the enforcement of the limitation of liability provisions in the Chapter 93A context back “on the policies underlying the statute and the distinctions drawn within the statutory scheme.” The SJC noted that “the Legislature intended to deter and severely punish — not to condone — defendants who willfully or knowingly engaged in unfair or deceptive acts.” The SJC then turned to the dispute at hand and affirmed the award of double damages based on the trial court’s finding that the landlord willfully violated Chapter 93A.

By having Massachusetts courts focus on whether defendants willfully or knowingly violate Chapter 93A, the SJC’s ruling bars enforcement of limitation of liability provisions that “would do violence to the public policy protected by the statute” and allow commercial parties to willfully and knowingly conduct themselves beyond the acceptable “rough and tumble” of the marketplace.

Robert F. Callahan Jr. is an associate in the Boston office of Robins Kaplan LLP. His national practice focuses on trial and appellate advocacy in the areas of intellectual property and complex commercial litigation. Callahan is also a graduate of the Massachusetts Bar Association’s Leadership Academy.

Jeremiah E. Light is a J.D. candidate at Boston University School of Law (expected May 2022), and a law clerk at Robins Kaplan LLP.