From left: Mansooruddin Ahmed and Karen L. Nowicki
Counsel for developers and contractors often incorporate “limitation of liability” clauses when drafting contracts for private development projects in Massachusetts. Recently, the Supreme Judicial Court provided further guidance concerning whether an advance release of such claims is a valid defense to an action brought pursuant to M.G.L. c. 93A § 11. H1 Lincoln, Inc. v. S. Washington St., LLC, 489 Mass. 1 (2022).
In H1 Lincoln, Inc., the court analyzed whether a waiver clause that generally immunized a landlord from “any speculative or consequential damages caused by the landlord’s failure to perform its obligations under [the] Lease” applied to an M.G.L. c. 93A claim filed by the landlord’s commercial tenant. Id. at 5. A long-term lease had been executed that allowed the tenant to develop a car dealership on the landlord’s property. The court ultimately found that where the landlord committed commercial extortion and made fraudulent misrepresentations, the lease’s limitation of liability clause did not bar recovery of the tenant’s claims for consequential damages under M.G.L. c. 93A, § 11 because such conduct was “willful and knowing.”
The court refocused on the policies underlying M.G.L. c. 93A, § 11, not on prior distinctions between whether the claims asserted sounded in tort or contract. The landlord’s limitation of liability clause was not enforceable because a defendant should not be allowed to “immunize itself in advance from liability for unfair or deceptive conduct that is done willfully or knowingly….” H1 Lincoln, Inc. v. S. Washington St., LLC, 489 Mass. 1, 26 (2022). These circumstances would “do violence” to the public policy protected by G.L. c. 93A. Id. This public policy consideration still applies even where the parties are sophisticated commercial entities familiar with the rough and tumble world of commerce. Id. at 26.
This “refocusing” on willful or knowing violations recognizes that M.G.L. c. 93A “ties liability for multiple damages to the degree of the defendant's culpability by creating two classes of defendants.” H1 Lincoln, Inc. v. S. Washington St., LLC, 489 Mass. 1, 26 (2022) n. 16 quoting Int'l Fid. Ins. Co. v. Wilson, 387 Mass. 841, 853 (1983). Defendants who breach M.G.L. c. 93A through “relatively innocent violations” are not liable for multiple damages, but the parties who have committed “willful or knowing” violations should not be protected by waiver/release clauses. Id.
Therefore, while counsel for developers and contractors may still incorporate such waivers of liability into their contracts, these waivers will not limit liability for knowing and willful violations of M.G.L. c. 93A.
Mansooruddin Ahmed is an associate at the law firm of Lane McNamara LLP. His practice areas include construction and employment law.
Karen L. Nowicki is an associate at the law firm of Lane McNamara LLP. Her practice areas include construction law, suretyship, trial practice and civil litigation.