Boston Pilots v. Motor Vessel Midnight Gambler & East Coast Excursions, Inc.

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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