594 F.Supp.3d 96
D. Mass.2022Background
- SOC (Secure Our City, Inc.) contracted with ECI Systems, LLC to install security systems for clients (e.g., Cumberland Farms, UDR) and in July 2017 the parties signed a Confidentiality, Non‑Compete and Non‑Solicitation Agreement containing a liquidated‑damages provision: 25% of ECI revenue from any SOC‑introduced customer for five years.
- SOC alleges ECI submitted fraudulent invoices, disclosed confidential information, disparaged SOC, and sabotaged systems, leading to Cumberland Farms’ termination of SOC; ECI disputes those contentions.
- SOC sued ECI and CEO Justin Davis; ECI asserted counterclaims and sought damages; Geva Barash was later added as a third‑party defendant/manager of SOC.
- Multiple discovery and dispositive motions followed, including cross‑motions for summary judgment, motions to strike, a belated SOC motion to amend its complaint, PIIC (ECI’s insurer) seeking intervention, and a Rule 12(c) motion for judgment on the pleadings.
- The Court (1) denied SOC’s motions to strike and allowed certain defendant submissions, (2) struck SOC’s late summary‑judgment filing and denied SOC leave to amend the complaint, (3) permitted PIIC to intervene permissively, (4) granted defendants summary judgment that the liquidated‑damages clause is an unenforceable penalty, (5) granted SOC summary judgment on ECI’s Chapter 93A counterclaim, and (6) denied defendants’ Rule 12(c) motion on SOC’s monies‑had‑and‑received claim.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Admissibility of portions of Davis affidavit and Barash deposition (motions to strike) | SOC: portions exceed personal knowledge / Barash offered legal opinion on liquidated damages | ECI: Davis statements are lay opinions from personal knowledge; Barash’s use of term “penalty” is permissible lay testimony | Denied SOC’s motions; Davis affidavit and Barash testimony admissible |
| Timeliness of SOC’s later summary‑judgment motion (motion to strike by defendants) | SOC: substance should be considered; overlaps with opposition | ECI: SOC filed after the Court’s April 14, 2021 deadline without leave; untimely | Granted defendants’ strike re: SOC’s late motion; SOC’s motion struck |
| Leave to amend complaint after scheduling order (Rule 15/16) | SOC: amendment would streamline trial and negate intervenor motion; sought to dismiss two counts without prejudice | ECI: enforcement of scheduling order / no good cause shown for 30‑month delay | Denied SOC’s motion for leave to amend for lack of good cause |
| Insurer intervention (PIIC) | PIIC: may intervene to submit jury instructions/special verdicts concerning potentially covered defamation/disparagement claims | ECI/SOC: insurer’s interest is contingent and not a matter of right | PIIC may not intervene as of right, but permissive intervention allowed |
| Enforceability of Agreement’s liquidated‑damages clause | SOC: clause is an agreed forecast of damages and enforceable | ECI: clause is disproportionate, unrelated to actual damages, and intended as a penalty | Court: clause is unenforceable as a penalty (summary judgment for defendants) |
| ECI’s Chapter 93A counterclaim (unfair/deceptive practices) | SOC: ECI’s claim lacks evidence of “extortionate” use of breach; only non‑payment shown | ECI: SOC withheld monies to gain leverage; alleges unfair business practices | Court: ECI failed to show coercion/extortionate quality; summary judgment for SOC on Count 3 |
| Monies‑had‑and‑received claim (Rule 12(c)) | SOC: equitable claim alleges a separate referral‑fee agreement (unrelated to written Agreement) | ECI: existence of a contract bars equitable recovery; claim duplicates contract remedy | Court: contract does not address referral fees alleged; equitable claim plausibly pleaded; 12(c) denied |
Key Cases Cited
- United States v. Reda, 787 F.3d 625 (1st Cir. 2015) (lay witness may use legal‑tinged terms without offering impermissible legal conclusions)
- Miceli v. JetBlue Airways Corp., 914 F.3d 73 (1st Cir. 2019) (scheduling‑order deadlines invoke Rule 16(b) good‑cause standard for late amendments)
- TAL Fin. Corp. v. CSC Consulting, Inc., 446 Mass. 422 (Mass. 2006) (liquidated‑damages clause enforced only if reasonable forecast, not a penalty)
- NPS, LLC v. Minihane, 451 Mass. 417 (Mass. 2008) (assess liquidated damages by difficulty of ascertaining harm and proportionality at formation)
- Kelly v. Marx, 428 Mass. 877 (Mass. 1999) (proportionality for liquidated damages assessed at time of contracting)
- Bose Corp. v. Ejaz, 732 F.3d 17 (1st Cir. 2013) (liquidated‑damages enforceability can be a summary‑judgment question when fact‑intensive issues resolved as matter of law)
- Travelers Indem. Co. v. Dingwell, 884 F.2d 629 (1st Cir. 1989) (insurer’s contingent interest generally insufficient for intervention as of right)
- Jelmoli Holding, Inc. v. Raymond James Fin. Servs., Inc., 470 F.3d 14 (1st Cir. 2006) (relation between money‑had‑and‑received and unjust‑enrichment doctrines)