Arabian Support & Services Company, LTD. v. Textron Systems Corporation
Filing
238
Chief Judge Patti B. Saris: MEMORANDUM AND ORDER:The Court ALLOWS TSC's motion for summary judgment (Docket No. 190), DENIES AS MOOT the motions to strike (Docket Nos. 194, 196, and 221), and DENIES TSC's renewed motion for judgment on the pleadings (Docket No. 193). SO ORDERED.(Lara, Miguel)
UNITED STATES DISTRICT COURT
DISTRICT OF MASSACHUSETTS
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Plaintiff,
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v.
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TEXTRON SYSTEMS CORPORATION,
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Defendant.
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ARABIAN SUPPORT & SERVICES
COMPANY, LTD.,
Civil Action
No. 15-12951-PBS
MEMORANDUM AND ORDER
March 19, 2019
Saris, C.J.
INTRODUCTION
This is a dispute arising out of the sale of cluster bombs
– also known as sensor fuzed weapons (“SFWs”) - to the Saudi
Arabian government. Plaintiff Arabian Support & Services Co.
(“ASASCO”), a Saudi Arabian company, brings this action against
Defendant Textron Systems Corporation (“Textron” or “TSC”), a
Massachusetts-based defense contractor, alleging that it is
entitled to six percent of the value of TSC’s sale of bombs to
Saudi Arabia as compensation for its efforts to help TSC secure
the contract. ASASCO seeks compensation from TSC based either on
the promise of additional compensation for securing the sale of
1
the cluster bombs or on the promised opportunity to provide
offset services related to the sale. In the First Amended
Complaint (Docket No. 107) (“Compl.”), ASASCO asserts claims of
fraudulent inducement (Count I), intentional misrepresentation
(Count II), negligent misrepresentation (Count III), quasi
contract/implied contract/promissory estoppel (Count IV), quasi
contract/unjust enrichment/quantum meruit (Count V), and
violation of the Massachusetts Consumer Protection Act, M.G.L.
c. 93A (“Chapter 93A”) (Count VI). The parties have engaged in
extensive discovery.
Before the Court is TSC’s motion for summary judgment on
all counts (Docket No. 190) and three motions to strike certain
witness statements and opinions (Docket Nos. 194, 196, and 221).
TSC also renews its motion for judgment on the pleadings (Docket
No. 193).1 After hearing, the Court ALLOWS TSC’s motion for
summary judgment on all counts. The Court DENIES AS MOOT all
three motions to strike because resolution of the motion for
summary judgment does not depend on any of the disputed
testimony or expert opinions. The Court also DENIES TSC’s
renewed motion for judgment on the pleadings on the ground the
Court has ruled on the motion for summary judgment.
1
The Court previously denied the motion without prejudice (Docket No. 135).
2
BACKGROUND
Unless otherwise noted, the following facts are undisputed.
I. The Beginning of the TSC-ASASCO Relationship
In order to sell munitions and other defense items to the
government of Saudi Arabia, TSC needed a consultant in Saudi
Arabia who could provide it with access to Saudi government
officials and convince those officials to budget funding towards
TSC-specific products. The relationship between TSC and ASASCO
largely developed through interactions between Avedis (Avo)
Boyamian, TSC’s Director of Middle East Business Development,
and Mansour Al-Tassan, ASASCO’s President and founder. At the
recommendation of General Abdullah Hamdan, considered the
“father” of the modern Saudi Arabian air force, Boyamian and AlTassan began to discuss working together in 2001. By 2003, the
men were discussing the market potential of selling cluster
bombs to the Royal Saudi Air Force. In the spring of 2004, TSC
began to discuss internally how best to structure a business
relationship with ASASCO.
One key hurdle to the relationship was ensuring that any
agreement and compensation scheme was lawful under U.S. and
Saudi law. To that end, Robert Kemp, TSC’s General Counsel,
sought legal advice from the International Law Firm in Riyadh on
how to structure the relationship. On March 24, 2004, he emailed
attorney Yusuf Giansiracusa, asking about the permissibility of
3
engaging a marketing consultant on a fixed monthly fee basis and
the feasibility of ASASCO’s serving as a service center provider
in Saudi Arabia. Giansiracusa advised that “[e]mploying a
marketing consultant for one or many different projects and/or
products is, in general, permissible as a matter of Saudi law.”
Pl. Ex. 27.2 But he cautioned that if a consultant’s “fixed fee
is merely a commission re-styled as a fixed fee, it will not be
permissible if the commission would not be permissible.” Id.
Giansiracusa approved of the idea of using ASASCO as a service
center provider and suggested that there is “no reason in
principle that Asasco [sic] couldn’t act as a marketing
consultant as well as a Service Centre operator under separate
contracts.” Id. Finally, he noted that “[a]s a lethal product,
the SFW cannot be sold through an agent.” Id.
On April 30, 2004, Boyamian forwarded a letter to ASASCO,
which stated: “The Textron Systems’ management team would
appreciate your advocacy support for the [Royal Saudi Air Force]
procurement of SFW. In recognition of your advocacy, TSC is
prepared to appoint ASASCO as a service center for support to
the [Royal Saudi Air Force] SFW program.” Pl. Ex. 32.
2
Record citations are the exhibit numbers designated by the parties as
described in the tables of contents (Docket Nos. 228, 229, 230, and 231).
4
Kemp emailed Giansiracusa again on July 8, 2004 requesting
advice on the possibility of paying ASASCO via a commission for
securing the sale of the bombs. Kemp wrote:
[W]e do not have a business case for a joint venture
with ASASCO because of the nature of this
weapon . . . . In addition, because of the potentially
great expense of engaging a consultant on a fixed,
periodic, non-contingent fee basis, we have been asked
to determine whether it would be possible to engage an
advocate of the type described above on a commission
basis, i.e. with the amount of the payment based on
the size of the ultimate order received and contingent
upon the receipt of an order.
Avo [Boyamian] has identified ASASCO as the likely
advocate for Textron Systems, and he anticipates that
they will expect a fee in the range of four percent
(4%) of a sale.
Pl. Ex. 37. On September 1, 2004, Vernon Cassin of the
International Law Firm advised Kemp that the sale of munitions
in Saudi Arabia is governed by the Council of Ministers
Resolution No. 1275 (“Resolution 1275”). Resolution 1275 states,
in relevant part:
No firm holding a contract with the Saudi Government
for the supply of arms or equipment required by the
Saudi Government may pay any sum as a commission to
any intermediary, sales agent, representative or
broker. This prohibition shall apply regardless of the
nationality of the firm or the nationality of the
intermediary, sales agent, representative or broker.
It shall apply also whether the contract was concluded
directly between the Saudi Government and the firm or
through a third-party State.
5
Pl. Ex. 39. Cassin advised Kemp that the proposed TSC-ASASCO
relationship had “a significant risk of falling within the scope
of the relationships prohibited under Resolution 1275.”
3
Id.
On September 15, 2004, Boyamian emailed Al-Tassan, asking
to meet in person to discuss the legal opinion provided by
Cassin. When Boyamian and Al-Tassan met in Cairo a week later,
Boyamian confirmed that TSC was prepared to pay ASASCO an amount
equal up to five percent of the total value of the SFW contract,
but that the agreement had to comply with U.S. and Saudi law.
Boyamian told Al-Tassan that based on Resolution 1275, offsets
were the “only way” ASASCO could receive such payments.4
3
The basis for Cassin’s opinion was as follows:
[W]e believe that the key factors that would cause a relationship to be
likely to fall within the categories covered by Resolution 1275 are
(i) whether the compensation is being paid for the purpose of marketing
or intermediation, (ii) whether the compensation is contingent upon the
conclusion of a successful sale and (iii) the compensation is
substantial either in the absolute or as a percentage of the sale.
In the case you have described, the proposed compensation certainly
appears to fall within categories (ii) and (iii) described above and
arguably falls within category (i) as well. Although it is difficult to
make a determination with any certainty because of the lack of cases in
which Resolution 1275 was, judged to be applicable, based on our
reading of the regulation and our discussions with people active in the
field, we believe that the arrangement you have described has a
significant risk of falling within the scope of the relationships
prohibited under Resolution 1275.
Pl. Ex. 39.
4
As background, an offset requirement allows a foreign government to use its
leverage as a purchaser to require a defense contractor to invest in the
foreign country as a condition of the arms sale. Usually, the purchasing
country establishes policies that require a foreign defense contractor to
invest some portion of the contract price back into the purchasing country to
create jobs or develop industries. A defense supplier is usually permitted to
build the price of offsets into the purchase price of the munitions, which
has the effect of the foreign government purchaser ultimately paying for part
6
Pl. Ex. 3 at 330:5-9. In 2004, both TSC and Al-Tassan believed
that ASASCO could not receive a commission on the sale of SFWs
under Saudi Arabian law.
II. The Consulting Agreements (2005-2009)
TSC and ASASCO executed four consulting agreements between
2005 and 2009. On November 10, 2004, Boyamian formally nominated
ASASCO to be TSC’s consultant in Saudi Arabia, with a focus on
selling SFWs to the Royal Saudi Air Force. Boyamian explained in
his nominating email to TSC leadership that “[t]he use of
commissioned representatives for sale of weapons in Saudi Arabia
is not authorized under local Royal Decree. General consulting
agreements to support foreign companies are acceptable.” Pl. Ex.
44. In late February 2005, TSC and ASASCO executed the first
consulting agreement. Al-Tassan understood at that time that
ASASCO’s role as a consultant was “to advocate the SFW sale.”
Def. Ex. 1 at 45:14-17. ASASCO entered into this first
consulting agreement (and all other consulting agreements)
because of promises from TSC that ASASCO would receive
additional compensation via the offset requirements for its
efforts to assist TSC in selling SFWs.
of the investment. Offsets are categorized as “direct” or “indirect.” Direct
offsets occur where the offset project is directly related to the defense
item being sold. For example, establishing a local company which could build,
service, and maintain aircrafts sold to the purchasing country. However, some
defense items do not lend themselves well to direct offsets. Instead, the
defense contractor may provide indirect offsets by investing in non-defense
related industries.
7
Al-Tassan negotiated, read, and understood the terms of the
agreement before signing on behalf of ASASCO. The first
agreement was for a year-long term during which ASASCO would be
compensated $10,000/month. Section 4(b) of the 2005 consulting
agreement stated:
It is expressly agreed by the parties hereto that any
and all services rendered by [ASASCO] to [TSC] shall
be deemed to have been given pursuant to this
Agreement and no additional payments (with the
exception of reimbursement for international travel
approved in advance by [TSC]) shall be due to or paid
to [ASASCO].
Def. Ex. 4 § 4(b). Importantly, in § 4(c) of the agreement, the
parties expressly agreed that ASASCO “shall not receive any
compensation or commission based in any manner whatsoever on the
volume of sales of the [TSC] products and/or services procured
or received under this Agreement.” Id. § 4(c). The agreement
also contained a statement of work which remained, in all
relevant respects, the same throughout the parties’ business
relationship. The statement of work included several tasks
ASASCO was expected to complete as a consultant, including
“[a]dvocat[ing] at the Saudi [Ministry of Defense and Aviation]
or at any other concerned Saudi Authority which is involved in
approval of funds, to secure allocation of funds for [TSC’s]
potential programs.” Def. Ex. 4 sched. A.
TSC and ASASCO periodically renewed and extended the
consulting agreements. On January 1, 2006 and January 1, 2007,
8
TSC and ASASCO executed the second and third consulting
agreements, respectively. Each of these agreements contained
substantially similar terms as the first consulting agreement.
After three years of paying ASASCO $10,000 per month, TSC
considered terminating the consulting relationship with ASASCO.
On July 1, 2008, Tom Saling from TSC sent Al-Tassan a letter
explaining that TSC would only extend the 2007 consulting
agreement on its original terms of $10,000/month through August
31, 2008. Saling explained to TSC officials in July 2008 that,
“[TSC] will be terminating the consulting services of ASASCO of
Saudi Arabia effective August 31, 2008. The ASASCO agreement was
specifically structured to support the sale of SFW to the
Kingdom. The sale of SFW to the Kingdom of Saudi Arabia is
pending US Government export approval.” Pl. Ex. 81. Boyamian
followed-up with Al-Tassan on August 15, 2008, writing in part,
“[t]his is in ref to our recent telecom regarding the expiration
of the Textron Systems–ASASCO consulting contract on August
31st, 2008 and I regret to confirm that TSC will not be able to
renew the Contract beyond August 31st, 2008.” Pl. Ex. 82.
In early September 2008, Boyamian convinced TSC to renew
its consulting agreement with ASASCO under a no-fee arrangement.
Boyamian told Kemp that “ASASCO [did] not expect to be
compensated, even in 2009.” Pl. Ex. 83. However, Kemp noted in
an email to Saling and Boyamian that “this is such a peculiar
9
arrangement that . . . it would make more sense to provide a
small month [sic] fee in consideration for [ASASCO’s] continuing
availability to consult with [Boyamian].” Id.
On September 4, 2008, TSC and ASASCO executed an extension
of the 2007 consulting agreement on a “no-fee basis.” The
extension letter to Al-Tassan stated in part that “[a]s you have
previously discussed with Avo Boyamian, effective September 1,
2008, ASASCO will not receive the monthly consultancy fee for
the extended term of the agreement.” Def. Ex. 9. A few days
later, Boyamian sent an email to colleagues at TSC explaining
the no-fee arrangement: “Effective September 1st, 2008, TSC
stopped paying ASASCO the monthly consultancy fee because, TSC
through Blenheim, an offset service provider company based in
UK, has an offset service providing agreement with ASASCO for
TSC business offset requirements in Saudi Arabia.” Pl. Ex. 93.
Boyamian forwarded this email to Al-Tassan the next day. At the
time, TSC, ASASCO, and Blenheim Capital Partners, Ltd.
(“Blenheim”) were still negotiating the terms of pending offset
services agreements, discussed further below. The “no-fee”
consulting agreement was extended through August 31, 2009, when
TSC and ASASCO entered into a fourth consulting agreement. The
fourth agreement was effective September 1, 2009 through August
31, 2011, and paid ASASCO a consulting fee of $500 per month as
Kemp suggested.
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III. The Separate Offset Agreements
A. Offsets in Saudi Arabia
According to ASASCO’s expert Leslie Janka,5 Saudi Arabia
generally requires offsets on foreign sales to the Saudi
Ministry of Defense and Aviation. A defense contractor’s offset
requirement is set by establishing a percentage of the total
value of the sale that must be earned in “offset credits.” For
the relevant time period, the Saudi government required offsets
of 35% of the total purchase price - until 2012 when it
increased to 40% of the purchase price - for all defense
contracts in excess of 400 million Saudi riyals (approximately
US $104 million). Saudi regulations appear to require a defense
contractor to have an approved offset plan in place before a
supply contract can be signed. However, a defense contractor is
not obligated to perform the offsets itself but can subcontract
the obligation to a third-party offset services provider. The
provider is obligated to develop and get approval for offset
projects to earn the defense contractor the required offset
credits. For reasons of expediency or politics, Saudi Arabia may
5
TSC moves to strike and exclude certain opinions of ASASCO’s expert, Leslie
Janka (Docket No. 196). The Court did not consider Janka’s opinions in ruling
on the motion for summary judgment, rather only relied on Janka’s report to
understand how offsets generally work. The motion to strike is therefore
denied as moot.
11
waive an offset requirement. The waiver would usually occur
through a written document.
B. TSC-ASASCO Offset Conversations (2006)
While executing the first consulting agreement, Boyamian
and Al-Tassan continued to discuss additional compensation for
ASASCO via offsets. Boyamian explained that by May 2006, TSC and
ASASCO “had a consultancy agreement, which is a standing alone
agreement. Now, we were starting – [Al-Tassan] was talking about
joint venture activities or offset-providing activities. That
was a totally separate subject.” Pl. Ex. 2 at 138:16-139:1.
In May, Al-Tassan emailed Boyamian a proposed structure for
the offset arrangement and invited TSC to respond and comment.
The proposal detailed how TSC would pay $35 million to
Aerosource Inc., a company fully owned and operated by ASASCO.
Aerosource would invest $5 million in economic offset projects
in Saudi Arabia and retain the remaining $30 million as a
“consultancy fee.” One of Al-Tassan’s stated objectives of the
proposal was “[t]o facilitate consultancy fees to ASASCO.” Pl.
Ex. 50.
TSC responded to Al-Tassan’s proposal shortly afterwards.
TSC mentioned investing five percent of the value of the SFW
contract into offset projects, but it noted that “[a]ll such
activity must result in Saudi Gov’t approval of offset projects,
grant credits/or waive requirement.” Pl. Ex. 51. “Next steps”
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would be for TSC and ASASCO “to review potential project
portfolio and develop strategy to gain Saudi approval as
offset,” and for TSC “to provide ASASCO with ‘offset provider’
agreement as means to begin to solidify approach.” Id.
In June 2006, Boyamian emailed Al-Tassan a draft offset
provider agreement between ASASCO and TSC. The agreement was
prepared by Neil Rutter, TSC’s Offset Manager. The draft
provided that ASASCO would be “entitled to receive a fee of X
percent (X%) of the value of an Offset Waiver provided that TSC
is satisfied that any potential Offset Obligation has been
waived irrevocably.”
6
Pl. Ex. 53 § 2.1. Alternatively, ASASCO
would be “entitled to receive a fee of X percent (X%) of the
value of an Offset Credit obtained through successful execution
of an Offset Project.”
7
Pl. Ex. 53 § 3.1. For ASASCO to be
compensated for any offset credits, the draft provided that TSC
had to advise ASASCO in writing that it had approved the offset
project. Pl. Ex. 53, § 3.2. This draft agreement was never
finalized or signed by the parties.
6
The draft agreement defined “Offset Waiver” as “a value, stated in dollars,
by which TSC’s actual Offset Obligation with respect to the Supply Contract
is less than thirty-five percent (35%) of the value of the Supply Contract or
the Offset Obligation[], whichever is higher.” Pl. Ex. 53 § 1.5.
7
The draft agreement defined “Offset Credits” as “the value of a credit,
stated in dollars, that would reduce TSC’s Offset Obligation[] in accordance
with the Offset Agreement and which are obtained through an Offset Project.”
Pl. Ex. 53 § 1.2.
13
On June 26, 2006, Boyamian forwarded Al-Tassan an email
chain containing a series of internal TSC emails discussing
ASASCO as a consultant and an offset services provider. The
email chain contained instructions for a compliance analyst at
TSC to prepare “two books: one for a new offset agreement with
ASASCO, and one for a renewal of the consultant agreement.” Pl.
Ex. 54. Boyamian forwarded the emails to Al-Tassan to motivate
him. Boyamian understood the consulting agreements and the
proposed offset agreement as “two separate things.” Pl. Ex. 2 at
155:23-156:1. Al-Tassan also understood that any arrangement
under which payment would be made for offset related services
would be a separate fee from the fee paid to ASASCO under the
consulting agreements.
C. Blenheim Capital (2006-2007)
On September 12, 2006, Rutter advised TSC leadership that
because of certain legal limitations on foreign military sales,
TSC needed to engage a third party, Blenheim Capital, to manage
the investing and coordination of offset services in Saudi
Arabia. ASASCO would continue to develop offset projects, but
Rutter noted that ASASCO did “not ha[ve] much experience with
offset [sic] in the Kingdom (or anywhere else).” Pl. Ex. 56.
Rutter suggested that TSC needed to “[c]ome to an agreement with
Blenheim Capital to support [TSC’s] offset activities in the
Kingdom, at a cost not to exceed 2%, with payments again being
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contingent on a sale.” Id. Later in September, Boyamian emailed
Al-Tassan to request that Al-Tassan meet with a representative
from Blenheim to further discuss offset projects. By June 2007,
TSC had decided to create a TSC-Blenheim agreement and then a
separate Blenheim-ASASCO agreement instead of directly
contracting with ASASCO for offset services.
D. TSC-Blenheim Offset Agreement (2008)
In February 2008, TSC entered into an Offset Services
Agreement (“OSA”) with Blenheim. The agreement established a
relationship between the companies in which Blenheim would help
TSC either avoid any offset requirements or meet any formal
offset obligations that arose from the sale of SFWs. The OSA
provided that, in the event that Blenheim was able to acquire a
waiver, TSC agreed to pay Blenheim a fee of two percent or six
percent of the value of the SFW supply contract, depending on
whether the sale was completed as a government-to-government
sale or as a direct commercial sale, respectively. The OSA
provided that if there was a waiver of the offset obligation, it
must be completed within six months of the sale. In the event
that TSC entered into an offset contract with Saudi Arabia, the
OSA provided Blenheim would receive a fee of six percent of the
value of the supply contract for any offset credits actually
received. Blenheim could enter into a subcontract with ASASCO to
fulfill its duties under the OSA but could not enter into a
15
subcontract with any other third party without the written
consent of TSC.
E. ASASCO-Blenheim Agreement (2009)
During the summer and fall of 2007, before the OSA between
TSC and Blenheim was finalized, Al-Tassan continued to negotiate
ASASCO’s compensation under an offset agreement. Boyamian sent
Al-Tassan a draft of the OSA between TSC and Blenheim on June
14, 2007. The OSA draft included a fee to Blenheim of six
percent. On June 21, 2007, Al-Tassan met with Boyamian, Rutter,
and Grant Rogan (from Blenheim) at the Paris Air Show to further
discuss offsets. At that meeting, Al-Tassan alleges that
Boyamian promised him ASASCO would receive six percent of the
value of the supply contract for offset services, and Blenheim’s
fee would be two percent.
Throughout the fall of 2008 and spring of 2009, Al-Tassan
continued to negotiate ASASCO’s exact fee with TSC and Blenheim.
On September 8, 2008, Al-Tassan emailed Boyamian with edits to
the proposed Blenheim-ASASCO agreement. He stated: “What is
unacceptable is the fee structure. . . . To receive ‘75% of such
fee paid by “TSC” to the Escrow Agreement’ is not as we have
agreed in Abu Dhabi and Paris.” Pl. Ex. 91. Al-Tassan emailed
Boyamian again on November 11, 2008 to get his input on the
payment structure between the three companies. Boyamian replied
that Al-Tassan should look back at the TSC-Blenheim agreement,
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but that it was his understanding that “Textron will be paying
8% of the contract value” to an escrow account with Blenheim to
meet its offset obligations, of which ASASCO would be entitled
to seven-eighths. Pl. Ex. 98. This understanding turned out to
be incorrect. The final OSA signed between TSC and Blenheim, as
stated above, provided that Blenheim would receive six percent
of the value of the supply contract, contingent on providing
credits or a waiver.
In early 2009, Al-Tassan emailed representatives from TSC
and Blenheim twice asking for clarification about ASASCO’s fee –
essentially asking for confirmation that 75% of what Blenheim
received from TSC equated to six percent of the value of the
supply contract. Al-Tassan also indicated at that time he
thought there were “two parts of the fee” – a fee for
acquisition and a fee for offsets. Pl. Ex. 100. There is no
record that anyone from TSC or Blenheim responded to either of
these emails.
Nevertheless, on April 6, 2009 Blenheim and ASASCO
finalized and entered into a subcontract whereby ASASCO would
assist Blenheim in its efforts to secure either an offset waiver
or an offset contract with Saudi Arabia (hereinafter the
“ASASCO-Blenheim Agreement”). Al-Tassan believed that the
ASASCO-Blenheim Agreement would be “a vehicle to pay ASASCO” a
“success fee.” Def. Ex. 1 at 124:15-23.
17
The agreement provided, in part, that if TSC paid a fee
into the escrow account pursuant to the OSA (between TSC and
Blenheim), then ASASCO would be entitled to 75% of such fee.
Additionally, if TSC entered into a formal offset obligation
with Saudi Arabia, then ASASCO’s fees would have to be used
solely for the purpose of investment in offset credit projects
approved by Saudi Arabia. Al-Tassan understood that ASASCO could
only be paid under the ASASCO-Blenheim Agreement if there was a
waiver of offset obligations or if offset credits were earned by
an offset program approved by Saudi Arabia. The agreement
defined its “Termination Date” as “the date on which the Offset
Services Agreement [OSA] is terminated for any reason.” Pl. Ex.
104 (“ASASCO-Blenheim Agreement”) § 1.1.
IV. 2011-2013
A. Al-Tassan Leaves Saudi Arabia
In early 2011, Al-Tassan left Saudia Arabia for Bahrain and
has, to date, never returned. Al-Tassan’s decision to leave
Saudi Arabia stemmed from a civil judgment entered against him
in the General Court in Riyadh for the equivalent of $26.5
million. The judgment arose from a civil dispute involving the
Bahraini Executive Air Services Company (“Bexair”), in which AlTassan owns shares and for which he serves as chairman. The
judgment was entered against Al-Tassan on October 12, 2009. On
June 22, 2010 the Riyadh police issued a civil arrest warrant
18
for Al-Tassan pursuant to its debt collection procedures. In
connection with the civil arrest warrant, an electronic order
(“travel ban”) prohibiting Al-Tassan from leaving Saudi Arabia
was issued. Al-Tassan never informed TSC or Blenheim of the
judgment, arrest warrant, travel ban, or his decision to leave
Saudi Arabia. Additionally, Al-Tassan specifically hid the fact
that he was not in Saudi Arabia from TSC officials. On at least
one occasion after he fled Saudi Arabia, Al-Tassan asked his
assistant, Dennis Shotwell, to draft an email with an excuse for
not being able to meet TSC officials in Riyadh, which he
ultimately sent to TSC officials.
When Al-Tassan left Saudi Arabia in early 2011, ASASCO was
still a party to the consulting agreement and the ASASCOBlenheim Agreement. ASASCO still arranged for meetings between
TSC and Saudi government representatives, but ASASCO
representatives did not attend a single in-person meeting with
Saudi officials regarding TSC’s business after Al-Tassan left
the country.
B. TSC Re-Evaluates the OSA
On May 5, 2011, Stephen Fogarty, TSC’s newly hired Director
of Business Offsets, sent an email to officials at TSC saying it
was “imperative” that the Blenheim OSA for Saudi SFWs be
terminated for a variety of reasons. Pl. Ex. 121. Attached to
the email was Fogarty’s evaluation of the financial impact of
19
the OSA. As part of Fogarty’s evaluation, he noted that a “6%
fee based on full contract value is excessive” in either the
waiver or offset credit scenario. Id. He further noted that
“[b]ased on 35% Offset Obligation, the fee as a percentage of
Offset Obligation is 17.1%,” and that this was “beyond any
measure of reasonableness.” Id. Besides terminating the OSA,
Fogarty also recommended that TSC “[d]evelop alternative offset
projects in advance” of Saudi Arabia signing a formal agreement
with the United States to purchase SFWs. Id.
The next day, a TSC official forwarded Fogarty’s evaluation
to TSC leadership and recommended that TSC terminate the OSA.
The official noted that the OSA included a sub-agreement whereby
ASASCO would receive “2/3 of the fee” which he described as
“[v]ery out of the ordinary.” Pl. Ex. 122. He explained that TSC
used ASASCO “as a consultant on SFW and therefore we would be
taking food off the table of our own consultant.” Id.
C. United States Announces Foreign Military Sale
Meanwhile, the sale of SFWs was rapidly moving forward. In
January 2011, Saudi Arabia sent a letter to the United States
government officially requesting that it be allowed to buy 1,300
SFWs from the United States. On June 10, 2011, the Department of
Defense provided statutorily required notice to Congress of a
possible sale to Saudi Arabia of SFWs, associated equipment,
parts, training, and logistical support for an estimated cost of
20
$355 million. The notice stated that “[t]he prime contractor
will be Textron Systems Corporation of Wilmington, MA. There are
no known offset agreements proposed in connection with this
potential sale.” Pl. Ex. 126.
D. TSC Discusses Offsets with Saudi Arabia
Before Saudi Arabia signed a final contract with the United
States, TSC, as the SFW supplier, sought to finalize an offset
arrangement with Saudi Arabia. On July 19, 2011, Tom Boyle from
TSC sent an offset concept paper to Brigadier General Mohammad
Al-Lomalen, the Assistant to the Secretary of the Saudi Economic
Offset Committee, detailing a proposed offset project with
Bexair-Saudi Arabia. Tom Boyle’s email to General Al-Lomalen
stated, in part:
After our meeting in Paris a few weeks ago and our
discussions regarding the next steps to finalize the
Textron Saudi Offset Contract, we have taken the steps
to develop a Saudi Company that will work with us and
the [Royal Saudi Air Force (“RSAF”)] on our Sensor
Fused Weapon (SFW) contract and we will utilize as a
direct offset project . . . .
The attached concept paper details that we will work
with Bexair–Saudi Arabia (www.bexair.com) in Riyadh to
do the RSAF pilot training on the SFW program as part
of our offset program. We are in the process of
finalizing an MOA with Bexair–Saudi Arabia and will
complete it soon to include it in out [sic] offset
contract with the [Economic Offset Secretariat
(“EOS”)].
If the concept paper meets with EOS approval, we will
complete the MOA documentation and set up an
appointment with you to meet at your offices and sign
the offset contract documents.
21
Def. Ex. 29. One day later, General Al-Lomalen responded:
EOS has analyzed your proposal, and has the following
comments:
1. The proposal does not meet the priorities set by
the [Economic Offset Committee]. At this point of time
manufacturing and life cycle support are the fields
[EOC is prioritizing].
2. To avoid any embarrassment, we strongly recommend
that you consult with the EOC before engaging any
third party. EOC will evaluate and approve the
beneficiary company based on different factors like
the in-kingdom capabilities, reputation, past
experience, financial status and Saudi manpower.
. . .
4. You should be aware that we are in close
coordination with the RSAF. . . . And unless we
conclude an Offset Agreement very soon, your endeavors
with them may be affected. In addition you will be
vulnerable to the new [offset] guidelines.
Therefore we suggest that you take the matter more
seriously and develop a different proposal(s) that
addresses the priorities referred to above. We also
recommend that you, promptly, deploy a team with
enough authority and experience, to come to the
kingdom to work with us face to face.
Id. Boyamian relayed to Al-Tassan that the Economic Offset
Committee “did not appreciate our proposal for a training
program. [It] is asking us to come up with a project to involve
manufacturing.” Pl. Ex. 128.
During the fall of 2011, TSC and Al-Tassan continued to
exchange emails and have conversations around potential
manufacturing projects that might meet with Saudi approval,
22
including a project involving Rolls Royce and another involving
manufacturing thermal batteries. By October 2011, Boyle believed
that the Economic Offset Committee did not want to work with AlTassan. When asked why he did not tell Al-Tassan that the EOC
expressed concerns about working with him, Boyle stated that he
believed TSC could still develop a project with ASASCO and craft
it in such a way that it would be viewed by Saudi Arabia as a
TSC, and not an ASASCO, driven project.
E. The Fifth Consulting Agreement
While continuing to discuss offset projects, TSC and ASASCO
entered into a fifth consulting agreement, effective September
1, 2011. Under the agreement, ASASCO was paid $500 per month,
the same amount as the last agreement, to continue consulting on
the sale of SFWs. The fifth consulting agreement was materially
the same as the prior four with one key difference. The fifth
agreement also contained an integration provision which asserted
that each party waived the right to assert any claim against the
other “based on any oral representations, statement, promise or
agreement whether made before or after the date of this
Agreement.” Pl. Ex. 129 § 16. Al-Tassan read and initialed each
page of the fifth consulting agreement. At the time Al-Tassan
signed the fifth agreement, no one from TSC had told Al-Tassan
that the company was contemplating terminating the OSA with
23
Blenheim. Al-Tassan also did not tell anyone from TSC that he
had fled from Saudi Arabia.
F. TSC Terminates the OSA
In November 2011, TSC acted on Fogarty’s recommendation to
terminate the OSA with Blenheim. On November 28, 2011, Boyle
from TSC emailed a letter to Blenheim representatives stating
that “[i]n recognition of recent changes to the offset
guidelines in Saudi Arabia,” TSC and Blenheim agreed to mutually
terminate the OSA. Pl. Ex. 142; Def. Ex. 31. The letter was
signed and accepted by Blenheim Capital on January 12, 2012.
ASASCO does not dispute that by its terms, the Blenheim-ASASCO
agreement also terminated when the OSA was terminated.
G. Saudi Arabia Signs the Letter of Agreement
The United States government and Saudi Arabia executed a
Letter of Agreement (“LOA”) on December 24, 2011 whereby Saudi
Arabia agreed to purchase SFWs from the United States. Boyamian
emailed Al-Tassan to tell him the news about the agreement on
January 3, 2012. The emailed stated: “Dear Mansour, Our brothers
in Saudi Arabia, signed the LOA on December 24, 2011 at the
Christmas eve, as a Christmas gift to us. CONGRATULATIONS to all
of us.” Pl. Ex. 143. The agreement finalized the terms of the
sale of SFWs between the United States government and Saudi
Arabia.
24
H. Al-Tassan Believes Blenheim is “Out of the Picture”
The parties dispute whether TSC told Al-Tassan that TSC and
Blenheim had terminated the OSA. Boyle asserts that he told AlTassan about the termination in approximately February 2012,
when they ran into each other at the Intercontinental Hotel in
Abu Dhabi. Al-Tassan asserts that no one told him anything with
regards to the termination of the OSA until September 2013.
Nonetheless, on May 30, 2012, Al-Tassan emailed his assistant
regarding a document Boyamian had sent to Al-Tassan. The email
stated, in part:
I have read the document and they have been advised in
two options and I would push for the JV to make it
more stronger for us. The issue of the SFW has not
been resolved yet and I am still trying in many
different ways carefully. If you recall our previous
agreement calls for compensation – correct but through
Blenheim, now Blenheim is out of the picture so, we
don’t know how to deal with it. Let’s think how we can
do it and satisfy both mutually.
Pl. Ex. 145; Def. Ex. 32. The same day, Shotwell responded:
The Memorandum . . . provides Textron 2 options – the
JV option and the TSO option. . . . I believe you
should agree to the TSO option now but keeping the
issue of the “Blenheim agreement” in the back-burner
since as per their option the JV option would take
time.
I believe you need to get them into your hands now
with the proposed TSO and accordingly start legal work
in setting up of the proposed JV (offset?) option in
anticipation of the required support/services
agreement for the possibility of both the SFW and
Shadow products to be classified as armaments. This
way you can be properly compensation [sic] for all
previous work done. Perhaps the TSO can include a
25
budget item/s that really is/are your proposed
compensation/s on any [Saudi Arabian] deal that would
be closed. 8
Pl. Ex. 145; Def. Ex. 32. Al-Tassan responded to Shotwell,
stating “I agree with you that we should tangle them with us in
any fashion under any arrangement while
we try slowly to get our fees as per the agreement with
Blenheim.” Pl. Ex. 145; Def. Ex. 32.
I. Extension of the Consulting Agreement
ASASCO and TSC signed an extension of the fifth consulting
agreement on August 16, 2012. The extension continued the terms
of the agreement through August 31, 2013. Throughout the fall of
2012, Al-Tassan continued to provide services for TSC, including
arranging meetings between Saudi officials and Textron’s
Chairman Scott Donnelly at Boyamian’s request. In October 2012,
Al-Tassan travelled to Wilmington, MA to meet with Boyamian and
others at TSC to discuss, among other things, the SFW
transaction. This was Al-Tassan’s one in-person meeting with TSC
representatives in Massachusetts during the course of the TSCASASCO business relationship. Neither party provides evidence of
what was specifically said during this meeting.
8
The parties have not explained what TSO stands for.
26
J. The Final SFW Supply Contract
The U.S. Department of Defense announced on August 20,
2013, that Textron Defense Systems, an affiliate of TSC, had
been awarded a final contract to provide “1,300 cluster bomb
units” to Saudi Arabia at a total price of $640,786,442. Pl. Ex.
153; Def. Ex. 35. The contract included $89.2 million as “Offset
Execution Costs” – a portion of TSC’s expected total offset
obligations – on the understanding that TSC would be required to
commit to a 40% offset obligation on the contract. Pl. Ex. 154;
Def. Ex. 35; Pl. Ex. 8 at 185:14-188:5.
K. TSC Does Not Renew Consulting Agreement
A few days later, on August 29, 2013, TSC notified ASASCO
via email that TSC “elected not to offer a renewal” of the fifth
consulting agreement, which was set to expire on August 31,
2013, and that TSC was “not aware of any outstanding obligations
between the parties.” Pl. Ex. 155; Def. Ex. 34. Al-Tassan did
not respond to this email. Instead, in September 2013, he
travelled to Boston, MA where he had dinner with Boyamian. At
that dinner, Al-Tassan alleges that he asked Boyamian about the
status of the offset obligation, and Boyamian told him TSC had
gotten rid of Blenheim.
L. Post-Script: TSC, Saudi Arabia, and Offsets
On June 9, 2014, a little less than a year after Textron
Defense Systems was awarded the final SFW supply contract, Saudi
27
Arabia’s Economic Offset Committee confirmed in a letter that
TSC’s offset commitment on the SFW sale would be 40% of the
monetary value of the contract. The letter also stated that
TSC’s offset commitment of “forty percent (40%) will be formally
included in the Offset Memorandum of Agreement which will be
signed by Textron and EOP when the new Economic Offset
Guidelines are issued by the EOC.” Pl. Ex. 158; Def. Ex. 36.
Subsequently, a U.S. Air Force Contracting Officer sent a letter
to TSC stating: “The Government recognizes the agreement on the
commitment rate of 40% and the U.S. Government will not be
requesting a price adjustment concerning the offset value to the
negotiated settlement on the subject contract.” Pl. Ex. 159.
Fogarty explained that this letter meant TSC would receive the
full $640 million and would not have a downward adjustment in
contract price due to any change in the assumed offset rate. To
date, TSC and Saudi Arabia have not entered into an Offset
Memorandum of Agreement. It is unclear whether TSC will ever
have to fulfill an offset requirement for the SFW sale. TSC has
retained the $89.2 million it received as part of the supply
contract for offset costs – and has never paid it back.
To date ASASCO has not obtained a waiver of TSC’s offset
requirements from Saudi Arabia. Additionally, ASASCO has not
delivered an offset project that has been accepted by Saudi
Arabia to satisfy TSC’s offset requirements.
28
V. Procedural History
ASASCO filed its original complaint against TSC on July 15,
2015, alleging three counts: (1) breach of contract, (2)
tortious interference, and (3) violation of Massachusetts
General Laws, Chapter 93A (Docket No. 1). TSC filed a motion to
dismiss (Docket No. 22), which the district court (Stearns, J.)
converted into a motion for summary judgment (Docket No. 25).
After allowing limited discovery, on March 11, 2016, the court
issued a Memorandum and Order granting summary judgment in favor
of TSC on all three counts (Docket No. 78).
On appeal, the First Circuit affirmed the district court’s
ruling dismissing ASASCO’s breach of contract and tortious
interference claims but reversed the Court’s dismissal of
ASASCO’s Chapter 93A misrepresentation claim based on the
failure of the contract claim. Arabian Support & Servs. Co. v.
Textron Sys. Corp., 855 F.3d 1, 6-7 (1st Cir. 2017) (“ASASCO”).
The First Circuit held that “ASASCO is entitled to proceed with
its claim that TSC engaged in an unfair business practice by
procuring ASASCO’s agreement to low-fee consulting contracts
with the promise of a future offset benefit, and then, after
successfully signing the weapons deal, disclaiming any
additional financial obligation to the Saudi company.” Id. at 3.
It added, “[I]f Textron did promise ASASCO offset related
remuneration, but then terminated the OSA without providing
29
ASASCO an alternative means to obtain it, we see room for a
viable Chapter 93A claim premised on Textron’s
misrepresentations.” Id. at 7. Finally, it held that ASASCO
should be given the opportunity to amend its complaint to
supplement its Chapter 93A claim with any common law
misrepresentation claims found in the record. Id. at 9.
On remand, the case was re-drawn to this Court. ASASCO
filed an amended complaint containing six counts (Docket No.
107). TSC filed a motion for judgment on the pleadings (Docket
No. 119), which the Court denied without prejudice (Docket No.
135). At the close of discovery, TSC moved for summary judgment
on all counts (Docket No. 190).
LEGAL STANDARD
The role of summary judgment is “to pierce the pleadings
and to assess the proof in order to see whether there is a
genuine need for trial.” Mesnick v. Gen. Elec. Co., 950 F.2d
816, 822 (1st Cir. 1991) (quotation omitted). Summary judgment
is appropriate when there is “no genuine dispute as to any
material fact and the movant is entitled to judgment as a matter
of law.” Fed. R. Civ. P. 56(a). A factual dispute precludes
summary judgment if it is both genuine and material. See
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247–48 (1986). An
issue is “genuine if the evidence about the fact is such that a
reasonable jury could resolve the point in the favor of the non30
moving party,” and “[a] fact is material if it has the potential
of determining the outcome of the litigation.” Farmers Ins.
Exch. v. RNK, Inc., 632 F.3d 777, 782 (1st Cir. 2011) (quotation
omitted).
The moving party is responsible for “identifying those
portions of [the record] which it believes demonstrate the
absence of a genuine issue of material fact.” Celotex Corp. v.
Catrett, 477 U.S. 317, 323 (1986). It can meet this burden
either by “offering evidence to disprove an element of the
plaintiff's case or by demonstrating an ‘absence of evidence to
support the non-moving party's case.’” Rakes v. U.S., 352 F.
Supp. 2d 47, 52 (D. Mass. 2005) (quoting Celotex, 477 U.S. at
325). If the moving party shows the absence of a disputed
material fact, the burden shifts to the non-moving party to “set
forth specific facts showing that there is a genuine issue for
trial.” Anderson, 477 U.S. at 256. “[C]onclusory allegations,
improbable inferences, and unsupported speculation” are
insufficient to create a genuine issue of material fact to
survive summary judgment. Sullivan v. City of Springfield, 561
F.3d 7, 14 (1st Cir. 2009) (quotation omitted). When ruling on a
motion for summary judgment, the court “view[s] the facts in the
light most favorable to the party opposing summary judgment.”
Rivera–Colón v. Mills, 635 F.3d 9, 10 (1st Cir. 2011).
31
DISCUSSION
I. Reasonable Reliance (Counts I – IV)
ASASCO argues that TSC “made false representations to
ASASCO regarding the amount and manner in which ASASCO would be
compensated for assisting TSC in securing the SFW Transaction.”
Compl. ¶¶ 125, 134, 143. ASASCO further alleges that it
“reasonably relied upon the false representations made by
representatives of [TSC] by performing services and expending
political capital to assist [TSC] in securing the SFW
Transaction.” Compl. ¶¶ 130, 139, 147. And ASASCO demands to be
compensated with six percent of the total amount of SFW sales.
Compl. ¶¶ 132, 141, 149. TSC contends that as a matter of law,
ASASCO cannot have reasonably relied on the alleged promises
made by Boyamian and other TSC representatives because of the
express language of the five consulting contracts and the offset
contract with Blenheim.
Under Massachusetts law, claims for fraudulent inducement,
intentional misrepresentation, negligent misrepresentation, and
promissory estoppel all require that the plaintiff reasonably
and justifiably rely on the defendant’s statement or promise.
See First Marblehead Corp. v. House, 473 F.3d 1, 9 (1st Cir.
2006) (holding that negligent misrepresentation requires
justifiable reliance); Kenda Corp. v. Pot O'Gold Money Leagues,
Inc., 329 F.3d 216, 225 (1st Cir. 2003) (holding that fraudulent
32
inducement requires that the plaintiff reasonably rely on the
misrepresentation); Coll v. PB Diagnostic Sys., Inc., 50 F.3d
1115, 1124 (1st Cir. 1995) (“ An element of promissory estoppel
is that the party invoking it must have reasonably relied on the
alleged promise to his detriment.” (quoting Hall v. Horizon
House Microwave, 506 N.E.2d 178, 184 (Mass. App. Ct. 1987)));
Kuwaiti Danish Comput. Co. v. Dig. Equip. Corp., 781 N.E.2d 787,
795 (Mass. 2003) (holding that fraudulent misrepresentation
requires reasonable reliance).
A long-standing rule in Massachusetts “declares that
reliance on supposed misrepresentations that contradict the
terms of the parties’ agreement is unreasonable as a matter of
law.” HSBC Realty Credit Corp. (USA) v. O'Neill, 745 F.3d 564,
571 (1st Cir. 2014) (citing Starr v. Fordham, 648 N.E.2d 1261,
1268 (Mass. 1995)). “[A] contractual provision flatly
contradictory to prior oral assurances should cause most people
—- and particularly experienced, knowledgeable businesspeople —to pause.” Turner v. Johnson & Johnson, 809 F.2d 90, 96 (1st
Cir. 1986).
TSC’s main argument is that a promise of a fee of six
percent of the SFW transaction for assisting in the sale of the
SFWs, if true, flatly contradicts the contractual provisions of
all five consulting agreements. Specifically, the consulting
agreements provide ASASCO “shall not receive any compensation or
33
commission based in any manner whatsoever on the volume of sales
of the [TSC] products and/or services procured or received under
this Agreement.” Def. Ex. 4 § 4(c); see also Def. Exs. 5, 6, 18,
30. This contractual provision is consistent with the parties’
understanding at the time they entered into the first consulting
agreement in 2005 that Saudi Resolution 1275 prohibited
commissions on the sale of munitions.
The provision undermines
any reasonable reliance by ASASCO on any promise that the
company would receive a six percent fee for securing the sale of
SFWs.
In Turner, the First Circuit concluded that under
Massachusetts law, a “plaintiff[] may not raise as fraudulent
any prior oral assertion inconsistent with a contract provision
that specifically addressed the particular point at issue” when
“both parties were experienced in business and the contract was
fully negotiated and voluntarily signed.” 809 F.2d at 97. AlTassan, as an experienced businessman, read and reviewed each of
the agreements before he signed them on behalf of ASASCO. ASASCO
cannot now assert that it reasonably relied on promises of
compensation in the form of a commission for assisting in
selling the cluster bombs.
ASASCO contends that it reasonably relied on promises of
extra compensation for offset services when its consulting fee
was reduced from $10,000 a month to $500 a month, arguing that
34
TSC received valuable services for nominal value. The First
Circuit addressed this issue when it reversed the earlier grant
of summary judgment, offering: “Why Textron substantially
reduced the consulting fee – and why ASASCO acquiesced to the
reduction – also seem relevant, and potentially revealing, for
ASASCO’s claim that it was promised offset-related compensation
outside of the consulting agreements.” ASASCO, 855 F.3d at 9.
The First Circuit suggested that “if [TSC] did promise ASASCO
offset-related remuneration, but then terminated the OSA without
providing ASASCO an alternative means to obtain it, we see room
for a viable Chapter 93A claim premised on [TSC’s]
misrepresentations.” Id. at 7. It understood TSC’s promise as a
“promised opportunity to perform offset services.” Id. at 8 n.9.
When all reasonable inferences are drawn in its favor,
ASASCO reasonably relied on TSC’s promise that it would be
compensated through its work on offsets, which TSC treated as a
separate from the consulting services, going so far as to create
“two books.” Expecting remuneration through offsets, ASASCO
entered into the ASASCO-Blenheim Agreement, which governed its
compensation for offset-related services through 2011. ASASCO
claims it was then blindsided when it learned in 2013 that the
OSA between TSC and Blenheim was terminated without its
knowledge. ASASCO asserts that it continued to work to provide
offsets and consulting services between January 12, 2012 and
35
September 2013 in reliance on its belief that it would receive
additional compensation via offsets.
The flaw in ASASCO’s argument is that there is no evidence
in the record that Al-Tassan was promised compensation of six
percent of the total SFW sale for offset services even if ASASCO
did not acquire a waiver or offset credits. While ASASCO and TSC
were discussing proposed offset projects in 2006, Tom Harrington
wrote to Al-Tassan that TSC was considering investing 5% of the
value of the SFW contract into offset projects, but that “[a]ll
such activity must result in Saudi Gov’t approval of offset
projects, grant credits/or waive requirement.” Pl. Ex. 51. And
while not finalized, the proposed TSC-ASASCO offset service
provider agreement required ASASCO to provide either a waiver or
credits to be compensated.
The parties formalized this understanding through the
tripartite offset agreements in 2008 and 2009. Under the OSA
there were only two ways for Blenheim to be paid for offset
services: (1) if it obtained an irrevocable waiver of TSC’s
offset requirements or (2) if it developed an offset project
that was approved by Saudi Arabia and generated offset credits.
Blenheim would receive six percent of the value of the SFW
supply contract, on a pro-rata basis, as offset credits were
received. With respect to the waiver, Blenheim would receive
either 2% or 6% of the value of the SFW contract. Under the
36
terms of the ASASCO-Blenheim Agreement, signed in April 2009,
ASASCO would assist Blenheim in its efforts to either produce
offset projects that were approved by Saudi Arabia to generate
offset credits or help acquire an irrevocable waiver. Under
either scenario, though, ASASCO would receive only 75% of any
fee earned by Blenheim under the OSA.
ASASCO argues that TSC made a number of false
representations to ASASCO before, during, and after the
companies entered into the OSA and ASASCO-Blenheim agreements as
to the exact fee it would receive for assisting in offsets.
Regardless, the exact amount of the promised percentage fee for
offset work is immaterial since ASASCO never produced either an
irrevocable waiver or offset credits for TSC. Again, there is no
evidence that TSC promised any fees for offset services unless
ASASCO produced offset credits or a waiver. And there is no
evidence that, even though TSC terminated the OSA, it interfered
with ASASCO’s efforts and opportunities to provide offsets or
acquire a waiver. Quite to the contrary, even while TSC was
contemplating terminating the OSA with Blenheim, it still wrote
to the Saudi Economic Offset Committee, proposing Bexair (an AlTassan company) as an in-country offset service provider for the
SFW sale. While the First Circuit was concerned that TSC was
denying ASASCO the “opportunity” to provide offset services, the
ultimate decision maker on offsets is the Saudi government, not
37
TSC. Whether TSC will have to provide offsets in the future is
unknown. So there is no evidence TSC deprived ASASCO of the
opportunity to provide offset services.
Accordingly, Defendant’s motion for summary judgment will
be allowed on Counts I, II, III, and IV.
II. Chapter 93A (Count VI)
ASASCO contends that the center of gravity of TSC’s
deceptive acts was in Massachusetts because it is where the
“entire course of misconduct and stringing along . . . emanated
from.” Docket No. 207 at 31. ASASCO further asserts that it is
where Boyamian and other TSC officials had their offices, where
key decisions were made, and where most communications –
including proposed agreements and Boyamian’s emails – originated
from. TSC responds that ASASCO’s Chapter 93A claim fails as a
matter of law because the allegedly unfair or deceptive actions
underlying the claims did not occur “primarily and
substantially” within Massachusetts.
Chapter 93A prohibits anyone from engaging in “[u]nfair
methods of competition and unfair or deceptive acts or practices
in the conduct of any trade or commerce.” Mass. Gen. Laws ch.
93A, § 2(a). To proceed on a 93A claim, the court must first
“determine whether the center of gravity of the circumstances
that give rise to the [93A] claim is primarily and substantially
within the Commonwealth.” Kuwaiti Danish, 781 N.E. 2d at 799.
38
TSC bears the burden of showing that any misconduct occurred
primarily and substantially outside Massachusetts. Roche v.
Royal Bank of Can., 109 F.3d 820, 829 (1st Cir. 1997).
In Roche, the First Circuit identified three factors that
are relevant to the determination: “(1) where defendant
committed the deception; (2) where plaintiff was deceived and
acted upon the deception; and (3) the situs of plaintiff's
losses due to the deception.” 109 F.3d at 829. The Court
considers these factors, although the center of gravity analysis
is not solely based on a formula “identified by any particular
factor or factors” because a significant factor that exists in
one case may not exist in another. Kuwaiti Danish, 781 N.E.2d at
798–99.
Where ASASCO was allegedly deceived, and the situs of its
loss, plainly weigh in TSC’s favor. The alleged oral
misrepresentations by Mr. Boyamian upon which ASASCO says it
relied occurred in Egypt, France, and Saudi Arabia. ASASCO is
not located in the Commonwealth and did not incur its losses in
the Commonwealth. It also did not receive or rely on the alleged
misrepresentations in Massachusetts. During the ten-year period
of the parties’ business relationship, Al-Tassan only visited
Massachusetts once, and then once after the relationship ended.
ASASCO makes no allegations of any misrepresentations being made
at those meetings.
39
ASASCO points out that TSC sent communications from
Massachusetts and its executive decision-making took place here.
ASASCO emphasizes that on September 9, 2008, Mr. Boyamian
forwarded a “crucial” email to Al-Tassan from Massachusetts that
the reason the consulting fee had been changed from $10,000 a
month to $0 a month was “because, TSC through Blenheim, an
offset service provider company based in UK, has an offset
service providing agreement with ASASCO for TSC business offset
requirements in Saudi Arabia.” Pl. Ex. 93. Even if this email
could be interpreted as an effort to string ASASCO along with
the promise of offset compensation via the OSA, ASASCO was
afforded the opportunity to provide offset services through its
agreement with Blenheim. As to the other emails and decisions,
the core of the misleading conduct in question did not occur
primarily and substantially in Massachusetts. See Sonoran
Scanners, Inc. v. Perkinelmer, Inc., 585 F.3d 535, 546 (1st Cir.
2009) (finding the center of gravity was not in Massachusetts
when plaintiff received and acted upon the allegedly deceptive
statements in Arizona, and where its losses were incurred in
Arizona, but where the allegedly deceptive statements were
uttered in Massachusetts); Uncle Henry's Inc. v. Plaut
Consulting Co., 399 F.3d 33, 45 (1st Cir. 2005) (holding that an
alleged deceptive practice did not occur primarily and
substantially in Massachusetts when the misrepresentations were
40
received primarily in Maine and where their impact was primarily
felt there).
In sum, the Massachusetts SJC’s decision in “Kuwaiti Danish
did not retreat from the proposition that, if the significant
contacts of the competing jurisdictions are approximately in the
balance, the conduct in question cannot be said to have occurred
primarily and substantially in Massachusetts.” Uncle Henry's,
399 F.3d at 45. Here, TSC has met its burden of demonstrating
that the center of gravity is not in Massachusetts.
Defendant’s motion for summary judgment will be allowed
with respect to Count VI.
III. Unjust Enrichment/Quantum Meruit (Count V)9
In its only remaining claim, ASASCO alleges that TSC
unfairly used its services over a ten-year period to secure the
SFW contract, all while paying ASASCO a nominal consulting fee
and intentionally concealing that it had terminated the OSA with
Blenheim. Quantum meruit is a theory of recovery and not an
independent cause of action. See J.A. Sullivan Corp. v.
Commonwealth, 494 N.E.2d 374, 377 (Mass. 1986), overruled on
other grounds by G4S Tech. LLC v. Mass. Tech. Park Corp., 99
N.E.3d 728 (Mass. 2018). “The underlying basis for awarding
quantum meruit damages in a quasi-contract case is unjust
9
The parties barely briefed this issue. Also, the issue of disgorgement is
mentioned in passing, so I do not discuss it.
41
enrichment of one party and unjust detriment to the other
party.” Salamon v. Terra, 477 N.E.2d 1029, 1031 (Mass. 1985).
“The injustice of the enrichment or detriment in quasi-contract
equates with the defeat of someone's reasonable expectations.”
Id. (quotation omitted).
Massachusetts law “does not allow litigants to override an
express contract by arguing unjust enrichment.” Platten v. HG
Bermuda Exempted Ltd., 437 F.3d 118, 130 (1st Cir. 2006). So to
the extent that ASASCO argues TSC was unjustly enriched by being
able to pay ASASCO a “nominal” consulting fee for securing the
SFW sale, that claim is barred by the five consulting agreements
as discussed above.
With respect to the promise of the opportunity to provide
offset services, “[w]hile a party does not recover on the
contract itself under quantum meruit, a court may look to the
terms of the underlying contract to help determine appropriate
recovery under quantum meruit.” Liss v. Studeny, 879 N.E.2d 676,
682 (Mass. 2008). In this case, as discussed above, the terms of
the ASASCO-Blenheim Agreement did not guarantee ASASCO payment
as a percentage of the SFW transaction to compensate it for
services in procuring the sale. Instead, ASASCO would receive
compensation for the provision of either offset credits or a
waiver. The terms of the ASASCO-Blenheim Agreement would not
lead a reasonable person to believe that he was entitled to
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compensation unless he provided such offset services. “As a
general rule, the court will not grant quantum meruit recovery
arising from a contingent fee contract where the contingency has
not occurred.” Liss, 879 N.E.2d at 682-83 (affirming that an
attorney could not recover fees under quantum meruit where a
contingency fee contract provided that the client would not be
liable to pay compensation “except from amounts collected” and
no amounts were ever collected).
When the offset compensation arrangement was designed,
ASASCO bore the risk that it would be unable to provide either
offsets or secure a waiver. There is no evidence in the record
of specific offset work ASASCO performed or expenses it incurred
in proposing offset projects after the OSA terminated in 2011,
when Al-Tassan alleges he was working under the impression that
OSA still was the governing agreement. Accordingly, ASASCO may
not recover quantum meruit compensation for the provision of
offset services.
Defendant’s motion for summary judgment is allowed with
respect to Count V.
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ORDER
For the reasons stated above, the Court ALLOWS TSC’s motion for
summary judgment (Docket No. 190), DENIES AS MOOT the motions to
strike (Docket Nos. 194, 196, and 221), and DENIES TSC’s renewed
motion for judgment on the pleadings (Docket No. 193).
SO ORDERED.
/s/ Patti B. Saris
Patti B. Saris
Chief United States District Judge
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