Opinion
No. 12–P–1132.
2013-08-14
K & G ENTERPRISES, LLC v. TIAX, LLC.
By the Court (TRAINOR, KATZMANN & SIKORA, JJ.).
MEMORANDUM AND ORDER PURSUANT TO RULE 1:28
This matter stems from the parties' failed attempt to develop a reliable pizza vending machine suitable for commercial use. Following a twelve-day trial, a Superior Court jury awarded the plaintiff, K & G Enterprises, LLC (K & G), $1 million on its claim for negligent misrepresentation against the defendant, TIAX, LLC (TIAX), and awarded TIAX $150,000 on its breach of contract claim against K & G. Both parties appeal, principally from the denial of their respective motions for judgment notwithstanding the verdict. TIAX additionally appeals from certain rulings of the trial judge in connection with its claims for violation of G.L. c. 93A and for misappropriation of intellectual property. We affirm.
We review the motions for judgment notwithstanding the verdict in accordance with the standard set out in Poirier v. Plymouth, 374 Mass. 206, 212 (1978) (determining whether “anywhere in the evidence, from whatever source derived, any combination of circumstances could be found from which a reasonable inference could be drawn in favor of” the prevailing party). In making this evaluation we “construe the evidence in the light most favorable to the nonmoving party and disregard that favorable to the moving party .” O'Brien v. Pearson, 449 Mass. 377, 383 (2007). See Phelan v. May Dept. Stores Co., 443 Mass. 52, 55 (2004). 1. Recovery for negligent misrepresentation. TIAX argues that K & G failed to prove that it was damaged by alleged misrepresentations made by TIAX regarding the readiness or reliability of the pizza vending machine, because the jury found that TIAX did not breach the parties' contracts.
In TIAX's view, the verdicts in TIAX's favor on K & G's breach of contract claims constituted an implied finding by the jury that TIAX substantially performed both the phase 1 and phase 2 contracts. Based on that reasoning, TIAX insists that K & G could not have been harmed as a result of any misstatements made by TIAX in connection with those contracts and that the jury improperly awarded $1 million in damages to K & G.
In order to succeed on a claim for negligent misrepresentation, K & G had to prove that TIAX “in the course of [its] business, profession or employment, or in any other transaction in which [it had] a pecuniary interest, suppli[ed] false information for the guidance of others in their business transactions without exercising reasonable care or competence in obtaining or communicating the information, that those others justifiably relied on the information, and that they suffered pecuniary loss caused by their justifiable reliance upon the information.” Cumis Ins. Soc., Inc. v. BJ's Wholesale Club, Inc., 455 Mass. 458, 471–472 (2009) (internal quotation marks omitted).
In accordance with the jury instructions, however, the jury could have found that TIAX's obligations under the contracts were not substantially performed, but rather were excused. The judge instructed the jury that TIAX was excused from performing the contracts under the following circumstances: (1) if the jury found that K & G failed to complete or perform its own obligations under the contracts or prevented TIAX's performance, (2) if K & G accepted lesser performance, under accord and satisfaction principles, or (3) with respect to phase 1, if K & G waived TIAX's performance. Thus the jury could have found that TIAX, although it failed to provide what it promised under the contracts, was not liable for breach of contract based on those defenses, in which case K & G could not recover on its contract claims.
Nevertheless, this finding would not have foreclosed K & G's recovery for negligent misrepresentation. “Misrepresentation may exist independent of a contractual relationship between the parties.” Twin Fires Inv., LLC v. Morgan Stanley Dean Witter & Co., 445 Mass. 411, 423 (2005). In the Twin Fires case, the plaintiff investors prevailed on their misrepresentation claim against a stockbroker, despite losing their breach of contract claim against him due to the failure of a condition precedent. Both claims arose from the stockbroker's promise to purchase shares of stock from an initial public offering. Similarly, on the record here, TIAX has not persuaded us that the jury's finding against TIAX on the negligent misrepresentation claim was necessarily inconsistent with its findings for TIAX on K & G's breach of contract claims, where the facts could support a finding that TIAX's contractual performance was excused.
See, e.g., Fox v. F & J Gattozzi Corp., 41 Mass.App.Ct. 581, 588 (1996) (plaintiffs prevailed on negligent misrepresentation and contract claim based on defendant's promise to provide them with retirement benefits); Kitner v. CTW Transp., Inc., 53 Mass.App.Ct. 741, 742 (2002) (jury found for plaintiffs on their negligent misrepresentation claim, while finding for defendant on plaintiffs' breach of contract claim, both arising from the parties' contract to purchase a truck which required maintenance of insurance).
Nor does it appear that TIAX objected to the form of the special questions on the issue or to the verdicts as inconsistent prior to the jury's dismissal. See Adams v. United States Steel Corp., 24 Mass.App.Ct. 102, 104–105 (1987) (issue not preserved for appeal where there was no objection to the form of the special questions or to the jury's verdicts as inconsistent before the jury were discharged).
What is prohibited, rather, is recovery of duplicative damages where liability in both contract and tort is found, based on the same set of facts. See Charles River Constr. Co. v. Kirksey, 20 Mass.App.Ct. 333, 345–346 (1985) (plaintiff prevailed on tort and contract claims in connection with the parties' construction project, but tort damages were subsumed in contract damages where facts did not justify a separate recovery).
The case of Cumis Ins. Soc., Inc. v. BJ's Wholesale Club, Inc ., 455 Mass. 458 (2009), upon which TIAX seeks to rely, is factually distinguishable. There the basis of the claim for misrepresentation was statements made by the defendants to a party other than the plaintiffs. As the Supreme Judicial Court noted in Cumis, the plaintiffs were attempting to rely on cases for negligent misrepresentation “based on representations in a third-party contract for professional services.” Id. at 475 n. 26. There were no direct representations in Cumis, and the exception had no application. Cumis has no relevance here because the representations at issue were made directly by the defendant to the plaintiff.
“Indulging, as we must, every reasonable intendment in favor of the verdicts,” id. at 343, the evidence, viewed in the light most favorable to K & G, supports the jury's finding of negligent misrepresentation against TIAX and the damages awarded on that claim. See Kitner v. CTW Transport, Inc., supra at 749–750. In reaching this conclusion, we reject TIAX's claims on appeal that pertain to the jury's assessment of the credibility of the witnesses or the weight accorded the evidence. See Phelan v. May Dept. Stores Co., 443 Mass. at 55.
Among the various statements made by TIAX that could support the jury's findings, we note in particular that in the summer of 2006, after TIAX failed to produce a machine suitable for field-testing as the phase 1 contract required, TIAX, despite its lack of performance, made representations that induced K & G not to terminate the contract and to execute the phase 2 contract. More specifically, Puzant Khatchadourian, the president of K & G, testified that, in July, 2006, after visiting another engineering company to see if it could succeed where TIAX had failed, he was persuaded to stay with TIAX. He did so in reliance on the statements of Philip Carbone, TIAX's project manager, that the TIAX engineers had learned the information required to complete the project, that a field-test demonstration unit would be ready soon, and that TIAX would deliver the field-test demonstration unit if K & G proceeded to the phase 2 contract.
The jury could have found that, in reliance on TIAX's representations, K & G was induced to waive its rights under the phase 1 contract by signing the phase 2 contract, which, under the express terms of the phase 1 contract, constituted acknowledgement of TIAX's satisfactory completion of phase 1. The jury could have also found that TIAX abandoned the plan for field-testing once the phase 2 contract was signed, and that a field-test demonstration unit was, in fact, nowhere near completion in July, 2006.
K & G presented sufficient evidence for the jury to have reasonably found that Carbone's statements to Khatchadourian in July of 2006 were false and negligent.
Carbone testified that the plan for field-testing was abandoned because the logistics would have been difficult and costly, the equipment necessary to maintain the machine in the field was not yet developed nor did TIAX have a plan to develop one, and someone would have had to oversee the machine almost on a constant basis. The jury reasonably could infer that TIAX was aware of those problems when Carbone made the statements to Khatchadourian to induce him not to terminate his relationship with TIAX.
Based on the jury instructions regarding damages for negligent misrepresentation, the jury could also have found that K & G presented sufficient evidence to support the award of $1 million in damages. That sum was consistent with the amount paid by K & G to TIAX over the months following the initial six-week assessment period, and reasonably could be viewed by the jury as the value of a field-test demonstration unit that TIAX promised but never produced. TIAX now complains that benefit of the bargain damages were not available to K & G for negligent misrepresentation, but TIAX did not object to the jury instructions on that basis.
In any event, we do not consider the amount awarded as “greatly disproportionate to the injury proved or as represent[ing] a miscarriage of justice.” Brewster Wallcovering Co. v. Blue Mountain Wallcoverings, Inc., 68 Mass.App.Ct. 582, 611 n. 65 (2007), quoting from Egan v. Holderman, 26 Mass App.Ct. 942, 944 (1988). See, e.g., Danca v. Taunton Sav. Bank, 385 Mass. 1, 9 (1982) (plaintiffs entitled to be compensated for all pecuniary loss as a result of reliance on misrepresentation).
At the charge conference, TIAX stated its opposition to K & G's claim for negligent misrepresentation generally, citing its directed verdict motion and reiterating its position that the statements were not actionable because they were made in the course of performing the contract and were promissory in nature. We do not view that objection as relieving TIAX from the requirement to bring to the judge's attention specific aspects of the instructions on the negligent misrepresentation claim with which it now takes issue. See MacCuish v. Volkswagenwerk A.G., 22 Mass.App.Ct. 380, 396–397 (1986), S. C., 400 Mass. 1003 (1987) (general objection, without explaining specific ground relied on by defendants, not adequate to give the judge reason to believe his charge was incorrect).
Finally, TIAX has not shown that the limit of liability provisions in the contracts, which limit damages to the total amount of compensation paid, applied to the damages awarded by the jury for K & G's negligent misrepresentation claim. As the judge observed, there is nothing in the record to indicate that the jury awarded damages for misrepresentations that arose solely in connection with one contract or the other.
2. Statements of opinion, puffery, or promise. TIAX maintains that the jury committed error in finding for K & G on its negligent misrepresentation claim because TIAX's statements regarding the pace of the project and readiness and reliability of the pizza vending machine for field-testing were not statements of fact. Rather, TIAX maintains that the statements were nonactionable opinions and puffery. On this point, the judge instructed the jury that to support a negligent misrepresentation claim, the defendant's statement must be one of fact, “not of expectation, estimate, opinion or judgment. Representations which are regarded as puffing or as matters of belief or opinion or that are promissory in nature are not actionable.”
The jury could have reasonably found that the evidence demonstrated that TIAX had been working on the field-test demonstration unit for seven months and had been repeatedly testing the capacity of the machine to make pizzas back-to-back, when it made the statements to Khatchadourian to induce him not to terminate the phase 1 contract and to proceed to phase 2. We agree with K & G that the facts of this case are more akin to those in Millen Indus ., Inc. v. Flexo–Accessories Co., 5 F.Supp.2d 72 (D.Mass.1998) (statement made, after testing, that press would work properly, could be understood as statements about existing configuration of machine), than Logan Equip. Corp. v. Simon Aerials, Inc., 736 F.Supp. 1188, 1202 (D.Mass.1990) (statements deemed opinions and estimates where “design and construction of lift had not even truly begun” when representations made). See also Pietrazak v. McDermott, 341 Mass. 107, 110 (1960) (builder liable where house was substantially finished when he stated that the basement would get no water). The jury could have found from the evidence that Carbone's statement in July, 2006, that TIAX's engineers had learned what was needed to complete the project and that a unit suitable for field-testing was nearly complete, was one of fact rather than opinion or puffery.
TIAX additionally argues that there was no evidence from which the jury could have found that the representations regarding the pizza vending machine's status were reasonably susceptible of actual knowledge and that K & G needed to present expert testimony on the issue. But in connection with the negligent misrepresentation claim, the trial judge instructed the jury to consider whether TIAX used the amount of care that a reasonable person would use in the circumstances, and not that of a competent engineering firm, and TIAX did not object to the instruction on that basis.
See, e.g ., Freeman v. Planning Bd. of W. Bolyston, 419 Mass. 548, 559, cert. denied, 516 U.S. 931 (1995) (where neither party objected to instruction, it became the law of the case). TIAX also suggests that K & G failed to put forth sufficient evidence to demonstrate that TIAX did not intend to perform as promised or that TIAX had superior knowledge of the machine's status at the time the representations were made regarding its reliability and readiness. While a defendant's lack of present intent to perform or superior knowledge have been recognized as exceptions to the rule that statements that are promissory in nature do not constitute misrepresentations, see Logan Equip. Corp. v. Simon Aerials, Inc., 736 F.Supp. at 1200, they were not included as such in the jury instructions.
To the contrary, when the jury sought clarification regarding the reasonable person standard, TIAX's counsel argued in favor of the instruction already given by the judge as to the amount of care a reasonable person would use in the circumstances.
Lack of evidence on those factors, therefore, cannot constitute grounds for setting aside the verdict. See, e.g., Brighetti v. Consolidated Rail Corp., 20 Mass.App.Ct. 192, 198 (1985) (question is whether the jury, applying the law as declared by the judge, had sufficient facts to support their finding).
TIAX did argue in its motion for directed verdict, citing Yerid v. Mason, 341 Mass. 527, 530 (1960), that “statements of opinion, of conditions to exist in the future, or of matters promissory in nature are not actionable,” but the judge's instructions were consistent with that principle.
3. G. L. c. 93A claims. In our view, the judge correctly ruled that the evidence was insufficient to support the jury's findings that K & G violated G.L. c. 93A, § 11. The judge instructed the jury that an instance of negligent misrepresentation “may be so extreme or egregious as to constitute a deceptive act or practice,” but we think, at most, the evidence showed that both parties, toward the end of their relationship, were guilty of finger-pointing and frustration as success continued to elude them. The jury were also instructed that a misrepresentation, to be negligent, must also be material. We agree with the judge that the “regrettable” incident of K & G's attorneys masquerading as investors when they visited TIAX's facility in December, 2007, was tangential to the issues of the case and, thus, was not material.
4. Misappropriation of intellectual property. TIAX did not move for a new trial in the Superior Court based on the exclusion of John Collins's testimony in support of its intellectual property claims, and does not seek that relief here. TIAX asks instead that we vacate the jury's finding that K & G did not breach the parties' intellectual property agreement and rule for TIAX as a matter of law, based on the language of the contract. We reject the premise, as it is apparent from the record that disputed facts prohibit our ruling on the claim as a matter of law.
5. K & G's cross appeal. K & G argues that the trial judge should have entered judgement notwithstanding the verdict on K & G's breach of contract claim against TIAX for the phase 2 contract. Specifically, K & G alleges that based on an earlier summary judgment ruling and the undisputed evidence at trial, the jury should have found that the contract required TIAX to deliver a prototype pizza vending machine that could achieve certifications from the National Sanitation Foundation (NSF) and Underwriter Laboratories (UL). The jury could have found from the evidence, and in accordance with the jury instructions pertaining to the breach of contract claims, that K & G prevented TIAX's completion of the phase 2 contract. Consequently, there was evidence to support the jury's finding that K & G was precluded from recovery for TIAX's failure to complete the NSF/UL certification process. The evidence, viewed in a light most favorable to TIAX,
showed that while TIAX was prepared to continue its efforts under phase 2, it was ordered by K & G to stop work and turn over the pizza vending machines, prior to completion of the work. Thus, the jury could have reasonably found that TIAX was thereby prevented from pursuing certification.
For purposes of K & G's cross appeal, we refer to the facts, as the jury could have found them, set forth in TIAX's blue brief, at page 8, and at pages 14–16.
As to K & G's argument that the parties' modification of the phase 1 contract lacked consideration, we agree with the judge that TIAX's promise to go forward with phase 2, in the face of overruns totalling $300,000 from phase 1, satisfied the requisite exchange of promises to support K & G's oral agreement to contribute $150,000 towards the overruns. See Meng v. Trustees of Boston Univ., 44 Mass.App.Ct. 650, 651 (1998). The jury were entitled to credit testimony to that effect, and we do not agree that the evidence on that claim was speculative.
TIAX's request for an award of appellate attorney's fees is denied.
Judgment affirmed.