United States District Court, D. Massachusetts
JOSEPH B. SHEA, Plaintiff,
PETER MILLETT and ALM RESEARCH LLC, Defendants.
MEMORANDUM AND ORDER ON MOTION TO DISMISS
ALLISON D. BURROUGHS U.S. DISTRICT JUDGE
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]. For the reasons
set forth below, the Court GRANTS Defendants'
FACTS ALLEGED IN THE COMPLAINT
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.
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.
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
STANDARD OF REVIEW
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).
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).
Chapter 93A Claim (Count II)
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)).
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).
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 ...