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Shea v. Millett

United States District Court, D. Massachusetts

May 3, 2018

JOSEPH B. SHEA, Plaintiff,
v.
PETER MILLETT and ALM RESEARCH LLC, Defendants.

          MEMORANDUM AND ORDER ON MOTION TO DISMISS

          ALLISON D. BURROUGHS U.S. DISTRICT JUDGE

         On October 17, 2017, Plaintiff Joseph B. Shea filed a complaint (“Compl.”) against Defendants Peter Millett and ALM Research LLC (“ALM”) in Middlesex Superior Court, seeking recovery of unpaid royalties for services rendered. [ECF No. 1-1]. Defendants jointly removed the state court action to this Court on November 13, 2017. [ECF No. 1]. Shea brought claims against Millett for breach of contract, promissory estoppel, declaratory judgment or injunctive relief, and a violation of Mass. Gen. Laws Chapter 93A, § 11, and also asserted the Chapter 93A claim against ALM. Now pending is Defendants' Partial Motion to Dismiss, which seeks dismissal of the Chapter 93A and promissory estoppel claims against Millett, and dismissal of the Chapter 93A claim against ALM. [ECF No. 7].[1] For the reasons set forth below, the Court GRANTS Defendants' motion.

         I. FACTS ALLEGED IN THE COMPLAINT[2]

         Millett, an orthopedic surgeon residing in Colorado, developed a medical product for arthroscopic shoulder surgery. See Compl. ¶¶ 2, 5-7. Millett unsuccessfully sought for years to obtain a royalty agreement with Arthrex, Inc. (“Arthrex”), a medical device and research company. Id. ¶ 6. In 2010, Millett approached Shea, a Massachusetts resident and former sales representative for a company affiliated with Arthrex, to request Shea's assistance in brokering a royalty agreement between Millett and Arthrex. Id. ¶ 7. Millett offered Shea 15% of any royalties paid by Arthrex for five years in exchange for Shea's services. Id. ¶ 8. Shea responded that he would only accept an arrangement in which he would be compensated throughout the life of any royalty agreement he brokered, and proposed instead that he receive 10% of all royalties over the life of any potential royalty agreement between Arthrex and Millett. Id. ¶ 9. Millett accepted Shea's proposal, and Shea proceeded to market Millett's product to several medical device firms. Id. ¶¶ 9-10.

         Over the next six months, Shea generated interest in Millett's product from Arthrex's competitors. Id. ¶ 11. Ultimately, as a result of Shea's efforts, Arthrex entered into a royalty agreement with Millett. Id. Millett then began to remit quarterly payments to Shea from the royalties he received from Arthrex, as agreed. Id. ¶ 12. As the years passed, however, Millett periodically attempted to condition future payments on Shea's agreement to shorten the term of the agreement without consideration. Id. ¶ 13. Shea rebuffed these efforts. Id. On one occasion in May 2012, Millett failed to make a timely payment, and stated that he had paid Shea enough money. Id. ¶ 14. Shea insisted that Millett adhere to the agreement, and Millett continued making payments. Id. ¶¶ 14-15.

         In July 2013, Millett transmitted a “Release” of himself and of ALM to Shea purporting to terminate any obligations that Millett or ALM had to continue making payments to Shea. Id. ¶ 15. Shea rejected the Release, and Millett continued to make payments until the second quarter of 2016, at which point Millett stopped making payments altogether. Id.

         II. STANDARD OF REVIEW

         On a motion to dismiss for failure to state a claim, the court accepts as true all well-pleaded facts in the complaint and draws all reasonable inferences in the light most favorable to the plaintiff. U.S. ex rel. Hutcheson v. Blackstone Med., Inc., 647 F.3d 377, 383 (1st Cir. 2011). While detailed factual allegations are not required, the complaint must set forth “more than labels and conclusions, ” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007); it must contain “factual allegations, either direct or inferential, respecting each material element necessary to sustain recovery under some actionable legal theory.” Gagliardi v. Sullivan, 513 F.3d 301, 305 (1st Cir. 2008) (internal quotations and citations omitted). The facts alleged, taken together, must “state a claim to relief that is plausible on its face.” A.G. ex rel. Maddox v. Elsevier, Inc., 732 F.3d 77, 80 (1st Cir. 2013) (quoting Twombly, 550 U.S. at 570).

         When assessing the sufficiency of a complaint, the court first “separate[s] the complaint's factual allegations (which must be accepted as true) from its conclusory legal allegations (which need not be credited).” Id. (quoting Morales-Cruz v. Univ. of P.R., 676 F.3d 220, 224 (1st Cir. 2012)). Next, the court “determine[s] whether the remaining factual content allows a ‘reasonable inference that the defendant is liable for the misconduct alleged.'” Id. (quoting Morales-Cruz, 676 F.3d at 224). “[T]he court may not disregard properly pled factual allegations, ‘even if it strikes a savvy judge that actual proof of those facts is improbable.'” Ocasio-Hernandez v. Fortuño-Burset, 640 F.3d 1, 12 (1st Cir. 2011) (quoting Twombly, 550 U.S. at 556). However, “where the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, ” a claim may be dismissed. Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009).

         III. DISCUSSION

         A. Chapter 93A Claim (Count II)

         Defendants Millett and ALM seek dismissal of Shea's Chapter 93A claim. Chapter 93A creates a private cause of action against those who engage in “unfair or deceptive acts or practices” in the conduct of trade or commerce. Mass. Gen. Laws ch. 93A, §§ 2, 11. To be considered unfair, the “conduct in question must fall within ‘the penumbra of some common-law, statutory, or other established concept of unfairness' or be ‘immoral, unethical, oppressive or unscrupulous.'” Jofran Sales, Inc. v. Watkins & Shepard Trucking, Inc., 216 F.Supp.3d 206, 215 (D. Mass. 2016) (quoting Commercial Union Ins. Co. v. Seven Provinces Ins. Co., 217 F.3d 33, 40 (1st Cir. 2000)). An act or practice is “deceptive” where it “‘possesses a tendency to deceive' and ‘could reasonably be found to have caused a person to act differently from the way he or she otherwise would have acted.'” Full Spectrum Software, Inc. v. Forte Automation Sys., Inc., 858 F.3d 666, 671-72 (1st Cir. 2017) (quoting Walsh v. TelTech Sys., Inc., 821 F.3d 155, 160 (1st Cir. 2016)).

         Here, Shea asserts that Millett attempted to condition payment on Shea's agreement to release his right to collect future payments, and he argues that this violated Chapter 93A. Defendants contend that Shea alleges only an ordinary breach of contract, and therefore fails to plead a Chapter 93A violation. As Defendants rightly point out, “a breach of contract, standing alone, is not an unfair trade practice under c. 93A.” Samia Cos. LLC v. MRI Software LLC, 898 F.Supp.2d 326, 345 (D. Mass. 2012) (quoting Zabin v. Picciotto, 896 N.E.2d 937, 963 (Mass. App. Ct. 2008)). “[A] party's refusal to make payments due under a contract does not [violate Chapter 93A] where the party, in good faith, disputes its obligation to make the payments.” Zabin, 896 N.E.2d at 963; accord Duclersaint v. Fed. Nat'l Mortg. Ass'n, 696 N.E.2d 536, 540 (Mass. 1998). A breach of contract only violates Chapter 93A when it is “both knowing and intended to secure unbargained-for benefits to the detriment of the [non-breaching] party, ” thus “exceed[ing] . . . mere self-interest” and “rising instead to the level of commercial extortion or a similar degree of culpable conduct.” Samia Cos., 898 F.Supp.2d at 345 (quoting Zabin, 896 N.E.2d at 963); accord Commercial Union, 217 F.3d at 40; see, e.g., Arthur D. Little, Inc. v. Dooyang Corp., 147 F.3d 47, 55-56 (1st Cir. 1998) (breach violated Chapter 93A where party withheld payment to force counterparty to accept discounted settlement of its claims for payment); Hannon v. Original Gunite Aquatech Pools, Inc., 434 N.E.2d 611, 615, 618 (Mass. 1982) (submission of low bid followed by demand for more money after signing contract would violate Chapter 93A).

         The complaint alleges that Millett threatened to withhold payment due under the contract unless Shea submitted to the imposition of a time limit on his claim to 10% of the royalties paid by Arthrex. Compl. ¶¶ 13-15. Construing the complaint liberally, Millett's threats to withhold payment derived not from a good faith interpretive disagreement as to his obligations under the contract, but instead, from an intent to pressure Shea into forfeiting his ongoing right to a share of Millett's royalties from Arthrex. Millett's demands can thus be construed as a disregard of his contractual duties for the purpose of securing an unbargained-for benefit-namely, a time limit on his obligation to share the Arthrex royalties with Shea. Compare Striar v. Am. Med. Int'l, Inc., 695 N.E.2d 1079, 1087 (Mass. App. Ct. 1998) (failure to make contract payments was not unfair trade practice where parties had genuine difference of opinion as to amounts due under contract) with Pepsi-Cola Metro. Bottling Co. v. Checkers, Inc., 754 F.2d 10, 18-19 (1st Cir.1985) (upholding finding of Chapter 93A violation where defendant withheld payment not due to dispute over liability or inability to pay, but rather as a “wedge . . . to enhance [defendant's] bargaining power”) and Cmty. Builders, Inc. v. Indian Motorcycle Assocs., 692 N.E.2d 964, 978-79 (Mass. App. Ct. 1998) (failure to make payments violated Chapter 93A where party withheld payment to pressure counterparty to compromise its claims for payment). While discovery may reveal that Millett had a good faith basis for contesting his obligations ...


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