Opinion
FBTCV156051029S
10-05-2017
Anthony Caltabiano, Jr. et al. v. Donna Vogel et al
UNPUBLISHED OPINION
MEMORANDUM OF DECISION RE MOTION TO DISMISS OF DEFENDANT DONNA VOGEL, NO. 165
Anthony D. Truglia Jr, Judge.
Facts and Procedural History
Plaintiffs Anthony Caltabiano, Jr. and Antoinette Lillian Caltabiano commenced this action in July 2015, seeking compensatory and punitive damages from defendants Donna Vogel and Donna J. Sicuranza. The plaintiffs also ask the court to impose a constructive trust for their benefit on assets now owned by or in the possession of defendants Vernon A. Tait All Animal Adoption, Preservation and Rescue Fund, Inc. (referred to in the complaint as TEAM) and The Dohnna, LLC (The Dohnna). The plaintiffs also ask the court to order " an accounting of the affairs of [the defendants] FeralStat, Inc., TEAM and The Dohnna."
Count one of the plaintiffs' complaint states a derivative cause of action for breach of fiduciary duty by Vogel and Sicuranza and sets forth the following allegations. The plaintiffs and Vogel are siblings. They are also brother and sister to John A. Caltabiano, who is now deceased. Prior to his death, which occurred on November 6, 2009, John A. Caltabiano formed three business entities, namely, FeralStat, Inc., TEAM and The Dohnna. In 1993, Caltabiano and a colleague created TEAM. The stated purpose of this corporation was to rescue homeless and neglected animals and provide shelter and medical care for them. In 2002, Caltabiano and Sicuranza formed The Dohnna and served as the company's sole members. In 2008, Caltabiano and Sicuranza formed FeralStat, Inc. to market and produce FeralStat, a proprietary contraceptive for cats, which Caltabiano had developed.
For convenience, all references to the plaintiff in this decision are to Anthony Caltabiano, Jr. All references to Caltabiano are to the decedent, John A. Caltabiano. References to FeralStat, Inc. are to the corporation; references to FeralStat are to the trademark for the medication developed by Caltabiano.
In August 2003, Caltabiano executed his last will and testament. Caltabiano's will bequeathed the remainder of his estate to his three siblings, Vogel and the plaintiffs, in equal shares. From 2005 through January 2010, Sicuranza listed herself as executive director of TEAM, Caltabiano as president and Vogel as secretary of TEAM. On or about August 19, 2008, Caltabiano filed an application to register a trademark for FeralStat with the United States Patent and Trademark Office (USPTO). On January 20, 2009, the USPTO issued a registration for the trademark.
Caltabiano served as president and director of FeralStat, Inc. until his death; Sicuranza served as secretary and director of the corporation. Upon information and belief, the plaintiffs further allege, Caltabiano was the owner of 5000 shares of stock in FeralStat, Inc. The plaintiffs allege that " sometime prior to Caltabiano's death, Sicuranza prepared, or had prepared by others, a trademark assignment document for the purposes of assigning the [FeralStat] trademark owned by and registered to Caltabiano to [FeralStat, Inc.]. On his deathbed, the plaintiffs allege, " Sicuranza took advantage of her relationship with [Caltabiano] and forged his name to said trademark assignment" and retained counsel to file the instrument of assignment with the USPTO. At no time, the plaintiffs allege, did Sicuranza inform them that she had taken steps to transfer the FeralStat trademark to FeralStat, Inc. To the contrary, the plaintiffs allege that she actively concealed her effort in order to delay or prevent the plaintiffs from taking legal action against her.
The plaintiffs further allege that between February 2010 to March 2013, Sicuranza filed notices of change and annual reports with the Connecticut Secretary of State for Feral Stat, Inc. and TEAM. These filings listed Sicuranza as the president and director of Feral Stat, Inc. and TEAM, Robert Sicuranza as the treasurer of TEAM, and Vogel as the secretary of Feral Stat, Inc. and TEAM. In between these filings, Sicuranza also became the sole member, principal and manager of The Dohnna. In 2012, the plaintiffs also discovered the records of the Connecticut Secretary of State indicated that FeralStat, Inc. was dissolved on or about July 12, 2012. At this time also, the plaintiffs further allege, Sicuranza took steps to assign the FeralStat trademark from FeralStat, Inc. to TEAM. The plaintiffs allege that, as a result of these actions, Vogel and Sicuranza, " individually and in their respective capacities as officers of [FeralStat, Inc.], took for themselves all the property of [FeralStat, Inc.] that had passed to the plaintiffs by virtue of Caltabiano's death and the terms of his last will and testament, to the plaintiffs' financial detriment." The plaintiffs claim that Sicuranza and Vogel breached their fiduciary obligations to them as shareholders in several ways. They claim that Vogel and Sicuranza failed to provide them with financial information regarding Feral Stat, Inc., consult them on major decisions affecting the corporation, siphoned assets from the corporation for their benefit, and to the plaintiffs' detriment, usurped corporate opportunity, and violated the articles of incorporation by carrying on the business and operations of Feral Stat, Inc., and dissolving Feral Stat, Inc. in a manner that violated [General Statutes] § § 33-380 and 33-381.
Additionally, the plaintiffs allege, Sicuranza and Vogel wrongfully deprived the plaintiffs of their personal interest in the FeralStat trademark, which should have passed to them through Caltabiano's estate, by forging his name on the assignment in favor of FeralStat, Inc. and then later assigning the trademark to TEAM. The plaintiffs, in their capacity as FeralStat, Inc. shareholders, allege that these actions injured FeralStat, Inc. They claim monetary damages and an " accounting, " on behalf of the corporation.
The plaintiffs repeat their allegations of wrongdoing of the derivative action set forth in count one in counts two through six, and re-assert them as direct causes of action against Sicuranza and Vogel. In count three, the plaintiffs further allege that Sicuranza and Vogel deprived them of dividends, income, cash and other assets of the corporation. By so doing, Sicuranza and Vogel wrongfully converted property and assets to themselves that should have been conferred on the plaintiffs. In count four, the plaintiffs allege that the actions detailed in the count one were intentional and caused harm to the plaintiffs. They claim treble damages pursuant to General Statutes § 52-564 under this cause of action.
Count two was stricken by an earlier order of the court (entry 128.01). The plaintiffs did not file a substitute pleading within fifteen days of the order, Practice Book § 10-44, so there is no second count for the court to dismiss by Vogel's motion. The following counts allege direct claims against Sicuranza and Vogel: Count three (Conversion), Count four (Theft), Count five (CUTPA), and Count six (Conspiracy).
General Statutes § 52-564 provides: " Any person who steals any property of another, or knowingly receives and conceals stolen property, shall pay the owner treble his damages."
In count five, the plaintiff alleges that Sicuranza and Vogel's actions as described in count one, usurped corporate opportunity of Feral Stat, Inc. in favor of TEAM, The Dohnna, or themselves. The plaintiffs allege that these actions violated the Connecticut Unfair Trade Practices Act, General Statutes § 42-110a et seq., and caused the plaintiffs to sustain an ascertainable loss. In count six, the plaintiffs allege that Sicuranza and Vogel acted pursuant to a scheme and in furtherance of their own interests, or the interests of TEAM or The Dohnna, and that such actions caused the plaintiffs to sustain damages.
The defendant Vogel now moves to dismiss the counts three through six for lack of standing. Vogel argues that neither plaintiff has standing to pursue direct claims against her because neither has alleged sufficient facts to show that the injuries claimed were unique to either of them individually.
The court heard argument on the defendant's motion to dismiss on September 18, 2017. The plaintiffs appeared to argue the motion but did not file a written response or objection to Vogel's motion.
Discussion
Practice Book § 10-30(a) provides that " [a] motion to dismiss shall be used to assert: (1) lack of jurisdiction over the subject matter." " The issue of standing implicates subject matter jurisdiction and is therefore a basis for granting a motion to dismiss." (Internal quotation marks omitted.) May v. Coffey, 291 Conn. 106, 113, 967 A.2d 495 (2009). " A motion to dismiss . . . properly attacks the jurisdiction of the court, essentially asserting that the plaintiff cannot as a matter of law and fact state a cause of action that should be heard by the court . . . A motion to dismiss tests, inter alia, whether, on the face of the record, the court is without jurisdiction." (Internal quotation marks omitted.) Beecher v. Mohegan Tribe of Indians of Connecticut, 282 Conn. 130, 134, 918 A.2d 880 (2007), quoting State v. Haight, 279 Conn. 546, 550, 903 A.2d 217 (2006). " When a . . . court decides a jurisdictional question raised by a pretrial motion to dismiss, it must consider the allegations of the complaint in their most favorable light . . . In this regard, a court must take the facts to be those alleged in the complaint, including those facts necessarily implied from the allegations, construing them in a manner most favorable to the pleader." (Citation omitted; internal quotation marks omitted.) Cogswell v. American Transit Ins. Co., 282 Conn. 505, 516, 923 A.2d 638 (2007).
The law concerning standing is well settled. " Standing is not a technical rule intended to keep aggrieved parties out of court; nor is it a test of substantive rights. Rather it is a practical concept designed to ensure that courts and parties are not vexed by suits brought to vindicate nonjusticiable interests and that judicial decisions which may affect the rights of others are forged in hot controversy, with each view fairly and vigorously represented." (Internal quotation marks omitted.) W. Farms Mall, LLC v. Town of W. Hartford, 279 Conn. 1, 11, 901 A.2d 649 (2006).
On the other hand, standing, when challenged, does require a preliminary showing. " Standing is established by showing that the party claiming it is authorized by statute to bring an action, in other words statutorily aggrieved, or is classically aggrieved . . . The fundamental test for determining [classical] aggrievement encompasses a well-settled twofold determination: First, the party claiming aggrievement must successfully demonstrate a specific, personal and legal interest in [the challenged action], as distinguished from a general interest, such as is the concern of all members of the community as a whole. Second, the party claiming aggrievement must successfully establish that this specific personal and legal interest has been specially and injuriously affected by the [challenged action] . . . Aggrievement is established if there is a possibility, as distinguished from a certainty, that some legally protected interest . . . has been adversely affected." (Citations omitted; internal quotation marks omitted.) Eder Bros., Inc. v. Wine Merchants of Connecticut, Inc., 275 Conn. 363, 369-70, 880 A.2d 138 (2005). " When standing is put in issue, the question is whether the person whose standing is challenged is a proper party to request an adjudication of the issue and not whether the controversy is otherwise justiciable, or whether, on the merits, the [party] has a legally protected interest [which may be remedied]." (Internal quotation marks omitted.) Steeneck v. University of Bridgeport, 235 Conn. 572, 579, 668 A.2d 688 (1995). See also In the Matter of Mary E. Bachand, 306 Conn. 37, 52, 49 A.3d 166 (2012).
Generally speaking, allegations of mismanagement, diversion of assets and diminution in the value of a corporate interest which affect the business entity as a whole are derivative in nature and must be brought as derivative actions. If, on the other hand, the plaintiff alleges claims of direct injury that are personal, separate and distinct from the other members or shareholders, or from the business entity itself, the claim may be brought in a direct action against the alleged wrongdoer. " A distinction must be made between the right of a shareholder to bring suit in an individual capacity as the sole party injured, and his right to sue derivatively on behalf of the corporation alleged to be injured . . . Generally, individual stockholders cannot sue the officers at law for damages on the theory that they are entitled to damages because mismanagement has rendered their stock of less value, since the injury is generally not to the shareholder individually, but to the corporation--to the shareholders collectively . . . In this regard, it is axiomatic that a claim of injury, the basis of which is a wrong to the corporation, must be brought in a derivative suit, with the plaintiff proceeding 'secondarily, ' deriving his rights from the corporation which is alleged to have been wronged . . . It is, however, well settled that if the injury is one to the plaintiff as a stockholder, and to him individually, and not to the corporation, as where an alleged fraud perpetrated by the corporation has affected the plaintiff directly, the cause of action is personal and individual . . . In such a case, the plaintiff-shareholder sustains a loss separate and distinct from that of the corporation, or from that of other shareholders, and thus has the right to seek redress in a personal capacity for a wrong done to him individually." (Citations omitted.) Yanow v. Teal Industries, Inc., 178 Conn. 262, 281-82, 422 A.2d 311 (1979).
The court begins its analysis with three Superior and Appellate Court cases factually similar to the issue presented in the defendant's motion. In Morgan Howard (United States), LLC v. Lewis, Superior Court, judicial district of Stamford-Norwalk at Stamford, Docket No. CV-05-4006343-S, (July 14, 2006, Jennings, J.), the trial court dismissed similar causes of action brought by a former employee and shareholder of the corporation for lack of standing. In Morgan Howard, the defendant alleged an individual claim on account of the diversion of profits by other members of the plaintiff for personal expenses. As a result of the plaintiff's action or inaction, the defendant argued that the plaintiff substantially deprived him of his financial interests in the LLC, which included, dividends and compensation. In ruling in the plaintiff's favor, the trial court reasoned that the injuries alleged were not unique and special to the defendant, but rather derivative in nature. Therefore, the defendant could not bring its claims individually.
Likewise, in FCR Realty v. Green, Superior Court, judicial district of Windham at Putnam, Docket No. CV-13-5005777-S, (April 30, 2014, Boland, J.), the plaintiff alleged that he sustained losses to his distributive share of company profits as a result of the defendant's violation of the LLC's operating agreement and his breach of the covenant of good faith and fair dealing. Relying on a pair of Superior Court cases, including Morgan Howard, the trial court granted the defendants' motion to dismiss on the ground that the individual claims asserted by the plaintiff failed to demonstrate a separate and distinct injury from other shareholders or the corporation itself. The trial court explained that a violation of an operating agreement which results in a company loss and corresponding reduction of an individual shareholder's compensation did not provide an independent basis for a direct claim.
The Appellate Court in Scarfo v. Snow, 168 Conn.App. 482, 146 A.3d 1006 (2016), remanded the trial court's decision and instructed it to dismiss the plaintiff's entire case due to lack of standing. Id., 504. In Scarfo, the plaintiff and the defendant entered into an agreement to create a limited liability company for a new joint venture to purchase and develop real property. Id., 486. Both parties signed an operating agreement, whereby each agreed to share equally in the management and costs and expenses of the LLC. Id. The plaintiff alleged claims of spoliation of evidence, breach of contract, and breach of fiduciary duty against the defendant based on breaches of their operating agreement. Id., 484.
The trial court initially found that the plaintiff failed to carry his burden of proof that the defendant had breached the parties' operating agreement. Id. On appeal, the Appellate Court, sua sponte, issued a supplemental briefing order to address the question of whether the plaintiff had standing to maintain the suit in his individual capacity. Id., 495. The plaintiff argued that he had standing because he suffered a direct injury on account of the defendant's mismanagement in the joint venture, self-dealing, and breach of fiduciary duties and obligations personally owed to him. Id., 496-97. Based on these facts, the Scarfo court held that even if the plaintiff correctly alleged an injury to himself, its injury was derivative. Id., 504. Any benefit or injury, the Appellate Court explained, that the plaintiff would have received or sustained from the joint venture, " were it not for the improprieties [or efforts] of [the defendant], would have flowed to the plaintiff through the [LLC]." Id.
In the present case, the gravamen of the plaintiffs' case is that Sicuranza and Vogel, acting together or singly, wrongfully converted the FeralStat trademark and its accompanying value, first to FeralStat, Inc., of which they were the principals after Caltabiano's death, and then to TEAM, which they also control. Also, the plaintiffs further allege, from the time of Caltabiano's death in 2009 to the present, Sicuranza and Vogel excluded the plaintiffs from participation in day-to-day operations of the corporation and unfairly and improperly diverted FeralStat, Inc.'s corporate income and assets to themselves. These allegations are no different from the direct claims alleged in FCR Realty, Morgan Howard, and Scarfo . Here as well, benefits that the plaintiffs would have received if Sicuranza and Vogel had not wrongfully converted the FeralStat trademark to themselves, or had not improperly and unfairly usurped and misappropriated corporate assets and opportunities to themselves, would have flowed to the plaintiffs through FeralStat, Inc.
Each of the allegations incorporated by reference in count one to counts three through six clearly allege corporate mismanagement, failure to abide by corporate formalities, and improper diversion of corporate assets and opportunities by Sicuranza and Vogel as officers and directors of FeralStat, Inc. There is no allegation that these actions harmed the plaintiffs in a way that is separate and distinct from the company itself and all other shareholders. The harm that the plaintiffs, as shareholders, may have suffered as a result of Sicuranza and Vogel's conversion of the FeralStat trademark, as alleged in count three, is no different in quality from the harm Sicuranza and Vogel themselves suffered from these actions, as shareholders . The court agrees with the defendant that the allegations of counts three through six allege injuries to FeralStat, Inc. as a whole, and not to the plaintiffs individually. All four causes of action, accordingly, are derivative in nature and must be dismissed.
Conclusion
For the foregoing reasons, the defendant's motion to dismiss counts three through six of the plaintiff's complaint is granted.