/>iIn Dworman v. PHH Mortg. Servs., the District of Massachusetts recently issued a decision that deals with various aspects of Chapter 93A jurisprudence. Some of the court’s statements about Chapter 93A, however, may benefit from clarification.
As to the dispute at issue, the plaintiff (a mortgagor) alleged that the defendants (mortgage servicers) breached a contract to forgive mortgage debt, and that defendants’ alleged failures were unfair or deceptive under Chapter 93A, Section 9. The defendants countered with allegations that the plaintiff breached their contract, and the court granted their motion for summary judgment against the plaintiff.
When addressing Chapter 93A, the court discussed the Chapter 93A “Legal Landscape” in its decision. In particular, the court concluded that, although sending a demand letter is prerequisite to a Section 9 suit, the “failure to respond or an inadequate response to a demand letter is not itself a violation of Chapter 93A.” First, a 30-day demand letter is required in most instances; however, a claimant does not need to send a demand letter to trigger Chapter 93A jurisdiction if the claim “is asserted by way of counterclaim or cross-claim, or if the prospective respondent does not maintain a place of business or does not keep assets within the commonwealth” as set forth in Section 9(3). Second, as to not responding to demand letters or providing an inadequate response, it is important to understand and appreciate that a bad faith refusal to grant relief in response to a demand letter “with knowledge or reason to know that the act or practice complained of violated said section two” may expose a defendant to double or treble damages, also as set forth in Section 9(3). Responses to demand letters may not only limit multiple damages, but may also cut off a plaintiff’s attorneys’ fees and costs.
Also, when explaining that a mere breach of contract without more does not violate Chapter 93A, the court stated that a defendant’s action must “attain a level of rascality that would raise an eyebrow of someone inured to the rough and tumble of the world of commerce.” However, the Massachusetts Supreme Judicial Court (SJC) abandoned the rascality language as uninstructive in Massachusetts Employers Ins. Exch. v. Propac-Mass, Inc., 420 Mass. 39 (1995). Instead, according to the SJC, courts should focus on the nature of the challenged conduct and on the purpose and effect of that conduct as the crucial factors in making a Chapter 93A fairness determination. That SJC standard has been used by the First Circuit Court of Appeals, along with an additional evaluation of “the equities between the parties,” the “plaintiff’s conduct,” and “[w]hat a defendant knew or [reasonably] should have known.” (Schuster v. Wynn MA, LLC, 118 F.4th 30 (2024)). As to when a breach of contract would violate Chapter 93A, there must be a “plus factor” with the breach. For example, conduct in disregard of known contractual arrangements and intended to secure benefits for the breaching party may violate Chapter 93A. In other words, conduct used as leverage to destroy another party’s rights is viewed as commercial extortion and may violate Section 2. A good faith contractual dispute regarding whether money is owed, or performance of some kind is due, may not.
