The United States District Court for the Middle District of Florida recently addressed the pleading requirements for Chapter 93A, Section 11 claims in the case of Liberty Mut. Ins. Co. v. Compex Legal Servs. Liberty sued Compex for allegedly breaching their master services agreement (MSA) by overbilling for services and for unallowable charges, not refunding overbilled or unallowable amounts, failing to honor audit rights, and imposing extracontractual conditions on Liberty.

In addition to common-law claims, Liberty filed a Chapter 93A, Section 11 claim, which Compex moved to dismiss. Compex argued that Liberty failed to plead (1) extortionate conduct, (2) damages beyond the alleged breach of contract, and (3) a factual connection to Massachusetts. The district court was not persuaded by these arguments and denied the motion.

First, the court recognized that an act is unfair under Chapter 93A, Section 2 if it (i) falls “within at least the penumbra of some common-law, statutory, or other established concept of unfairness,” (ii) “is immoral, unethical, oppressive, or unscrupulous” and (iii) “causes substantial injury to consumers [or competitors or other businessmen].” The court noted that conduct generally must have an extortionate quality to transform a breach of contract into an unfair business practice. The court concluded that Liberty adequately alleged this by asserting that Compex had tried to impose its extracontractual conditions on Liberty as a prerequisite for conducting an audit, which was extortionate.

Second, the court disagreed with Compex’s assertion that Massachusetts case law precluded Liberty from proving causation and harm arising from Compex’s alleged extortionate conduct for Rule 12(b)(6) purposes. The case law cited was distinguishable based on Liberty’s complaint and, absent Massachusetts case law requiring Liberty to assert “unique” Chapter 93A damages, the court concluded that Compex did not meet its burden under Rule 12(b)(6) to support its argument.

Third, the court determined that Compex failed to prove that the alleged unfair acts did not occur “primarily and substantially” in Massachusetts, as required by Section 11. Liberty’s complaint did not specify the location of the acts, and Compex did not provide any other facts for consideration. The court ruled that the “primarily and substantially” argument was an affirmative defense not proper to consider under the circumstances, but noted it could be raised in a motion for summary judgment.

This decision underscores the fact-dependent nature of unfairness under Chapter 93A, Section 2, and the “primarily and substantially” requirement for Section 11 claims. The burden of proving unfairness rests with the plaintiff, while the burden of proving location rests with the defendant. While a simple breach of contract does not normally rise to the level of a 93A violation, when that breach is being used to try to extort additional benefits or opportunities, that can result in 93A liability.