Cash Energy, Inc. v. Weiner

• Decision Date: 26 June 1991
• Docket Number: Civ. A. No. 90-12624-K.
• Citation: 768 F. Supp. 892
• Parties: CASH ENERGY, INC., et al., Plaintiffs, v. Melvin WEINER, et al., Defendants.
• Court: U.S. District Court — District of Massachusetts

768 F. Supp. 892

CASH ENERGY, INC., et al., Plaintiffs, v. Melvin WEINER, et al., Defendants.

Civ. A. No. 90-12624-K.

United States District Court, D. Massachusetts.

June 26, 1991.

Carl K. King, Posternak, Blankstein & Lund, Boston, Mass., for plaintiffs.

Robert S. Sanoff, Nicholas C. Theodorou, Foley, Hoag & Eliot, Boston, Mass., for defendants.

MEMORANDUM AND ORDER

KEETON, District Judge.

This case concerns the alleged environmental contamination of a property in North Andover, Massachusetts, owned and developed by plaintiffs. Over a period of years, defendant corporations engaged in the storage and/or transfer of chemical solvents on a site adjacent to plaintiffs' property. A commercial condominium was created on plaintiffs' property in the fall of 1986.

Now before the court are the following: (1) Defendants' Motion to Dismiss (Docket No. 7, filed December 17, 1990), together with a supporting memorandum (Docket No. 8, filed December 17, 1990); (2) Plaintiffs' Memorandum in Opposition (Docket No. 21, filed April 3, 1991); (3) Affidavit of Mark O. Henry and attached exhibits (Docket No. 22, filed April 3, 1991); and (4) Defendants' Reply Memorandum in Support of their Motion to Dismiss (Docket No. 23, filed May 1, 1991).

At issue here is the motion of all defendants to dismiss plaintiffs' claim under Mass.G.L. c. 93A, and the motion of individual defendants Melvin L. Weiner, William E. Stilwell, Jr., Howard C. Cobin, and James F. Creen ("the individual defendants") to dismiss all claims against them.

I. Chapter 93A Claims

In Count VIII of their Verified Complaint (Docket No. 1, filed October 31, 1990), plaintiffs allege against each of the defendants (both corporate and individual) a claim under the Massachusetts Consumer Protection Act, Mass.G.L. c. 93A, § 11. This is a bold and novel claim. Massachusetts courts have held repeatedly that section 11 extends Chapter 93A to the "business context," Slaney v. Westwood Auto, Inc., 366 Mass. 688, 322 N.E.2d 768, 774-75 (1975), Lantner v. Carson, 374 Mass. 606, 373 N.E.2d 973, 976 (1978), but they have never applied Chapter 93A to a dispute between business entities whose only relationship arises from their ownership and use of neighboring properties.

The primary theory is that defendants are liable because they failed to inform Cash Energy of the contamination of their own site when they discovered the problem in the fall of 1986 — despite their alleged knowledge of Cash Energy's incipient plans for condominium development.

Section 11 provides that:

Any person who engages in the conduct of any trade or commerce and who suffers any loss of money or property, real or personal, as a result of the use or employment by another person who engages in any trade or commerce of an unfair method of competition or an unfair or deceptive act or practice declared unlawful by section two or by any rule or regulation issued under paragraph (c) of section two may, as hereinafter provided, bring an action....

The statute on its face requires that both the injured party and the injuring party be engaged "in the conduct of any trade or commerce." Plaintiffs argue that it does not require any business relationship between the parties. Defendants argue that Chapter 93A does not apply unless the parties share a "business relationship." Memorandum in Support at pp. 5-7.

Two different kinds of "business relationship" are apparent. First, the statutory phrase "unfair method of competition" suggests a competitive relationship; the complaint does not allege that such a relationship existed here. Second, the statutory phrase "unfair or deceptive act" suggests a relationship as parties to a transaction. The complaint does not allege such a relationship, and plaintiffs argue that it need not do so.

Most helpful to the defendants is the statement by the Massachusetts Supreme Judicial Court ("S.J.C.") that "... § 11 of G.L. c. 93A was intended to refer to individuals acting in a business context in their dealings with other business persons,...." Manning v. Zuckerman, 388 Mass. 8, 444 N.E.2d 1262, 1263 (1983) (emphasis added). This statement about the scope of section 11 was cited and restated by the First Circuit in V.S.H. Realty, Inc. v. Texaco, Inc., 757 F.2d 411, 416 (1st Cir. 1985).

On a strictly linguistic analysis, however, the significance of the statement in Manning is less helpful to defendants when one takes account of the full sentence from which the foregoing quotation is extracted:

As this court has frequently stated, § 11 of G.L. c. 93A was intended to refer to individuals acting in a business context in their dealings with other business persons, and not to every commercial transaction whatsoever.

Manning, 444 N.E.2d, at 1263 (emphasis added). This passage was a restatement of past S.J.C. decisions. It did not imply that a new rule was being generated in Manning itself. Also, none of the three cases cited described the scope of section 11 as explicitly requiring a transactional business relationship between the parties. See Lantner, 373 N.E.2d at 976 (1978); Nader v. Citron, 372 Mass. 96, 360 N.E.2d 870, 871 (1977); PMP Associates v. Globe Newspaper Co., 366 Mass. 593, 321 N.E.2d 915, 917 (1975). It would thus seem inappropriate to interpret Manning as formally declaring an additional requirement for stating a claim under Chapter 93A.

The full context also makes clear that the distinction made in Manning was between a transaction in a business context and a transaction not in a business context. Indeed, this has been the focus of the entire section 11 line of cases. As indicated by two more opinions on which the defendants rely, the question invariably has been "whether parties to a transaction are engaged in trade or commerce," Nei v. Burley, 388 Mass. 307, 446 N.E.2d 674, 680, (1983), or "whether a private individual's participation in a given transaction takes place in a `business context.'" Begelfer v. Najarian, 381 Mass. 177, 409 N.E.2d 167, 176 (1980). All of these formulations take as an assumed premise that there was some transaction. The facts of the cases never presented a need to consider a different context.

Nevertheless, when no directly relevant precedents are available to guide this court's resolution of an issue of interpretation of a state statute, dicta (and even implied dicta) in the state court opinions have substantial weight. Moreover, the assumed premise that, apart from claims of unfair competition, section 11 applies only between parties having some transactional business relationship is consistent with the development of Chapter 93A, enacted as a consumer protection act and later extended to the protection of business entities as well. The common thread is protection against unfair acts and practices in transactions.

In view of the history of development of Chapter 93A and the lack of any precedent supporting plaintiffs' novel argument for an expansive reading that, to say the least, tests the limits of common sense, I conclude that the motion to dismiss the Chapter 93A claims in the plaintiffs' complaint must be allowed.

II. Claims Against Individuals

Defendants also attack the legal sufficiency of all claims against the four individual defendants. These claims are variously founded upon the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), § 107, codified at 42 U.S.C. § 9607 (Counts I and II), Mass.G.L. c. 21E (Count III), and the common law actions of trespass and negligence (Counts IV, V, and IX).

A. Grounds for Claims Against Individuals in the Corporate Hierarchy

Traditional principles of corporate law preclude individual liability unless grounds are shown either for piercing the corporate veil or finding active personal involvement in a tortious act. My Bread Baking Co. v. Cumberland Farms, Inc., 353 Mass. 614, 233 N.E.2d 748, 751-52 (1968); Marks v. Polaroid Corporation, 237 F.2d 428 (1st Cir.1956), cert. denied, 352 U.S. 1005, 77 S.Ct. 564, 1 L.Ed.2d 550 (1957). Plaintiffs proceed on the latter theory.

The governing standard has been stated in this way: "What is required is some showing of direct personal involvement by the corporate officer in some decision or action which is causally related to plaintiff's injury." Escude Cruz v. Ortho Pharmaceutical Corp., 619 F.2d 902, 907 (1st Cir.1980). It may be sufficient that "the record indicates an issue of fact concerning the officer's possible involvement in matters that might have caused the plaintiff's injury," Mangual v. General Battery Corp., 710 F.2d 15, 20 (1st Cir. 1983), or concerning whether the officer is "the guiding spirit" in the tortious affair, Marks, 237 F.2d at 435. Nonetheless, a problem remains as to what level of specificity of allegations of involvement and causation is required to survive a motion to dismiss.

CERCLA and analogous statutes have established new bases for legal responsibility—that is, bases beyond the two accepted at common law. If different, the standard for establishing liability under Chapter 21E may be lower than under CERCLA, because the state statute, in addition to applying to all those covered by CERCLA, may apply to persons "who otherwise cause, or are legally responsible for a release or threat of release." Mass.G.L. c. 21E, § 5(a)(5). For the present, however, I assume (as do all parties) that, at least in relation to matters relevant here, the same standard governs CERCLA and Chapter 21E. This assumption is quite plausible, for courts have consistently interpreted the state statute as conforming with CERCLA. E.g., Dedham Water Co. v. Cumberland Farms Dairy, Inc., 889 F.2d 1146 (1st Cir. 1989).

Both CERCLA and Chapter 21E apply to the current "owner and operator" of the site, and plaintiffs attempt to place the individual defendants in this category. The meaning of "owner and operator" is in dispute. A number of courts have held that the crucial characteristic identifying a person or entity...