Zurich American Insurance Company et al v. Watts Regulator Co. et al

Filing 43

Judge Nathaniel M. Gorton: ORDER entered. MEMORANDUM AND ORDER "In accordance with the foregoing, plaintiffs' motion to dismiss and strike defendants' Watts Regulator Co. and Watts Water Technologies, Inc. second amended counterclaims (Docket No. 34 ) is ALLOWED." (Duong, Diep)

United States District Court
District of Massachusetts
________________________________
)
ZURICH AMERICAN INSURANCE
)
COMPANY and AMERICAN GUARANTEE
)
& LIABILITY INSURANCE COMPANY,
)
Plaintiffs,
)
Civil Action No.
)
10-11190-NMG
v.
)
)
WATTS REGULATOR CO., WATTS WATER )
TECHNOLOGIES, INC., SPENCE
)
ENGINEERING COMPANY, INC., and
)
CIRCOR INTERNATIONAL, INC.,
)
Defendants.
)
________________________________ )

MEMORANDUM & ORDER
GORTON, J.
This breach of contract action arises from a
retrospectively-rated insurance policy.

Pending before the Court

is plaintiffs’ motion to dismiss and strike defendants’ second
amended counterclaims.
I.

Factual Background
Plaintiffs Zurich American Insurance Company, as successor-

in-interest to Zurich Insurance Company, and American Guarantee
and Liability Insurance Company (collectively “Zurich”) bring
suit against Watts Regulator Company and Watts Water
Technologies, Inc., formerly known as Watts Industries, Inc.
(collectively “Watts”), as well as Spence Engineering Company,
Inc. (“Spence”) and CIRCOR International, Inc. (“CIRCOR”) for
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breach of contract.
Zurich is an insurance company incorporated in New York with
its principal place of business in Illinois.

Watts is a

Massachusetts corporation with its principal place of business in
Massachusetts.

Spence and CIRCOR are both Delaware corporations

with a principal place of business in Massachusetts.
Pursuant to agreements between Zurich and Watts, Zurich
provided Watts and certain affiliated entities with workers’
compensation, general liability and business auto insurance
coverage for the policy period of June 30, 1985 to June 30, 1986
(“the Insurance Program”).

Because the Insurance Program is

retrospectively-rated, Watts paid an initial premium and Zurich
subsequently performed periodic retrospective adjustments based
on claims actually incurred and/or paid by Zurich.

Thus, at the

time of each adjustment, either Watts was required to pay an
additional amount to Zurich or Zurich was required to return an
excess amount to Watts.
Zurich alleges that, although it has complied with its
obligations under the Insurance Program, Watts has failed to pay
Zurich for retrospective adjustments in the aggregate amount of
$816,185.

From October 21, 2008 to July 15, 2010, Zurich and

Watts had a “standstill” agreement that temporarily suspended any
claims related to the unpaid invoices.

The day after that

agreement expired, Zurich brought the instant suit.

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In two counterclaims, Watts alleges that Zurich seeks to
collect payment on the so-called “Sixteenth Adjustment” (i.e. the
retrospective adjustment for losses incurred in 2001) in the
amount of $6,214 plus interest, even though Zurich previously
informed Watts that particular adjustment was voided and Watts
did not have to pay that amount.

Zurich also allegedly refuses

to provide individualized information to substantiate the
“Seventeenth Adjustment” (i.e. losses incurred in 2002) in the
amount of $102,078 and the “Nineteenth Adjustment” (i.e. losses
incurred in 2004) in the amount of $513,882, even though Zurich
had previously provided such supporting information for prior
adjustments.
II.

Procedural History
On July 16, 2010, Zurich brought suit against Watts,

alleging in the sole count of the Complaint that Watts breached
the Insurance Program and owed Zurich the amount of $816,185.
Watts timely responded by filing an answer and asserting six
counterclaims which were subsequently amended twice.
In October, 2010, with the assent of Watts, Zurich filed an
Amended Complaint which named Spence and CIRCOR as additional
defendants.

The Amended Complaint alleges breach of contract by

Watts (Count I) and breach of contract by Spence and CIRCOR under
alternative theories of contract modification and novation (Count
II) or successor liability (Count III).

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Watts timely responded

by filing an answer and amending its counterclaims to assert a
violation of the Massachusetts Consumer Protection Act, Mass.
Gen. Laws ch. 93A (“Chapter 93A”) against Zurich (Counterclaim I)
and for a declaratory judgment (Counterclaim II).

Spence and

CIRCOR filed an answer.
In November, 2010, Zurich moved to dismiss Counterclaim I
pursuant to Fed. R. Civ. P. 12(b)(6) and to strike Counterclaim
II pursuant to Fed. R. Civ. P. 12(f).

Watts has opposed the

motion which is currently pending before the Court.
III. Motion to Dismiss Counterclaim I
A.

Legal Standard

In order to survive a motion to dismiss for failure to state
a claim under Fed. R. Civ. P. 12(b)(6), a counterclaim must
contain factual allegations sufficient “to raise a right to
relief above the speculative level.”
550 U.S. 544, 555 (2007).

Bell Atl. Corp. v. Twombly,

The Court may look only to the facts

alleged in the pleadings, documents attached as exhibits or
incorporated by reference in the counterclaim and matters of
which judicial notice can be taken.

Nollet v. Justices of the

Trial Court of Mass., 83 F. Supp. 2d 204, 208 (D. Mass. 2000),
aff’d, 248 F.3d 1127 (1st Cir. 2000).

Furthermore, the Court

must accept all factual allegations in the counterclaim as true
and draw all reasonable inferences in the counterclaimant’s
favor.

Langadinos v. Am. Airlines, Inc., 199 F.3d 68, 69 (1st

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Cir. 2000).

If the facts in the counterclaim are sufficient to

state a cause of action, a motion to dismiss must be denied.

See

Nollet, 83 F. Supp. 2d at 208.
Although a court must accept as true all of the factual
allegations contained in a counterclaim, that doctrine is not
applicable to legal conclusions.
1937, 1949 (2009).

Ashcroft v. Iqbal, 129 S. Ct.

Threadbare recitals of the legal elements,

supported by mere conclusory statements, do not suffice to state
a cause of action.

Id.

Accordingly, a counterclaim does not

state a claim for relief where the well-pled facts fail to
warrant an inference of any more than the mere possibility of
misconduct.
B.

Id. at 1950.

Application

In its first counterclaim, Watts alleges that Zurich has
engaged in unfair and deceptive practices in violation of Chapter
93A.

Zurich moves to dismiss that counterclaim for failure to

state a claim.

The Court accepts all factual allegations in the

counterclaims as true and draws all reasonable inferences in the
counterclaimant’s favor.

See Langadinos, 199 F. 3d at 69.

Chapter 93A proscribes those engaged in trade or commerce
from employing “unfair methods of competition and unfair or
deceptive acts or practices” and authorizes businesses to sue one
another for engaging in such practices.
§§ 2, 11.

Mass. Gen. Laws ch. 93A,

Whether a particular set of circumstances are unfair
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or deceptive under Chapter 93A is a question of fact.

Incase,

Inc. v. Timex Corp., 421 F. Supp. 2d 226, 239 (D. Mass. 2006).
In the context of disputes among businesses, where both
parties are sophisticated commercial players, the “objectionable
conduct must attain a level of rascality that would raise an
eyebrow to the rough and tumble of the world of commerce.”
Vision Graphics v. E.I. Dupont De Nemours, 41 F. Supp. 2d 93, 101
(D. Mass. 1999) (quoting Levings v. Forbes & Wallace, Inc., 396
N.E.2d 149, 153 (Mass. App. Ct. 1979)); Anthony’s Pier Four, Inc.
v. HBC Assocs., 583 N.E.2d 806, 822 (Mass. 1991); Madan v. Royal
Indemnity Co., 532 N.E.2d 1214, 1217 n.7 (Mass. App. Ct. 1989)
(citations omitted) (noting higher standard of unfairness under §
11).

Thus, to prove a violation of Chapter 93A, Watts must show

that Zurich’s conduct fell within “the penumbra” of some
“established concept of unfairness” or was “immoral, unethical,
oppressive or unscrupulous”.

See Boyle v. Int’l Truck & Engine

Corp., 369 F.3d 9, 15 (1st Cir. 2004) (citations and internal
quotations omitted).
It is well settled that “the mere breach of a contract,
without more, does not amount to a [Chapter] 93A violation.”
Madan, 532 N.E.2d at 1217 (citation omitted); see also Killian
Corp. v. Murphy, 2010 WL 4244829, *4-5 (Mass. Super. Aug. 6,
2010).

In order to prevail on a Chapter 93A claim premised on a

breach of contract, the breach must be “so egregious as to

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possess an extortionate quality that gives it the rancid flavor
of unfairness.”

Goldstein v. Enanta Pharm., Inc., 2011 WL

1795282, *1 (Mass. App. Ct. May 12, 2011) (citation and internal
quotations omitted).

In other words, such a claim will fail if

“there was no ulterior motive, no coercive or extortionate
objective.”

Killian, 2010 WL 4244829 at *5 (citation omitted)

(listing cases rejecting Chapter 93A claims based on breach of
contract).

Indeed, “a good faith dispute as to whether money is

owed, or performance of some kind is due, is not the stuff of
which a [Chapter] 93A claim is made.”

Duclersaint v. Fed. Nat’l

Mortg. Ass’n, 696 N.E.2d 536, 540 (Mass. 1998).
Here, Watts alleges Zurich violated Chapter 93A by 1)
seeking to collect certain amounts (i.e. the Sixteenth,
Seventeenth and Nineteenth Adjustments) that Zurich previously
represented were not due and 2) refusing to provide supporting
documentation to substantiate the amounts due in certain
invoices.
With respect to the purportedly voided adjustments, the
exhibits attached by Watts to its counterclaims demonstrate that
although certain invoices were revised and/or voided, the total
amount due remained the same.
allegations.

Such exhibits belie Watts’

See Clorox Co. P.R. v. Proctor & Gamble, 228 F.3d

24, 32 (1st Cir. 2000) (citation omitted) (“It is a well-settled
rule that when a written instrument contradicts allegations in

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the complaint to which it is attached, the exhibit trumps the
allegations.”).
Although certain misrepresentations, such as those
consciously made for use as a competitive weapon, may be “so
seriously deceptive and harmful” as to raise the possibility of
recovery under Chapter 93A, see Giuffrida v. High Country
Investor, Inc., 897 N.E.2d 82, 95 (Mass. App. Ct. 2008)
(citations omitted), the alleged misrepresentations here do not
rise to that level.

Watts alleges that Zurich misrepresented

whether certain invoices were void but fails to allege any facts
to suggest that Zurich made the misrepresentations as part of its
business strategy, to gain competitive advantage or for some
other coercive or extortionate objective.
Moreover, Watts is unable to articulate the harm it has
suffered, if any, as a result of Zurich’s actions, other than the
costs of the present litigation.

Litigation costs, such as

attorney’s fees, for the instant action are insufficient to
constitute a loss of money or property within the meaning of
Chapter 93A, § 11.

See Tech Plus, Inc. v. Ansel, 793 N.E.2d

1256, 1264-65 (Mass. App. Ct. 2003).
With respect to Zurich’s failure to provide supporting
documentation, Watts asserts that Zurich engaged in an unfair and
deceptive practice by refusing to provide “backup” information at
Watts’ request.

Although Watts, in its opposition to the motion

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to dismiss, argues that Zurich has a contractual obligation to
provide that information, the counterclaims themselves fail to
allege such a contractual duty.

Even if the contract did include

such an obligation, the fact that Zurich, in good faith,
plausibly contends that Watts has no contractual right to that
information is sufficient to rebut the alleged violation of
Chapter 93A.

See Boston Symphony Orchestra, Inc. v. Commercial

Union Ins. Co., 545 N.E.2d 1156, 1160 (Mass. 1989) (finding good
faith reliance on a plausible, even if ultimately incorrect,
interpretation of a contract does not constitute a Chapter 93A
violation).
In sum, there are insufficient facts alleged from which a
finder of fact could find that Zurich acted in bad faith or
violated an “established conception of unfairness”.

To the

contrary, this case appears to involve “an ordinary contract
dispute” between sophisticated commercial players.

See Kobayashi

v. Orio Ventures, Inc., 678 N.E.2d 180, 189 (Mass. App. Ct. 1997)
(citation omitted).

Accordingly, Counterclaim I will be

dismissed.
IV.

Motion to Strike Counterclaim II
A.

Legal Standard

Pursuant to Fed. R. Civ. P. 12(f), the Court may strike from
a pleading “any redundant, immaterial, impertinent, or scandalous
matter.”

A “redundant” matter is one that “consists of

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allegations that constitute a needless repetition of other
averments.”

Ross-Simons of Warwick, Inc. v. Baccarat, Inc., 182

F.R.D. 386, 398 (D.R.I. 1998) (citations omitted).

Although

motions to strike are generally disfavored, the Court possesses
considerable discretion in resolving such a motion.

Soni v.

Boston Med. Ctr. Corp., 683 F. Supp. 2d 74, 92 (D. Mass. 2009)
(citation omitted); see also Alvarado-Morales v. Digital Equip.
Corp., 843 F.2d 613, 618 (1st Cir. 1988) (citations omitted).
Motions to strike are “rarely granted absent a showing of
prejudice to the moving party.”

Hayes v. McGee, 2011 WL 39341,

*2 (D. Mass. Jan. 6, 2011) (citation omitted).
B.

Application

In its second counterclaim, Watts seeks a declaratory
judgment with respect to Zurich’s rights and obligations under
the Insurance Program, including a declaration that Watts is not
liable to Zurich for certain retrospective adjustments.

Zurich

contends that the counterclaim and declarations sought thereby
are redundant because they merely “repackag[e] denials and
defenses”.
This Court finds little controlling authority on the matter
but notes that other courts have allowed, without a showing of
prejudice, motions to strike

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repetitious and unnecessary pleadings, such as a
counterclaim that merely restates an affirmative defense, or
which seeks the opposite effect of the complaint.
In re Feeley, 393 B.R. 43, 51 (Bankr. D. Mass. 2008) (citing and
quoting Lincoln Nat’l Corp. v. Steadfast Ins. Co., 2006 WL
1660591, *2 (N.D. Ind. June 9, 2006) (listing cases)); see also
Tenneco Inc. v. Saxony Bar & Tube, Inc., 776 F.2d 1375, 1379 (7th
Cir. 1985) (noting repetition occurs when one party seeks to
enforce a contract while opposing party seeks a declaration of
the contract’s meaning).

Allowing such a motion may serve to

expedite the case by removing “unnecessary clutter from the
case”.

Heller Fin., Inc. v. Midwhey Powder Co., Inc., 883 F.2d

1286, 1294 (7th Cir. 1989).

Moreover, pursuant to the

Declaratory Judgment Act, 28 U.S.C. § 2201, the Court has
complete discretion in determining “whether and when” to
entertain a counterclaim for declaratory judgment.

See Wilton v.

Seven Falls Co., 515 U.S. 277, 282 (1995) (noting district court
has discretion under Declaratory Judgment Act whether to exercise
jurisdiction); U.S. Liability Ins. Co. v. Selman, 70 F.3d 684,
694 & n.9 (1st Cir. 1995) (upholding district court’s withholding
of a declaration with respect to the limit on insurance policy
and noting “courts have no obligation to answer hypothetical
questions”).
Here, although Counterclaim II enumerates seven specific
declarations sought, several are duplicative of each other, many

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reiterate affirmative defenses asserted and all address issues
already before the Court by virtue of Zurich’s Amended Complaint
and Watts’ Answer.

Because of the redundancy, the Court will,

therefore, allow plaintiff’s motion to strike Counterclaim II.
ORDER
In accordance with the foregoing, plaintiffs’ motion to
dismiss and strike defendants’ Watts Regulator Co. and Watts
Water Technologies, Inc. second amended counterclaims (Docket No.
34) is ALLOWED.

So ordered.
/s/ Nathaniel M. Gorton
Nathaniel M. Gorton
United States District Judge
Dated June 10, 2011

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