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Full Opinion
United States Court of Appeals
For the First Circuit
No. 06-1577
No. 06-1578
INCASE INCORPORATED,
Plaintiff, Appellant/Cross-Appellee
v.
TIMEX CORPORATION,
Defendant, Appellee/Cross-Appellant
APPEALS FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. F. Dennis Saylor, U.S. District Judge]
Before
Torruella, Circuit Judge,
Stahl, Senior Circuit Judge,
and Howard, Circuit Judge.
Sandra J. Staub, with whom Allison, Angier & Bartmon LLP were
on brief, for plaintiff-appellant/cross-appellee.
Timonth W. Mungovan, with whom Stephen M. LaRose and Nixon
Peabody LLP were on brief, for defendant-appellee/cross-appellant.
May 24, 2007
STAHL, Senior Circuit Judge. Incase, Inc. ("Incase"),
won jury verdicts against Timex Corporation ("Timex") in the United
States District Court for the District of Massachusetts on its
claims of misappropriation of trade secret, breach of contract, and
implied contract. The district court subsequently granted judgment
as a matter of law to Timex on the trade secret and implied
contract claims. In a subsequent bench trial, the district court
also found that Timex had committed unfair and deceptive trade
practices, but denied Incase punitive damages. Incase now appeals
the judgment as a matter of law and the denial of punitive damages.
Timex cross-appeals on the denial of its motions for judgment as a
matter of law on the remaining claim, and the holding that it
committed unfair and deceptive trade practices. Timex also appeals
the denial of its motion for a new trial. We affirm the decisions
in all respects.
I. Background
We recite the facts in the light most favorable to the
jury's verdict. Azimi v. Jordan's Meats, Inc., 456 F.3d 228, 232
(1st Cir. 2006).
Incase is a designer and manufacturer of injection-molded
plastic packaging products, located in Hopedale, Massachusetts. In
late 1997 and early 1998, Incase had discussions with Timex, a
manufacturer of watches and other electronics based in Middlebury,
Connecticut, about providing packaging for some of Timex's watches.
-2-
Following these meetings, Incase began working on several packaging
products for Timex, including the watch holders at issue here.
Incase's usual procedure is to provide design services in
conjunction with its manufacturing. Incase does not charge
directly for the design services, but their expectation is that, if
the design is satisfactory to the client, then Incase would receive
a contract to manufacture the product.
The products at issue in this case are two watch
packages, known as the "S-4" and "S-5."1 Each is comprised of a
series of integrated plastic components, including a ring or collar
(which functions like a wrist) on a fixed base. The whole package
allows for secure retail display of the watch without having to
remove it from its packaging. The S-4 and S-5 differed in the way
the "price flag" was incorporated into the package. The price flag
is a small plastic component attached to the base that can display
the price, SKU,2 or other information. In the S-4, the price flag
is fixed, while in the S-5, the price flag is moveable and
removable. The removable price flag was important to Timex, since
1
The S-5 is also referred to by the parties and the district
court as the "Universal" design, the "G-4," and the "S-4 revision."
There is some indication that the term "S-5" may not have been used
until Timex contracted with Yuhing, as discussed further below.
For the sake of clarity, we will simply refer to these two designs
as "S-4" (the holder with a fixed price flag) and "S-5" (the holder
with a movable price flag).
2
"Stock Keeping Unit," an identifying code used in inventory
management.
-3-
it allowed for better use of its automated manufacturing and
distribution system, and because it allowed retailers to use the
same watch holder for both promotional and everyday display. Timex
had used moveable and removable price flags before, but prior
designs had only two positions, while the S-5's price flag had
three, and later four. The removable price flag is the focus of
Incase's misappropriation of trade secrets claim.
By May 1998, the S-4 design was complete and Timex wanted
to move toward developing the molding and tooling required for
manufacture. Incase, which contracts out the tooling for its
products, asked Timex to pay for the cost of tooling. Timex
agreed, but asked that Incase cover the cost up-front, with Timex
reimbursing Incase later. Incase agreed, provided that Timex
commit to purchasing a certain number of units. In a meeting in
May 1998, Timex agreed to purchase two million units per year for
three years, and Incase agreed to pay the up-front cost for the
tooling, which was not to exceed $133,000.3 On July 6, 1998, Timex
faxed to Incase a purchase order that said, in part:
Timex will purchase six million holders
between January 1, 1999[,] and December 31,
3
In its decision for the Mass. Gen. Laws ch. 93A, § 11, claim,
the district court found that the parties agreed either that the
cost of tooling for the S-4 holders would not exceed $133,000, or
that they would negotiate later toward a final cost. Incase, Inc.
v. Timex Corp., 421 F. Supp. 2d 226, 232 (D. Mass. 2006).
-4-
2000.[4] However, this purchase is contingent
upon Incase remaining competitive with the
industry. The current piece prices are as
follows: Large $0.1100, Small $0.1075.
The purchase order also stated, "Tooling cost not to exceed
$133,000." The parties continued to negotiate over tooling costs
after this purchase order, ultimately settling on a tooling price
of $126,000.5
After completing the tooling negotiation, Timex issued a
new purchase order on October 26, 1998, that recited the same per-
unit prices for the S-4 holders, but stated a quantity of only two
million holders, rather than six million. Incase began
manufacturing S-4 holders under the purchase order in October 1998.
Timex ordered 300,000 units between October and December 1998, but
the orders gradually declined until finally ceasing entirely in
August 2000. Ultimately, Incase delivered a total of 2,731,500 S-4
units to Timex.
In the meantime, Incase and Timex had begun working on
the S-5 design, with the removable price flag. Over the course of
1998, the parties went back and forth with specifications, design
ideas, and at least twenty prototypes. The design was largely
4
The parties do not address the fact that this writing covers
two years, rather than three. We do not believe the discrepancy is
relevant to this appeal.
5
Including tooling for other parts of the product, the total
tooling cost was $397,200.
-5-
complete by May 1999, but Timex never placed any orders or entered
into a contract for the manufacturing of the units.
By August 1999, Timex, unbeknownst to Incase, was in
discussions with Yuhing, a Philippines manufacturing concern, with
a view toward their producing the S-5. In its dealings with
Yuhing, Timex relied on Incase's drawings and prototypes of the S-
5. The S-5 that Yuhing ultimately produced differed in some minor
respects from the S-5 that Incase had developed, though each
incorporated the removable price flag.6 By May 2000, Yuhing was
manufacturing S-5 units for Timex. Ultimately, Timex purchased
3,569,000 S-5 units from Yuhing.
Timex never notified Incase that it had given the
manufacturing work for the S-5 to a different company. In March
2001, Frank Zanghi, vice president of Incase, was in a Target store
when he noticed Timex products displayed in Yuhing's S-5 package,
with the price flag derived from Incase's price flag design.
Incase subsequently brought suit in Massachusetts state court
against Timex, alleging breach of contract to purchase six million
S-4 holders, misappropriation of trade secrets for the S-5 price
flag, unjust enrichment/implied contract7 for use of Incase's S-5
6
The Yuhing price flag had four positions, while Incase's
model had three.
7
Incase had originally titled this claim as "conversion," but
the district court ultimately treated it as a quasi-contract claim,
re-titling it "unjust enrichment/implied contract."
-6-
design, and unfair and deceptive trade practices in violation of
Mass. Gen. Laws ch. 93A, § 11 ("Chapter 93A").8 Timex removed the
case to United States District Court based on diversity of
citizenship.
Following trial on the contract, implied contract, and
trade secret claims, a jury returned a verdict for Incase on all
claims.9 Timex moved for a judgment as a matter of law, and the
district court granted the motion with respect to the trade secret
and S-5 implied contract claims, but allowed the S-4 breach of
contract verdict to stand. Timex also moved for a new trial on the
basis of unfair surprise, because Incase had changed its damages
theory shortly before trial. The district court denied the new
trial motion.
The district court then conducted a bench trial on the
Chapter 93A claim. The court found that Timex had violated Chapter
93A, Incase, Inc. v. Timex Corp., 421 F. Supp. 2d 226, 240-41 (D.
Mass. 2006), but that it had not done so "wilfully" or "knowingly"
under the statute, and therefore that Incase was not entitled to
8
Incase also brought claims for breach of contract with
respect to heart rate monitor packages and for fraud and
misrepresentation, both of which were disposed of on summary
judgment and are not part of this appeal.
9
The jury awarded Incase $139,191 on the trade secret claim,
$267,750 on the breach of contract claim, and $246,261 on the
implied contract claim.
-7-
punitive damages, id. at 242. The reasons for the court's various
rulings are discussed in detail below.
Both parties appeal. Incase appeals from the court's
judgment as a matter of law on the trade secret and implied
contract claims, and the finding of no willful or knowing violation
of Chapter 93A. Timex cross-appeals the failure of the court to
enter judgment as a matter of law on the breach of contract claim,
and also on the finding of a Chapter 93A violation. Timex also
appeals the denial of its motion for a new trial.
II. Discussion
A. Misappropriation of Trade Secrets
We review de novo a district court's grant of a post-
verdict motion for judgment as a matter of law. See Quiles-Quiles
v. Henderson, 439 F.3d 1, 4 (1st Cir. 2006). "Our review is
'weighted toward preservation of the jury verdict' because a
verdict should be set aside only if the jury failed to reach the
only result permitted by the evidence." Id. (quoting Crowley v.
L.L. Bean, Inc., 303 F.3d 387, 393 (1st Cir. 2002) (emphasis in
original)).
To prevail on a claim of misappropriation of trade
secrets, a plaintiff must show: 1) the information is a trade
secret; 2) the plaintiff took reasonable steps to preserve the
secrecy of the information; and 3) the defendant used improper
means, in breach of a confidential relationship, to acquire and use
-8-
the trade secret. Data Gen. Corp. v. Grumman Sys. Support Corp.,
36 F.3d 1147, 1165 (1st Cir. 1994).10 In issuing its judgment as
a matter of law, the court held that Incase had not presented any
evidence that the information was secret or that it had taken
reasonable steps to preserve the secrecy of the information. Timex
also argues here that there was no confidential relationship formed
between the parties, and that the trade secret was not even the
property of Incase in the first place.11
The appeal on this claim turns on the second element of
the misappropriation cause of action: whether Incase took
reasonable steps to preserve the secrecy of the price flag design.12
The district court noted that no documents were marked
10
Massachusetts also has a statute addressing trade secrets.
See Mass. Gen. Laws ch. 93, § 42. Incase appears not to have
brought its claim under the statute, instead relying on the common-
law tort of misappropriation of trade secrets. The statutory and
common-law claims may be essentially equivalent. See Burton v.
Milton Bradley Co., 592 F. Supp. 1021, 1028 (D.R.I. 1984), rev'd on
other grounds, 763 F.2d 461, 467 (1st Cir. 1985).
11
The district court said that the parties had formed a
confidential relationship. It did not address the question of
ownership of the information.
12
Timex also argues that the lack of secrecy protections
affects whether the price flag design is a trade secret in the
first place. See Jet Spray Cooler, Inc. v. Crampton, 361 Mass.
835, 282 N.E.2d 921, 925 (1972) (holding that one factor in the
analysis of whether information is a trade secret is "the extent of
measures taken by the employer to guard the secrecy of the
information"). Because Timex raises no other argument against
trade secret status, we simply move to the second element, where
secrecy is directly on point. We do not reach the question of
whether the price flag design is actually a trade secret.
-9-
"confidential" or "secret"; there were no security precautions or
confidentiality agreements; Incase had not told Timex the design
was a secret; and Incase's principal designer on the project, Bob
Shelton, did not think the design was a secret. Timex adds that
Frank Zanghi, Incase's vice president, did not tell anyone at Timex
that the design was confidential.
Incase argues that the jury could have found evidence of
steps to preserve secrecy in the fact that Incase showed the
designs only to Timex; the trade practices of the watch packaging
industry; and the fact that Timex treated the designs as
confidential in its dealings with Yuhing. It also argues that
Shelton's testimony should not have been given the weight it was by
the court, since he was speaking for himself, not the company, when
he said that he did not believe the design was secret. Incase also
points to other testimony by Shelton where he said that he did not
show the work to anyone other than Timex.
After a careful review of the record, we have not found
any evidence to support Incase's argument that it took reasonable
steps to preserve the secrecy of the price flag design. Although
Frank Zanghi testified, for example, that when Incase works on a
project, it is treated as "confidential between Incase and the
company," tr. 10/12/05 at 55, that the design is "proprietary" and
"our property," id. at 77, and that he believed that the price flag
designs were secret, tr. 10/13/05 at 29, he admitted under cross-
-10-
examination that this policy was never articulated to Timex, id. at
31. The fact that Incase kept its work for Timex private from the
world is not sufficient; discretion is a normal feature of a
business relationship. Instead, there must be affirmative steps to
preserve the secrecy of the information as against the party
against whom the misappropriation claim is made. See J.T. Healy &
Son, Inc. v. James A. Murphy & Son, Inc., 357 Mass. 728, 260 N.E.2d
723, 730-31 (1970) (Protecting a trade secret "calls for constant
warnings to all persons to whom the trade secret has become known
and obtaining from each an agreement, preferably in writing,
acknowledging its secrecy and promising to respect it. To exclude
the public from the manufacturing area is not enough."). Here,
there is no evidence that any such steps were taken. Therefore, we
affirm the district court's judgment as a matter of law on the
misappropriation of trade secrets claim.
B. Unjust Enrichment/Implied Contract
As with the trade secret claim, we review de novo the
court's judgment as a matter of law on the implied contract claim,
with our review weighted toward preservation of the jury verdict.
See Quiles-Quiles, 439 F.3d at 4.
The jury found that a contract should be implied in law
for the design work that Incase did on the S-5 and awarded Incase
$246,261. The court disagreed:
Incase put on evidence as to the length of
time that it had worked on the design, but
-11-
there was no evidence as to what those
services or products were worth. There was
evidence as to what Timex had paid to Yuhing
in the Philippines for the product, but I
don't think that's a fair measure of the
damage to Incase for its design services and
prototype services; and I did not see how the
jury award matches the evidence. The jury
doesn't need perfect information, and its
damages awards do not need to be precise as to
the penny in this regard, but neither can it
speculate or conjecture as to the damages, and
I don't see that there was evidence here as to
those damages.
Initially somewhat confused itself by how the jury
reached this particular figure, Incase now points on appeal to what
it believes to be the source. It argues that the jury reached its
conclusion by multiplying 3,569,000 (the number of S-5 units that
Timex purchased from Yuhing) by 6.9 cents--which yields exactly
$246,261. The 6.9-cent figure comes from the testimony of Walter
G. Frick, the president of Incase. Frick testified that Incase's
selling price for the S-5 would have been 14.5 cents per unit,
which would have yielded a profit to Incase of 9 cents per unit.
During cross-examination, however, Frick essentially conceded that
12.5 cents per unit was a more accurate selling price. Frick
testified that, using 12.5 cents rather than 14.5 cents, the
profit-per-unit would come out to 6.9 cents rather than 9 cents.
The jury appears to have credited this testimony.
With the source of the calculation established, we turn
to the question of whether that source was proper. Timex argues
that this is a lost-profits calculation, when only a value-of-
-12-
services calculation is appropriate. Under Massachusetts law, a
quasi-contract may be implied in law to remedy the unjust
enrichment of another party, even where the facts do not
necessarily support the existence of an express or implied-in-fact
contract. See Bolen v. Paragon Plastics, Inc., 747 F. Supp. 103,
106 (D. Mass. 1990); Salamon v. Terra, 394 Mass. 857, 477 N.E.2d
1029, 1031 (1985). In such a case, the proper measure of damages
is quantum meruit, or the reasonable value of services provided.
See J.A. Sullivan Corp. v. Massachusetts, 397 Mass. 789, 494 N.E.2d
374, 379 (1986); Salamon, 477 N.E.2d at 1031.
"The question of what [is] fair and reasonable
compensation for the services rendered is a question of fact."
Guenard v. Burke, 387 Mass. 802, 443 N.E.2d 892, 896 (1982). The
jury's award "need not be susceptible of calculation with
mathematical exactness, provided there is a sufficient foundation
for a rational conclusion." Lowrie v. Castle, 225 Mass. 37, 51,
113 N.E. 206 (1916); see Kitner v. CTW Transp., Inc., 53 Mass. App.
Ct. 741, 762 N.E.2d 867, 873 (2002). In a case such as this, where
the jury cannot estimate the value of the services from common
knowledge, the plaintiff must present evidence of the reasonable
value of the services to receive anything more than nominal
damages. See Hurwitz v. Parkway Country Club, Inc., 343 Mass. 661,
180 N.E.2d 94, 97 (1962); Driscoll v. Bunar, 328 Mass. 398, 103
N.E.2d 809, 813 (1952). However, the damages may not be based only
-13-
upon lost profits. See J.A. Sullivan Corp., 494 N.E.2d at 379
("The amount of recovery on a claim based in quantum meruit is the
fair and reasonable value of material and labor supplied to the
benefiting party."); Restatement (Second) of Contracts §§ 344 cmt.
a, 371.
Instead of presenting evidence of the value of its labor
and materials and other costs of creating the design, or of the
value of the benefit conferred on Timex, see Slawsby v. Slawsby, 33
Mass. App. Ct. 465, 601 N.E.2d 478, 480 (1992), Incase presented
evidence only of the profit it would have had if it had won the S-5
manufacturing contract. Incase's task was admittedly difficult,
because of its policy of not charging separately for design
services. Instead, it uses these services as sales tools to win
manufacturing contracts, expecting to recoup the design costs in
the profit from those contracts. But assuming that there is some
profit on the manufacturing process itself (and some overall
corporate profit), the entire expected contract profits cannot
reasonably be said to be equivalent to the value of the design
services alone. As difficult as it might have been, Incase was
obligated to present at least some evidence, even if not precise,
as to the actual value of the services provided.
C. Express Contract
We review de novo a district court's denial of a motion
for judgment as a matter of law. Bisbal-Ramos v. City of Mayagüez,
-14-
467 F.3d 16, 22 (1st Cir. 2006). "The verdict must be upheld
'unless the facts and inferences, viewed in the light most
favorable to the verdict, point so strongly and overwhelmingly in
favor of the movant that a reasonable jury could not have returned
the verdict.'" Borges Colón v. Román-Abreu, 438 F.3d 1, 14 (1st
Cir. 2006) (quoting Acevedo-Diaz v. Aponte, 1 F.3d 62, 66 (1st Cir.
1993) (internal quotation marks, alterations, and citation
omitted)).
Timex argues that no reasonable jury could have found
that there was a contract within the Statute of Frauds for six
million S-4 units. It says that there was no meeting of the minds
by the time of the July 6 purchase order for six million units,
which the jury found to be the writing embodying the agreement of
the parties, and that we should instead look to the October 26
purchase order for two million units. Timex argues two main
points: that the cost of tooling was a material term not yet
settled, and that Zanghi admitted that a contract had not yet been
finalized at the time of the July 6 purchase order.
In ruling on Timex's motion for judgment as a matter of
law, the district court said:
The price of tooling was not settled at the
time that agreement was made. The jury could
have found that the parties agreed that the
price would not exceed $133,000, the jury
could have found that the parties agreed to
negotiate in good faith on the tooling, or the
jury could have found that the parties agreed
to leave the term entirely open; but under any
-15-
of those scenarios, the jury could find
nonetheless an agreement and a reasonably
certain basis for granting an appropriate
remedy under Section 2204 of the Uniform
Commercial Code; and it is, I think,
significant that the parties' ultimate
agreement on the tooling price was $126,000,
which was less than $133,000.
We agree that a reasonable jury could have concluded a contract was
formed despite the fact that final agreement on the tooling cost
was reached only later. The July 6 purchase order states, "Tooling
cost not to exceed $133,000." Incase was not precluded from
attempting to renegotiate this point, which it may have done when
it proposed the $153,000 tooling cost on July 21. But in the end,
the tooling cost for the S-4 holders came in at $126,000,
consistent with the terms of the July 6 purchase order. Therefore,
we see no reason to conclude that a reasonable jury would have had
to have found that there was no meeting of the minds before July 6.
Timex's argument that there was no contract because of
Zanghi's "admissions" also fails. Zanghi testified that, at the
end of the May 1998 meeting with Timex officials where the parties
reached agreement on terms, he did not believe that they had a
"contract." Timex argues that this is the sort of factual
admission that should be treated as determinative. See United
States v. Parrilla-Tirado, 22 F.3d 368, 373 (1st Cir. 1994). But
the question of contract existence is a legal conclusion, not an
evidentiary admission. Furthermore, a layman's conception of what
constitutes a contract should not determine the legal outcome.
-16-
Many people understand a contract to be the fully drafted and
executed written embodiment of the agreement, rather than the
agreement itself, something made clear in the following exchange
with Timex's counsel:
Q. And so, the fact that you didn't have a
purchase order in May for six million units,
you understood, then, you did not yet have a
contract with Timex?
A. No. My terminology--I believe I had an
agreement with Timex. So your terminology is
different. No, I did not have a contract yet.
Therefore, we agree with the district court that there was
sufficient evidence for the jury to find that a contract for the S-
4 holders existed at the time of the May 1998 meeting, a contract
which was then memorialized in the July 6 purchase order.
D. Chapter 93A
Incase's claim under Chapter 93A was tried before the
district court in a bench trial. The court held that Timex had
violated Chapter 93A, but had not done so willfully or knowingly,
and that thus Incase was not entitled to punitive damages. Incase,
421 F. Supp. 2d at 240-41. The court held further that damages
under Chapter 93A would be duplicative of what Incase had already
received at trial, and that therefore no additional damages were
warranted (though attorney's fees were awarded). Id. at 242-43.
Incase now appeals the holding that Timex did not violate the
statute willfully or knowingly. Timex appeals the holding that it
violated Chapter 93A.
-17-
A party will be liable under Chapter 93A if it engages in
an "unfair method of competition" or an "unfair or deceptive act or
practice." Mass. Gen. Laws ch. 93A, § 11. Here, Incase focuses on
the "unfair or deceptive act or practice" prong of the statute.
Simple breach of contract is not sufficiently unfair or deceptive
to be alone a violation of Chapter 93A. See Commercial Union Ins.
Co. v. Seven Provinces Ins. Co., 217 F.3d 33, 40 (1st Cir. 2000).
The district court found that Timex's use of the S-5 price flag
design, while not misappropriation of a trade secret, was enough of
an unfair and deceptive act to turn a garden-variety contract claim
into violation of Chapter 93A. Incase, 421 F. Supp. 2d at 240-41.
Timex argues that combining the contract and trade secret claims in
this way is error. It further argues that, even if combining the
two were appropriate, doing so in this case depends on the finding
that the S-4 and S-5 units are interchangeable, a finding for
which, Timex argues, there is no evidence in the record.
We first address the district court's finding that the S-
4 and S-5 were interchangeable. This is a finding of fact, and
thus will stand unless clearly erroneous. Commercial Union Ins.
Co., 217 F.3d at 40. Timex argues that there is no evidence for
this finding, but the district court referred specifically to
testimony of Timex representatives who said that the two were
essentially fungible products used for the same purpose. See
-18-
Incase, 421 F. Supp. 2d at 237. Therefore, we see no clear error
in the court's finding.
We next address the Chapter 93A ruling itself. "A ruling
that conduct violates [Chapter] 93A is a legal, not a factual,
determination." R.W. Granger & Sons, Inc. v. J & S Insulation,
Inc., 435 Mass. 66, 754 N.E.2d 668, 675-76 (2001). "Although
whether a particular set of acts, in their factual setting, is
unfair or deceptive is a question of fact, the boundaries of what
may qualify for consideration as a [Chapter] 93A violation is a
question of law." Schwanbeck v. Federal-Mogul Corp., 31 Mass. App.
Ct. 390, 578 N.E.2d 789, 803-04 (1991), rev'd on other grounds, 412
Mass. 703, 592 N.E.2d 1289 (1992). "'[A] practice or act will be
unfair under [Chapter 93A] if it is (1) within the penumbra of a
common law, statutory, or other established concept of unfairness;
(2) immoral, unethical, oppressive, or unscrupulous; or (3) causes
substantial injury to competitors or other business people.'"
Morrison v. Toys "R" Us, Inc., 441 Mass. 451, 806 N.E.2d 388, 392
(2004) (quoting Heller Fin. v. Ins. Co. of N. Am., 410 Mass. 400,
573 N.E.2d 8, 12-13 (1991)). Which acts will be considered
"deceptive" is less clearly defined in the case law. See Aspinall
v. Philip Morris Cos., 442 Mass. 381, 813 N.E.2d 476, 486 (2004).
Some cases have held that an act or practice is deceptive "'if it
could reasonably be found to have caused a person to act
differently from the way he or she otherwise would have acted.'"
-19-
Id. (quoting Purity Supreme, Inc. v. Attorney Gen., 380 Mass. 762,
407 N.E.2d 297, 307 (1980) (internal quotation marks, citation, and
alterations omitted)). The term "goes far beyond the scope of the
common law action for fraud and deceit." Slaney v. Westwood Auto,
Inc., 366 Mass. 688, 322 N.E.2d 768, 779 (1975).
The district court is not precise about whether Timex's
behavior was unfair, deceptive, or both, and the parties similarly
do not distinguish between the two kinds of acts. The thrust of
the district court's opinion, however, strongly implies that the
court's decision stood more on grounds of unfairness than
deception. "Through a unique set of circumstances, Timex was able
to obtain design services for free, which it used to obtain a
lower-cost contract from another supplier, which then led directly
to the breach of contract with Incase. Under these circumstances,
Timex's acts were unfair and deceptive within the meaning of
[C]hapter 93A." Incase, 421 F. Supp. 2d at 240-41.
"In determining whether an act or practice is unfair, as
opposed to deceptive, we must evaluate the equities between the
parties. What a defendant knew or should have known may be
relevant in determining unfairness. Similarly, a plaintiff's
conduct, his knowledge, and what he reasonably should have known
may be factors in determining whether an act or practice is
unfair." Swanson v. Bankers Life Co., 389 Mass. 345, 450 N.E.2d
577, 580 (1980) (internal citations omitted). By August 1999,
-20-
while the contract for the S-4 holders was still in effect, Timex
had already decided to move the manufacture of the S-5 holders,
with the Incase-designed price flag, to Yuhing, and subsequently
used those S-5 units to replace the S-4 units it had not yet
ordered from Incase. Timex describes the district court's holding
as a "hybrid form of liability" fashioned from a "garden variety .
. . breach of contract and a failed misappropriation claim." In
doing so, Timex misunderstands the court's ruling and the nature of
Chapter 93A. Because a mere breach of contract is not sufficient
to establish a violation of 93A, almost any successful 93A claim
based in part on a contract violation will be a "hybrid" with some
other bad act. Furthermore, the district court was not merely
linking two unrelated claims; the court drew a direct line between
the unethically procured free design services and the subsequent
breach of the S-4 contract. This is sufficiently unscrupulous to
sustain a Chapter 93A claim.
Incase claims that the act was not merely unfair, but was
willfully and knowingly so. The district court disagreed, but did
not articulate its reasons. Incase, 421 F. Supp. 2d at 242. The
cases, again, are unclear about what constitutes willful or knowing
behavior, but most of them tend to cluster around findings of: (a)
coercion or extortion, see Anthony's Pier Four, Inc. v. HBC
Assocs., 411 Mass. 451, 583 N.E.2d 806, 822 (1991) (withholding
monies owed as a form of extortion is willful); Pepsi-Cola Metro.
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Bottling Co. v. Checkers, Inc., 754 F.2d 10, 18 (1st Cir. 1985)
(withholding payment as a wedge to enhance bargaining power is
willful); (b) fraud and similar forms of misrepresentation,13 see
Datacomm Interface, Inc. v. Computerworld, Inc., 396 Mass. 760, 489
N.E.2d 185, 197 (1986); Serv. Publ'ns, Inc. v. Goverman, 396 Mass.
567, 487 N.E.2d 520, 578 n.13 (1986); see also Computer Sys. Eng'g,
Inc. v. Qantel Corp., 740 F.2d 59, 67-68 (1st Cir. 1984) (a willful
or knowing violation includes "a misrepresentation made with
reckless disregard as to its truth or falsity"); or (c) abusive
litigation, see Fed. Ins. Co. v. HPSC, Inc., 480 F.3d 26, 37 (1st
Cir. 2007); Int'l Fid. Ins. Co. v. Wilson, 387 Mass. 841, 443
N.E.2d 1308, 1318 (1983).
There was no evidence presented of coercion, fraud,
abusive litigation, or similar behavior by Timex, and thus we find
no error in the district court's decision to withhold punitive
damages.
E. New Trial Motion
We review a district court's denial of a motion for a new
trial for abuse of discretion. Klonoski v. Mahlab, 156 F.3d 255,
274 (1st Cir. 1998). Timex argues that it was unfair and
prejudicial for Incase to alter its damages theory close to the
start of trial, and that the district court's denial of its motion
13
This is distinguished from negligent misrepresentation, which
is sufficiently deceptive to be a basis for a 93A claim. Glickman
v. Brown, 21 Mass. App. Ct. 229, 486 N.E.2d 737, 741 (1985).
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for a new trial based on this "unfair surprise" amounted to an
abuse of discretion. Incase responds that it was forced to make
the change, because the district judge had strongly implied at a
Daubert14 hearing seven days prior to trial that he was not likely
to allow the then-current expert estimate of damages.
Both parties are somewhat off the mark. Timex and Incase
each address Incase's change from an estimate of 18,000,000 price
flags that Incase would have produced to 3,569,000 units. In doing
so, they conflate the S-4 express contract claim, the
misappropriation of trade secrets claim, and the S-5 unjust
enrichment/implied contract claim. Because the latter two are not
at issue, we address only the damages testimony concerning the S-4
units.15
As we read the evidence, there was no change in the
number of units used to estimate damages--it was always 3,328,500,16
the difference between the 6,000,000 units Timex contracted to
purchase and the 2,731,500 it actually did purchase. Compare app.
at 1068 with app. at 1079. The only figures in the damages
calculation that changed significantly were the unit price and the
14
Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579 (1993).
15
To the degree that Timex is also arguing the "unfair
surprise" of Incase changing its damages calculations with respect
to the trade secret and implied contract claims, that argument is
moot.
16
The unpurchased S-4 units numbered 3,328,500. The purchased
S-5 units from Yuhing numbered 3,569,000.
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machine labor cost.17 Compare app. at 1081 with app. at 1079. In
the later calculation, machine labor cost was cut by three-
quarters, presumably because the earlier calculation neglected to
consider that a laborer was operating four machines, rather than
one.18 The unit price went up to correspond with changes in
Incase's pricing during the course of the contract. Incase
calculated that Timex's reduced pace of purchasing would cause
prices to go up.19 Incase argued below that Timex had agreed to
this change and had purchased units at the new, higher price.
Timex does not attack the validity of the unit price
figure or the pricing schedule, nor does it raise any issues
related to contract modification. Furthermore, it does not
directly challenge the court's decision to allow the evidence of
the higher prices. It appeals only the denial of a new trial based
17
Timex claims that the actual method of calculating lost
profits changed as well, with the later calculation not subtracting
fixed costs. We see no evidence of this. The breakdowns at
appendix pages 1079 and 1081 show the same method: unit price, less
material costs, machine labor cost, machine direct overhead, and
inefficiency costs, to reach a gross profit figure.
18
Neither party discusses this figure, and therefore we focus
on the unit price.
19
The earlier damages calculation had used the unit prices from
the July 6 purchase order. But on August 22, 2000, Incase informed
Timex that the prices under their contract would have to increase
because Timex had not kept pace with its promised 2,000,000 units
per year. The prices were increased from 11 (large units) and
10.75 (small) cents per unit to 14.75 and 14.5 cents per unit,
respectively.
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on the "unfair surprise" of moving from the (roughly) 10-cent
figure to the 14-cent figure several days before trial.
As the district court noted, this "was certainly not a
model of how these issues should be handled." But all that was at
issue is a change in one variable in a relatively simple formula.
Timex had ample opportunity to cross-examine Frick, the witness who
presented the testimony, and to argue to the jury that the purchase
order price, not the later modification, was the correct number to
use. In this context, we do not see any surprise that is
"inconsistent with substantial justice." Perez-Perez v. Popular
Leasing Rental, Inc., 993 F.2d 281, 287 (1st Cir. 1993) (quoting
Conway v. Chem. Leaman Tank Lines, Inc., 687 F.2d 108, 111-12 (5th
Cir. 1982) (internal quotation marks omitted)).
III. Conclusion
For the forgoing reasons, we affirm.
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