Court: District Court, D. Massachusetts; November 17, 2015; Federal District Court
Barr Incorporated, the Plaintiff, filed a lawsuit against Studio One, Inc., the Defendant, claiming tortious interference with contractual and advantageous relations, as well as unfair and deceptive trade practices under Massachusetts General Laws Chapter 93A. The Defendant's motion to dismiss the amended complaint was based on the assertion that the Plaintiff failed to state a claim for which relief could be granted and on a claim preclusion argument. The court denied the motion to dismiss.
The case is based on diversity jurisdiction, as Barr is a Connecticut corporation and Studio One is a Massachusetts corporation, with the Plaintiff seeking $1,000,000 in damages, exceeding the $75,000 threshold required for federal jurisdiction.
The dispute centers on the Northbrook Village II Project in Berlin, Massachusetts, where Barr served as the general contractor under a contract with the project owner, Northbrook Village II, Inc. Studio One was engaged by the owner to administer the contract and was designated as the Initial Decision Maker for resolving claims related to the contract. The contract stipulated that Studio One was to make decisions in good faith and without bias, and it could not certify a termination "for cause" without following specific procedural requirements.
Barr alleges it performed its contractual obligations properly, but delays arose from Owner and Studio One's failure to prepare timely designs for necessary changes to the project. These delays extended the project completion date and entitled Barr to additional time and payment, which it claims were wrongfully withheld by the Owner and Studio One. Despite being entitled to additional compensation under certain conditions, Barr's claims were obstructed by the defendants, who also faced funding issues that affected their ability to meet contractual obligations.
On March 20, 2013, an "Owner Project meeting" addressed the Owner's financial mismanagement, which Plaintiff claims Defendant was aware of despite the unclear attendance. Plaintiff alleges that Owner and Defendant conspired to create reasons to terminate Plaintiff's contract, with the Owner seeking to excuse its mismanagement and avoid payments. To facilitate this, Owner required Defendant to certify sufficient grounds for termination, while Defendant insisted on the contract termination to receive compensation for project delays. Defendant ultimately certified grounds for termination despite knowing they were unfounded. Following this, Owner refused to pay Plaintiff for requisitions from March to May 2013 and claimed a breach of contract without specificity. On June 3, 2013, Owner notified Plaintiff of its intention to terminate the contract, alleging that Plaintiff materially breached it by not providing skilled workers or proper materials, despite knowing these claims were false and that delays were not Plaintiff's fault.
Plaintiff argues that Defendant influenced the Owner to breach the contract for financial gain, enabling Defendant to receive benefits it wouldn't have otherwise obtained. The termination notice included a "Corrective Action Plan" deemed onerous, indicating that Owner and Defendant anticipated Plaintiff would not comply. After receiving the termination notice, Plaintiff filed a claim regarding the improper certification, which Defendant ignored, failing to adhere to the claims procedure and acting without good faith. Plaintiff was formally terminated on June 30, 2013, and asserts that Defendant knowingly interfered with Plaintiff's legitimate contracts and economic opportunities, which Defendant was aware of.
On November 13, 2013, Plaintiff initiated a lawsuit against Owner in the Worcester Division of the U.S. District Court for Massachusetts, alleging breach of contract and violations of Chapter 93A. On August 14, 2014, all claims were dismissed with prejudice through a stipulation involving Hartford Fire Insurance Company. Subsequently, on April 30, 2015, Plaintiff filed a new complaint, amending it on June 8, 2015, after which Defendant filed a motion to dismiss.
When evaluating a motion to dismiss under Rule 12(b)(6), the court must accept all well-pleaded facts as true and draw reasonable inferences in favor of the plaintiff. The burden lies with the moving party to show that the complaint lacks sufficient factual matter to establish a plausible claim for relief. A claim is deemed plausible when the plaintiff provides enough factual content for the court to reasonably infer the defendant's liability. The court must credit factual assertions while disregarding mere conclusory statements.
Plaintiff's amended complaint includes three counts: tortious interference with contractual relations, tortious interference with advantageous relations, and unfair and deceptive trade practices under Chapter 93A. Defendant seeks to dismiss the first two counts for failure to state a claim and argues that they should also be dismissed based on claim preclusion due to the earlier stipulation of dismissal. Additionally, Defendant contends that Count III, which relies on the allegations from Counts I and II, should be dismissed for the same reasons.
To establish a claim of tortious interference with a contract under Massachusetts law, a plaintiff must demonstrate: 1) existence of a contract with a third party; 2) the defendant knowingly induced the third party to breach that contract; 3) the interference was intentional and improper in motive or means; and 4) the plaintiff suffered harm due to the defendant's actions. Similarly, claims of tortious interference with advantageous relations require proof of a known advantageous relationship, deliberate interference with improper motive or means, and resulting economic harm. Both claims necessitate a showing of improper motive or means.
The defendant contends that the plaintiff must meet a heightened standard of "actual malice" for tortious interference claims involving corporate officials or supervisors acting within their employment scope, citing precedent cases. This argument is based on the notion that such officials have a conditional privilege, justifying a higher pleading standard. The defendant references several cases to support this claim, including Bratt v. IBM, which recognized conditional privilege for potentially defamatory communications serving legitimate business interests, and Shore v. Retailers Commercial Agency, which similarly acknowledged such privileges in the context of credit reports.
However, the plaintiff argues that the heightened pleading standard does not apply in this case, as it does not involve a corporate official or supervisor acting in their official capacity. The court finds the defendant's reasoning unconvincing, confirming that the heightened standard from those cited cases is not relevant to the current situation.
Defendant's reliance on defamation cases is ineffective, as they do not align factually or legally with the tortious interference claims at issue. The New York case, BIB Construction, does not aid the Defendant, as it merely required a lack of good faith and independent tortious action, which Plaintiff has sufficiently alleged. Importantly, Massachusetts law does not necessitate a showing of malice for intentional interference torts, as established in United Truck Leasing Corp. v. Geltman, where the Supreme Judicial Court removed the term "malicious" from the elements of such torts. An exception exists for employment cases involving corporate officials, but it is not applicable here. Plaintiff is not required to plead actual malice, and beyond this argument, Defendant has not claimed that Plaintiff has failed to state plausible tortious interference claims.
Upon reviewing the allegations, Plaintiff has sufficiently met the elements for tortious interference with a contract by asserting that it entered a contract with Owner and that Defendant induced its termination through false certification. This certification was allegedly motivated by a desire for additional compensation, indicating improper actions. Plaintiff has also claimed economic harm due to lost payments under the contract. For tortious interference with advantageous relations, Plaintiff alleged relationships with subcontractors that Defendant knowingly disrupted, leading to identifiable economic harm from prospective contracts lost due to termination. Consequently, the court denies Defendant's motion to dismiss Counts I and II.
Regarding claim preclusion, Defendant argues for dismissal based on res judicata, which requires a final judgment on the merits, identicality of causes of action, and identicality of parties between the prior and current suits. The First Circuit has advised caution in applying res judicata to nonparties.
The parties dispute whether the stipulation of dismissal in Plaintiff's prior suit against Owner constitutes a "final judgment on the merits." Both cite Langton v. Hogan, which clarifies that consent judgments do not serve as rulings on the merits applicable to non-parties under principles of stare decisis or claim/issue preclusion. While parties in the earlier case are bound by the stipulation, Defendant, not being a party to that suit, is not bound by it. The concept of privity, which would require Defendant to have significantly controlled Owner's involvement or acted as its representative, is not satisfied here. Even if Defendant met the first prong of claim preclusion, it would still fail to demonstrate sufficient identicality of parties, as established by case law including Taylor v. Sturgell. The reasoning in Taylor applies broadly to nonparties and does not distinguish between plaintiffs and defendants. Therefore, Defendant cannot satisfy the requirements for claim preclusion in this case.
The Court in Taylor affirmed the principle that a litigant is not bound by a judgment if they were not a party to it, while identifying six exceptions to this general rule regarding nonparty preclusion, noting these are merely a framework. Three exceptions—preclusion by agreement, proxy relitigation, and statutory schemes—are deemed irrelevant. The other three exceptions are relevant but do not apply in this case.
First, a "substantive legal relationship" must exist between the party and nonparty, such as that between property owners or bailors and bailees. Although a legal relationship existed between Defendant and Owner under the AIA contract, it does not meet the substantive criteria outlined by the Court.
Second, nonparty preclusion may occur if a nonparty was adequately represented by a party with the same interests in the earlier suit. However, there is no evidence that Owner acted as Defendant's representative or that the court protected Defendant's interests in the previous case. The contractual provision indicating Defendant's role does not equate to adequate representation in this context.
Lastly, preclusion is applicable if the nonparty "assumed control" over the earlier litigation. The Court found that Defendant could not demonstrate it controlled Owner’s involvement in the prior case. Attempts by Defendant to invoke claim preclusion based on a "close and significant" relationship with Owner are rejected, as the Taylor decision does not allow for a "virtual representation" exception beyond its categorical framework.
Defendant's reliance on the First Circuit's Silva case is misplaced, as the relationship involved there was significantly closer than that between Defendant and Owner. Consequently, because Defendant fails to satisfy the necessary prongs of the claim preclusion test, Plaintiff's case is not barred by claim preclusion.
Count III is dependent on the allegations made in Counts I and II, and the Defendant's motion to dismiss Count III is rejected for the same reasons as Counts I and II, which remain active. The court fully denies the Defendant’s motion to dismiss (Dkt. No. 15). The Defendant's argument involves claim preclusion, a concept under the broader doctrine of res judicata, as clarified by Taylor v. Sturgell. Claim preclusion and issue preclusion collectively contribute to res judicata, with identicality assessed through a transactional approach that ties a cause of action to a set of related facts. Factors for consideration include the temporal, spatial, and motivational relationships among the facts, their suitability as a trial unit, and alignment with the parties' expectations. The earlier case against the Owner involved breach of contract, while the current case involves tortious interference with contractual relations. The Defendant argues that the facts underlying both cases are interconnected, focusing on the circumstances surrounding the Plaintiff's termination under the Contract. The court addresses the concept of "privity," noting that while it can justify preclusion, the Defendant lacks a substantive legal relationship or control over the Owner, which undermines its narrower privity arguments. The broader interpretation of privity does not provide additional grounds for claim preclusion beyond those previously discussed.
