On Oct. 10, the Massachusetts Appeals Court addressed when a breach of contract violates Chapter 93A in Green Paradise Servs., LLC. V. Hatch Landscape & Design, Inc.

In this case, the plaintiff (a subcontractor) sued the defendant (its general contractor) for breach of contract and violation of Chapter 93A, Section 11. The plaintiff asserted that the general contractor failed to pay for work performed under a written contract to remove snow and ice from various businesses. The jury found that the defendant breached the contract and violated Section 11. The defendant’s appeal concerned the Section 11 finding only.

The trial evidence demonstrated that the plaintiff completed the work as agreed. The defendant had not raised concerns about the quality of the work but failed to pay the full amount owed. The defendant did not withhold payment to force the plaintiff to do extra work or to secure additional benefits under the contract. Although the defendant asserted at trial that the plaintiff breached the contract by overbilling its time, the defendant did not present any evidence it had previously communicated this concern to the plaintiff.

Based on the record, the Appeals Court vacated the Section 11 verdict because a mere breach of contract (even an intentional and “unseemly” one) does not in itself amount to an unfair act or practice under Sections 2 and 11. Rather, some “additional factor” is needed to trigger Chapter 93A liability. For example, a breach that disregards known contractual arrangements and intends to secure benefits for the breaching party, i.e., when a breaching party uses the breach as leverage to extract additional contractual benefits or renegotiate the parties’ relationship, violates Chapter 93A. If the defendant had withheld payment as leverage to force the plaintiff to accept a lower rate of payment, that conduct may have violated Chapter 93A, but plaintiff did not present evidence of such leverage at trial. In that regard, the Appeals Court (in a footnote) rejected the defendant’s argument that Section 11 liability cannot arise from “a legitimate dispute over the value of [Green Paradise’s] services.” Although not cited by the Appeals Court, Chapter 93A jurisprudence does contemplate such an argument; however, there was no factual evidence presented at trial to support it here.

Also, according to the Appeals Court, an intent to extract additional benefits from a contract or relationship cannot be reasonably inferred when a contracting party does nothing more than breach a contract and refuses to explain why, which is what occurred here. Nor would the Appeals Court infer Chapter 93A liability from the defendant’s payment of services at the beginning of the winter season (e.g., infer that the defendant had made initial payments as an unfair ploy to induce the plaintiff to plow throughout the season for no pay). Rather, Chapter 93A liability requires a party’s “extortionate conduct” to arise from the breach (or threatened breach) of a contract itself, and not from its initial compliance with the contract.

Despite the jury’s finding that the defendant breached the contract and the Appeal Court’s recognition that such breach was knowing, unjustified, unseemly, and harmful to the plaintiff, that conduct did not rise “to the level of ‘commercial extortion’ or a similar degree of culpable conduct” required to violate Chapter 93A. Accordingly, the Appeals Court vacated the verdict and reversed the related judgment for double damages.

Ultimately, contracting parties should take care when not making contractual payments and knowingly breaching contracts. The result in this case may have been different if a proper factual record was available to support Chapter 93A liability.