Bridge Over Troubled Waters, Inc. v. Argo Tea, Inc.

220 F.Supp.3d 213

BRIDGE OVER TROUBLED WATERS, INC., Plaintiff,

v.ARGO TEA, INC., Defendant.

CIVIL ACTION NO. 15–13610–WGY

United States District Court, D. Massachusetts.

Signed December 14, 2016

Brandon P. Burkart, Gregory S. Sampson, Kyle Philip Dorso, Patrick G.H. Mott, Thomas J. Phillips, Wayne F. Dennison, Brown Rudnick LLP, Boston, MA, for Plaintiff.

Sander A. Rikleen, Thomas W. Kirchofer. Sherin & Lodgen LLP. Boston, MA, for Defendant.

MEMORANDUM & ORDER

YOUNG, District Judge.

I. INTRODUCTION

This action involves the alleged breach of a commercial lease agreement (the "Lease"). The plaintiff and building owner Bridge Over Troubled Water, Inc. ("Bridge") entered into the Lease with the defendant Argo Tea, Inc. ("Argo"), pursuant to which Argo would rent a portion of Bridge's premises to operate a tea shop.

Bridge sued claiming that Argo failed to perform its obligations under the Lease and that Argo engaged in unfair and deceptive practices in violation of Massachusetts General Laws, chapter 93A, and seeking to recover rent under the Lease's liquidated damages clause (an "accelerated rent" provision). Argo filed an answer in which it argued, as an affirmative defense, that Bridge failed to mitigate its damages. It also brought counterclaims seeking declaratory relief that the Lease's rent acceleration clause is unenforceable, claiming that Bridge itself violated chapter 93A, and asking the Court to impose a constructive trust for Argo's benefit upon any net revenue received by Bridge as a result of releasing the premises in order to prevent Bridge from "double-dipping."

Bridge now moves for summary judgment on both its counts for breach of contract and for violations of chapter 93A as well as on Argo's counterclaim for violations of chapter 93A. Argo, in turn, moves for summary judgment as to both of Bridge's counts for breach of contract and for violations of chapter 93A.

A. Procedural History

Bridge initiated this action for breach of contract and for violations of Massachusetts General Laws, chapter 93A ("chapter 93A") on October 21, 2015. Compl., ECF No. 1. Argo timely filed an answer which contained fifteen affirmative defenses and counterclaims for declaratory relief regarding the enforceability of the acceleration clause, violations of chapter 93A, and a constructive trust. Answer and Countercls. ("Answer"), ECF No. 9.

On December 10, 2015, Bridge moved to dismiss each of Argo's three counterclaims and to strike its tenth affirmative defense (failure to mitigate). Pl.'s Mot. Dismiss Def.'s Countercls. and Strike Affirmative Defense, ECF No. 13; Mem. Supp. Pl.'s Mot. Dismiss Def.'s Countercls. and Strike Affirmative Defense, ECF No. 14. Argo opposed Bridge's motion to dismiss. Argo Tea's Opp. Mot. Dismiss Countercls. and Strike Affirmative Defense, ECF No. 21. After a hearing on January 20, 2016, this Court denied Bridge's motion to dismiss. Elec. Clerk's Notes, ECF No. 26.

On October 7, 2016, Bridge filed a motion for partial summary judgment, Pl.'s Mot. Partial Summ. J., ECF No. 38, on both its counts for breach of contract and for violations of chapter 93A, as well as on Argo's second counterclaim for violations of chapter 93A, along with a supporting memorandum, Pl.'s Mem. Supp. Mot. Partial Summ. J. ("Pl.'s Mem."), ECF No. 39, and statement of facts. Statement of Undisputed Facts Supp. Bridge's Mot. Partial Summ. J. ("Pl.'s Statement Facts"), ECF No. 40.

That same day, Argo filed a motion for summary judgment on both Bridge's counts for breach of contract and for violations of chapter 93A, Def.'s Mot. Summ. J., ECF No. 41, along with a supporting memorandum, Argo Tea's Mem. Supp. Mot. Summ. J., ("Def.'s Mem."), ECF No. 42, and statement of facts, Argo's Statement of Undisputed Facts ("Def.'s Statement Facts"), ECF No. 43.

On October 28, 2016, Argo and Bridge each filed a memorandum in opposition to the other's motion for summary judgment, Pl.'s Opp. Def.'s Mot. Summ. J. ("Pl.'s Opp. Mem."), ECF No. 59; Argo's Mem. Opp. Pl.'s Mot. Summ. J. ("Def.'s Opp. Mem."), ECF No. 55, along with supporting counterstatements of facts. Pl.'s Resp. Def.'s Statement Undisputed Material Facts ("Pl.'s Counterstatement Facts"), ECF No. 60; Argo Tea's Resp. Bridge's Statement Facts Supp. Mot. Partial Summ. J. ("Def.'s Counterstatement Facts"), ECF No. 56. On November 7, 2016, Argo filed a reply to Pl.'s Opp. Mem. Argo's Reply Supp. Mot. Summ. J. ("Def.'s Reply"), ECF No. 64.

B. Factual Background

Bridge is a nonprofit corporation headquartered in Massachusetts. Pl.'s Statement Facts ¶ 1; Def.'s Counterstatement Facts ¶ 1. Defendant Argo is a Delaware corporation headquartered in Illinois. Compl. ¶ 2, Answer ¶ 2; Pl.'s Statement Facts ¶ 2; Def.'s Counterstatement Facts ¶ 3. Bridge owns a building at 47 West Street in Boston. Pl.'s Statement Facts ¶ 4; Def.'s Counterstatement Facts ¶ 4. Bridge leases out part of the ground floor of that building ("the premises") to commercial tenants to help fund its nonprofit activities. Pl.'s Statement Facts ¶ 7; Def.'s Counterstatement Facts ¶ 7.

On January 8, 2015, Bridge and Argo entered into a lease agreement, according to which Argo was to operate a retail tea shop on the premises. Pl.'s Statement Facts ¶ 8; Def.'s Counterstatement Facts ¶ 8. The parties dispute much of what happened next.

Under the terms of the Lease, Argo had to make "reasonable efforts" to obtain all required governmental permits to build and operate the shop within 120 days from the signing of the Lease (i.e. , May 8, 2015).¹ Compl., Ex. 1 ("Lease") 12, ECF 1–1.

Before applying for the necessary permits, Argo was obligated under the Lease to submit its renovation plans and other specifications to Bridge for its approval. Id. at 11. Argo had sixty days from the signing of the Lease to do so.² Id. The parties dispute when Argo first submitted the initial set of plans to Bridge and the extent to which the plans were complete. Def.'s Statement Facts ¶ 10; Pl.'s Counterstatement Facts ¶ 10.

After many rounds of revision, Argo submitted revised plans to Bridge on April 20, 2015. Pl.'s Statement Facts ¶ 25; Def.'s Counterstatement Facts ¶ 25. The parties further dispute whether Bridge gave written approval of the plans on May 7, or whether, having failed to give written approval, they were deemed tacitly to have approved only on May 18, 2015 (after Argo's deadline to obtain all necessary permits). Pl.'s Statement Facts ¶¶ 31, 42; Def.'s Counterstatement Facts ¶¶ 31, 42.

On June 10, 2015, Argo wrote Bridge expressing its intent to terminate the Lease and seeking the return of its security deposit. Pl.'s Statement Facts ¶ 45; Def.'s Counterstatement Facts ¶ 45; Decl. Kyle Dorso Supp. Pl.'s Mot. Partial Summ. J. ("Dorso Decl."), Ex. 24, ECF No. 50–24. In that letter, Argo maintained that it was exercising its right to terminate the Lease pursuant to Lease Section 4.5(c) which provides in relevant part that:

If [Argo has not received the necessary permits by May 8, 2015] then either party shall have the right to terminate this Lease without further recourse by notice to the other party, except that Tenant shall not have the right to so terminate this Lease if Tenant is in default of any of its obligations hereunder.

Lease 12.

Bridge responded on June 16, 2015 by sending a letter to Argo rejecting its purported termination and stating that Argo was in breach of its obligations under Section 4.5(c) of the Lease. Pl.'s Statement Facts ¶ 4 6; Def.'s Counterstatement Facts ¶ 46; Dorso Decl., Ex. 25, ECF No. 50–25. Bridge further informed Argo that under the terms of the Lease, Argo had 30 days to cure the breach. Id. On July 20, 2015, Bridge sent Argo a letter claiming that Argo had failed to cure its breach and terminating the Lease. Pl.'s Statement Facts ¶ 47; Def.'s Counterstatement Facts ¶ 47; Dorso Decl., Ex. 26, ECF No. 50–26.

II. ANALYSIS

Under Federal Rule of Civil Procedure 56(c), summary judgment is appropriate when the moving party demonstrates that there exists no genuine issue of material fact and that it is entitled to judgment as matter of law. See Fed. R. Civ. P. 56(c) ; Celotex v. Catrett , 477 U.S. 317, 322–23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) ; Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 247, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). "An issue is ‘genuine’ if the evidence of record permits a rational factfinder to resolve it in favor of either party." Borges ex rel. S.M.B.W. v. Serrano–Isern , 605 F.3d 1, 4 (1st Cir. 2010) (citation omitted). Furthermore, "[a] fact is ‘material’ if its existence or nonexistence has the potential to change the outcome of the suit." Id. at 5 (citation omitted).

A. Breach of Contract

Under Massachusetts law, whether a material breach of contract has occurred is matter of fact.³ Coviello v. Richardson , 76 Mass.App.Ct. 603, 609, 924 N.E.2d 761 (2010) ; Hastings Assocs., Inc. v. Local 369 Bldg. Fund, Inc. , 42 Mass.App.Ct. 162, 171, 675 N.E.2d 403 (1997). A material breach occurs when the breach goes to "an essential and inducing feature of the contract." Lease–It v. Massachusetts Port Authority , 33 Mass.App.Ct. 391, 396, 600 N.E.2d 599 (1992) (citing Bucholz v. Green Bros. Co. , 272 Mass. 49, 52, 172 N.E. 101 (1930) ). This case is no exception.

Here, the parties dispute whether Argo made "reasonable efforts" to obtain all required governmental permits to build and operate the shop within 120 days from the signing of the Lease, Pl.'s Mem. 2–5; Def.'s Mem. 4–5, including timely submitting complete renovation plans for Bridge's approval. Pl.'s Mem. 3, 10; Def.'s Mem. 4. To support its claim. Bridge points to email exchanges between Argo's employees and Argo's architects suggesting that Argo delayed putting together the plans required to obtain the permits until only a few days before the deadline for Bridge's approval. Pl.'s Mem. 5. Bridge also claims that Argo knowingly submitted an incomplete first set of plans to Bridge while stating that they were complete, or almost so. Id.

Argo, in...