Wang Laboratories, Inc. v. Business Incentives, Inc.

• Decision Date: 30 December 1986
• Citation: Wang Laboratories, Inc. v. Business Incentives, Inc., 398 Mass. 854, 501 N.E.2d 1163 (Mass. 1986)
• Parties: WANG LABORATORIES, INC. v. BUSINESS INCENTIVES, INC. 1
• Court: Supreme Judicial Court of Massachusetts

Page 1163

501 N.E.2d 1163

398 Mass. 854

WANG LABORATORIES, INC. v.BUSINESS INCENTIVES, INC.¹

Supreme Judicial Court of Massachusetts Middlesex.

Argued Sept. 8, 1986.

Decided Dec. 30, 1986.

Wayne H. Scott(John M. Lynch, Boston, with him), for Business Incentives, Inc.

Richard K. Donahue, Lowell, for Wang Laboratories, Inc.

Before HENNESSEY, C.J., and WILKINS, NOLAN, LYNCH and O'CONNOR, JJ.

O'CONNOR, Justice.

This is an appeal by Business Incentives, Inc.(BI), from judgments awarding it contract damages and attorneys' fees on its counterclaim but denying it multiple damages under G.L. c. 93A, § 11 (1984 ed.).We allowed BI's application for direct appellate review.We reverse the judgment entered on Count VII, and remand the case to the Superior Court for further proceedings.

Wang Laboratories, Inc.(Wang), began this action in the District Court to recover for alleged violations of contract and G.L. c. 93A (1984 ed.).BI removed the case to the Superior Court, answered the complaint, and counterclaimed in seven counts for alleged violations of contract and of G.L. c. 93A, §§ 2 and 11.The matter was tried in the Superior Court by a judge without a jury.The judge denied recovery to Wang, found for Wang on Counts IV, V, and VI of BI's counterclaim, and awarded single contract damages to BI on Counts I, II, III, and VII of its counterclaim.He awarded attorneys' fees to BI.Counts I, II and III of the counterclaim allege Wang's failure to pay BI at the contract rate for services performed in fiscal 1977, 1979, and 1980.Count VII alleges that Wang unlawfully terminated the contract in 1981, thus depriving BI of commissions it would have earned under the contract for fiscal 1981 and 1982.BI appeals from the judge's failure to award it multiple damages under c. 93A, § 11.BI's argument on appeal properly focuses on its perceived entitlement to multiple damages on Count VII of its counterclaim.

The judge found the following facts.In 1977, Wang and Dudley L. Post, whose business was subsequently incorporated as Business Incentives, Inc., entered into a contract in which Post agreed to help Wang obtain tax benefits through Wang's participation in certain tax incentive programs in which it had not previously participated.The contract provided that Post would identify Wang's eligibility for the benefits, collect the information necessary to establish eligibility, apply to the appropriate governmental agencies for the required certifications, perform the necessary calculations, and execute the appropriate forms.Post's compensation was agreed to be one third of Wang's resulting tax savings, payable when the tax returns were filed.The contract, which did not contain a termination clause, extended through 1983.

Post performed as agreed, and in 1977he generated $137,774 in tax savings for Wang.He submitted a bill for $45,925, but he and Wang agreed that half of that amount would be set aside in case part or all of the tax savings subsequently should be disallowed after audit.Although none of the savings were disallowed after audit, Wang did not pay the remaining half of the fee.

In early 1978, Wang hired Lawrence Joseph as a junior manager to conduct its in-house tax affairs.He reported to David Hennessey, Wang's international manager, but he essentially operated as a one-person tax department.Joseph and Post dealt closely with each other, and Post submitted his written work to Joseph.Post's work generated tax savings for Wang for fiscal 1978 in the sum of $292,926, and Wang paid Post his agreed one-third fee.

In early 1979, Joseph obtained a copy of Post's contract with Wang, and he commented in a memorandum that, because of Wang's expansion between 1977 and 1979, the contract would encompass at least nine more facilities than it encompassed when it was first executed.In a later memorandum to international manager Hennessey, to director and vice president of personnel Theda McGrath, to general counselEdward Grayson, and to treasurer Harry Chou, Joseph said, "If it is found that the credit will not yield a substantial savings to Wang, it is our opinion that Dudley should still be retained through 1983.However, if it [is] found that there will be a substantial savings, Wang will either terminate his contract or attempt to place a cap on the fee paid to him as we want to avoid a situation similar to this year where the effort put forth is not commensurate with savings generated.We[Joseph and Grayson] plan to meet sometime next week to make a final decision on his future relations with Wang."(Emphasis in original.)

As a result of Joseph's activity concerning Post's contract with Wang, Joseph and Grayson met with Post in May, 1979, and negotiated an amendment to the contract which limited it to four facilities.Post generated tax savings for Wang for fiscal 1979 in the sum of $311,269.He submitted a bill for $103,756, which was never paid.

In 1979, Wang hired Eugene Bullis as supervising comptroller and Michael Fox as manager of corporate taxation.Fox became Joseph's immediate supervisor.In April, 1980, Joseph circulated a memorandum to Bullis and Fox.In addition to criticizing Post's performance under his contract, the substance of the memorandum was that Post's services could be performed in-house, and that Post's fees could be eliminated.In reference to the 1979amendment to Post's contract, Joseph wrote: "It should be noted that the decision to attempt to have Dudley's contract cancelled was at the time due solely to the fact that his 1978 fee was $97,000, and it was felt that the fee would become even larger in future years based on our interpretation of the law....Furthermore, both Mike Fox and I feel that Wang has the capabilities and the personnel to handle adequately the work necessary in order to generate these credits on their own."

Grayson, Chou, and Fox began a course of discussions which did not include Post and which assumed the truth of Joseph's contentions concerning all aspects of Post's work.Post continued to perform his services under the contract and submitted savings to Wang of $642,516 for fiscal year 1980, billing for a one-third fee of $214,172.Wang did not pay any portion of this fee.Eventually, Bullis and Grayson authorized Fox to negotiate a "buy out" of Post's contract.When it became clear that that could not be accomplished, Wang terminated Post's contract and commenced the present action.

The judge further found as follows: "Joseph's conduct in insinuating that Post was not utilizing the programs to Wang's full benefit was not advanced in good faith.It is clear to me that his alliance with Post was broken with an intent to advance his own interests within the corporation.His interference constituted a wilful act calculated to obtain the benefits of Post's contract for Wang without cost and in disregard of known contractual arrangements....Although the focus is not upon Joseph's wrongful interference with Post's relationship with Wang in this case, it is germane insofar as Wang remains respondeat superior for the actions it undertook to cause the wrongful breach of the agreement."The judge then found that the Wang executives who terminated Post's contract in reliance on the inadequate and erroneous information supplied by Joseph were guilty of an unfair practice which was chargeable to Wang.However, he also found that, since the executives' conduct was only negligent rather than wilful, multiple recovery under G.L. c. 93A, § 11, was unavailable.²

General Laws c. 93A, § 2(a), provides: "Unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce are hereby declared unlawful."Chapter 93A, § 11, provides in pertinent part: "Any person who engages in the conduct of any trade or commerce and who suffers any loss of money or property, ... as a...