RFF Family Partnership, LP v. Ross Ex Rel. BD Lending Trust , 814 F.3d 520 ( 2016 )

United States Court of Appeals
For the First Circuit
Nos. 15-1224
15-1510
RFF FAMILY PARTNERSHIP, LP,
Plaintiff, Appellant,
v.
STEVEN A. ROSS, individually and in his capacity as
Trustee of BD Lending Trust; LINK DEVELOPMENT, LLC,
Defendants, Appellees.
APPEALS FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Nathaniel M. Gorton, U.S. District Judge]
Before
Lynch, Circuit Judge,
Souter,* Associate Justice,
and Selya, Circuit Judge.
Richard E. Briansky, with whom Amy B. Hackett and McCarter
English, LLP were on brief, for RFF Family Partnership, LP.
Arnold E. Cohen, with whom Law Offices of Arnold E. Cohen was
on brief, for Steven A. Ross.
Michael S. Bonner, with whom Gregory J. Aceto, Michael B.
Cole, and Aceto, Bonner & Prager, P.C. were on brief, for Link
Development, LLC.
* Hon. David H. Souter, Associate Justice (Ret.) of the
Supreme Court of the United States, sitting by designation.
February 18, 2016
LYNCH, Circuit Judge. These appeals are the latest stage
of a series of lawsuits involving Link Development, LLC ("Link"),
BD Lending Trust ("BD"),1 and RFF Family Partnership, LP ("RFF").
The three-way dispute has emanated from an unauthorized conveyance
of a mortgage to BD ("BD Mortgage") by an attorney later disbarred,
on a twenty-two acre commercial property in Saugus, Massachusetts
("the Property"), then owned by Link and now owned by RFF.
Previous related litigation has resulted in two settlement
agreements: a June 2012 settlement between Link and BD and a
November 2012 settlement between RFF and BD.
In this diversity action, RFF appeals: (1) the district
court's entry of summary judgment for Link and against RFF on RFF's
claims on the validity of the BD Mortgage, on the basis that RFF
was judicially estopped from challenging the validity of the BD
Mortgage; (2) the district court's decision to exclude attorneys'
fees from damages that BD owed RFF for breach of the settlement
agreement between RFF and BD, and the district court's refusal to
enter judgment as a matter of law in favor of RFF on contract
damages; and (3) the district court's award of attorneys' fees to
RFF under Chapter 93A of the Massachusetts General Laws for an
1 The named party in this suit is Steven A. Ross, who is
being sued both individually and in his capacity as trustee of BD.
We refer to the party as "BD" where Ross is being sued in his
capacity as trustee of BD, and as "Ross" only with regard to claims
against Ross in his individual capacity.
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amount that was lower than what RFF had requested. In this
opinion, we address Massachusetts law on many of these topics --
topics of general interest in Massachusetts commercial litigation.
We vacate the district court's entry of summary judgment
against RFF on its claims pertaining to the validity of the BD
Mortgage, and we remand for further proceedings. We affirm the
district court's decisions related to contract damages and affirm
the district court's award of attorneys' fees under Chapter 93A of
the Massachusetts General Laws.
I.
In 2005, Link was formed by now-disbarred lawyer Stuart
Sojcher on behalf of an investor to hold and develop the Property.
In September 2006, Sojcher, without the authorization of Link,
executed a $600,000 promissory note payable to BD, secured by the
BD Mortgage. The loan was increased to $700,000 shortly
thereafter. In October 2006, the BD Mortgage was recorded. In
November 2006, after Sojcher absconded with most of the proceeds
of the loan, Link defaulted on the loan and BD commenced
foreclosure proceedings on the Property.
In December 2006, Link filed a complaint against Sojcher
and BD in Massachusetts Superior Court seeking, inter alia, a
declaration that the BD Mortgage was invalid because Sojcher had
lacked Link's authorization to execute the mortgage.
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In October 2007, while the Superior Court action was
still pending, Link executed a $1.4 million note payable to RFF,
secured by a mortgage on the Property ("RFF Mortgage"). As part
of the loan agreement, Link represented that the RFF Mortgage would
be a "good first mortgage and not . . . subject to any liens or
encumbrances, whether inferior or superior." In March 2008, Link
defaulted on the RFF loan. In March 2010, RFF foreclosed on the
Property. RFF subsequently purchased the Property for itself at
a public auction. RFF has continued to own the Property since
that point.
In June 2011, RFF filed a complaint in the District of
Massachusetts against BD and Link, alleging that Link had defaulted
on its loan; that Link had falsely represented that it had conveyed
a "good first mortgage"; and that the BD Mortgage was invalid.
Complaint, RFF Family P'ship, LP v. Link Dev., LLC, No. 11-cv-
10968 (D. Mass. June 1, 2011).
In June 2012, Link and BD agreed to a settlement of the
2006 Superior Court action ("Link/BD Settlement"). Link agreed to
dismiss its claims against BD and waive its right to contest the
BD Mortgage. In return, BD agreed to pay Link $450,000 up front
and an additional sum of $750,000 with interest (or slightly less,
depending on how long the debt remained outstanding) on a later
date. To secure BD's payment obligation, BD provided Link with an
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assignment of the BD Mortgage to be held in escrow and recorded in
the event of BD's default.
In November 2012, RFF and BD agreed to a settlement of
the 2011 federal action ("RFF/BD Settlement"). The parties
declined to put the terms of the agreement on the record at the
time, although it was later disclosed to the court that BD had
agreed to discharge the BD Mortgage in exchange for a payment of
$140,000 from RFF. Because the RFF/BD Settlement disposed of all
of the claims against BD in the 2011 federal action, the district
court dismissed BD and conducted a bench trial on RFF's claims
against Link. The district court found in favor of RFF on several
of its claims against Link, but it expressly declined to resolve
the question of the validity of the BD Mortgage because that issue
had been withdrawn pursuant to the RFF/BD Settlement.
In December 2012, BD notified Link that it intended to
execute a discharge of the BD Mortgage in fulfillment of its
obligation under the RFF/BD Settlement. Link, believing that such
an action would be a breach of the Link/BD Settlement, recorded
the assignment of the BD Mortgage it had held in escrow. BD has
since claimed that it cannot discharge the BD Mortgage in
fulfillment of its obligation under the RFF/BD Settlement because
Link holds the assignment of the BD Mortgage. RFF successfully
moved for an order to enforce the RFF/BD Settlement against BD and
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later moved for contempt against BD for its continued refusal to
discharge the BD Mortgage.
On January 10, 2014, RFF filed the complaint in this
diversity action in the District of Massachusetts against Link,
Ross, and BD. The complaint alleged the following five counts:
(1) declaratory judgment on the invalidity of the BD Mortgage,
against Link and BD; (2) breach of contract by BD on the RFF/BD
Settlement; (3) negligent and/or intentional misrepresentation by
BD and Ross for representations made at the time the RFF/BD
Settlement was entered; (4) slander of title by Link and BD for
BD's recording of the BD Mortgage, for Link's recording of the
assignment of the BD Mortgage, and for Link's and BD's refusals to
discharge the BD Mortgage; and (5) violation of Chapter 93A of the
Massachusetts General Laws by BD and Ross. Various cross-claims
were filed between Link and BD.
The interests at play are as follows. RFF, as owner of
the Property, is seeking unencumbered title to the Property. RFF
is taking two parallel approaches in that pursuit: it seeks to
enforce BD's obligation under the RFF/BD Settlement to discharge
the BD Mortgage while it also seeks a declaration that the BD
Mortgage is invalid. Link holds the assignment of the BD Mortgage
and is awaiting payment by BD of the remainder of the Link/BD
Settlement. BD is in a bind because it is obligated by the RFF/BD
Settlement to discharge the BD Mortgage but it cannot do so until
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it makes its payment to Link, which is now holding the BD Mortgage.
The $140,000 that RFF would pay BD to discharge the BD Mortgage is
not enough to cover the amount that BD owes Link, and BD has no
assets.
On September 30, 2014, the district court entered a
memorandum and order on a number of pending evidentiary and
dispositive motions. RFF Family P'ship, LP v. Link Dev., LLC, 53
F. Supp. 3d 267 (D. Mass. 2014). As relevant here, the district
court denied Link's motion to dismiss RFF's claims on the
invalidity of the BD Mortgage (Counts I and IV) on the bases of
statute of limitations and res judicata. Id. at 274–76. However,
the district court entered summary judgment for Link on those
claims on the basis that RFF was judicially estopped from
contesting the validity of the BD Mortgage. Id. at 278. The
district court also ruled on partial summary judgment that BD had
breached the RFF/BD Settlement. Id. at 277.
In January 2015, the district court held a jury trial on
the remaining claims which, as relevant here, included damages
suffered by RFF from BD's breach of the RFF/BD Settlement (since
liability had been established as a matter of law) and the Chapter
93A claims against BD. On January 21, 2015, the jury returned its
verdict. As relevant here, the jury awarded RFF $1 in damage for
BD's breach of the RFF/BD Settlement and awarded $1 in damage for
BD's violation of Chapter 93A.
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These appeals followed.2
II.
RFF first challenges the district court's entry of
summary judgment for Link on Counts I and IV on the basis that RFF
is judicially estopped from challenging the validity of the BD
Mortgage. We hold that the district court abused its discretion
in applying judicial estoppel, and that the outcome is not
supported by either of Link's proposed alternative bases of res
judicata or statute of limitations.3 We vacate.
2 BD and Ross initially filed a cross-appeal, but they
have since voluntarily dismissed the cross-appeal. Judgment, RFF
Family P'ship, LP v. Ross, No. 15-1443 (1st Cir. Sept. 30, 2015).
Only RFF's two appeals are before us.
3 RFF argues that we do not have jurisdiction to consider
Link's alternative arguments on statute of limitations and res
judicata because those issues are outside of the scope of its
Notices of Appeal. That is not so.
RFF's relevant Notice of Appeal states, in relevant
part, that it is appealing "from the District Court's Memorandum
and Order dated September 30, 2014 granting summary judgment in
favor of the defendants on Counts I and IV of RFF's Complaint."
If successful, Link's statute of limitations and res
judicata arguments, although raised before the district court in
a motion to dismiss and not on summary judgment, would support the
district court's disposition of Counts I and IV. Even though
neither statute of limitations nor res judicata was the district
court's basis for decision, we consider those arguments because we
may affirm summary judgment on any ground with record support.
Collazo v. Nicholson, 535 F.3d 41, 44 (1st Cir. 2008).
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A. Judicial Estoppel
We review the district court's application of judicial
estoppel for abuse of discretion.4 Alt. Sys. Concepts, Inc. v.
Synopsys, Inc., 374 F.3d 23, 30 (1st Cir. 2004).
Judicial estoppel is an equitable doctrine that
"prevent[s] a litigant from taking a litigation position that is
inconsistent with a litigation position successfully asserted by
him in an earlier phase of the same case or in an earlier court
proceeding." Perry v. Blum, 629 F.3d 1, 8 (1st Cir. 2010); see
also New Hampshire v. Maine, 532 U.S. 742, 749 (2001). The purpose
of the doctrine is "to protect the integrity of the judicial
process," New Hampshire, 532 U.S. at 749 (quoting Edwards v. Aetna
Life Ins. Co., 690 F.2d 595, 598 (6th Cir. 1982)), by "prohibiting
parties from deliberately changing positions according to the
exigencies of the moment," id. at 750 (quoting United States v.
McCaskey, 9 F.3d 368, 378 (5th Cir. 1993)). Courts typically
invoke judicial estoppel "when a litigant tries to play fast and
loose with the courts." Perry, 629 F.3d at 8.
4 As we noted in establishing this standard in Alternative
System Concepts, Inc. v. Synopsis, Inc., "[t]he fact that this
case arises in the summary judgment context does not affect our
decision to review the trial court's determination [of judicial
estoppel] for abuse of discretion." 374 F.3d 23, 31 (1st Cir.
2004).
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Although "[t]he contours of judicial estoppel are hazy"
and "its elements cannot be reduced to a scientifically precise
formula," we have identified three conditions that must be
satisfied to establish judicial estoppel.5 Id. at 8–9. "First, a
party's earlier and later positions must be clearly inconsistent."
Id. at 9; see also Alt. Sys. Concepts, Inc., 374 F.3d at 33 (for
judicial estoppel, positions "must be directly inconsistent, that
is, mutually exclusive"). "Second, the party must have succeeded
in persuading a court to accept the earlier position." Perry, 629
F.3d at 9. To demonstrate acceptance of the prior position by a
court, "a party need not show that the earlier representation led
to a favorable ruling on the merits of the proceeding in which it
was made, but must show that the court adopted and relied on the
represented position either in a preliminary matter or as part of
a final disposition." Id. at 11. "Third, the party seeking to
assert the inconsistent position must stand to derive an unfair
advantage if the new position is accepted by the court." Id. at
9.
5 Because "judicial estoppel appears neither clearly
procedural nor clearly substantive," there is a potential choice
of law question of whether federal or state law should govern in
this diversity action. Alt. Sys. Concepts, Inc., 374 F.3d at 32.
Because RFF and Link both seem to assume the application of the
federal law of judicial estoppel, we accept the parties' agreement
without deciding the issue. See id. (declining to decide choice
of law issue by, as we do here, relying on parties' agreement).
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Link argues that RFF is judicially estopped from
challenging the validity of the BD Mortgage because (1) RFF made
representations that the BD Mortgage was valid in state court
actions in Massachusetts Superior Court, the Massachusetts Appeals
Court, and the Massachusetts Supreme Judicial Court, and those
courts accepted such representations, and (2) RFF entered into and
took actions to enforce the RFF/BD Settlement, which was allegedly
predicated on the validity of the BD Mortgage.
1. State Court Actions
As its first basis for judicial estoppel, Link points to
a malpractice suit that RFF brought in Massachusetts Superior Court
against its former counsel, Burns & Levinson LLP ("B&L"), which
represented RFF in the 2007 loan transaction in which Link executed
the RFF Mortgage. The notice of claim that RFF sent to B&L in
2011 asserted that RFF had retained B&L to secure a first mortgage
on the Property but that B&L had committed malpractice by "failing
to identify and payoff [sic] an existing mortgage of record in
favor of BD." RFF asserted that as a result, the RFF Mortgage
ended up "subordinate to the BD Mortgage." RFF's October 2, 2012,
amended complaint claimed that B&L committed malpractice by
"fail[ing] to either discharge or subordinate" approximately $2.7
million in "senior liens of record" on the Property -- the BD
Mortgage and another mortgage not relevant here.
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B&L filed a motion to dismiss RFF's complaint for, inter
alia, failure to sufficiently allege that RFF had suffered a loss
as a proximate result of B&L's alleged malpractice. On November
21, 2012, the Superior Court denied B&L's motion, finding, inter
alia, that RFF had sufficiently pleaded loss by alleging that as
a result of B&L's alleged malpractice, the RFF Mortgage was
subordinate to the BD Mortgage. RFF Family P'ship, LP v. Burns &
Levinson, LLP, No. 12-2234, 2012 WL 6062740, at *4 (Mass. Super.
Ct. Nov. 21, 2012) (noting that "[t]he Amended Complaint
alleges . . . that due to the B&L defendants' malpractice, what
ought to have been a first mortgage securing [RFF's] $1.4 million
loan is in fact -- so far as record title is concerned -- in third
position, behind $2.7 million in prior liens").
Link argues that RFF's representations to the Superior
Court in the B&L malpractice action judicially estop RFF from now
claiming that the BD Mortgage is invalid.6 RFF responds that its
6 Link also relies on similar statements made by RFF to
the Massachusetts Appeals Court and the Supreme Judicial Court in
seeking interlocutory review of a discovery order in the B&L
malpractice action. In its petition for interlocutory review by
the Massachusetts Appeals Court, RFF asserted that B&L "failed to
subordinate or discharge certain preexisting liens encumbering the
property and did not disclose this failure to RFF" and that "[a]s
a result, RFF's mortgage was subordinate to approximately $2.7
million in liens." Link claims that the Massachusetts Appeals
Court relied on those statements in granting interlocutory review
and that the Supreme Judicial Court also relied on those statements
in taking the case sua sponte.
We treat RFF's statements in the Massachusetts Appeals
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prior statements that the RFF Mortgage was subordinate to the BD
Mortgage did not presuppose the validity of the BD Mortgage.
We agree with RFF that RFF's position in the instant
action that the BD Mortgage is invalid is not "directly
inconsistent, that is, mutually exclusive," Alt. Sys. Concepts,
Inc., 374 F.3d at 33, with RFF's prior statements. An allegation
that lawyers engaged in malpractice by failing to discover and
address a senior encumbrance of record on a property before
executing a supposed first mortgage does not rest on an assumption
that the prior encumbrance was valid. Even an invalid mortgage
can be a senior encumbrance of record that clouds title. See 65
Am. Jur. 2d Quieting Title and Determination of Adverse Claims
§ 13 ("A cloud on title is an outstanding instrument, record,
claim, or encumbrance that is actually invalid or inoperative but
may nevertheless impair the title to property."). This conclusion
is supported by Link's summary judgment filings in the district
court, where Link claimed judicial estoppel on the basis that "[t]o
make the argument that the RFF mortgage was subordinate to the BD
Mortgage, RFF impliedly was contending that the BD mortgage is
valid, rather than invalid." RFF's "implied[]" position in its
Court and Supreme Judicial Court together with RFF's Superior Court
allegations because they are essentially the same in substance:
that B&L's malpractice injured RFF by making the RFF Mortgage
"subordinate" to existing liens on the Property, including the BD
Mortgage.
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prior litigation does not meet the "directly inconsistent"
requirement for judicial estoppel.
Moreover, it is not certain that the Superior Court
accepted RFF's implied position to be that the BD Mortgage was
valid, as necessary to meet the second requirement for judicial
estoppel. On the contrary, the Superior Court's recitation of
RFF's allegations included the express limitation that "what ought
to have been a first mortgage . . . is in fact -- so far as record
title is concerned -- . . . behind . . . prior liens." RFF Family
P'ship, LP, 2012 WL 6062740, at *4 (emphasis added). Additionally,
the Superior Court expressly recognized that RFF was seeking to
void the BD Mortgage in a separate pending action, and it
acknowledged that RFF might later be able to recover against B&L
for the costs incurred in that separate action. Id. at *2, *4.
Because there is no support in the record for the
district court's conclusion, the district court abused its
discretion in concluding that RFF's position in the instant case
is judicially estopped by RFF's prior state court representations.
2. RFF/BD Settlement and RFF's Attempts at Enforcement
As its second basis for judicial estoppel, Link points
to the RFF/BD Settlement and RFF's subsequent actions to enforce
that settlement and hold BD in contempt for noncompliance.
On November 14, 2012, RFF reported to the district court
that it had settled its claim against BD in the 2011 federal case,
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but it declined to put the terms of the settlement on the record.
In reliance on the settlement, the district court dismissed BD
from the 2011 case. The district court understood the RFF/BD
Settlement as removing the issue of the validity of the BD Mortgage
from the litigation and proceeded to conduct a trial only on RFF's
claims against Link.
Subsequently, RFF filed a motion to enforce the RFF/BD
Settlement, and the district court granted that motion on June 26,
2013. On October 23, 2013, RFF filed a motion for contempt against
BD for violation of the district court's order on the previous
motion to enforce the RFF/BD Settlement. Filings in those
subsequent proceedings showed the terms of the RFF/BD Settlement
to be that RFF would pay BD $140,000 in return for a discharge of
the BD Mortgage.
Link argues that the RFF/BD Settlement and RFF's
subsequent efforts to enforce the settlement were premised on the
validity of the BD Mortgage and that RFF cannot now assert
invalidity. However, the fact of settlement cannot be taken as
any admission by RFF. Rather, a settlement is born of compromise.
Cf. Fed. R. Evid. 408 advisory committee's note to 1972 proposed
rules (suggesting that evidence of a settlement offer is irrelevant
to validity or invalidity of the underlying claim because it "may
be motivated by a desire for peace rather than from any concession
of weakness of position"). Nor did the settlement entail judicial
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acceptance of any position taken by RFF. See Perry, 629 F.3d at
12 ("[S]ettlement 'neither requires nor implies any judicial
endorsement of either party's claims or theories.'" (quoting In re
Bankvest Capital Corp., 375 F.3d 51, 60 (1st Cir. 2004))); see
also Lowery v. Stovall, 92 F.3d 219, 225 (4th Cir. 1996)
("[J]udicial estoppel does not apply to the settlement of an
ordinary civil suit because 'there is no "judicial acceptance" of
anyone's position' . . . ." (quoting Reynolds v. Comm'r of Internal
Revenue, 861 F.2d 469, 473 (6th Cir. 1988))). Link points to the
next sentence in Perry, that "[s]o viewed, an unexplained
settlement does not provide the prior success necessary for
judicial estoppel," 629 F.3d at 12, and attempts to distinguish
Perry on the basis that the RFF/BD Settlement was well known to
the district court and therefore not an "unexplained settlement."
But the logic of the prior statement in Perry (that settlement
does not require judicial endorsement of either side) did not
depend on the unexplained nature of the settlement in that case,
and In re Bankvest Capital Corp., the opinion quoted in Perry, did
not suggest such a limitation. 375 F.3d at 60.
The RFF/BD Settlement does not judicially estop RFF's
claims of invalidity. Nor did RFF, by later suing to enforce the
settlement, stake out a position inconsistent with its instant
claim that the BD Mortgage is invalid. The district court, by
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reaching a conclusion with no support in the record, abused its
discretion in applying judicial estoppel.
B. Statute of Limitations
Link suggests that were we to conclude that the district
court erred in applying judicial estoppel, we could still affirm
on the alternate basis that RFF's declaratory judgment and slander
of title claims are barred by the statute of limitations. We
disagree.
Link argues that because both claims are premised on the
allegation that the recording of the BD Mortgage encumbered RFF's
title, the statute of limitations should have started to run in
October 2006, when the BD Mortgage was recorded. At the latest,
Link argues, the causes of action accrued in March 2010 when RFF
foreclosed on the Property. Link argues that based on either of
those dates, the January 10, 2014, complaint in this action is
untimely under the three-year statute of limitations for slander
of title claims in Massachusetts. Mass. Gen. Laws ch. 260, § 4.
The district court rejected this claim on the basis that
the statute of limitations began to run only upon the December
2012 assignment of the BD Mortgage to Link. RFF Family P'ship,
LP, 53 F. Supp. 3d at 274–75. We agree. Slander of title under
Massachusetts law is "essentially a claim of defamation where the
false statement focuses on the plaintiffs' rights in property."
George v. Teare, No. CA994102, 2000 WL 1512376, at *3 (Mass. Super.
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Ct. Sept. 5, 2000); see also Karmaloop, Inc. v. Sneider, No. 08-
3580, 2013 WL 5612721, at *4 (Mass. Super. Ct. Apr. 25, 2013).
RFF's slander of title claim is based on Link's recording of the
assignment of the BD Mortgage on December 6, 2012. The statute of
limitations could not have begun to run prior to that date because
the allegedly defamatory recording had not yet taken place. Even
if it were the case that the defamatory statement existed prior to
that in the form of the BD Mortgage, RFF could not have asserted
a slander of title claim until it acquired title to the Property
on June 22, 2011 -- and the action is timely even if we use that
date instead.
As for the declaratory judgment count, Link's only
argument is that it is in substance identical to the slander of
title claim and that the slander of title claim is untimely. As
we have concluded that the slander of title claim is timely, Link
has no remaining argument as to why we must dismiss the declaratory
judgment claim as untimely.
C. Res Judicata
Link suggests that if we do not affirm on judicial
estoppel or statute of limitations, we may alternatively affirm by
finding that the RFF/BD Settlement has res judicata effect that
prevents RFF from relitigating the validity of the BD Mortgage.
The district court rejected this argument, and the district court
was correct to do so.
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"The doctrine of claim preclusion makes a valid, final
judgment conclusive on the parties and their privies, and bars
further litigation of all matters that were or should have been
adjudicated in the action."7 TLT Constr. Corp. v. A. Anthony Tappe
& Assocs., Inc., 716 N.E.2d 1044, 1049 (Mass. App. Ct. 1999)
(quoting Heacock v. Heacock, 520 N.E.2d 151, 152–53 (Mass. 1988)).
Under Massachusetts law,8 three elements are required for claim
preclusion: "(1) the identity or privity of the parties to the
present and prior actions; (2) identity of the cause of action;
7 Under Massachusetts law, the term "res judicata"
includes both claim preclusion and issue preclusion. Heacock v.
Heacock, 520 N.E.2d 151, 152 n.2 (Mass. 1988). Link appears to be
arguing only for claim preclusion.
8 The parties again fail to address the choice of law
issue. Link cites mostly Massachusetts cases, while RFF cites
federal law from various circuits.
Under Semtek International Inc. v. Lockheed Martin
Corp., "federal common law governs the claim-preclusive effect of
a dismissal by a federal court sitting in diversity." 531 U.S.
497, 508 (2001). The appropriate rule under federal common law is
"the law that would be applied by state courts in the State in
which the federal diversity court sits," id., unless that rule
would be "incompatible with federal interests," id. at 509.
We have no occasion to determine whether there is any
incompatibility with federal interests under Semtek because it
seems that here, "under either federal or Massachusetts law, the
outcome is the same," Hatch v. Trail King Indus., Inc., 699 F.3d
38, 44 (1st Cir. 2012). Both federal and Massachusetts law seem
to apply similar three-element tests for claim preclusion, see Bay
State HMO Mgmt., Inc. v. Tingley Sys., Inc., 181 F.3d 174, 177
(1st Cir. 1999) (articulating three-element test similar to test
in TLT Construction Corp., above), and neither party suggests that
there is any relevant difference in how Massachusetts and federal
law apply those tests.
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and (3) prior final judgment on the merits." Id. (quoting
Gloucester Marine Rys. Corp. v. Charles Parisi, Inc., 631 N.E.2d
1021, 1024 (Mass. App. Ct. 1994)).
The district court held that claim preclusion does not
apply because the third element is missing. It explained: "While
a settlement can have preclusive effect, that is so only if the
Court enters a final judgment which it did not . . . . The validity
of the BD Mortgage was not adjudicated in any decision or judgment
entered as part of the 2011 case." RFF Family P'ship, LP, 53 F.
Supp. 3d at 275–76. We agree.9
We have held in cases under federal law that settlements
may have preclusive effect if there is court approval of the
settlement or there is entry of judgment with prejudice. See
United States v. Cunan, 156 F.3d 110, 114 (1st Cir. 1998) ("[A]
voluntary dismissal with prejudice is ordinarily deemed a final
judgment that satisfies the res judicata criterion."); Langton v.
Hogan, 71 F.3d 930, 935 (1st Cir. 1995) ("When a dispute of law
exists between parties to a case and they agree to a settlement of
that dispute and entry of a judgment with prejudice based on that
settlement, then the terms of that judgment in relation to that
legal issue are subject to res judicata principles. A judgment
9 For that reason we do not need to evaluate the other two
elements of claim preclusion, and we decline to do so to avoid
making unnecessary pronouncements on state law.
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that is entered with prejudice under the terms of a settlement,
whether by stipulated dismissal, a consent judgment, or a
confession of judgment, is not subject to collateral attack by a
party or a person in privity, and it bars a second suit on the
same claim or cause of action."); In re Medomak Canning, 922 F.2d
895, 900 (1st Cir. 1990) ("Generally, a court-approved settlement
receives the same res judicata effect as a litigated
judgment . . . .").
Whether the same is true under Massachusetts law is
uncertain. Link cites no Massachusetts case in which any
settlement was given claim preclusive effect. But, assuming
without deciding that Massachusetts law is similar to federal law,
the RFF/BD Settlement lacks either of the characteristics found in
settlements that have been given claim-preclusive effect.
First, the RFF/BD Settlement was not a court-approved
settlement. Although the case law does not appear to elaborate on
what it means for a settlement to be court-approved, the record
does not support the claim that the district court approved the
settlement. Link claims that the district court approved the
settlement on two different occasions. The first supposed approval
was when RFF informed the court of the settlement, the district
court confirmed with the parties that "all matters have been
resolved to satisfaction of both parties," and the district court
subsequently dismissed BD from the case in reliance on that
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settlement. The second supposed approval was when, in allowing
RFF's motion to enforce the settlement, the district court "f[ound]
that RFF and [BD] agreed upon all material terms of a settlement
and that it is a valid and binding agreement." But neither of
those occasions could be considered to be court approval. On the
first occasion, the terms of the settlement were not even disclosed
to the district court, so the mere fact that the district court
asked the parties whether they were satisfied with the agreement
could not count as approval of the settlement. On the second
occasion, the district court was referring to the enforceability
of the settlement as a private contract, not giving judicial
approval to the settlement. In In re Medomak Canning, the case
that Link cites for the court-approval requirement, the parties
filed a "Joint Application for Approval of Compromise" with the
bankruptcy court, and they received such approval. 922 F.2d at
897. On neither occasion here was there any such court approval
procedure that could give the settlement claim-preclusive effect.
Second, RFF received what was likely a voluntary
dismissal without prejudice. Federal Rule of Civil Procedure 41(a)
provides that, for either of the two types of voluntary dismissal
it describes, dismissal is without prejudice unless stated
otherwise. There was no such statement in the district court's
dismissal of the BD Mortgage invalidity claim in the 2011 federal
action. RFF Family P'ship, LP v. Link Dev., LLC, 932 F. Supp. 2d
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213, 228 (D. Mass. 2013) (dismissing Count I, for declaratory
judgment on the validity of the BD Mortgage, based on the pretrial
settlement without specifying whether dismissal was for
prejudice).
Because the RFF/BD Settlement was not a court-approved
settlement and did not receive a dismissal with prejudice, it
possesses neither of the characteristics of settlements that have
been found to have claim-preclusive effect.10 A purely private
settlement binds parties as a matter of pure contract law, but
Link points to no authority to show that a purely private
settlement should have claim-preclusive effect that prevents
subsequent judicial action. While this outcome unintuitively
allows RFF to reopen the issue of the validity of the BD Mortgage
after reaching a settlement of that claim in an earlier action,
that problem is not for the doctrine of claim preclusion to solve.
Rather, parties can avoid this situation in the future by including
a release of claims as part of a settlement agreement -- just as
the Link/BD Settlement contained a release in which Link waived
any future challenge to the validity of the BD Mortgage, and just
as the RFF/BD Settlement could have done.
10 We express no opinion as to whether either of those
characteristics, standing alone, would have been sufficient for
the settlement to have preclusive effect or whether the existence
of both would have been either necessary or sufficient.
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To recapitulate, the district court abused its
discretion in finding judicial estoppel and its entry of summary
judgment for Link on Counts I and IV is not saved by either of the
alternative bases for affirmance offered by Link. We vacate.
III.
We proceed to RFF's breach of contract claim against BD.
Because the district court concluded as a matter of law that BD
had breached the RFF/BD Settlement by failing to discharge the BD
Mortgage, the only issue at trial on that claim was the amount of
damages sustained by RFF as a result of that breach. Following
the close of evidence and the jury verdict, respectively, the
district court denied RFF's initial and renewed motions for
judgment as a matter of law on damages in the amount of attorneys'
fees incurred to prosecute the claims plus the amount needed to
discharge the BD Mortgage, instructed the jury that it could not
consider attorneys' fees in awarding damages, and excluded
evidence of attorneys' fees from the jury's consideration.
RFF claims two errors. First, RFF argues that the
district court erred as a matter of law by excluding attorneys'
fees from contract damages and thereby denying judgment as a matter
of law, instructing the jury not to consider attorneys' fees, and
excluding such evidence from the jury. Second, RFF argues that
the district court erred in not granting judgment as a matter of
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law on $866,000 in damages, based on the amount that Link was
demanding for a discharge of the BD Mortgage.
We review the denial of a judgment as a matter of law de
novo, examining the evidence in the light most favorable to the
nonmovant. Jones ex rel. United States v. Massachusetts Gen.
Hosp., 780 F.3d 479, 487 (1st Cir. 2015). Unpreserved challenges
to orders excluding evidence are reviewed for plain error. United
States v. Powers, 702 F.3d 1, 10 (1st Cir. 2012); see also Fed. R.
Evid. 103(e).
A. Attorneys' Fees
RFF first challenges the district court's decision to
exclude attorneys' fees from damages for breach of contract on the
basis that there was "no reason not to follow the so-called
American Rule."
RFF argues that because the legal fees it incurred in
enforcing the RFF/BD Settlement and attempting to discharge the BD
Mortgage were a direct result of BD's breach of its obligations
under the RFF/BD Settlement, those fees are recoverable as
compensatory damages. RFF argues that recovery of attorneys' fees
as compensatory damages is different from the award of attorneys'
fees as costs of the action, and that the American Rule does not
preclude the former. RFF cites only a single line of cases under
Ohio law in support of its argument. Rohrer Corp. v. Dane Elec
Corp. USA, 482 F. App'x 113, 117 (6th Cir. 2012); Raymond J.
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Schaefer, Inc. v. Pytlik, No. OT-09-026, 2010 WL 3820552, at *6
(Ohio Ct. App. Sept. 30, 2010); Shanker v. Columbus Warehouse Ltd.
P'ship, No. 99AP-772, 2000 WL 726786, at *5 (Ohio Ct. App. June 6,
2000).
BD responds11 that RFF's argument is unavailing because
Massachusetts law governs this case,12 and RFF has presented no
Massachusetts authority to support the argument that attorneys'
fees may be considered part of compensatory damages for breach of
a settlement agreement.
On the contrary, "[t]he usual rule in Massachusetts is
to prohibit successful litigants from recovering their attorney's
fees and expenses except in a very limited class of cases."
Preferred Mut. Ins. Co. v. Gamache, 686 N.E.2d 989, 991 (Mass.
1997) (describing Massachusetts's use of the "American Rule").
The limited class of cases includes those arising when "(1) a
statute permits awards of costs, or (2) a valid contract or
stipulation provides for costs, or (3) rules concerning damages
permit recovery of costs." Fuss v. Fuss, 368 N.E.2d 271, 274
11 As a threshold matter, BD argues that RFF has waived its
argument that attorneys' fees should be recoverable as contract
damages. We decline to resolve this waiver issue but, instead,
resolve the issue (favorably to BD) on the merits.
12 The parties appear to agree that Massachusetts law
governs the request for attorneys' fees in this case, and so do
we. See In re Volkswagen & Audi Warranty Extension Litig., 692
F.3d 4, 15 (1st Cir. 2012); Krewson v. City of Quincy, 74 F.3d 15,
17 (1st Cir. 1996).
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(Mass. 1977) (citations omitted). The third exception in Fuss,
which admits of the possibility that "rules concerning damages
[may] permit recovery of costs," id., seems to foreclose RFF's
argument that its framing of attorneys' fees as part of
compensatory damages rather than as costs of the action removes it
from the scope of the American Rule. Rather, to prevail on this
issue, RFF must identify Massachusetts authority supporting a
"rule[] concerning damages [that] permit[s] recovery of costs,"
id., in this kind of situation. RFF has not done so, and we
decline to extend Massachusetts law beyond what is supported by
existing authority.13 See Braga v. Genlyte Grp., Inc., 420 F.3d
35, 42 (1st Cir. 2005) ("A federal court sitting in diversity must
'take care not to extend state law beyond its well-marked
boundaries in an area . . . that is quintessentially the province
of state courts.'" (alteration in original) (quoting Markham v.
Fay, 74 F.3d 1347, 1356 (1st Cir. 1996))).
13To the extent that there is any Massachusetts authority,
it cuts against RFF. In Wilkinson v. Citation Insurance Co., the
Supreme Judicial Court drew a distinction between "[t]he amount
recovered on any contract breach" and "the cost to the prevailing
party of establishing the breach, typically attorney's fees." 856
N.E.2d 829, 836 n.9 (Mass. 2006). The SJC suggested that the
"benefit of the bargain" under a contract does not include fees
incurred in establishing recovery under that contract. Id. As
applied here, the benefit of the bargain that RFF can recover as
compensatory damages is limited to what it negotiated for in the
RFF/BD Settlement, namely, discharge of the BD Mortgage. RFF
attempts to extend the benefit of the bargain to include the
benefit of not having to litigate to receive that discharge, but
Wilkinson weighs against such a move.
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In the alternative, RFF relies on a Massachusetts rule
called the third-party attorney fee exception. Under that
exception, attorneys' fees can be collected as part of damages
when "tortious conduct . . . requir[es] the victim of the tort to
sue or defend against a third party in order to protect his
rights." M.F. Roach Co. v. Town of Provincetown, 247 N.E.2d 377,
378 (Mass. 1969). In M.F. Roach, a corporation tortiously
interfered with the plaintiff's performance of its contract with
the town, and the court awarded the plaintiff damages against the
corporation for the plaintiff's loss of profits on the contract as
well as attorneys' fees for the plaintiff's action against the
town to restore contractual rights. Id. RFF argues that, like in
M.F. Roach, to the extent that BD's breach required RFF to file
this action against Link to discharge the BD Mortgage, the
attorneys' fees should be included in the damages.
RFF cannot recover on this theory. As an initial matter,
RFF did not raise the third-party fee exception in the district
court, so it is likely waived. United States v. Graf, 784 F.3d 1,
6 n.6 (1st Cir. 2015); Millay v. Maine Dep't of Labor, Bureau of
Rehab., Div. for Blind & Visually Impaired, 762 F.3d 152, 157 n.4
(1st Cir. 2014). But even if we consider it a variant of the more
general arguments that RFF raised in district court about the
inclusion of attorneys' fees in compensatory damages, M.F. Roach
is distinguishable -- although not for the reasons that BD argues.
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BD offers only one plausible basis for distinguishing M.F. Roach:
that BD was allegedly responsible for breach of contract, whereas
M.F. Roach involved tortious behavior. But while it is true that
M.F. Roach referred expressly to "tortious conduct," BD does not
raise any reason why the same situation could not arise in a
contract action. In fact, our circuit has previously seemed to
understand M.F. Roach as applying equally to breach of contract
actions. See Mut. Fire, Marine & Inland Ins. Co. v. Costa, 789
F.2d 83, 88 (1st Cir. 1986) (citing M.F. Roach for proposition
that "when the natural consequence of a defendant's tortious
conduct or a defendant's breach of contract is to cause the
plaintiff to become involved in litigation with a third party, the
attorney's fees associated with that litigation are recoverable
from the defendant") (first emphasis added)).
The more relevant distinction is that in M.F. Roach --
at least insofar as the thin recitation of the facts in that case
allows us to gather -- the only way for the plaintiff to restore
contractual rights lost as a result of the defendant's tortious
interference was to bring a suit against the third party. See
O'Brien v. New Eng. Tel. & Tel. Co., 664 N.E.2d 843, 850 (Mass.
1996) (describing M.F. Roach as a situation in which "the plaintiff
is forced to sue a third party to hold it to the bargain with which
a defendant intentionally and wrongfully interfered" (emphasis
added)). Here, BD's breach did not force RFF to bring a suit
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against Link to invalidate the BD Mortgage. Rather, RFF's contract
action against BD could afford RFF a full recovery for any damages
that RFF suffered as a result of BD's breach. RFF cannot claim as
damages the litigation expenses incurred to bring an action against
a third party that it was not forced to bring.
In sum, we find no error in the district court's decision
to exclude attorneys' fees from contract damages. We note that
the parties could have inserted into the settlement a clause making
attorneys' fees recoverable in the event suit had to be brought to
enforce the settlement. However, they chose not to do so.
B. Contract Damages of $866,000
RFF argues that it was entitled to a judgment as a matter
of law on Count II for contract damages of $866,000, the sum that
Link is demanding to discharge the BD Mortgage. This argument has
not been adequately preserved for appeal.
In its Rule 50(a) motion filed after the close of
evidence, RFF requested that the court direct a verdict on damages
for "the amount of money necessary for RFF to obtain a discharge
of [the BD M]ortgage, with that amount to be determined by the
jury." RFF did not specify a dollar figure or press any theory
for how that amount should be calculated. In renewing the claim
in its Rule 50(b) motion after the jury verdict, RFF attached a
dollar figure to that amount for the first time and argued that
based on the evidence in the record, no reasonable juror could
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have awarded damages in any amount lower than $866,000. In the
Rule 50(b) motion and before us now, RFF derived the $866,000
figure from the amount that Link's manager testified that Link was
demanding for a discharge of the BD Mortgage.
In order to challenge the sufficiency of evidence on
appeal, the claim must have been raised in a Rule 50(a) motion and
then renewed in a Rule 50(b) motion. Latin Am. Music Co. Inc. v.
Media Power Grp., Inc., 705 F.3d 34, 38 (1st Cir. 2013) (citing
Hammond v. T.J. Litle & Co., 82 F.3d 1166, 1171 (1st Cir. 1996));
see also Unitherm Food Sys., Inc. v. Swift-Eckrich, Inc., 546 U.S.
394, 405 (2006). The Rule 50(a) motion "must be sufficiently
specific so as to apprise the district court of the grounds relied
on in support of the motion." T G Plastics Trading Co. v. Toray
Plastics (Am.), Inc., 775 F.3d 31, 39 (1st Cir. 2014) (quoting
Monteagudo v. Asociación de Empleados del Estado Libre Asociado de
P.R., 554 F.3d 164, 170 (1st Cir. 2009)). Arguments must be
"'spell[ed] out . . . squarely and distinctly' in the district
court" to avoid waiver. Id. (alterations in original) (quoting
United States v. Samboy, 433 F.3d 154, 161 (1st Cir. 2005)).
RFF's Rule 50(a) motion was not sufficient to put the
district court on notice of the argument it is making before us
now. RFF's request for damages in "the amount of money necessary
for RFF to obtain a discharge of the mortgage, with that amount to
be determined by the jury" gave no hint to the district court of
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its argument now that there was no evidence before the jury that
would allow the jury to return a verdict of less than $866,000 in
damages.
Nor is RFF saved by having argued for $866,000 in its
Rule 50(b) motion. A Rule 50(b) motion cannot be used to introduce
"a legal theory not distinctly articulated" in the Rule 50(a)
motion. Parker v. Garrish, 547 F.3d 1, 12 (1st Cir. 2008)
(emphasis added) (quoting Correa v. Hosp. S.F., 69 F.3d 1184, 1196
(1st Cir. 1995)). RFF's subsequent expansion of an argument that
was merely a toehold in the Rule 50(a) motion did not suffice to
preserve the issue for appeal.
IV.
Finally, RFF argues that the district court erred by
awarding it attorneys' fees under Massachusetts General Laws,
Chapter 93A, in an amount lower than what RFF had requested.
After the jury found a violation of Chapter 93A by BD
and awarded RFF nominal damages, RFF sought $191,029.65 in
attorneys' fees.14 The district court awarded $47,757 in
attorneys' fees, which was twenty-five percent of the amount sought
by RFF. RFF Family P'ship, LP v. Link Dev., LLC, No. 14-10065,
2015 WL 1472253, at *5 (D. Mass. Mar. 31, 2015). The district
14 A party prevailing on a Chapter 93A claim is entitled to
recover "reasonable attorneys' fees and costs incurred in said
action." Mass. Gen. Laws ch. 93A, § 11.
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court's reasons for the reduction included "the minimal success
and limited damages recovered by RFF at trial and the insufficient
documentation RFF provided to the Court in support of its request."
Id. RFF contests this reduction in the fee award.15
In awarding attorneys' fees under Chapter 93A, courts
are directed to "consider the nature of the case and the issues
presented, the time and labor required, the amount of damages
involved, the result obtained, the experience, reputation, and
ability of the attorney, the usual price charged for similar
services by other attorneys in the same area, and the amount of
awards in similar cases."16 Twin Fires Inv., LLC v. Morgan Stanley
Dean Witter & Co., 837 N.E.2d 1121, 1138 (Mass. 2005) (quoting
Linthicum v. Archambault, 398 N.E.2d 482, 488 (Mass. 1979)). "No
one factor is determinative, and a factor-by-factor analysis,
although helpful, is not required." Id. (quoting Berman v.
Linnane, 748 N.E.2d 466, 469 (Mass. 2001)).
The district court wrote a detailed and careful order
that considered those exact factors: the "very limited recovery
RFF obtained in this case," namely only nominal damages, RFF Family
15 The district court also denied RFF's request for $3,229
in costs, RFF Family P'ship, LP, 2015 WL 1472253, at *2, *5, but
RFF does not appear to be appealing that denial.
16 Both parties assume, and we agree, that Massachusetts
law governs the award of attorneys' fees here. Star Fin. Servs.,
Inc. v. AASTAR Mortg. Corp., 89 F.3d 5, 16 (1st Cir. 1996).
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P'ship, LP, 2015 WL 1472253, at *3; the "poor quality of the
supporting documentation" submitted by RFF as proof of the fees it
incurred, id. at *4; the inclusion in that documentation of legal
work pertaining to noncompensable claims and the difficulty the
district court encountered in attempting to distinguish between
compensable and noncompensable fees, id.; and the numerous
redactions in the bills that prevented the district court from
determining the reasonableness of the fees requested, id. at *5.
In the end, the fee award is "largely discretionary," Twin Fires
Inv., LLC, 837 N.E.2d at 1138, and there was no abuse of discretion
here.
There was no requirement under Massachusetts law that
the district court strictly apply the lodestar method and calculate
the reduction in the fee award by the hour. The Supreme Judicial
Court has made it clear that judges are "not required to review
and allow or disallow each individual item in the bill, but [can]
consider the bill as a whole." Berman, 748 N.E.2d at 469.
V.
For the reasons stated, we vacate the district court's
entry of summary judgment against RFF on its claims on the validity
of the BD Mortgage, and we remand for further proceedings
consistent with this opinion. We affirm the district court's
decisions on contract damages and affirm the district court's award
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of attorneys' fees under Massachusetts General Laws, Chapter 93A.
All parties will bear their own costs.
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