‘Trade Or Commerce’ As A Threshold Issue Under Chapter 93A: Lessons For Professional Services Litigation

In Vuuren v. Lowenstein Sandler LLP, a Massachusetts Superior Court judge entered summary judgment for the defendant in the plaintiff’s Chapter 93A, Section 11 claim based on the plaintiff’s failure to prove the defendant was acting in “trade or commerce.” The plaintiff, Hugo Van Vuuren, a South African citizen and co-founder of the venture capital fund Xfund, sued law firm Lowenstein Sandler LLP and its partner Marie DeFalco on multiple grounds, including an alleged violation of Massachusetts General Laws Chapter 93A, Section 11. Van Vuuren contended that Lowenstein and DeFalco engaged in unfair or deceptive acts or practices by communicating with U.S. immigration authorities to have his O-1 visa revoked and by allegedly assisting his former business partner, Patrick Chung, in providing information to a U.S. consulate that resulted in Van Vuuren being deemed ineligible for any future visa.

The central and dispositive issue with respect to the Chapter 93A claim was whether Lowenstein and DeFalco’s conduct occurred within “trade or commerce.” Chapter 93A prohibits unfair or deceptive acts or practices only when they occur “in the conduct of any trade or commerce,” and this requirement applies equally to business-versus-business claims brought under Section 11. The court emphasized that the “trade or commerce” requirement is satisfied only when the defendant was operating in a “business context” at the time of the allegedly unfair or deceptive activity. A plaintiff may establish the requisite business context by demonstrating either that the defendant had a commercial relationship with the plaintiff or that the defendant’s actions interfered with trade or commerce in some independent way. Van Vuuren was unable to satisfy either avenue of proof.

First, a critical and undisputed fact was that Lowenstein and DeFalco never represented Van Vuuren in any capacity. Lowenstein was retained in February 2016 solely to represent the Xfund entities – specifically the management company and the general partner – in connection with general corporate matters. The firm’s engagement letter expressly stated that Lowenstein had not agreed to represent any member or other person in their individual capacity. From the moment Lowenstein entered the picture, Van Vuuren was represented by his own separate counsel, and Van Vuuren’s own attorneys acknowledged in writing as early as March 10, 2016, that “Lowenstein Sandler is not representing Hugo’s interests in the management company or the General Partner.” Because no attorney-client relationship, or any other commercial relationship, ever existed between Lowenstein and Van Vuuren, the court found there was no basis upon which to anchor a Chapter 93A claim.

Second, the court rejected Van Vuuren’s attempt to establish the trade or commerce element through the alternative theory that Lowenstein’s conduct interfered with trade or commerce more broadly. The court found that Van Vuuren’s O-1 visa status was a purely personal matter with no connection to trade or commerce. His visa was tied to his employment by the Xfund entities, and once that employment was terminated and Xfund withdrew its sponsorship, the visa issue became a personal consequence of a private business dispute rather than a matter implicating trade or commerce. Similarly, the assistance that Lowenstein and DeFalco provided to Xfund in connection with the immigration matter concerned a private dispute between two members of closely held LLCs and therefore did not occur in trade or commerce. The court drew on Kurker v. Hill, 44 Mass. App. Ct. 184 (1998), which held that attorneys who allegedly helped majority shareholders freeze out a minority shareholder were not engaged in trade or commerce because the freeze-out was a private grievance rather than a commercial activity.

The court also noted that the absence of any fiduciary duty owed by Lowenstein and DeFalco to Van Vuuren was independently fatal to the Chapter 93A claim. The court acknowledged that, had a fiduciary relationship existed – or even a relationship “sufficiently akin” to an attorney-client relationship – that might have satisfied the trade or commerce requirement, relying on the Appeals Court’s decision in Baker v. Wilmer Cutler Pickering Hale & Dorr LLP, 91 Mass. App. Ct. 835 (2017). However, because the court had already determined that no such relationship existed, that avenue was foreclosed. This illustrates how the Chapter 93A analysis in the context of professional services claims is closely intertwined with the fiduciary duty analysis – a finding that no fiduciary or analogous relationship existed may bear directly on the Chapter 93A claim as well.

The court’s ruling on the Chapter 93A claim offers several analytical observations relevant to practitioners handling similar matters. The decision addresses the principle that a law firm retained to represent an entity does not thereby automatically expose itself to Chapter 93A liability to adverse parties or non-clients simply because its representation benefits the majority owner at the expense of a minority owner. Where the firm has no commercial relationship with the plaintiff, where its conduct is confined to advising its actual client in connection with a private intra-company dispute, and where the plaintiff’s alleged injury – such as the loss of a visa – does not itself constitute an interference with trade or commerce, the court found that Chapter 93A did not provide a remedy. Practitioners handling similar matters may wish to examine the threshold “trade or commerce” element at the pleading and summary judgment stages, as the court’s analysis suggests it may present a distinct basis for dismissal independent of the merits of the underlying misconduct allegations.

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