Opinion
No. 97-637-F
April 28, 2000
In their second amended complaint, the plaintiffs allege that all the defendants except George W. Moore, Inc. ("Moore, Inc.") have violated the Massachusetts Civil Rights Act, G.L.c. 12, § 11I (Count II) and the Massachusetts Consumer Protection Act, G.L. c. 93A, § 11 (Count III), and have intentionally interfered with their contractual and advantageous relations with Moore, Inc. (Counts VII and Count VIII). Since there were substantial and difficult factual and legal issues regarding the plaintiffs' damages if they were to establish liability, this Court bifurcated the trial in this action, focusing first on issues of liability. All parties waived their right to a jury trial and agreed to have all matters decided by the Court. The bench trial as to liability began on March 22, 2000 and concluded on March 31, 2000.
Count One, alleging violations of the Anti-SLAPP statute, G.L.c. 231, § 59H, was earlier dismissed by the Court. All parties agree that Counts IV, V, and VI, which complain about Moore, Inc. and Goffe, Inc.'s alleged failure to remove certain property from the premises at 110 Beaver Street, are properly severed from this action. Count IX seeks the imposition of a constructive trust and was deemed a claim for damages rather than a separate basis for liability.
The liability phase of the trial itself posed substantial and difficult issues of fact and law. As described in far greater detail below, the defendant Goffe, Inc. purchased from Moore, Inc. a Promissory Note in the principal amount of $850,000 granted by the defendant Trustee of the 110 Beaver Street Trust, as well as the Mortgage on 110 Beaver Street in Waltham that secured that Promissory Note. Goffe, Inc. subsequently caused foreclosure proceedings to be initiated that resulted in the forced sale of 110 Beaver Street. The plaintiffs contend that the defendants' primary motivation in purchasing that Note and causing the foreclosure was to pressure the plaintiffs into dismissing legal challenges they had made to the defendants' construction of a shopping center on nearby property. The defendants insist that they possessed no such motivation and simply pursued a good business deal. This Court will first make findings as to the conduct and intent of the defendants, and will then determine the equally difficult legal issues regarding whether the alleged conduct, if proven, constitutes statutory and common law violations as alleged.
Since all counts against Moore, Inc. have been severed from this action, this Court will use the term "defendants" to refer to all the named defendants except Moore, Inc.
Findings of Fact
The Duffy Companies
The defendants Norman Duffy and Robert Duffy are principals of the various Duffy Companies, often referred to as Duffy Associates, which include, among other related entities, the defendants Duffy Brothers Management, Co. and Goffe, Inc. The Duffy Companies are closely-held, indeed family-owned, private corporations. Norman and Robert are brothers and each own 25 percent of these companies; the other 50 percent is owned in equal shares by James Duffy (a third brother) and Joan Duffy (their sister-in-law — wife of their deceased brother, and mother of the defendant Kevin Duffy).
Since Joan Duffy was not active in the business, this Court will often refer to the owners as the Duffy Brothers.
The Duffy Companies began in 1962, when the brothers began building single family homes. By the 1980's, they began to build and develop commercial properties. In the 1990's, armed with abundant cash, confidence, and nerve, they focused on the purchase of distressed properties, especially properties with environmental problems that were routinely denied financing by cautious financial institutions.
In 1973, the Duffy Brothers purchased a substantial amount of contaminated property previously owned by the Shell Oil Company on Waverly Oaks Road in Waltham. They have since constructed three mixed use commercial buildings on this property. In 1984, they purchased additional land on Waverly Oaks Road, which was separated from the property they bought in 1973 by the Shell Tank Farm, land still owned by Shell that housed large oil storage tanks. In 1989, they bought a thin, irregularly shaped swath of land adjoining the railroad tracks that lay in back of the Shell properties. They later developed this land by constructing buildings offering less expensive warehouse and research and development space. In February 1996, they linked these three properties by purchasing the Shell Tank Farm. This property had substantial environmental contamination which needed to be remediated before new development could begin on this property.
The Proposed Development of 313 Waverly Oaks Road
The Duffys planned to build a retail shopping center on the Shell Tank Farm site at 313 Waverly Oaks Road, anchored by a supermarket. In August 1995, when this site was still owned by Shell but the Duffys had Shell's authority to commence work on the property in anticipation of its planned sale, defendant Kevin Duffy, Duffy Associates' Chief Engineer, approached the environmental consulting firm, Beals and Thomas, Inc.("Beals and Thomas"), and requested a written proposal regarding the provision of permitting and professional design and engineering services for the contemplated retail development. On August 30, 1995, Beals and Thomas provided this proposal, and on September 29, 1995, it was retained by Duffy Associates. Paul Finger served as Beals and Thomas's Project Manager.
When Shell maintained oil tanks on this property, it surrounded them with earthen berms or dikes. These berms had been damaged when Shell removed these tanks, but Beals and Thomas restored them to their previous condition. However, the most recent maps prepared by the National Flood Insurance Program ("NFIP") included the containment area enclosed by these earthen berms as Bordering Land Subject to Flooding ("BLSF"), meaning that the NFIP had concluded that this area would be under water in the worst flood anticipated every 100 years. These maps are presumed to be correct unless the City's Conservation Commission finds, based on credible evidence from a registered professional engineer or other competent professional, that the maps should be revised and issues a Determination of Applicability essentially revising the NFIP maps. On March 19, 1996, Beals and Thomas submitted to the City of Waltham Conservation Commission a Request for a Determination of Applicability that, if approved, would place the areas contained by these berms outside of the BLSF because "the elevation of the berms that completely surround the containment areas is above the 100-year floodplain elevation." The Conservation Commission, without opposition, approved this Request for a Determination of Eligibility on March 28, 1996, effectively finding that, regardless of the NFIP maps, the area contained by these berms was outside the BLSF.
This approval allowed Duffy Associates to take the next step for Conservation Commission approval of its retail development at 313 Waverly Oaks Road — on or about April 25, 1996, it filed a Notice of Intent with the Conservation Commission. A Notice of Intent is essentially an application to the Conservation of Commission for an Order of Conditions authorizing the proposed work on this wetland site. Without an Order of Conditions, this work may not commence.
A critical issue with regard to the Notice of Intent was whether the proposed project would diminish the amount of flood storage capacity at 313 Waverly Oaks Road and thereby increase the vulnerability of adjacent property to flooding. Consequently, the law required Duffy Associates to give notice to all abutters. Among those abutters was the plaintiff Jeff Buster, who was Trustee of the 110 Beaver Street Trust, which owned property across Beaver Street and on the other side of the railroad tracks from 313 Waverly Oaks Road. The beneficial owner of the 110 Beaver Street Trust was the 110 Beaver Street Partnership, whose partners were the plaintiffs Martha Eakin (Buster's wife) and Paul McGinty. Sitting on this property was an old mill building and a smaller companion building (known as the Butler Building) that Buster, Eakin, and McGinty were seeking to develop into commercial rental property. The basement slab of the mill building was already within six inches of the ground water table and Buster was concerned that the proposed retail development would reduce the flood storage area of the nearby site and make his basement unrentable. Buster, therefore, asked Beals and Thomas on May 1, 1996 to send him a copy of the Notice of Intent. Beals and Thomas did not send him a copy, but instead told him that he could either review a copy at the Conservation Commission or come to their offices in Westborough and pick up a copy if he was prepared to pay the copying costs.
On May 9, 1996, the Conservation Commission met for the first time to consider Duffy Associates' Notice of Intent. Paul Finger discussed the proposed project. Buster and McGinty attended this meeting. Buster raised concerns about the quality of the water coming off the site; McGinty asked about the area inside the berms. Commissioner John Bradley asked for and obtained a continuance so that site visits could be conducted. A first site visit was scheduled for May 20, 1996, with neighbors permitted to attend, and a second site visit was set for May 22, limited to Commission members. The Commission was to meet on May 23 to discuss the results of these site visits.
On or about May 21, 1996, Buster retained H2O Engineering Consulting Associates, Inc., hydrologist consultants, to review the drainage analysis of the proposed retail development at 313 Waverly Oaks Road. Edward Chiang, its President, wrote Buster that he could not complete the review in time for the May 23 Conservation Commission meeting, and asked Buster to seek an extension of time from the Commission so that he may complete his work.
Buster and Dr. Chiang attended the May 23 Conservation Commission meeting. At this meeting, Buster noted that Shell's removal of its oil tanks resulted in the breaking of the dike walls and contended that Duffy Associates had re-built them in order to change the status of the containment area. Finger replied that the Commission had already resolved this issue when it issued a Determination of Applicability removing this area from the BLSF. Dr. Chiang contended that this area was also deemed BLSF under the maps prepared by the Federal Emergency Management Agency ("FEMA") and that any change of designation also required FEMA approval. The Commission continued the matter until June 13.
On May 24, 1996, Kevin Duffy wrote a memorandum to his colleagues at Duffy Associates about the May 23 Conservation Commission meeting. He wrote that the meeting "did not go particularly well." He observed that the Commission Chairman did not attend the meeting and that the Acting Chairman "was intimidated by the size of the crowd, and our abutter, Mr. Buster." Kevin Duffy wrote that, after the meeting, Buster approached Finger. "The outcome of the discussion," Kevin Duffy wrote, "was essentially that Buster is attempting to use the Con-Com/Wetlands Act to stop the project. He indicated that he intended to appeal the issuance of a positive Order of Conditions." Kevin Duffy predicted that the Conservation Commission would grant the Order of Conditions on June 13. Duffy wrote:
The next step is trying to preclude the filing of an appeal to DEP. There are two main reasons, other than the obvious, as to why this is so important:
DEP's appeal period requires approximately 70 days after which an adjudicatory hearing could still be requested and
If DEP issues a Superseding Order it may also trigger MEPA.
MEPA is an acronym for the Massachusetts Environmental Protection Act.
When available, we should sit down and discuss possible strategies regarding the potential appeal from Con-Com.
As a result of this memorandum, Duffy Associates decided to retain legal counsel to furnish advice as to how to prevent Buster from appealing the Order of Conditions to the Massachusetts Department of Environmental Protection ("DEP"). In a letter to environmental attorney Anton Moehrke dated May 28, 1996, Kevin Duffy suggested that Buster was leading the opposition to the Notice of Intent, since he was the sole opponent at the first meeting but the second meeting was attended "by a room full of people along with Mr. Buster." He also suggested that Buster did not wish to resolve any flooding problems but simply wanted to delay the project. Duffy wrote:
We have attempted to address Buster's issues but they continue to change. He is, as I indicated in the attached memo, using the Commission and "the Act" as a delay tool.
The "attached memo" is not in evidence.
Duffy concluded by asking Moehrke's "input and advice on strategies to preclude or dismiss any filing of a 'frivolous' appeal."
On June 12, 1996, Finger had a lengthy telephone discussion with Chiang in which Chiang's concerns were aired and, Finger thought, adequately addressed. As a result of this telephone call, Finger believed that Chiang had been persuaded that Beals and Thomas's estimates, and not Chiang's, were closer to the mark and that Chiang no longer disagreed with these findings. Finger communicated this optimistic news to Kevin Duffy.
On June 12, however, Buster wrote a five-page letter to the Conservation Commission detailing his opposition to the Notice of Intent and attaching a letter from Dr. Chiang containing his findings and criticisms. Buster attacked the Notice of Intent on a number of fronts, among them:
He challenged Duffy Associates' contention that the dikes were above the level of a 100-year flood, and asked the Commission to reconsider its findings on that subject in the Determination of Eligibility.
He argued that Duffy Associates had rebuilt the dikes without an Order from either the Conservation Commission or the DEP, which he contended was required for such construction.
He asserted that Dr. Chiang had concluded that the flood storage volumes were three times less than the volumes projected by Beals and Thomas.
At the June 13, 1996 meeting of the Conservation Commission, Buster asked that the hearing not go forward, since the Chairman of the Commission said he had not been present at all the meetings on this project, another member was absent, and a third member said she could not vote. The Chairman acknowledged Buster's objection but pressed forward. The Chairman rejected Buster's challenges to the dikes and to the earlier Determination of Eligibility, noting that there were procedures to appeal that decision. However, he decided to postpone the vote yet again, until June 27, to address the issue of flood storage.
On June 17, Chiang faxed a note to Finger declaring, "I have tried very hard, but could not come up [sic] the storage volume as your computation indicated. Unless a drawing indicates each area as your computation shown, so I can check it, I do not see our number be closed [sic] to each other." The Commission Chairman, however, asked that Dr. Chiang meet with Beals and Thomas in an effort to resolve their differences, and such a meeting took place on June 19. It failed to produce any agreement as to flood storage. On June 21, Buster wrote to the Commission again, pressing his objections to the restoration of the dikes and attaching Dr. Chiang's letter which reasserted his disagreement with Beals and Thomas regarding flood storage volume.
On June 27, 1996, the Commission met and again considered the Notice of Intent. The minutes reflect that the Commission's own consultant substantially agreed with Beals and Thomas's estimates as to flood storage volume. The Commission voted unanimously to issue an Order of Conditions; one Commissioner abstained. The Order of Conditions was formally issued on July 17, 1996. On July 29, 1996, Buster filed a Notice of Appeal with the DEP and sent certified copies to Beals and Thomas, as agent for Duffy Brothers Management, and to Duffy Brothers Management itself. On August 2, 1996, Buster, Eakin, McGinty, and another abutter filed a complaint in Middlesex County Superior Court requesting that the Order of Conditions be vacated because it violated the Massachusetts Open Meeting Law.
On August 7, 1996, Kevin Duffy wrote the DEP and asked it to reject Buster's appeal since Duffy Brothers Management had not received its copy of the appeal by certified mail until August 2, 1996, more than ten business days after the Order of Conditions had been issued. On August 23, 1996, the DEP informed all relevant parties that it had accepted Buster's appeal, effectively denying Duffy's request that it be deemed time-barred. As a result of DEP's acceptance of the appeal, according to what DEP's Wetlands Section Chief wrote in this letter, "No activity may commence on any portion of the project subject to the jurisdiction of the Wetlands Protection Act, Massachusetts General Laws, Chapter 131 Section 40, until the Department has issued a Superseding Order of Conditions and all appeal periods have elapsed."
At some time prior to Duffy Brothers Management's receipt of this letter, perhaps as early as June 1996, the Duffys had asked Frank French to speak with Buster on their behalf to see if the problem could be resolved through negotiations. French reported back to them that he had spoken to Buster but Buster had no interest in entering into negotiations, because he had them just where he wanted them.
The net result of all these events is that the Duffys were extremely angry with Buster. They knew that Buster had devoted a considerable amount of time, effort, and money to persuade the Conservation Commission to deny the Order of Conditions, including retaining his own hydrologist, and they came to believe that he was not acting in good faith in doing so. They thought that Beals and Thomas's numbers were correct regarding the flood storage volume (as did the Conservation Commission's consultant) and they understood that Dr. Chiang had relaxed his objections when he discussed these matters with them. Yet, rather than drop his objections or attempt to fashion a mutually agreeable compromise, Buster appeared to them to be voicing his earlier objections with new intensity and adding new objections. The Duffys believed that Buster's purpose was to delay the development as long as he could, not to resolve any concerns about flooding in the area. They believed that, to accomplish this purpose of delay, Buster would press his appeal in the DEP to its fullest extent, since development could not begin until Buster had exhausted unsuccessfully his adjudicatory appeal. They understood Buster's purpose to be economic blackmail, and Buster's purported response to French, the Duffys' intermediary, confirmed this impression. The fact that Buster had never demanded anything from them at this time and that it was not clear what he wanted from them did not cause them to question this understanding of Buster's true motive.
The Duffys disliked Buster not only because they thought he was trying to blackmail them, but also because he was indeed standing in the way of a highly profitable project to develop 313 Waverly Oaks Road into a shopping center. Norman Duffy, the President of the Duffy Companies, testified that, under their worst case scenario, the shopping center would reap $500,000 per year in net profit while, under their best case scenario, it would yield net profit of between $1.5 to $2.0 million per year.
Kevin Duffy recognized that the DEP appeal was a two-tier process. The first tier, lasting between 70 and 120 days was the administrative appeal to DEP. The second tier, which could take as long as two or three years, was the adjudicatory appeal. The Duffys knew that, even if Buster lost the administrative appeal, which they expected he would, he would seek and be entitled to the far longer adjudicatory appeal, and all development would be stayed until this adjudicatory appeal was decided in their favor. The Duffys were not seriously doubtful of the outcome of the appeal, but they did not want this project to stand still for that long. In short, Buster had the power, through an appeal the Duffys considered frivolous, to deny them this substantial income stream for many years.
Kevin Duffy testified that the delay caused by the appeal did not significantly disrupt their development plans because they first needed to conduct substantial environmental remediation of this property, which would likely take at least one year. The Court does not doubt that this remediation needed to be done and that the better course, from the point of view of an engineer like Kevin Duffy, is to postpone building until this work is done. However, Robert Duffy, who handles construction for the Duffy Companies, admitted that, while building may not have begun until the remediation was completed, they might have tried to begin construction during the remediation if they had tenants ready and willing to occupy this space. In any event, even if the Duffys intended to postpone all construction until the remediation was completed, Buster's DEP appeal would still likely delay the start of construction, since the remediation could be completed in roughly a year and the appeal may drag on for another one or two years beyond then.
The fact of the matter is that Buster's DEP appeal injured the Duffys in at least four ways. First, as described above, it delayed the commencement of construction on the shopping center for at least one and maybe two years, and delayed the income stream that would result from the completion of construction.
Second, it made it more difficult to market the shopping center to prospective tenants, because they could not predict when it would be ready for occupancy. The Duffys had made a written proposal to Star Market about it becoming the anchor tenant in this shopping center on February 29, 1996, and had serious discussions with Star Market as recently as June 11, 1996. Even if it were true, as Norman Duffy testified, that Star Market told him that it could accommodate the Duffys' construction schedule, he could not realistically have expected that a delay of two to three years would not affect Star Market's willingness to sign a lease.
Third, the Duffys, as they testified, take pride in their ability and willingness to move quickly. They are a family company, not a bureaucracy, and they like to make decisions promptly and then act quickly on those decisions. They recognize that time is money, and they attempt to minimize the former to optimize the latter. Delays are always a problem in construction, and the Duffys were experienced in both construction and delay. But the delay caused by Buster's DEP appeal was essentially beyond their control, and that made it both less predictable and less bearable to the Duffys.
Fourth, the DEP appeal meant that the Duffys needed to devote time, money, and effort to defeat this appeal, all of which could otherwise have been used to develop the shopping center and other pending projects.
Goffe, Inc.'s Purchase of the Promissory Note and Mortgage
On August 22, 1996, Norman Duffy met with a tenant at 100 Beaver Street who was interested in becoming a tenant at a new Duffy Companies' building they were completing in Bedford. During this discussion, the tenant said something about the building at 110 Beaver Street being in trouble. After learning this tidbit and also learning of DEP's acceptance of the appeal, the Duffys met and agreed to investigate the property at 110 Beaver Street. They moved very quickly with their investigation. On August 27, 1996, Robert Duffy, Jr., an attorney with Duffy Associates and defendant Robert Duffy, Sr.'s son, wrote a privileged memorandum that the defendants described in the privilege log as an "internal memorandum re: outstanding debt and encumbrances." On August 30, 1996, general counsel Frank Dewar wrote another privileged memorandum described in the privilege log as an "internal memorandum re: encumbrances on 110 Beaver St. property." As a result of their due diligence, the Duffys learned that real estate taxes had not been paid on this property for roughly two years and that there was a suit pending with the City of Waltham regarding alleged zoning violations which had caused the City to refuse to issue building permits. They either learned or already knew that Moore, Inc. held an $850,000 promissory note from Buster, as Trustee of the 110 Beaver Street Trust, which was secured by a mortgage on the property at 110 Beaver Street. They also learned that Buster was in default on this Note.
The plaintiffs claim that the Duffys invented this conversation. It is true that Norman Duffy initially testified that he was told this by Harvey Silvergate, the President of Lexicon, and the next day said he had spoken to the broker who told him that the meeting was actually with Harvey Schein. However, Robert and Kevin Duffy confirm that Norman Duffy learned something about 110 Beaver Street in August 1996, as does the Duffy Companies' general counsel, Frank Dewar. I, therefore, conclude that Norman Duffy was told something about 110 Beaver Street being in trouble at this meeting.
They already knew there were environmental problems on this property from earlier discussions with George Moore himself. By September 9, 1996, Kevin Duffy had examined the DEP file for 110 Beaver Street. From that file, he learned that DEP in 1990 had allowed Moore, Inc. and its consultants to proceed with environmental assessment and remedial activities on this property without waiting for DEP approvals as long as the necessary response actions were completed by May 1995. Since Moore, Inc. and later Buster had not complied with the necessary reporting requirements to DEP, the waiver had expired and all future environmental response actions needed DEP approval. Kevin Duffy found it difficult to estimate the cost of environmental remediation on this site, but he estimated the cost to be roughly $325,000.
The Duffys decided to purchase Moore, Inc.'s Note and Mortgage on this property, with the intent of immediately foreclosing. Dewar learned from documents filed at the Registry of Deeds that Moore, Inc. was represented by the law firm of Sherburne, Powers Needham ("SPN"), the same law firm that represented Duffy Associates. Dewar called Phil Notopoulos, an SPN attorney, and asked if the firm still represented Moore, Inc. Notopoulos checked into the matter and later called Dewar to inform him that SPN had a conflict which prevented it from representing either Moore, Inc. or Duffy Associates in any sale between them. He told Dewar that Moore would talk with them directly.
The first telephone call to Moore from the Duffys was not made until the end of October 1996. There was no explanation during the trial for this delay but I conclude that Duffy Associates was trying unsuccessfully to obtain information from SPN regarding the payment status of this Note and the amount of outstanding tax liens. Dewar testified that the Duffys had been trying to obtain this information since early October, and I conclude that they wanted this information before they initiated negotiations with Moore. After obtaining roughly accurate numbers regarding the payment status and the tax liens, Robert Duffy, Sr. telephoned Moore and asked if he was interested in selling the Note on the property at 110 Beaver Street. Moore said he was interested, and Robert Duffy offered $100,000. Moore rejected the offer, saying it would take substantially more for them to have a deal. Robert Duffy said he would need to speak with other members of his family.
In late October or the first week of November 1996, Robert Duffy again spoke with Moore and increased his offer to $300,000. Moore agreed to meet with him at the Duffy Companies' offices. At this meeting, attended by Moore, Robert Duffy, Sr., and Dewar, Duffy told Moore that they would pay him $300,000 for the Note and also pay off the Internal Revenue Service ("IRS") and real estate liens once the amount was ascertained. Moore found this offer agreeable.
After this meeting, two things changed with the Duffys. First, they decided that time was of the essence, and insisted that the deal quickly be finalized. Second, they insisted, as an essential pre-condition of the deal, that Moore, Inc. commence foreclosure proceedings on the property at 110 Beaver Street. While neither of these issues had been raised at the earlier-described meeting with Moore, they now became all-important to the Duffys. The Duffys and Dewar met with the attorneys at SPN on November 6 and again on November 7 to obtain precisely accurate information as to the amount due on the Note and the amount of the tax liens. Although Moore had only brought in his own attorney, Robert Moran, on November 5 to assist him in consummating this deal, Dewar wrote Moran on November 14 and insisted that the offer must be accepted by November 18 and the foreclosure commenced by November 20. Indeed, Dewar's offer provided that the $300,000 in cash would be paid within 30 days of the service of notice, publication, and approval of the petition to the Land Court regarding foreclosure. In other words, not only did foreclosure proceedings have to be commenced by Moore, Inc. by November 20, but the sooner they were commenced the sooner Moore, Inc. would receive the cash.
When Moore and Moran met with Robert Duffy, Sr., Norman Duffy, and Dewar on November 18 — the deadline for the agreement given by Dewar — Moore and Moran disagreed with two elements of Dewar's proposal: they did not want themselves to initiate the foreclosure and they wanted the money paid on the date of the assignment. The Duffys insisted that the foreclosure be commenced by Moore, Inc. and would not budge from this position. One of the Duffy representatives said that they did not want their name on the foreclosure notice filed in the Land Court. At the close of this meeting, there remained a stalemate: the Duffys would not proceed with the deal unless Moore, Inc. commenced foreclosure and Moore, Inc. wanted the Duffys to commence foreclosure after the assignment.
This stalemate ended because Moran subsequently learned that SPN, without the knowledge of either Moore or the Duffys, had filed a Complaint to Foreclose Mortgage in the name of Moore, Inc. on November 13, 1996. This Complaint was filed one day before Dewar's November 14 letter to Moran demanding that Moore, Inc. file such a complaint, and five days before the November 18 meeting debating who would file the complaint. It is plain that the Duffys paid SPN to prepare the foreclosure papers but it appears that the actual filing emerged from a miscommunication within SPN. Once this error was discovered, the debate became academic and the parties quickly moved to execute the Assignment of Security Interests on November 26, 1996, assigning Moore, Inc's Note and Mortgage to a Duffy entity, Goffe, Inc.
Negotiations Between the Plaintiffs and Defendants
Buster first learned of the Complaint to Foreclose Mortgage when he received it by certified mail on December 6, 1996. He telephoned Moore after receiving it, and learned that Moore, Inc. had sold the mortgage to one of the Duffy entities. Buster immediately recognized that this was not good news.
As of December 1996, Buster was in default on the Note and Mortgage on multiple grounds. He had paid none or nearly none of the real estate taxes, a sufficient event of default by itself. He was substantially behind in his mortgage payments, also a sufficient event of default by itself. He had done essentially none of the environmental remediation that had been promised, even though the Assumption and Indemnification Agreement executed with Moore, Inc. provided that he would complete all of the response actions ordered by DEP before May 1995. That Agreement explicitly provided that his failure to comply with this condition constituted grounds for foreclosure. Moreover, Buster had engaged in substantial construction at 110 Beaver Street without obtaining any building permits, believing that the City of Waltham had acted unlawfully by refusing to issue any building permits while the property remained in violation of zoning regulations. This, too, constituted independent grounds for foreclosure.
Buster's primary defense against foreclosure was Moore, Inc.'s failure to comply with its obligations to remove certain property from 110 Beaver Street, but Buster understood that this defense would not likely succeed against a foreclosure action pressed by Goffe, Inc., since these obligations were not contained in either the Promissory Note or the Mortgage. In short, Buster had to recognize that Goffe, Inc. could foreclose on the property if it wanted to.
Buster spoke with Kevin Duffy on December 17, 1996 and requested a meeting. At this meeting, attended by Buster, Eakin, and McGinty on behalf of the 110 Beaver Street Trust and Norman, Robert, Sr., and Kevin Duffy on behalf of Goffe, Inc., Buster and his partners initially contended that they were not in default because of Moore's failure to remove property it was storing there, but the Duffys told him that the storage problem was between Buster and Moore. Buster and his partners discussed their need for financing to complete the environmental remediation and renovate the building to permit additional commercial tenancies. They asked the Duffys to provide this additional financing. They also asked the Duffys to locate their construction company in the basement of the building to provide additional revenue. The Duffys told them to put together a business plan as to how they would cure their defaults and promised to meet again after the holidays.
Buster initiated discussion at this meeting about the DEP appeal. As a way to resolve his concerns about the flood storage problems caused by the shopping center development, Buster proposed that the Duffys pay for a dam on the Fernald Swamp, on property owned by the federal government across the street from 313 Waverly Oaks Road, that would improve the amount of flood storage in the area. Kevin Duffy said he would look into it but reminded Buster that they did not own this property.
The next meeting was held on January 7, 1997, with the same attendees, minus Eakin. Prior to this meeting, Dewar had proposed and the Duffys had agreed to offer Buster two alternatives. Under the "buy-out option," Buster would execute a deed in lieu of foreclosure, withdraw his appeal to DEP, and dismiss his Superior Court action alleging violations of the Open Meeting Law. In return, Buster and the Trust would receive a total of $100,000: $25,000 immediately, another $25,000 upon the conclusion of the foreclosure, and the $50,000 balance six months after the foreclosure if there were no further challenges to the Duffys' plans for the shopping center development. Under the "forbearance option," Buster would keep the property, sign a forbearance agreement, withdraw his appeal to DEP, and dismiss his Superior Court action alleging violations of the Open Meeting Law. The forbearance agreement involved deferring three mortgage payments in 1997 (totaling $31,500) and the mortgage payments and real estate taxes that were in arrears (totaling $179,413) for 59 months, at 9.5 percent interest, until December 1, 2001, when a lump sum payment of $340,404.85 would be due. Mortgage payments that came due (apart from the first three in 1997) would continue to be paid as provided in the Note.
At the meeting, Buster and McGinty presented no business plan for repayment of the Note obligations or for curing the defaults. Rather, they resumed discussion regarding the flood storage issue. Norman Duffy told them that he had looked into the Fernald Swamp idea and that it was impracticable. When Buster proposed additional ideas to address his flood storage concerns, the Duffys re-focused him on the immediate issue of the mortgage. When it became clear that Buster intended to offer no settlement proposal, the Duffys presented Buster and McGinty in writing with their two options. Buster and McGinty indicated that both of these options would be unacceptable. They reminded the Duffys of the revenue they could expect from the shopping center development, and the amount they would lose from the delay produced by the DEP appeal. McGinty suggested that the Duffys should be prepared to tear up the mortgage in return for dropping the DEP appeal. The Duffys replied that Buster and McGinty had only these two alternatives. They said that they had done their homework and would prevail. In short, although they did not use these words, the Duffys made it clear that Buster and McGinty could take one of these two options or reject them and, if they rejected them, they would lose their property to foreclosure.
Later, Buster telephoned Robert Duffy, Sr. to discuss this matter further. It is not clear what Buster had in mind with this telephone call but it is plain that he did not call to accept either of the two options. Robert Duffy told him that there was no room for further discussion. The decision had been made to pursue foreclosure.
The Pursuit of a Foreclosure Sale
The foreclosure sale was scheduled for February 7, 1997. The plaintiffs, with the assistance of counsel, recognized that they had only two chances of preventing foreclosure. First, they could file suit and seek a preliminary injunction against the Duffys, contending that the Duffys had violated their civil rights and acted tortiously by seeking to foreclose on 110 Beaver Street for the purpose of pressuring them to surrender their DEP appeal and their Superior Court action. Second, if a preliminary injunction were denied on those grounds, the 110 Beaver Street Partnership could file for bankruptcy and seek the protection of the automatic stay. On February 4, 1997, the plaintiffs filed the instant action and moved for a preliminary injunction staying the foreclosure sale. On February 5, 1997, after hearing, the motion for preliminary injunction was denied by Judge Julian Houston. On or just before February 7, 1997, prior to the foreclosure sale scheduled that morning, the 110 Beaver Street Partnership filed for bankruptcy protection under Chapter 11.
Buster attended the foreclosure sale on the morning of February 7, 1997, and handed the auctioneer, Jeffrey Mann, a fax notifying him that the 110 Beaver Street Partnership had filed for Chapter 11 bankruptcy, triggering the automatic stay provision of the bankruptcy law. As a result, Mann, after consulting with his attorney, postponed the foreclosure sale and set a new date. Robert Duffy, Sr. learned at the foreclosure sale of the bankruptcy filing. He had anticipated that Buster would file for bankruptcy to delay the foreclosure sale, since it is commonly done and he was experienced in such matters. Yet, while he was not surprised, he was not pleased, because the filing meant that the foreclosure would cost more in terms of time, money, and effort.
To leave the aborted foreclosure sale, Robert Duffy had to navigate a long, narrow driveway in front of 110 Beaver Street in his BMW automobile. As he headed down that driveway, his path was partially blocked by a small group of people, including Mann and Buster, who were standing and talking. Robert Duffy recalled that he rolled down his window and said, "Hey, guys, I'd hate to have a terrible accident here. Would you mind moving out of the way?" He recalled that they laughed and moved, and he drove on. Buster recalled that Robert Duffy said, "Jeff, wouldn't it be too bad if I accidently gunned the car and couldn't turn sharp enough to miss hitting you?" I doubt that Robert Duffy's words exactly matched either recollection but I find that Buster's recollection is closer to the mark. I find that Robert Duffy made some sarcastic comment to the effect that it would be too bad if he could not stop his vehicle in time to avoid hitting them. I find that most of those present found his remark a humorous way to tell them to move. Indeed, one of the group responded that it would not be so unlucky to be hit by a BMW. Buster did not find Duffy's comment to be so funny. While Robert Duffy's remarks were a blend of anger, humor, frustration, sarcasm, and irony, I do not find that they were intended to threaten physical harm to Buster, or that Buster understood them to threaten physical harm, or that they reasonably could have been understood in those circumstances as a threat of physical harm. Rather, Duffy's remarks reasonably could be understood as an expression of his anger and frustration, and I believe that Buster recognized them as such. There is no evidence that Buster feared any physical harm from the Duffys; rather, he feared the economic harm they could cause to him.
With the foreclosure stay delayed indefinitely as a result of the automatic stay, Kevin Duffy on February 11, 1997 visited Richard Cardillo, the Deputy Fire Chief for the City of Waltham in charge of the Fire Prevention Bureau. Duffy told Cardillo that his company owned the mortgage on the property at 110 Beaver Street and wanted Cardillo to inspect the property because Duffy had concerns about safety. Duffy specifically mentioned that there were open elevator shafts and that children were using a ballet studio in the building. Cardillo said that only a complaint from a person with an interest in the property could trigger an inspection, and he would need to check with the Law Department to determine whether holding a mortgage constituted a sufficient interest. Kevin Duffy later asked Cardillo whether he had conducted any inspection, but Cardillo said he had not because he had not yet heard from the Law Department. On April 25, 1997, Cardillo wrote a memorandum to Duffy Associates stating that, as of April 4, 1997, the only inspections that were conducted at 110 Beaver Street were in-service inspections intended to look for blatant fire hazards and familiarize firefighters with the layout of the building in the event of fire.
On May 27, 1997, a hearing was held in the Bankruptcy Court on one of Duffy Associates' motions to lift the automatic stay to permit the foreclosure sale to be held. The focus of this hearing was Duffy Associates' contention that environmental problems posed an immediate public health hazard. During this hearing, counsel for the 110 Beaver Street Partnership argued that the pre-existing conditions were not becoming worse, that rental income was growing, and that the value of the property was increasing. The attorney for Duffy Associates replied that the pre-existing conditions were indeed getting worse because the Partnership was bringing in new tenancies to the building and offering to build out for them when they had no building permits and could not obtain any building permits in light of the existing zoning violations. Another attorney for Duffy Associates told the Court that, if building inspectors were to come to the site to inspect the property, they would take administrative action once they discovered that a manufacturing facility authorized for one tenant had been converted without building permits or certificates of occupancy into thirty commercial tenant spaces. The anticipated action of the building inspector, the attorney told the Court, would significantly impair the value of the property, and justify lifting the automatic stay. The Bankruptcy Court took no action on the stay at this hearing, intending to revisit the issue at the next hearing on June 25.
The Duffys either attended this hearing or learned of it from their attorneys. They recognized that 110 Beaver Street had substantial building and fire safety violations that justified administrative action by the City and that, if the City were to take such action against the property, it would strengthen their arguments for a lifting of the stay. Shortly after this hearing, Norman Duffy requested a meeting with the Mayor of Waltham, and a meeting was scheduled for May 30, 1997. At the meeting was Mayor Stanley, attorneys with the City Solicitor's Office, Deputy Chief Cardillo, Building Inspector Ralph Gaudet, Norman Duffy, and Robert Duffy, Sr. Norman Duffy told the Mayor that he believed there were safety violations at 110 Beaver Street, that Buster owned the building, that Buster had not allowed the Fire Department to inspect the building, that children were attending a ballet school on the top floor, and that Buster should be treated like everyone else with regard to matters of compliance. The Mayor turned to Cardillo and asked him why he had not done any inspection. Cardillo said the reason was that he was still waiting for an opinion from the Law Department. The Mayor asked the attorneys from the Law Department if they would render an opinion, and they said they would. The Mayor asked if there was a question of safety for the children using that building, and Cardillo said he did not know. The Mayor told him he should find out. Nothing was said to the Mayor at this meeting about the bankruptcy action or the effect the City's actions may have on that action.
The Mayor's words had their intended effect. Within hours of the meeting, Deputy Chief Cardillo wrote to Buster telling him that a full fire inspection of 110 Beaver Street would be conducted on June 2, 1997 to check for fire code violations. Buster wrote back later that day and said that his attorney wanted a reasonable amount of time to review this request and wanted to accompany the Fire Department in its inspection. The letter indicated that permission to enter the property would be granted only through counsel. Cardillo proceeded to apply for an administrative search warrant to inspect the property, which he obtained on June 3, 1997.
The inspection took place on June 9, 1997. Buster cooperated with the inspection only after being presented with the administrative search warrant. The report of the inspection, prepared on June 10, 1997, revealed many serious violations at the property. Access to the hydrants and sprinkler connections were obstructed by the large amount of metal stored on the property. There were above-and below-ground storage tanks on the property, without the required permits. There was substantial new construction and many new tenants, but none of this work was authorized by building permits and no certificates of occupancy had been issued. Some sprinkler heads were blocked and painted. There were inadequate exit signs and lighting, making it difficult to find an exit in the event of fire.
On June 24, 1997, Ralph Gaudet, the City's Building Commissioner, ordered Buster to stop all construction work and to cease and desist all occupancies in the building. Gaudet found that the construction work had been done without building permits and the required architectural and engineering plans, and that no certificates of occupancy had been issued. The existence of the Cease and Desist Order influenced the Bankruptcy Court in her decision to lift the automatic stay and allow Goffe, Inc. to proceed with the foreclosure sale on the property.
The Defendants' Intent and Primary Motivation in Purchasing the Note and Mortgage and Pursuing a Foreclosure Sale
While admittedly a close question, this Court finds that the primary motivation of the defendants in deciding to purchase the Note and Mortgage held by Moore, Inc. was to induce Buster to withdraw his DEP appeal and his Superior Court lawsuit. It was not the only motive; the Duffys recognized that the purchase of the Note and Mortgage was a sound business move standing alone. Yet, this Court finds that, if Buster had not challenged the Conservation Commission's Order of Conditions, the Duffys would not have purchased his Note and Mortgage, at least at that time.
Over several years, the Duffys had, as Dewar characterized it in his November 14, 1996 letter to Moran, "a continuing but low level of interest" in the property at 110 Beaver Street. The Duffys had looked at possibly purchasing 110 Beaver Street in the late 1970's for use as a low-rent commercial building but Moore, Inc. wanted too much for the property. In the early 1990's, a broker had brought them a proposal to sell both 100 and 110 Beaver Street but the Duffys found the price again to be too high. In May 1992, 100 Beaver Street went up for auction following a bank foreclosure, but the Duffys chose not to bid because the price went up too quickly. In 1994, they had the chance to bid on 110 Beaver Street at a tax auction but they were not interested, thinking that the price remained too high.
When Norman Duffy heard on August 22, 1996 that the building at 110 Beaver Street was in trouble, he jumped on that information, not because he had been coveting 110 Beaver Street for so long, but because it presented an extraordinary opportunity to turn the tables on Buster and regain the advantage. As of August 23, 1996, when the DEP accepted Buster's appeal, Buster held all the cards; by persisting in his appeals, he could potentially delay construction at 313 Waverly Oaks Road for two to three years. Although Buster never asked them for anything, they believed that his objections were not sincere and that he was trying to blackmail them for some reason. Perhaps most frustrating, they could do nothing to stop him except battle him at DEP and in court or succumb to his anticipated blackmail demands. The information about 110 Beaver Street being in trouble seemed a godsend for the Duffys because it meant that they could both gain substantial leverage over Buster and pursue a low-priority, but still desirable business objective. Since it soon became clear that Buster was hopelessly in default, their purchase of the Note and Mortgage meant that they could determine whether Buster and his colleagues retained ownership of that property. This gave them two extraordinarily good options: (1) they could agree to allow Buster to retain the property if he withdrew his appeal and dismissed his Superior Court suit, which meant that they could regain control of their development of the shopping center and avoid potentially years of delay; or (2) they could sell the property at foreclosure and either obtain at a discount a nearby property they had always thought useful or make a tidy profit on the Note. While the Duffys had doubts that Buster, as a matter of legal standing, would lose his right to proceed with the DEP appeal if he were no longer an abutter, they reasonably recognized this to be a possibility. Moreover, even if Buster retained standing, the Duffys must have recognized that Buster would have no economic reason to pursue his appeal if he did not own any property that would be affected by the new development. If he no longer owned 110 Beaver Street, there would be no reason other than spite or principle to spend any money on the DEP appeal, and both of these sentiments would likely wear thin as the costs of such an appeal grew larger.
As discussed earlier, the withdrawal of the DEP appeal was worth a great deal of money to the Duffys. It defies belief that savvy and experienced businessmen like the Duffys totally disregarded this benefit when they contemplated purchasing Buster's Note and Mortgage.
The Duffys claim that their sole interest was in purchasing this property at a discount, either tearing down or renovating the old mill building, and developing it into lower-rent commercial space. However, a number of facts demonstrate that this was not their sole interest. First, they never considered approaching Buster to sell them this property. While they contend that this would have proven a more expensive option, they never even considered it and certainly never explored a possible sale with Buster. While purchasing the property from Buster may have cost more, it would have enabled them to develop the property right away. The Duffys knew that foreclosure sales are routinely delayed by bankruptcy filings, triggering automatic stays. Yet, they never seemed to calculate the additional costs generated by this foreseeable obstacle in evaluating the economics of this deal.
Second, during their negotiations with Moore and Moran, the Duffys insisted that Moore initiate foreclosure proceedings. While, at trial, the Duffys testified that they made this demand simply to save time in moving towards the foreclosure sale, this cannot be true because this demand was not made until on or about November 14, 1996 and it was this particular demand that delayed final agreement as to the assignment. Once this issue became moot when the parties learned that SPN had already filed the Complaint to Foreclose Mortgage without Moore's approval, the assignment was executed on November 26. In short, since this was the last issue separating the parties, it did not save any time for the Duffys to insist on it; if they had surrendered the point, the assignment could have been quickly executed and the Duffys themselves could have filed the Complaint. The reason why the Duffys insisted on this provision was that they recognized it would look bad to the DEP if they had initiated the foreclosure; they wanted it to look as if Moore, Inc. had begun the foreclosure and the Duffys had simply taken this problem off its hands.
Third, after they purchased the Note and Mortgage, they offered Buster the option of retaining ownership of the property under a forbearance agreement, provided he agree to withdraw his challenges to the Order of Conditions. If their true interest was taking ownership of and developing the property, this would have substantially delayed and diverted them from achieving that objective. The Duffys testified that the market for commercial property was strong in 1996; they were experienced enough to know that such a strong market was unlikely to last forever. Moreover, the Duffys were builders, not bankers. They had never purchased a Note before and had no interest in making this a sideline business. Even if they had been bankers, this offer made no financial sense but for the value to them of being freed from the DEP appeal. Buster and the Partnership were poor credit risks and there was no prospect of any improvement in their financial position. Indeed, since the building's rental revenue rested on tenancies constructed without building permits and occupied without certificates of occupancy, the prognosis for continued payment of this Note was grim. The offer of a forbearance agreement was made for no other purpose than to induce Buster to withdraw his challenges to the Order of Conditions.
While this Court finds that the Duffys' primary motivation in purchasing the Note and Mortgage was to strengthen their position with regard to the DEP appeal, it finds that this was not their primary motivation in pursuing foreclosure. Once they had purchased the Note and Mortgage, the only sensible business course was to move towards foreclosure. As described earlier, Buster and the Partnership were hopelessly in default, and there was no serious prospect that they could either remedy their default or cease further events of default. The only reason to forbear was to gain the even greater advantage of withdrawal of Buster's DEP appeal. If Buster had never filed such an appeal and Goffe, Inc. had still purchased the Note and Mortgage, it would not have offered an option of forbearance. Stated differently, if the Note and Mortgage had been sold to someone other than a Duffy entity, that creditor, if acting reasonably, would quickly have decided that foreclosure was the most sound business course. Therefore, it cannot be said that the Duffys pursued a foreclosure sale because of the DEP appeal. Rather, the Duffys offered an option other than a foreclosure sale only because of the DEP appeal.
The Defendants' Intent and Primary Motivation in Meeting with the Mayor
This Court finds that the primary motivation in meeting with Mayor Stanley on May 30, 1997 was to trigger administrative action by the City of Waltham that would strengthen their argument for lifting the automatic stay in Bankruptcy Court. When Kevin Duffy first asked the Fire Department to inspect the property on February 11, 1997, he acted out of concern for the safety of the occupants of 110 Beaver Street and to diminish the liability risk to Goffe, Inc. as the mortgage holder of that property. I do not believe he considered, only four days after the foreclosure sale had been postponed because of the bankruptcy filing, that action by the Fire Department may help Goffe, Inc. lift the automatic stay and proceed with the foreclosure sale.
These safety and liability concerns did not go away when the City failed to take prompt action. The Duffys would have pursued these issues even if they did not improve their chances to lift the automatic stay and they did, albeit with little vigor. However, what triggered the meeting with the Mayor was their recognition, obtained from the Bankruptcy Court hearing on May 27, 1997, that (1) administrative action would substantially help them to obtain a lifting of the automatic stay, and (2) that Buster was prevailing in delaying the lifting of this stay, in part, by arguing to the Bankruptcy Court that rental revenue at 110 Beaver Street was increasing when they knew that all that rental revenue was being obtained without the required building permits and certificate of occupancies, and that the tenants were potentially at risk in the event of fire. The Duffys were far too savvy to have failed to recognize the impact that the administrative action they sought would have on the pending proceedings in the Bankruptcy Court.
This Court finds nothing wrong with the action taken by the City after May 30. If the City can be criticized, it can only be for failing to have acted sooner once it received warnings of serious safety and building violations. This Court does not find that anyone from the City knew of the effect the City's actions were likely to have on the bankruptcy proceedings or acted with the purpose of helping the Duffys in those proceedings.
Conclusions of Law
Having made these findings of fact, this Court must now apply those facts to the governing law to determine who shall prevail in this litigation. Since different issues of law are raised with respect to each of the various claims, this Court will examine each claim separately.
Count Two: Alleged Violation of the Massachusetts Civil Rights Act
Under the Massachusetts Civil Rights Act ("the Act"):
Any person whose exercise or enjoyment of rights secured by the constitution or laws of the United States, or of rights secured by the constitution or laws of the commonwealth has been interfered with, or attempted to be interfered with [by threats, intimidation or coercion] may institute and prosecute in his own name and on his own behalf a civil action for injunctive and other appropriate equitable relief . . ., including the award of compensatory money damages. . . .
G.L.c. 12, §§ 11H and 11I. The Supreme Judicial Court has described the legislative purpose behind the passage of this Act in 1979:
The Legislature passed this statute to respond to a need for civil rights protection under State law. Deprivations of secured rights by private individuals using violence or threats of violence were prevalent at the time that the Legislature considered G.L.c. 12, §§ 11H and 11I. . . . Aggrieved parties often could not succeed under 42 U.S.C. § 1983. . . because the Federal statute requires "State action.". . . . The statute encompassed private action where otherwise "State action" would be required. . . . We conclude that the Legislature intended to provide a remedy under G.L.c. 12, §§ 11I, coextensive with 42 U.S.C. § 1983. . ., except that the Federal statute requires State action whereas its State counterpart does not. . . .
Batchelder v. Allied Stores Corp., 393 Mass. 819, 821-823 (1985).
"Like all civil rights statutes, §§ 11H and 11I are entitled to liberal construction. Accordingly, cases within the reason, although not within the letter, of a remedial statute are embraced by its provisions." Redgrave v. Boston Symphony Orchestra, Inc., 399 Mass. 93, 99 (1987) (citations omitted). Yet, the Supreme Judicial Court has also recognized "that by the Civil Rights Act, the Legislature did not intend to create a vast constitutional [and statutory] tort. . . . Freeman v. Planning Board of West Boylston, 419 Mass. 548, 565 (1995), cert. denied, 116 S.Ct. 337 (1995) quoting Bally v. Northeastern University, 403 Mass. 713, 718 (1989) which quotes Bell v. Mazza, 394 Mass. 176, 182 (1985) (internal quotation marks omitted). "[T]he insertion by the Legislature of the requirement of threats, intimidation or coercion was specifically intended to limit liability under the Act." Freeman v. Planning Board of West Boylston, 419 Mass. at 565-566.
To prevail on a claim under the Act, the plaintiffs must prove that:
"[their] exercise of enjoyment of rights secured by the Constitution or the laws of either the United States or the Commonwealth,
have been interfered with, or attempted to be interfered with, and
that the interference or attempted interference was by threats, intimidation or coercion."
Freeman v. Planning Board of West Boylston, 419 Mass. at 564.
The plaintiffs contend that the defendants attempted to interfere with their right to appeal the Conservation Commission's issuance of the Order of Conditions to the DEP and the Superior Court by threats, intimidation, or coercion. Is to the first element, there is no dispute that the plaintiffs' right to appeal is a right secured by the Constitution or laws of the Commonwealth. As to the second element, this Court has found that the defendants purchased the Note and Mortgage from Moore, Inc. with the primary purpose of inducing Buster to withdraw these appeals. The crux of this case focuses on the third element whether the defendants' conduct constituted "threats, intimidation or coercion" under the Act.
The Supreme Judicial Act has defined each of these three terms. A threat "involves the intentional exertion of pressure to make another fearful or apprehensive of injury or harm." Planned Parenthood League of Massachusetts, Inc. v. Blake, 417 Mass. 467, 474 (1994). Intimidation "involves putting in fear for the purpose of compelling or deterring conduct." Id. Coercion is "the application to another of such force, either physical or moral, as to constrain him to do against his will something he would not otherwise have done." Id. quoting Webster's New International Dictionary at 519 (2d ed. 1959).
This Court has already concluded that Robert Duffy, Sr.'s remark to Buster on February 7, 1997 while leaving the aborted foreclosure sale was not intended to threaten physical harm to Buster, that Buster did not understand the remark to threaten physical harm, and that a reasonable person in Buster's position under the same circumstances would not have understood his remark as a threat of physical harm. See infra at 22-23. In view of these factual findings, this foolish remark cannot be found to constitute a threat, intimidation or coercion as those terms are defined under the Act. See Planned Parenthood League of Massachusetts, Inc. v. Blake, 417 Mass. at 474-475 (correct standard is whether reasonable person under same circumstances would be threatened, intimidated, or coerced by the defendant's conduct).
Apart from this failed allegation, the focus of the plaintiffs' case is that the defendants' conduct in purchasing the Note and Mortgage, pushing for foreclosure, and ultimately obtaining foreclosure constituted economic coercion. The plaintiffs concede that this conduct did not produce any physical harm or threaten them with physical harm. They contend, however, that the defendants' conduct threatened them with economic harm, attempted to intimidate them with the fear of economic harm, and attempted to coerce them economically to withdraw their appeals, and that this is sufficient to enable them to prevail under the Act.
This is admittedly a close question. The Supreme Judicial Court has declared that proof of "an actual or potential physical confrontation accompanied by a threat of harm" is an essential element of a claim under the Act. Planned Parenthood League of Massachusetts, Inc. v. Blake, 417 Mass. at 473 and cases cited. The Court has explained this limitation by declaring, "The Massachusetts Civil Rights Act was enacted in response to deprivations of secured rights by private individuals using violence or threats of violence amounting to racial harassment. Our cases holding that the Massachusetts Civil Rights Act was violated have involved actual or potential physical confrontations involving a threat of harm." Id. at 473-474 n. 8. However, in other cases, the Supreme Judicial Court has acknowledged that, in view of its decision in Redgrave v. Boston Symphony Orchestra, Inc., 399 Mass. 93 (1987), a breach of contract may be sufficient to constitute the necessary threat, intimidation, or coercion. SeeWillitts v. Roman Catholic Archbishop of Boston, 411 Mass. 202, 210 (1991) ("relief under the Act may be granted where the 'threat, intimidation or coercion' involves either a physical confrontation accompanied by a threat of harm . . . or the loss of a contract right"); Bally v. Northeastern University, 403 Mass. 713, 719-720 (1989) (same). In 1994, in Planned Parenthood League of Massachusetts, Inc. v. Blake, the Supreme Judicial Court attempted to eliminate this apparent exception to the requirement of a physical confrontation involving a threat of harm, declaring thatRedgrave "involved potential threats to the physical safety of the audience and symphony players." 417 Mass. at 474 n. 8. Yet, in Bally, decided in 1989, the Court acknowledged that "Redgrave did not involve physical confrontation." Bally v. Northeastern University, 403 Mass. at 720. More recently, the Court has expressly "assumed without deciding the point that coercion which does not involve physical force might violate the Act," thus avoiding any definitive ruling on this question. Swanset Development Corp. v. Taunton, 423 Mass. 390, 396 n. 11 (1996). See also Freeman v. Planning Board of West Boylston, 419 Mass. at 566 n. 18.
In short, Redgrave is the lone exception to the rule that an actual or potential physical confrontation accompanied by a threat of harm is required to prove a violation under the Act, and it is the precedent on which the plaintiffs rely in contending that economic coercion alone is sufficient to establish a violation of the Act. To determine whether this exception truly exists, it is necessary to examine Redgrave with great care.
According to the complaint in that case, in March 1982, Vanessa Redgrave entered into a contract with the Boston Symphony Orchestra ("BSO") to narrate six performances of Stravinsky's "Oedipus Rex," scheduled to be performed in April 1982. In late March and early April 1982, the BSO was threatened by persons who disagreed with Ms. Redgrave's public statements about the Palestine Liberation Organization and Israel with severe adverse consequences if Ms. Redgrave was permitted to narrate these performances. As a result of these threats, the BSO cancelled the performances, cancelled her contract, and paid her the $31,000 she was entitled to be paid under her contract. Redgrave v. Boston Symphony Orchestra, Inc., 557 F. Supp. 230, 233 (D.Mass. 1983).
Redgrave brought her case in United States District Court for the District of Massachusetts, where it was assigned to Judge Robert Keeton. The BSO moved to dismiss all counts, including the count alleging a violation of the Act by the BSO and the unknown defendants Doe and Roe, who purportedly threatened trouble unless Redgrave was fired. Judge Keeton, in two paragraphs, denied the motion to dismiss the claim under the Act. He declared, "Whether plaintiffs will be able to demonstrate that the BSO, as distinguished from defendants Doe and Roe, coerced Ms. Redgrave, is a matter left for another time." Id. at 242. He also admitted that he was "troubled by the rather conclusory nature of the allegations of violation of civil rights protected by state law, and by uncertainties of the law defining those rights. . . ." Id. In short, using the permissive motion to dismiss standard, Judge Keeton allowed this claim to go forward with all of its uncertainties, with the expectation that both the facts and the law would become clearer as the case progressed.
At trial, the jury rejected the plaintiff's claim under the Act by answering "No," to the following questions posed to them in the special verdict form:
Was the only reason, or the primary reason, that the Boston Symphony Orchestra (BSO) cancelled the arrangements for Vanessa Redgrave to appear in the performances of Oedipus Rex, in which Vanessa Redgrave was to appear as narrator, that the agents who acted for the BSO in making the decision to cancel disagreed with political views that Vanessa Redgrave had publicly expressed?
Did one or more of the agents of the BSO take a position in favor of cancellation of the arrangements because of disagreement with political views that Vanessa Redgrave had publicly expressed?
Redgrave v. Boston Symphony Orchestra, Inc., 602 F. Supp. 1189, 1192, 1203 (D.Mass. 1985). At trial, Judge Keeton ruled that, if the BSO had simply cancelled the performances in acquiescence to the disapproval expressed by its subscribers and members of the community to Ms. Redgrave's political views regarding the Middle East, this would not constitute a violation of the Act. Id. at 1192. After Judge Keeton rejected Redgrave's motion for judgment notwithstanding the verdict on her claim under the Act, she appealed to the First Circuit Court of Appeals.
The First Circuit certified two questions to the Supreme Judicial Court:
1. Under the Massachusetts Civil Rights Act, Mass. Gen. Laws Ann. ch. 12, Sec. 11H and Sec. 11I, may a defendant be held liable for interfering with the rights of another person, by 'threats, intimidation, or coercion', if the defendant had no personal desire to interfere with the rights of that person but acquiesced to pressure from third parties who did wish to interfere with such rights?
2. If a defendant can be held liable under the Massachusetts Civil Rights Act for acquiescence to third party pressure, is it a defense for the defendant to show that its actions were independently motivated by additional concerns, such as the threat of extensive economic loss, physical safety, or particular concerns affecting the defendant's course of business?
Redgrave v. Boston Symphony Orchestra, Inc., 399 Mass. 93, 96 (1987). In this decision, the Supreme Judicial Court answered "Yes" to the first question and "No" to the second question. Id. at 101. Nowhere in this decision does the Supreme Judicial Court consider whether economic coercion is sufficient to constitute a claim under the Act. Rather, the Court simply held that "the provisions of Secs. 11H and 11I must apply to any threatening, intimidating, or coercive behavior regardless of whether the defendant specifically intended to interfere with a right to which the plaintiff is entitled." Id. at 100. It did not define what type of behavior was sufficient to constitute "threatening, intimidating, or coercive behavior" under the Act because the certified questions did not speak to this issue. Specifically, it never decided that a breach of contract is (or is not) sufficient to constitute a threat, intimidation, or coercion actionable under the Act. It simply answered certified questions in a case where the plaintiff's theory that the defendant's breach of contract violated the Act by interfering with her free speech rights through threats, intimidation, or coercion was allowed to reach trial in federal court.
After receiving the answers to these certified questions, the First Circuit, as matter of Massachusetts law, found that the BSO's cancellation of the Redgrave performances could not be the basis of liability under the Act. Redgrave v.Boston Symphony Orchestra, Inc., 855 F.2d 888, 909 (1st Cir. 1988).
In view of this history, it is plain that the Supreme Judicial Court has never found that economic coercion, standing alone, is sufficient to constitute the threats, intimidation, or coercion required under the Act. Those Supreme Judicial Court cases which declare that a breach of contract may be sufficient to constitute this forbidden behavior do so only under the mistaken belief that the Supreme Judicial Court in Redgrave permitted the case to go forward on this ground, when all that it truly did was answer certified questions in a case where a federal district court judge denied a pre-trial motion to dismiss the claim under the Act.
Stripped of the so-called Redgrave exception, the Supreme Judicial Court's interpretation of the Act becomes far clearer. When one considers the events that caused the Legislature to pass the Civil Rights Act, the legislative purpose it was intended to accomplish, the limitation on its scope intended by the requirement that the interference with civil rights be "by threats, intimidation or coercion," and the danger that, without this limitation, it will become a vast constitutional and statutory tort, this Court concludes that proof of "an actual or potential physical confrontation accompanied by a threat of harm" is an essential element of a claim under the Act. Planned Parenthood League of Massachusetts, Inc. v. Blake, 417 Mass. at 473. Economic coercion, standing alone, is not enough. Since the evidence in this case proves that the defendants did nothing more than place economic pressure on the defendants to withdraw their appeals and this is insufficient as a matter of law to establish a violation of the Act, the plaintiffs cannot prevail on this claim.
Limiting the definition of "threats, intimidation, and coercion" to exclude mere economic coercion is necessary to prevent this Act from reaching conduct far beyond its intended scope and disrupting the delicate balance that the common law has established with regard to such conduct. For instance, presently, an employer who terminates an at-will employee for exercising such secured rights as the right to free speech may, in some circumstances, be found to have breached the implied covenant of good faith and fair dealing by terminating the employment in violation of public policy. In such a case, only the employer is liable and damages are limited to those available under the common law for breach of contract. However, if this same conduct were deemed a violation of the Act because it interfered through economic coercion with the employee's exercise of her constitutional rights, the individual employees involved in the termination would be personally liable and the damages under G.L. c. 12, § 11I would include not only "compensatory money damages" but also reasonable attorneys' fees. This would dramatically alter the balance the law has reached between an employer's freedom to terminate an at-will employee and the limited protections accorded to employees to express their opinions without employment consequence. Perhaps because application of the Act would so alter this balance, the Supreme Judicial Court has consistently rejected claims of this nature brought by employees under the Act. See, e.g., Willits v. Roman Catholic Archbishop of Boston, 411 Mass. 202, 210-211 (1991) (finding no violation of Act when defendant refused to renew contract of a teacher who had attempted to organize other teachers); Korb v.Raytheon Corp., 410 Mass. 581, 585 (1991) (finding no violation of Act when defense contractor fired officer who had publicly criticized increased defense spending).
Similarly, in Freeman v. Planning Board of West Boylston, a developer sued the Town and certain members of its Planning Board individually, alleging violations of the Act for their failure to approve a subdivision plan that complied with applicable regulations. 419 Mass. at 549, 557. The developer contended that the defendants violated his exercise of rights secured by a law of the Commonwealth that required the Planning Board to approve a plan that complied with all applicable rules and regulations. Id. at 564. The Supreme Judicial Court found that these actions did not constitute a violation of the Act, declaring, "We doubt the Legislature contemplated that every legal error committed by a local planning board, having the intended effect of requiring a landowner to alter in some way his proposed use of the property, should necessarily give rise to liability under the Act." Id. at 566. It continued, "A local planning board, whose functions are in many respects discretionary and which involve the interpretation and application of highly technical laws and regulations, should be allowed to address matters within its realm of responsibility without exposure to liability under the Act every time its actions are overturned."Id.
The fact of the matter is that, unless the Act is limited in scope to those interferences of secured rights involving an actual or potential physical confrontation accompanied by a threat of harm, it will be limited only by some judicial variant of "I know it when I see it." Since so much conduct falls within the rubric of "rights secured by the constitution or laws" of the United States and Commonwealth, and since the reach of the Act is not limited to state action, and since so much that persons do may affect the economic position of others, interpreting the Act to include economic coercion will render the Act nearly boundless in its reach. Limiting the Act to actual or potential physical confrontations accompanied by a threat of harm reflects what the Legislature thought it was enacting in 1979 and is necessary to prevent that legislation from becoming "a vast constitutional [and statutory] tort." See id. at 565; Bally v. Northeastern University, 403 Mass. at 718.
It should be noted that the Supreme Judicial Court has never interpreted Redgrave to provide relief under the Act for economic coercion. Rather, in those cases that have recognizedRedgrave as an exception to the usual requirement of physical confrontation accompanied by a threat of harm, the Court has simply declared that "loss of a contract right" may be a separate basis for relief. See Willitts v. Roman Catholic Archbishop of Boston, 411 Mass. at 210; Bally v. Northeastern University, 403 Mass. at 719-720. In the instant case, as discussed later in this decision, the plaintiffs were not deprived of any contract right. Consequently, even if this limited exception applied, it would not provide the plaintiffs with a basis for relief under the facts of this case.
There is also an independent, more technical reason why the plaintiffs cannot prevail on this claim. As discussed earlier, the defendants purchased the Note and Mortgage and caused the foreclosure complaint to be filed in the Land Court without first notifying the plaintiffs, and the evidence is clear that the plaintiffs first learned of the assignment and the foreclosure complaint well after they had occurred. For this reason, this conduct cannot be deemed "threats, intimidation or coercion" under the Act because the plaintiffs were not pressured to withdraw their appeals as a means of preventing the Note and Mortgage from being purchased or the foreclosure complaint from being filed. "[A] direct deprivation of rights, even if unlawful, is not coercive because it is not an attempt to force someone to do something the person is not lawfully required to do." Freeman v.Planning Board of West Boylston, 419 Mass. at 565; Swanset Development Corp. v. Taunton, 423 Mass. at 396. Phrased differently, the plaintiffs could not feel any pressure to withdraw their appeals until they knew that the defendants had the ability and the intent to foreclose on their mortgage, and they did not have this knowledge until Goffe, Inc. owned the Note and Mortgage.
Once Goffe, Inc. owned the Note and Mortgage, it had the right to foreclose when Buster failed to cure the defaults "regardless of its motive or that of its officers." Order,Jeffrey Buster v. George W. Moore, Inc., No. 97-J-845 (App.Ct. Dec. 17, 1997) (single justice opinion by Judge Gillerman) quotingColonial Operating Co. v. Poorvu, 306 Mass. 104, 107 (1940). Moreover, even if its motive mattered, this Court has found that the defendants were not motivated to foreclose to strengthen their position with regard to the appeals. Rather, once Goffe, Inc. owned the Note and Mortgage, foreclosure was the only sensible economic course regardless of the status of those appeals; the only reason not to foreclose was if Buster wanted to trade the withdrawal of his appeals in return for forbearance. It cannot be a threat, intimidation, or coercion under the Act for the defendants to offer the plaintiffs an alternative to foreclosure when they lawfully were entitled to foreclose as a result of the plaintiffs' defaults and foreclosure was the most profitable option.
In other words, the defendants did not engage in threats, intimidation, or coercion before they obtained the Note and Mortgage because they did not seek to induce the plaintiffs to surrender any civil right to prevent them from purchasing the Note and Mortgage. Nor did the defendants engage in threats, intimidation, or coercion after they purchased the Note and Mortgage because they had every right to foreclose on the mortgage, and could offer as an alternative to foreclosure a settlement involving the withdrawal of their appeals. When a debtor has "one card left to play," it is not a violation of the Act for the creditor to be willing to trade something to obtain that card. Nor, if the debtor is unwilling to make that trade, is it a violation of the Act for the creditor to pursue his legal rights.
For all these reasons, judgment shall enter in favor of the defendants on Count Two, alleging a violation of the Act.
Count Three: Alleged Violations of the Massachusetts Consumer Protection Act
Under the Massachusetts Consumer Protection Act, G.L., c. 93A, § 11, any person in trade or commerce who "suffers any loss of money or property, real or personal, as a result of the use or employment by another person who engages in any trade or commerce of an unfair method of competition or an unfair or deceptive act or practice declared unlawful by section two . . . [may bring a civil action]." G.L.c. 93A, § 11. G.L.c. 93A, § 2 makes unlawful any "[u]nfair methods of competition and unfair acts or practices in the conduct of any trade or commerce. . . ." G.L.c. 93A, § 2. The Supreme Judicial Court has stated that "the following are 'considerations to be used in determining whether a practice is to be deemed unfair: (1) whether the practice . . . is within at least the penumbra of some common-law, statutory, or other established concept of unfairness; (2) . . . is immoral, unethical, oppressive, or unscrupulous; (3) . . . causes substantial injury [to] . . . competitors or other businessmen.'" Datacomm Interface, Inc. v.Computerworld Inc., 396 Mass. 760, 778 (1986) quoting PMP Assocs., Inc. v. Globe Newspaper Co., 366 Mass. 593, 596 (1975) which itself quotes 29 Fed. Reg. 8325, 8355 (1964).
The plaintiffs allege that essentially the same conduct that they contend violated the Massachusetts Civil Rights Act also violated G.L.c. 93A, § 11. Stripped to its essence, the plaintiffs argue that, even if economic coercion falls outside the scope of the Massachusetts Civil Rights Act, it is independently a violation of Chapter 93A for a business to purchase a Note and Mortgage for the purpose of gaining the economic leverage needed to induce the borrower to drop an administrative appeal and a lawsuit.
There is no doubt that the mere purchase of a Note and Mortgage is not, by itself, an unfair act or practice. Nor is foreclosure unfair where there has been an event of default that has not been cured. Nor is it unfair for a Noteholder to offer to forbear rather than foreclose in return for other valuable consideration. The issue, then, is whether conduct that is not unfair itself can become unfair when the motive is to induce another business to abandon litigation.
The plaintiffs have not provided this Court with any case that has interpreted Chapter 93A in this fashion and this Court is reluctant to expand the scope of Chapter 93A to permit such claims. It would be a different matter if this case involved any false or fraudulent representations, or conduct knowingly in disregard of plain contractual obligations, but it does not. SeeDatacomm Interface, Inc. v. Computerworld Inc., 396 Mass. at 780;Anthony's Pier Four, Inc. v. HBC Associates, 411 Mass. 451, 474 (1991). In such cases, the conduct is wrong regardless of motive, so deterring it with the remedies available under Chapter 93A (treble damages and attorney's fees) does not risk discouraging lawful conduct. But the plaintiffs here seek Chapter 93A remedies when a business engages in a business transaction that is otherwise lawful and fair except for its purpose of obtaining economic leverage against a business with whom it is in litigation. There are many businesses in litigation with each other and many business decisions that may affect whether an adversary wishes to pursue or abandon the litigation. If these business decisions could potentially trigger a Chapter 93A claim based on improper motive, they may pragmatically become too expensive to risk. Ironically, if the motive of economic leverage transformed an otherwise fair business decision into an unfair act or practice in violation of Chapter 93A, it would give a company in litigation with another substantial economic leverage over its adversary. As a result, a business may be able to thwart a competitor's plans by commencing litigation against it, since the pursuit of those plans could be alleged to constitute an attempt to pressure the competitor to abandon the litigation, in violation of Chapter 93A. Moreover, this expansion of Chapter 93A would discourage the settlement of such business disputes, since an offer of settlement may become evidence of that improper motive. The better rule is that motive may indeed matter in a Chapter 93A claim, but only when the conduct itself is unlawful or unfair. See Massachusetts Employers Insurance Exchange v. Propac-Mass., Inc., 420 Mass. 39, 42-43 (1995) ("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.c. 93A fairness determination.").
For these reasons, this Court declines to find that the Duffys engaged in an unfair act or practice, in violation of Chapter 93A, by purchasing the Buster Note and Mortgage from Moore, Inc. Nor was it an unfair act or practice to press foreclosure in view of the uncured events of default. Nor was it an unfair act or practice to offer a compromise that would prevent foreclosure in which the withdrawal of the administrative appeal and the dismissal of the Superior Court complaint was part of the consideration sought.
This Court recognizes that, had either of the alternative agreements offered by the Duffys been executed, there may be a question as to whether the promise to withdraw the appeal and dismiss the Superior Court action would be enforceable as a matter of public policy. See Beacon Hill Civic Association v.Ristorante Toscano, Inc., 422 Mass. 318 (1996) (finding unenforceable as a matter of public policy an agreement between a civic association and a restaurant in which the civic association agreed not to oppose the restaurant's application for a beer and wine license in return for the restaurant's agreement not to apply in the future for a liquor license). However, the mere fact that a court may refuse to enforce an agreement does not mean that it is an unfair act or practice to negotiate such an agreement.
Nor was it an unfair act or practice for the Duffys to urge the Mayor of Waltham to conduct a fire and safety inspection at 110 Beaver Street without disclosing to the Mayor the ulterior purpose behind their request. The Duffys did not make any false or fraudulent representations to the Mayor to induce him to act. Indeed, in view of the conditions at that property, a fire and safety inspection was entirely justified. The fact that the Duffys did not tell the Mayor that administrative action would help them to lift the automatic stay does not make their conduct an unfair act or practice in violation of Chapter 93A. Indeed, if it were a violation of Chapter 93A to solicit governmental action without disclosing all of one's reasons for doing so, the scope of Chapter 93A would be expanded exponentially.
For all these reasons, judgment shall enter in favor of the defendants on Count Three, alleging a violation of Chapter 93A.
Counts Seven and Eight: Intentional Interference with Contractual and Advantageous Relations
The plaintiffs contend that the Duffys intentionally interfered with the 110 Beaver Street Trust's contractual and advantageous relationship with Moore, Inc. by purchasing the Note and Mortgage and by inducing Moore, Inc. to initiate foreclosure. This Court finds these claims without merit.
An essential element of the tort of intentional interference with contractual or advantageous relations is that the defendants interfered with a contract or business relationship. See Adcom Products, Inc. v. Konica Business Machines USA, Inc., 41 Mass. App. Ct. 101, 104 (1995), rev. denied, 423 Mass. 1111 (1996). The Duffys' purchase of the Note and Mortgage cannot be deemed an interference with that contract; it was simply an assignment of rights under that contract. Moore was not pressured or coerced to sell the Note; he simply preferred the lump sum offered by the Duffys to the uncertainties and problems posed by remaining the Noteholder.
Moore's illness no doubt contributed to his decision to assign the Note. He had more serious, life-threatening problems to deal with; he did not need the aggravation involved in collecting from Buster.
Nor can the Duffys' insistence that Moore, Inc. commence foreclosure as a pre-condition of their purchase of the Note be deemed an interference with contract when, as here, there was abundant cause for foreclosure in view of the number of uncured events of default. Moreover, the commencement of the foreclosure action during Moore, Inc.'s tenure as Noteholder had no practical consequence, since it preceded by only a few days Goffe, Inc.'s purchase of the Note. There can be no doubt that, once Goffe, Inc. had been assigned the Note, it had more than adequate grounds for foreclosure.
For all these reasons, judgment shall enter for the defendants on Counts Seven and Eight, alleging intentional interference with contract and advantageous relations.
ORDER
For the reasons stated above, it is hereby ORDERED that judgment enter for the defendants on Counts Two, Three, Seven, and Eight. Statutory costs are awarded to the defendants.
_____________________________ Ralph D. Gants Justice of the Superior Court
DATED: April 2000