MITCHELL v. LIBERTY CHEVROLET INC (2020)

MEMORANDUM AND ORDER PURSUANT TO RULE 23.0

This matter arises out of an arbitration award that Michael Mitchell secured against Liberty Chevrolet (Liberty) under the Lemon Law, G. L. c. 90, § 7N 1/4. After Liberty failed to pay the award by the deadline specified in the Lemon Law, Mitchell brought suit in District Court, seeking enforcement of the award and damages under G. L. c. 93A. A judge calculated Mitchell's damages to be equal to the amount of the award, trebled those damages after finding that Liberty knowingly and willfully violated G. L. c. 93A, and awarded Mitchell his attorney's fees. The Appellate Division of the District Court affirmed. Liberty appeals, arguing that Mitchell's damages should be limited to the interest that he could have earned on the money awarded by the arbitrator and that he is not entitled to attorney's fees. We affirm.

Background. We briefly summarize the pertinent facts, which are undisputed. A more thorough discussion can be found in the decision of the Appellate Division. See Mitchell v. Liberty Chevrolet, Inc., 2019 Mass. App. Div. 61 (2019).

In March 2017 Mitchell purchased a used car from Liberty. Soon after taking delivery, Mitchell noticed that squeaking noises were coming from the brakes and from the engine compartment. Mitchell took the car to a mechanic, who determined that the brake pads and rotors needed replacement and that the air compressor clutch was not engaging properly.

In April 2017 Mitchell made numerous attempts to persuade Liberty to repair the car. When Liberty refused, Mitchell filed an arbitration request under the Lemon Law with the Office of Consumer Affairs and Business Regulation. See G. L. c. 90, § 7N 1/4 (3) (A) (iii); 201 Code Mass. Regs. § 11.02 (2018). On June 20, 2017, an arbitrator found that the defects in the car impaired its use and safety and ordered Liberty to accept return of the car and refund Mitchell the repurchase price, in the amount of $13,329.82.

Under the Lemon Law, Liberty was required to deliver the refund or file an appeal within twenty-one days of the issuance of the arbitration award. See G. L. c. 90, § 7N 1/4 (3) (A) (iii). Liberty did neither.² Consequently, on July 21, 2017, Mitchell's attorney sent Liberty a letter pursuant to G. L. c. 93A, § 9, demanding payment of the award within thirty days. The letter detailed Mitchell's numerous, but fruitless, attempts to speak with someone at Liberty about the specifics of returning the vehicle and obtaining a refund. Liberty failed to make a written offer to repurchase the vehicle within thirty days of the demand.

On September 20, 2017, three months after the award issued, Liberty finally contacted Mitchell and offered to pay the refund once he returned the car and executed documents to release the lien held by the lender.³ Mitchell rejected the offer on the basis that he was also owed damages and attorney's fees as a result of Liberty's failure to pay the award in a timely manner. When the parties could not come to agreement, Mitchell brought this suit, claiming that he was owed the amount of the unsatisfied award, which should be trebled under G. L. c. 93A. Liberty, while conceding liability, claimed that Mitchell's damages were limited to “the loss of use of money equal to the value of Mitchell's equity in the vehicle,” or $75.08.

After a nonevidentiary hearing, the judge agreed with Mitchell that his damages were equal to the amount of the arbitrator's award and, finding Liberty's conduct to be “knowing, deliberate and most egregious,” trebled those damages for a total of $39,989.46. The judge later awarded Mitchell attorney's fees in the amount of $9,219.50, plus costs and expenses of $435.53. The Appellate Division affirmed the judgment in all respects.

Discussion. 1. Damages. Liberty does not contest that its failure to pay the arbitration award within twenty-one days, as required by the Lemon Law, was a violation of G. L. c. 93A. See G. L. c. 90, § 7N 1/4 (6) (“A dealer's failure to comply with any of the provisions of this section shall constitute an unfair or deceptive act under the provisions of chapter ninetythree A”). Liberty argues, however, that the amount of the award does not constitute actual damages under c. 93A because the arbitrator's order that Liberty repurchase the car was not a damages award, but an order for rescission. Because rescission is an equitable remedy, Liberty claims that the repurchase price of the car must be excluded from the amount of damages to be trebled.

Liberty relies on Schwartz v. Rose, 418 Mass. 41 (1994), in support of its position. There, a seller of land concealed from the buyer a letter from the local conservation commission indicating that the land might not be buildable. See id. at 44. When the buyer learned of the letter, he filed suit seeking rescission of the transaction and damages under c. 93A. See id. at 45. Finding the withholding of the letter to be unfair and deceptive, the judge ordered the transaction rescinded and the seller to refund the purchase money to the buyer, and then awarded damages consisting of various incidental expenses the buyer incurred between the closing and the order of rescission, but not including the purchase price of the land. See id. at 42. The Supreme Judicial Court affirmed, stating that c. 93A “clearly distinguishes between actual damages, which are subject to multiplication, and equitable relief,” such as rescission. Id. at 47. Thus, “[w]hen rescission is justified by a violation of c. 93A, the actual damages subject to multiplication consist of the losses suffered by the plaintiff because of the interruption in the status quo.” Id. at 47-48.

Schwartz does not aid Liberty's position here because this is not a case where rescission was “justified by a violation of c. 93A.” Schwartz, 418 Mass. at 47. Rather, the arbitrator ordered Liberty to refund Mitchell his money because Liberty sold him a defective car in violation of the Lemon Law. Even assuming the arbitrator's award was in the nature of rescission, an issue we do not decide, the c. 93A violation arose not from any conduct warranting the rescission, but from Liberty's subsequent acts of keeping the repurchase money instead of refunding it to Mitchell as required by the award. The repurchase money remained unpaid when Mitchell filed his c. 93A claim and was therefore part of his actual damages subject to multiplication.⁴ That Mitchell financed part of the purchase price does not require a corresponding reduction in damages, to the extent Liberty so argues, because Mitchell remained obligated to pay the loan. Offsetting damages merely because the consumer financed, rather than outright purchased, the defective vehicle would also contravene the goals of punishment and deterrence underlying c. 93A.

The parties debate at length whether the arbitration award is a “judgment” within the meaning of the following provision of G. L. c. 93A, § 9 (3), which was added by legislative amendment in 1989: “For the purposes of this chapter, the amount of actual damages to be multiplied by the court shall be the amount of the judgment on all claims arising out of the same and underlying transaction or occurrence, regardless of the existence or nonexistence of insurance coverage available in payment of the claim.”⁵ We need not reach this question. The 1989 amendment did not “make a prior judgment a prerequisite to recovery” under c. 93A. Auto Flat Car Crushers, Inc. v. Hanover Ins. Co., 469 Mass. 813, 826 (2014). Rather, its purpose was to expand recovery by allowing in appropriate circumstances for “the entire amount of [a prior] judgment [to] form the basis for multiplication, even if the judgment represents more than the amount of actual damages attributable to a defendant's G. L. c. 93A violation.” Id. at 828. See Drywall Sys., Inc. v. ZVI Constr. Co., 435 Mass. 664, 669 (2002) (“The 1989 amendment ․ expanded the base on which multiple damages may be awarded”).⁶ The amendment did not affect the general rule that a c. 93A plaintiff is entitled to recover “all foreseeable and consequential damages arising out of conduct which violates the statute.” Auto Flat Car Crushers, supra at 829, quoting Brown v. LeClair, 20 Mass. App. Ct. 976, 979 (1985). The general rule applies here because the refund that Mitchell was owed, but that Liberty retained, constitutes foreseeable, i.e., actual, damages directly arising out of Liberty's violation of c. 93A.

Liberty's remaining arguments -- that Mitchell retained the car and was therefore not deprived of its total value, and that he has unclean hands -- are waived because, as the Appellate Division noted, Liberty failed to raise them to the judge. See Kennie v. Natural Resource Dep't of Dennis, 451 Mass. 754, 760 n.13 (2008). Liberty's reliance on the doctrine of unclean hands is misplaced in any event, as that doctrine applies only to equitable relief. See Murphy v. Wachovia Bank of Del., 88 Mass. App. Ct. 9, 15 (2015). We do note that, where a dealer has acted promptly and reasonably to attempt to rectify a violation of the Lemon Law, but has been stymied by the buyer, the dealer has available the defense that its c. 93A violation was not knowing and willful. But as the judge found, that was not what occurred here; rather, Liberty's conduct was “knowing, deliberate and most egregious,” making trebling of damages appropriate.

2. Attorney's fees. Liberty's challenge to the award of attorney's fees requires little discussion. Liberty relies on G. L. c. 93A, § 9 (4), which provides that “the court shall deny recovery of attorney's fees and costs which are incurred after the rejection of a reasonable written offer of settlement made within thirty days of the mailing or delivery of the written demand for relief required by this section.” It is undisputed that Liberty did not make a written offer of settlement within thirty days of the arbitration award, which “serves as the statutorily designated equivalent of the c. 93A demand letter.” Latino v. Ford Motor Co., 403 Mass. 247, 250 (1988). Nor did Liberty even make a written offer of settlement within thirty days of Mitchell's July 21, 2017, demand letter. The attorney's fees award was thus proper.

Mitchell has requested and is entitled to appellate attorney's fees. See Yorke Mgt. v. Castro, 406 Mass. 17, 19 (1989). He may submit an application for such fees and costs, with appropriate supporting materials, to the clerk of this court within fourteen days of the date of the rescript. Liberty shall have ten days thereafter to respond. See Fabre v. Walton, 441 Mass. 9, 10-11 (2004).

Decision and order of the Appellate Division affirmed.

FOOTNOTES

2.   On July 12, 2017 (twenty-two days after the award issued), Liberty filed a complaint in Middlesex Superior Court, purporting to appeal the arbitrator's decision. The complaint was later abandoned or dismissed, however, because Liberty did not pay the filing fee.

3.   Both parties were communicating through counsel by this time.

4.   Had Liberty paid any portion of the money, it would have been entitled to an offset, “to be applied after multiplying ․ actual damages, if appropriate.” Auto Flat Car Crushers, Inc. v. Hanover Ins. Co., 469 Mass. 813, 830-831 (2014).

5.   The 1989 amendment added an identical provision to G. L. c. 93A, § 11. See Rhodes v. AIG Domestic Claims, Inc., 461 Mass. 486, 498 (2012).

6.   The 1989 amendment has most often been discussed in cases involving unfair settlement practices by insurers. See, e.g., Kapp v. Arbella Mut. Ins. Co., 426 Mass. 683, 685-686 (1998); Clegg v. Butler, 424 Mass. 413, 423-425 (1997). The Supreme Judicial Court has held in that context that an arbitrator's award on an underlying coverage claim is not a judgment within the meaning of G. L. c. 93A, § 9 (3). See Clegg, supra at 424-425; Bonofiglio v. Commercial Union Ins. Co., 411 Mass. 31, 37 (1991). But in Drywall Sys., 435 Mass. at 669, the court clarified that “[t]he use of the word ‘judgment’ in [c. 93A] is merely contextual, referring to all damages that, in the aggregate, may be multiplied by a court for a wilful or knowing violation of” the statute.