AMERICAN MGMT. SERV. v. George S. May Intern. Co.

• Decision Date: 01 April 1996
• Docket Number: Civil Action No. 95-12155-NG.
• Citation: 933 F. Supp. 64
• Parties: AMERICAN MANAGEMENT SERVICES, INC., Plaintiff, v. GEORGE S. MAY INTERNATIONAL CO. and Donald J. Fletcher, Defendants.
• Court: U.S. District Court — District of Massachusetts

933 F. Supp. 64

AMERICAN MANAGEMENT SERVICES, INC., Plaintiff, v. GEORGE S. MAY INTERNATIONAL CO. and Donald J. Fletcher, Defendants.

Civil Action No. 95-12155-NG.

United States District Court, D. Massachusetts.

April 1, 1996.

COPYRIGHT MATERIAL OMITTED

Gregory C. Keating, Karen M. Collari, Thomas E. Shirley, Choate, Hall & Stewart, Boston, MA, for George S. May International Company and Donald J. Fletcher.

Mark A. Berthiaume, Goldstein & Manello, P.C., Boston, MA, for American Management Services, Inc.

MEMORANDUM AND ORDER

GERTNER, District Judge.

I. INTRODUCTION

Before me is a Motion by defendants George S. May, and Donald J. Fletcher To Stay This Proceeding Given the Existence of Parallel State Court Proceedings Currently Pending in Illinois, and To Dismiss Counts I and II as They Fail to State a Claim as a Matter of Law, filed October 3, 1995 docket entry 2. For the reasons set forth below, defendants' motion is ALLOWED.

This action involves a dispute between two management consulting firms, plaintiff American Management Services, Inc. ("AMS") and defendant George S. May International Co. ("May"). In early 1995, seven May employees quit to take up employment with AMS. They did so in spite of the fact that they had all signed non-competition agreements which prohibited them from using proprietary information or working in similar business for six months after leaving May.

In response to this mass exodus, May instituted legal proceedings in Illinois against the former employees, and against AMS (collectively "the Illinois actions"). May instituted actions against five of the employees in the Circuit Court of Cook County, Illinois. These actions alleged violation of non-competition agreements. May also instituted actions against two other former employees in federal district court (also in Illinois), seeking arbitration over alleged breaches of non-competition agreements. In addition to suits against individual employees, May also instituted an action in the Circuit Court of Cook County against AMS, charging it with tortious interference with prospective advantage and tortious interference with contract.

In September and October of 1995, four of May's five actions alleging breach of non-competition agreement were dismissed. The reasons for those dismissals are not apparent from the record before this Court, however it is apparent that May was given leave in each case to amend its complaint.¹ Also in October, 1995, one of May's actions seeking arbitration was transferred to this Court. On October 27, 1995, the Circuit Court of Cook County denied AMS's motion to dismiss the complaint against it for lack of personal jurisdiction, and AMS's petition for leave to appeal to the Illinois Appellate Court was denied on December 21, 1995.

AMS commenced the instant action in Middlesex Superior Court on September 28, 1995 and it was removed to federal court by defendants. In this action AMS charges that the civil actions instituted by May in Illinois constitute violations of M.G.L. ch. 93A (Count I), abuse of process (Count II), tortious interference with advantageous business relationships (Count III), and tortious interference with prospective advantage (Count IV). Also named is defendant Donald J. Fletcher, the president of May.

Currently before the Court is defendants' Motion to Stay Proceedings and to Dismiss Counts I and II. For the following reasons, this motion is ALLOWED.

II. DISCUSSION

A. Dismissal of Counts I and II

1. Standard of Review

It is not proper to dismiss a complaint under Fed.R.Civ.P. 12(b)(6) unless "it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations." Hishon v. King & Spalding, 467 U.S. 69, 73, 104 S.Ct. 2229, 2232, 81 L.Ed.2d 59 (1984).

In making this determination, a court should accept the well-pleaded complaint as true and indulge every reasonable inference in favor of the plaintiff. Correa-Martinez v. Arrillaga-Belendez, 903 F.2d 49, 52 (1st Cir.1990). This standard of review "does not mean, however, that a court must (or should) accept every allegation made by the complainant, no matter how conclusory or generalized." U.S. v. AVX Corp., 962 F.2d 108, 115 (1st Cir.1992). "A reviewing court is obliged neither to credit bald assertions, periphrastic circumlocutions, unsubstantiated conclusions, or outright vituperation, nor to honor subjective characterizations, optimistic predictions, or problematic suppositions. Empirically unverifiable conclusions, not logically compelled, or at least supported, by the stated facts, deserve no deference." Id. (citations and internal quotations omitted).

2. Dismissal of Count I (Chapter 93A)

In Count I, AMS alleges that by instituting the various lawsuits described above, May and Fletcher violated the Massachusetts Consumer Protection Act, M.G.L. ch. 93A § 11. This act creates a cause of action against those who engage in unfair or deceptive trade practices or unfair methods of competition.

Defendants move to dismiss this count because, they contend, the violations of Chapter 93A alleged by plaintiffs did not take place "primarily and substantially within the Commonwealth." The statute provides that "no actions shall be brought or maintained under this section unless the actions and transactions constituting the alleged unfair method of competition or the unfair or deceptive act or practice occurred primarily and substantially within the commonwealth." M.G.L. ch. 93A § 11. The statute places the burden of proof on this issue on the defendant. Id.

Plaintiffs oppose this motion by claiming that "because AMS has alleged that the Defendants have acted (and will continue to act) in Massachusetts," the question of where the violations occurred is one of fact which is not susceptible to a motion to dismiss. (Plaintiff's Opposition at 19). This argument is, simply put, sophistry.

First, nowhere in the complaint is there any allegation that defendants acted in Massachusetts. The sum total of the allegations contained in the complaint is that defendants instituted the aforementioned lawsuits in Illinois. The word "Massachusetts" never appears in the factual recitation except to identify the domicile of the plaintiff.

Moreover, even if the complaint could be read to allege some activity in Massachusetts (e.g. service of process), there is no reasonable interpretation of the allegations in the complaint suggesting activities occurring "primarily and substantially" in Massachusetts. The only wrongdoing alleged in the complaint is the institution of lawsuits in Illinois. The prosecution of these lawsuits will, presumably, take place entirely in Illinois. It is thus patently clear that even if some of the activities related to the lawsuits take place in Massachusetts, they will "primarily and substantially" take place in Illinois.

The case law cited by plaintiffs does nothing to undermine this analysis. The Massachusetts Supreme Judicial Court has considered the meaning of the term "primarily and substantially in Massachusetts" on only two occasions, neither of which seems particularly germane here.

In Burnham v. Mark IV Homes, 387 Mass. 575, 441 N.E.2d 1027 (1982), the Court held that a Chapter 93A violation arising from the breach of an implied warranty of merchantability on modular homes takes place at the point of installation. To the extent that such a breach also constitutes a Chapter 93A violation, that violation also occurs at the place of installation. Id. at 579-582, 441 N.E.2d 1027. In Bushkin Associates v. Raytheon Co., 393 Mass. 622, 473 N.E.2d 662 (1985), the Court held that a misrepresentation made by a person in Massachusetts to a person outside of Massachusetts did not occur primarily within Massachusetts. Id. at 637-639, 473 N.E.2d 662.

To the extent that these cases shed any light on the issue at hand, neither suggests that prosecution of out-of-state lawsuits against Massachusetts residents takes place within the Commonwealth. No more helpful to plaintiff's cause is Clinton Hosp. Ass'n v. Corson Group, Inc., 907 F.2d 1260 (1st Cir. 1990). Clinton involved an action by a Massachusetts hospital against a New York based physician recruitment firm. The hospital alleged that the firm had misrepresented the quality of the physicians it had recruited. Applying a three factor test, the Court concluded that the trial judge's finding that the deception had taken place primarily and substantially in Massachusetts was not clearly erroneous. Id. at 1264-1267.

The three factors examined by the Clinton court were 1) the location of the defendant at the time the deception occurred, 2) the location of the plaintiff when it received the deceptive statements, and 3) where the plaintiff suffered its loss. Id. at 1265-1266. The Court emphasized that even if the defendant was outside of Massachusetts when the misstatements were made, the statute looks to the location of both "actions and transactions." Since a transaction involves both parties, the Court concluded that it occurs where both parties are located. Id. at 1266.

The reasoning of Clinton is inapplicable to the type of claim at issue here. Plaintiff's claim does not involve a transaction, but a series of actions associated with the prosecution of the Illinois lawsuits. The harm to the plaintiffs results not from anything injected into Massachusetts by defendants, but from ongoing activities taking place in Illinois. In Clinton, by contrast, the entire claimed wrongdoing of the defendants consisted of misrepresentations made into Massachusetts. In Clinton the court ultimately concluded that no one of its factors was determinative and that a "pragmatic, functional" approach was warranted.

In essence, AMS contends it is entitled to the benefit of Chapter 93A solely because it is a Massachusetts domiciliary. As the Massachusetts Appeals Court has noted, this reasoning would denude the "primarily and substantially"...