Nader v. Citron

Decision Date08 March 1977
Citation372 Mass. 96,360 N.E.2d 870
CourtUnited States State Supreme Judicial Court of Massachusetts Supreme Court

Joseph G. Abromovitz, Boston, for Philip Citron and another.

Paul K. Connolly, Jr., Waltham, for plaintiff.


QUIRICO, Justice.

This case presents questions about the scope of G.L. c. 93A, § 11, which gives a private cause of action to a person who is engaged in business and who suffers a loss as a result of an unfair or deceptive act or practice by another person also engaged in business. The section was added by St.1972, c. 614, § 2, entitled 'An Act further regulating unfair trade practices,' and extended the provisions of the consumer protection act, G.L. c. 93A, to certain businessmen. The scope of c. 93A has come before us with increasing frequency. See York v Sullivan, 369 Mass. --- a, 338 N.E.2d 341 (1975), which collects many of our earlier opinions. See also KOHL V. SILVER LAKE MOTORS, INC., 369 MASS. --- , 343 N.E.2D 375 (1976)B. Yet in this burgeoning area, only PMP Assocs. v. Globe Newspaper Co., 366 Mass. 593, 321 N.E.2d 915 (1975), and PMP Assocs. v. Hearst Corp., 366 Mass. 600, 321 N.E.2d 920 (1975), have presented questions directly involving c. 93A, § 11. We thus deal largely with matters of first impression.

The plaintiff has brought a complaint against Philip Citron (Citron), Philip Citron, Inc. (P.C.I.), the officers and directors of P.C.I., Lordly & Dame, Inc. (Lordly), and the Hartford Accident and Indemnity Company on various theories of breach of contract, breach of fiduciary duty, breach of duties by corporate officers and directors, fraudulent conveyance, de facto merger, execution on a bond, and violations of c. 93A. Three counts of the nine count complaint are before us, and these three counts purport to deal solely with c. 93A.

Two of the defendants, Citron and Lordly, filed motions to dismiss these three counts under Mass.R.Civ.P. 12(b)(6), 365 Mass. 754 (1974), for failure to state a claim upon which relief can be granted. A judge of the Superior Court denied these motions and reported questions of law to the Appeals Court pursuant to G.L. c. 231, § 111, and Mass.R.Civ.P. 64, 365 Mass. 831 (1974). We granted the plaintiff's application for direct appellate review. G.L. c. 211A, § 10(A).

These motions to dismiss present the question of the legal sufficiency of the complaint as stating claims under G.L. c. 93A, § 11, and G.L. c. 109A, §§ 4, 7. In evaluating the denial of a motion to dismiss under rule 12(b)(6), we follow the standard advanced by the United States Supreme Court in Conley v. Gibson, 355 U.S. 41, 45--46, 78 S.Ct. 99, 102, 2 L.Ed.2d 80 (1957): 'In appraising the sufficiency of the complaint we follow, of course, the accepted rule that a complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.' Furthermore, the allegations of the complaint, as well as such inferences that may be drawn therefrom in the plaintiff's favor, are to be taken as true. BALSAVICH V. LOCAL 170, INTERNATIONAL BROTHERHOOD OF TEAMSTERS, 371 MASS. --- , 356 N.E.2D 1217 (1976)C. Druker v. Roland Wm. Jutras Assocs., --- Mass. ---, --- d, 348 N.E.2d 763 (1976). Charbonnier v. Amico, --- Mass. ---, --- - --- e, 324 N.E.2d 895 (1975). We summarize the facts alleged in the complaint from this perspective.

P.C.I. was a booking agency (defined in G.L. c. 140, § 180A) and engaged in the business of soliciting speaking engagements for its clients. Citron was at all relevant times the president, treasurer, and a director of P.C.I. About April 5, 1973, P.C.I. persuaded Nader to be a client. P.C.I. and Citron agreed to seek speaking engagements for Nader, to act as his agent for the collection of fees due him as a result of such lectures, to deduct a commission of ten per cent from the fees received, and to forward the balance directly to Nader.

P.C.I. and Citron solicited and secured speaking engagements for Nader, Nader delivered numerous lectures, and the resulting fees were sent to P.C.I. and Citron. Beginning about April 15, 1974, P.C.I. and Citron did not deduct commissions or send to Nader his fees. Instead, in violation of the agreement and their duties as agents and fiduciaries, P.C.I. and Citron commingled the fees with general corporate funds and spent all the fees received from Nader's speaking engagement. Nader has received neither the fees nor any accounting of the funds thus received by P.C.I. and Citron.

For a period of time, Lordly, another booking agency, considered the possibility of merging with P.C.I. When Lordly learned of P.C.I.'s corporate liability to Nader no merger occurred because Lordly expressly sought to avoid such liability. Rather, Lordly hired Citron as an employee and had him bring the client and customer lists of P.C.I. to Lordly. These lists constituted all the assets of P.C.I., which Lordly obtained without assuming the liabilities of P.C.I. The motions to dismiss raise a procedural question as well as the question whether these recited facts give rise to liability under c. 93A, § 11.

1. The demand letter. The first reported question is whether the trial judge was correct in ruling that one seeking relief under G.L. c. 93A, § 11, need not make a written demand on a defendant for relief as a condition precedent to bringing an action for relief. We hold that the judge properly ruled that such a demand is unnecessary.

General Laws c. 93A, § 11, inserted by St.1972, c. 614, § 2, applies to a 'person who engages in the conduct of any trade or commerce . . ..' General Laws c. 93A, § 9, as amended through St.1973, c. 939, on the other hand, encompasses consumers, defined singly as a 'person who purchases or leases goods, services or property, real or personal, primarily for personal, family or household purposes.' While the plaintiff is renowned for his zealous advocacy of the rights of consumers, there is no dispute that in this case he has sought relief under § 11 as a businessman.

The statutory scheme provides different procedures for consumers seeking relief under § 9 and businessmen seeking relief under § 11. Before an action may be initiated under § 9, the consumer must mail a written demand letter to a prospective defendant. 1 In Slaney v. Westwood Auto, Inc., 366 Mass. 688, 704, 322 N.E.2d 768, 779 (1975), we explained a rationale for this requirement: 'The demand letter serves a dual function. The first of these functions is to encourage negotiation and settlement by notifying prospective defendants of claims arising from allegedly unlawful conduct. . . . The second function of the letter is to operate as a control on the amount of damages which the complainant can ultimately recover if he proves his case.'

In ENTRIALGO V. TWIN CITY DODGE, INC., 368 MASS. --- , 333 N.E.2D, 202 (1975)F, we relied on the Slaney case to hold that '(a) demand letter listing the specific deceptive practices claimed is a prerequisite to suit (under § 9) and as a special element must be alleged and proved. . . . The purpose of the demand letter is to facilitate the settlement and damage assessment aspects of c. 93A and as such the letter and notice therein is a procedural requirement the absence of which is a bar to suit.' See York v. Sullivan, --- Mass. ---, --- - --- g, 338 N.E.2d 341 (1975); Baldassari v. Public Fin. Trust, --- Mass. ---, --- - --- h, 337 N.E.2d 701 (1975).

Section 11 provides a different procedure for achieving the same objectives of facilitating settlement and fixing damages. After the complainant has brought his action, '(t)he respondent may tender with his answer in any such action a written offer of settlement for single damages. If such tender or settlement is rejected by the petitioner, and if the court finds that the relief tendered was reasonable in relation to the injury actually suffered by the petitioner, then the court shall not award more than single damages.' G.L. c. 93A, § 11, inserted by St.1972, c. 614, § 2. This statutory procedure is self-explanatory and does not contain any provision for a preliminary demand letter.

Whatever the merits of implying the demand letter scheme of § 9 into § 11, as urged by the defendants, we find no support for such implication in the language and structure of § 11. In another context we have stated that 'the provisions of G.L. c. 93A, § 9, . . . though not applicable to an action under § 11, provide a useful analogy.' J. & J. Enterprises, Inc. v. Martignetti, --- Mass. ---, --- i, 341 N.E.2d 645, 649 (1976). (emphasis added). Yet analogies, whatever their utility, do not form a basis for the judicial rewriting of statutes; the demand letter procedure is simply not mandated by § 11. Nor does this difference in statutory treatment between businessmen and consumers approach a denial of equal protection. Commonwealth v. Henry's Drywall Co., 366 Mass. 539, 545--546, 320 N.E.2d 911 (1974). New Orleans v. Dukes, 427 U.S. 297, 96 S.Ct. 253, 49 L.Ed.2d 511 (1976). Williamson v. Lee Optical Inc., 348 U.S. 483, 487--488, 75 S.Ct. 461, 99 L.Ed. 563 (1955). We therefore answer the first question affirmatively.

2. Count three. The second reported question is whether the trial judge correctly denied the motion of Citron to dismiss count three of the complaint for failure to state a claim upon which relief could be granted. This count alleges that Citron, as president, treasurer, and a director of P.C.I., engaged in 'an unfair or deceptive act or practice' under c. 93A, §§ 2, 11, by violating his alleged agreement with the plaintiff and his fiduciary duty to him by 'co-mingling and spending as (his) own the funds (he) received in payment of the Plaintiff's lectures, and . . . fail(ing) to make the agreed upon payments to . . . (the plaint...

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