USCA1 Opinion

United States Court of Appeals

For the First Circuit
____________________

No. 96-1748
JOHN C. ROCHE and MARK A. DIRICO,
Plaintiffs, Appellants,

v.

THE ROYAL BANK OF CANADA and DELOITTE & TOUCHE, INC.,

Defendants, Appellees.

No. 96-1932
THE ROYAL BANK OF CANADA and DELOITTE & TOUCHE, INC.,
Defendants, Cross-Appellants,

v.

JOHN C. ROCHE and MARK A. DIRICO,

Plaintiffs, Cross-Appellees.

____________________

APPEALS FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF MASSACHUSETTS

[Hon. Patti B. Saris, U.S. District Judge]

___________________
____________________
Before

Selya, Circuit Judge,

_____________
Coffin, Senior Circuit Judge,
____________________
and Lynch, Circuit Judge.
_____________

____________________

Vincent M. Amoroso,
___________________

with whom

John J. O'Connor and

__________________

Peabod
______

Arnold were on brief, for plaintiffs.

______

Mark A. Berthiaume, with whom Gary R. Greenberg, Louis J. Scer

__________________
__________________ _____________

Jr.,
___

Jonathan D. Cohen, and Goldstein & Manello, P.C. were on bri

_________________
__________________________

for defendants.

____________________

April 1, 1997
____________________

LYNCH, Circuit
LYNCH, Circuit

Judge.
Judge.

The

plaintiffs, Boston-

______________

area

businessmen John Roche

fish

farm in

Prince

and Mark DiRico,

Edward Island,

invested in a

Canada.

The

venture

failed, and they sued the court-appointed receiver which sold

them

the farm and the bank which had originally financed the

project.

common law

A jury found against plaintiffs on their claims of

fraud and

misrepresentation for failure

their burden of showing proximate cause.

initially

finding

Mass. Gen. Laws

that

defendants

practices,

but

had committed

that

their

"primarily and substantially"

by chapter

93A.

The district court,

plaintiffs' allegations

ch. 93A ("chapter

to meet

actionable under

93A"), found after

unfair

and deceptive

offending acts

did

not

in Massachusetts, as

Plaintiffs recovered

nothing.

trial

trade

occur

required

Defendants'

motion for

appeal

attorneys' fees was

on the chapter 93A

also denied.

Both

parties

issue, and defendants appeal from

the denial of attorneys' fees.

We affirm.

I.

We recite the facts as the

could have found them.

85 F.3d 752, 756

to

Cambridge Plating Co. v. Napco, Inc.,

_____________________
___________

(1st Cir. 1996).

are lacking, we view

the ruling, making

jury and district court

"Where

specific findings

the record in the light

most favorable

all reasonably supported inferences."

United States v. McCarthy, 77 F.3d 522, 525 (1st Cir. 1996).

_____________
________

-22

The story starts

A.S.,

in February

Aquacare

a Norwegian firm, conducted a study for its subsidiary

Seasprings Farms Ltd., on the

farm

1987, when

in

prepared

presented

viability of a land-based fish

Prince Edward

Island,

(the

prospectus

general

information

technical aspects of the

Canada

("PEI").

Aquacare

about

the

proposed operation.

Aquacare

report),

biological

which

and

The prospectus

also contained financial

production capacity

131.8 tons

of

of fish in

projections and

asserted that

the

the contemplated

facility would

be

the first year

of operation and

360

tons annually thereafter.

The Royal

of

the

Bank of Canada financed the construction

farm, which

was operated

Harvesting, Ltd. ("Marine").

the facility

delays

and

in December

the plant

was

Things went badly from the

fast as

rates.

anticipated

By October

and

by

a firm

called Marine

Fish were first introduced into

1987, but there

not completed

start.

had

were construction

until

June 1988.

The fish did not

unexpectedly

high

grow as

mortality

1988, the fish had not yet reached market

size (4 lbs), as expected.

In

retained

Aquatech

aquaculture

farm's

October,

firm, to

problems.

Cleve

Myers,

Systems,

A.S.,

perform

Marine's

another

an independent

Myers wanted to

President,

Norwegian

study of

know, among other things,

how many tons of fish the farm was capable of producing.

-33

the

Dr.

Michael Smith, a biologist from Aquatech, came to the farm on

October

30

making

observations,

conducting tests, and speaking with employees.

Dr. Smith was

not shown

manuals

and

spent

three

days

the Aquacare I report, but

were made

Smith's analysis

available

the Aquacare operating

to him.

was a forty-four page

The result

of

Dr.

report (the Aquatech

report), dated November 18, 1988.

The Aquatech report

farm.

criticized the

design of

the

The report stated that "until experience over a fully

operational

annual cycle

produce,

at best,

Smith's

report

only

also

improving production.

has been

200 tons

made

For

gained," the

of fish

several

per

farm could

year.

Dr.

recommendations

instance, it recommended

for

that a

higher proportion

of fresh water

for

both

purposes

control.

of

be pumped into

temperature

control

the tanks,

and

salinity

This suggestion deviated from the specifications in

the Aquacare

operating manuals.

The

200-ton projection was

premised on the assumption that the recommended changes would

be implemented.

Meanwhile, Osler, Inc., one

of Marine's two fifty-

percent shareholders,

was in receivership, and

Skillingsbanken,

other

the

A.S. Bergens

fifty-percent shareholder,

was

refusing to inject additional capital into the venture.

On

November 30, Myers turned the

keys to the farm

over to Lou McGinn, the Loan Officer in charge of the project

-44

at

the Royal Bank, and requested

voluntary receivership.

capital he

He also

report

regarding the

which

Myers stated that

was unable to care

staff.

that the farm be placed in

without operating

for the inventory or

stated that he had "received

production capabilities

indicate [sic] that the

facility is not
___

pay the

a consultant's

of

the plant

viable as it

presently is financed."

him that he received

that "the

200 tons

McGinn stated

told

"a consultant's report" which indicated

plant was capable of

of product per year

product per year

that Myers had

producing only approximately

as opposed to the

upon which its financing and

been initially contemplated and established."

360 tons of

viability had

In a letter of

January 4, 1989, to McGinn, Myers wrote that:

after the [Aquatech] report

indicated an

expected tonnage, which was not viable, I

received confirmation

from the directors

and major shareholders to advise the bank

and request a receiver.
considered

it

Both they and I

wrong

operations with this

to

continue

information in

our

possession.

McGinn understood from Myers that the Aquatech report was one

of the

factors that led Marine

to decide not to

inject any

more

money into

McGinn informed

the project

and to

his supervisor

-55

opt

for receivership.

of the development,

and the

supervisor

noted

in

memo

that

"apparently

recent

study . . . placessomequestion ontheviabilityof theproject."1

At the

PEI

Royal Bank's request, the

appointed Deloitte

assets.

Karen

&

Touche2 as

Cramm, a partner in

Supreme Court of

receiver of

Deloitte's Halifax, Nova

Scotia office, was in charge of the receivership.

instructions on

the handling

Bank, specifically

court.

Marine,

The Royal

with

expectation was

from

$ 2.8

the

million

Cramm took

assets from the

well

as from

sole secured

note

that none of Marine's

get anything out of the sale

shortfall.

of the

McGinn, as

Bank was

Marine's

the

Royal

PEI

creditor of

outstanding.

The

other creditors would

of the assets; there would be a

____________________

1.

More

than a year later,

prepared

a "Bad

and Doubtful

Marine,

which was

somewhat

understanding.

on February 26, 1990,

Debt Report"
contradictory

on the
to

his

McGinn
loan to
earlier

The report stated, in relevant part:

While

the

funds

materialize

as

aware of a
overall

based

originally

and

did

anticipated we

viability

which

involved

question

of

on

were

growth

for

the

significantly
by

as

much

to the

operation,

the findings

indicated
expected

maybe

the

not

were not

developing concern as

seemingly
study

in

of

rates
species

overstated
as

50%.

Accordingly, Skillingsbanken A/S were not

prepared
manner

to

participate further

and requested that

in any

a Receiver be

appointed immediately.

2.

Deloitte

& Touche was known

as Touche Ross

Ltd. at the

time the initial events leading to this litigation occurred.

-66

Cramm

assets and

immediately

reviewed the

decided to

immediately

possession

of

Marine's

company's financial records.

employees were terminated as

as employees

took

employees of Marine and rehired

of Deloitte, as receiver for

Marine.

Deloitte

sell the farm by means of a public tender.

began

preparing

Farm

an information

package

Cramm

which

could be sent to potential investors.

showed Cramm

report.

the

would

both

the Aquacare

Cramm read both

reports in

offer

the

the

Around this time Myers

I report

reports.

She

and the

included neither of

information package,

Aquacare

I report

Aquatech

though later

alone

to

she

prospective

purchasers.

Deloitte

newspapers, including

and

inviting

placed

in

various

the Boston Globe, describing

______ _____

the farm

interested

further information.

advertisements

readers

to contact

The ads stated

Deloitte

that the "business

for

is

intended to be sold on a going-concern basis."

In early December,

after learning that

become insolvent, Aquacare contacted

Marine had

Cramm and told her that

it

wanted access to

operations.

which

the plant to conduct

Aquacare had

criticized

specifications.

heard about the

Aquacare's

Cramm

agreed

a review of plant

Aquatech report,

design

and

operational

to

Aquacare's

request.

Aquacare then issued two unsolicited reports, the Aquacare II

report

on December 15 and

the Aquacare III follow-up report

-77

on

December 20,

attempting

Aquacare II reviewed plant

to rebut

the Aquatech

operations and praised the design

and operational specifications of the plant.

asserted that

360-ton production

problem," provided there was

"can

be achieved

without

fingerlings

a fingerling acquisition plan.

Aquacare II

also blamed Marine's management

failures.

Aquacare

report.

Aquacare II re-

proper stocking of

(young fish), and recommended

III

report.

explicitly refuted

for the plant's

the

Aquatech

Aquacare did not bill Deloitte for these reports.

Meanwhile,

developer,

had

been

John Roche, a Massachusetts real estate

seeking

business

opportunity

in

aquaculture. After reading the Globe ad, he called Cramm from

_____

his

home in

Massachusetts.

information package.

The

next day she

Roche discussed

sent him the

the farm with

two of

his business associates, Mark DiRico (the chief engineer of a

packaging

supply

business)

expressed an interest.

facility in Canada.

Cliff

run out

Call,

Roche and Call decided to

During this

the previous investors

they had

George

who

both

visit the

On January 3 or 4, 1989, they toured the

facility with Cramm.

why

and

visit, Roche asked

had failed.

of money.

Roche and

Cramm

She responded that

Call also

met with

Yorston, the Plant Manager, who told them that some of

the fish

were ready for

sale and that all

was an infusion of new capital.

the plant needed

-88

Cramm offered the visitors a copy of the Aquacare I

report.

Before receiving it,

disclaimer, which stated, among

they were required

to sign a

other things, that they were

aware that Deloitte "had not, in any way, attempted to verify

the

information contained

offered

the

Aquacare

herein."

I report

to

Cramm stated

prospective

that she

purchasers

because "it was an informative package that included a layout

of

the plant facility" and "it talked about, in general, the

aquaculture

operation."

She

explained that

the disclaimer

was intended to protect Deloitte against claims involving any

inaccuracies in the information contained in the report, such

as

the

financial

profitability

projections,

analysis.

She

growth

had

not

charts,

and

reviewed

that

information and had no opinion as to its accuracy.

Cramm admits

copy

of the

financial

she did not

Aquatech report,

statements that

offer Roche

but claims

Roche

and Call

it was

and Call

among the

were invited

to

view.

Roche and Call

next met with

McGinn at the

Royal

Bank

before

of Canada

to discuss

him, told the two

receivership because

financing.

McGinn,

Americans that the

the previous

like Cramm

farm went into

investors had run

out of

money.

Roche

Roche showed the

and Call

returned

Aquacare I

to Massachusetts,

report to DiRico.

-99

During

where

the

next

week,

McGinn

Roche had

several telephone

about potential financing.

Roche retain a local Canadian

McGinn

MacPherson, to assist him in

dealing with various government agencies.

January

11,

recommended that

lawyer, Scott MacKenzie, and a

local Canadian accountant, Stan

On

conversations with

Roche

and

Roche did so.

Call,

this

time

accompanied by DiRico, met with McGinn and Cramm at the Royal

Bank in PEI.

DiRico asked McGinn for "sales figures"; DiRico

claims that McGinn gave him a copy of

telling

the Aquacare I report,

him that "all the figures are in here."

he was

not asked to

sign a

DiRico

was given

copy of

disclaimer.

the

Cramm

report at

DiRico says

denies that

this

meeting.

DiRico

asked

McGinn

about

the

plant's

troubles;

McGinn

responded that mismanagement was to blame.

Roche and his associates also went to see the farm.

Cliff Yorston, the

one of

Plant Manager, pulled

the tanks and

told the

whole tankful of similar

$ 3.75 a pound in

to

generate

a large fish

two visitors that

he had

"beauties" which could be sold

Boston.

Roche and his

operating capital

for

the

from

for

associates planned

plant through

the

immediate sale of inventory.

Roche

and

million the next day,

his partners

an

offer of

subject to Royal Bank financing.

Cramm, after securing the

offer,

made

instead choosing

$ 2.9

But

Royal Bank's support, rejected the

to

accept a

lower all-cash

offer

-1010

($ 1.4 million) from a

group led by Hirsch Spiegleman.

The

Spiegleman group's offer, unlike the Roche group's offer, did

not require Royal Bank financing.

On or around January 17, Cramm told Roche that

offer

had been rejected.

group

would

still

be

his

McGinn also asked Roche if Roche's

interested

in

the

event that

the

Spiegleman deal fell through.

After his bid was accepted,

Spiegleman requested a

copy of the Aquatech report (which he referred to as the "200

ton report").

The record

does not

reveal how

unlike Roche, knew about the Aquatech report.

Aquacare of Spiegleman's request

give him a copy of

Spiegleman,

Cramm informed

and asked for permission to

the Aquacare II and Aquacare

III reports

at the same time.

In

collapsed.

mid-February

1989,

bid.

Spiegleman

deal

The Roche group hoped to take over the Spiegleman

offer rather than going through

new

the

the process of submitting

Seeking financing, Roche and his partners met with

Amy Hunter, a

loan officer

at Boston Private

Bank &

Trust

Company

(Boston Private).

Aquacare

presenting

report.

the

Hunter

report as

Hunter that the fish farm

Roche

his

gave Hunter a

understood

that

business plan.

copy of the

Roche

was

Roche told

went into receivership because the

previous owners had run out of money.

-1111

Roche also told Hunter

that

he planned

to raise

operating capital

by immediately

selling fish.

Hunter next called Cramm and McGinn to confirm what

Roche

had told

equipment was

the right

that

her.

Cramm

told

state-of-the-art and

management.

McGinn echoed

Roche would get half

Hunter that

the

all that was

farm's

needed was

these thoughts, adding

his investment back

in the first

three months without even

having to invest in any

Hunter asked McGinn if he

knew of any downside risks to

farm

new fish.

or whether he had any projections for the farm.

responded

the

McGinn

that he did not know any downside risks other than

bad management

and that Roche's

ideas sounded good

to him.

He

did not

offer any

Boston Private

other projections.

approved a

loan of

On

February 28,

$ 1.2 million

to Roche,

secured by property Roche owned in the Boston area.

Cramm, however, decided not

over Spiegleman's

to

all

potentially

Consequently, she

sent it

offer.

out

Instead, she

interested

to allow Roche to take

re-tendered the farm

buyers,

including

Roche.

edited the original information packet and

on March

1 to

everyone who

had expressed

an

interest in the farm.3

____________________

3.

The only

substantive change made

addition of an express statement,

in the packet

was the

in light of a disagreement

with the Spiegleman group, that the assets that were for sale
did not include an investment tax credit belonging to Marine.
The packet also mentioned that the Spiegleman deal had fallen
through.

-1212

On March 2, Cramm received from Yorston, the farm's

Plant Manager,

copy of

recent memorandum

Aquacare (the Aquacare IV report).

prepared

by Aquacare

accidentally

fell

for

into

by

This memorandum had been

its subsidiary,

Yorston's

written

hands

Seasprings.

It

because Aquacare,

intending to send

fish farm's

it by fax

fax number.

to Seasprings,

The

Aquacare IV report

scathing

criticism

of Deloitte's

Aquacare

asserted that Deloitte,

the status quo pending sale, was

of the farm's assets.

marketability.

was

money

Additionally,

by

and

Aquacare

1990

the farm.

to maintain

actually reducing the value

these

failed

earning

in a

unmarketable

fish.

timely fashion

to

the farm and future harvests

Aquacare believed

management the value of

1989

by attempting

feeding

Deloitte had

be lower.

of

contained

Aquacare believed that Deloitte

purchase fingerlings to restock

would

management

the

For instance, several tons of fish had

matured past

wasting

sent it to

that under

Deloitte's

the inventory as well as

the farm's

potential

implicitly disavowed

its

were

own

decreasing

earlier

daily.

production

capacity

projections,

made in

the

Aquacare

I report

and

reasserted in the Aquacare II report, at least as to 1989 and

1990.4

____________________

4.

McGinn explained the decision not to buy any fingerlings,

despite

Aquacare's

recommendations

that

fingerlings

be

purchased in a carefully prescribed manner at specific times,

as part of defendants' strategy of maintaining the status quo
pending

the sale

of the

assets without

-1313

investing

any new

Roche and DiRico visited the farm again on March 8.

Roche told Yorston that if his bid was accepted he would need

to start

selling fish immediately to

raise working capital.

Yorston replied that he had $ 150,000 worth of fish ready for

shipment

to Boston.

Roche also believed that, once the farm

was purchased, McGinn was prepared to provide working capital

in the form

of a Royal

Bank operating line.

Roche and his partners offered $ 1.4 million.

On March

10,

This offer was

accepted on March 13.

Roche called

about

the prospects

response

to Roche.

Yorston on March 13

of immediate

The

sales.

cover sheet

to inquire again

Yorston

said, "Here

faxed a

are some

projected

cash flows

anticipated sales in

for 1989."

The

attached projections

March of $ 154,000 and

the year of almost $ 2.5 million.5

total sales for

These projections had not

been prepared by Deloitte or by Marine, but by the Spiegleman

group.

the

identifying

heading at the top of the page so that, when the

projections

were

However,

sent

identified

someone

by fax,

to Roche.

had obliterated

the source

of

the projections

was not

Yorston had earlier told Roche that he

____________________

money

in the farm.

Spiegleman deal

This remained their

fell through

and it

strategy after the

became clear

that the

assets would not be sold until late March.

5.

There is no

indication as to whether these

figures were

supposed to be in US currency or in Canadian currency.

-1414

was not authorized to release any information about the plant

without permission from Cramm.

On March 17, Scott MacKenzie, the Canadian attorney

hired

by Roche

articles

to help

buy the

farm, faxed

two newspaper

to Roche, along with a brief note saying that Roche

might

find the attached articles "interesting."

One of the

articles discussed Marine's collapse, quoting Myers as saying

"[t]he Aquatech

report was

open to Marine Harvesting

place a receiver

devastating and the

only option

Ltd. was to request that

on site."

Roche filed

the bank

the articles

away

without reading them.

On March

of

the

farm.

International

purchase.

20, the Canadian court

Roche

formed

Marine Fisheries,

Roche

instructed

shipment to Boston.

Yorston was

orders

pound

of

complained

2 to

approved the sale

corporation

Ltd.

(IMFL),

in

Canada,

to make

the

orders

for

able to fill the first

few

Yorston to

fish, but

the

that the fish were too small.

fill

buyers

in Boston

Yorston was unable

to fill the

resigned.

took

these

first order

for 4

to 6

pound fish.

He

then

Scott Taylor, formerly the farm's Chief Biologist,

over Yorston's position, but he was also unable to fill

orders.

In April,

Taylor told Roche

that the larger

fish were all unmarketable because they were too old and that

the other fish

were too

small for sale.

that the smaller fish would be

Taylor

predicted

four pounds by June and could

-1515

be sold then.

to four

By June, the smaller fish still

pounds.

Richard Gallant,

Taylor was

fired.

recommended, in

The

had not grown

new Plant Manager,

order to cut

expenses and

see if the fish would grow faster, that the fish be placed in

cages in the bay.

This was done in July.

Roche and

his partners injected cash

of their own

into the enterprise to save it and also took out an operating

line of

credit from the Bank of Nova Scotia in the amount of

$ 500,000.

Roche personally guaranteed the loan.

During the

summer, Roche and DiRico bought Call's share.

Roche

He began

came to think

negotiating with

the fish farm

a local veterinary

was a failure.

college which

was

interested in buying the farm for research purposes.

hired Deloitte to help him set up this deal.

and

Cleve Myers, both recently hired

He

Stan MacPherson

by Deloitte, worked on

the project.

In

September 1989,

Tipped

off by

report

in a desk drawer.

former secretary,

note from Cleve Myers,

placed

afternoon.

Attached

was at

he

the fish

found the

to the report was a 1988

The note said that the farm:

in

receivership

Friday

The fish have not grown fast

enough, as you know, plus I have received

a specialist's report from Norway stating
that we

can only grow

(just enough to lose one

each year).

farm.

Aquatech

the former president of Marine,

prospective fish dealer.

was

Roche

200 tons annually

million dollars

to a

-1616

After

reading

the

report

and

the

attached

note

Roche

concluded that he had been defrauded.

In November

1989, the

Bank of Nova

Scotia called

the loan and demanded that Roche, as personal guarantor, make

payment to the bank.

He did not do so.

The fish farm closed

in December,

Bank

and went into

of Nova Scotia sued

receivership in

February.

Roche and DiRico

The

on the defaulted

loan.

Meanwhile,

IMFL,

corporation, was dissolved

brought

the

in May

this action against

plaintiffs'

1990.

Canadian

Roche and

Deloitte and the

DiRico

Royal Bank in

November 1990.

II.

Roche and

DiRico sued Deloitte and

on two theories: common

"unfair

the Royal Bank

law fraud and misrepresentation, and

or deceptive acts or practices in the conduct of any

trade or commerce," under Mass. Gen. Laws ch. 93A,

The

common law

counts were

tried before

2.

a jury.

Since the defendants did not consent

of

the

district

chapter 93A

judge.

Bank on all

claim, that

The jury

the common law

to a jury determination

claim

was decided

returned a verdict

counts.

As

by the

for the Royal

for the common

law

claims against Deloitte, the jury found that Roche and DiRico

had proved there were negligent misrepresentations, but

that

the plaintiffs were ninety-nine percent negligent compared to

-1717

the one

percent negligence of Deloitte;

foundered

on

recovery.

proximate

The district

engaged in

court

but that the

place "primarily

ruled

11.

and

there

was

that defendants

to

the standard

actionable conduct did

and substantially within

Massachusetts, as chapter 93A

ch. 93A,

grounds

misrepresentations contrary

chapter 93A,6

of

cause

therefore the claim

no

had

of

not take

the commonwealth"

requires.

Mass. Gen. Laws

The court thus ruled in favor

of defendants

on the issue of chapter 93A liability.

Plaintiffs,

predicate

chapter

while

rulings, appeal

93A

liability.

defending the

district court's

the court's ultimate

They assert

that

the

decision on

deception

occurred

primarily

Defendants,

by

and

substantially

contrast,

in

defend

the

Massachusetts.7

"primarily

and

____________________

6.

Defendants argue on appeal

Seventh

that this ruling violates the

Amendment in light of the jury verdict on the common

law claims.

We need not

reach the issue since we affirm the

chapter 93A judgment for defendants on other grounds.

7.

Plaintiffs

substantially"

argue

that

decision

is

the
in

court's
tension

"primarily
with

its

and

earlier

decision to apply Massachusetts law to the dispute instead of

Canadian law.

Defendants

make essentially the same argument

in reverse -- that the latter decision was correct and should

trump the former.

These arguments miss the mark.

of

the

law

test and

though similar in many

judge

should reach

tests

in a

"primarily

and substantially"

respects, are not identical.

opposite results

single case

The choice

is no

in applying

sign of

error.

test,
That a

these two
See, e.g.,
___ ____

Bushkin Assocs., Inc. v. Raytheon Co., 473 N.E.2d 662 (Mass.

_____________________
_____________
1985) (applying

Massachusetts

law but

concluding that

the

deception

occurred

Massachusetts);

cf.
___

primarily

and

Burnham v.
_______

substantially

outside

Mark IV Homes, Inc.,

_____________________

441

N.E.2d 1027, 1031 n.9 (Mass. 1982).

-1818

substantially" ruling, but challenge a number of the district

court's

that

predicate rulings.

Roche and DiRico are

because

the deception,

Specifically,

not the real

as alleged,

defendants argue

parties in interest

was perpetrated

on the

Canadian

corporation established

by

purchase and operate

the fish farm,

individuals.

also

They

(Massachusetts)

argue

conflicts

Roche

not on

that,

and

DiRico

to

the two men

as

under

principles, Canadian

forum

state

law, rather

than Massachusetts law, should have been applied to the suit.

Finally,

they

argue

even

under

Massachusetts law,

successfully

shown

actionable conduct

plaintiffs

had

under 93A.

Because we affirm the ruling below

that

the

not

that,

conduct was

Massachusetts,

not

there is

primarily

no

reason

on the ground

and substantially

to address

in

defendants'

other arguments in any detail.

The

primarily and

question of

whether

the

deception

substantially in Massachusetts is

occurred

one of law,

which we review de
__

France
______

novo.
____

Compagnie de Reassurance d'Ile de

__________________________________

v. New England Reinsurance Corp., 57 F.3d 56, 90 (1st

_____________________________

Cir.

1995); Clinton Hosp. Ass'n v. Corson Group, Inc., 907

____________________
___________________

F.2d

1260, 1264

cannot

(1st

Cir. 1990).

be conducted in a vacuum.

This review,

however,

We first determine exactly

what constituted the unfair or deceptive acts.

____

The district court found that six acts or omissions

constituted

actionable deception on the plaintiffs.

-1919

Whether

a certain act or

is

actionable

omission (or cluster of acts

under chapter

Brennan v. Carvel Corp.,

_______
____________

93A

is

or omissions)

question of

929 F.2d 801, 813 (1st

fact.

Cir. 1991);

USM Corp. v. Arthur D. Little Sys., Inc., 546 N.E.2d 888, 897
_________
___________________________

(Mass. App.

Ct. 1989).

Review is

defining the deception, the

pragmatic, functional

for clear error.

district court then employed the

analysis spelled out by

Clinton Hospital, 907 F.2d

_________________

After

at 1266,

in order

this court in

to ascertain

whether the deception occurred primarily and substantially in

Massachusetts.8

court's

Neither

methodology

in

party

challenges

determining

substantially" question by examining

(or omissions)

the larger

use

3:15, at

relevant wrongful

personal

See also
___ ____

32

conduct to

jurisdiction

under

&

n.59.1

is

acts

We therefore

Gilleran, The Law of

___________

(1995 Supp.)

be considered for

93A

and

say, by examining

parties' dealings.

methodology.

Chapter 93A
____________

"primarily

only the specific

of misconduct, instead of,

context of the

the same

the

the district

that

("The

purposes of

conduct

which

violated 93A.") (citing cases).

____________________

8.

As a procedural

matter, courts of appeals may review the

"primarily and substantially" issue

at various stages of the

litigation:

e.g.,
____

after trial,

see Clinton Hospital, 907

___ _________________

F.2d at 1261; Makino, U.S.A., Inc. v. Metlife Capital Credit

____________________
_______________________
Corp., 518 N.E.2d
_____
from summary
Co.,
___

519 (Mass.

or on

judgment, see Goldstein Oil Co. v.

___ __________________

479 N.E.2d 728

comes to

App. Ct. 1988);

(Mass. App. Ct. 1985).

us after trial,

appeal

C.K. Smith
__________

Here, the case

with specific factual

findings by

thedistrictjudgeon whatexactlyconstitutedtheacts ofdeception.

-2020

The

district

court found

that the

following six

acts/omissions constituted the deception:

i.

Cramm's response on January 4,

to

a question from
the

1989,

plaintiffs about the

problems

of

fish farm,

indicating

that the

previous operators had

run out

of money, but omitting that the investors

withdrew

after

reading

the

statement

to

Aquatech

report;

ii.

McGinn's

the

same

effect;

iii.
a

Cramm's failure to offer plaintiffs

copy of the

offered

Aquatech report

them a

copy of

when she

the Aquacare

report;

iv.

Cramm's

1989,

to

Aquacare

failure,

disclose
IV

Aquacare
projections

no

to

report,

Aquacare I report;

March 1,

plaintiffs
which showed

longer
it had

after

stood

made in

by

the
that
the

the earlier

v.
be

McGinn's statement that buyers would

able

to

sell

fish

immediately

to

generate operating capital; and

vi.

McGinn's

failure to

tell

Hunter

about the Aquatech report, after offering

his opinion
farm, when

as to

the viability

she asked if he

of the

had any more

information.9

Both

parties

challenge

findings on what constituted

the

district

the deception.

court's

Plaintiffs urge

____________________

9.

The

district

deceptive oral
and

court

excluded

from

statements made by Yorston

the deceptive fax sent

by Yorston to

consideration

the

to the plaintiffs
Roche because the

plaintiffs had failed to plead Yorston's allegedly fraudulent

conduct with

the requisite specificity.

this ruling.

We need not reach the issue as it is immaterial

to the outcome.

-2121

Plaintiffs protest

us to give a

broader construction, while defendants complain

that the district

We have reviewed

court saw deception where there

the record

conflicting testimony

on many

and are mindful

points.

The

was none.

that there

is

judge saw

the

witnesses on the stand and had the opportunity to weigh their

credibility.

See Fed. R. Civ. P. 52(a).

___

Defendants argue

finding that defendants

Aquatech

claim

report.

is

knowledge

the

an

Defendants

prior to buying

are

Aquatech report.

This

erred in

to disclose

because

plaintiffs

the farm about

of failing

report through

be imputed

to

disclose,

the

knowledge, the defendants essentially

plaintiffs had

agent MacKenzie

plaintiffs.10

First,

imputed knowledge

knew about

a newspaper article and

to the

had

the very document

is based on either of two alternate theories.

report: their

the

assert that the non-disclosure

here

accused

defendants assert that

the

deceptively failed

impossibility

defendants

argue,

that the district court

of

the Aquatech

that knowledge could

Second,

defendants assert

that the plaintiffs had constructive knowledge: MacKenzie had

faxed

copy

of

the

article

to

Roche

(a

week

after

plaintiffs' offer was accepted),

and Roche's knowledge could

be

an agency

assumed, without

relying on

theory (although

____________________

10.
Co.,
___

Defendants
444 N.E.2d

rely on
355, 358

DeVaux v.
______
(Mass.

cases for this agency theory.

-2222

American Home Assurance

________________________
1983), and

several other

Roche did not

read the

assuming these

failed

to

theories

demonstrate

closing, plaintiffs

Aquatech

report.

Aquacare

not

had

at most

knew

finding

after).11

defendants

reversible

error.

Even

have

the

of the existence of
_________________

the

deception

with

Prior

still

to

with a copy of the

__________

been provided

I report.

err in

are valid,

Defendants'

providing plaintiffs

plaintiffs

article until long

here

was in

not

report given

a copy of
___________

the

that

rival

Under these facts the district court did

that defendants

deceptively failed

to

disclose the Aquatech report.

Defendants also

argue it

was clear error

for the

district court to conclude that the farm's original investors

pulled out because of the Aquatech report, a conclusion

which the non-disclosure claim rests.

upon

Defendants are correct

that the record does not reveal that the investors pulled out

solely because of the

______

the report

clearly

unfavorable Aquatech report.

played a

decision to place

the plant

least,

McGinn

Cramm and

major role

in the

in receivership.

knew that

However,

investors'

At the

the previous

very

investors

pulled out just after receiving the Aquatech report, and that

the report played a large role in this decision.

Myers wrote

McGinn on January 4, 1989, saying that both the directors and

____________________

11.

Defendants cite

Chandler v.
________

Atlas Gen. Indus.,

_________________

215 F.

Supp. 617, 618-19 (D. Mass. 1963), for the proposition that a
plaintiff

"cannot close

his eyes

to

the obvious

and then

claim to be deceived."

-2323

the

major

operations

shareholders thought

after receiving the

it

wrong to

information in

report as to the expected tonnage.

Plaintiffs,

was

continue

the Aquatech

There is no clear error.

in turn, challenge certain findings of

non-deception
___

as clearly

erroneous.

advertisement

placed

Cramm

by

described the farm as

for which it was organized."

the

Plaintiffs

Aquatech

it

"going concern"

particular object in view" or "an existing solvent

(6th ed. 1990).

of

because

the

is being carried on as a whole and

business, which is being conducted in

way

argue that

deceptive

a "going concern."

is "[a]n enterprise which

with some

was

They

term

rely

the usual and ordinary

Black's Law Dictionary 691

______________________

The district court determined that

"going

concern"

entirely on

Dr.

here

was

Smith's

not

the use

deceptive.

findings in

the

report in asserting on appeal that the farm was not

"going concern."

In

Dr. Smith's opinion, say plaintiffs,

the farm's pumping system was incapable of operating properly

at optimum levels and the farm was, as a general matter,

not

state-of-the-art.

Plaintiffs' charge

First,

Dr. Smith

whose conflicting

case.

one aquaculture

two grounds.

expert among

views about the farm became

several

known in this

Indeed, this is the very reason his report should have

been available

given

is

of error fails on

to the plaintiffs:

a different

report

by a

-2424

the plaintiffs

had been

competing aquaculture

firm

which expressed a

and

production

disclosure

available

claim

about

far rosier view

capacity.

is

truth.

never

While

rooted

in

the viability

concern" argument presents Dr.

But most damaging to

His report

the

the

of

plaintiffs'

variety

the

operations

of

non-

opinions

farm, their

"going

Smith's opinion as the single

plaintiffs, Dr. Smith's report

suggested, let alone stated,

"going concern."

of the farm's

that the farm

was not a

indicates only his belief

that

the farm was more poorly designed, and consequently a riskier

investment, than its designers thought.12

Finally, that the farm ultimately failed (and thus,

presumably could not properly have been described as a "going

concern"

it was

the

at some point during its decline) is not proof that

doomed to failure at

start of

the

receivership.

plaintiffs' overall case

not have failed if

during

the time the ad

Indeed,

was placed, at

implicit in

the

is a claim that their venture might

the receiver had managed the

farm better

the term of the receivership and if the selling price

better reflected the actual

value of the assets.

Precisely

because the value and production capacity of the farm were so

hotly disputed at trial, the judge did not commit clear error

in finding

that the farm was

____________________

a "going concern" at

the time

12.

Plaintiffs also claim

that the

farm was

concern" because it fell short of Amy Hunter's

"going concern."

Amy

not a

"going

definition of

Hunter's definition of "going concern"

need not have been adopted by the court.

-2525

the

Globe ad was placed.

_____

The farm's

ultimate failure does

not change this.13

These factual findings lead to the question whether

the

deception

occurred

Massachusetts.

Contrary

primarily

and

substantially

to the standard burden

in

of proof on

jurisdictional questions, here the burden is on defendants to

__________

show

that

their

misconduct

substantially outside
_______

93A,

occurred

Massachusetts.

primarily

Mass. Gen.

and

Laws ch.

11; Compagnie de Reassurance d'Ile de France, 57 F.3d

________________________________________

at

90; see Gilleran, supra,

___
_____

"

11 provides an exemption from 93A liability, available as

defense, rather

suit."

than

3:16,

jurisdictional

Kansallis Fin. Ltd. v.

___________________

Cir. 1994).

The

satisfied this

at 65.

This is because

prerequisite

Fern, 40 F.3d
____

to

476, 481 (1st

district court's conclusion that defendants

statutory burden is

one of law,

reviewed de
__

novo.
____

Compagnie de Reassurance d'Ile de France, 57

_________________________________________

F.3d at

90; Clinton Hospital, 907 F.2d at 1264.

________________

In Clinton Hospital, this

_________________

body of

court

Massachusetts precedent as support

functional

approach

misconduct

occurs

Massachusetts.

for

determining

primarily

sparse

for a pragmatic,

whether

and

The Clinton Hospital

_________________

read the

actionable

substantially

court

in

distilled the

____________________

13.

Similarly,

plaintiffs'

assertions

that

the

two

information packets were deceptive also fail. These arguments

bootstrap on

the argument about

say plaintiffs, are deceptive

the ad, since

the packets,

because they describe the farm

as a "going concern."

-2626

approach

down to

three basic

factors: (1)

where defendant

committed the deception; (2) where plaintiff was deceived and

acted upon

the deception; and

losses due

to the deception.

court, applying

reasoned

that

(3) the situs

Id.
___

of plaintiff's

at 1265-66.

The district

the Clinton Hospital factors to

_________________

the

deception here

substantially in Canada.

occurred

this case,

primarily

and

This court has previously recognized that the first

factor

is the least weighty of the three factors.

de Reassurance d'Ile de France,

_________________________________

Hospital,
________

907 F.2d at 1265-66.

of this and ruled

57

F.3d

Compagnie
_________

at 90;

Clinton
_______

The district court was aware

that the first factor weighed

against the

plaintiffs because most of the defendants' misrepresentations

and deceptive acts were committed in Canada.

correct.

Indeed, the district court

understated the point:

all the misrepresentations occurred in Canada.

___

plaintiffs argue on appeal

defendants'

This

deceptive

This is plainly

Nevertheless,

that the "clear preponderance" of

conduct

occurred

in

Massachusetts.

argument, however, is premised on a certain set of acts

which the

district

deception.

did

not

consider

part

Specifically, plaintiffs assert that

Globe
_____

ad and

which

defendants

district

court

the

court did

two information

committed

in

not err in

packets were not misleading.

-2727

packets were

Massachusetts.

finding that the

of

the

the Boston
______

deceptions

But

the

ad and the

As to the non-disclosure of the Aquatech report and

the

Aquacare IV report,

ascertaining where this

disclosure did not

___

there is a

occurred.

occur.

Hospital as support for

________

The

metaphysical dilemma in

The very

problem is that

district court read

the proposition that

non-disclosure

occurs where the defendant who fails to disclose

This was

obviously Canada.

answer this

disclose

disclosure

question.

certain

of

dealings were fairly

arose

documents,

is located.

Clinton Hospital does

________________

Where the defendants'

documents

other

But

Clinton
_______

out

and

obligation to

of their

where

not

the

voluntary

parties'

evenly split between two places,

it is

most

reasonable to

equally

in both

say

that

places.

misrepresentations,

as

the

non-disclosure

However,

since all

detailed

above, were

occurred

the

made

actual

by

the

defendants in Canada, the first Clinton Hospital factor still

________________

weighs

in

concluded,

favor

of

defendants.14

and we agree,

that the

The

bulk of

district

court

the defendants'

unfair and deceptive acts and omissions were in Canada.

The

analysis

second Clinton Hospital

_________________

requires

an

of where the plaintiffs received and acted upon the

deceptive or unfair acts or practices.

properly

factor

recognized,

____________________

this

factor,

As the district court

though

framed

by

the

14.

That

some

Canada, were
with

of

the

received in

respect to the

misrepresentations,
Massachusetts, will

second Clinton Hospital

________________

while made

in

be considered
factor, but is

not relevant here.

-2828

Clinton Hospital
________________

court as

a single factor,

really requires

two distinct inquiries.

As to where the plaintiffs received the

deception,

the district

In coming

the

their

court concluded that it was

to this decision,

misleading statements

telephone

primarily Canada.

the court declined

made by

conversation

McGinn to

because

the

to consider

Hunter during

district

court

believed Hunter "was not acting as an agent of the plaintiffs

when

she received

evidence

she relayed

plaintiffs."

misrepresentation, and

any of

Plaintiffs

including this

is an

the

the misrepresentations

complain

arguable issue, but we resolve

calling on

no

to the

erred in

deception.

not

This

it against plaintiffs.

agency law, Hunter was acting

Private, not for plaintiffs,

is no evidence

the court

telephone conversation as a

In terms of strict

there is

for Boston

when she made the call.

There

that Hunter told McGinn or Cramm that she was

Roche's

behalf or

that she

would transmit

the

information to Roche.

Thus, while there was a

Hunter, it was not of plaintiffs.

second rationale -- that

deception of

As to the district court's

no misrepresentations were conveyed

by Hunter to plaintiffs -- it is inapplicable on these facts.

McGinn

concealed

from Hunter

Hunter testified, she

the

very

information which,

would have relayed to

_____ ____

had been more forthcoming.

-2929

Roche if McGinn

The

only

other

misrepresentation

Massachusetts was the Yorston

court's own

On

statements

made

plaintiffs in

there.

the other hand,

by

the

And, as discussed

disclose was, for these

were

evenly

there were

and

in this

three misleading

received

the plaintiffs'

by

the

initial visits

above, the defendants' failure to

purposes, received by the plaintiffs

equally in Massachusetts and

dealings

may be considered

defendants

Canada during

in

fax, which, under the district

evidentiary rulings,

analysis.

received

Canada, as the parties' overall

divided

between

those

two

places.

Therefore, while

both places, we

the plaintiffs

received

agree with the district

the deception

in

court that slightly

more of it was received in Canada.15

The second Clinton Hospital factor also requires us

________________

to

examine

where

plaintiffs

Indeed, in Clinton Hospital,

________________

critical

factor

deception at

is

the time of

F.2d at 1265-66; see

___

France,
______

the

acted

upon

the

deception.

this court recognized that "the

locus

of

reliance."

the

recipient

of

the

Clinton Hospital, 907

_________________

also Compagnie de Reassurance d'Ile de

____ __________________________________

57 F.3d at 90.

Under varying circumstances this may

or may not be the same place as the place where the plaintiff

____________________

15.

As with the

urge us
the

to frame the

description

Boston
______

first Clinton Hospital factor,

_________________
deception broadly enough

of the

Globe ad and in
_____

which plaintiffs

farm as

plaintiffs
to encompass

"going concern"

the two information

obviously received in

in the

packets, all of

Massachusetts.

For

reasons expressed above, we will not do so.

-3030

received the

deception.

Here, the

district court concluded

that the plaintiffs' actions

between Massachusetts,

by Massachusetts

lawyer and

purchase

in reliance were evenly divided

where they negotiated

properties, and Canada, where

accountant and

the farm,

and

formed a Canadian

a loan secured

they hired a

corporation to

that this

sub-factor thus

favored

court thus

concluded that

the two-

neither party.

The

faceted

district

second factor,

like

the first

factor, weighed

in

favor of Canada, and consequently in favor of the defendants.

We agree.

The third Clinton Hospital

________________

of

the

loss.

conceptions of

The

parties

the loss

here.

factor is the

advance

radically

Plaintiffs assert

location

different

that the

loss was the loss of the Massachusetts property

that secured

the Boston Private loan and that was ultimately foreclosed on

when

the

conceive

plaintiffs

of the

defaulted

loss as

the

on the

loss of

loan.

Defendants

the money

which was

invested in the farm in Canada.

The

district

definition.

perhaps

The court's

court

adopted

reasoning was

the

plaintiffs'

heavily influenced,

even mandated, by its earlier ruling on the scope of

the damages which plaintiffs would be allowed to seek in this

action.

defendants'

In

that

earlier

ruling,

the

court

rejected

argument that the plaintiffs as individuals were

-3131

not the real parties in interest in this case by defining the

alleged losses narrowly, allowing plaintiffs to seek recovery

only of

losses they incurred personally

corporation and not those

in Canada.

The

context.

losses suffered by the corporation

district court felt obligated, for

of consistency, to

this

in capitalizing the

The

use the

court

same conception of

thus concluded

that

the sake

the loss

in

this third

factor favored the plaintiffs.

The

We agree.

district court balanced

the three factors and

found that defendants -- in whose favor the first two factors

weighed -- had met their burden of proving that the deception

had

occurred

Massachusetts.

is

not

primarily

Although

substantially

outside

the pragmatic, functional

analysis

necessarily limited

and

to

the

three factors,

it

is

significant that two of the three identified factors weigh in

favor of the

defendants here.

Inc. v. Amplicon, Inc.,

____
______________

Cf. Central Mass. Television,

___ _________________________

930 F. Supp. 16, 27 (D.

("[W]hen

'place of

injury' is

the only factor

favor of

a claimant, the admonition

Mass. 1996)

weighing in

of Massachusetts courts

that liability under chapter 93A is not to be imposed lightly

is particularly relevant.").

III.

Defendants moved, after trial, for

in the

sum of $ 865,000.

attorneys' fees

The district court,

memorandum, denied this motion.

-3232

in a written

Defendants appeal.

The district court first noted

the dispute between

the parties over whether United States or Canadian law should

apply

that

to the

fee-shifting claim.

Canadian law

interpreted

applied, as

Canadian

law

to

Then,

assuming arguendo
________

defendants urged,

grant

judges

"absolute

unfettered" discretion in attorneys' fees claims.

this discretion, the district

of

fees

would

be

the court

and

Exercising

court determined that an award

"inequitable"

because

of

defendants'

intentional misconduct, and it denied the motion.

Defendants base their argument -- one wholly

based

on Canadian substantive law -- on the underlying premise that

Canadian

substantive

between the parties.

law

They

applies

to

the

make no argument

entire

dispute

that they

are

entitled

court,

to

fees under

however,

position,

law

only.

issue,

the

The

court

disposing of,

It is

as the

law.

The

defendants'

Massachusetts

claim.

considering, and

argument

rejected

applying

chapter 93A

Massachusetts

law

choice

to

the

Canadian law, well within

of

of

the claim

for

attorneys'

law

plaintiffs'

consulted Canadian

unnecessary to resolve

denial

district

law

in

the sake

of

the choice of

fees was,

under

the trial court's discretion given

the circumstances of this case.

Defendants unsuccessfully argue

court

overestimated

Canadian courts in the

the

degree

of

that the

discretion

fee-shifting context.

-3333

district

enjoyed by

Under Canadian

law,

"[a] successful litigant has by law no right to costs."

Orkin, The Law of Costs

__________________

"Although

expectation

some cases

202.1, at 2-3

[the successful

of receiving

have termed

litigant]

(2d ed.

may have

[costs], this

discretion to award or withhold costs."

a reasonable

is subject

the court's absolute

Id.
___

1993).16

to what

and unfettered

This discretion

is "to be

exercised according to

particular case."

the circumstances of

each

Id.
___

Defendants also

argue

that the

court abused

its

discretion by basing its

denial of fees on its

finding that

defendants'

conduct was

violative of

93A.

claim

Massachusetts

that

law

is

attorney fee determinations and

erred

in

considering

Massachusetts

court's

law.

reasoning.

wrongful, not
________

denying the

intentionally

that

irrelevant

to

that

was

point

it violated

is that

their

a particular

court noted that

withhold

Canadian

violative

Defendants misapprehend

The

They

thus that the district judge

conduct

motion, the

to

chapter

material

the

of

district

conduct was

statute.

In

"defendants acted

information

from

plaintiffs."

Chapter

93A was merely the lens

the court examined defendants' conduct.

broad discretion Canadian law

through which

Certainly, under the

accords judges in attorney fee

____________________

16.

The term

"costs," as used in

attorneys' fees.

See id.
___ ___

Canadian law, encompasses

201, at 2-1.

-3434

determinations, the district

judge was entitled to

consider

this misconduct.

Defendants

claim

prevailed

motion

substantially outside

for attorneys'

district court, exercising its

be

inequitable

conduct

plaintiffs' chapter

93A

because they successfully asserted that the misconduct

occurred primarily and

Their

on

to

had been

award

defendants'

plaintiffs as

intentional

was

denied because

the

discretion, believed it would

fees to

established

proper, in this context,

fees

Massachusetts.

parties

at trial.

whose

wrongful

It was

entirely

for the district judge

misconduct

in

to consider

deceiving

a circumstance militating against

the

an award of

fees.

IV.

For the reasons

the district court in

defendants' post-trial

affirmed.
________

expressed above,

the judgment

favor of defendants and the

motion for attorneys'

Parties to bear their own costs.

of

denial of

fees are

both

-3535