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Ahern vs. Scholz PDF Print E-mail

As for whether Scholz reasonably relied on Ahern's nondisclosure, his case is damaged by the fact that the evidence is undisputed that Ahern did not actually solicit the waiver. Scholz' attorney contacted his counsel and offered it to him. Scholz explained his motivation at trial:


A. Well, I figured if I, if I finished the record six months later and I missed that date that Paul Ahern was entitled to his 12 percent of the royalties, you know, I missed that date and then six months later delivered the record, I was sure he would be upset about that and, and want his 12 percent anyway, and I didn't want to fight with him.


Q. And was it your intention at that time --


A. I had enough trouble at that point.


Q. And did you ask for anything in return for that waiver?


A. No.


(Day 10, pages 38-39). However, Scholz points to his testimony at trial that he "obviously" would not have agreed to the waiver had he known of Ahern's failure to pay him publishing royalties as evidence of his reliance. Giving Scholz the benefit of all the inferences, a reasonable juror could find under these circumstances that Ahern sought to induce Scholz into a fraudulent agreement, once it had been offered to him, through nondisclosure of his failure to pay. The presence of the fourth element, damages, Scholz contends, is witnessed by the fact that he now owes Ahern money: had he not waived the deadline, Ahern would not have been entitled to royalties from the third album. Given all of the above, we find that Scholz has mustered sufficient evidence for the issue to go to the jury.


B. Invalidation of the Waiver


In his Fourth and Fifth Affirmative Defenses, Scholz argues that the waiver should be invalidated because he did not knowingly give his consent. He maintains here that in order to prevail, all he must prove is that he would not have agreed to the waiver if he had known of Ahern's failure to account to and pay him royalties. Since he testified to that effect, he argues, the district court erred in granting a directed verdict. We disagree. First, we note that none of the cases Scholz looks to for support discuss invalidation as an affirmative defense under Federal Rule of Civil Procedure 8(c). Although the case law indicates that there is precedent for such an affirmative defense, see , e.g. , Unites States v. Krieger , 773 F. Supp. 580, 583 (S.D.N.Y. 1991) (denying summary judgment on, inter alia , claim for invalidity of guarantees despite failure to claim it as an affirmative defense), we have found, and the parties present, no comprehensive discussion of its nature. See 2A James Wm. Moore et al., Moore's Federal Practice ¶ 8.27[4] n.6 (2d ed. 1995) (listing most common affirmative defenses, excluding invalidity).


We find no other support for Scholz' position in the cases he cites. Allen , which he looks to for the proposition that all he has to prove is that he would not have agreed to the waiver, does not address invalidity of a waiver or release. Rather, it notes that a court may rescind a release "'where it finds either mutual mistake or one party's unilateral mistake coupled with some fraud . . . of the other party.'" Allen , 945 F.2d at 44 (quoting National Union Fire Ins. Co. v. Walton Ins. Ltd. , 696 F. Supp. 897, 902 (S.D.N.Y. 1988)). Scholz did not plead mutual mistake, and his rescission claim based on fraud is addressed above.


Scholz states that he does not have to show Ahern owed him a fiduciary duty in order to state a claim for invalidation. Indeed, the court in Allen notes that where one party has superior knowledge not available to the other party, a duty to disclose may arise, apparently exclusive of a fiduciary duty, id. at 45, but Scholz does not point to any evidence that he could not have discovered that Ahern had not been paying him. His reliance on Gishen v. Dura Corp. , 362 Mass. 177, 285 N.E.2d 117 (Mass. 1972), apparently for the proposition that "[a] party cannot waive information with respect to an error in calculation whose existence is unknown to him, particularly where his ignorance is caused by the very lack of disclosure in question and where the parties are not fully at arm's length," id. at 122, is misplaced. First and most importantly, under the choice-of-law provision of the FMA, the parties here are applying New York, not Massachusetts, law. Second, the Gishen opinion addressed a request for a jury instruction on waiver, which was denied because the party had not previously presented the argument; it does not involve an affirmative defense. Id. at 121. The quoted language is dicta -- and seems to undercut Scholz' proposition that a fiduciary relationship is not necessary.


Scholz' citation to Werking v. Amity Estates, Inc. , 137 N.E.2d 321 (N.Y. 1956), also proves unfruitful. There, the court defines a waiver as "'the intentional relinquishment of a known right with both knowledge of its existence and an intention to relinquish it.'" Id. at 327 (quoting Whitney on Contracts 273 (4th ed. 1946)). The court found the waiver in question, of jurisdictional defects in a tax sale of plaintiff's farm, invalid because plaintiff "had no knowledge of the right he is charged with having knowingly and intentionally relinquished." Id. Here, however, Scholz knew exactly what right he was relinquishing: the right not to pay Ahern 12 percent of the royalties from the third album.

 

MASSACHUSETTS LAW CLAIMS


We next turn to Ahern's claim against Scholz under Massachusetts General Law Chapter 93A, sections 2 and 11 ("Chapter 93A"). The district court found that Scholz' failure to pay royalties as provided in the FMA violated Chapter 93A. More specifically, it held that the Scholz Statement regarding the royalties on the third album constituted an unfair and deceptive business practice, and that it was a "deliberate and blatant attempt to deprive Plaintiff Ahern of moneys rightfully due and owing to him." (District Court Memorandum and Order, page 3). The court awarded Ahern $547,000 as well as costs, interest, and reasonable attorney's fees.


Scholz now contends that his actions do not rise to the level of unfair or deceptive trade practices within the meaning of Chapter 93A. Section 11 of Chapter 93A provides a cause of action to


[a]ny person who engages in the conduct of any trade or commerce and who suffers any loss of money or property, real or personal, as a result of the use or employment of another person who engages in any trade or commerce of . . . an unfair or deceptive act or practice . . . .


Mass. Gen. L. ch. 93A, § 11. [14] We begin with our standard of review; once it is established, we address Scholz' attack on the sufficiency of the district court's findings, and his contention that his acts did not rise to the level of "rascality" courts require of Chapter 93A violations. See Quaker State Oil Ref. Corp. v. Garrity Oil Co. , 884 F.2d 1510, 1513 (1st Cir. 1989). Because we ultimately find that the district court erred as a matter of law in finding that Scholz violated Chapter 93A, we need not address the defenses Scholz raises to the application of that Chapter.



 
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