Be Careful When You Decide to Breach a Contract

M.G.L. c. 93A (i) prohibits deceptive or unfair acts or practices in trade or business, (ii) mandates that a defendant reimburse a prevailing plaintiff for its reasonable attorneys’ fees, and (iii) allows for the recovery of at least double and up to triple damages if the defendant acted knowingly or willfully. Thus, it is one of the most potent weapons in a business litigation arsenal. As I have written previously, leveraging another to settle a dispute can violate Chapter 93A, as can exercising valid contract rights, if the motivation in doing so is ulterior. While a mere breach of contract, without more, is not a violation of the statute, a recent case from the Massachusetts Superior Court presents a stark reminder that whether conduct is viewed as a “mere breach” or part of a deceptive or unfair course of conduct can be in the eye of the beholder.

In American Translation Partners, Inc. v. Lahey Clinic Hospital, Inc., ATP entered into a three-year contract with Lahey to provide interpreters to assist Lahey’s medical professionals in their interactions with non-English speaking patients. As part of this contract, Lahey agreed that it would:

 [N]ot directly or indirectly, solicit, hire []or engage the services of any Interpreter who has performed services for [Lahey] for a period of twenty-four (24) months following completion of such Interpreter’s last assignment with [Lahey] from [ATP].

As the three-year term of the contract was coming to an end, the parties entered into an interim agreement to give them time to negotiate towards a new contract. During this interim period, a representative of ATP sent a letter to Lahey criticizing certain protocols that were instituted by a particular doctor. According to ATP, Lahey’s hiring of ATP translators declined after that letter was sent, and the negotiations for a new contract later failed.

Thereafter, ATP brought suit, alleging that Lahey had hired various individual interpreters supplied by ATP through another interpretation company within the 24-month window prohibiting such activity and while the parties were attempting to negotiate a new contract. Lahey moved for summary judgment on several claims, including the count asserting violations of Chapter 93A. In doing so, Lahey argued that even if it had breached the parties’ contract, (i) Madan v. Royal Indemnification Co. holds that a mere breach of contract, without more, does not violate Chapter 93A, and (ii) there was no evidence of anything beyond a mere breach.

While the Superior Court judge acknowledged Madan’s holding, he went on to say:

Did Lahey intentionally breach the contract and did it do so to either punish ATP or to gain a financial benefit? Persuasive evidence will have to be offered that Lahey knew that it was likely breaching the Services Agreement but decided to do so anyway either as a lever in its ongoing contract negotiations with ATP or to simply reap unfair benefits. On this record, summary judgment in favor of Lahey must be denied.

So if you are considering breaching a contract, keep American Translation Partners in mind and think about what you can do (and what you should not do) so as to limit the risk that your business partner will be able to claim that a breach also constitutes a deceptive or unfair act or practice. Such cool reflection could save you a lot of litigation angst down the road.

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