Arbitration Waiver Violates Chapter 93A

A Massachusetts Superior Court Judge has held that a contractor’s failure to register with the Commonwealth under Mass. Gen. Laws. Chapter 142A constitutes an injury under Mass. Gen. Laws c. 93A (the Massachusetts Consumer Protection Statute). See Groleau v. Russo-Gariele, Norfolk Superior Court, Civil Action No. 2012-01818.  Chapter 142A regulates the home improvement contracting industry and allows a homeowner to submit disputes under the Home Improvement Contractor Arbitration Program (“HICARB”).

The homeowner hired the contractor to perform work on her home.  The contractor told the homeowner she needed to sign an “Affidavit/Home Improvement Contractor Law Supplement to Permit Application” in order to get a building permit.  The affidavit identified the contractor as a “Home Improvement Contractor” and contained language at the bottom indicating that homeowners dealing with unregistered contractors did not have access to HICARB.  At the time, the contractor was not registered with the Commonwealth.  He did not inform the homeowner of this.

Prior to completion of the project, the contractor stopped working on the property and sued the homeowner for unpaid amounts.  The homeowner counterclaimed alleging breach of contract, as well as violations of Chapters 142A and 93A.  At the conclusion of the jury-waived trial, the judge found that the homeowner owed the contractor $1,988.  However, he also found that the contractor violated Chapter 142A by operating without a certificate of registration.  The judge found that the homeowner could show actual damage stemming from the contractor’s failure to register because she lost the ability to arbitrate the dispute, which may have resulted in significant additional attorneys’ fees.

In finding that the homeowner sustained “injury,” the judge found that the contractor abandoned the project without justification, given that he was not owed substantial funds, and had accepted payment for work he had not performed.  The judge held that the abandonment caused additional costs attributable to the completion of work within the scope of the contract and deprivation of occupancy of the property that the homeowner otherwise would have enjoyed.  The judge dismissed the contractor’s argument that signing the affidavit waived the plaintiff’s right to arbitrate, noting that Chapter 142A makes it unlawful for any agreement for residential contracting services to contain a provision that would waive any rights conveyed to the owner under that chapter.  Additionally, the judge held that the affidavit did not actually waive the owner’s statutory rights by its terms.  The affidavit also does not waive Chapter 142A rights in a clear and conspicuous way as would be expected in a consumer transaction in which a business owner claims a consumer has waived consumer protection rights.  The judge noted that the information in the affidavit referencing unregistered contractors was merely a “notice” and is not suggestive of a waiver of statutory rights is signed by the homeowner.

The judge entered judgment for the homeowner on her Chapter 93A claim, which allows her to submit a motion for the contractor to pay her legal fees and costs.  This case shows how the courts will work to invalidate written agreements that require a consumer to give up a statutorily protected consumer right and will also invalidate agreements that include waivers which are not “clear and conspicuous.”