even construing the Amended Complaint liberally as alleging a continuing course of conduct, the CUTPA claim is nevertheless time-barred since the Complaint was filed more than three years after the last alleged act in this course of conduct occurred.
C. The California Franchise Investment Law
California's Franchise Investment Law ("CFIL") makes it unlawful, inter alia, to willfully make untrue statements of material fact in a franchise circular. See Cal. Corp. Code § 31202 (West 1997). Plaintiffs Hackett, Lynch and Selik allege that defendants made misleading statements in the Unit Franchise Offering circular, and omitted to state certain material facts which would have made the statements not misleading, in violation of CFIL. (Am. Compl. at PP 89-92.) However, as with the claims under Texas and Connecticut law, even assuming that the allegations in the Amended Complaint are sufficient to state a cause of action under CFIL, they must be dismissed because they are barred by the applicable statute of limitations.
Under CFIL, a cause of action must be "brought before the expiration of four years after the act or transaction constituting the violation [or within] one year after the discovery by the plaintiff of the fact constituting the violation." Cal. Corp. Code § 31303 (West 1997). It is unclear when the allegedly untrue statements were "made" in the Franchise Agreements, but at the very latest, the causes of action under CFIL accrued as of the time the plaintiffs signed the Agreements. Since the Amended Complaint states that Lynch signed her Franchise Agreement on November 1, 1990,
Hackett signed his agreement on June 21, 1990 and Selik signed his agreement on May 13, 1990 (Am. Compl. at PP 53, 45, 68), the operative outside dates for the filing of the Complaint, in order for the claims to be timely, occurred between May 13 and November 1, 1994. The Complaint was not filed until October 27, 1995, and the claims are thus time-barred.
Nor are the claims saved by applying the statute's discovery rule. The Amended Complaint admits that Lynch, Hackett and Selik were aware that the representations in the Franchise Agreement were false some time in 1992. (Am. Compl. at PP 46, 54, 69.) Moreover, even absent these admissions, documents attached to the Amended Complaint make clear that these plaintiffs either knew or should have known of the falsity of the statements long before October 27, 1994. (See Am. Compl., Exs. 29, 31-42.) Finally, under any scenario, plaintiffs were aware of the purported falsity of the statements more than one year before the initial Complaint was filed, since the sale of UCMC occurred sometime in early 1993. (Hearing Tr. At 41; See Am. Compl., Ex. 42.) Thus, the CFIL claims are clearly time-barred and must be dismissed.
D. The Massachusetts Consumer Protection Act
The Massachusetts Consumer Protection Act ("MCPA") provides in relevant part that "unfair or deceptive acts or practices in the conduct of any trade or commerce are hereby declared unlawful." Mass. Gen. Laws. ch. 93A, § 2(a). Lynch alleges that defendants violated the MCPA when Broockman and Jones made misrepresentations to her about the Marblelife system during meetings held in Massachusetts, in order to induce her into entering into the Franchise Agreement. (Am. Compl. at PP 94-96.) Defendants, citing scant law in support of their position, claim that the cause of action under the MCPA is barred by its four-year statute of limitations, see Mass. Gen. Laws ch. 260, § 5A, and that no tolling provision under Massachusetts law applies to MCPA claims. (Def. Br. at 25; Def. Reply Br. at 14.) Lynch, whose argument is equally bereft of legal authority, claims that the "discovery rule" saves the MCPA claim from being barred under the statute of limitations.
Whether or not the four-year statute of limitations bars the claim hinges on when the MCPA cause of action accrued, and therefore, when the statute of limitations began to run. If, as defendants argue, the cause of action accrued when Lynch signed her Franchise Agreement, she is clearly barred from bringing this claim. However, under Massachusetts law, a claim brought under the MCPA that is grounded in fraud on the part of the defendant, as is the one pleaded in the Amended Complaint, does not begin to accrue until the plaintiff "knew or reasonably should have known" of the deceptive conduct, Eaton Fin. Corp. v. Dunlavey, No. 9114, 1991 WL 241863, at *6 (Mass. App. Div. Nov. 7, 1991); accord Cargill v. Gilmore, No. 920485G, 1993 WL 818899, at *3 (Mass. Super. Aug. 18, 1993), or, put another way, "when the plaintiff knew or should have known of appreciable harm resulting from the defendant's [deceptive conduct]." International Mobiles Corp. v. Corroon & Black/Fairfield & Ellis, Inc., 29 Mass. App. Ct. 215, 560 N.E.2d 122, 126 (Mass. App. Ct. 1990); accord Cambridge Plating Co. v. Napco, Inc., 991 F.2d 21, 25 (1st Cir. 1993) (construing accrual of chapter 93A claim under Massachusetts law), aff'd in part and vacated in part after remand, 85 F.3d 752 (1st Cir. 1996); Paterson-Leitch Co. v. Massachusetts Mun. Wholesale Elec. Co., 840 F.2d 985, 994 (1st Cir. 1988) (same); see also Bouchie v. Atlantic Chrysler Plymouth, Toyota Inc., No. 9350, 1996 WL 210685, at *2 (Mass. App. Div. Apr. 8, 1996) (accrual date for chapter 93A cause of action determined in accordance with same principles governing accrual of the underlying cause of action); Demoulas v. Demoulas, No. 902344B, 1993 WL 818620, at *11 (Mass. Super. Oct. 4, 1993) (fraud cause of action accrues when the plaintiff learns or reasonably should have learned of the fraud).
The record as it now stands does not establish as a matter of law that Lynch's claim under the MCPA is time-barred. The earliest date that Lynch admits she was aware of the falsity of the representations is 1992 (Am. Compl. at P 54), which puts the claim well within the four-year statutory window under the MCPA. Moreover, defendants have not pointed to anything in the record that would support a finding that Lynch should have known of the falsity of the statements in early October of 1991. Therefore, the MCPA claim cannot be dismissed at this juncture as time-barred.
Defendants also attack the MCPA claim on the basis that, accepting all of the allegations in the Amended Complaint as true, plaintiffs fail to allege that the actions taken in violation of the MCPA occurred "primarily and substantially" within Massachusetts, as is required to state a claim under the MCPA. See Mass. Gen. Laws ch. 93A, § 11. The burden of proving that the conduct complained of did not occur primarily and substantially in Massachusetts rests on the defendant. Id.; see also Clinton Hosp. Assoc. v. The Corson Group. Inc., 907 F.2d 1260, 1264 (1st Cir. 1990); Bushkin Assocs., Inc. v. Raytheon Co., 393 Mass. 622, 473 N.E.2d 662, 672 (Mass. 1985). Applying the relevant factors required under Massachusetts law to the allegations in the Amended Complaint, and construing the Amended Complaint in plaintiffs' favor, I find that the defendants here have not met this burden.
Massachusetts courts have identified three factors that, at a minimum, should be considered by courts in deciding whether or not a deceptive act or practice occurred primarily within Massachusetts for purposes of the MCPA. Those factors, none of which standing alone is necessarily dispositive, are (1) where the deceptive statement was made; (2) the location of the plaintiff when the plaintiff received and acted on the deceptive statement; and (3) the situs where the plaintiff suffered his loss as a result of the deceptive act or practice. Bushkin, 473 N.E.2d at 672; Clinton, 907 F.2d at 1265-66. Courts consider the second factor to be critical, Compagnie de Reassurance D'Ile De France v. New England Reinsurance Corp., 57 F.3d 56, 90 (1st Cir.), cert. denied, 516 U.S. 1009, 116 S. Ct. 564, 133 L. Ed. 2d 490 (1995); Clinton, 907 F.2d at 1265-66, while the third factor appears to be the least weighty. Clinton, 907 F.2d at 1266; Makino, U.S.A., Inc. v. Metlife Capital Credit Corp., 25 Mass. App. Ct. 302, 518 N.E.2d 519, 523 (Mass. App. Ct.), review denied, 402 Mass. 1101, 521 N.E.2d 398 (Mass. 1988). Finally, if the factors are in equipoise, the "primary and substantial" requirement is not met, since the preponderance of the wrongful conduct cannot be said to have occurred in Massachusetts. Bushkin, 473 N.E.2d at 672; Compagnie Generale Maritime v. Central Int'l, No. 921200, 1995 WL 809527, at *4 (Mass. Super. Mar. 24, 1995).
Plaintiffs allege that the deceptive statements underlying the MCPA claim were made to and received by Lynch during meetings that took place in Massachusetts. (Am. Compl. at PP 94-95.) Lynch would have sustained any injury resulting from these misrepresentations in California, where she resides and where her Marblelife franchise is located. (See Am. Compl. at P 6.) However, as to the critical fact of where Lynch relied on the misrepresentations, or where she signed her Franchise Agreement, the record is silent. Without additional facts, I cannot conclude that defendants have carried their burden of establishing that the deceptive conduct did not occur substantially and primarily in Massachusetts. Therefore, the claim under the MCPA cannot be dismissed.
For the foregoing reasons, I respectfully recommend that defendants' motion to dismiss the Amended Complaint pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure be granted in part and denied in part. Specifically, I recommend that (1) the state statutory claims brought pursuant to the Texas Deceptive Trade Practices Act, the Connecticut Unfair Trade Practices Act and the California Franchise Investment Law be dismissed; (2) all claims against defendant UCC be dismissed; (3) the remedy for any breach of warranty claim against defendants UCMC and UCC&P be limited to the replacement or purchase price of the warrantied goods; and (4) all claims for tortious interference with prospective business relations be dismissed. Remaining in the case are (1) the claim brought pursuant to the Massachusetts Consumer Protection Act; (2) the breach of contract claims against UCMC and UCC&P; (3) the breach of warranty claims against UCMC and UCC&P, as limited above; (4) the fraud claims against all defendants except UCC; (5) the negligent misrepresentation claims against all defendants except UCC; (6) the civil conspiracy claims against all defendants except UCC; and (7) the tortious interference with contract claims against UCC&P and individual defendants Lutjen and Kennedy.
The parties are instructed to meet and submit a proposed plan and schedule for the completion of pre-trial discovery and other pre-trial activities in this matter within twenty days of the date of this order.
Pursuant to 28 U.S.C. § 636(b)(1)(C) and Rule 72 of the Federal Rules of Civil Procedure, the parties shall have ten days from service of this Report to file written objections. See also Rules 6(a) and 6(e) of the Federal Rules of Civil Procedure. Such objections shall be filed with the Clerk of the Court, with extra copies delivered to the chambers of the Honorable Kimba M. Wood, United States District Judge, and to the Chambers of the undersigned, Room 1660. Any requests for an extension of time for filing objections must be directed to Judge Wood. Failure to file objections will result in a waiver of those objections for purposes of appeal. Thomas v. Arn, 474 U.S. 140, 106 S. Ct. 466, 88 L. Ed. 2d 435 (1985); Frank v. Johnson, 968 F.2d 298, 300 (2d Cir.), cert. denied, 506 U.S. 1038, 113 S. Ct. 825, 121 L. Ed. 2d 696 (1992); Small v. Secretary of Health and Human Servs., 892 F.2d 15, 16 (2d Cir. 1989).
Dated: May 20, 1997
New York, New York
Theodore H. Katz
United States Magistrate Judge