These are civil actions commenced by Whitinsville Plaza, Inc. (Plaza), against Charles H. Kotseas and Paul Kotseas (Kotseas) and against Whitinsville CVS, Inc. (CVS). In its further amended complaint against Kotseas, Plaza alleged imminent violations of certain anticompetitive deed restrictions and requested declaratory, injunctive, and monetary relief under theories of breach of contract and unfair acts or practices within the meaning of G.L.c. 93A, § 2. Plaza's amended complaint against CVS likewise alleged imminent violations of the deed restrictions, and it requested declaratory, injunctive, and monetary relief on theories of breach of contract, unfair trade practices, and interference with contractual relations. A judge of the Superior Court granted the defendants' motions to dismiss for failure to state a claim. See Mass. R. Civ. P. 12 (b) (6), 365 Mass. 754 (1974).
In ruling on a motion to dismiss, "the allegations of the complaint [and annexed exhibits], as well as such inferences that may be drawn therefrom in the plaintiff's favor, are to be taken as true." Nader v. Citron, 372 Mass. 96, 98 (1977). Accord, Dziokonski v. Babineau, 375 Mass. 555, 556 (1978); Lantner v. Carson, 375 Mass. 606, 608 (1978). These are as follows. In 1968, Kotseas conveyed certain land identified as "Parcel A" to four individuals as trustees of the "122 Trust" (Trust), a wholly owned subsidiary of Plaza. The deed set forth numerous, detailed, reciprocal restrictions and covenants designed to assure the harmonious development of a shopping center on Parcel A and on abutting land retained by Kotseas. In particular, Kotseas promised (a) not to use the retained land in competition with the discount store contemplated by the grantee and (b) to use the retained land only for enumerated business purposes.
As against Kotseas, Plaza sought (a) an injunction prohibiting the use of the retained land in violation of the restrictions and (b) damages suffered because of the alleged violations. In the alternative, Plaza prayed for a declaration that its own land was no longer subject to the anticompetitive restrictions. Plaza also requested the court to find that Kotseas had knowingly and wilfully violated G.L.c. 93A, § 2, and to award double or treble damages and counsel fees. As against CVS, Plaza requested similar relief and also requested damages on the theory that CVS had tortiously interfered with Plaza's contract by inducing Kotseas to violate its restrictions. The defendants filed motions to dismiss, stating as grounds that Plaza lacked standing to sue on the covenants and that the covenants were, in any event, unreasonable and in restraint of trade.
The granting of the motions to dismiss raises a number of complex and somewhat interrelated issues. Our analysis
A. Real covenant analysis. Plaza has primarily sought to maintain its actions on the theory that the covenants contained in the 1968 deed run with the land. In our view, Plaza has alleged sufficient facts to be entitled to a hearing on its claims for legal and equitable relief on this theory. See generally 5 R. Powell, Real Property pars. 672-675, at 149-185 (P. Rohan rev. ed. 1979) (summarizing requirements for covenants to run with land). The covenants in question are evidenced by a writing signed by Kotseas, the covenantor. See Frank v. Visockas, 356 Mass. 227, 228-229 (1969) (equity action); Kennedy v. Owen, 136 Mass. 199, 203 (1884) (action at law); G.L.c. 259, § 1, Fourth (Statute of Frauds for interests in land). The language of the 1968 deed aptly expresses the intention of the original parties that the covenants run with the land. See Snow v. Van Dam, 291 Mass. 477, 480-481 (1935) (equity action); Savage v. Mason, 3 Cush. 500, 505 (1849) (action at law). The deed also grants mutual easements sufficient to satisfy the requirement that Plaza and CVS be in privity of estate. See, e.g., Morse v. Aldrich, 19 Pick. 449, 454 (1837) (action at law). Plaza's complaint alleges that CVS had actual knowledge of the restrictions and shows, in any event, that the restrictions were recorded with the deed. See, e.g., Whitney v. Union Ry., 11 Gray 359, 363-364 (1860) (notice required for existence of equitable servitude).
One additional prerequisite for either legal or equitable relief is, however, arguably lacking in this case on the present state of our case law. It is essential that both the benefit and the burden of a real covenant "touch and concern" the affected parcels of land before it will be considered to run. Orenberg v. Johnston, 269 Mass. 312, 316 (1929). Bronson v. Coffin, 118 Mass. 156, 163 (1875). Wheelock v. Thayer, 16 Pick. 68, 70 (1835). This court has long held that a covenant not to compete contained in a deed, such as is involved in this case, does not "touch and
It is essential to our task that we identify precisely the holding and rationale of the cases we propose to overrule. Norcross was an action seeking specific performance of a covenant not to quarry stone from a parcel of land. The covenant in question was contained in a deed by which one Kibbe conveyed a stone quarry to one Flynt, and it concerned adjoining land retained by Kibbe. The defendant James, a successor to Kibbe's interest, began operating a quarry on the restricted land. The plaintiff Norcross, a successor to Flynt's interest, sought an injunction to halt that operation. 140 Mass. at 188. In an opinion by Justice Holmes, this court denied relief. Id. at 192.
Justice Holmes analyzed the case before him in two steps. He first noted a distinction drawn in early English decisions between promises resembling warranties of title and those resembling grants of easements. Warranty-like covenants ran "with the estate" to grantees from the covenantee, but were enforceable only against the covenantor. Easement-like covenants, on the other hand, ran "with the land" in favor of and against subsequent owners. Id. at 188-190. See also O.W. Holmes, The Common Law 371-409 (1881) (developing historical analysis summarized later in Norcross opinion).
Having traced the development of the law of real covenants, Justice Holmes proceeded to determine whether the covenant could be encompassed within the easement-like class.
Two observations about Norcross are appropriate before we consider later developments. First of all, the benefit of the covenant surely touched and concerned the dominant estate within the ordinary sense and meaning of the phrase "touch and concern." Justice Holmes's analysis has been described as "overlook[ing] the purpose of all building restrictions, which is to enhance the market value of the promisee's land, whether for residential or for business purposes." 2 American Law of Property § 9.28, at 414 (Casner ed. 1952). It has been suggested that Justice Holmes's "real objection to [the covenant was] the policy against monopolies, and not any policy with reference to real covenants as such." C. Clark, Real Covenants and Other Interests Which "Run with Land" 84 n. 26 (1929). Cf. Norcross, 140 Mass. at 193 (unnecessary to decide whether covenant would be invalid restraint of trade if enforcement attempted against Kibbe). If free-competition policies were indeed the basis for the Norcross decision, it would now seem preferable for us to deal with them explicitly rather than to condemn all anticompetitive covenants regardless of reasonableness.
Second, Norcross seems to turn on an assumption that there could be no other class of covenants, differing both from easements and from warranties, but which might
Notwithstanding the questions inherent in the Norcross decision, this court uncritically followed that case in Shade v. M. O'Keefe, Inc., 260 Mass. 180 (1927). Like Norcross, Shade was a suit in equity by a successor to the promisee against a successor to the promisor seeking specific performance of an anticompetitive covenant. The covenant in question prohibited the operation of a grocery store on the defendant's land for ninety-nine years after 1902, the date of the original deed. 260 Mass. at 181-182. The court reiterated that, for a covenant to be enforceable in equity, it must accompany or create "an easement or quasi easement" in the promisor's land for the benefit of the promisee's land. Id. at 183. It thus followed the rule stated by Justice Holmes in Norcross.
This court next confronted the question raised by Norcross in Shell Oil Co. v. Henry Ouellette & Sons, 352 Mass. 725 (1967), which was a suit in equity by a remote grantee of the promisee against the original promisor and a potential purchaser of part of the burdened land. We there considered a broad and sweeping covenant restraining all uses of the defendants' land that would compete with an existing use of the plaintiff's land. 352 Mass. 726-727. We wrote, "There is much to be said for the position advanced by one of the amici curiae that it is not `unreasonable to approve covenants ... which protect ... [business] investments — very large in most instances — against competition close by,' where the protection will be very limited geographically and will not constitute, in the particular circumstances, an unreasonable restraint of trade. If we were without precedent, we might (in 1967 conditions) reach a conclusion different from that of our predecessors upon the facts which appeared in Norcross v. James, and in Shade v. M. O'Keefe, Inc. We recognize that there may be substantial reasons for permitting those, having privity of estate with a covenantee of a reasonable covenant restricting competition, to enforce such a covenant in equity against a person having (a) actual or constructive notice of the covenant, and (b) privity of estate with the covenantor." We nonetheless held Norcross controlling and ordered that the complaint be dismissed. Id. at 729-731. We did so primarily because of bar reliance on our earlier decisions, but we gave clear warning of our intention to reconsider Norcross "in the case of a reasonably limited covenant ... hereafter made, which shows clearly the parties' intention that the burden and benefit of the covenant are to run to successors in title of the covenantor and the covenantee." Id. at 730-731 & 731 n. 8.
In the Gulf Oil case, we ultimately held that the plaintiff might properly seek an injunction against the contemplated use by Mt. Hope. Id. at 501. We did not, however, explicitly overrule Norcross to reach this result. Instead, we noted that application of the Norcross rule had been limited to cases where "the plain and practically exclusive reason for the covenant was to eliminate possible competition for the promisee." Id. at 499. Reasoning that the covenants in Gulf Oil were primarily designed to foster planned growth of the redevelopment area and not to grant an individual landowner a monopoly, we concluded that the "touch and concern" requirement was met. Id. at 499-500.
Massachusetts has been practically alone in its position that covenants not to compete do not run with the land to which they relate. It has long been the opinion of text writers that our rule is anachronistic and in need of
In addition to the doctrinal questions about the Norcross rule and the preference of most authorities for a more flexible approach, we may note the unfairness that would result from applying that rule to the facts of this case. In what appears to have been an arm's-length transaction, Kotseas agreed in 1968 not to use retained land in competition with the Trust. We may assume (a) that Kotseas received compensation for thus giving up part of his ownership rights by limiting the uses he could make of the retained land, and (b) that freedom from destructive, next-door competition was part of the inducement for the Trust's purchase and of the price paid by the Trust. Plaza, a closely associated business entity, succeeded to the Trust's interest in 1975. One of these entities established a business, presumably at great cost to itself and in reliance on the contractually obtained limitation of competition in its own narrow market area. Notwithstanding the promise not to do so, Kotseas proceeded to lease land to CVS for the purpose of carrying on the business that it knew would, at least in part, compete with Plaza and divert customers from Plaza's premises. Acting with full knowledge of the 1968 arrangement, CVS participated in
We think the time has come to acknowledge the infirmities and inequities of Norcross. Prior decisions by this court establish what we believe is the proper direction. With respect to covenants in commercial leases, we have long held that reasonable anticompetitive covenants are enforceable by and against successors to the original parties. R.M. Sedrose, Inc. v. Mazmanian, 326 Mass. 578, 581 (1950). Parker v. Levin, 285 Mass. 125, 127 (1934). Sheff v. Candy Box Inc., 274 Mass. 402, 406 (1931). Strates v. Keniry, 231 Mass. 426, 429 (1918). We have applied a similar rule with respect to covenants between fee owners when we could identify intelligible land-use planning goals. Gulf Oil Corp. v. Fall River Hous. Auth., supra at 499-500. Jenney v. Hynes, 282 Mass. 182, 195 (1933). The distinction we attempted to draw in Gulf Oil between covenants intended to suppress competition and those aimed at orderly land development was, we think, in part an attempt to reconcile our decisions with the Norcross rule, but was perhaps otherwise untenable as a practical matter: it is difficult to separate over-all planning goals from the natural desire of businessmen-developers to be free from unlimited and ruinous competition by their neighbors. In short, our decisions support what we hereby state to be the law: reasonable covenants against competition may be considered to run with the land when they serve a purpose of facilitating orderly and harmonious development for commercial use. To the extent they are inconsistent with this statement, Norcross, Shade, and Ouellette are hereby expressly overruled.
We recognized in our decision in Ouellette that "[t]he fact of bar reliance in the past, however, must be given
What we have said should not be construed as an invitation to legal draftsmen to insert unlimited, "boilerplate"-type covenants against competition in real estate documents. As we have said, an enforceable covenant will be one which is consistent with a reasonable over-all purpose to develop real estate for commercial use. In addition, the ordinary requirements for creation and enforcement of real covenants must be met. We have summarized many of these requirements earlier in this opinion. Others are found in G.L.c. 184, §§ 27, 30, which regulate enforcement of land-use restrictions generally. Within these limits, however, commercial developers may control the course of development by reasonable restrictive covenants free from resort to devious subterfuges
B. Contract analysis. Although part I A. of this opinion indicates that each of Plaza's complaints states a cause of action and that, accordingly, neither should have been dismissed, we do not overlook the possibility of relief on a purely contractual basis. The deeds from Kotseas to the Trust and from the Trust to Plaza amply demonstrate an intention that the rights accruing under Kotseas's covenants were assignable and, hence, enforceable by Plaza against Kotseas. See Adamowicz v. Iwanicki, 286 Mass. 453, 456 (1934); Restatement (Second) of Contracts § 149, Comment d, Illustration 6 (Tent. Drafts 1-7, 1973). As an alternative to the remedy available on a real-covenant theory, Plaza may, on proper pleadings, prove facts sufficient to warrant contractual relief including an order directing Kotseas to enforce the deed restrictions against CVS. Moreover, such proof may be relevant to Plaza's complaint that CVS tortiously induced Kotseas to violate the provisions of the deed to the Trust. See Restatement (Second) of Torts § 766 (Tent. Draft No. 23, 1977).
The parties in this case have not briefed or argued the issues suggested by this cursory analysis of contract doctrines. We therefore stop short of extended discussion. See, e.g., Town Taxi Inc. v. Police Comm'r of Boston, 377 Mass. 576, 579 (1979); Mass. R.A.P. 16 (a) (4), as amended, 367 Mass. 919 (1975). Because the assignability of the benefit of Kotseas's contractual obligation presents an issue of fact, however, it was error to dismiss the claim based on CVS's alleged interference with that obligation.
C. Plaza's claims under G.L.c. 93A. What we have already said sufficiently establishes Plaza's right to proceed beyond the pleading stage on counts other than those seeking recovery under G.L.c. 93A. Therefore it is not strictly necessary that we consider separately whether the facts alleged in Plaza's complaints also state a claim for relief under G.L.c. 93A, §§ 2 (a) and 11. Nader
It would doubtless be helpful if there were a clear definition of conduct which may constitute a violation of c. 93A. Such a definition would assist litigants in identifying those cases which have only the normal incentives for settlement as distinguished from those which truly implicate the incentives under c. 93A. On the other hand there are some practical considerations which suggest that it might be unwise for us to attempt to formulate such a definition at so early a stage of this litigation. First, c. 93A is a relatively new statute. It was originally enacted in 1967 (St. 1967, c. 813, § 1), and § 11 was added thereto in 1972 (St. 1972, c. 614, § 2). There has not been a sufficient amount of litigation from which to develop definitions. Second, it would be preferable if a definition were formulated and developed with the benefit of a record of facts agreed upon or actually established by proof rather than from mere allegations in a complaint as in the present case. Commonwealth v. DeCotis, 366 Mass. 234, 241-242 (1974).
The plaintiff's allegations in support of its claim for relief under c. 93A are basically the following: the defendants, either alone or in concert, have violated the terms of a commercial agreement, and their conduct "constitutes unfair acts and practices prohibited" by the statute. We conclude that those allegations are not sufficient to
II. DEFENSE OF UNREASONABLENESS.
In addition to making the various arguments referred to in part I, the defendants in both cases argue that Plaza's complaints should be dismissed because the covenants sought to be enforced constitute an unreasonable restraint of trade. We cannot tell from the record on which of the several grounds stated in the motions the judge relied in ordering the actions dismissed. All issues raised by the defendants' arguments nonetheless remain open on appeal. Ciszewski v. Industrial Accident Bd., 367 Mass. 135, 138 (1975). Thomas Cook & Sons v. Assembled Homes, Inc., 357 Mass. 425, 426 (1970). Waldor Realty Corp. v. Town Clerk of Bellingham, 350 Mass. 669, 671 (1966). Affirmance of the dismissal on the ground of unreasonable restraint of trade might be proper, but only if we first held the covenants unenforceable as a matter of law. See Conley v. Gibson, 355 U.S. 41, 45-46 (1957). We cannot so hold on the factually barren record before us.
The defendants have relied in their briefs almost exclusively on consent decrees entered by the Federal Trade Commission and on unpublished decisions by trial courts in other States. These are not, however, authoritative interpretations of Federal law. See May Dep't Stores Co. v. First Hartford Corp., 435 F.Supp. 849, 852-853 (D. Conn. 1977), and cases cited. They do not establish that the facts disclosed by the record in this case constitute a per se violation of any Federal law. Goldschmid, Antitrust's Neglected Stepchild: A Proposal for Dealing with Restrictive Covenants under Federal Law, 73 Colum. L.
The defendants also argue that the restrictive covenants are illegal under the common law. Our law is settled that a covenant restraining competition will be enforced if it is reasonably limited in time and space and consonant with the public interest. Analogic Corp. v. Data Translation, Inc., 371 Mass. 643, 647 (1976). Loranger Constr. Co. v. C. Franklin Corp., 355 Mass. 727, 730 (1969). Thomas v. Paker, 327 Mass. 339, 341 (1951). Where a covenant restrains an individual employee from competing with his employer, we have insisted that the covenant be necessary for the protection of the employer, and we have accordingly identified only a few interests worthy of protection. See New England Canteen Serv., Inc. v. Ashley, 372 Mass. 671, 674 (1977), and cases cited. The cases of Marine Contractors Co. v. Hurley, 365 Mass. 280, 287-288 (1974), All Stainless, Inc. v. Colby, 364 Mass. 773, 779 (1974), and Richmond Bros. v. Westinghouse Broadcasting Co., 357 Mass. 106, 111 (1970), in which we have said that an employer is not entitled to protection from ordinary competition and on which the defendants rely, all embody our concern to preserve an individual's livelihood except in narrowly defined circumstances. The covenants involved here, however, impose no restraint on Kotseas's employment opportunities and, to the extent they may bind CVS, restrain a business entity rather than an individual. They are not rendered unenforceable merely because they protect an interest we might not recognize in any employment setting. Unreasonableness in time, space, or product line, or obstruction of the public
Finally, we reject the suggestions that, merely by bringing suit to enforce the 1968 restrictions, Plaza has violated the antitrust laws or c. 93A. Absent oppressive or vexatious misuse of legal process, it is not illegal to resort to the courts in an attempt to limit competition. Eastern R.R. Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127, 139 (1961). Cf. California Motor Transp. Co. v. Trucking Unlimited, 404 U.S. 508, 515 (1972). The present record suggests that Plaza has merely sought to enforce what it reasonably believes to be a lawful contractual obligation assumed by the defendants.
To the extent that they dismiss Plaza's claims under c. 93A, the judgments are affirmed without prejudice to Plaza's right to amend its complaints within a reasonable time hereafter. To the extent they dismiss Plaza's claims for violation of real covenants or for interference with contractual relations, the judgments are erroneous and must be vacated. The cases are remanded to the Superior Court for further proceedings consistent with this opinion.