McEvoy Travel Bureau, Inc. v. Norton Co.

• Decision Date: 28 November 1990
• Citation: 408 Mass. 704,563 N.E.2d 188
• Parties: , 9 A.L.R.5th 1007 McEVOY TRAVEL BUREAU, INC. v. NORTON COMPANY.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 188

563 N.E.2d 188

408 Mass. 704, 9 A.L.R.5th 1007

McEVOY TRAVEL BUREAU, INC. v. NORTON COMPANY.

Supreme Judicial Court of Massachusetts,

Worcester.

Argued Sept. 6, 1990.

Decided Nov. 28, 1990.

Michael P. Angelini, Worcester, for defendant.

Daniel F. Featherston, Jr., Boston, for plaintiff.

Donald N. Sweeney, George P. Field and Edgar J. Bellefontaine, Boston, for John R. Schwanbeck, amicus curiae, submitted a brief.

Before LIACOS, C.J., and NOLAN, O'CONNOR and GREANEY, JJ.

GREANEY, Justice.

McEvoy Travel Bureau, Inc. (McEvoy), brought this action against Norton Company (Norton) in the Superior Court alleging breach of contract, fraud, and unfair and deceptive trade practices in violation of G.L. c. 93A, §§ 2(a ) and 11 (1988 ed.). The breach of contract and fraud claims were tried to a jury which returned a verdict on the contract claim against Norton in the amount of $35,000, and a separate verdict on the fraud claim in the amount of $465,000.

Norton filed motions for judgment notwithstanding the verdicts, Mass.R.Civ.P. 50(b), 365 Mass. 814 (1974), and, in the alternative, for a new trial, Mass.R.Civ.P. 59(a), 365 Mass. 827 (1974). Norton's motion for judgment notwithstanding the verdicts was granted by the judge as to the breach of contract verdict and denied as to the fraud verdict. ¹ (McEvoy has not appealed the judgment n.o.v. for Norton on the contract claim, and, consequently, that claim is not before us.) On Norton's motion for new trial, the judge ordered a new trial unless McEvoy agreed to remit $165,000 of damages which the judge deemed excessive. McEvoy accepted the remittitur. The judge thereafter ruled in favor of McEvoy on its claim under G.L. c. 93A, doubling the damages, and indicating that McEvoy was to recover attorney's fees and costs. An amended judgment entered assessing $600,000 in damages (the reduced amount of $300,000 doubled), plus attorney's fees and costs. ² The judgment computed prejudgment interest only on the base damages of $300,000. McEvoy moved pursuant to Mass.R.Civ.P. 59(e), 365 Mass. 828 (1974), to alter or amend the judgment to have prejudgment interest computed on the entire $600,000. This motion was denied.

Norton has appealed, claiming that it was entitled to judgment as matter of law on the fraud claim because McEvoy's evidence failed to establish fraud. In connection with this argument, Norton contends that because the finding of liability under G.L. c. 93A was based exclusively on the jury's finding of fraud, it was entitled to judgment in its favor on the G.L. c. 93A claim. Norton also claims error in matters of evidence and in the jury instructions. McEvoy has cross-appealed, asserting that it was entitled to prejudgment interest on the full $600,000 in damages. We transferred the appeals to this court. We find no error in any of the points argued and, therefore, affirm the amended judgment.

Based on the evidence presented by McEvoy the jury could have found the following. ³ McEvoy was a small Worcester travel agency founded in the 1940's. For three decades prior to 1980, McEvoy provided air travel services to Norton, a large international conglomerate based in Worcester. During those three decades McEvoy and Norton never had a written contract or agreement of any kind. In the summer and fall of 1980, during a series of conferences with McEvoy, Norton proposed an arrangement whereby Norton would make McEvoy its exclusive travel agent for all of its Worcester area business. In return, McEvoy would make several commitments necessary to service the increased volume of business and share the commissions thereby derived. The parties agreed at this time that the arrangement would be a "long-term" contract. At no time during the negotiations was a written contract mentioned or envisioned.

All of the elements of the new arrangement were agreed upon by late November, 1980. McEvoy commenced performing its obligations under the agreement at that time. In particular, McEvoy, at considerable expense, moved its office to Norton's building, signed a five-year lease on that office, hired the necessary extra personnel, and purchased computer systems and other equipment necessary to handle all of Norton' business. In addition, McEvoy ceased its efforts to obtain other clients in order to devote more attention to its Norton account. McEvoy commenced full service of Norton's travel needs on January 1, 1981.

After McEvoy had been fully performing under the agreement for two months, Norton's director of corporate purchasing and transportation drafted a contract to memorialize the financial arrangements between the parties and sent it to McEvoy. In view of the lengthy dealings between the parties based exclusively on oral understandings, McEvoy was surprised by the contract and was particularly concerned that the contract contained a sixty-day termination clause. In addition, the contract had a term of one year, renewable at the end of 1981. McEvoy voiced its concerns at a meeting with Norton's representative in early March, 1981. Norton's representative reassured McEvoy that the parties in fact would continue to have a long term arrangement and that the termination clause was "inoperative" and "meaningless," a mere technicality that Norton's law department had required. Based on these statements, McEvoy decided to sign the agreement a day or so after the meeting.

While these assurances were being given, Norton was exploring a different arrangement. Norton's representative anticipated that certain Federal regulations might change which would permit corporate travel customers a large share of travel agency commissions, then prohibited, and would make unnecessary (or less necessary) an exclusive servicing arrangement like McEvoy's. Without disclosures to McEvoy, Norton's representative, shortly before the signing of the contract, had circulated internal memoranda within Norton indicating that the arrangement with McEvoy was a "trial arrangement ... for 1981," and further indicating that Norton should keep all its options open, including a so-called "in-house" option that could dispense with the need for McEvoy. In the meantime, the McEvoy arrangement would permit Norton's employee to learn the details of the travel business. As has been indicated, these secret purposes were not shared with McEvoy, which was told that it had a long-term deal that would not be affected by the termination clause in the contract.

In 1982 and 1983, the parties executed two subsequent written contracts which were identical to the 1981 contract, except that the financial formula for profit sharing was different in each one. The termination clause was not discussed at the signing of either of the two subsequent contracts.

Prior to the signing of the 1983 contract, Norton advised McEvoy that it planned to explore the possibility of using a different travel agency if it could find one that offered better terms. During the first half of 1983, Norton entered into an arrangement with another travel agency. In May, Norton exercised the sixty-day termination provision of the 1983 contract, thereby ending its lengthy relationship with McEvoy.

1. The basis of McEvoy's common law claim against Norton is that Norton fraudulently induced McEvoy to sign the written contract by misrepresenting its intentions. McEvoy contended that by declaring that the termination provisions were "meaningless" or "inoperative," and that the long-standing arrangement which had existed between the parties would continue in full force, Norton, in effect, had represented that it harbored no intention of invoking the termination provision. The jury agreed and found that Norton had made false representations because Norton did, in fact, actually intend to invoke the termination provision.

Massachusetts law clearly states that statements of present intention as to future conduct may be the basis for a fraud action if, as the jury could have found to be the case here, the statements misrepresent the actual intention of the speaker and were relied upon by the recipient to his damage. ⁴ Barrett Assocs., Inc. v. Aronson, 346 Mass. 150, 152, 190 N.E.2d 867 (1963). Feldman v. Witmark, 254 Mass. 480, 481-482, 150 N.E. 329 (1926). See also Restatement (Second) of Torts § 530 (1977).

Norton cites Turner v. Johnson & Johnson, 809 F.2d 90 (1st Cir.1986), in support of the contention that a fraud claim cannot be based upon the oral misrepresentations alleged by McEvoy because those statements contradict a specific and unambiguous provision of a written contract. Turner involved the sale by the plaintiffs of an electric thermometer business to Johnson & Johnson in return for cash consideration and a portion of the royalties. There were extensive negotiations during a period of six months, and the parties exchanged several versions of a written contract. Id. at 93. At one point during the negotiations, Johnson & Johnson represented to the plaintiffs, among other things, that it would promote the sale of the thermometer, offer it to customers, and educate health care professionals on how to use it. The final version of the written contract, however, stated that Johnson & Johnson was not obligated to use its best efforts to market the thermometer.

When Johnson & Johnson failed to market the thermometer, the plaintiffs sued, alleging common law fraud. The United States Court of Appeals for the First Circuit reversed a judgment based on a jury verdict in favor of the plaintiffs. The court held that "where both parties were experienced in business and the contract was fully negotiated and voluntarily signed, plaintiffs may not raise as fraudulent any prior oral assertion inconsistent with a contract provision that specifically addressed the particular point at issue." Id. at 97.

Turner is distinguishable from this case in at least two important respects. First, in Turner, the alleged fraud took place during negotiations prior to...