While its protection of consumers is well known to most Massachusetts businesses, Massachusetts General Laws Chapter 93A also prohibits businesses from engaging in unfair and deceptive business practices in their dealings with other businesses. The potential reach of Chapter 93A in this area is broad since, to constitute a violation of the statute, the conduct in question need not be illegal, but only “within at least the penumbra of some… established concept of unfairness.” PMP Assocs. v. Globe Newspaper Co. “The statute works from its own bottom. Actionable unfairness does not require an established common-law wrong or breach of an equitable standard.” Renovator’s Supply, Inc. v. Sovereign Bank.

While the courts continue to flesh out the types of business-to-business conduct prohibited by the statute, one established category of prohibited activity is so-called “coercive or extortionate tactics” engaged in to obtain advantages or concessions from another business. The Massachusetts Appeals Court’s recent decision in the Renovator’s Supply case represents the latest example of the type of “coercive tactics” prohibited by Chapter 93A. In that case, the plaintiff had an existing line of credit with Sovereign Bank, which it had renewed annually for a number of years, often after the expiration of the preceding year’s agreement. During those periods, the bank routinely kept the credit line open for the plaintiff until a new agreement was signed.

In 2002, the bank began to have concerns about the terms of the credit line and began internal discussions on the need to modify the terms of the credit agreement to require additional collateral and a higher interest rate. However, it did not communicate these concerns to the plaintiff or tell the plaintiff of the proposed new terms, but told the plaintiff that it would write up a renewal agreement. The day after the expiration of the old agreement, the bank notified the plaintiff that its credit line would only be renewed if it agreed to pay a higher interest rate and provide additional collateral. The plaintiff refused the new terms and, as a result of the loss of its line of credit, was forced to scale back business activities, for which it suffered losses.

The court concluded that, based upon historical practice and the promises made by the bank concerning a new agreement, the bank was estopped from terminating the credit line without reasonable notice. Despite finding that the bank had no contractual obligation to give notice or to continue the line of credit after its expiration, however, the Court also found that the Bank’s conduct was an attempt to exploit the timing of its notice to force additional terms on the plaintiff. The Court concluded that the use of such leverage represented coercive conduct by the Bank that violated Chapter 93A. It affirmed a judgment doubling the plaintiff’s actual damages and awarding attorney’s fees and costs.