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SJC Limited Liability Decision Leaves the Massachusetts Business Community Pondering Future Impacts

By April 26, 2022 No Comments

In January 2022, the Massachusetts Supreme Judicial Court (SJC) rendered a unanimous decision that will have long-lasting implications for the Massachusetts business community. The decision has consequences for any company who conducts business which implicates Massachusetts law, specifically M.G.L. c. 93A. Businesses outside of Massachusetts whose conduct or relationship bring them into the Commonwealth may also fall under the purview of Chapter 93A and be implicated by the SJC’s decision.

On January 24, 2022, the SJC issued a ruling that directly curtailed the enforceability of limitation of liability provisions in the context of willful or knowing violations of Massachusetts General Law Chapter 93A. In H1 Lincoln, Inc. v. S. Wash. St., LLC, the SJC concluded as a matter of public policy 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 [Chapter 93A].” 489 Mass. 1, 2-3 (2022). (HI Lincoln, Inc. decision.)

The background to this decision is a broad statute (Chapter 93A) that inhibits unfair and deceptive business practices. In the instant case the conduct in question was between businesses which is covered by Section 11 of the statute (Section 9 deals with consumers). The courts have ruled many times on Chapter 93A matters over the years and this decision has taken a distinctly new direction. The SJC was very clear that limitation of liability clauses that protect defendants who willfully and knowingly engaged in unfair or deceptive practices in violation of Chapter 93A are not enforceable.

The SJC court cited “public policy” as a deciding factor in its decision. This is a deliberate departure from the previous enforceability test that the Appeals Court in Standard Register Co. v. Bolton-Emerson, Inc., 38 Mass. App. Ct. 545, 549 (1995), developed which used the distinction between contract and tort law as a basis for the test of applying Chapter 93A. Instead of referring to the claim, which might be either a tort or contract issue, the SJC recommended focusing on the defendant’s conduct (as opposed to the type of claim). The court advocated this approach as a way of upholding the deterrent aspect of the law

The court has called upon those deliberating over these matters in the future to ask whether the violations of Chapter 93A were “willful and knowing” “unfair and deceptive conduct” that the law intends to protect against. The SJC decision intends to uphold the law as a deterrent of willful and knowing violations of Chapter 93A, rather than be overly permissive about the freedom of businesses to allocate risk within their contracts. Thus, in cases like H1 Lincoln, Inc. v. S. Wash. St., LLC, where a commercial landlord was found liable for willfully and knowingly using unfair tactics to break a commercial lease to “extort” additional benefits from a commercial tenant who intended to start a car dealership, double damages were awarded.

The most obvious result of this decision is that the defendants will be under extra pressure to prove that their conduct was not willfully and knowingly unfair and deceptive. The Massachusetts business community, however, is left to wonder where to draw the line between actionable conduct in violation of Chapter 93A, and conduct labeled by the SJC as “relatively innocent” violations of Chapter 93A that do not trigger the public policy considerations of Chapter 93A. Businesses should continue to pursue allocation of risk between their contracting parties, so long as the eventual violations, if any, are not willfully or knowingly unfair or deceptive.

At Pakrooh Law we are experienced business litigators who work with businesses who are facing litigation or are entering into a business deal that needs thorough contract review with consideration of the latest legal precedents. If you are entering into a business deal with a Massachusetts company or if you are facing litigation over breach of contract or claims of violations of Chapter 93A, we will be there every step of the way to advise you on that deal or advocate for your best interests.