The opinion
UNITED STATES DISTRICT COURT
DISTRICT OF MASSACHUSETTS
_______________________________________
)
MICHAEL DAY, )
)
Plaintiff, )
) Civil Action No.
v. ) 18-10396-FDS
)
CHARLES GRACY and )
MARK GRACY, )
)
Defendants. )
_______________________________________)
ORDER ON DEFENDANTS’ MOTION FOR PARTIAL DISMISSAL
SAYLOR, J.
This is an action for repayment of a loan. Jurisdiction is based on diversity of citizenship.
Plaintiff Michael Day loaned defendants Charles and Mark Gracy a total of $71,312.67
over the course of about a year to help them operate their community theater company. Despite
the Gracys’ many promises to the contrary, only $11,000 of that amount was ever repaid. Day
has filed this action alleging fraud, breach of contract, money had and received, and violation of
Mass. Gen. Laws ch. 93A, among other things. The Gracys have filed a motion for partial
dismissal for failure to state a claim on which relief can be granted as to the violation of chapter
93A. For the following reasons, that motion will be denied.
I. Background
A. Factual Background
The following facts are set forth as alleged in the complaint.
Charles and Mark Gracy, who are married, owned and operated the Community Theater
Company of Andover, Inc. (“ACT”) from at least May 1, 2008, through the summer of 2016.
(Compl. ¶¶ 6, 7, 9, 49). Charles Gracy was the President and Mark Gracy was the Director. (Id.
¶ 7). ACT was tax exempt under 26 U.S.C. § 501(c)(3) from at least 2013 until May 15, 2015.
(Id. ¶ 8).
In September 2013, Day told both Gracys that he would be willing to lend them money
for ACT, but that it would need to be paid back before his children went to college. (Id. ¶¶ 10-
11). Charles Gracy promised it would be repaid much sooner than that. (Id. ¶ 11) Accordingly,
on September 16, 2013, Day loaned the Gracys and ACT $15,000 pursuant to a short loan
agreement, which stated as follows:
Today, September 16, 2013, Michael Day has loaned Charles Gracy and ACT
Theater Company, individually and collectively, Fifteen Thousand Dollars.*
Charles Gracy, individually and on behalf of ACT Theater Company, agrees to
pay as much of the loan back as possible by November 30, 2013. Any amount not
paid back by said date will be paid back in whatever increments possible, as soon
as possible, but in no event later than November 30, 2014.
As long as best efforts are made by Charles Gracy to pay back the loan as noted
above, no interest will be charged as long as the loan is paid back within twelve
months of today. Any amounts remaining outstanding as of that date will be
charged interest at a simple rate of 1% per month from the initial date of the loan.
. . . .
* If any additional loans are made then they will follow these same terms.
(Compl. Ex. 2). The agreement was signed by Day and Charles Gracy. (Id.).
In December 2013, the Gracys represented to Day that ACT was having trouble
fundraising because they could not show any funds in its accounts. (Id. ¶ 22). Mark Gracy
stated that he was willing to take money out of his retirement account to repay Day if the
business was unsuccessful. (Id. ¶ 25). Day loaned them and ACT an additional $50,000 on
December 31, 2013, “for the sole purpose of being able to demonstrate the existence of a capital
fund.” (Id. ¶¶ 23, 26). It was deposited into an account named “ACT Capital Fund,” on which
Charles Gracy was the sole authorized signatory. (Id. ¶ 28).
On April 15, 2014, the Gracys repaid Day $11,000 from the ACT Capital Fund account.
(Id. ¶ 31).
Three days later, defendants tendered a check for another $15,000 to Day, also from the
ACT Capital Fund, but it bounced on April 18 and again on April 24, 2018. (Id. ¶¶ 32-33).
According to the complaint, Charles Gracy promised to look into it, but never did. (Id. ¶ 35).
During that time, Day had been assisting ACT with expenses for its operations, and he
requested reimbursement in the amount of $1,436.67. (Id. ¶¶ 36, 38). The Gracys tendered a
check in that amount, which also bounced. (Id. ¶ 38).
ACT had a show that was set to open on October 31, 2014. (Id. ¶ 40). On October 30,
the Gracys told Day that their show could not open because ACT did not have insurance. (Id.).
Day advanced $876 to pay the insurance. (Id. ¶ 42). The next day, the Gracys told Day they still
could not open because ACT “lacked the funds to do so.” (Id. ¶ 44). Day then loaned them
another $4,000. (Id. ¶ 46).
As of November 30, 2014, $60,312.67 of the debt remained outstanding. (Id. ¶¶ 48, 52).
ACT ceased operating in the summer of 2016, and the Gracys have since moved to Florida. (Id.
¶¶ 2-3, 50). Through the summer of 2016, the Gracys continued to promise Day that he would
be repaid in full. (Id. ¶¶ 50-51).
On January 19, 2018, Day sent the Gracys a demand letter pursuant to Mass. Gen. Laws
ch. 93A, § 9(3). (Id. ¶ 161).
B. Procedural Background
Day filed this action on February 28, 2018. The complaint contains eleven counts,
against both Gracys unless otherwise specified: (1) fraud; (2) negligent misrepresentation;
(3) breach of contract against Charles Gracy; (4) breach of oral contract against Mark Gracy;
(5) breach of the covenant of good faith and fair dealing; (6) money had and received;
(7) promissory estoppel; (8) quantum meruit; (9) unjust enrichment; (10) breach of fiduciary
duty against Charles Gracy; and (11) violation of Mass. Gen. Laws ch. 93A. (Compl. ¶¶ 55-
163).
Charles Gracy was served on May 4, 2018, and Mark Gracy eventually stipulated to
service on June 1. The Gracys have moved to dismiss the complaint as to count 11, violation of
chapter 93A, for failure to state a claim upon which relief can be granted.
II. Standard of Review
On a motion to dismiss, the court “must assume the truth of all well-plead[ed] facts and
give . . . plaintiff the benefit of all reasonable inferences therefrom.” Ruiz v. Bally Total Fitness
Holding Corp., 496 F.3d 1, 5 (1st Cir. 2007) (citing Rogan v. Menino, 175 F.3d 75, 77 (1st Cir.
1999)). To survive a defendant’s motion to dismiss, a plaintiff must state a claim that is
plausible on its face. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). That is, “[f]actual
allegations must be enough to raise a right to relief above the speculative level . . . on the
assumption that all the allegations in the complaint are true (even if doubtful in fact).” Id. at 555
(citations omitted). “The plausibility standard is not akin to a ‘probability requirement,’ but it
asks for more than a sheer possibility that a defendant has acted unlawfully.” Ashcroft v. Iqbal,
556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 556). Dismissal is appropriate if the
complaint fails to set forth “factual allegations, either direct or inferential, respecting each
material element necessary to sustain recovery under some actionable legal theory.” Gagliardi v.
Sullivan, 513 F.3d 301, 305 (1st Cir. 2008) (quoting Centro Medico del Turabo, Inc. v. Feliciano
de Melecio, 406 F.3d 1, 6 (1st Cir. 2005)).
III. Analysis
The Gracys contend that Count 11 must be dismissed because they were not engaged in
“trade or commerce” within the meaning of the statute and none of the allegations in the
complaint are sufficient to reach the level of an “unfair or deceptive” act.
“Unfair methods of competition and unfair or deceptive acts or practices in the conduct of
any trade or commerce are hereby declared unlawful.” Mass. Gen. Laws ch. 93A, § 2. The
statute defines “trade” and “commerce” broadly, to
include the advertising, the offering for sale, rent or lease, the sale, rent, lease or
distribution of any services and any property, tangible or intangible, real, personal
or mixed, any security as defined in subparagraph (k) of section four hundred and
one of chapter one hundred and ten A and any contract of sale of a commodity for
future delivery, and any other article, commodity, or thing of value wherever
situate, and shall include any trade or commerce directly or indirectly affecting
the people of this commonwealth.”
Id. § 1(b).
“[A]nalysis of the applicability of G.L. c. 93A, § 11, requires a dual inquiry whether there
was a commercial transaction between a person engaged in trade or commerce and another
person engaged in trade or commerce, such that they were acting in a ‘business context.’”
Milliken & Co. v. Duro Textiles, LLC, 451 Mass. 547, 563 (2008). Relief under chapter 93A “is
not available to parties in a strictly private transaction.” Id. (quoting Linkage Corp. v. Trs. of
Bos. Univ., 425 Mass. 1, 23 n.33 (1997). “An entity’s status as a charitable corporation is not, in
and of itself, dispositive of the issue whether c. 93A applies.” Linkage Corp., 425 Mass. at 23
(quoting Planned Parenthood Fed’n of Am., Inc. v. Problem Pregnancy of Worcester, Inc., 398
Mass. 480, 492-93 (1986)) (internal quotation marks omitted). To determine whether the
transaction occurred in a “business context,” courts consider the “nature of the transaction,” the
“character of the parties involved,” the “activities engaged in by the parties,” “whether similar
transactions have been undertaken in the past,” and “whether the transaction is motivated by
business or personal reasons.” Id. at 24 (quoting Begelfer v. Najarian, 381 Mass. 177, 190-91
(1980)); see Milliken, 451 Mass. at 563-64. “A commercial transaction need not occur in the
ordinary course of a person’s trade or business before liability under G.L. c. 93A will be
imposed.” Milliken, 451 Mass. at 564. And the Supreme Judicial Court has “emphasize[d] the
fact-specific nature of the inquiry.” Linkage Corp., 425 Mass. at 26.
The Gracys contend that the non-profit theater was not a business, and that “the mere
borrowing of money by a non-profit corporation . . . does not constitute ‘trade’ or ‘commerce’
sufficient to establish a claim under Chapter 93A in this case.” (Mot. to Dismiss at 4). At this
stage of the proceeding, however, the complaint has alleged sufficient facts to support a finding
that the parties were engaged in commerce under the meaning of the statute. It is clear that the
money was loaned for the purpose of meeting ACT’s operating expenses, not for the Gracys’
personal expenses. It was used for business purposes, such as insurance. Although ACT was, at
the time Day loaned the money, a tax-exempt, non-profit entity, it appears that it was attempting
to “profit” from its arrangement with Day as a means of obtaining sufficient investment to put on
a show. See Linkage Corp., 425 Mass. at 25 & n.35 (explaining that “[a]lthough by definition, a
qualified nonprofit corporation does not earn a ‘profit’ from its activities, such a corporation
need not be profitmaking in order to profit from an activity” and that the court’s “use of the term
‘profit’ here is meant colloquially, in the sense of revenues that exceed expenses”). Although the
analysis on a developed factual record could lead to a different result, the complaint plausibly
alleges that chapter 93A applies to the loans here.
Next, the Gracys contend that this is a “garden-variety” breach-of-contract claim, and that
none of their alleged conduct is “unfair” or “deceptive” under the meaning of the statute. It is
true that “the mere breach of a contract, without more, does not amount to a [Chapter] 93A
violation.” Zurich Am. Ins. Co. v. Watts Regulator Co., 796 F. Supp. 2d 240, 244 (D. Mass.
2011) (alteration in original) (quoting Madan v. Royal Indem. Co., 26 Mass. App. Ct. 756, 762
(1989)). However, the complaint clearly alleges more than just a breach of contract. Indeed,
Count 1, which the Gracys do not seek to dismiss for failure to state a claim, is for fraud. Fraud
is the quintessential “deceptive” activity. See McEvoy Travel Bureau, Inc. v. Norton Co., 408
Mass. 704, 714 (1990). Accordingly, the motion to dismiss will be denied.
IV. Conclusion
For the foregoing reasons, the motion to dismiss Count 11 for failure to state a claim on
which relief can be granted is DENIED.
So Ordered.
/s/ F. Dennis Saylor
F. Dennis Saylor, IV
Dated: July 20, 2018 United States District Judge