Opinion
No. X-08 CV07-4012293S
March 11, 2010
Memorandum of Decision on Objections (Nos. 162, 165, and 166) to Plaintiff's Request for Leave to Amend Complaint (No. 161)
This case was commenced in April of 2007. It was originally scheduled to be tried commencing on April 14, 2009, but that date was extended at the request of all parties because of a stay of proceedings for the parties to exchange informal discovery and negotiate regarding a settlement of this broad ranging dispute. The trial of this case is currently scheduled to commence on October 19, 2010.
At issue is the disposition of the substantial assets of the plaintiffs' grandparents Richard and Elsie Ettinger. Mr. Ettinger co-founded Prentice Hall Corporation in 1913. The couple allegedly placed cash and securities including large blocks of Prentice Hall stock into various trusts created in 1929, 1931, 1942, 1947, 1967, and 1968. The plaintiff's mother Virginia P. Ettinger Andrews, one of the three children of Richard and Elsie Ettinger, became the beneficial owner of some of those trust assets and allegedly controlled more than one million shares of Prentice Hall stock at the time of her death in 1982. Mrs. Andrews allegedly established one or more trusts for and/ or bequeathed assets to her five children including the two plaintiffs Joan Andrews and Jane Goff. At issue is their claim that assets of their grandparents' and/or their mother were not properly accounted for or distributed to the plaintiffs. The defendants are United States Trust Company, alleged to have been the administrator and manager of various of the alleged trusts, an employee and a former employee of United States Trust Company, and the plaintiffs' aunt Elaine Hapgood, alleged to be a trustee of one of the trusts.
The original 2007 complaint sounded in nine counts: (1) Accounting of the 1929 Trust (as to all defendants); (2) Accounting as to the 1967 Trust (as to the defendants U.S. Trust, Sartorius, and Ramsay); (3) Accounting of the 1967 Ettinger Trust (as to defendants Hapgood and Ramsay); (4) (Accounting of the Other Trusts (as to all defendants); (5) Breach of Fiduciary Duty (as to all defendants); (6) Conversion of Funds (as to all defendants); (7) Unjust Enrichment (as to all defendants); (8) CUTPA (as to all defendants); and (9) Constructive Trust (as to all defendants). In January of 2008, after U.S. Trust had provided the plaintiffs with documentary discovery regarding the various trusts, including evidence of approved accountings and final distributions of certain trusts, the plaintiffs filed an amended complaint in six counts: (1) Accounting of Prentice Hall Stock owned by Virginia P. Ettinger Andrews (as to all defendants); (2) (denominated as "Count Five" but obviously meant to be Count Two) Breach of Fiduciary Duty (as to all defendants); (3) Conversion of Funds (as to all defendants); (4) Unjust Enrichment (as to all defendants); (5) CUTPA (as to defendants U.S. Trust and Ramsey); (6) Constructive Trust (as to all defendants). The original Counts One, Two, and Three of the 2007 complaint, seeking accountings of specific trusts, and Count Four, seeking an accountings of "the other trusts" were not re-alleged in the 2008 amended complaint and were therefore abandoned and no longer claimed in the case. Also, Count Two of the 2007 complaint had been the only count specifically directed by name against the defendant John M. Sartorious, Jr. He suggests he was dropped as a defendant when the original Count Two was not re-alleged in the 2008 amended complaint, although Counts One, Two, Three Four, and Six of that amended complaint continue to be directed to "all defendants." Since no withdrawal of action as to defendant Sartorious has been filed, he remained as a defendant in the case with respect to claims directed against "all defendants."
This count is in the second position of the counts alleged in the amended complaint. They are numbered, One, Five, Three, Four, Five, Six, Seven, Eight.
Now before the court are defendants' objections to plaintiffs' Request for Leave to Amend by filing a Second Amended Complaint dated August 13, 2009. In the proposed Second Amended Complaint the plaintiffs would allege (following a detailed 35-paragraph description of the parties, including John Sartorious, Jr. as a defendant, and the "background" facts, many of which are alleged on "information and belief"), seven counts: (1) Fraud (naming in ¶ 37 defendants Hapgood, U.S. Trust, Sartorious, and Ramsey, being all of the defendants); (2) Accounting (seeking from "all defendants" an "accounting concerning each of the trusts described in this Second Amended Complaint"); (3) Breach of Fiduciary Duty (directed to "each of the defendants" as alleged fiduciaries of the plaintiffs); (4) Conversion of Funds (directed simply to unspecified "defendants"); (5) Unjust Enrichment (also directed simply to unspecified "defendants"); (6) CUTPA (directed to defendants U.S. Trust, Ramsay, and Sartorious); and (7) Constructive Trust (directed to "defendants").
Count Three (Breach of Fiduciary Duty) of the proposed Second Amended Complaint is virtually identical to Count Two (erroneously called Count Five) of the existing 2008 Amended Complaint, and may be filed.
Count Four (Conversion of Funds) of the proposed Second Amended Complaint is likewise virtually identical to Count Three of the 2008 Amended Complaint. The proposed amendment is less specific in one way. In 2008 the claim of conversion was expressly made "As to All Defendants." The proposed Count Four is directed to unspecified "defendants." That is a detail that can be addressed if necessary by a Request to Revise. Count Four of the proposed Second Amended Complaint may also be filed.
Count Five of the proposed Second Amended Complaint (Unjust Enrichment) is similar to Count Four of the 2008 Amended Complaint except that, just as with regard to the conversion counts, this proposed count also is no longer directed to "all defendants" but just to unspecified "defendants," and, more significantly, the basic allegation of wrongdoing which is alleged in the existing 2008 Amended Complaint as a fact ("Defendants have been unjustly enriched . . .") is now alleged simply "on information and belief." (¶ 53.) This latter change is troubling to the court. After three years of litigation and the opportunity to conduct discovery, and the actual receipt of what is claimed to be extensive discovery provided by U.S. Trust during the period of stay for settlement negotiations, and now at a point some seven months before trial with the discovery deadline expiring imminently (May 15, 2010 per Case Management Order No. 2) one would expect that key allegations if anything would be more definite and factual, and not attenuated by the hedging "information and belief" qualification. Although "information and belief" pleading of facts is not uncommon, the actual rule of practice is that an attorney's signature on any pleading ". . . shall constitute a certificate that . . . that to the best of the signer's knowledge, information and belief there is good ground to support it." (Emphasis added.) Practice Book § 4-2(b). There is appellate authority, however, suggesting that "information and belief" pleading satisfies Connecticut's fact pleading standard. See ABB Automation v. Zaharna, 77 Conn.App. 260, 265-67 (2003). The differences between the 2008 Amended Complaint and the proposed Second Amended Complaint with regard to pleading Unjust Enrichment are therefore not sufficient cause to deny the amendment. The proposed Count Five may be filed.
"Information and belief" is also alleged as to Conversion of Funds (proposed Count Four), but it is also alleged that way in the existing 2008 amended complaint, so there is no change with respect to that count. The "information and belief" qualifier is, however, a change with respect to Unjust Enrichment (proposed Count Five).
The proposed CUTPA count (Count Six) is patterned after the existing CUTPA count which is Count Five of the 2008 Amended Complaint. The differences are that defendant Sartorious has been added as a target of this claim in addition to U.S. Trust and Ramsay, and the previous allegation that the defendants "were engaged in trade or commerce within the meaning of [the CUTPA statute]" has been omitted. That omission may go to the sufficiency of the count to state a CUTPA claim, but it is well established that the fact that the allegations are factually inaccurate or legally insufficient are not grounds for denying permission to file them. Those issues are properly raised by motion to strike or motion for summary judgment after the amendments are filed, and should not be decided preliminarily in conjunction with a motion to amend. Smith v. Furness, 117 Conn. 97, 99-100 (1933) ("The trial court in so deciding erred in that substantive rights are not to be determined upon a motion for permission to amend"); Jimmie's, Incorporated v. Planning Zoning Commission of the City of West Haven, Docket No. CV06-4018289S, Superior Court, Judicial District of New Haven (June 15, 2006, Corradino, J.) (2006 WL1828469 (Conn.Super,); 41 Conn. L. Rptr. 516) (". . . [a] ruling on a motion to amend pleadings should not be a vehicle to decide an issue of law," quoting from Horton Knox, Connecticut Civil Procedure, p. 490 commentary to Practice Book § 10-60); and Solomon v. Liquor Control Commission, 8 Conn.Sup. 511 (1940) (". . . [n]either does the granting of the motion [to amend answer] have the effect of giving sanction or refusing it, to the claims made . . . in support of such motion, as concerns the effect of the amendment, if and when filed, upon the fate of the proceedings"). And, the addition of defendant Sartorious as a an alleged CUTPA violator is allowed. As previously indicated, he has remained as a defendant throughout the pendency of this case and several other claims are directed against him under the category "all defendants."
The more difficult issues are whether or not the court should allow at this stage of the proceedings a wholly new claim of fraud against all defendants (proposed Count One), and the resurrection of the previously abandoned 2007 claims for trust accountings in the form of a single new omnibus count (proposed Count Two) seeking an accounting from all defendants as to "each of the trusts described in this Second Amended Complaint." For the reasons to be stated herein the objections will be sustained to proposed Count One and Count Two.
From the court's reading of the proposed Second Amended Complaint there are nine such alleged trusts, created over a span of almost forty years. 1929, 1931, 1942, 1947 (two trusts), 1967 amended in 1972, 1968 (two trusts) and a profit sharing trust for grandchildren created on a date unknown to plaintiffs.
The standard on requests for pretrial amendments has been clearly stated by the Appellate Court:
In the interest of justice, our courts have generally been most liberal in allowing amendments. Where a sound reason to amend is shown, the court must allow the amendment. Refusal under such circumstances constitutes an abuse of discretion. The essential tests are whether the ruling of the court will work an injustice to either [party] and whether the granting of the motion will unduly delay a trial. In the final analysis, the court will allow an amendment unless it will cause an unreasonable delay, mislead the opposing party, take unfair advantage of the opposing party or confuse the issues, or if there has been negligence or laches attaching to the offering party. (Internal quotation marks and citations omitted.)
Moore v. Sergi, 38 Conn.App. 829, 835-36. (1995).
Even under our liberal amendment policy, the proposed fraud count (Count One) fails to satisfy the test. A fraud allegation against four defendants relating to events going back perhaps as much as eighty years, raised after three years of litigation, within seven months of a trial date, with discovery deadlines closing in two months, is simply asking too much and creates significant prejudice to the defendants. Adding this count would inevitably cause a substantial delay of the trial date, already once continued for 18 months. The court cannot see any reason other than negligence or laches why this claim is made for the first time at this late date. There is no allegation or argument of newly discovered evidence of fraud. In fact the plaintiffs have alleged all along (apparently in anticipation of a statute of limitations defense) that the conduct of the defendants alleged in the existing counts has been fraudulently concealed in violation of Conn. Gen. Stat. § 52-595. If they were aware of that alleged fraud when the case was commenced in 2007, surely they would also have been aware at least generally of the fraud they now propose to allege. Although, as previously discussed, an amendment should not be disallowed for legal insufficiency, this proposed amendment can be disallowed for its total failure to adhere to Connecticut pleading requirements.
If fraudulent concealment to avoid a statute of limitations defense is all that plaintiffs are trying to plead in the proposed Count One, they have already pleaded that theory in the existing 2008 Amended Complaint. (Count One, ¶ 18, incorporated into all subsequent counts.)
Each pleading shall contain a plain and concise statement of the material facts on which the pleader relies, but not of the evidence by which they are to be proved, such statement to be divided into paragraphs numbered consecutively, each containing as nearly as may be a separate allegation.
Practice Book § 10-1
The first pleading on the part of the plaintiff shall be known as the complaint. It shall contain a concise statement of the facts constituting the cause of action . . .
Practice Book § 10-20
There is a heightened pleading requirement for causes of action based on fraud. "Because the standard of proof at trial is heightened, so too is the standard for pleading a cause of action. Thus, [w]here a claim for damages is based upon fraud, the mere allegation that a fraud has been perpetrated is insufficient; the specific acts relied upon must be set forth in the complaint. Maruca v. Phillips, 139 Conn. 79, 81 (1952). A plaintiff cannot make general assertions of fraudulent misrepresentations, but must plead particular facts demonstrating what the representations were and how they were false. Plotkin v. Barot, Docket No. CV97-0346547, Superior Court, Judicial District of Fairfield (June 15, 1999, Skolnick, J.), (Striking fraudulent misrepresentation count for failure to specifically allege what the statements were or the reason they were false); Chestnut v. Kent, Docket No. CV97-0346653, Superior Court, Judicial District of Fairfield, (April 17, 1998, Skolnick, J.), ( 22 Conn. L. Rptr. 29). Here the plaintiffs have merged into one count general claims of alleged fraud of four defendants occupying various alleged positions with respect to nine trusts created and administered over the last half century or more without any specific facts as to which defendant made what statement which was false for what reason, or which defendant concealed which fact under what circumstances creating an obligation to disclose. When there are multiple defendants, the complaint must be pleaded so as to make clear which statements of material fact apply to, and which causes of action are interposed against, each defendant. Stated otherwise, a defendant should know the factual allegations that are directed to it and which causes of action it must defend against. See, e.g. Walker Manor Environmental Trust v. Oyster Landing Condominium Ass'n, Docket No. CV06-4006038, Superior Court, Judicial District of Ansonia-Milford at Derby (December 22, 2006, Esposito, J.) 2006 Ct.Sup. 23796 ("It is apparent from the complaint . . . that confusion exists as to what cause of action the Plaintiffs are asserting and to which defendants the claims apply"). This is far more than a count that lacks legal sufficiency to state a cause of action in fraud. It is a count that wholly fails to comply with applicable rules of pleading a fraud claim against multiple defendants involving multiple trusts over a period of many years. The request to add Count One is therefore denied.
Count Two asks for an accounting of by all defendants concerning each of the nine trusts alleged in the proposed Second Amended Complaint. The original 2007 complaint asked for accountings, but did so by at least breaking some of the claims regarding separate trusts into separate counts identifying the applicable defendants. Count One asked all defendants to account regarding the 1929 trust. Count Two asked defendants U.S. Trust, Sartorious, and Ramsey to account regarding the 1967 trust. Count Three asked the defendants Hapgood and Ramsey to account regarding the 1967 Ettinger trust. Count Four asks all defendants to account as to "the other trusts."
The proposed requested amendment to put back in one conglomerate count a request for four parties to account regarding nine trusts is denied. Plaintiffs obviously knew about the trusts and the alleged failures to account when they started the case back in 2007. Then, after receiving informal documentary discovery from U.S. Trust, they in effect withdrew those claims when they amended the complaint in 2008. There is no explanation why the court should allow those claims to be revived at this late stage of the litigation, more than two years after they were abandoned. To allow that to be done without any explanation would cause undue prejudice to the defendants, and would almost certainly delay once again the trial date, especially since the plaintiffs have chosen for some unknown reason to plead the accounting claim in one all-inclusive count with less specificity than even the four counts pleaded in 2007. The same disregard of rules of pleading as was discussed above with respect the proposed fraud count applies here with respect to the proposed Count Two seeking trust accountings. The request to amend by adding Count Two to the Second Amended Count is denied.
Order
The defendants' objections to the plaintiffs' Request for Leave to Amend Complaint are sustained as to Count One and Count Two of the proposed Second Amended Complaint, and overruled as to Counts Three, Four, Five, Six and Seven of the Proposed Second Amended Complaint.