Opinion
No. CV 085022854-S
January 5, 2011
MEMORANDUM OF DECISION DEFENDANT'S MOTION TO STRIKE #139
I FACTS
The plaintiff, Coldform, Inc., commenced this action against the defendant, Faurecia Automotive Seating Canada, LTD., on November 9, 2007. The amended complaint alleges the following. The defendant agreed to purchase various automotive seating parts from the defendant. In March 2007, the defendant subsequently cancelled the orders for six of those parts. At the time of the cancellations, the defendant had already produced, but not yet delivered, a significant portion of the order.
Additionally, on October 17, 2005, the plaintiff agreed to produce and supply the defendant with a certain part known as "part no. 9453486." During negotiations, the defendant misrepresented that it would supply a purchase order for this part with the intent that the plaintiff commence production and incur manufacturing costs. Thereafter, the defendant failed to issue a purchase order, and as a result, the plaintiff has been harmed.
The plaintiff subsequently filed a breach of contract action against the defendant. After the commencement of the litigation, the parties renegotiated the purchase terms for those orders that had not been cancelled. Specifically, the defendant committed to purchase additional parts (surcharge parts) for a two-year period at a higher cost. Unbeknownst to the plaintiff, the defendant was soliciting bids and proposals for the manufacture of the same parts from other vendors during the negotiations. In reliance on the defendant's representations, the plaintiff commenced production and incurred costs. Thereafter, the defendant repudiated the agreement, and refused to pay for any of the manufactured parts. The plaintiff alleges that the defendant knowingly made its representations with the intent of inducing the plaintiff to expend tooling and related production costs. The defendant's misrepresentations forced the plaintiff out of business.
The plaintiff then filed an amended thirteen-count complaint. Counts one through six allege a breach of contract with respect to orders for the six parts cancelled in March 2007. Count seven, alleging misrepresentation, count eight, alleging estoppel, count nine, alleging quantum meruit, and count ten, alleging breach of contract, are all specific to part no. 945386. Counts eleven and twelve allege, respectively, misrepresentation and negligent misrepresentation of the surcharge parts. Finally, count thirteen alleges violations of the Connecticut Unfair Trade Practices Act (CUTPA).
The amended complaint names Faurecia Automotive Seating, Inc. as a second defendant, and collectively refers to both defendants as "the defendant." The complaint alleges that at all relevant times, both were transacting business together. Faurecia Automotive Seating, Inc. has not filed an appearance in this matter. The only defendant referred to in this memorandum is Faurecia Automotive Seating Canada, LTD.
Counts eight, nine and ten reference a part no. 945388. The defendant points out, and the plaintiff does not contest, that this is a typographical error and that those counts refer to part no. 945386.
On June 28, 2010, the defendant filed a motion to strike counts seven, eleven, twelve, and thirteen on the following grounds: (1) these counts allege torts, which the plaintiff has contractually waived in its purchase order; (2) the plaintiff fails to allege a CUPTA violation as a matter of law; and (3) the plaintiff is asserting a claim that is barred by the economic loss doctrine.
II DISCUSSION
"The purpose of a motion to strike is to contest . . . the legal sufficiency of the allegations of any complaint . . . to state a claim upon which relief can be granted." (Internal quotation marks omitted.) Fort Trumbull Conservancy, LLC v. Alves, 262 Conn. 480, 498, 815 A.2d 1188 (2003). In considering a motion to strike, the court must "construe the complaint in the manner most favorable to sustaining its legal sufficiency." (Internal quotation marks omitted.) American Progressive Life Health Ins. Co. of New York v. Better Benefits, LLC, 292 Conn. 111, 120, 971 A.2d 17 (2009).
A. Whether the Court May Strike the Tort Claims because They Have Been Contractually Waived
The defendant argues that the court should strike all counts sounding in tort, including the CUTPA claim, because the plaintiff contractually waived these claims. Specifically, the defendant argues that the purchase order specifically provides that the plaintiff "waives any claims that it may have against [the defendant] in tort, under statute or equity . . ." It argues that, notwithstanding this waiver, counts seven, eleven and twelve sound in tort, while count thirteen is a statutory tort remedy. Therefore, they are prohibited by the contract. The defendant has attached the purchase order as an exhibit.
"It is well established that a motion to strike must be considered within the confines of the pleadings and not external documents such as the agreements between the parties." (Internal quotation marks omitted.) Zirinsky v. Zirinsky, 87 Conn.App. 257, 268 n. 9, 865 A.2d 488, cert. denied, 273 Conn. 916, 871 A.2d 372 (2005). Therefore, the court cannot consider the purchase order produced by the defendant in this motion to strike because it is an external document and not attached to the pleadings. See Tracy v. New Milford Public Schools, 101 Conn.App. 560, 566, 922 A.2d 280, cert. denied, 284 Conn. 910, 931 A.2d 935 (2007) ("[i]t is . . . improper for the court to consider material outside of the pleading that is being challenged by the motion [to strike]" [internal quotation marks omitted]). Accordingly, the court denies the motion to strike based on the ground that the plaintiff's claims are contractually prohibited.
B. Whether the Plaintiff Fails to Allege a CUTPA Violation
The defendant argues that the court should strike count thirteen because it merely asserts that the defendant's breach of contract constitutes an unfair trade practice, and therefore, fails to sufficiently allege facts that rise to the level of a CUTPA claim.
"CUTPA provides in relevant part that [n]o person shall engage in unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce. General Statutes § 42-110b(a) . . . An act or practice is deceptive if three conditions are met. First, there must be a representation, omission, or other practice likely to mislead. Second, the consumers must interpret the message reasonably under the circumstances. Third, the misleading representation, omission, or practice must be material — that is, likely to affect consumer decisions or conduct . . . Whether a practice is unfair and thus violates CUTPA is an issue of fact." (Citations omitted; internal quotation marks omitted.) Miller v. Guimares, 78 Conn.App. 760, 775, 829 A.2d 422 (2003). "[A] competitor or other business person can maintain a CUTPA cause of action without showing consumer injury." (Internal quotation marks omitted.) Larsen Chelsey Realty Co. v. Larsen, 232 Conn. 480, 496, 656 A.2d 1009 (1995).
Count thirteen realleges and incorporates all of the counts and adds that the defendant's actions "evidence a deliberate pattern and practice to intentionally ignore contractual agreements and promises with the intent of unfairly and improperly trying to force the Plaintiff to submit to or accept the defendant's practices at risk of facing financial ruin." It further alleges that, as a result, the defendant has violated CUTPA.
The defendant is correct that mere allegations of breach of contract are not sufficient to invoke CUTPA. See, e.g., Hudson United Bank v. Cinnamon Ridge Corp., 81 Conn.App. 557, 571, 845 A.2d 417 (2004). However, in this case, by incorporating counts eleven and twelve into count thirteen, the plaintiff has sufficiently alleged that, after this litigation commenced, the defendant made misleading representations about its willingness to buy the surcharge parts with the intent to induce the plaintiff to incur great costs, while simultaneously negotiating with other vendors for the same parts. It further alleges that the plaintiff reasonably relied on those representations to its detriment because the defendant refused to pay for the manufactured parts. These facts, viewed in the light most favorable to the plaintiff, constitute sufficiently aggravating circumstances to support a CUTPA claim.
C. Whether the Economic Loss Doctrine Bars the Plaintiff's Tort Claims
Finally, the defendant argues that the plaintiff's tort claims are barred by the economic loss doctrine. "The economic loss doctrine is a judicially created doctrine which bars recovery in tort where the relationship between the parties is contractual and the only losses alleged are economic." (Internal quotation marks omitted.) Reynolds, Pearson Co., LLC v. Miglietta Superior Court, judicial district of Hartford, Docket No. CV 00 0801247 (March 27, 2001, Berger, J.) ( 29 Conn. L. Rptr. 481, 483). Specifically, the defendant argues that the parties bargained for, and allocated, the risk in the contract. Therefore, it asserts that the plaintiff's remedies are limited to those provided in a breach of contract action.
The court finds that the economic loss doctrine does not bar the plaintiff's claims in this action because it is not alleging purely economic losses arising from the defective performance of the contract. See Williams Ford, Inc. v. Hartford Courant Co., 232 Conn. 559, 579, 657 A.2d 212 (1995) (refusing to apply economic loss rule where plaintiff alleged both breach of contract and negligent misrepresentation).
The defendant erroneously relies on Flagg Energy Development Corp. v. General Motors Corp., 244 Conn. 126, 709 A.2d 1075 (1998), wherein the court applied principles that supported the economic loss doctrine. In Flagg, the court concluded that plaintiff sought tort damages for the defendant's representations as to the quality and merchantability of the goods it supplied under the terms of a commercial contract. Id., 155. The defendant sought to strike these counts on the ground that the plaintiff was really seeking recovery for commercial loss resulting from product failure, and, therefore, was limited to the remedies provided by the Uniform Commercial Code (UCC). Id., 152. The plaintiff responded that its claims were permitted by the UCC, namely, General Statutes §§ 42a-1-103 and 42a-2-721, which allowed recovery in tort. Id.
Section 42a-1-103(b) provides: "Unless displaced by the particular provisions of this title, the principles of law and equity, including the law merchant and the law relative to capacity to contract, principal and agent, estoppel, fraud, misrepresentation, duress, coercion, mistake, bankruptcy, and other validating or invalidating cause supplement its provisions."
Section 42a-2-721 provides: "Remedies for material misrepresentation or fraud include all remedies available under this article for nonfraudulent breach. Neither rescission or a claim for rescission of the contract for sale nor rejection or return of the goods shall bar or be deemed inconsistent with a claim for damages or other remedy."
The court agreed that commercial losses arising out of the defective performance of goods are governed by the UCC. Id., 153-54. In addition, the court recognized that the UCC does allow a broad range of common-law actions, including actions for fraud and misrepresentation. Id., 154. However, the court found that the UCC specifically excepted tort claims that were "displaced by [other] particular provisions." Id., 155. The court concluded that the plaintiff's claims were displaced because claims for fraud or misrepresentations were inconsistent with the remedies that the UCC afforded for products liability actions. Id.
Since Flagg was decided, there has been no further appellate review of the economic loss doctrine. As a result, there is divergence of opinion among the judges of the Superior Court as to whether Flagg bars tort claims for economic losses in non product liability cases. Nevertheless, this court is persuaded by the holding in Reynolds, Pearson Co., LLC v. Miglietta, supra, 29 Conn. L. Rptr. 485. In that case, the plaintiffs alleged intentional and negligent misrepresentation, as well as breach of contract. The defendants filed a motion to strike, arguing that the plaintiff's alleged economic losses arising from a contractual violation, and therefore, the plaintiff's remedies were limited to those provided in a breach of contract action. Id., 483.
The court in Reynolds declined to find that the economic loss doctrine barred the plaintiffs' tort claims. It reasoned that Flagg did not provide "support for the proposition that the economic loss doctrine has been conclusively adopted as precluding all tort claims such as those in the present case. The holding in Flagg may fairly be read as holding that where a plaintiff claims commercial losses suffered as a result of defective performance of a contract for the sale of goods, such losses are governed by the UCC, which in turn preserves common law actions for fraud and misrepresentation only as long as such actions are consistent with the particular provisions of the UCC." Id., 484.
The court agrees with the defendant that the parties are sophisticated entities that bargained for the contract at issue, and therefore, are free to negotiate for the allocation of risk in the performance of the contract, including the risk of cancelled orders. The court also agrees that the parties' contractual relationship is governed by the UCC because it involves the sale of goods. See General Statutes § 42a-2-102. Nevertheless, the plaintiff is not only alleging a breach of the contract. It is also claiming that the defendant knowingly misrepresented its willingness to purchase parts in order to drive the plaintiff out of business. While parties may contractually allocate certain risks in the performance of the contract, they do not bargain for the risk of misrepresentation in the formation of the contract. Accordingly, because the plaintiff's tort claims are separate from the breach of contract allegations, they are permitted by §§ 42a-1-103 and 42a-2-721.
Section 42a-2-102 provides in relevant part: "Unless the context otherwise requires, this article applies to transactions in goods . . ."
III CONCLUSION
For the foregoing reasons, the defendant's motion to strike counts seven, eleven, twelve and thirteen is denied.