No Capital, No Claim: Chapter 93A Rejected In Kirby v. Mousis

In Kirby v. Mousis, the Massachusetts Appeals Court affirmed judgment for the defendants on the plaintiffs' Chapter 93A, § 11 claim and reinforced that failed business ventures and unmet funding promises generally do not, without more, constitute "unfair or deceptive" conduct under the statute. The dispute arose from an effort to expand a gaming-terminal business into Pennsylvania. The plaintiffs claimed the defendants wrongfully excluded them after the defendants proceeded with the opportunity through a newly formed entity. Following a bench trial, however, the judge found — and the Appeals Court agreed — that the plaintiffs had expressly conditioned their participation in the venture on their ability to raise $1 million in capital, which they failed to satisfy.

The court issued a decisive Chapter 93A ruling. The record showed that the plaintiffs repeatedly represented that they would imminently have substantial funding, but they only raised a small fraction of the required amount and defaulted on a key purchase agreement, which was terminated for nonperformance. In that context, the Appeals Court concluded that the defendants' decision to move forward without the plaintiffs was not unfair or deceptive. The defendants had given the plaintiffs a legitimate opportunity to participate on clearly defined terms, and the plaintiffs' inability to meet those terms caused their exclusion. The court emphasized that Chapter 93A requires an assessment of what the parties knew — or should have known — at the time of the challenged conduct. Here, the plaintiffs knew their equity interest depended on raising the agreed-upon capital — and knew they had not done so. Once that condition precedent failed, the defendants had no continuing obligation to include the plaintiffs in the transaction or to disclose that they intended to pursue the opportunity independently. As a result, the plaintiffs' statutory claim failed, along with their related fiduciary and fraud theories.

This decision underscores that parties may not be able to turn every claim arising out of an allegedly breached contract into unfair or deceptive business practices claim under Chapter 93A, especially when the contract parties are sophisticated businesspersons or entities.

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