Smith v. Dorchester Real Estate, Inc.
732 F.3d 51
1st Cir.2013Background
- Fraudulent real estate scheme used a schizophrenic, illiterate straw buyer (Smith) for two overvalued properties in MA.
- Smith relied on Century 21 Dorchester Real Estate and NEMCO, plus others, at closings where he did not read or understand documents.
- Closing agents, including Bertucci (attorney) and Adamos (Century 21 agent), misrepresented investments and helped secure loans from Fremont and Meritage.
- Foreclosures on both properties followed, destroying Smith's credit and causing emotional distress.
- Jury awarded damages to Smith; district court trebled/doubled some damages under MA 93A; several defendants appealed or cross-appealed.
- The First Circuit affirming in part and reversing/remanding decisions on damages, 93A, vicarious liability, and related issues.
- Procedural posture includes review of sufficiency of evidence, Daubert admissibility, and demand-letter requirements under MA 93A.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Sufficiency of evidence vs Century 21 on fraud | Smith proves misrepresentation and reliance via Adamos/Foley actions | Century 21 not proven to have made or approved misrepresentations | Yes; substantial evidence supports fraud finding against Century 21 |
| Breach of fiduciary duty by Century 21 | Century 21 abused trust in a knowledge-disparity context | No fiduciary relationship; no breach shown | Sufficient evidence supported breach of fiduciary duty by Century 21 |
| Admissibility of damages expert Dr. Smith (hedonic, credit, time) | Dr. Smith's testimony admissible under Daubert to prove damages | Dr. Smith's hedonic and credit-damages methodologies unreliable | Dr. Smith's testimony partially inadmissible; remand for Daubert-based re-evaluation; new trial on damages} |
| NEMCO 93A claim and common-law liability | NEMCO liable for fraud/breach through its agent's actions | No statements by NEMCO; closing agent not agent of NEMCO; no 93A liability | Common-law fraud reversed; 93A claim vacated/remanded for merits; require further proceedings on 93A |
| Demand letters under MA 93A | Smith complied by mailing to a prospective respondent | Letters to Century 21 agents insufficient; must be to a prospective respondent | Demand-letter requirements satisfied for Union Capital; Century 21 remanded for merits; need further proceedings |
Key Cases Cited
- Fordyce v. Town of Hanover, 929 N.E.2d 929 (Mass. 2010) (fraud element and reliance standard under MA law)
- Geo. Knight & Co. v. Watson Wyatt & Co., 170 F.3d 210 (1st Cir. 1999) (trust/identity in fiduciary-relationship analysis)
- Broomfield v. Kosow, 212 N.E.2d 560 (Mass. 1965) (fiduciary-duty considerations in disproportionate knowledge contexts)
- Indus. Gen. Corp. v. Sequoia Pac. Sys. Corp., 44 F.3d 40 (1st Cir. 1995) (factors for determining when a business relationship is fiduciary)
- Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579 (1993) (gatekeeping reliability standard for expert testimony)
- Kumho Tire Co. v. Carmichael, 526 U.S. 137 (1999) (Daubert gatekeeping applies to all expert testimony)