Chestnut Hill Dev. Corp. v. Otis Elevator Co.

• Decision Date: 18 June 1990
• Docket Number: Civ. A. No. 86-1387-C.
• Parties: CHESTNUT HILL DEVELOPMENT CORPORATION, Plaintiff, v. OTIS ELEVATOR COMPANY, Defendant.
• Court: U.S. District Court — District of Massachusetts

739 F. Supp. 692

CHESTNUT HILL DEVELOPMENT CORPORATION, Plaintiff, v. OTIS ELEVATOR COMPANY, Defendant.

Civ. A. No. 86-1387-C.

United States District Court, D. Massachusetts.

June 18, 1990.

Paul S. Samson, Kevin Hern, Jr., Reimer and Braunstein, Boston, Mass., for plaintiff.

David Abelman, William H. Baker, Gregory M. Kennan, Nutter, MClennen & Fish, Boston, Mass., for defendant.

MEMORANDUM

CAFFREY, Senior District Judge.

This is a contract and unfair trade practices action brought by Chestnut Hill Development Corporation ("Chestnut Hill") against Otis Elevator Company ("Otis") for the alleged delayed installation and defective functioning of five elevators in a condominium complex owned by Chestnut Hill. The matter is now before the Court on defendant Otis' motion for summary judgment or partial summary judgment. Otis has moved for summary judgment on all claims brought by the plaintiff, Chestnut Hill, on the grounds that Chestnut Hill's claims are barred under the doctrines of res judicata and collateral estoppel. Alternatively, Otis has moved for partial summary judgment, requesting this Court to rule against Chestnut Hill on its product defect and Mass.Gen.L. ch. 93A claims on the basis of res judicata and to rule that Chestnut Hill may not recover damages in the form of interest carrying costs on its delay claims¹ because such damages are consequential and not recoverable under this Court's opinion and order of February 19, 1987. For the following reasons, this Court concludes that Otis' motion for summary judgment should be granted in part and denied in part.

I.

Chestnut Hill was the owner and developer of Hampton Place, a condominium project located in Chestnut Hill, Massachusetts. On January 21, 1983, Chestnut Hill entered into a general contract with Vappi & Company, Inc. ("Vappi") for the construction of Hampton Place. On June 17, 1983, the defendant, Otis, entered into a subcontract with Vappi in which Otis agreed to furnish and install a total of five elevators at Hampton Place: one hydraulic elevator, two geared-drive elevators, and two battery powered elevators known in the trade as "Mid-rise Systems with Variable Frequency Drive Control" ("MRVF").

Otis agreed to have all of the elevators in operation at Hampton Place by March 1, 1984 for a price of $375,000. It is not disputed that two elevators were accepted by Vappi on August 3, 1984, two others were accepted on November 20, 1984, and the final elevator was accepted on December 17, 1984. Chestnut Hill complains that once the elevators were eventually installed, they were defective and did not operate properly. The problems with the elevators included excessive car noise during operation, rough and shaky rides, inoperative doors, failure to respond to calls, uneven levelling at floors, noisy ventilating fans, and excessive breakdowns.

On March 27, 1986, Chestnut Hill brought this action against Otis in the Middlesex Superior Court of the Commonwealth of Massachusetts, alleging a breach of contract and several breach of warranty claims² and seeking to recover for damages caused by the delay in installation and the defective operation of the elevators. In its complaint, Chestnut Hill also asserted an unfair and deceptive trade practices claim under Mass.Gen.L. ch. 93A ("Chapter 93A") against Otis seeking treble damages. See Mass.Gen.L. ch. 93A §§ 2, 11. Chestnut Hill alleged that Otis engaged in unfair and deceptive acts and practices in violation of Chapter 93A by making representations as to the exceptional performance of the MRVF elevators to induce Chestnut Hill to purchase them while it knew of their defective design and problems which existed with the functioning of these elevators nationwide. On May 1, 1986, Otis removed this action to this Court pursuant to 28 U.S.C. § 1441. This Court exercises diversity jurisdiction over the action pursuant to 28 U.S.C. § 1332.

A. Middlesex I: Chestnut Hill v. Vappi

On September 16, 1986, Chestnut Hill brought an action in Middlesex Superior Court of the Commonwealth of Massachusetts ("Middlesex I") against Vappi, the general contractor of Hampton Place, and its surety, Insurance Company of North America ("INA"). In its complaint, Chestnut Hill asserted a breach of contract claim, a breach of warranty claim, and a Chapter 93A claim against Vappi. Chestnut Hill also stated a breach of bond claim against North America. Judging from the complaint, Chestnut Hill's 93A claim against Vappi apparently was based on Vappi's defective construction work and its failure and refusal to correct various defects in the construction of Hampton Place, including the defective functioning of the elevators installed by Otis.

The superior court granted Vappi's motion to compel arbitration of Chestnut Hill's claims, referred the claims to arbitration, and stayed the action pending arbitration. On June 10, 1987, the arbitration hearings commenced. Recognizing Otis' indemnity obligations for any liability arising out of Otis' elevator work, counsel for Otis appeared in the arbitration proceeding as co-counsel for Vappi to defend the elevator-related claims. The arbitration proceedings continued from June 10, 1987 through October 1988. On November 15, 1988, the arbitrator entered his Award and Findings. Regarding the elevator claims, the award stated:

The elevators installed for Chestnut Hill Development Corp. at Hampton Place by Otis Elevator Company, a subcontractor to Vappi & Company, Inc. are operating satisfactorily, save for the MRVS and excessive noise complaints. Chestnut Hill Development Corp. is entitled to recover $30,000 for noise problems of the MRVS (including the maintenance claim to the extent one can be maintained).³

The arbitrator also ruled: "this award is in full settlement of all claims and/or counterclaims between the consenting parties submitted to this arbitration."

Chestnut Hill filed a motion to sever and partially vacate or modify the arbitrator's award. In its motion, Chestnut Hill argued that the arbitrator exceeded his powers in ruling that the arbitration had settled all claims and counterclaims between the parties and requested the superior court to strike that portion of the award. Chestnut Hill argued that the arbitrator had in fact failed and/or refused to rule on Chestnut Hill's Chapter 93A claim against Vappi and its indemnification and contribution claims against Vappi. The superior court judge denied Chestnut Hill's motion and confirmed the arbitration award in its entirety. In light of the arbitration award and findings, the superior court judge allowed Vappi's motion for summary judgment against Chestnut Hill.

B. Middlesex II: Trustees v. Chestnut Hill v. Otis

In the fall of 1987 while the arbitration hearings were proceeding, the Trustees of the Hampton Place condominium project, as successor owners of Hampton Place, brought an action against Chestnut Hill seeking to recover for the defects in construction, including the elevator defects. Chestnut Hill filed a third-party complaint against Otis, Vappi, INA, and other Hampton Place subcontractors. In its third-party complaint, Chestnut Hill asserted claims for indemnification and contribution against Otis for any liability to the Trustees for elevator defects. Chestnut Hill also brought a Chapter 93A claim against Otis for its refusal to comply with its warranties by its failure to correct the defects in the elevators and their functioning.⁴

After confirmation of the arbitration award, Otis and the other third-party defendants moved for summary judgment. Otis argued that under the doctrines of res judicata and collateral estoppel, the arbitration award precluded Chestnut Hill's claims against Otis, including its Chapter 93A claim. In its opposition, Chestnut Hill argued that the doctrines of res judicata and collateral estoppel did not bar its claims against Otis because Otis was not a party to the arbitration and the arbitrator did not decide Chestnut Hill's indemnification claim or its Chapter 93A claim against Otis. The superior court judge rejected Chestnut Hill's arguments and on May 18, 1989 allowed Otis' motion for summary judgment on the third-party claims. On August 18, 1989, the superior court entered final judgment pursuant to Mass.R.Civ.P. 54(b) and "dismissed with prejudice all claims by third-party plaintiff Chestnut Hill against the third-party defendants in this action." In entering final judgment, the superior court ruled:

(i) all issues raised by Chestnut Hill's claims against the third-party defendants were resolved by a prior litigation and arbitration and are thus barred under the doctrines of res judicata and collateral estoppel....

II.

In the action before this Court, Otis now moves for summary judgment on all of Chestnut Hill's claims on the ground that they are barred under the doctrine of res judicata and/or involve issues that Chestnut Hill is precluded from relitigating under the doctrine of collateral estoppel. Specifically, Otis argues that under the doctrine of res judicata, the confirmed arbitration award in Middlesex I and the superior court's summary judgment on the third-party complaint in Middlesex II bar Chestnut Hill's claims in the action before this Court. Additionally, Otis contends that Chestnut Hill is precluded under the doctrine of collateral estoppel from relitigating issues, such as the preclusive effect of the arbitration on Chestnut Hill's claims, allegedly decided in those prior actions. In addressing Otis' arguments, this Court will apply Massachusetts law because "federal courts are to give state court judgments the res judicata effect that state law prescribes." Isaac v. Schwartz, 706 F.2d 15, 16 (1st Cir.1983).

The doctrine of res judicata bars relitigation of a claim that has been adjudicated in a prior action involving the same parties or their privies. Commissioner v. Sunnen, 333 U.S. 591, 597, 68 S.Ct. 715, 719, 92 L.Ed. 898 (1948); Ratner v. Rockwood...