Reed v. Zipcar, Inc. ( 2013 )

Not for Publication in West's Federal Reporter
United States Court of Appeals
For the First Circuit
No. 12-2048
NAOMI REED,
Plaintiff, Appellant,
v.
ZIPCAR, INC.,
Defendant, Appellee.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Nathaniel M. Gorton, U.S. District Judge]
Before
Thompson, Circuit Judge,
Souter,* Associate Justice,
and Stahl, Circuit Judge.
Frank John Jablonski, with whom Progressive Law Group, LLC,
Eugene R. Richard and Wayne, Richard & Hurwitz, LLP were on brief,
for appellant.
Matthew Rawlinson, with whom Michael E. Bern, Christopher J.
Cunio, Patrick E. Gibbs, Nicholas D. Stellakis, Cooley Manion Jones
LLP, and Latham & Watkins LLP, were on brief, for appellee.
July 17, 2013
*
Hon. David H. Souter, Associate Justice (Ret.) of the
Supreme Court of the United States, sitting by designation.
SOUTER, Associate Justice. Naomi Reed appeals the
district court’s dismissal of her complaint against Zipcar, Inc.,
claiming that certain fees charged by the corporation are unlawful.
We affirm.
I
Zipcar, Inc. operates a car-sharing service in major
cities. Its customers become “members” by paying an annual fee and
signing a membership agreement, after which they may reserve cars
by the hour for a fee proportional to the period agreed upon. A
critical term of the reservation contract obligates the customer to
return the rented car to its origin by the end of the specified
period to ensure that the next customer with a reservation is not
delayed. As a condition of membership, Zipcar customers agree to
pay a $50 hourly late fee if they return a car late.
Reed is a Zipcar member, who has twice paid a $50 fee for
returning a car within one hour after the reservation time expired.
She filed a putative class action on diversity grounds in the
district court contending that Zipcar’s late fees violate governing
Massachusetts law because they are “unfair and disproportionate
relative to the costs of late returns, and further, do not reflect
reasonable forecasts of damages due to late returns.” J.A. 19.
She alleged that Zipcar’s fees exceed those of four comparable
firms, which charged late fees of $25 or less. Based on these
purported benchmarks, Reed argued Zipcar’s fee was unlawful,
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subject to claims for unjust enrichment, and for money had and
received, and was a violation of the Massachusetts Consumer
Protection Act, Mass. Gen. Laws ch. 93A; she sought restitution and
a declaration that Zipcar had acted unlawfully.
After argument, the district court granted Zipcar’s
motion to dismiss the complaint for failure to state a claim.
First, the court concluded that Reed had failed to state an
“unlawful penalty” claim under Massachusetts law, because a party
may argue that a liquidated damages provision provides for an
unlawful penalty only as a defense to enforcement; it refused “to
endorse a claim for relief heretofore unrecognized by Massachusetts
courts, especially in light of the present consensus against its
recognition as an independent cause of action.” J.A. 206. The
court noted in any event that such a claim would have been
precluded by the voluntary payment doctrine. Second, the court
dismissed Reed’s equitable claims because under Massachusetts law
they would arise only when there is no express contract between the
parties governing the subject; they were also barred because of the
existence of an adequate remedy at law.
Finally, the district court rejected Reed’s Chapter 93A
count because she had failed to plead sufficient facts to make out
a plausible claim for relief. Her statutory complaint comprised
two theories: that Zipcar’s late fees were grossly disproportionate
to the damages caused by tardy returns and that the late fees were
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procedurally unconscionable. On the former, the district court
found that “[e]stimating the damages resulting from late returns
. . . cannot be done with precision, much less easily,” J.A. 212,
and that Reed had failed to offer any reasonable approximation of
the harm that Zipcar could expect from breach. The fact that other
companies charged lower fees did not support a plausible inference
that Zipcar’s fees were grossly disproportionate, owing to the
variety of reasons that could support a variance in fees, and in
any event, “it would be a stretch to characterize Zipcar’s only
slightly higher late fees as ‘grossly disproportionate.’” J.A.
212. On the latter Chapter 93A theory, the court found that Reed
had failed to allege that Zipcar’s late fee was concealed or that
she was misled.
Reed timely appealed, and this court has jurisdiction
under 28 U.S.C. § 1291.
II
We review a dismissal under Rule 12(b)(6) de novo,
Freeman v. Town of Hudson, 714 F.3d 29, 35 (1st Cir. 2013),
accepting here “all factual allegations in [Reed’s] complaint as
true” and asking whether she has set forth allegations sufficient
to warrant relief as a matter of law, Tellabs, Inc. v. Makor Issues
& Rights, Ltd., 551 U.S. 308, 322 (2007). The “combined
allegations . . . must state a plausible, not a merely conceivable,
case for relief.” Sepulveda-Villarini v. Dep’t. of Educ. of P.R.,
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628 F.3d 25, 29 (1st Cir. 2010) (citing Ashcroft v. Iqbal, 556 U.S.
662, 678-79 (2009)). A claim is plausible if its factual
allegations taken as true “allow[] the court to draw the reasonable
inference that the defendant is liable for the misconduct alleged.”
Iqbal, 556 U.S. at 678. While “[t]he plausibility standard is not
akin to a ‘probability requirement,’” it demands “more than a sheer
possibility that a defendant has acted unlawfully.” Id. (quoting
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556 (2007)). Unless the
allegations push a claim “across the line from conceivable to
plausible,” dismissal is proper. Twombly, 550 U.S. at 570.
A
Reed says that the district court errantly rejected her
two theories of relief under Chapter 93A. Massachusetts General
Laws Chapter 93A makes unlawful any “[u]nfair methods of
competition and unfair or deceptive acts or practices in the
conduct of any trade or commerce.” We have previously observed
that “[t]he statute does not define ‘unfair’ and ‘deceptive,’” but
the Supreme Judicial Court (SJC) has held “[a] practice [to be]
unfair if it is within the penumbra of some common-law, statutory,
or other established concept of unfairness; is immoral, unethical,
oppressive, or unscrupulous; and causes substantial injury to other
businessmen.” Kenda Corp. v. Pot O’Gold Money Leagues, Inc., 329
F.3d 216, 234 (1st Cir. 2003) (quoting Linkage Corp. v. Trustees of
Boston Univ., 679 N.E.2d 191, 209 (Mass. 1997)) (second alteration
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in original) (internal quotation marks omitted). “Chapter 93A
liability is decided case-by-case, and Massachusetts courts have
consistently emphasized the ‘fact-specific nature of the inquiry.’”
Arthur D. Little, Inc. v. Dooyang Corp., 147 F.3d 47, 55 (1st Cir.
1998) (quoting Linkage Corp., 679 N.E.2d at 209). “Massachusetts
leaves the determination of what constitutes an unfair trade
practice to the finder of fact, subject to the court’s performance
of a legal gate-keeping function.” Mass. Eye & Ear Infirmary v.
QLT Phototherapeutics, Inc., 552 F.3d 47, 69 (1st Cir. 2009)
(citing Milliken & Co. v. Duro Textiles, LLC, 887 N.E.2d 244, 259
(Mass. 2008)).
Reed insists that she stated a plausible Chapter 93A
claim by alleging facts sufficient to show that Zipcar’s late fee
is an unlawful penalty. She argues that she showed that the fee
does not approximate damages anticipated at the time of contract
formation, and that she demonstrated that Zipcar’s late fees are
about twice as high, or more, as those of other companies in the
industry. We assume without deciding that a litigant could bring
a Chapter 93A claim by carrying the burden Reed says she has
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satisfied.1 But even assuming the adequacy of such a claim, Reed’s
complaint falls short of sufficient facts to state one plausibly.
First, Reed did not plausibly allege that damages were
easy to ascertain at the time of contract formation; her complaint
is essentially silent on the issue. Although it contains a variety
of conclusory statements about Zipcar’s capacity to monitor its
fleet, the fact that it clusters cars close together, and that
Zipcar has in place “protocols” “to systematically impose” the late
fees, none of these supports a fair inference that the parties
could have anticipated with ease the magnitude of likely damages
from breach. See Appellant’s Br. 35 n.14. As a point of
comparison, the SJC has found damages “difficult to ascertain” at
the time of formation in a case where the value of the item at
issue “would vary depending on the demand . . . at the time of
breach.” Minihane, 886 N.E.2d at 674. Here, Reed has failed to
allege that the cost of breach would not be similarly variable,
1
Her proffered showing may well fall within the “penumbra” of
the standard under Massachusetts law for raising an affirmative
defense to enforcement of a liquidated damages provision.
Massachusetts courts will reject such a defense and enforce the
provision so long as two criteria are met: first, “damages flowing
from a breach [must have been] difficult to ascertain” at the time
of contracting; and second, “the sum agreed on as liquidated
damages [must] represent[] a ‘reasonable forecast of damages
expected to occur in the event of a breach.’” NPS, LLC v.
Minihane, 886 N.E.2d 670, 673 (Mass. 2008) (quoting Cummings
Props., LLC v. Nat’l Commc’ns Corp., 869 N.E.2d 617, 620 (Mass.
2007). Reed disavows that she raised this claim outside of Chapter
93A. See Appellant’s Br. 18 (“Reed did not assert a stand-alone
unlawful penalty claim.”).
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rendering damages “extremely difficult, if not impossible” to
anticipate at the time of formation. Id.Indeed, her complaint works against her, being replete
with self-defeating allegations that could support the inference
that damages would have been difficult to predict at the time of
formation. She acknowledges that the cost to Zipcar of a late
return will fluctuate depending on when the car is ultimately
returned, whether another customer with an immediately subsequent
reservation is waiting, and whether alternative accommodations for
the unlucky customer would have been ready to hand. The district
court was entirely justified in concluding that the pleadings
indicate that “[e]stimating damages resulting from late returns
. . . cannot be done with precision, much less easily.” J.A. 212.
Second, Reed failed to allege facts that could support an
inference that the late fee was on the upside of a reasonable
forecast of Zipcar’s damages in the event of breach, under the
standard that liquidated damages will pass muster where the “sum is
not grossly disproportionate to the expected damages arising from
a breach of the . . . agreement, nor is it ‘unconscionably
excessive’ so as to be defeated as a matter of public policy.”
Kelly v. Marx, 705 N.E.2d 1114, 1117 (Mass. 1999) (quoting A-Z
Servicenter, Inc. v. Segall, 138 N.E.2d 266, 268 (Mass. 1956)).
Simply put, Reed’s complaint contains no allegations as to what a
reasonable estimate of damages would be. This is sufficient to
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defeat this claim because, as the district court explained, Reed
cannot adequately plead “that the late fee is ‘grossly
disproportionate’ to the expected harm caused by late returns
without coming up with a reasonable approximation of that harm.”
J.A. 212.
What Reed has pleaded are a series of fees charged by
competitors that are lower than the fee charged by Zipcar, but this
alone is not enough, because Reed has failed to put forth
sufficient facts to support an inference that the cited charges
reasonably approximate the cost of breach. For one thing, we note
that the question for the district court was whether Zipcar’s fee
was grossly disproportionate as properly estimated when the
contract was made, but two of the four competitors cited by Reed
did not exist in 2006 when Reed became a Zipcar member. The fees
imposed by the remaining two are offered in a vacuum, devoid of
facts that would support an inference that their fees exemplified
a persuasive industry standard or reflected the actual costs faced
by a firm like Zipcar. The need for some such factual allegation
follows from the commonly understood fact that there are myriad
reasons that firms (particularly, new market entrants) might offer
rates lower than the dominant market participant, and Reed has
alleged nothing to support a plausible inference that these fees
reflected their true costs of breach.2
2
Reed contests the district court’s use of the voluntary
payment doctrine as an alternative basis for its decision. We need
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B
Reed also excepts to the dismissal of her equitable
claims for unjust enrichment and for money had and received. She
says that the district court erroneously established a “bright
line” rule that precludes equitable claims arising from contract,
Appellant’s Br. 44, and that, contrary to the district court’s
finding, she did not have an adequate remedy at law. These claims
were properly dismissed for the reasons given by the district
court. Under Massachusetts law, litigants may not “override an
express contract by arguing unjust enrichment,” Platten v. HG
Bermuda Exempted Ltd., 437 F.3d 118, 130 (1st Cir. 2006), and the
claim of money had and received is simply a narrower form of an
unjust enrichment, limited to wrongs arising from money changing
hands, see Jelmoli Holding, Inc. v. Raymond James Fin. Servs.,
Inc., 470 F.3d 14, 17 n. 2 (1st Cir. 2006). Thus, neither
equitable ground asserted by Reed can trump the plain terms of the
contract willingly entered by both parties. Because Reed neither
alleges that the contract is invalid generally or that its
provisions are unclear, Reed cannot escape its terms by resort to
equity.
C
Finally, Reed faults the district court for failing to
address her request for a declaration that Zipcar’s fees were
not pass on this additional ground for affirmance.
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illegal. But Reed’s declaratory relief claim is premised upon the
validity of her inadequately pleaded substantive claims, and she
offers no other basis for issuing a declaration. There was simply
nothing alleged for the district court to declare unlawful. See,
e.g., Lozano v. AT&T Wireless Servs., Inc., 504 F.3d 718, 729 (9th
Cir. 2007) (rejecting a declaratory judgment claim as merely
“parasitic” of other claims rejected).
III
The judgment of the district court is affirmed.
It is so ordered.
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