Into the Storm: Willful Or Knowing 93A Conduct Overcomes Contracts

Background. The highest court of Massachusetts, the Supreme Judicial Court, has just issued a transformative decision affecting business versus business disputes. The Court’s decision was aided by an amicus brief filed by Michael Gilleran of FisherBroyles, LLP. The decision provides that the Massachusetts Chapter 93A law, which prohibits unfair and deceptive trade practices, and provides for awards of up triple damages as well as attorneys’ fees, can in certain circumstances overcome contractual limitation of liability clauses. Attorney Gilleran has for many years been the author of a leading treatise, including updates, on the Chapter 93A law. Attorney Gilleran’s treatise is published by largest legal publisher, Thomson Reuters Westlaw.

The Decision. The case is titled H1 Lincoln v. South Washington Street. More specifically the Supreme Judicial Court held in H1 Lincoln that a defendant who willfully or knowingly engaged in an unfair or deceptive breach of a contract would be liable under Chapter 93A. Thus, a Chapter 93A claim can now overcome contracts. But then the Court went even further in holding that the Chapter 93A claim would still prevail even if the contract contained a limitation of liability clause. Such clauses could include express and agreed disclaimers of liability for actual, consequential, and punitive damages, even presumably 93A damages themselves.

Likely New Rule. The Supreme Judicial Court issued this decision while also expressly stating that “an intentional breach of contract alone was not enough to constitute” a 93A violation. So, the new liability rule under 93A hereafter probably looks something like this: breach of contract + intentional conduct + some tort including deception, leverage or coercion. This is a momentous change despite the fact that the Supreme Judicial Court issued its own partial disclaimer.

Problem for Business Defendants. No business defendant can any longer rest on the assurance that its contractual limitation of liability clause will protect it when a dispute arises. And it has lost protection most especially when its own non-performance was strategic and willful, a time when it most wants protection. Any business defendant will need the highest legal expertise to navigate in this new environment.

Going Forward. There will now be a storm of new 93A claims based on alleged willful contract breaches. Lower courts will now have the job of deciphering whether those willful breaches translate into valid 93A claims. Chapter 93A now – almost – swallows contracts.