Home » LAW » 2010 Haddad v Hogan (93A)

2010 Haddad v Hogan (93A)

United States Court of Appeals
For the First Circuit
Nos. 06-2206, 09-1479
HADDAD MOTOR GROUP, INC.;
GEORGE HADDAD,
Plaintiffs, Appellees,
v.
KARP, ACKERMAN, SKABOWSKI & HOGAN, P.C.;
PETER J. HOGAN,
Defendants, Appellants.
APPEALS FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. William G. Young, U.S. District Judge]
Before
Torruella, Boudin and Howard,
Circuit Judges.
John G. Neylon with whom Neylon & O’Brien, P.A. was on
consolidated brief for appellants.
Paul M. Harris with whom Lauren R. Holland and Murtha Cullina,
LLP were on consolidated brief for appellees.
April 20, 2010
The opinion and report are unreported. The district court 1
judge who presided over the pre-trial and trial proceedings became
terminally ill, and a successor district judge took over after the
merits were resolved but before a final decision on attorneys’ fees
and costs, which had been referred to a magistrate judge. The
successor district court judge approved a report from the
magistrate judge awarding attorneys’ fees and costs.
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BOUDIN, Circuit Judge. Haddad Motor Group (“HMG”), a car
dealership in Pittsfield, Massachusetts, sued its former accounting
firm, Karp, Ackerman, Skabowski & Hogan, P.C. (“KASH”), and one of
the partners, Peter Hogan (“Hogan”), over allegedly negligent tax
advice. HMG recovered damages and attorneys’ fees. The
accountants’ appeal is now before us. We summarize the background
events and the proceedings, drawing primarily from the opinion of
the district court and a report by the magistrate judge.1
George Haddad, the owner of HMG, retained KASH as HMG’s
accountant in December 1997. Just over six months before, HMG had
executed a so-called “margin-against-the-box” transaction to
finance the purchase of a second car dealership. At the time, HMG
owned shares of BankBoston stock (then worth almost $360,000); to
make use of the stock without immediately incurring a capital gains
tax by selling it, HMG borrowed an equivalent amount of the same
stock from PaineWebber (paying interest for this privilege and
pledging to replace the borrowed shares with its own shares at a
later date).
HMG then sold the borrowed shares to finance the purchase
of the dealership. This effectively deferred capital gains taxes
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on its own shares until the transaction was closed out by a later
transfer of HMG’s shares to PaineWebber to replace the borrowed
ones that had been sold. Thus, eventually HMG had to relinquish
its shares and realize the gains, and the cost of delaying this
realization was the “rent” that it had to pay PaineWebber until the
shares it had loaned HMG were replaced by HMG’s own shares.
In late 1997 and during 1998, Haddad and Hogan had
discussions on the tax position of Haddad and his dealerships, the
possible closing of the “margin-against-the-box” transaction, the
conversion of HMG from a Subchapter C to a Subchapter S
corporation, and the use of losses of the new dealership to offset
gains to HMG. A Subchapter C corporation pays taxes on its income;
a Subchapter S corporation does not: its income is attributed to
its shareholders, who report that income and pay taxes on it
personally. See A.W. Chesterton Co., Inc. v. Chesterton, 128 F.3d
1, 3 (1st Cir. 1997).
In December 1998, George Haddad and HMG’s controller,
Desiree Croteau, met with KASH’s Hogan; both sides agree that at
this meeting they discussed whether HMG should close-out the
“margin-against-the-box” transaction and whether HMG should convert
to a Subchapter S corporation. Just what advice was given was
disputed at trial–Haddad blamed KASH for misadvising him on these
steps–but is not critical to this appeal because the accountants
A built-in-gains tax applies to certain asset sales made by 2
a company that converts from a Subchapter C to a Subchapter S
corporation and is designed to limit the use of conversions to
avoid paying tax on gains; the tax applies to sales of appreciated
assets “dating from the S corporation’s days as a C corporation”
and applies so long as the asset is sold within 10 years of the
conversion. See 26 U.S.C. § 1374(a), (d)(7) (2006); MMC Corp. v.
C.I.R., 551 F.3d 1218, 1220-21 (10th Cir. 2009). Technically, the
built-in-gains tax could also have been avoided by closing the
“margin-against-the-box” transaction before converting to a
Subchapter S corporation, but then HMG would have been a Subchapter
C corporation when the capital gains were realized, and so
presumably would have had to pay tax at the corporate level.
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were found liable because of the timing of tax payments, not
because of the transactions themselves.
On February 11, 1999, HMG closed out the “margin-againstthe-
box” transaction, realizing a capital gain of approximately
$311,000 on its BankBoston stock. On March 15, 1999, HMG converted
to a Subchapter S corporation retroactive to January 1, 1999.
Although normally a Subchapter S corporation is not a tax-paying
entity, HMG became liable for a so-called “built-in-gains” tax of
approximately $135,000 on the gains because HMG had converted from
Subchapter C to Subchapter S status and the stock dated from when
HMG was a Subchapter C corporation. The built-in-gains tax could
have been avoided if HMG had converted to Subchapter S status and
kept the transaction open for 10 years.2
The “margin-against-the-box” transaction was closed in
the first quarter of 1999, which meant HMG should have estimated
its built-in-gains tax liability at that time and begun making or
increasing quarterly installment payments to the IRS based on that
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estimate; HMG failed to make such payments, giving rise to
additional liability for underpayment. In December 1999, KASH
informed George Haddad that HMG was liable for the built-in-gains
tax and recommended that HMG delay filing its 1999 taxes from March
2000 to September 2000, the given reason being an on-going audit of
HMG’s 1997 tax return by the IRS.
Subsequently, on March 14, 2000, KASH filed a Form 7004
with the IRS to extend the deadline for filing HMG’s taxes until
September 15, 2000. The extension form required an estimate of the
tentative tax due and payment of that amount, but KASH omitted any
reference to the large built-in-gains tax that was due and instead
listed the tentative tax as only $9,799. HMG did not pay the much
larger built-in-gains tax until October 2000, making itself
potentially liable for penalties and interest.
The outcome was that the IRS imposed a penalty of $5,200
on HMG for failing to make estimated quarterly payments on the
built-in-gains tax in 1999 and imposed interest of $5,084 for
delaying payment in 2000 from March 15 until October; it abated any
penalty for the delay in payment in 2000 after a new accountant
blamed this delay on KASH. Massachusetts, which apparently
received some estimated payments but not enough, imposed a penalty
of $1,544 and interest of $517 for the delay in payment of the
balance of the tax in 2000.
HMG’s claims rested on section 11 of Chapter 93A, which 3
provides a right of recovery for any business entity injured by “an
unfair method of competition or an unfair or deceptive act or
practice” by another business entity. Mass. Gen. Law. ch. 93A, §
11. The statute permits the award of double or treble actual
damages at the judge’s discretion for “willful or knowing
violation[s]” and also requires the award of “reasonable attorneys’
fees and costs” to a successful plaintiff, “irrespective of the
amount in controversy.” Id.
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In December 2002, HMG sued KASH in Massachusetts state
court, and KASH removed the suit to the federal district court
based on diversity jurisdiction. The complaint focused on two
charges: (1) that KASH gave faulty advice in recommending that HMG
close-out the “margin-against-the-box” transaction and convert to
a Subchapter S corporation; and (2) that in an attempt to delay
facing up to the adverse tax consequences of those transactions,
KASH caused HMG to incur unnecessary penalties and interest. HMG’s
claims, as finally presented, asserted negligence and a violation
of Chapter 93A, Mass. Gen. Law. ch. 93A (2008).3
The jury found that KASH had been negligent as to the
failures to make timely payments, but the damages awarded ($7,145)
were solely for federal and state interest and penalties incurred
from March 15, 2000 (the date on which HMG’s tentative taxes were
due) until October 15, 2000 (when the tax was paid). The jury
awarded nothing for the other penalties the IRS imposed on HMG for
failing to make quarterly installment payments in 1999.
The jury also awarded nothing on the claim that KASH
negligently advised HMG on the Subchapter S conversion and closing
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the “margin-against-the-box” transaction. The jury could have
thought KASH’s advice on these transactions non-negligent or that
HMG suffered no damages as it was unlikely to have kept the
transaction open for 10 years while continuing to pay “rent” on the
borrowed stock. In all events, HMG does not challenge the jury’s
verdict so far as it was adverse to HMG.
On the Chapter 93A claim, the jury gave an advisory
verdict rejecting any award, possibly concluding that the
underpayment on the extension was mere negligence and did not reach
the Chapter 93A threshold of wrongdoing; but the trial judge–the
trier of fact as to this claim–found for HMG, concluding that KASH
had violated section 11 of Chapter 93A by deceiving HMG as to the
required payments and had knowingly misstated HMG’s tentative tax
due on the extension form in March 2000.
Further, the trial judge expanded the damage award.
Although the jury awarded only the amount of interest and penalties
imposed on HMG after March 15, 2000–the date on which HMG’s
tentative taxes were due–the judge added $5,200 to that amount
(for a total of $12,345) based on the IRS penalty imposed on HMG
for not making quarterly estimated payments in 1999 after the
transaction had been closed. The trial judge then trebled the
total (to $37,035), as Chapter 93A permits, based on a further
finding of a “willful or knowing violation” by KASH. Mass. Gen.
Laws ch. 93A, § 11. Further adjustments for interest, and then for
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a recalculation of interest, led to a final damage award of
$42,227.10.
Then, after proceedings before and a recommendation by a
magistrate judge, the district court awarded HMG $205,992 in
attorneys’ fees and $53,698 in costs. Unlike the exemplary double
or triple damages permitted by section 11, an award of attorneys’
fees for the prevailing plaintiff is mandatory for a Chapter 93A
violation. Mass. Gen. Laws ch. 93A, § 11. KASH has now appealed
from both the judgment imposing damage liability and the later
award of attorneys’ fees and costs, and we have consolidated the
two appeals.
In this court KASH adopts a “kitchen sink” approach,
challenging numerous district court rulings on multiple grounds;
but the main attacks are directed against the court’s Chapter 93A
findings, which undergird the treble damages and attorneys’ fees
awards, and against the calculation of attorneys’ fees. This being
a diversity case, Massachusetts substantive law applies. Gasperini
v. Ctr. for Humanities, Inc., 518 U.S. 415, 427 (1996). The
standard of review varies with the individual claim of error.
KASH first argues that the district judge’s fact-finding
underlying his Chapter 93A verdict was clearly erroneous and
warrants reversal, focusing on three subsidiary findings. Two of
the district judge’s statements challenged by KASH concern the tax
consequences of closing the “margin-against-the-box” transaction
One is that the judge thought that the “built-in-gains” tax 4
was an additional tax, rather than a substitute for a Subchapter C
tax that would otherwise have to be paid; but this is accurate if
HMG converted and waited 10 years. The other is that the judge
said the “built-in-gains” tax would not have been imposed if the
conversion had been delayed a year–technically an accurate
statement even if one assumes that a Subchapter C tax would be paid
instead. Elsewhere in the opinion, the judge more precisely noted
that built-in-gains taxes are “imposed on the sale of any
appreciated corporate assets within ten years of a corporation’s
conversion to a subchapter S corporation.”
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and converting to a Subchapter S corporation. Read carefully, 4
neither statement is inaccurate; one does hinge on the possibility
that, had Haddad fully understood the tax consequences, he would
have kept the “margin-against-the-box” transaction open for 10 more
years, but the judge made no finding on the point.
Anyway, neither supposed error matters because Chapter
93A liability was not imposed with respect to KASH’s advice to HMG
on these transactions; rather, Chapter 93A liability was imposed
because of KASH’s allegedly deceptive conduct in concealing the tax
liability from HMG by not advising HMG of the need to make
quarterly tax payments in 1999 and by filing in March 2000 an
extension form listing the wrong amount of tentative tax. An error
on either of the points KASH raises would not undercut the award
based on this other conduct by KASH.
The third and more pertinent subsidiary finding attacked
by KASH is the finding that the accountants were responsible for
HMG’s failure to pay the tentative tax due by March 15, 2000. KASH
claims HMG understood its liability for the extra tax and
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deliberately underpaid in order to conserve cash. There was
conflict on this point and some of the evidence was helpful to
KASH’s position, but the trial judge’s position was supported by
detailed findings and is not clearly erroneous. We need not repeat
his explanation because KASH’s attack is itself defective.
It is of no use for KASH to cite to or even describe
evidence in its favor without also discussing the evidence the
other way and showing by analysis why no reasonable judge or jury
could decide the issue against it. Cf. United States v. McCarthy,
77 F.3d 522, 529 (1st Cir. 1996), cert. denied, 519 U.S. 991
(1996), 519 U.S. 1093 (1997). Importantly, KASH does not explain
its own patent understatement of the taxes due when it filed an
extension form. The jury and the trial judge agreed that KASH was
at fault for that non-payment (although not to the same degree).
KASH alternatively argues that its conduct did not rise
to the level of “rascality” needed to establish a Chapter 93A
violation, Damon v. Sun Co., Inc., 87 F.3d 1467, 1483-84 (1st Cir.
1996), but this claim–not seriously developed–depends partly on
the premise that HMG was properly advised as to the need to make
its tentative tax payment in March 2000 and chose to conserve cash.
The trial judge found that KASH failed to give proper advice so as
to conceal the adverse tax consequences of its earlier advice and,
further, found that KASH knowingly provided false information to
the IRS about the tax due when filing the extension form. This is
The proper standard of review, discussed in various 5
decisions, e.g., Fed. Ins. Co. v. HPSC, Inc., 480 F.3d 26, 34 (1st
Cir. 2007), ought to depend on the precise challenge or challenges:
construing the statute is a matter of law; findings as to conduct
and motive are reviewed for clear error; and on “law application”
issues deference is often afforded although there are exceptions,
see, e.g., Bolton v. Taylor, 367 F.3d 5, 7-8 (1st Cir. 2004).
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enough, whatever the standard of appellate review governing the
rascality label.5
KASH next claims that the judge erred by meeting with the
jury, after the jury rendered its own verdict, to ask them about
their advisory verdict on the Chapter 93A claim. KASH’s theory is
not that the jury’s verdict should be overturned on this basis, but
that this conversation influenced the judge’s Chapter 93A decision.
The district judge, however, told the parties that he would speak
with the jurors and KASH did not object, leaving KASH dependant on
showing plain error. United States v. Hilario-Hilario, 529 F.3d
65, 74-75 (1st Cir.), cert. denied, 129 S. Ct. 470 (2008).
KASH claims it did not object because it did not expect
the district judge to talk to the jury about its deliberations, but
the judge told counsel that he was going to talk to the jury and
then “advise you [counsel] as to what the jury says about
negligence damages”; if KASH wanted specific limitations on what
was discussed (or objected to any discussion), it should have said
so then. KASH says that the discussion was harmful to it but it
gives no persuasive reason for thinking that the discussion altered
the result; and, whatever the advisability of the judge’s
The cases KASH does cite are inapposite, with most focusing 6
on impermissible interference with a jury’s verdict. E.g., Nelson
v. S. Pac. Co., 67 P.2d 682, 685-86 (Cal. 1937) (judge ought not
interrupt jury deliberations prior to jury verdict); Shears v.
Metro. Transit Auth., 86 N.E.2d 437, 437-38 (Mass. 1949) (postverdict
statements from jury cannot be used to alter jury verdict).
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consultation, the demanding standard of plain error has not been
met. See United States v. Olano, 507 U.S. 725, 734-36 (1993).6
Relatedly, KASH says the district court erred in denying
KASH’s later requests for admissions as to what the judge told the
parties about his communications with the jury. KASH’s argument is
hard to decipher, but the point is subsumed by our prior
discussion. KASH did not object beforehand, and an inquiry after
the event, about a judge and jury discussion to which it did not
object and that cannot be undone, comes too late (save, perhaps, in
extraordinary circumstances not here present).
A more serious claim is KASH’s attack on the calculation
of damages, homing in on the fact that the delay in paying its
taxes gave HMG the use of the money in the meantime. There was
evidence at trial (not seriously disputed by HMG) that HMG earned
about 7 percent on the withheld funds; KASH says both that HMG
deliberately intended to underpay its taxes and that, anyway, the
benefits to HMG of not paying offset any interest and penalties
imposed by the IRS and state tax authorities. The first point was
a disputed issue resolved by both jury and judge against KASH and
is not seriously developed.
Such offsets, consistent with the Restatement (Second) of 7
Torts § 920 (1979), have been applied by Massachusetts courts in
Chapter 93A cases, see, e.g., Ameripride Linen & Apparel Servs.,
Inc. v. Eat Well, Inc., 836 N.E.2d 1116, 1120-21 (Mass. App. Ct.),
review denied, 840 N.E.2d 55 (Mass. 2005); see also Kattar v.
Demoulas, 739 N.E.2d 246, 258 (Mass. 2000).
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The second point might be a basis for reducing damages if
a remand for that purpose was what KASH now sought. The jury
seemingly allowed no offset and the judge even more clearly did not
do so. Whether an offset should be allowed could be regarded as a
policy choice, cf. Restatement (Second) of Torts § 920A(2) & cmt.
b (1979) (collateral source rule), but the Massachusetts case law–
which neither party develops–may well favor such an offset. HMG 7
does not attempt to explain why, given the testimony as to HMG’s
use of an interest paying account for spare cash and evidence about
the rate paid, there should be no offset.
However, KASH has not asked for a recalculation that
reduces damages, but rather for a determination that there were no
net damages, and even a 7 percent return on withheld payments would
not show that. Whether the tax authorities’ imposition is regarded
as interest, a penalty, or some combination of the two, the total
paid by HMG appears to exceed what it could have earned in
interest. The gap is not bridged by speculation by KASH that HMG
benefitted in some unspecified amount because withholding payment
made its capital position better (at least in appearance).
One Massachusetts appellate case explicitly holds offsets 8
occur only after applying double or treble damages in Chapter 93A
claims, Ameripride Linen, 836 N.E.2d at 1120-22, and another
Supreme Judicial Court case implies as much, Wolfberg v. Hunter,
432 N.E.2d 467, 473-74 (Mass. 1982).
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KASH’s all-or-nothing gambit is understandable. A remand
might marginally reduce the damages, although not by much because
under Chapter 93A the offset might be made only after the gross
loss was computed and trebled. Litigating on remand to achieve a 8
minor reduction would cost KASH money and might add to attorneys’
fees for HMG, and KASH would still owe the huge attorneys’ fees
already awarded, unless it could get them reduced or nullified on
independent grounds. Anyway, KASH has not sought a remand to
recalculate damages so these issues need not be pursued.
KASH next argues that the district court erred in
assessing $12,345 in damages (before trebling) instead of the only
$7,145 in damages awarded by the jury. It claims that the
additional $5,200 in damages added by the trial judge accrued prior
to KASH’s March 15, 2000, filing for an extension of time to submit
HMG’s taxes, and that March 15, 2000, was the first day on which a
Chapter 93A violation could have occurred given the jury’s finding
that KASH did not act negligently prior to this date.
The district judge, however, explained that the $5,200
“represent[ed the] separate penalties imposed on HMG by the [IRS]
because HMG failed (due to the unfair and deceptive act of KASH) to
make quarterly payments on its liability for the [built-in gains
KASH might have argued that the jury verdict negated 9
deception and that this resolution, even if wrong, was binding on
the judge, but neither is a fool-proof proposition. See Troy v.
Bay State Computer Group, Inc., 141 F.3d 378, 382-83 & n.3 (1st
Cir. 1998); Wallace Motor Sales, Inc. v. Am. Motors Sales Corp.,
780 F.2d 1049, 1064-67 (1st Cir. 1985).
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tax] for tax year 1999.” The built-in-gains tax resulted from a
1999 transaction and, as already discussed, HMG should have made
quarterly installment payments on that amount in 1999. KASH
nowhere shows that this finding is clear error, nor does KASH
explain why the jury’s verdict should foreclose the judge’s
conclusion. 9
This brings us to the treble damage award. The first
argument is that KASH’s Chapter 93A violation was not willful or
knowing–the threshold requirement for trebling. Mass. Gen. Laws
ch. 93A, § 11. But the trial judge found that KASH had deceived
HMG by not telling it to make quarterly installment payments in
1999 and further deceived HMG (and effectively the IRS as well) by
not revealing the built-in-gains tax liability on the March 2000
extension form. KASH’s argument, cursorily made, does not show
clear error by the judge.
A more serious objection to the treble damages exists.
Under section 11 of Chapter 93A:
The respondent may tender with his answer in
any such action a written offer of settlement
for single damages. If such tender or
settlement is rejected by the petitioner, and
if the court finds that the relief tendered
was reasonable in relation to the injury
The trial judge may have believed that because section 9 10
requires a demand letter and section 11 does not, compare Mass.
Gen. Laws ch. 93A, § 9(3), with id. § 11, HMG’s demand letter and
KASH’s settlement offer went only to the section 9 claims. But the
actual content of the demand letter and settlement offer belie this
assumption.
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actually suffered by the petitioner, then the
court shall not award more than single
damages.
Mass. Gen. Laws ch. 93A, § 11. Pertinently, in October 2002 and
prior to its answer, KASH made an offer to settle the case for
$20,000. Ultimately, the single damages (ignoring interest) KASH
was found to owe amounted to only $12,345, so it says the $20,000
was a reasonable offer and cuts off treble damages.
The district judge said that the letter was directed only
to claims (later dismissed) brought by George Haddad personally
(under section 9 of Chapter 93A) and not to the claims by HMG
(under section 11) and also that the offer was not attached to
KASH’s answer as the statute requires. However, the demand letter
HMG sent to KASH asked for $224,569, with no distinction as to
Haddad and HMG; KASH’s response, offering $20,000, makes clear that
the offer was for a general release from both parties, so the trial
judge’s first reason was clear error.10
As to the second ground, the settlement offer was made
before the answer rather than with it, but the statute aims to
ensure that a timely settlement offer is made, see Int’l Fidelity
Ins. Co. v. Wilson, 443 N.E.2d 1308, 1318 (Mass. 1983), and HMG
KASH filed several detailed requests for findings of fact and 11
rulings of law on the Chapter 93A claim prior to the judge’s
decision and so had ample opportunity to raise the objection.
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points to no prejudice from the pre-answer offer to settle the
intertwined claims of the two plaintiffs. The timing of KASH’s
offer was prompted by the requirements of section 9, which
specifies that a demand letter be sent before the complaint is
filed. Mass. Gen. Laws ch. 93A, § 9(3).
However, KASH forfeited this objection to trebling by
failing to make the argument prior to judgment. KASH did raise the
objection by a motion to amend or alter the judgment filed in
January 2006, but KASH points us to no earlier presentation of the
argument. Arguments that could readily have been made prior to the
judgment cannot first be raised in a motion to alter or amend a
judgment. Venegas-Hernandez v. Sonolux Records, 370 F.3d 183, 189-
90 (1st Cir. 2004). In its reply brief, KASH simply ignores this 11
problem.
The last set of issues on appeal concern the award of
attorneys’ fees and costs, “reasonable” fees and costs being
automatic under Chapter 93A. Mass. Gen. Laws ch. 93A, § 11. KASH
argues that no fees were reasonable because of the settlement
offer. The magistrate judge thought that issue beyond her remit,
partly because the district judge had rejected the argument, but we
have not accepted his grounds. And, as KASH did raise this
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argument before the proceeding to determine fees and costs, it did
not forfeit this version of its objection.
Whether a reasonable settlement offer automatically bars
attorneys’ fees for a claim under section 11 is unclear. One could
argue for a negative answer given that section 9 does contain such
an automatic bar, Mass. Gen. Laws ch. 93A, § 9(4), while section 11
does not. Either way, rejection of a reasonable offer might still
bear on the reasonable amount of attorneys’ fees incurred
thereafter and, while the magistrate judge may have been right that
the settlement issue was out of her hands, we are not similarly
limited.
KASH argues the settlement offer must have been
“reasonable” because it exceeded the $12,345 that HMG claimed in
Chapter 93A damages by the time of trial (and that were awarded by
the district judge). But KASH’s settlement offer was for general
release of all HMG’s claims, which included a claim based on
supposedly incompetent advice relating to closing the “marginagainst-
the-box” transaction and converting to Subchapter S status.
If incurring the built-in-gains tax was due to negligent advice,
the amount of loss was substantial.
The negligent advice claim failed at trial, but that does
not mean it had no value and that no reasonable attorney could have
expected to recover more than $20,000 on the combined claims. Cf.
Twin Fires Inv., LLC v. Morgan Stanley Dean Witter & Co., 837
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N.E.2d 1121, 1139 (Mass. 2005). The defense was already tainted by
KASH’s handling of the estimated tax payments, and, conceivably, a
jury might have thought that, with better advice, the transaction
might have been kept open long enough to avoid the tax altogether.
KASH argues that the allowed fees are unreasonably high
and should not reflect the time spent to show negligent advice as
to closing the transaction and converting to a Subchapter S
corporation, claims that failed at trial. Our review of an
attorneys’ fees award is deferential, see Figueroa-Torres v.
Toledo-Davila, 232 F.3d 270, 277-79 (1st Cir. 2000),
notwithstanding KASH’s observation that the magistrate judge did
not preside over the trial, e.g., Interface Partners Int’l Ltd. v.
Hananel, 575 F.3d 97, 100-101 & n.6 (1st Cir. 2009).
The Chapter 93A claims here–that KASH failed to tell HMG
to make quarterly installment payments and filed a misleading
extension form–turned in part on the asserted premise that Hogan
misled Haddad in giving the earlier advice that generated the
built-in-gains tax liability in the first place. The supposed
earlier misadvice was HMG’s explanation as to why KASH would want
to conceal the resulting adverse tax consequences; Haddad
specifically testified that he had been assured that taxes on the
closing would be small.
Under Massachusetts precedent, fees and costs for non-
Chapter 93A claims are recoverable provided that those claims and
E.g., Twin Fires Inv.,, 837 N.E.2d at 1137-39; see also 12
NASCO, Inc. v. Pub. Storage, Inc., 127 F.3d 148, 153-54 (1st Cir.
1997).
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the Chapter 93A claims arise from a “single chain of events,”
DiMarzo v. Am. Mut. Ins. Co., 449 N.E.2d 1189, 1202 (Mass. 1983)
(quoting Simon v. Solomon, 431 N.E.2d 556, 570 (Mass. 1982)); see
also Schaumberg v. Friedmann, 888 N.E.2d 963, 968-69 (Mass. App.
Ct. 2008), and the magistrate judge found the claims here
sufficiently interconnected.
The amount recovered is one factor in determining what
fee is reasonable, e.g., Star Fin. Servs., Inc. v. AASTAR Mortg.
Corp., 89 F.3d 5, 16 (1st Cir. 1996), Linthicum v. Archambault, 398
N.E.2d 482, 488 (Mass. 1979), but is by no means “the fundamental
factor,” Homsi v. C. H. Babb Co., 409 N.E.2d 219, 225 (Mass. App.
Ct. 1980); see also Peckham v. Cont’l Cas. Ins. Co., 895 F.2d 830,
841 (1st Cir. 1990). The case law contains examples of Chapter 93A
cases where the fees awarded far exceed the damages awarded. 12
Here, the final recovery was not trivial–about $40,000–
with the potential recovery being perhaps greater. Cf. Twin Fires
Inv., 837 N.E.2d at 1139. The magistrate judge considered other
factors–for example, the complexity of the case–and reduced the
requested fees and costs by about 18 percent; KASH fails to show
that this result was impermissible. Other judges might have
reduced the fee because of the time spent on a quite weak claim,
but this is a judgment call which we decline to second-guess.
-21-
KASH offers other arguments on the matters addressed and
on a few other issues, including claims that the district court
should have granted it directed verdicts, instructed on comparative
negligence and made other requested fee adjustments. We have
considered all of these arguments but think none of them needs
further discussion.
Affirmed.