Facts
- In 1968, Charles Kotseas conveyed “Parcel A” to trustees of the “122 Trust,” later associated with Whitinsville Plaza, Inc. (Plaza), as part of a planned shopping center.
- The 1968 deed included detailed reciprocal covenants regulating development of Parcel A and adjoining land retained by Kotseas.
- Kotseas covenanted not to use the retained land in competition with the discount store contemplated for Parcel A and to limit the retained land to specified commercial uses.
- The deed permitted a “drug store,” defined by an appended list of permissible merchandise categories.
- The deed stated the restrictions were intended to be covenants running with the land and binding on successors.
- Parcel A was developed as a discount department store site; in 1975 the Trust conveyed Parcel A to Plaza, expressly subjecting Plaza to and granting Plaza the benefit of the 1968 restrictions.
- In 1977, Kotseas leased part of the retained land to Whitinsville CVS, Inc. (CVS) for use as a “discount department store and pharmacy,” with the lease expressly subject to the deed restrictions.
- Plaza alleged CVS’s planned use would violate the noncompetition covenant and filed actions seeking declaratory, injunctive, and monetary relief against Kotseas and CVS, including claims under Mass. Gen. Laws ch. 93A and for interference with contractual relations.
Issues
- Whether the deed’s noncompetition covenant “touched and concerned” the land so as to run with the land and bind successors, including a commercial tenant on the retained land.
- Whether the covenant was unenforceable as an unreasonable restraint of trade or contrary to public policy.
- Whether the complaints stated claims for relief sufficient to survive dismissal under Mass. R. Civ. P. 12(b)(6).
Decision
- The Supreme Judicial Court granted direct appellate review and reversed the blanket Rule 12(b)(6) dismissals in part, remanding for further proceedings.
- The court held that reasonable noncompetition covenants connected to commercial land development can “touch and concern” the land and may run with the land.
- The court rejected a categorical rule that covenants not to compete never run with the land in Massachusetts.
- Applying the motion-to-dismiss standard, the court concluded the trial judge improperly resolved reasonableness and touch-and-concern questions against Plaza on the pleadings.
Legal Principles
- A covenant may run with the land when it has a substantial relationship to the land and its use (the “touch and concern” requirement), not merely to personal conduct.
- In commercial settings, a reasonable noncompetition covenant may touch and concern land when it is part of an integrated plan regulating uses to facilitate coordinated development (such as a shopping center).
- Enforceability depends on reasonableness; limits as to location, scope of prohibited competition, and connection to legitimate development objectives support validity against restraint-of-trade and public-policy challenges.
- Express intent in the instrument that benefits and burdens bind successors supports successor enforcement, subject to other servitude requirements.
- On a Rule 12(b)(6) motion, well-pleaded allegations and reasonable inferences must be taken as true; disputed factual and mixed law-fact questions about reasonableness and land-relatedness ordinarily are not resolved solely on the pleadings.
Conclusion
The court held that a shopping-center noncompetition covenant can run with the land when it reasonably relates to coordinated commercial development, and it reinstated portions of Plaza’s claims because dismissal on the pleadings improperly treated the covenant as incapable of running with the land and foreclosed fact-dependent questions of reasonableness.