Opinion
HHDCV156059731S
03-08-2016
Brignole, Bush & Lewis, LLC v. Justin Freeman dba Law Office of Justin C. Freeman et al
UNPUBLISHED OPINION
MEMORANDUM OF DECISION RE MOTIONS TO STRIKE (#114 AND #115)
Sheila A. Huddleston, Judge.
This case arises out of a dispute over legal fees owed to a law firm after an attorney left the firm, taking some twenty cases with him to a new firm. The plaintiff, his former employer, seeks to recover a proportionate share of legal fees from funds resulting from the settlement of certain of those cases. The defendants are the attorney and the law firm with which he now practices. The defendants have moved separately to strike counts sounding in conversion, accounting, violation of the Connecticut Unfair Trade Practices Act (CUTPA), and breach of fiduciary duty. Although each defendant filed a motion to strike, the arguments made by each as to the conversion, CUTPA, and breach of fiduciary duty claims are essentially identical, as are the arguments in opposition by the plaintiff. The court will therefore address both motions to strike in this decision. For the reasons discussed below, the motion to strike are denied as to the claims for conversion and accounting, but are granted as to the claims for breach of fiduciary duty and CUTPA.
RELEVANT FACTUAL ALLEGATIONS
On May 26, 2015, the plaintiff, Brignole, Bush & Lewis, LLC, filed an eleven-count complaint against the defendants, Justin Freeman d/b/a Law Office of Justin C. Freeman (Freeman firm) and J. Xavier Pryor (Pryor). The complaint alleges the following facts. Pryor, an attorney formerly employed by the plaintiff, left the plaintiff law firm in February 2014 and began working at the Freeman firm, taking twenty files with him. On February 19, 2014, Pryor, as agent, servant and employee of the Freeman firm and individually, agreed, in writing, to maintain the plaintiffs fee as a lien against all settlement proceeds for the plaintiff's legal fees, and to hold the fees, in accordance with the Connecticut Bar Association Committee on Professional Ethics Formal Opinion No. 31 (Opinion 31), until the parties could determine the division of the fees between the two firms. The defendants reimbursed the plaintiff for the costs it had incurred with respect to each of the twenty transferred files.
As originally issued in 1978, Opinion 31 required a new attorney taking over a contingency fee case to make arrangements for the payment of the initial lawyer's fee or to hold the fee in his clients' funds account until any dispute over the fee was resolved. In 1988, however, after the Supreme Court's decision in Marsh, Day & Calhoun, the committee on professional ethics issued a revised version (Revised Opinion 31). See Bershtein, Bershtein and Bershtein v. Nemeth, 221 Conn. 236, 240 n.5, 603 A.2d 389 (1992). Revised Opinion 31 addresses the obligations of the discharged lawyer rather than the new lawyer. It provides in relevant part: " [A] discharged lawyer on a contingency fee violates Rule 1.16 (d) when he retains the file after demand for its surrender if (a) there is an agreement with the client or successor counsel concerning payment of fees and expenses or (b) successor counsel provides the discharged lawyer with a letter that he will hold in his clients' funds sufficient proceeds from the settlement to pay the discharged lawyer what he would have been entitled to under his contingency fee agreement . . . until the fee dispute is resolved by a court or otherwise." Id. Rule 1.16(d) of the Rules of Professional Conduct provides in relevant part: " Upon termination of representation, a lawyer shall take steps to the extent reasonably practicable to protect a client's interests, such as . . . surrendering papers and property to which the client is entitled . . . The lawyer may retain papers relating to the client to the extent permitted by other law." Id.
In August 2014, Pryor notified the plaintiff that he had settled one of the cases and agreed, in writing, that one-third of the attorneys fee in the case would be remitted to the plaintiff. The plaintiff, however, never received that payment, and the Freeman firm subsequently denied that Pryor had authority to enter such an agreement.
Subsequently, the plaintiff discovered that several other cases that had been transferred to the defendants had in fact settled without notice to the plaintiff. The plaintiff learned that the Freeman firm refused to recognize the plaintiff's liens on the settlement proceeds. As of March 10, 2015, a total of six cases had been settled without paying the plaintiff its share of the fees. The plaintiff notified the defendants that it wished to engage in the Connecticut Bar Association's fee dispute resolution program, but the defendants refused.
Counts one through six are brought against the Freeman firm. The first two counts allege breach of contract claims for legal fees relating to six specific cases; count three alleges a claim of conversion; count four is an accounting claim; count five alleges a CUTPA violation; and count six alleges a breach of fiduciary duty. Counts seven through eleven are brought against Pryor individually and repeat the allegations of breach of contract, conversion, CUTPA, and breach of fiduciary duty in essentially the same form as the claims asserted against the Freeman firm.
On September 22, 2015, the Freeman firm filed a motion to strike counts three (conversion), four (accounting), five (CUTPA), and six (breach of fiduciary duty). (Motion #115.) On the same date, Pryor filed a motion to strike counts nine (conversion), ten (CUTPA), and eleven (breach of fiduciary duty). (Motion #114.) On October 27, 2015, the plaintiff filed a memorandum in law in opposition to each motion to strike. The court heard oral arguments on the motions and objections at short calendar on November 23, 2015.
DISCUSSION
" A motion to strike challenges the legal sufficiency of a pleading, and, consequently, requires no factual findings by the trial court." (Internal quotation marks omitted.) Simms v. Seaman, 308 Conn. 523, 529, 69 A.3d 880 (2013). Courts must " construe the complaint in the manner most favorable to sustaining its legal sufficiency." Coppola Construction Co., Inc. v. Hoffman Enterprises Ltd. Partnership, 309 Conn. 342, 350, 71 A.3d 480 (2013). " [P]leadings must be construed broadly and realistically, rather than narrowly and technically." Id. " [A]ll well-pleaded facts and those facts necessarily implied from the allegations are taken as admitted." Id.
" A motion to strike admits all facts well pleaded; it does not admit legal conclusions or the truth or accuracy of opinions stated in the pleadings." (Emphasis in original; internal quotation marks omitted.) Faulkner v. United Technologies Corp., 240 Conn. 576, 588, 693 A.2d 293 (1997). Much of the plaintiff's opposition to the motion to strike relies on the plaintiff's legal conclusion, asserted throughout the complaint, that Opinion 31 and Rule 1.15 of the Rules of Professional Conduct establish legal standards for civil liability. The court disagrees. Opinion 31, like all opinions of the Bar Association's Committee on Professional Ethics, is purely advisory. See Marsh, Day & Calhoun v. Solomon, 204 Conn. 639, 646 n.4, 529 A.2d 702 (1987). It does not, in and of itself, impose a legal duty. Similarly, the Supreme Court has repeatedly held that the Rules of Professional Conduct are not intended to be the basis of civil liability claims. See Biller Associates v. Peterken, 269 Conn. 716, 723, 849 A.2d 847 (2004).
While the court does not rely on the legal conclusions expressed by the plaintiff in its complaint and in its opposition to the motion to strike, it does consider the facts alleged: namely, that the defendants agreed in writing to hold any attorneys fees they obtained on the transferred files in their clients' funds account, in accordance with Opinion 31, until the appropriate division of the fees was determined, and that they then failed to do so.
I
CONVERSION
The Freeman firm and Pryor argue that liens are not subject to claims of conversion and that the plaintiff fails to identify property in which it has a possessory interest. They argue that a lien is merely a debt and mere debts cannot form the basis for a conversion claim. Based on the facts alleged in the complaint, the court disagrees.
" The tort of [c]onversion occurs when one, without authorization, assumes and exercises ownership over property belonging to another, to the exclusion of the owner's rights . . . Thus, [c]onversion is some unauthorized act which deprives another of his property permanently or for an indefinite time; some unauthorized assumption and exercise of the powers of the owner to his harm. The essence of the wrong is that the property rights of the plaintiff have been dealt with in a manner adverse to him, inconsistent with his right of dominion and to his harm . . . The term owner is one of general application and includes one having an interest other than the full legal and beneficial title." (Citation omitted; internal quotation marks omitted.) Deming v. Nationwide Mutual Ins. Co., 279 Conn. 745, 770, 905 A.2d 623 (2006).
" Under our case law, [m]oney can clearly be the subject to conversion. See Devitt v. Manulik, 176 Conn. 657, 662-63, 410 A.2d 465 (1979) (recovery of money wrongfully taken from joint survivorship bank account); Dunham v. Cox, 81 Conn. 268, 270-71, 70 A. 1033 (1908) (recovery of a sum of money entrusted to the defendant for payment to a third person); Shelby Mutual Ins. Co. v. Della Ghelfa, 3 Conn.App. 432, 435, 489 A.2d 398 (1985), aff'd, 200 Conn. 630, 513 A.2d 52 (1986) (recovery by insurer from insured's attorney pursuant to General Statutes [Rev. to 1979] § 38-325[b]) . . . The plaintiffs must establish, however, legal ownership or right to possession of specifically identifiable moneys." (Citations omitted; internal quotation marks omitted.) Deming v. Nationwide Mutual Ins. Co., supra, 279 Conn. 771-72. In Macomber v. Travelers Property & Casualty Corp., 261 Conn. 620, 649, 804 A.2d 180 (2002), our Supreme Court cited with approval decisions from other jurisdictions setting forth the general rule that an action for conversion of funds may not be maintained to satisfy a mere obligation to pay money. Rather, " [i]t must be shown that the money claimed, or its equivalent, at all times belonged to the plaintiff and that the defendant converted it to his own use . . . Thus, [t]he requirement that the money be identified as a specific chattel does not permit as a subject of conversion an indebtedness which may be discharged by the payment of money generally . . . A mere obligation to pay money may not be enforced by a conversion action . . . and an action in tort is inappropriate where the basis of the suit is a contract, either express or implied . . . Consistent with this rule, in our case law sustaining a cause of action wherein money was the subject of the conversion or theft, the plaintiffs in those cases at one time had possession of, or legal title to, the money." (Citations omitted; internal quotation marks omitted.) Deming v. Nationwide Mutual Ins. Co., supra, 279 Conn. 772.
Our courts have previously held that the failure of an attorney to honor a lien or obligation which has been properly asserted constitutes conversion. See State v. Angelo, 39 Conn.App. 709, 713, 667 A.2d 81(1995); Shelby Mutual Insurance Co. v. Della Ghelfa, supra, 3 Conn.App. 435; State v. Blawie, 31 Conn.Supp. 552, 558, 334 A.2d 484 (1974). Under the common law of Connecticut, attorneys may assert both a self-executing retaining lien on a client's files and a charging lien on funds recovered by a client as a result of the attorney's work. See Marsh, Day & Calhoun v. Solomon, supra, 204 Conn. 648-49. " An attorney's retaining lien is a possessory lien on a client's papers and files that the attorney holds until his fee has been paid . . . A retaining lien differs from a charging lien, which is a lien placed upon any money recovery or fund due the client at the conclusion of the suit." (Citations omitted.) Id., 643. While, in Connecticut, clients have a recognized right to change attorneys, attorneys also have the right to receive payments for the services they have rendered. See id., 648-49. " [B]arring unusual circumstances, such as prejudice to the rights of a client, an attorney is under no obligation to release the files of a client unless there has been payment, the furnishing of adequate security or, of course, a mutually acceptable arrangement between the parties." Id., 646. In this case, the plaintiff alleged that it released the clients' files to Pryor after obtaining his agreement that the defendants would recognize the plaintiff's fee lien with respect to any settlement funds obtained. The plaintiff has sufficiently alleged an interest in discrete, identifiable funds, to which the plaintiff had a legal right, to sustain a claim for conversion. Accordingly, the motions to strike are denied as to counts three and nine.
II
CUTPA
In their separate motions, the defendants argue that counts five and ten of the plaintiff's complaint, alleging a violation of CUTPA, should be stricken because a simple breach of contract claim is not a sufficient basis for a CUTPA violation. The defendants also argue that the plaintiffs claim is derivative of an employer/employee relationship which is outside the scope of CUTPA. The plaintiff counters that the defendants' violation of Opinion 31 and Rule 1.15(f) of the Rules of Professional Conduct constitutes a violation of CUTPA because it amounts to a violation of public policy.
General Statutes § 42-110b provides that " (a) No person shall engage in unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce." In determining whether or not the conduct at issue constitutes an unfair or deceptive trade practice, courts must apply the so-called " cigarette rule" which asks: " (1) [w]hether the practice, without necessarily having been previously considered unlawful, offends public policy as it has been established by statutes, the common law, or otherwise--whether, in other words, it is within at least the penumbra of some common law, statutory, or other established concept of unfairness; (2) whether it is immoral, unethical, oppressive, or unscrupulous; (3) whether it causes substantial injury to consumers . . . All three criteria do not need to be satisfied to support a finding of unfairness. A practice may be unfair because of the degree to which it meets one of the criteria or because to a lesser extent it meets all three." (Citations omitted; internal quotation marks omitted.) Jacobs v. Healey Ford-Subaru, Inc., 231 Conn. 707, 725, 652 A.2d 496 (1995).
Our Supreme Court has noted that the federal courts have abandoned the " cigarette rule" but has not yet decided whether Connecticut similarly should abandon it. See Artie's Auto Body, Inc. v. Hartford Fire Ins. Co., 317 Conn. 602, 622 n.13, 119 A.3d 1139 (2015). Because the cigarette rule remains the law in Connecticut until the Supreme Court or the legislature instructs otherwise, trial courts must still apply it.
Our Supreme Court has held that CUTPA applies to the entrepreneurial aspects of the practice of law. See Suffield Development Associates Ltd. Partnership v. National Loan Investors, L.P., 260 Conn. 766, 781, 802 A.2d 44 (2002). It has also made clear, however, that violations of the Rules of Professional Conduct do not give rise to a CUTPA claim. See Mozzochi v. Beck, 204 Conn. 490, 501 n.7, 529 A.2d 171 (1987); see also Noble v. Marshall, 23 Conn.App. 227, 231, 579 A.2d 594 (1990). " [T]he Rules of Professional Conduct do not of themselves give rise to a cause of action . . . The rules that have been adopted by the judges of the Superior Court have the force of law . . . but they were not intended to create a private cause of action under CUTPA." (Citation omitted; footnote omitted.) Noble v. Marshall, supra, 23 Conn.App. 231. Opinion 31 does not have the force of law; it is advisory only. Thus, in the present case, the plaintiff's reliance on ethical rules and Bar opinions to assert a cause of action under CUTPA similarly fail.
The plaintiff also alleges that the defendants' breach of contract gives rise to a cause of action under CUTPA. The Appellate Court has held that " the same facts that establish a breach of contract claim may be sufficient to establish a CUTPA violation . . ." Lester v. Resort Camplands International, Inc., 27 Conn.App. 59, 71, 605 A.2d 550 (1992). " There is a split of authority in Superior Court decisions regarding what is necessary to establish a CUTPA claim for breach of contract, the majority of courts holding that a simple breach of contract, even if intentional, does not amount to a violation of CUTPA in the absence of substantial aggravating circumstances . . . A simple breach of contract does not offend traditional notions of fairness and, standing alone, does not offend public policy so as to invoke CUTPA. A CUTPA claim lies where the facts alleged support a claim for more than a mere breach of contract. Depending upon the nature of the assertions, however, the same facts that establish a breach of contract claim may be sufficient to establish a CUTPA violation . . . That generally is so when the aggravating factors present constitute more than a failure to deliver a promise." (Citations omitted; internal quotation marks omitted.) Greene v. Orsini, 50 Conn.Supp. 312, 315, 926 A.2d 708 (2007). In this case, the plaintiff's allegations do not describe any aggravating factors that would transform a simple failure to perform an agreement into an unfair trade practice under CUTPA. Accordingly, counts five and ten are ordered stricken.
III
BREACH OF FIDUCIARY DUTY
The defendants also move to strike counts six and eleven, which counts allege a breach of fiduciary duty. The defendants argue that the plaintiff failed to prove the existence of a fiduciary duty and that the recognition of a fiduciary relationship between the plaintiff and the defendant would present a conflict with the defendants' obligations to their clients.
The plaintiff counters that the defendants had a fiduciary duty to the plaintiff under Opinion 31 and the Rules of Professional Conduct. As stated previously, the Supreme Court has expressly held that the Rules of Professional Conduct do not create civil liability for attorneys. See Biller Associates v. Peterken, supra, 269 Conn. 723. The relevance of Opinion 31 here is not in its legal force--as stated previously, it is advisory only--but in the defendants' written agreement to comply with it.
A fiduciary duty springs not from a simple duty of care, but from a duty of loyalty to the party claiming the fiduciary relationship. See Beverly Hills Concepts, Inc. v. Schatz & Schatz, Ribicoff & Kotkin, 247 Conn. 48, 57, 717 A.2d 724 (1998). A party claiming a fiduciary relationship must plead and prove that the party it characterizes as a fiduciary had a duty to represent his or her interest. See Hi-Ho Tower, Inc. v. Com-Tronics, Inc., 255 Conn. 20, 38, 761 A.2d 1268 (2000); Murphy v. Wakelee, 247 Conn. 396, 400, 721 A.2d 1181 (1998). " It is axiomatic that a party cannot breach a fiduciary duty to another party unless a fiduciary relationship exists between them." Biller Associates v. Peterken, supra, 269 Conn. 723. " [A] fiduciary or confidential relationship is characterized by a unique degree of trust and confidence between the parties, one of whom has superior knowledge, skill or expertise and is under a duty to represent the interests of the other . . . The superior position of the fiduciary or dominant party affords him great opportunity for abuse of the confidence reposed in him." (Internal quotation marks omitted.) Konover Development Corp. v. Zeller, 228 Conn. 206, 219, 635 A.2d 798 (1994).
In Biller Associates v. Peterken, supra, 269 Conn. 723, the Supreme Court rejected a claim that Rule 1.15 of the Rules of Professional Conduct imposed a fiduciary duty on an attorney to a third party owed money by the attorney's client. In Biller, the plaintiff was a public insurance adjusting firm that had been retained to survey and estimate a fire loss for purposes of negotiating a settlement with an insurer. The insurer deemed the fire suspicious and refused to pay. The insureds then retained the defendant attorney, who ultimately negotiated a settlement based on the plaintiff's analysis. The defendant attorney was aware that his clients had agreed to pay the plaintiff ten percent of any recovery they obtained from their insurer. The defendant attorney settled the claim, however, with the condition that the insurer exclude the plaintiff's name from any settlement checks. The insureds obtained their settlement and refused to pay the plaintiff. In suing the attorney who negotiated the settlement, the plaintiff relied on Rule 1.15 (b)--now Rule 1.15(e)--which provided that " [u]pon receiving funds or other property in which a . . . third person has an interest, a lawyer shall promptly notify the client or third person [and] a lawyer shall promptly deliver to the . .., third person any funds . . . that the . . . third person is entitled to receive."
In rejecting the plaintiff's breach of fiduciary duty claim against the attorney, the Supreme Court held that " the rules governing the professional conduct of attorneys, without more, do not give rise to a cause of action . . . They are not designed to be a basis for civil liability . . . Accordingly, nothing in the Rules should be deemed to augment any substantive legal duty of lawyers or the extra-disciplinary consequence of violating such a duty." (Citations omitted; internal quotation marks omitted.) Biller Associates v. Peterken, supra, 269 Conn. 722-23. The court further stated that " [a]lthough this court has refrained from defining a fiduciary relationship in precise detail and in such a manner as to exclude new situations . . . we have recognized that not all business relationships implicate the duty of a fiduciary . . . In particular instances, certain relationships, as a matter of law, do not impose upon either party the duty of a fiduciary . . . In the seminal cases in which this court has recognized the existence of a fiduciary relationship, the fiduciary was either in a dominant position, thereby creating a relationship of dependency, or was under a specific duty to act for the benefit of another . . . In the cases in which this court has, as a matter of law, refused to recognize a fiduciary relationship, the parties were either dealing at arm's length, thereby lacking a relationship of dominance and dependence, or the parties were not engaged in a relationship of special trust and confidence." (Internal quotation marks omitted.) Id., 723-24. " [T]he fact that one business person trusts another and relies on [that person] to perform [his obligations] does not rise to the level of a confidential relationship for purposes of establishing a fiduciary duty." (Internal quotation marks omitted.) Id., 725.
In this case, the facts alleged do not establish that the defendants owed any duty of loyalty to the plaintiff. The defendants are competitors of the plaintiff. The mere fact that the plaintiff allegedly relied on a promise by the defendants to protect its fee lien does not give rise to a relationship of trust and confidence. Courts have, moreover, been highly reluctant to recognize any attorney's duty to any third party that might interfere with the attorney's duty of loyalty to his client. While this case may be distinguishable from Biller in that the plaintiff claims funds that the client agreed to pay his attorney, it is nevertheless conceivable that recognizing a fiduciary duty to a client's former lawyer could lead to a conflict with the successor lawyer's duty to his client. Accordingly, counts six and eleven are stricken.
IV
ACCOUNTING
The Freeman firm also moves to strike count four, which alleges a claim for an accounting. In support to the motion to strike, the defendant argues that the plaintiff failed to allege elements to support a fiduciary relationship and the plaintiff relies upon the formation of a fiduciary relationship that would violate the defendant's obligation to his clients. The plaintiff counters that it is entitled to an accounting pursuant to Rule of Professional Conduct 1.15(f). The plaintiff further argues that it is not necessary for a fiduciary relationship to exist because our courts have held that the existence of mutual or complicated accounts is sufficient grounds for an accounting.
" An accounting is defined as an adjustment of the accounts of the parties and a rendering of a judgment for the balance ascertained to be due. An action for an accounting usually invokes the equity powers of the court, and the remedy that is most frequently resorted to . . . is by way of a suit in equity . . . An accounting is not available in an action where the amount due is readily ascertainable. Equity will ordinarily take jurisdiction to settle the account if the facts create a reasonable doubt whether adequate relief may be obtained at law . . . To support an action of accounting, one of several conditions must exist. There must be a fiduciary relationship, or the existence of a mutual and/or complicated accounts, or a need of discovery, or some other special ground of equitable jurisdiction such as fraud . . . The right to compel an account in equity exists not only in the case of those relationships which are traditionally regarded as those of trust and confidence, but also in those formal relations which exist whenever one person trusts in, and relies upon, another. The relationship between . . . parties to a business agreement . . . [has] . . . been deemed to involve such confidence and trust so as to entitle one of the parties to an accounting in equity." (Citations omitted; emphasis in original; internal quotation marks omitted.) Mankert v. Elmatco Products, Inc., 84 Conn.App. 456, 460-61, 854 A.2d 766, cert. denied, 271 Conn. 925, 859 A.2d 580 (2004).
As discussed in the previous section, the facts alleged in the complaint do not give rise to a fiduciary relationship between the parties. Nonetheless, a claim for accounting is sufficient when the plaintiff alleges a formal relationship in which one person trusts in, and relies upon, another. In this case, the plaintiff has alleged that it released client files to the defendants in reliance on the defendants' promise to protect its fee lien in any recovery obtained by the clients. See Rockwell v. New Departure Mfg. Co., 102 Conn. 255, 308-09, 128 A. 302 (1925) (accounting ordered when inventor demanded royalties owed to him pursuant to agreement). The plaintiff has alleged sufficient grounds for an accounting and the defendant's motion to strike count four of the plaintiff's complaint is denied.
CONCLUSION
For the foregoing reasons, the Freeman firm's motion to strike counts five (CUTPA) and six (breach of fiduciary duty) is granted. Its motion to strike counts three (conversion) and four (accounting) is denied. Pryor's motion to strike counts ten (CUTPA) and eleven (breach of fiduciary duty) is granted. His motion to strike count nine (conversion) is denied.