United States Court of Appeals
For the First Circuit
No. 08-2393
MARILYN KUNELIUS,
Plaintiff, Appellant,
v.
TOWN OF STOW; THE TRUST FOR PUBLIC LAND;
CRAIG A. MACDONNELL, in his individual capacity,
Defendants, Appellees,
A PARTNERSHIP OF UNKNOWN NAME BETWEEN
TOWN OF STOW AND THE TRUST FOR PUBLIC LAND,
Defendant.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. George A. O'Toole, Jr., U.S. District Judge]
Before
Torruella, Lipez and Howard,
Circuit Judges.
Michael C. McLaughlin for appellant.
Richard A. Oetheimer, with whom Dahlia S. Fetouh and Goodwin
Procter LLP, were on brief, for appellees The Trust for Public Land
and Craig A. MacDonnell.
Deborah I. Ecker, with whom Deidre Brennan Regan and Brody,
Hardoon, Perkins & Kesten, LLP, were on brief for appellee Town of
Stow.
November 9, 2009
HOWARD, Circuit Judge. Similar to other states,
Massachusetts provides tax relief to landowners of agricultural,
horticultural or forest land. When such land is converted to other
uses, the Commonwealth requires landowners to compensate their
respective municipalities. The compensation may be take the form
of, for example, payment of a conveyance tax when the land is sold,
or payment of roll-back taxes if the land otherwise ceases to
qualify for preferential tax treatment. In addition to these tax
features, Massachusetts law also provides that once a landowner
decides to sell the land for other than agricultural,
horticultural, or as relevant here, forest uses, the municipality
is entitled to a right of first refusal ("ROFR"). Mass. Gen. Laws
ch. 61. This ROFR provides the municipality with a 120-day period
in which to meet a bona fide offer to purchase the land. The
municipality thus has the right but not the obligation to preserve
salutary land uses by purchasing land that the landowner desires to
sell, and the landowner receives the compensation that a willing
buyer in an arm's-length transaction is prepared to pay.
In this case, plaintiff-appellant Marilyn Kunelius
accepted a bona fide offer to purchase a parcel of land, which
included acreage that had been certified under Mass. Gen. Laws ch.
61 as forest land. Pursuant to the statute, the Town of Stow chose
to exercise its ROFR. In addition, the Town assigned this right,
as also permitted by the statute, to the Trust for Public Land
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("TPL" or "Trust"), a nonprofit conservation organization. From
the beginning, it was clear that a number of circumstances had to
align in a precise constellation for the Trust and the Town to
consummate the transaction. Despite potential difficulties with
the transaction, the Town and TPL nevertheless went through with
the assignment of the ROFR. The Trust's optimistic hopes for
obtaining private philanthropy, state grants, and local zoning
relief, however, were not fulfilled. As a result, the Town and the
Trust failed to complete the transaction. In the interim,
Kunelius's previous buyer chose to develop other land.
Conceding that it had breached its obligations under its
contract with Kunelius, the Trust paid liquidated damages in the
amount specified in the purchase and sale contract that had been
negotiated between Kunelius and her original buyer. Kunelius,
however, believing that she was entitled to significantly more,
brought suit in the district court. The complaint sought several
species of relief, including the invalidation of the liquidated
damages clause, specific performance or full contract damages,
remedies for the Town and Trust's breach of the covenant of good
faith and fair dealing, relief under the business-to-business
provisions of Chapter 93A, and relief under the Contracts Clause of
the United States Constitution. On cross-motions for summary
judgment, the district court granted summary judgment to all of the
defendants: the Town, the Trust, an alleged partnership between
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the Town and Trust, and Trust employee Craig MacDonnell. Kunelius
now appeals.
I. Background
By and large, the facts are not in dispute, but to the
extent that they are, we recite them in the light most favorable to
the non-moving party, here, the appellant. See Essex Ins. Co. v.
BloomSouth Flooring Corp., 562 F.3d 399, 401 (1st Cir. 2009);
CoxCom, Inc. v. Chaffee, 536 F.3d 101, 108 (1st Cir. 2008).
A. The Original Transaction
Beginning in 2001, Kunelius sought to sell her horse farm
located at 142 and 144 Red Acre Road in Stow, Massachusetts. The
land abuts two conservation areas, the Red Acre Woods conservation
area and the Captain Sargent conservation area, and it sits atop
the Town's largest aquifer. The total land area of this parcel is
approximately 50.67 acres, 42.1 acres of which had been designated
as forest land since 1985, pursuant to Mass. Gen. Laws ch. 61 § 2.
Upon the remainder of the parcel (approximately 8.57 acres) sit a
main house and a caretaker's house, as well as the accouterments of
a horse farm, including a paddock, barn, and other improvements.
In mid-2002, Kunelius entered into negotiations with
Cohousing Resources LLC ("Cohousing"), a consulting company based
in the state of Washington that assists local communities in
forming and developing co-housing projects. Co-housing projects
like the one Cohousing contemplated here place an emphasis on open
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space and communal living. Because Cohousing requires the groups
on whose behalf it undertakes development to commit to a certain
threshold level of funding before Cohousing becomes involved,
Cohousing's projects have a relatively high probability of coming
to fruition. Through extensive negotiation and personal contact,
Kunelius, her attorney and her real estate agent came to trust
Cohousing and its principal representative, Chris ScottHansen. As
a result, Kunelius was comfortable offering terms to Cohousing that
she may not have offered to another counterparty.
Cohousing's initial offer was for a purchase price of
$1.1 million, with a deposit of $50,000 to be held in escrow
pending closing. In this first signed offer, the only contingency
was an evaluation of the property's suitability for the eventual
construction of a thirty-unit development. The offer contained a
provision that permitted the seller to select from a range of
remedies in the event of the buyer's breach:
Upon default by Buyer, Seller, at its sole
option, may (i) retain the deposit as
liquidated damages as its sole remedy, or (ii)
repay the deposit to the Buyer and
subsequently enforce this Agreement and pursue
any and all remedies available at law or
equity, including an action for specific
performance and damages.
This offer was not accepted, and negotiations continued.
Cohousing's next offer was for the same purchase price, but
contemplated that Kunelius would provide substantial seller
financing. In addition, the deposit amount was reduced to only
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$10,000 up front and a payment of $1,500 per month thereafter. The
record suggests that the monthly payment was to replace Kunelius's
horse farm income, because her customers would likely look
elsewhere to board their horses. After a period for the
feasibility study, Kunelius was free to make use of the deposits.
This revised offer also specifically contemplated the
probability that Cohousing would file an application for relief
from local zoning requirements, invoking the streamlined approval
process for affordable housing set forth in Chapter 40B of the
Massachusetts General Laws. See Mass. Gen. Laws ch. 40B §§ 20-23.
In view of the anticipated approval process, the time for closing
on this offer was approximately two years.
At Kunelius's request, this revised offer, although
written to include all of her property, contemplated the
possibility that "a significant portion of the undeveloped
land . . . not to exceed 42 acres may be encumbered by or deeded to
the Town of Stow," and that this encumbrance or transfer was to
occur after all 40B approvals had been made and before closing.
The upshot of this feature was to allow Kunelius to receive any tax
credit for the transfer or encumbrance.1 Finally, the liquidated
1
The record reflects that Kunelius intended to donate the 42.1
acres of forest land to the Town. We need not speculate about her
reasons for structuring her affairs in the way that she did, rather
than attempting to sell only the 8.57 acres in a transaction
separate from the contemplated land donation. See Mass. Gen. Laws
ch. 61 § 8 (2001) (providing that only land taxed under Chapter 61
is subject to the right of first refusal); see also Town of Sudbury
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damages provision in Cohousing's revised offer remained the same as
in the prior offer.
Although Kunelius did not accept the second offer,
negotiations continued, and the parties eventually reached an
agreement. The terms of the contract, which was drafted by
Kunelius's attorney, diverged in several ways from previous offers.
The slightly increased purchase price was to be paid in the same
fashion as before, with Kunelius holding a note for a portion of
the price. The time for performance was set at September 26, 2003,
although Cohousing had the opportunity to extend this period for a
year if "the Chap. 40B approval process is proceeding forward."
Among other changes were the inclusion of at least two
references to the possibility of the Town exercising its ROFR. One
provision stated flatly that "[i]n the event that the Town of Stow
exercises its right of first refusal pursuant to Mass. Gen. Laws
ch. 61, all monies deposited hereunder shall be forthwith returned
to BUYER without further recourse by either party in equity or
law." Another change involved a clarification of Kunelius's right
to transfer that portion of her land classified as forest land:
after the 40B development was approved and the seller received all
v. Scott, 787 N.E.2d 536, 542 & n.11 (Mass. 2003) (clarifying that
Mass. Gen. Laws ch. 61A § 17 should be interpreted to allow "the
municipality to exercise its first refusal rights as to the portion
of the land that is to be separated from the remainder, when sold
or converted, as set forth in [Mass. Gen. Laws ch. 61A § 14], while
the remainder of the land may remain in c. 61A"(emphasis added)).
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"purchase monies," the seller would transfer "all right, title, and
interest in the said 42.1 acre parcel currently under [sic.] Mass.
Gen. Laws ch. 61, as a charitable contribution."
For purposes of this action, however, the most important
change between the prior offers and the signed contract was the
clause specifying the remedies available to the seller in the event
of the buyer's breach. The revised clause reads:
If BUYER shall fail to fulfill the BUYER'S
agreements herein, all deposits made hereunder
by the BUYER shall be retained by the SELLER
as liquidated damages and this shall
constitute SELLER'S sole remedy in equity and
law.
Both Kunelius and Cohousing signed this agreement sometime in
October of 2002.
B. The Town Assigns Its ROFR to TPL
Within days of signing her agreement with Cohousing,
Kunelius provided notice to the Town, and other parties required to
be notified by statute, of her intent to sell all of her 50.67
acres. Spearheaded by a group known as the Friends of Red Acre
("FORA"), which included many of Kunelius's immediate neighbors on
Red Acre Road, opposition to the proposed co-housing development
sprouted quickly. This opposition eventually focused on alleged
excess costs the Town would have to bear as the result of the co-
housing development. Urging that the Town exercise its ROFR was
one of the principal arrows in the opposition's quiver.
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By December 2002, FORA proposed an alternative to the
Cohousing's proposed development. The FORA plan provided that the
Town would contribute $100,000 from Community Preservation Act
funds and $300,000 from general town funds, as well as assign its
ROFR to a non-profit conservation group. Additional funds would be
raised by selling both homes on the property as affordable housing,
and selling the horse farm operations to Eye of the Storm, a non-
profit equine rescue organization. (These proposed sales
contemplated relief from various zoning regulations). All of the
remaining purchase price funding was to come through private
donations.
The Trust for Public Land was identified as the non-
profit conservation organization most likely to accept assignment
of the Town's ROFR. TPL expressed a strong interest in accepting
the assignment, but only if certain conditions were met. Those
conditions included the Town's appropriating $400,000 to support
the project, FORA and others raising the $22,000 in required
deposits under Kunelius's contract with Cohousing, TPL determining
that the project was feasible, and its governing board approving
the assignment. On January 13, 2003, the Town decided to borrow
and appropriate $305,000 from its general funds to support the
Town's exercise of the ROFR. (The remaining $95,000 was to come
from Community Preservation Act funds). But because the Town
wished to exempt the borrowing from the limitations of Proposition
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2 ½, see Mass. Gen. Laws ch. 59 § 21C, the vote was tentative,
pending confirmation in a Special Town Election. By a vote of 515
to 355, however, Stow voters declined to approve the project.
Undaunted, FORA and the Trust pushed ahead and convinced
the Town to extend consideration of the ROFR to the full 120-day
period specified in the statute. During that time, Craig
McDonnell, the TPL project manager for this transaction, prepared
a lengthy "Project Fact Sheet" to brief TPL's governing board on
the project and assist the board in arriving at a decision about
how to proceed. In this document, McDonnell explained that
Kunelius was planning to deed most of forest acres to the Town free
of charge, but that TPL's involvement in the project would result
in the conservation of three additional acres and provide the Town
access to a pond on the 8.57 acres that Cohousing was planning to
develop for fire suppression purposes.
As to the financing and risks of the proposal, McDonnell
noted that with the failure of the appropriation, TPL would have to
accept the assignment before the Town could replace the defeated
$300,000 appropriation with additional Community Preservation Act
funds, but that this risk was mitigated by the fact that he
believed that TPL's exposure was limited to liquidated damages in
the amount of $22,000, as provided in the contract between Kunelius
and Cohousing. (Concomitantly, with this candid private assessment
of TPL's obligations and exposure with respect to this transaction,
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McDonnell publicly made disparaging statements about developers and
touted TPL's commitment to complete the transaction and make
Kunelius "whole.") McDonnell further noted that Kunelius was upset
at the prospect of the Town assigning its ROFR to the Trust. He
suggested, however, that the litigation risk was "minimal" due to
the clarity of the liquidated damages clause, and he predicted that
the Trust would prevail on summary judgment after minimal discovery
in any suit brought by Kunelius. Eventually, TPL's governing board
approved the acceptance of the assignment, but the board
nonetheless withheld authority for TPL to close on the transaction.
Armed with this limited authority, McDonnell went ahead
with efforts to acquire an assignment of the ROFR. Without
disclosing to the Town the constraints placed on TPL, McDonnell
negotiated with the Town's Board of Selectmen regarding the terms
under which TPL would accept the assignment. By and large, the
negotiations did not reflect significant disagreement between the
Town and TPL, although TPL refused to indemnify the Town for
potential damages or defense costs in the event of potential
litigation. TPL did acknowledge that "the decided cases under
Chapter 61 do not explicitly resolve all of the potential issues
that arise when a municipality assigns its right of first refusal
to a nonprofit conservation organization, including which terms of
the underlying contract should obligate the assignee."
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At a Board of Selectmen meeting on February 11, 2003,2
days before the Town's ROFR was scheduled to lapse, the Town
assigned the ROFR to the Trust on the terms described above. At
the meeting, McDonnell gave a presentation describing the benefits
of the transaction and urged approval of the assignment, but
McDonnell did not disclose the conditions that the Trust's
governing board placed on its acceptance of the assignment. By a
vote of three to one, the Town's Board of Selectmen voted to assign
the ROFR to the Trust, which the Trust accepted in writing the next
day. In due course, Kunelius was provided with written notice that
the Town had assigned the ROFR to the Trust, which provided notice
of its acceptance.
C. The Transaction Sours
About a month later, by March 19, 2003, McDonnell was
singing a different tune. On that date, McDonnell wrote in
confidence to members of FORA, "I recently have spent some time
thinking through this project in detail . . . and have a realized
that a number of key assumptions about structure and timing are
unworkable." In an attached confidential memorandum, McDonnell
explained that the TPL would require $1.154 million at closing and
2
The day before, on February 10, 2009, The Stow Community
Preservation Committee, the body that administers Community
Preservation Act Funds, heard a joint FORA/TPL plea to use funds to
support the Trust's planned exercise of the ROFR. The Committee
voted to recommend that the Town approve the necessary expenditures
at the Town's annual meeting in May 2009.
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proposed relying on Eye of the Storm, a fledgling non-profit with
little infrastructure, to raise $400,000 either through fundraising
or a loan secured by its interest in 144 Red Acre Road before
closing. In addition, McDonnell contemplated raising $450,000
through private philanthropy prior to closing.
FORA agreed with these observations but concluded that
McDonnell's proposed fund raising timetable was overly optimistic
and urged the Trust to close with borrowed funds. To that end,
FORA arranged for a line of credit for the Trust.
McDonnell replied with another confidential memorandum
dated March 27, after the assignment but before the Town provided
any funds. In this memorandum, for the first time, McDonnell
disclosed to FORA that "TPL's national board has given only a
tentative approval to this excellent adventure we are undertaking
together. . . . We have not received the go-ahead to actually
purchase the property. Our board is awaiting progress on both the
political and fundraising fronts. Unless we secure approval at the
May town meeting and make substantial progress on the remaining
finances, I do not believe we will get national approval for this
project."3 Although McDonnell did not foreclose the possibility of
TPL's obtaining "conservation financing," he made clear that it
3
There is no indication in the record that these limitations
on TPL's authority were disclosed to Kunelius or the Town at this
time.
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would have to be limited to $600,000, the combined value of the
main house and the horse farm/caretaker's house.4
Despite these doubts with respect to the financing of the
project, the Trust, FORA, and the Town pressed onward. The Trust
and the Town applied for state aid to rehabilitate the two homes on
the Kunelius property, and prepared for the Town meeting, which was
to confirm the Town's contribution of Community Preservation Act
funds. At the meeting, the funds were approved, but this approval
marked the high-water mark of the potential transaction.
Soon thereafter, in mid-June 2003, although contrary
indications were evident even before the Trust accepted the ROFR,
it became clearer that the Trust's plan of dividing the parcel in
order to sell the two homes on the Kunelius property was unlikely
to fare well in the zoning process. In another blow to the
project, in early July 2003, the State Department of Housing and
Community Development denied the grant application to renovate the
two houses on the property. The combination of these body blows
forced the Trust to ramp up planning for abandoning the
transaction, and to that end, McDonnell wrote to TPL colleagues "I
think the most important thing about the 'exit strategy' is not to
4
In April 2003, McDonnell represented to the Massachusetts
Department of Housing and Community Development that TPL had access
to a six million dollar line of credit from a bank and would
consider using this resource, even though internal TPL discussions
suggested that TPL's governing board was unlikely to approve the
use of financing in this project.
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be seen as TPL pulling the plug, but for a consensus to emerge from
all that the project has now got some fatal flaws . . . ."
The prediction of fatal flaws proved prescient, though
some of them were of TPL's own making. Peter Christiansen, a
leader of FORA, wrote that McDonnell's conduct led him to "feel
raped," and that McDonnell had told him that TPL would neither
engage in any fundraising nor supply any fundraising prospects.
Christiansen further claimed that the Trust solicited leads that
FORA members had identified for funding of other projects. This
alleged poaching, combined with TPL's threats to pull out of the
purchase altogether, made it difficult for FORA members to harness
their relationships with potential donors. Once it appeared likely
that TPL would withdraw from the transaction, that appearance would
bode ill for FORA-members' relationships with repeat players in the
conservation world.
By July 31, 2003, the Trust informed FORA that it was
"not particularly sanguine" that the transaction could close.
Indeed, TPL unequivocally stated that only price concessions from
Kunelius, who was forced to deal with TPL by virtue of the ROFR,
could save the transaction.5 TPL then requested $350,000 in price
concessions from Kunelius, which she refused. Although TPL and
FORA continued to trade arguments about the feasibility of
5
At this time, TPL received discouraging news on the zoning
front: outside counsel advised TPL that approval of the variances
was extremely unlikely.
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financing, the project was effectively dead. TPL unilaterally
withdrew its application for a zoning variance on September 25,
2003, and did not close on September 26, 2003.
D. Proceedings Below
Although further discussions occurred between TPL and
Kunelius (sometimes with the facilitation of Town officials),
resolution proved elusive. Kunelius filed the present suit against
the Town, the Trust, an alleged partnership between the Town and
Trust, and McDonnell in his individual capacity.6
After preliminary skirmishing, including the dismissal of one count
not at issue here, and after the conclusion of discovery, the
district court granted summary judgment to all defendants.7 This
appeal timely followed.
II. Discussion
We review summary judgment rulings de novo, and the
presence of cross-motions for summary judgment does not alter or
6
On appeal, Kunelius has not advanced any developed argument
in support of her claims against McDonnell in his personal
capacity, and therefore those arguments have been waived. Pomales
v. Celulares Telefonica, Inc., 447 F.3d 79, 85 n.4 (1st Cir. 2006)
7
We note that during the pendency of discovery, all defendants
jointly filed a motion to certify a central question of this suit
to the Massachusetts Supreme Judicial Court. The defendants argued
that "there is no controlling precedent in the decisions of the SJC
or the Massachusetts Appeals Court" regarding whether a liquidated
damages clause negotiated between the owner of Chapter 61 lands and
a willing buyer should, by operation of law, become a provision
that is applicable to a municipality or non-profit conservation
organization exercising an ROFR. This motion was eventually
withdrawn, subject to renewal.
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dilute this standard. Desrosiers v. Hartford Life and Accident
Ins. Co., 515 F.3d 87, 92 (1st Cir. 2008). We will affirm entry of
summary judgment if the record -- viewed in the light most
favorable to the nonmoving party, including all reasonable
inferences drawn in favor of the nonmoving party -- discloses no
genuine issue of material fact, and the moving party is entitled to
judgment as a matter of law. Arroyo-Audifred v. Verizon Wireless,
Inc., 527 F.3d 215, 218 (1st Cir. 2008).
We apply the substantive law of the forum state, here
Massachusetts, to claims invoking the court's diversity
jurisdiction, see Citibank Global Mkts., Inc. v. Rodriguez-Santana,
573 F.3d 17, 23 (1st Cir. 2009) (citing Erie R.R. Co. v. Tompkins,
304 U.S. 64, 78 (1938)), but we of course apply federal law to the
federal claims. Where no authoritative decision from the state
court of last resort resolves an issue of state substantive law, we
must predict, as best as we can, that court's resolution of the
issue before us. Essex Ins. Co., 562 F.3d at 404 (citation
omitted). Although we have no single Polaris to guide our
prediction of the state court's resolution of such questions, we
rely on analogous cases decided in the forum state, persuasive
reasoning in cases from other states, and other secondary sources,
such as Restatements and treatises. Id. (citing Trans-Spec Truck
Serv. v. Caterpillar Inc., 524 F.3d 315, 323 (1st Cir.), cert.
denied, 129 S. Ct. 500 (2008)).
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We will first discuss the appellant's claims that the
original contract's liquidated damages provision does not apply to
the Town or to TPL, and that the liquidated damages clause is in
any event invalid. After that, we will address the Chapter 93A
claim, the claim based on the covenant of good faith and fair
dealing. Finally, we will briefly discuss Kunelius's remaining
claims.
A. Applicability of the Liquidated Damages Clause to the Town
and Trust
We begin with the question of whether the liquidated
damages clause in Kunelius's contract with Cohousing is a term that
inures to the benefit of the Trust and the Town. The district
court noted that all parties agree that TPL breached the purchase
and sale contract, but they disagree as to the proper remedy.
Kunelius sought specific performance or full benefit-of-the-bargain
damages, while the Trust claimed that Kunelius's remedy for breach
was limited to the $19,000 in deposits and monthly payments that it
had already paid and Kunelius has retained.
The district court observed, as the parties had, that it
is unclear whether Massachusetts courts would find that an exercise
of an ROFR requires the purchaser to "literally meet every last
detail of the prior offer or only the essential terms, such as, for
instance, the identity of the subject property, the price, the time
for performance and the like, but not subsidiary agreements, such
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as, for instance, mortgage contingencies, rights to inspect . . .
or pertinent to this controversy, provisions regarding remedies for
breach." Kunelius v. Town of Stow, No. 05-11697-GAO, 2008 WL
4372752 at *2 (D. Mass. Sept. 23, 2008) (footnote omitted). The
district court determined that it did not need to answer this
question because the parties agreed that the purchase and sale
agreement "set[] forth the terms of their contract." As evidence
of this agreement on the part of plaintiff, the district court
cited paragraph 58 of her complaint which states, "The P & S is a
valid and enforceable contract between Kunelius and Stow and TPL."
Id.
Unlike the district court, we are not persuaded that
Kunelius has admitted that the liquidated damages provision applied
to the Town and the Trust. Paragraph 55 of her complaint
specifically states that "The obligations of Stow and TPL under
Mass. Gen. Laws ch. 61 could not be avoided by relying on the
liquidated damage[s] clause . . . since such liquidated damage[s]
clause . . . was applicable only to Cohousing since it sought
certain permits and approvals in connection with its [Chapter] 40B
. . . Development." (emphasis added). In light of this paragraph,
we think that the complaint is best read as asserting that the Town
and the Trust's joint exercise of the ROFR, by operation of law,
obliged them to purchase the property identified in the contract at
the price stated.
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The district court is, of course, correct that the Trust
has consistently taken the position that it assumed the role of
Cohousing in the contract and that the liquidated damages provision
inured to its benefit. The plaintiff, however, claims that through
her then-counsel, she communicated to the Town attorney her belief
that the liquidated damages clause did not apply to the Town and
the Trust. Moreover, the record also reveals that the Trust, in a
communication to the Town, acknowledged that the question of which
provisions of the P & S apply to the exercisor or assignee of an
ROFR under Chapter 61 remains an open question. Ultimately,
therefore, we are satisfied that the plaintiff adequately preserved
this question below, and has properly raised it on appeal.
Ordinarily, in Massachusetts "contract interpretation is
for the court, unless disputed issues of fact bear upon the
interpretation of ambiguous language." Liberty Mut. Ins. Co. v.
Greenwich Ins. Co., 417 F.3d 193, 197 (1st Cir. 2005) (citing
Fishman v. LaSalle Nat'l Bank, 247 F.3d 300, 303 (1st Cir. 2001)).
We have explained that "judges construe contracts, if only the
words need be considered, and the jury does the job under
instructions if evidentiary issues have to be resolved." Fishman,
237 F.3d at 303 (citations omitted). Here, there are no
evidentiary questions to resolve; rather, we must decide, as a
matter of law, whether the liquidated damages provision, by
operation of law, was made applicable to the Town and the Trust.
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For the reasons that follow, we believe that the Supreme
Judicial Court ("SJC") would hold that the liquidated damages
provision inures to the benefit of the Trust and the Town.
Although there is scant case law interpreting Mass. Gen. Laws ch.
61 § 8, we may look to case law decided under the nearly
identically-worded ROFR provision of agricultural and horticultural
lands, Mass. Gen. Laws ch. 61A § 14. See Comm. v. Smith, 728
N.E.2d 272, 276 (Mass. 2000) (noting that it is most appropriate to
use construction of one statute to inform construction of another
when the two statutes relate to the same class of things or share
a similar purpose) (citation omitted).
At the time that Kunelius entered into the transaction
with Cohousing, the SJC had not decided any cases under either
statute, but that court has since decided at least two cases under
ch. 61A § 14. In Town of Sudbury v. Scott, a divided SJC, after
reviewing the various features of Chapter 61A, including the
conveyance tax, the roll-back tax, and the ROFR, held that in order
for parties to the sale of lands certified under Chapter 61A to
avoid a municipality's ROFR, the putative purchaser must not have
the intent to convert the land to non-agricultural or non-
horticultural purposes at the time of purchase. 787 N.E.2d at 544.
The court therefore vacated summary judgment in favor of the
purchaser and remanded the case for a determination of the
purchaser's intent at the time of the purchase. Id. at 546-47. In
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Town of Franklin v. Wyllie, a unanimous SJC held that a developer's
offer to purchase undeveloped land subject to Chapter 61A was bona
fide, even though the final purchase price was contingent on the
number of lots ultimately approved for development. 819 N.E.2d
943, 948 (Mass. 2005). The court went on to conclude that since
the offer was bona fide, had the Town of Franklin chosen to
exercise its ROFR it would have been obliged to determine how many
lots would be approved for development to fix the purchase price,
in order to purchase the property "on substantially the same terms
and conditions" as those struck between the non-municipal buyer and
the seller. Id. at 950 (citing Stone v. W.E. Aubuchon Co., 562
N.E.2d 852 (Mass. App. Ct. 1990)).8
8
The Massachusetts legislature has since abrogated the rule in
Wyllie, and Mass. Gen. Laws ch. 61A § 14 and C. 61 §8 now require
that in order to be "bona fide," an offer must not be "dependent on
potential changes to current zoning or conditions or contingencies
relating to the potential for or the potential extent of
subdivision of the property for residential use or the potential
for, or the potential extent of development of the property for
industrial or commercial use, made by a party unaffiliated with the
landowner for fixed consideration payable upon delivery of the
deed." St. 2006 C. 394 §§ 18, 31.
We apply the law as it was before the legislature amended it,
effective March 22, 2007. See Fleet Nat'l Bank v. Comm'r of
Revenue, 852 N.E.2d 22, 28-29 (Mass. 2007) (noting that retroactive
application of statutes adjusting substantive rights, as opposed to
remedies, is disfavored and thus the court employs a presumption
against retroactive application that it uses to resolve uncertain
cases)(citing Austin v. Boston Univ. Hosp., 363 N.E.2d 515 (Mass.
1977)); see also City of Newburyport v. Woodman, No. 309692, 2007
WL 3256964, at *3-4 (Mass. Land Ct. 2007) (noting that General
Court enacted C. 394 to overturn the decision in Wyllie, but that
this enactment was not to be applied retroactively).
-22-
Thus, neither Scott nor Wyllie addresses the precise
question at issue here. Nevertheless, the appellees make much of
the fact that in both decisions the SJC suggested more broadly that
the statutory ROFR conferred on a municipality under C. 61A § 14
and C. 61 § 8 "ripen[s] into an option to purchase according to the
terms of the offer." Wyllie, 819 N.E.2d at 949 (citing Greenfield
Country Estates Tenants Ass'n v. Deep, 666 N.E.2d 988, 993 n.14
(Mass. 1989)); see also Wyllie, 819 N.E.2d at 949 ("There is no
indication, however, that the Legislature intended that a
municipality's 'first refusal option' to purchase would encompass
the right to purchase such land on different terms and conditions
than [those] set forth in the 'bona fide offer.'" (emphasis added)
(citing Scott, 787 N.E.2d at 544 n. 14))). From this language, the
appellees argue that they should be obliged to take on no more risk
or offer no more certainty that their transaction would close than
Cohousing offered in its bona fide offer.
The plaintiff's position is that she was able to offer a
streamlined liquidated damages clause to Cohousing because she had
established a considerable amount of mutual trust and understanding
with ScottHansen, and because she felt comfortable that Cohousing's
development was properly financed and Chapter 40B approvals would
be forthcoming. Consequently, the argument goes, it would be
grossly unfair to give the Town and the Trust these same
concessions, particularly in light of the fact that the Trust's
-23-
ability to close was tenuous from the beginning and its statements
to the contrary were disingenuous. Embedded in this argument is
the policy concern that granting municipalities and nonprofits
added leverage to disrupt transactions involving certified land
would tilt the statutory structure too far toward the municipality
and would therefore reduce the number of landowners willing to
participate in the scheme.
These arguments are not without some appeal, although the
most obvious response is that Kunelius understood herself to be
bargaining in the shadow of the Town's ROFR. She therefore also
should have understood the desirability of accounting for the fact
that any deal she struck would be available to the Town, or to any
non-profit conservation organization to which the Town might choose
to assign the lease. She may well have been able to negotiate
terms that would have better protected her in the event that less
reliable counterparties, such as the Town and the Trust, would
become parties to this transaction. Whether or not such terms
ultimately would have protected her, we must decide the case on the
facts as they are. Despite her knowledge that the ROFR lurked in
the weeds, Kunelius in fact did not include any language in the
contract to limit her risk in the event of the exercise of the
known ROFR.
In addition to Kunelius's control over the drafting of
her contract, the cases at common law (which applies to statutory
-24-
ROFRs, see Scott, 787 N.E.2d at 543 n.12), cut against her legal
position. Most common law courts do not appear to have focused
carefully on this question, and thus have not addressed the
specific concerns that the appellant identifies, but most have
generally stated that once a seller receives a bona fide offer, the
ROFR ripens into an option to purchase the property "at the price
and otherwise on the terms stated in the offer." T.W. Nickerson,
Inc. v. Fleet Nat. Bank, 898 N.E.2d 868, 878 (Mass. App. Ct. 2009)
(quoting Frostar Corp. v. Malloy, 823 N.E.2d 417 (Mass. App. Ct.
2005) (emphasis added)); see also Gleason v. Norwest Mortgage,
Inc., 243 F.3d 130, 139 n. 5 (3d Cir. 2001) (applying Minnesota
law) (citing Allison v. Agribank FCB, 949 S.W.2d 182, 186 (Mo. Ct.
App. 1997)); Henry Simons Lumber Co v. Simons, 44 N.W.2d 726, 727
(Minn. 1950). As a result, the holder of an ROFR must have
knowledge of the terms and conditions of the entire offer so that
the holder may decide if she wishes to meet the offer. T.W.
Nickerson, 898 N.E.2d at 878 (citing Gyurkey v. Babler, 651 P.2d
928 (Idaho 1982)); see also Uno Rest., Inc. v. Boston Kenmore
Realty Corp., 805 N.E.2d 957, 962-63 (Mass. 2004); Miller v. LeSea
Broadcasting, Inc., 87 F.3d 224, (7th Cir. 1996) (applying
Wisconsin law) (noting that requirement that holder of ROFR exactly
match a bona fide offer is in fact a protection for the grantor of
the ROFR). Requiring that the holder of an ROFR have access to
-25-
such terms would serve little purpose if the holder of the ROFR
were not required to meet them.
Thus, the decisions interpreting the statutory ROFR at
issue in this case (or more precisely, its twin), as well as
decisions dealing with common law rights of first refusal more
generally, all suggest that the holder of an ROFR must meet all of
the terms and conditions of the offer, including subsidiary terms
such as the liquidated damages clause at issue here. Many courts
do, however, make an exception for immaterial terms with which the
holder of an ROFR need not comply,9 e.g., W. Tex. Transmission,
L.P. v. Enron Corp., 907 F.2d 1554, 1556 (5th Cir. 1990); John D.
Stump & Assocs., Inc. v. Cunningham Mem'l Park Inc., 419 S.E.2d
699, 705 (W. Va. 1992); Brownies Creek Collieries, Inc. v. Asher
Coal Mining Co., 417 S.W.2d 249, 252 (Ky. 1967), and even those
that do not make a materiality exception generally make three
exceptions to the rule of exact matching. First, the grantor can
waive exact matching by agreeing that certain terms should not
apply to the holder of an ROFR. Miller, 87 F.3d at 227; see also
State Dept. of Transp. v. Providence and Worcester R.R. Co., 674
A.2d 1239, 1243-44 (R.I. 1996) (state, acting pursuant to a
statutory ROFR, did not void the ROFR by pointing out that seller
9
Alternatively, these courts permit the exercise of an ROFR
even if there are insubstantial variations between the bona fide
offer and the holder of the ROFR's offer, which is essentially the
same thing. See Miller, 87 F.3d at 226.
-26-
was not required to undertake onerous action that would have been
required had the bona fide offer been accepted). Second, it is of
course clear that the names of the parties will not exactly match
the proper names contained in the bona fide offer when the holder
of an ROFR exercises it. Miller, 87 F.3d at 227; Providence and
Worcester R.R. Co., 674 A.2d at 1243-44 (noting that name of buyer
should be changed to "the state"). Finally, courts will relax the
rule of perfect matching in the presence of bad faith. Wyllie, 819
N.E.2d at 949 n. 8; Miller, 87 F.3d at 228 (citing Or. RSA No.6,
Inc. v. Castle Rock Cellular of Or., L.P., 76 F.3d 1003, 1007 (9th
Cir. 1996)). Aside from these exceptions, however, most courts
hold that the terms of the bona fide offer become binding on the
holder of an ROFR. This authority persuades us that the SJC likely
would adopt a similar rule.
In an argument faintly reminiscent of the third exception
noted above, the appellant asserts that the Trust acted in bad
faith such that the Trust should not be entitled to rely on the
liquidated damages provision. As examples of that bad faith, the
appellant points to the Trust's unwillingness to allow her to make
a charitable donation of the 42.1 acres, its refusal to proceed
under Chapter 40B, and its attempt to lower the purchase price.
While declining to proceed with a Chapter 40B application was
entirely proper, the Trust's other actions may suggest the
possibility of a violation of Chapter 93A, a breach of the implied
-27-
covenant of good faith and fair dealing, or the Trust's
anticipatory breach of its contract with the appellant (the first
two of which we address later, and the last being a cause of action
that has not found much hospitality under Massachusetts law, see
generally Daniels v. Newton, 114 Mass. 530 (1874)). We fail to
see, however, in what way these action support an argument for
varying the terms under which the Trust could accept the contract.
Accordingly, this argument does not disturb our conclusion that the
liquidated damages provision applies to the Trust and the Town.
B. Validity of the Liquidated Damages Provision
Having determined that the liquidated damages provision
of Kunelius's contract with Cohousing formed a part of her
relationship with the Town and the Trust, we turn to her argument
that the provision is nevertheless invalid. In Massachusetts,
whether a liquidated damages clause is valid and enforceable is a
question of law, and therefore we review the issue de novo. NPS
LLC v. Minihane, 886 N.E.2d 670, 673 & n.5 (Mass. 2008). Although
it was once unsettled, it is now clear that in Massachusetts, the
party resisting the enforcement of the liquidated damages provision
bears the burden of persuasion. Id. (citing TAL Fin. Corp. v. CSC
Consulting, Inc., 844 N.E.2d 1085, 1092 (Mass. 2006)); see also
Honey Dew Assocs., Inc. v. M&K Food Corp., 241 F.3d 23, 27 (1st
Cir. 2001).
-28-
Massachusetts courts have long accepted contracts with
liquidated damages provisions, particularly those involved in the
purchase and sale of real estate. Kelly v. Marx, 705 N.E.2d 1114,
1116 (Mass. 1999). Generally, a contract containing a provision
awarding liquidated damages to the seller of real property in the
event of a buyer's breach will be enforced so long as "at the time
the agreement was made, potential damages were difficult to
determine and the [liquidated damages provision] was a reasonable
forecast of damages expected to occur." Perroncello v. Donahue,
859 N.E.2d 827, 831 (Mass. 2007) (quoting Kelly, 705 N.E.2d at
1115). Under this rubric, Massachusetts courts have specifically
eschewed the "second look" approach and evaluate both of these
factors only at the time of contract formation. Kelly, 705 N.E.2d
at 1116. Nevertheless, liquidated damages clauses will not be
enforced if they provide for an amount that is "'grossly
disproportionate to a reasonable estimate of actual damages' made
at the time of contract formation." Id. (quoting Lynch v. Andrew,
481 N.E.2d 1383, 1386 (Mass. App. Ct. 1985).
Interestingly, most cases challenging liquidated damages
provisions do so on the theory that overly large liquidated damage
awards impermissibly function as a penalty.10 See, e.g., NPS LLC,
10
There are good reasons to wonder whether worrying about
whether liquidated damages take on a penal aspect is wise as a
matter of contract law or economic policy. See generally, Charles
J. Goetz and Robert E. Scott, Liquidated Damages, Penalties, and
the Just Compensation Principle, 77 Colum. L. Rev. 554, 556 (1977)
-29-
886 N.E.2d at 673. In this case, the appellant complains that the
liquidated damages provision was inadequate because it vastly
underestimated her damages and therefore functions as a penalty
against her.11
This theory is relatively novel, and the weight of
authority is against it. E.g., Margaret H. Wayne Trust v. Lipsky,
846 P.2d 904, 910 (Idaho 1993); Mahoney v. Tingley, 529 P.2d 1068,
1070-71 (Wash. 1975) ("Except where extraordinary circumstances are
involved such as fraud or serious overreaching by the purchaser, a
seller who chooses to utilize the device of liquidated damages in
an earnest money agreement . . . cannot avoid the effect of that
agreement."); see also Nasco Inc. v. Pub. Storage, Inc., No. 92-CV-
12731-RCL, 1995 WL 337072 (D. Mass. May 20, 1995). Nevertheless,
it appears that in Kelly, and the cases decided thereafter, the SJC
has left open the possibility that a liquidated damages clause will
be set aside if it grossly overestimated or underestimated a
(arguing that uncritical application of the penalty doctrine
"frequently induces a costly reexamination of the initial
allocation of risks and may also deny the non-breaching party
either adequate compensation for the harm caused by the breach or
the opportunity to insure more optimally against such harm").
11
In this regard, we note that the record suggests that the
current, less favorable liquidated damages provision was not
included among Cohousing's original offers but was made a part of
the agreement that Kunelius's attorney ultimately drafted. While
this fact is not dispositive of her claim, it is clear that the
appellant was not stuck with this clause as the result of an
adhesion contract, and the record further suggests that the
appellant did not arrive at this particular clause due to a
substantial inequality in bargaining power.
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party's damages at the time of contract formation. See Kelly, 705
N.E.2d at 1116 (liquidated damages provision will not be enforced
if it provides for an amount "grossly disproportionate to a
reasonable damages made at the time of contract formation"); Howard
v. Wee, 811 N.E.2d 1050, 1052 (Mass. App. Ct. 2004) (noting that
$1,000 in liquidated damages was not "unreasonably low," but not
questioning that unreasonably low liquidated damages can be set
aside under Kelly).
We must therefore determine whether the liquidated
damages provision at issue in this case was, as a matter of law,
grossly disproportionate to a reasonable estimate of the damages
Kunelius would incur in the event that the sale of her $1.16
million property was not successful.12 Massachusetts courts have
held that an earnest money deposit of 5% of the purchase price in
a contract for the purchase and sale of real estate is reasonable
as a matter law. Kelly, 705 N.E.2d at 1117; see also NRT New
England, Inc. v. Moncure, 24 Mass. L. Rptr. 599, 2008 WL 4739794,
at *5 (Mass. Super. 2008); Old Oxford Realty Partners LLC v. Shea,
No. 305754, 2005 WL 1323110, at *5 (Mass Land Ct. 2005). Although
we have found one reported decision in which a Massachusetts court
12
In order to uphold the liquidated damages provision, we also
need to conclude that Kunelius's damages were difficult to measure
at the time of contract formation. In light of the Kelly court's
observation that such damages are often hard to value in
transactions involving the purchase and sale of real estate, this
is an easy threshold to clear.
-31-
blessed a lower amount of liquidated damages, it was in a factual
circumstance that differs materially from this case. In Howard,
the court of appeals found that liquidated damages in the amount of
$1000 was not "unreasonably low" considering that this amount was
to cover damages incurred over a period of about eleven days. 811
N.E.2d at 1052.
Here, Kunelius was to receive $19,000 in liquidated
damages.13 This amount is approximately 2% of the total purchase
price of $1.16 million, obviously less than the 5% that
Massachusetts courts have upheld. But Kunelius failed to produce
evidence or argue in the district court that the 2% liquidated
damages clause was "grossly disproportionate" to a reasonable
estimate of her actual damages at the time of contract formation,
and therefore, this argument has been waived. CoxCom, Inc., 536
F.3d at 110 n.11. As a result, like the district court we too must
13
The Town and the Trust had six months to close. Closing had
to occur on or before September 26, 2003 because the contract term
granting an extension of the closing date was contingent on the
"Chap. 40B approval process . . . proceeding forward." Although it
could be argued that the pertinent time of contract formation for
purposes of evaluating the liquidated damages clause was the time
Kunelius negotiated the bona fide offer, evaluating the propriety
of the damages clause at the time the Trust exercised its
assignment is not a "second look" in the classic sense, because it
was at that point that the Trust accepted the contract, and an
agreement was formed between Kunelius and the Trust. See T.W.
Nickerson, Inc., 898 N.E.2d at 878. Rather, a second look occurs
when a court evaluates the propriety of a damages provision at the
time of breach. See Kelly, 705 N.E.2d at 1116 (explaining that
under a so-called "second look" analysis, a court looks to the
actual damages resulting from the breach) (emphasis added).
-32-
conclude that the liquidated damages provision is enforceable in
this case.
C. The Chapter 93A Claim
The appellant also presses a claim under the business-to-
business provisions of the consumer protection statute, Mass. Gen.
Laws ch. 93A, § 11. It is helpful here to review briefly the
structure of the Massachusetts consumer protection statute.
Section 2 of this statute prohibits unfair and deceptive acts and
practices, see Mass. Gen. Laws ch. 93A § 2(a), and sections 9 and
11 provide consumers and "businessmen" with private causes of
action to enforce this prohibition. Id. §§ 9, 11; see also Lantner
v. Carson, 373 N.E.2d 973, 975-76 (Mass. 1978).14
In order for a defendant to be liable under the statute
for damages from unfair or deceptive practices, the transaction at
issue must have occurred in the conduct of "any trade or commerce,"
see Mass. Gen. Laws ch. 93A §§ 9, 11, which the statute defines as
including "the advertising, [or] offering for sale . . . of
14
We note that appellant's complaint did not specify whether
she was proceeding under the consumer or business protection
provisions of Chapter 93A. At summary judgment, counsel for the
appellant specified for the first time that she was proceeding
under the business-to-business provisions. We note that had the
plaintiff proceeded on the consumer prong of Chapter 93A, summary
judgment for the defendants would have been appropriate because the
plaintiff did not serve the defendants with a demand letter as
required by that section. See Mass. Gen. Laws ch. 93A § 9.
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[selling] any property . . . real, personal, or mixed." Id.
§(1)(b). Recognizing the potentially broad ambit of this statute,
the SJC, relying on the statute's creation of a separate cause of
action for "businessmen" who are harmed by unfair and deceptive
practices, has made clear that "the proscription in [Mass. Gen.
Laws ch. 93A § 2] of 'unfair or deceptive acts or practices in the
conduct of any trade or commerce' must be read to apply to those
acts or practices which are perpetrated in a business context."
Lantner, 373 N.E.2d at 976.
In interpreting section 11, Massachusetts courts have
looked not only at whether defendants were sufficiently involved in
trade or commerce to be held liable under the statute, but also at
whether plaintiffs were engaged in trade or commerce. This
distinction is important because Massachusetts courts have
understood that the private rights of action found in sections 9
and 11 are mutually exclusive. Frullo v. Landenberger, 814 N.E.2d
1105, 1112 (Mass. App. Ct. 2004) (citing Divenuti v. Reardon, 637
N.E.2d 234, 239 (Mass. App. Ct. 1994)); see also Milliken & Co. v.
Duro Textiles, LLC, 887 N.E.2d 244, 259 (Mass. 2008) (noting that
ch. 93A § 11 is only available after satisfaction of dual threshold
inquiries of whether a transaction was commercial in nature, and
whether the parties to the transaction were engaged in trade or
commerce "such that they were acting in a business context")
(citing Linkage Corp. v. Trs. of Boston Univ., 679 N.E.2d 191, 206-
-34-
07 (Mass. 1997))). Thus, in order for Kunelius to move past the
threshold on her Chapter 93A claim, she must show (1) that the sale
of the entire parcel, including her home and a horse farm, was a
commercial transaction, and (2) that both she and the Trust were
engaged in trade or commerce, such that this transaction occurred
in a business context.
It is true that the Massachusetts courts have held that
Chapter 93A does not "reach strictly private transactions such as
the isolated sale of a private home." Begelfer v. Najarian, 409
N.E.2d 167, 175 (Mass. 1980). In that case, the court noted that
whether an isolated transaction takes place in a "business context"
must be determined from the circumstances in each case, such as the
frequency of similar transactions, the motivation behind the
transaction, and the role of the participant in the transaction.
Id. at 176. The SJC has made clear, however, that a commercial
transaction need not "take place only in the ordinary course of a
person's business or occupation before its participants may be
subject to liability." Id.
Considering these factors, the record can be read to
support, at least in the summary judgment posture of this case, an
inference that the sale of the property was a commercial
transaction. Whether a party is engaged in trade or commerce is a
question of fact, see Feeney v. Dell Inc., 908 N.E.2d 753, 770
(Mass. 2009), and thus our review on summary judgment is de novo,
-35-
with all inferences drawn in favor of the non-movant (here, the
plaintiff). The record includes testimony from the appellant's
real estate agent that he met Kunelius as a result of the need to
move his horses to her farm. He further testified that as of May
24, 2007, the date of his deposition, his horse remained boarded on
the appellant's property. The agent testified that Kunelius agreed
to permit Cohousing (and eventually the Trust) to substitute a
$50,000 deposit for a $10,000 deposit plus monthly payments of
$1,500 to replace income she feared she would lose because "her
boarding tenants would begin to leave" once they learned that her
horse farm was for sale.15 This evidence, combined with Kunelius's
own affidavit stating that she rented stalls for horses on her
property, harvested firewood, and was the barn manager, could
permit a reasonable factfinder to conclude that Kunelius was not
merely selling her home, but her business and the principal source
of her livelihood.
Massachusetts courts have held that the sale of a
business or substantially all of the assets of a business can be a
commercial transaction subject to the proscriptions of Chapter 93A.
Rex Lumber Co. v. Acton Block Co., Inc., 562 N.E.2d 845, 850 (Mass.
App. Ct. 1990). In Rex Lumber, the defendant, Acton Block Co.,
15
The agent testified that he paid the appellant about $250 per
month to board his horse at her farm. Thus, the record supports
the inference that appellant likely received payment for boarding
five horses at her farm at the time she entered the contract.
-36-
proposed to sell the land and building on which its former
business, which had been discontinued for two years, had once
operated, in order to fund the retirement of the defendant's owner.
Id. at 846. The appeals court nonetheless held that the
transaction was a commercial one made in a business context, under
Lantner and Begelfer, despite the fact that it was not made in the
ordinary course of business. Rex Lumber, 562 N.E.2d at 850. Thus,
while it is a close question, we believe that at this summary
judgment stage it is possible to conclude that the sale of
appellant's horse farm and other property, from which she derived
significant income, was a commercial transaction. Similarly, there
is enough evidence in the record to support the conclusion that
Kunelius was engaged in trade or business with respect to the
transaction in which she disposed of all of the assets that she
harnessed to produce her income, and fund her retirement, if Rex
Lumber is good law. Therefore, the district court was on shaky
footing in determining that Kunelius was not engaged in trade or
commerce generally or with respect to this particular transaction.
Relying on our authority to affirm the decision of the
district court on any basis made manifest in the record, States
Res. Corp. v. The Architectural Team, Inc., 433 F.3d 73, 80 (1st
Cir. 2005) (citing Uncle Henry's, Inc. v. Plaut Consulting Co., 399
F.3d 33, 41 (1st Cir. 2005)), the Trust urges that summary judgment
was appropriate because the Trust was not engaged in trade or
-37-
commerce, based on its status as a nonprofit corporation.16 We
agree. In Massachusetts, a defendant's nonprofit status is not
dispositive of whether it can be liable under Chapter 93A. Compare
Linkage Corp. v. Trs. of Boston Univ., 679 N.E.2d 191, 207 n.34
(Mass. 1997) (noting that Massachusetts courts have held nonprofit
corporations liable under Chapter 93A) (citing Miller v. Risk Mgmt.
Found. of the Harvard Med. Insts., Inc., 630 N.E.2d 304 (Mass. App.
Ct. 1994))), with Poznik v. Mass. Med. Prof'l Ins. Ass'n., 628
N.E.2d 1, 3-4 (Mass. 1994) (holding that MMPIA was not engaged in
trade or commerce because of its character as a "statutorily
mandated, nonprofit association" that was "motivated by legislative
mandate not business or personal reasons" (citing Barrett v. Mass.
Insurers Insolvency Fund, 592 N.E.2d 1317, 1319 (Mass. 1992))), and
All Seasons Servs., Inc. v. Comm'r of Health and Hosps. of Boston,
620 N.E.2d 778,779-80 (Mass. 1993) (finding that hospital operated
by Boston Board of Health and Hospitals, a municipal entity, was
16
The district court dismissed the Chapter 93A claim against
the Town because the Town assigned the ROFR to the Trust and never
became a party to the appellant's contract with the Trust.
Kunelius, 2008 WL 4372752 at *4 n.7. The appellant has not
challenged this ruling on appeal and it is therefore waived. Stamp
v. Metro. Life Ins. Co., 531 F.3d 84, 88 (1st Cir. 2008). The
district court, however, did not have occasion to determine whether
a partnership between the Town and the Trust existed because it
found that any such partnership was entitled to summary judgment
for the same reasons that the Trust was entitled to summary
judgment. Kunelius, 2008 WL 4372752 at *1 n.1, *5. As we, like
the district court, conclude that the Trust was entitled to summary
judgment on this count, we need not decide whether any such
partnership existed because it too would be entitled to summary
judgment.
-38-
not engaged in trade or commerce when it sought bids for operation
of vending machines and canteen facility, as this operation was
incidental to its charitable mission of providing medical
services).
Determining whether a nonprofit defendant is beyond the
reach of Chapter 93A is a "fact-specific . . . inquiry," but a
nonprofit defendant will not be considered engaged in trade or
commerce when it "undertakes activities in furtherance of its core
mission." Linkage Corp., 679 N.E.2d at 209. Nevertheless, when
"an institution's business motivations, in combination with the
nature of the transaction and the activities of the parties,
establish a 'business context' as contemplated in [Begelfer v.
Najarian, 409 N.E.2d 167 (Mass. 1980)], G.L. c. 93A will apply
because the institution has inserted itself into the marketplace in
a way that makes it only proper that it be subject to rules of
ethical behavior and fair play." Id.
In view of its conclusion that Kunelius was not engaged
in trade or commerce, the district court did not evaluate whether
the Trust was so engaged. In our view, the record viewed in the
light most favorable to Kunelius, nonetheless requires the
conclusion that TPL, undisputably a not for profit organization,
was acting in pursuit of its core nonprofit charitable mission of
preserving and conserving land. The fact that it planned to
purchase Kunelius's property, renovate both houses, and resell one
-39-
or possibly both of them on the open market was merely a means to
an end, and not intended to turn a profit -- like a hospital
providing limited commissary services -- and therefore not
actionable under Chapter 93A. See All Seasons Servs., Inc., 620
N.E.2d at 780. In that vein, we note that even in its commercial
transactions, the Trust planned to promote its core charitable
mission of land conservation by including conservation covenants
that ran with the parcels it sold on the open market. Thus, while
it may be true that the record supports an inference that the Trust
acted sharply in its dealings with Kunelius, the SJC has
nonetheless made clear that where a nonprofit defendant is acting
in furtherance of its core mission, Chapter 93A is not designed to
reach such conduct. Accordingly, summary judgment as to this count
was properly granted to the Trust, the Town, and a partnership
between the Town and Trust, if any such partnership existed.
D. Covenant of Good Faith and Fair Dealing
The district court found that the plaintiff did not plead
a violation of the covenant of good faith and fair dealing in her
complaint, but instead raised it for the first time in connection
with cross motions for summary judgment. Kunelius, 2008 WL 4372752
at *1 n.2. The appellant argues that her complaint sets forth
sufficient facts to state a claim for breach of the covenant and
that the summary judgment record permits the inference that the
covenant was breached; therefore, she should be permitted to pursue
-40-
this claim. In support of this argument, Kunelius cites a number
of Massachusetts cases explaining Massachusetts state pleading
standards, but as we are in federal court, federal pleading
standards apply. Jerry Smith and Jeffrey Parness, 2 Moore's Fed.
Practice § 8.04[1][A] at 8-23 (3d ed. 2007); see also In re Tower
Air, Inc., 416 F.3d 229, 236-38 (3d Cir. 2005) (noting that
district court mistakenly applied heightened requirements for state
notice pleading standard in federal case).
In federal court, when a plaintiff raises a claim for the
first time in response to a summary judgment motion, it is possible
to treat the claim as a motion to amend the complaint under Rule
15(a) of the Federal Rules of Civil Procedure. Sover v.
Hattiesburg Pub. Sch. Dist., 549 F.3d 985, 989 n.2 (5th Cir. 2008).
The plaintiff, however, made no such argument to the district court
and has not advanced one here. Therefore, we need not linger over
this question. See Cook v. Gates, 528 F.3d 42, 62 n.13 (1st Cir.
2008); Nieves-Vega v. Ortiz-Quiñones, 443 F.3d 134, 137 n.1 (1st
Cir. 2006) (finding that claim raised for the first time at oral
argument is, at best, forfeit). In any event, it was not likely an
abuse of discretion -- and certainly not plain error -- for the
district court to deny such a circuitous request for an amendment
after summary judgment motions had been docketed. See Brooks v.
AIG SunAmerica Life Assur. Co., 480 F.3d 579, 590 (1st Cir.
2007)(noting that party urging amendment of complaint at the
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eleventh hour to fend of summary judgment must demonstrate that the
proposed amendments are supported by the record) (citing Adorno v.
Crowley Towing & Transp. Co., 443 F.3d 122, 126 & n.3 (1st Cir.
2006))); but see González-Pérez v. Hosp. Interamericano de Medicina
Avanzada, 355 F.3d 1, 5-6 (1st Cir. 2004) (declining to find that
district court abused discretion in permitting defendant to
interpose timeliness defense supported by the record for the first
time at summary judgment). Consequently, we affirm the district
court's refusal to consider the appellant's claim for relief under
the covenant of good faith and fair dealing. We express no opinion
whether this claim would have been meritorious if adequately pled,
but we note that the covenant of good faith and fair dealing is
implied in every contract, including those involving rights of
first refusal. Uno Rests., Inc., 805 N.E.2d at 964.
E. Remaining Claims
In addition to these claims, the appellant has advanced
a number of others, accusing the Town and the Trust of fraud and
misrepresentation, intentional interference with her contractual
relations with Cohousing, and through 42 U.S.C. § 1983, a violation
of the Contracts Clause of the U.S. Constitution. We have reviewed
these claims and find them to be without merit.
1. Fraud and Misrepresentation
As to the fraud and misrepresentation claim, the district
court correctly noted that Kunelius had produced enough evidence to
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permit an inference that TPL misrepresented both its ability and
intent to purchase the property. Kunelius, 2008 WL 4372752 at *6.
The court, however, also correctly concluded that Kunelius did not
prove her reliance on any material misrepresentations made by the
Trust. The appellant's brief on appeal identifies no legally
cognizable reliance. Accordingly, summary judgment was appropriate
as to that count.
2. Intentional Interference with Contractual Relations
Kunelius's argument on appeal regarding the intentional
interference claim is that it was "erroneous for the [district
court] to apply the more traditional intentional interference
requirements, as the [district court] did in the instant case."
The appellant has cited no case law or other indication that the
SJC would modify these causes of action in her favor to account for
the wrinkle of the statutory ROFR. Accordingly, we, like the
district court, are powerless to modify them. We discern no error
in the district court's application of the traditional standards
for intentional interference with contractual relations in this
case, see Kunelius, 2008 WL 4372752 at *5 (citing Draghetti v.
Chmielewski, 626 N.E.2d 826, 868 (Mass. 1994)), and therefore that
decision is affirmed.
3. Contracts Clause Claim
In perhaps her most ambitious and overreaching claim,
Kunelius claims that Mass. Gen. Laws ch. 61, § 8 impermissibly
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impairs a contractual obligation and therefore violates the
Contracts Clause of the U.S. Constitution. U.S. Const. art. I, §
10 cl. 1. ("No state shall . . . pass any . . . Law impairing the
Obligation of Contracts."). We need not grapple with the question
of whether a violation of the Contracts Clause is actionable under
§ 1983, or as the district court did, with whether the Trust's
actions constituted state action, because we conclude that under
the circumstances of this case the exercise of the ROFR, even with
the Trust's subsequent default, was not a violation of the
Contracts Clause.
It has long been understood that the seemingly absolute
prohibition in the Contracts clause "must be accommodated to the
inherent police power of the State 'to safeguard the vital interest
of its people.'" Energy Reserves Group v. Kan. Power & Light Co.,
459 U.S. 400, 410 (1983) (quoting Home Bldg. & Loan Ass'n v.
Blaisdell, 290 U.S. 398, 434 (1934)). Therefore, as the Supreme
Court has made clear, the Contracts Clause is not implicated unless
a change in state law impairs a contractual obligation, and such
impairment is substantial. Alliance of Auto. Mfrs. v. Gwadosky,
430 F.3d 30, 42 (1st Cir. 2005). In the present case, there was no
change in state law, and further the ROFR at issue here, which
allows a municipality -- or its chosen nonprofit -- to purchase
land on the same terms as those in a bona fide offer, is not an
impermissibly substantial impairment of a contractual right, if it
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is an impairment at all. Id. (citing McGrath v. R.I. Ret. Bd., 88
F.3d 12, 16 (1st Cir. 1996) (noting that even an impairment of
contract that is substantial will be upheld if it is reasonable and
necessary to fulfill an important public purpose). Accordingly,
the grant of summary judgment as to the Contracts Clause claim was
proper.
III. Conclusion
The district court's grant of summary judgment is
affirmed.
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Kunelius v. Town of Stow
Court: Court of Appeals for the First Circuit
Date filed: 2009-11-09
Citations: 588 F.3d 1
Copy CitationsCombined Opinion