Stagecoach Transportation v. Shuttle, Inc.

• Decision Date: 06 December 1999
• Docket Number: P-1016
• Citation: 50 Mass. App. Ct. 812,741 N.E.2d 862
• Parties: (Mass.App.Ct. 2001) STAGECOACH TRANSPORTATION, INC. vs. SHUTTLE, INC Docket No.: 98-
• Court: Appeals Court of Massachusetts

741 N.E.2d 862 (Mass.App.Ct. 2001)

STAGECOACH TRANSPORTATION, INC. vs. SHUTTLE, INC

Docket No.: 98-P-1016.

Massachusetts Court of Appeals

December 6, 1999

February 6, 2001

County: Suffolk.

Present: Perretta, Gillerman, & Gelinas, JJ.

Contract, Performance and breach, Choice of law clause. Consumer Protection Act, Damages, Attorney's fees. Damages, Breach of contract, Consumer protection case, Attorney's fees. Jury and Jurors. Practice, Civil, Conduct of juror.

Civil action commenced in the Superior Court Department on May 13, 1994.

The case was tried before David M. Roseman, J., and motions for new trial and for other further relief were heard by him.

Andrew J. Frackman, of New York, for Shuttle, Inc.

Douglas G. Moxham for Stagecoach Transportation, Inc., & others.

Orders denying motions for new trial and for further relief affirmed.

GELINAS, J.

We consider in this case whether a claim for damages under G. L. c. 93A, brought in a Massachusetts court, is precluded by a choice of law provision (New York law as the choice) in an unsigned contract. We further consider whether jury misconduct in this case requires a new trial, whether the plaintiff was in breach of the contract, thereby excusing the defendant's breach, and, finally, whether the evidence of damages at trial was sufficient to support the jury's award. We find no error and affirm the judgment and the orders of the Superior Court denying motions for a new trial and other further relief.

A jury in the Superior Court determined that Stagecoach Transportation, Inc. (Stagecoach), and Shuttle, Inc. (Shuttle), had agreed to all the material terms of an unsigned contract and awarded substantial damages to Stagecoach. The jury further determined that Stagecoach had failed to sign the contract in reliance on promises made by Shuttle's then vice-president, Terry V. Hallcom; that Hallcom's conduct in this regard was unfair and deceptive; and that Stagecoach had thereby suffered damage. A Superior Court judge, acting on Stagecoach's claim for punitive damages under G. L. c. 93A, §§ 2 and 11, doubled the jury's contract damage award. The jury further found that Stagecoach had made false representations of material fact to Shuttle regarding tickets purchased or bills rendered to Shuttle, that Shuttle thereby suffered damage, and that Shuttle further suffered damage as a result of the unfair or deceptive conduct of Martin Hoffman, Stagecoach's president. On the issue of jury misconduct, the trial judge, after hearing, determined that a hypothetical jury would not have been influenced by the foreman's bringing to them a definition of "material breach" that he had obtained from his insurance broker during an evening telephone conversation. The trial judge further denied Shuttle's motions for a new trial and other further relief, finding that there was no change in senior management that amounted to a breach of contract on Stagecoach's part, and that there was sufficient evidence to support the jury's finding of damages.

Facts. We summarize the evidence, reserving certain particulars for our discussion of the issues. Kevin O'Brien, founder and then-president of Stagecoach, initiated a novel airline and sedan service with Trump Shuttle, Inc. (Trump), predecessor of defendant Shuttle.¹ Under a two-year agreement (1991 contract) originating on September 5, 1991, the parties offered door to door transportation (an air/ground package called the "TicPac") between Boston, New York, and Washington, D.C. Stagecoach provided ground transportation, portal to airport and airport to portal. Shuttle provided air transportation, airport to airport. Stagecoach purchased airline tickets from Shuttle for resale to passengers, at reduced prices as set forth in the 1991 contract; Shuttle had the right to purchase ground transportation vouchers from Stagecoach for resale to passengers, again at reduced prices as set forth in the 1991 contract. The TicPac could also be purchased from a passenger's travel agent. The incentives to customers for purchasing a TicPac were convenience and a reduced cost of transportation.

In the course of working together in negotiating and then implementing the 1991 contract, Shuttle's vice-president of operations, Hallcom, and Stagecoach's then president, Kevin O'Brien, developed a close business and personal relationship. The business side of the relationship waned in May, 1993, when O'Brien, indicted and convicted of Medicare fraud for his activities while an officer of an unrelated company, was sentenced to prison. In 1992, when first indicted on the Medicare fraud charge, O'Brien resigned as president of Stagecoach. He continued to work for Stagecoach as director of sales and marketing until he began serving his sentence in 1993. Upon O'Brien's resignation as president, Martin Hoffman, one of Stagecoach's principal investors, was named as president; Martin's father, Herbert S. Hoffman (Hoffman), was chairman of Stagecoach's board of directors and became chief executive officer.

In May of 1993, prior to the expiration of the 1991 contract, Shuttle invited a proposal from Stagecoach for continuing that contract with a revised pricing structure. Shuttle also invited a like proposal from Boston Coach, Inc., Stagecoach's competitor.

After discussion with both companies regarding the terms of a new agreement, including a new pricing structure, Shuttle sent notice that it was awarding the new contract to Stagecoach.² Signing became a problem. Hallcom met with Hoffman in July, asking Hoffman for a delay in signing. The reason given: Hallcom was about to become president of Shuttle and wanted to reserve the contract signing for himself. Hoffman agreed. In September of 1993 Hallcom in fact became president. Hoffman pressed for a signed contract. Hallcom demurred. The reason: Hallcom was now pressing Stagecoach to enter into a separate arrangement which would provide financial benefit to Hallcom's friend O'Brien, who was still in prison. Stagecoach attempted to comply, offering a variety of suggestions as to how O'Brien might be accommodated upon his release from prison, including a consulting job with Stagecoach. None of the suggestions proved satisfactory to Hallcom and Shuttle. Stagecoach and Shuttle continued to do business, each acting according to the terms of the new, unsigned agreement. Pressure increased on Stagecoach to help O'Brien; the scope of assistance sought now extended to members of O'Brien's family formerly employed by Stagecoach. In the spring of 1994, still not having signed the 1993 contract, Shuttle demanded a change that required Stagecoach to relinquish the exclusive arrangement feature of the agreement.³ In May, 1994, Shuttle began using the services of another ground transport provider and repeated its ultimatum that Stagecoach relinquish the exclusive rights under the agreement. Stagecoach refused, and Shuttle then refused to provide tickets. On May 13, 1994, Stagecoach filed suit.

Proceedings. Stagecoach's complaint sought, in addition to injunctive relief, damages for breach of contract and violation of G. L. c. 93A, §§ 2 and 11, and alleged that Shuttle was estopped from denying the existence of the 1993 agreement. Shuttle, in turn, brought counterclaims against Stagecoach and its principals. The Superior Court denied Stagecoach's request for injunctive relief and also denied the parties' cross motions for summary judgment. In February of 1997, prior to trial, Stagecoach amended its complaint, adding a claim for monies owed and unpaid on certain invoices billed to Shuttle. The matter proceeded to trial before a jury in the Superior Court in May of 1997. The jury returned a verdict in favor of Stagecoach for $2,750,000 and rendered an advisory opinion on the c. 93A claim. The trial judge found a violation, by Shuttle, of c. 93A, adopted the jury's advisory opinion on the c. 93A claim, and awarded Stagecoach an additional $2,750,000 as punitive damages.⁴ Twenty-two special questions were submitted to the jury.⁵ The jury awarded Stagecoach an additional amount of $104,000.00 for actual charges incurred as a result of Shuttle's failure to pay certain invoices. The damages awarded Stagecoach were offset by a jury finding that Stagecoach and Martin Hoffman had not reported to Shuttle the proceeds from the sale of certain tickets. The jury determined the amount of the offset to be $152,330.00, or $88,490.00 against Shuttle and $63,840.00 against Martin Hoffman. The judge awarded attorney's fees of $335,000.00 to Stagecoach. He also awarded attorney's fees and costs to Shuttle in the amount of $21,280.00 against Martin Hoffman.

Chapter 93A award. We consider first the judge's award of damages to Stagecoach under G. L. c. 93A, §§ 2 and 11, and Shuttle's claims that (a) New York choice of law controls and that, under New York law, Stagecoach is entitled to neither punitive damages nor attorney's fees, and (b) even if Massachusetts law prevails, Stagecoach is not entitled to G. L. c. 93A damages because there was no injury to Stagecoach, Shuttle's conduct did not rise to a level of "rascality" and egregiousness, see Spence v. Boston Edison Co., 390 Mass. 604, 616 (1983), necessary to support a finding of violation of G. L. c. 93A, and the award itself was erroneous, because based on lost profits as found by the jury.⁶

(a) Choice of law. The jury's response to question one stated that the parties had agreed to all the material terms of the contract. Assuming that the choice of law provision was a material term, we consider whether the clause precludes c. 93A recovery here.

The choice of law clause in the unsigned contract provided: "This Agreement shall be governed and interpreted in accordance with the laws of the State of New York. Without limiting in any way the jurisdiction of the courts of any state, nation or province, or Shuttle's right to invoke the jurisdiction of such courts, Stagecoach hereby submits and consents...