Ruling Emphasizes Punitive Nature of Attorney's Fees Award Pursuant to M.G.L. c. 93A

May 22, 2014

In Holland v. Jachmann, the Massachusetts Supreme Judicial Court (SJC) considered whether the attorney's fees attributable to the plaintiff business's in-house counsel are recoverable as part of assessed damages in a successful claim under M.G.L. c. 93A (Chapter 93A). There, the dispute arose out of a complicated business transaction that effectively split the plaintiff company in two. The defendants were found to have violated Chapter 93A on eight counts, including flagrant breaches of contract and deceptive business practices.

Chapter 93A gives a court discretion to award attorney's fees incurred in connection with an action for unfair and/or deceptive acts or practices in violation of the statute, as well as recovery of double or treble damages. As the SJC observed, the legislative purpose of the statute is to deter misconduct, making the multiple damages and attorney's fee awards punitive in nature.

In Holland, the superior court found that the defendants' actions were part of an effort to undermine the plaintiff company's business interests, and that this pattern of conduct rose to the level of a violation of Chapter 93A. Accordingly, the judge awarded attorney's fees to the plaintiff, including legal fees for the company's in-house counsel's services. The defendants appealed the award, claiming that, because the in-house lawyer was a salaried employee and did not bill the company for his services, legal fees were not "incurred" by the company for purposes of the Chapter 93A award. The plaintiff contended that the awarding of attorney's fees is meant to be punitive in nature, and that there is no reason to relieve the defendants of the consequences of their actions.

Noting the surprisingly "novel" nature of the issue, the SJC agreed with the plaintiffs. Adopting the superior court's deference to the principles of fairness, public policy, and existing case law awarding attorney's fees even in the absence of billing, the SJC noted that every hour in-house counsel spent on the litigation of the matter was an hour he could not spend addressing his typical duties as in-house counsel for the company. The SJC further observed that this diversion of focus had a financial impact on the plaintiff company. Additionally, where in-house counsel participated actively in all aspects of the litigation, his substantial involvement supported the award of attorney's fees.

The SJC opined that the policy underlying Chapter 93A would be undercut if it were to deny attorney's fees to the plaintiff simply because the company elected to utilize its general counsel's expertise. Such a result would reward the defendants for their questionable behavior, contrary to the intended deterrent effect underlying the statute. On these bases, the SJC affirmed the award of in-house counsel fees charged to the defendants in favor of the plaintiff company.