United States Court of Appeals
For the First Circuit
No. 02-1494
THE BOSTON PILOTS; ARTHUR WHITTEMORE, CAPTAIN; L.J. CANNON;
R.B. EMERY; R. STOVER; J. COLLINS; C. HOYT;
J.S. CARMODY; R.P. CUSHMAN; J.E. FRYE, JR;
R.G. CORDES; F. MORTON; G.H. FARMER,
Plaintiffs, Appellants,
v.
THE MOTOR VESSEL MIDNIGHT GAMBLER AND
EAST COAST EXCURSIONS, INC.,
Defendants, Appellees.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. George A. O'Toole, Jr., U.S. District Judge]
Before
Selya, Circuit Judge,
Coffin, Senior Circuit Judge,
and Lipez, Circuit Judge.
Michael J. Rauworth with whom Cetrulo & Capone LLP was on
brief for appellants.
Seth S. Holbrook with whom Holbrook & Murphy was on brief for
appellees.
February 10, 2004
COFFIN, Senior Circuit Judge. The Boston Pilots, an
unincorporated association of licensed marine pilots, appeal from
a ruling denying them recovery under the Massachusetts Consumer
Protection Act, Mass. Gen. Laws ch. 93A. The Pilots contend that
the effort and expense incurred in collecting pilotage fees owed by
the appellees - the marine vessel Midnight Gambler and its
operator, East Coast Excursions - stemmed from dilatory conduct by
East Coast that ran afoul of ch. 93A's proscription against "unfair
or deceptive acts or practices in the conduct of any trade or
commerce," Mass. Gen. Laws ch. 93A, § 2. Although the conduct
of East Coast is questionable, we find no clear error in the
district court's determination that such behavior does not warrant
sanction under ch. 93A.
The district court, sitting in admiralty under 28 U.S.C. §
1333, resolved the underlying fee dispute on summary judgment and
awarded fees to the Pilots in a total amount of $60,768.06. The
Pilots prevailed on two separate motions for summary judgment, the
first for fees due for pilotage services actually rendered during
August and September 1999, and the second for pilotage fees due for
October and November of that same year, when East Coast claimed the
Midnight Gambler was no longer required to carry pilots because of
a revision in the ship's tonnage.
A bench trial on the ch. 93A claim followed the second summary
judgment order, and the district court held that East Coast and the
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Midnight Gambler would not be subject to additional penalties under
the consumer protection statute. The court denied the Pilots'
claim for attorney's fees as well as other costs, expenses and
interest, allowed under Mass. Gen. Laws ch. 231, § 6F for frivolous
or vexatious litigation. The Pilots appeal these orders as well as
denial of their post-trial motion to reconsider. Neither side
appeals the judgments awarding pilotage fees.
I. Background
The dispute between the Pilots and East Coast arose over the
obligation of every foreign flag vessel of 350 tons or more to
carry a commissioned pilot while operating in Commonwealth waters.
See Mass. Gen. Laws ch. 103, § 19. According to an International
Tonnage Certificate registered with Lloyd's Register of Shipping,
the Midnight Gambler, a Panamanian flag ship that made daily
gambling cruises, weighed 372 gross tons.
The Gambler grumbled about the statutory pilotage requirement.
East Coast President Dan Teitel testified that he was surprised the
statute applied to the vessel because of its relatively small size
(109 feet in length) and the brevity of its excursions. Teitel
also noted that he was aware of no other port making such
requirements of casino vessels traveling in and out of the same
port each day, regardless of the ship's foreign flag.
Nevertheless, East Coast duly carried a pilot for each of the
Gambler's voyages in August and September 1999.
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Unfortunately, the pilot's daily fees exceeded the Gambler's
profits. Teitel contacted a Boston admiralty attorney who
suggested it might be possible to re-estimate the tonnage of the
vessel. Based on this suggestion, Teitel contacted a naval
architect, who in turn procured a "Statement of Tonnage" from the
American Bureau of Shipping.1
The parties no longer dispute the fact that the new Statement
of Tonnage, listing "regulatory tonnage" for the Midnight Gambler
at 314 tons, was never a valid replacement for the official
international tonnage certificate. Teitel, however, testified that
when he received the Statement, he did not understand - and as a
lay businessman, not an admiralty expert, could not have understood
- that this re-measured tonnage was simply hypothetical and did not
change Midnight Gambler's tonnage for purposes of the mandatory
pilotage statute. Maintaining that the vessel was no longer above
the applicable tonnage for the pilotage statute, he contacted
Captain Arthur Whittemore, then President of the Boston Pilots, and
told him the Gambler would no longer be carrying pilots.
1
The process of computing vessel tonnage is referred to as
"admeasurement." The "re-estimation" of vessel tonnage involves
admeasuring the vessel under a different set of tonnage
regulations. In the instant case, the Midnight Gambler's valid
Certificate of Tonnage was issued under international tonnage
regulations. The ABS naval engineer performed the admeasurement
for the Statement using United States regulations; because the
calculation involved a contrary to fact assumption that the Gambler
was under United States flag, the Statement could not be used to
alter the vessel's tonnage for purposes of the Massachusetts
statute.
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The Pilots, however, objected and after unsuccessfully
demanding payment for services already rendered,2 brought an action
in rem against the vessel and in personam against East Coast. As
a result, the vessel was arrested in November by the U.S. Marshal
Service. Although East Coast recovered the vessel after posting a
surety bond, it ceased operations in the face of impending
litigation.
As noted above, the district court ordered payment of pilotage
fees for the duration of the time the Midnight Gambler was in
operation. It rejected, however, the Pilots' request for damages
based on unfair conduct under ch. 93A, and also rejected claims for
attorney's fees and related costs and expenses under Mass. Gen.
Laws ch. 231, § 6F. In this appeal, the Pilots contend that
appellees' conduct warranted both damages and an award of
attorney's fees, costs and interest.
II. The Pilots' Chapter 93A Appeal
In analyzing a district court's disposition of a ch. 93A claim
following a bench trial, we review findings of fact for clear error
and conclusions of law de novo. Saint-Gobain Indus. Ceramics, Inc.
v. Wellons, Inc., 246 F.3d 64, 73 (1st Cir. 2001). While the
determination of whether a particular set of acts is unfair or
deceptive is a question of fact, "the boundaries of what may
2
East Coast paid only for the first week of pilotage fees due
for August and September.
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qualify for consideration as a ch. 93A violation is a question of
law." Commercial Union Ins. Co. v. Seven Provinces Ins. Co., 217
F.3d 33, 40 (1st Cir. 2000)(internal citations omitted).
The Pilots' claim for recovery under ch. 93A rests on two
primary grounds. First, they contend that the American Statement
of Tonnage was obtained as a pretext to evade an indisputable
statutory obligation and to delay the inevitable day of reckoning.
The Pilots argue it was inexcusable for East Coast to continue to
resist the Pilots' claims after learning that the Statement had no
validity. Second, the Pilots argue that the attempts by East Coast
to settle the case for an amount less than what was due were
tantamount to commercial extortion. The Pilots cite clear error in
the district court's factual findings that the Statement of Tonnage
was not deceptive and that East Coast lacked the ability to pay the
pilotage fees. In addition, the Pilots urge us to conclude that
the district court failed to apply the law properly.
We address first the court's factual findings and then
consider whether the alleged conduct falls within the ambit of ch.
93A.
A. Findings of Fact
The Statement of Tonnage. The district court's conclusion
that the Statement was not deceptively generated is generally
supported by Teitel's trial testimony. Teitel learned of the re-
measurement process from an admiralty attorney, suggesting that it
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was at least a plausible option. Although the American Bureau of
Shipping engineer testified that a cover letter included with the
Statement specified the measurement was merely hypothetical, Teitel
explained that only a copy of the Statement, not the cover letter,
was forwarded to him by the naval architect, who was his liaison
with the Bureau. Furthermore, Teitel testified that only after the
ship was arrested did he begin to doubt the Statement's validity.
Moreover, although East Coast's purpose in securing the Statement
was undoubtedly to circumvent a statutory obligation, we do not see
that its initial reliance on the new measurement was entirely
baseless. Though dubious, even the Pilots did not dismiss the
Statement outright; at trial Captain Whittemore admitted that there
was sufficient uncertainty surrounding its validity to warrant a
non-judicial hearing on the subject by the Pilots.
The district court's apparent acceptance of Teitel's testimony
as sincere is entitled to deference, see Deguio v. United States,
920 F.2d 103, 106 (1st Cir. 1990)("It is normally within the
exclusive province of the trier to make determinations regarding
witnesses' credibility.")(citing Anderson v. Bessemer City, 470
U.S. 564, 575 (1985)), and we thus find no clear error in the
district court's finding that the Statement was not a deceptive
act.3
3
The district court suggested that even if the Statement was
an attempted deception, it did not merit sanction under ch. 93A
because from the outset the Pilots doubted its validity. We do
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The Pilots contend that the district court's conclusion does
not dispose of the issue; even if it was not deceptive, the Pilots
argue the Statement was nevertheless an unfair pretext. We agree
that the analysis of unfairness has a somewhat different
substantive thrust than that of deception. See Cambridge Plating
Co. v. Napco, Inc., 85 F.3d 752, 769 (1st Cir. 1996)("Chapter 93A
liability may exist if the defendant's conduct falls within at
least the penumbra of some common-law, statutory or other
established concept of unfairness or is immoral, unethical,
oppressive or unscrupulous.")(internal citations omitted).
However, the evidence before the district court - namely, East
Coast's initial genuine mistake regarding the validity of the
admeasurement performed by ABS - equally supports the conclusion
that procuring the Statement was not unfair.
Inability to Pay. Teitel explained that the Gambler venture
was not turning a profit, and thus there was no money from which
the pre-September pilotage fees could be paid.4 The Pilots
countered that once a bond sufficient to satisfy the debt was
posted, there could be no defense of lack of funds. Teitel,
however, noted that the bond required only that East Coast put up
not, however, endorse the general proposition that an unsuccessful
ruse can never rise to a culpable level of deception under ch. 93A.
4
Teitel explained that East Coast, if given some time to grow
the business, expected that the venture, if free from the burden of
pilotage fees, could over the long run become profitable.
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$800 cash; the rest was secured against the boat. Throughout the
trial, Teitel stuck to his story that delayed payment was due to
lack of funds, not strategic foot-dragging.
In light of this testimony and the deferential standard of
review, we affirm the district court's findings.
B. East Coast's Conduct Did Not Violate Chapter 93A
The Pilots assert that even if the Statement of Tonnage was
not deceptive and East Coast lacked the ability to pay the full
amount of its debt, ch. 93A liability nevertheless should have been
imposed because East Coast's settlement conduct amounted to
commercial extortion. In particular, the Pilots point to East
Coast's refusal to pay coupled with repeated settlement offers
below the total amount claimed by the Pilots. The district court
disagreed, characterizing East Coast's conduct as "simple failure
to pay a debt." See, e.g., Quaker State Oil Ref. Corp. v. Garrity
Oil Co., 884 F.2d 1510, 1513 (1st Cir. 1989)(merely withholding
funds and countersuing does not give rise to liability under ch.
93A). According to the district court, East Coast's refusal to pay
the invoices was neither an effort to gain unfair advantage nor an
attempt to force an unconscionable settlement.
The precise contours of ch. 93A liability have remained
somewhat undefined, despite frequent litigation. See, e.g.,
Cambridge Plating Co., 85 F.3d at 769 ("Perhaps by design, the
dimensions of Chapter 93A liability are difficult to discern with
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precision."); Levings v. Forbes & Wallace, Inc., 8 Mass. App. Ct.
498, 503 (1979)("What is unfair is a definitional problem of long
standing, which statutory draftsmen have prudently avoided."). To
guide our scrutiny of the context and course of dealing, "we focus
on the nature of challenged conduct and on the purpose and effect
of that conduct as the crucial factors in making a G.L. 93A
fairness determination." Commercial Union Ins. Co., 217 F.3d at 40
(quoting Massachusetts Employers Ins. Exch. v. Propac-Mass, Inc.,
420 Mass. 39, 648 N.E.2d 435, 438 (1995)).
The Pilots claim that East Coast effectively sought a discount
on an indisputably due trade debt. See Arthur D. Little, Inc. v.
Dooyang Corp., 147 F.3d 47, 55-56 (1st Cir. 1998)(affirming that an
attempt to "extract a favorable settlement . . . for less than the
amount . . . owed by repeatedly promising to pay, not doing so,
stringing out the process, and forcing [the other party] to sue"
violated ch. 93A); Community Builders, Inc. v. Indian Motorcycle
Assoc., Inc., 44 Mass. App. Ct. 537, 559, 692 N.E.2d 964, 979
(1998)(finding that defendant's "foot dragging was intended to put
pressure on [plaintiff] to compromise its claim").
The context in which the settlement overtures were made,
however, is important. Each offer occurred before the district
court had rendered either of its two summary judgment orders and
was in an amount greater than what was owed for the first portion
of disputed pilotage fees, namely, those due for August and
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September services. The offers also occurred before East Coast's
concession regarding the Statement of Tonnage. Even if, at the
time the offers were made, the August and September pilotage was
indisputably due, liability for the October and November pilotage
was yet to be determined. Thus the offers were not objectively
inadequate.
In a similar vein, East Coast's refusal to pay was neither a
"wedge" to gain advantage in an on-going commercial relationship,
see Pepsi-Cola Metro. Bottling Co. v. Checkers, Inc., 754 F.2d 10,
18 (1st Cir. 1985), nor a coercive act inviting increasingly
detrimental reliance by the Pilots on hollow assurances to pay. In
both Arthur D. Little and Community Builders, relied on by the
Pilots, additional services were wrested from the aggrieved party
through such false promises. See Arthur D. Little, Inc., 147 F.3d
at 56; Community Builders, 44 Mass. App. Ct. at 559, 692 N.E.2d at
978. While East Coast bitterly resisted the Pilots' effort to
collect, it did not parlay its indebtedness into a strategic
advantage. See Framingham Auto Sales, Inc. v. Workers' Credit
Union, 41 Mass. App. Ct. 416, 418, 671 N.E.2d 963, 965 (1996)("Mere
resistance to a just claim is not the stuff of c.93A."). Although
East Coast had dropped its reliance on the Statement of Tonnage by
the time the court heard oral argument on the Pilots' first motion
for summary judgment, it continued to pursue its defense on other
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grounds, including the method of calculating fees and the Pilots'
standing.
The Pilots rely heavily on R.W. Granger & Sons, Inc. v. J&S
Insulation, Inc., 435 Mass. 66, 754 N.E.2d 668 (2001), in which a
surety company was found to have violated ch. 93A by resisting an
already adjudicated claim and making a "manifestly inadequate"
offer of settlement. 435 Mass. at 72, 754 N.E.2d at 676. The
district court distinguished Granger in a footnote, explaining that
in that instance, liability was in part predicated on violations of
Mass. Gen. Laws ch. 176D, which prescribes a standard of conduct
for insurance companies.
The Pilots correctly point out that Granger also affirms ch.
93A liability on grounds independent of ch. 176D. The Granger
court, however, relied on conduct that occurred after judgment had
been entered against the surety. As noted above, East Coast's
settlement offers preceded the liability rulings. Although in
retrospect, East Coast's likelihood of success was slim, we decline
to override the trier's findings of fact and use this as the basis
for a ch. 93A violation. See Quaker State Oil Ref. Corp., 884 F.2d
at 1514 ("Whether or not the counterclaims now appear futile,
Garrity had the right to test them through litigation.").
The Pilots fare no better by relying on Anthony's Pier Four,
Inc. v. HBC Assoc., 411 Mass. 451, 583 N.E.2d 806 (1991). In
Anthony's Pier Four, a developer relied on what appeared to be
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objective approval by the real estate owner of both the terms of
the contract and changes to the development plan made over the
course of the project. Millions of dollars and years of effort
were suddenly endangered when the owner willfully breached the
contract because he "'made a lousy deal' . . . 'and . . . had to
get more money to be satisfied.'" Anthony's Pier Four, 411 Mass.
at 460, 583 N.E.2d at 814. Though the Pilots attempt to argue that
East Coast engaged in a similarly reprehensible manner, we do not
agree. The distinction rests in part on a matter of degree. The
harm suffered in cases relied on by the Pilots was compounded by
deceptive or unfair behavior that prevented - or at a minimum
diverted - the injured parties from seeking immediate redress. See
also Arthur D. Little, 147 F.3d at 51 ("Dooyang repeatedly promised
to pay the outstanding . . . invoices, though it had no intent to
do so."); Community Builders, Inc., 44 Mass. App. Ct. at 557
("Rubin, at the time he signed the June, 1987, agreement with GBCD,
had no intention of paying GBCD the fees to which Rubin was
committing.").
While we think East Coast's behavior treads close to the line
between a sharp-edged business tactic and an unfair subterfuge, we
ultimately conclude that application of the law to the facts as
found by the trial court does not give rise to liability under ch.
93A.
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III. Motion for Costs, Expenses and Interest under
Mass. Gen. Laws ch. 231, § 6F
The district court summarily denied, without opinion, the
Pilots' motion for interest, costs and expenses, including
attorney's fees, under Mass. Gen. Laws ch. 231, § 6F. Section 6F
permits recovery if "all or substantially all" of a party's claims
or defenses are "wholly insubstantial, frivolous and not advanced
in good faith." Appeal is provided for under Mass. Gen. Laws ch.
231 § 6G, which directs the reviewing court to examine the finding
and award, if any, "as if it were initially deciding the matter."
See Hahn v. Planning Bd. of Stoughton, 403 Mass. 332, 336, 529
N.E.2d 1334, 1337 (1988)(reviewing de novo an appeal of a motion
made under § 6F).
The Pilots ground their motion on East Coast's opposition to
the Pilots' summary judgment motions, charging that reliance on the
Statement of Tonnage was a meritless defense. We think, however,
that East Coast was entitled to test its theory through the summary
judgment phase.5 Aside from the mistaken reliance on the Statement
of Tonnage, East Coast disputed the calculation of fees, the
Pilots' standing, and the ability of the Pilots to recover the
October and November fees based on the Pilots' own threats to
withhold services owing to the outstanding debt for August and
5
We note that East Coast did not appeal the district court's
summary judgment orders, which almost certainly would have been a
vexatious extension of this litigation.
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September pilotage. Though ultimately unavailing, East Coast's
efforts were supported by a marginally colorable foundation and
thus not wholly insubstantial or frivolous.
We reach a similar conclusion on the issue of good faith. In
Massachusetts, good faith implies "an absence of malice, an absence
of design to defraud or to seek an unconscionable advantage."
Hahn, 403 Mass. at 337, 529 N.E.2d at 1331. We agree with the
district court that the conduct here does not reflect malicious or
fraudulent malfeasance that justifies an award under § 6F. See
Police Comm'r of Boston v. Gows, 429 Mass. 14, 19, 709 N.E.2d 1126,
1129 (1999)("An award of attorney's fees should be reserved for
rare and egregious cases."). Moreover, for reasons similar to our
conclusion that East Coast did not pursue a strategy of commercial
extortion, see infra at 9-12, we also conclude there was no effort
to seek unconscionable advantage.
Affirmed. Each party shall bear its own costs.
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