Opinion
No. CV99 036 26 55
December 8, 2003
MEMORANDUM OF DECISION
By Amended Complaint dated May 15, 2000, the Plaintiff, Consumer Incentive Services International, Inc. (CISI), alleges that the Defendant, Memberworks, Incorporated (MW) breached various agreements whereby the Defendant agreed to compensate the Plaintiff for business opportunities the Plaintiff introduced to the Defendant (Counts One, Two and Five). The Plaintiff also asserts claims of anticipatory breach (Count Three); unjust enrichment (Counts Four and Seven); promissory estoppel (Count Six); and violations of the Connecticut Unfair Trade Practice Act (Counts Eight and Nine).
As a result, the Plaintiff alleges that it has suffered harm and seeks monetary and equitable relief from the court, including, inter alia, money damages, punitive damages, attorneys fees, costs and interest. The Defendant denies these claims essentially for the reason that an enforceable agreement ever existed between the two parties. This matter was tried before this Court in December 2002 and January 2003. By agreement of the parties trial briefs and reply briefs were submitted prior to Closing Arguments which were heard by this Court on November 17, 2003.
Facts
The Defendant, MW, formerly known as Cardmember Publishing Corp. (CPC), is a publically traded corporation, which provides membership service programs. These programs are sold by MW to customers of banks and other finance-related companies, retail merchants, utilities and other consumer-related industries which send monthly bills. The Plaintiff, CISI, is a closely held corporation which provides consumer-related consulting, marketing, program design and sales services. In addition, it assists other marketing companies in targeting and obtaining new clients as a broker.
David Swanson (Swanson), President of CISI, was first introduced to MW in the late summer, 1996, when, James Duffy (Duffy), Chief Financial Officer of MW and an acquaintance of Swanson, asked Swanson to forward him information concerning CISI. Prior to discussions between MW and CISI concerning a working relationship, Swanson forwarded a Non-Disclosure and Non-Circumvention Agreement (Ex. E) to Duffy, which was intended to protect their mutual interests. Similarly, MW forwarded a confidentiality agreement to CISI (Ex. D). Each of these documents were signed by representatives of the parties.
Subsequently, there were discussions between MW and CISI concerning possible business opportunities. Over the course of the next few months, CISI introduced a number of potential clients to MW, some of whom formed connections with MW; some of whom did not. Swanson wrote to Martin Donner (Donner), Senior Vice President of MW, on July 10, 1997, "in advance of a more formal agreement between our companies," and identified accounts that CISI brought in to MW. (Exhibit N.) In a letter dated July 31, 1997 (Exhibit P), Donner acknowledged to Swanson that these companies were introduced to MW by CISI, and agreed that MW would not market directly to any of these accounts. As to CISI's compensation, MW was to pay a fee "to be determined on a `case by case' basis for any net revenue derived from these relationships." Included on the list was Coverdell Company (Coverdell), a prospective client that CISI first introduced to MW, although CISI did not have an independent business relationship with Coverdell.
Additional correspondences concerning the Coverdell prospect were exchanged between CISI and MW during the summer of 1997. In a letter dated August 8, 1997 (Exhibit S), Donner documented a schedule of royalty payments that CISI would receive relative to three specific products that MW hoped to sell wholesale to Coverdell. In a "wholesale" transaction, MW would provide the product to the client, who would pay MW a fee for the product. The client would be responsible for the cost and risk of marketing the product. CISI's royalty payments would be based on net revenue to MW. This schedule was subsequently modified (Exhibits T, Z and GG); a final agreement concerning royalty payments never materialized.
Martin Donner's sole responsibility at MW was developing wholesale business; Swanson worked with Donner to create wholesale opportunities for MW, from which, if successful, CISI would derive a commission. (Tr. 1/8/03 pp. 75-77.) The Plaintiff's complaint, ¶ 6, also describes CISI's responsibilities regarding MW as locating customers to whom MW could sell its programs on a "wholesale basis." While CISI contests that "wholesale" business was the focus of its relationship with MW, the weight of the evidence supports the defendant's position that the parties were working towards establishing wholesale business.
Donner and Swanson met with Michael Levinson (Levinson), CEO of Coverdell, in July 1997, in Atlanta, Georgia, to discuss business opportunities between MW and Coverdell. Prior to the meeting Swanson forwarded a "Confidential Memo" to Donner, which outlined Coverdell's background, business activities and management, for the purpose of preparing Donner for the meeting. Swanson received the information contained in the memo from Dan Berman, a Coverdell consultant, who also acted as a broker to CISI in giving it business leads. A second meeting was held in August 1997, between MW, CISI and Coverdell, in Omaha, Nebraska. Gary Johnson (Johnson), President of MW, was present at this meeting, and expressed dismay that MW's Merger and Acquisition department had not previously connected with Coverdell.
Swanson understood at that time that MW considered Coverdell an acquisition candidate. (Tr. 1/7/03, p. 5.) Later that summer he had a conversation with Jim Duffy, CEO of MW, concerning MW's acquisition of Coverdell, as well as possible acquisition of CISI by MW. (Tr. 12/18/02, p. 56.) Although Swanson was fully aware that MW considered Coverdell an acquisition candidate, he did not discuss with MW how CISI's interests in the Coverdell/MW relationship would be impacted by such a merger; nor did Swanson send MW correspondence outlining CISI's right to compensation should Coverdell be acquired by MW. None of the documents exchanged between CISI and MW prior to the acquisition of Coverdell contemplated or discussed in any way the impact the acquisition would have on the Coverdell account.
The documents on which the plaintiff bases its breach of contract claims are the Non-Circumvention and Non-Disclosure Agreement of June 1996 (Exhibit E); the letter of July 10, 1997, identifying protected accounts (Exhibit N); the letter of July 31, 1997 identifying the "protected" companies (Exhibit P); and the letter of August 8, 1997, which sets forth CISI's royalty fee schedule pertaining to Coverdell. (Exhibit S.)
Following the August meeting Swanson continued his efforts to effectuate a business relationship between MW and Coverdell. Swanson forwarded information to Levinson concerning MW services, and the pricing of MW programs which were expected to be marketed by Coverdell. (Exhibit U.) Swanson also attended a meeting on September 26, 1997, in Stamford, Connecticut, involving MW and Coverdell. An agreement between MW and Coverdell was executed on October 1, 1997, whereby MW agreed to supply its membership programs to Coverdell clients for specified fees.
On April 2, 1998, prior to MW receiving any revenue from its wholesale relationship with Coverdell, the defendant acquired all the outstanding common stock of Coverdell, for 18.4 million dollars ($18,400,000.00). (Exhibit KKK, p. 14.) Because the acquisition preceded any sales by MW to Coverdell, CISI never received royalty fees related to Coverdell. The nature of the business relationship between MW and Coverdell dramatically changed following Coverdell's acquisition. While a "wholesale" arrangement was contemplated by the October 1, 1997 agreement, following acquisition, MW was responsible for the cost and risk of marketing the products it sold through Coverdell. Further, the client fee arrangement changed, as did the number and types of products sold by MW through Coverdell.
While press releases (Exhibits 23, MM and NN) indicate that Coverdell was acquired for 17.1 million dollars in cash and MW common stock, this court credits MW's Annual Report for 1998, which states that Coverdell was acquired for 18.4 million dollars. (Exhibit KKK.)
Subsequent to the acquisition, Swanson forwarded an e-mail to Duffy and Johnson congratulating MW on the Coverdell Acquisition. Swanson continued his business relationship with MW. In July 1998, Swanson forwarded a "Draft Agreement" to MW in which proposed terms and conditions of their association were documented. (Exhibit 10.) Paragraph 6 of this agreement articulates a schedule of commissions to which CISI would be entitled should MW acquire or merge with a company introduced to MW through the efforts of CISI. A number of revisions were exchanged between the two companies; however, a formalized agreement was never executed.
Discussion Breach of Contract
The gravamen of the plaintiff's claim is that a number of separate correspondences and agreements exchanged between MW and CISI constituted a contract whereby MW was required to compensate CISI for any revenue received by MW through the sale of its products through Coverdell. The plaintiff claims that the defendant breached this contract, and that CISI is entitled to damages.
"The existence of a contract is a question of fact to be determined by the trier on the basis of all the evidence." (Internal quotation marks omitted.) Avon Meadow Condominium Assn., Inc. v. Bank of Boston Connecticut, 50 Conn. App. 688, 695, 719 A.2d 66, cert. denied, 247 Conn. 946, 723 A.2d 320 (1998). To form a valid and binding contract in Connecticut, there must be a mutual understanding of the terms that are definite and certain between the parties. See Ubysz v. DiPietro, 185 Conn. 47, 51, 440 A.2d 830 (1981); Augeri v. C.F. Wooding Co., 173 Conn. 426, 429-30, 378 A.2d 538 (1977); Cavallo v. Lewis, 1 Conn. App. 519, 520, 473 A.2d 338 (1984). "To constitute an offer and acceptance sufficient to create an enforceable contract, each must be found to have been based on an identical understanding by the parties." Bridgeport Pine Engineering Co. v. DeMatteo Construction Co., 159 Conn. 242, 249, 268 A.2d 391 (1970). If the minds of the parties have not truly met, no enforceable contract exists. See Fortier v. Newington Group, Inc., 30 Conn. App. 505, 620 A.2d 1321 (1993). "[A]n agreement must be definite and certain as to its terms and requirements." (Internal quotation marks omitted.) Id. "So long as any essential matters are left open for further consideration, the contract is not complete." 17A Am.Jur.2d, Contracts § 32 (1991).
The evidence in this case fails to demonstrate a mutual understanding of the terms and requirements between CISI and MW concerning the Coverdell account. The plaintiff bulwarks its position on several correspondences which were exchanged between MW and CISI in 1996 and 1997. These letters identify "protected clients," and potential commission rates; however, taken together they evidence an attempt by the parties to reach agreement; not an integrated agreement pertaining to Coverdell. In the July 10, 1997 letter authored by Swanson to identify protected accounts (Exhibit P), Swanson writes: "since we are moving fairly rapidly with sales efforts on behalf of MemberWorks, and in advance of a more formal agreement between our companies, I have prepared a list of the new accounts to date that CISI has brought into MemberWorks."
Critical issues were never resolved between the parties concerning Coverdell, i.e., the schedule and rate of compensation was in flux during the negotiations; the duration of the contract was undefined; the specific responsibilities of each were not addressed. "An agreement to agree to a material term at a later time is no agreement at all." Lizotte v. Enfield, Superior Court, Judicial District of Hartford/New Britain at Hartford, Docket No. 367352 (August 31, 1999, Sheldon, J.). Perhaps, under the circumstances, the most essential term, the effect of MW's acquisition of Coverdell, was left open and never acknowledged in any of the documents which the plaintiff argues constitute an enforceable contract. Swanson was fully aware early in the negotiations between Coverdell and MW, that MW wanted to purchase Coverdell. This acquisition would alter the business structure and organization between Coverdell and MW, and consequently, CISI arrangement with MW as to the Coverdell account. Nonetheless, Swanson remained silent on this issue, "presuming" (Transcript, 12/19/02, p. 34) that CISI would receive a fee on all net revenue MW derived from Coverdell. The court finds this position untenable.
The parties did not have a "meeting of the minds" concerning essential matters relating to their agreement relating to Coverdell. Accordingly, an enforceable contract did not exist between CISI and MW as to the Coverdell account. Even, arguendo, had these correspondences comprised a contract, the evidence does not support that it was breached. The payment of commission to CISI was premised on wholesale transactions which never transpired between MW and Coverdell; accordingly, compensation was not due to CISI based on any purported agreement.
The plaintiff argues vigorously in its Reply Brief that the defendant breached the November 21, 1996 Non-Disclosure and Non-Circumvention Agreement (Exhibit B), by "usurping" the Coverdell opportunity. The Non-Disclosure and Non-Circumvention Agreement states:
1. CISI and CPC shall provide each other with information about the Programs. The parties shall also furnish each other with copies of appropriate marketing information which is sent under separate cover for review to determine the feasibility of their participating in the Programs in a manner which is yet to be determined.
2. CISI and CPC hereby agree to respect the proprietary and confidential nature of the other parties' Programs themselves, and of all the documents and information, including the names of business referrals and contacts, that are or will be provided and shall keep such information confidential, and shall treat such information as proprietary to the providing party. Both parties shall not reveal any such information to any person nor in any other way utilize or permit utilization of the concept of such information of documents without the other's prior written consent.
3. CISI and CPC agree not to circumvent the efforts of each other, and maintain complete confidentiality with respect to each others' clients, prospects, suppliers, business referrals and contacts, and related parties.
4. Both CPC and CISI shall take reasonable actions to ensure that their partners, employees, agents and associates shall comply with the confidentiality specified in this Agreement and shall indemnify and hold each other harmless for any losses or damages resulting from any such person's failure to keep the information specified herein confidential.
Arguing that the courts have been staunch in upholding non-circumvention agreements, the plaintiff cites Eden Hannon Co. v. Sumitomo Trust Banking Co., 914 F.2d 556 (4th Cir. 1990). In that case, the defendant, a potential investor of the plaintiff, signed a "Non-disclosure and Non-circumvention" agreement which specifically required that the potential investor "not to independently purchase lease transactions" with Xerox's PAS Program "for a period equal to the term of the Purchase Agreement." The court found that the defendant breached this specific provision of the Non-circumvention agreement by independently bidding on the Xerox program.
So too, in Cura Financial Services v. Electronic Payment Exchange, Inc., 2001 WL 1334188, *1 (Del.) (2001), a second case cited by CISI, the defendant committed through contract not to "deal with Cura's confidential bank sources without Cura's permission, and would not otherwise circumvent Cura in dealing with Cura's bank sources." Id. at 1. Despite this agreement, and subsequent instructions by the plaintiff to "stay away" from its bank, the defendant forged a relationship with the plaintiff's bank, without permission from or compensation to the plaintiff. The court found this a clear violation of the Non-Circumvention Agreement. In both the above cases, the Non-circumvention Agreements prohibited specific actions on the part of the defendants; prohibitions which were which were subsequently ignored by the offending party. In both cases, the court found the Non-circumvention Agreements to be valid contracts, which had been breached.
The terms of the Non-Circumvention agreement in this case, however, are nebulous. The provision applicable to the plaintiff's claims is paragraph 3, which merely proscribes "circumventing" the efforts of the other. Circumvention is not defined in this agreement; nor are specific actions constituting "circumvention" identified in the agreement, as in the other cases cited by the plaintiff. Certainly, "acquisition" is not prohibited in this agreement. The agreement is silent as to compensation. Moreover, business with or acquisition of Coverdell was not considered at the time the Non-Circumvention Agreement was signed in 1996; accordingly, these contingencies could not have been contemplated by the parties. Swanson, himself, agreed with this proposition. This document is too ambiguous to support the plaintiff's claims for commissions on Coverdell sales.
Claims based on the Non-Disclosure portion of the agreement were ruled out of the case by this court, Melville, J., on a Motion to Strike (April 25, 2000).
"In determining whether a contract is ambiguous, the words of the contract must be given their natural and ordinary meaning . . . A contract is unambiguous when its language is clear and conveys a definite and precise intent . . . The court will not torture words to impart ambiguity where ordinary meaning leaves no room for ambiguity . . . Moreover, the mere fact that the parties advance different interpretations of the language in question does not necessitate a conclusion that the language is ambiguous." (Internal quotation marks omitted.) BD Associates, Inc. v. Russell, 73 Conn. App. 66, 71, 807 A.2d 1001 (2002). The plaintiff cites a dictionary definition of "circumvent" in its reply brief; however, this definition provides little insight into the parties' intention. For example, does circumvent in this agreement mean deceive; victimize; muffle; rebuff; to turn one's back? "If the language of the contract is susceptible to more than one reasonable interpretation, the contract is ambiguous." United Illuminating Co. v. Wisvest-Connecticut, LLC, 259 Conn. 665, 670, 671, 791 A.2d 546 (2002). A contract is rendered ambiguous if the intent of the parties is not clear and certain from the language of the contract. Id., citing Levine v. Massey, 232 Conn. 272, 278-79, 654 A.2d 737 (1995). If any ambiguity should exist, "[e]vidence concerning the intention of the parties may be found in the conduct and language of the parties and the surrounding circumstances." Geddie v. Cadle Co., 49 Conn. App. 265, 271, 714 A.2d 678 (1998).
"Circumvent" means, among other things, to deceive, trick, dupe, bamboozle, hornswaggle, string along, put something over, slip one over on, pull a fast one on, betray, leave in the lurch, holding the bag, double-cross, cheat on, two-time, outmaneuver, outsmart, evade, get out of, give one the run-around, throw off the scent, outwit, outsmart, get the better of, stonewall, elude, give the slip, pull a fast one, make a fool of, make a sucker of, victimize, cut the ground from under one, tie one's hands, and clip the wings of, to keep away from avoid, bypass, dodge, duck, escape, eschew, get around shun, keep (or stay) (or steer) clear of, to pass around but not through, circumnavigate, detour, go around, skirt, to avoid fulfilling or answering completely, sidestep, to get away from (a pursuer), lose, shake off, slip, throw off, give someone the shake (something requiring an outlet) in check, choke back, hold back, hold down, hush (up), muffle, quench, repress, smother, squelch, stifle, strangle, suppress, to slight (someone) deliberately, rebuff, snub, spurn, close (or shut) the door on, give someone the cold shoulder, give someone the go-by, turn one's back, Roget's International Thesaurus, 4th Edition (1977); Roget's II: The New Thesaurus, Third Edition, 1995.
The actions and communications of the parties surrounding the Coverdell acquisition do not support the plaintiff's position that this transaction violated the terms and purpose of the Non-Circumvention Agreement. Prior to the initiation of this lawsuit, there is no documentary evidence to suggest that the plaintiff considered MW's acquisition of Coverdell a breach of the Non-Circumvention Agreement, or that MW "usurped" an opportunity of CISI. Swanson was aware of this potential in the early stages of, and throughout, the negotiations with Coverdell. Nonetheless, there were no conversations or correspondence in which Swanson articulated opposition or the position that such actions would be contrary to the Non-Circumvention Agreement. Nor, were there negotiations between the parties to address the contingencies should MW acquire Coverdell.
Swanson, in the summer of 1998, addressed the acquisition, indirectly, in his draft agreement (Exhibit 10) wherein he provides for a finder's fee, not continued commissions, should a company he introduced be acquired. (Emphasis added.) The court does not credit the plaintiff's testimony that based on the Non-Disclosure and Non-Circumvention Agreement, CISI was entitled to commissions on Coverdell-related sales for as long as revenue was derived. The terms of the Non-Circumvention' Agreement are too vague and imprecise to mandate that outcome. "When more than one meaning can be given language in a contract, the language is to be construed against the party who drew it, see Sturman v. Socha, 191 Conn. 1, 9, 463 A.2d 527 (1983), in this case CISI. For these reasons the court finds that the Non-Circumvention Agreement does not constitute an enforceable agreement between these parties requiring MW to pay CISI commissions on revenue MW derived from Coverdell.
Based on the above, this court finds that the plaintiff has not met its burden of proving that the various correspondences (Exhibits N, P or S), or the Non-Circumvention Agreement were enforceable contracts which were breached by the defendant. The court, therefore, finds in favor of MW on the First, Second, and Fifth Counts.
Anticipatory Breach
"An anticipatory breach of contract occurs when the breaching party repudiates his duty before the time for performance has arrived." Martin v. Kavanewsky, 157 Conn. 514, 518-19, 255 A.2d 619 (1969); Koski v. Eyles, 37 Conn. Sup. 861, 862, 440 A.2d 317 (1981). Because the court finds that an enforceable contract did not exist between the plaintiff and defendant concerning the Coverdell account, the plaintiff cannot prevail on a claim of anticipatory breach. Accordingly, the court finds for the defendant on Count Three of the complaint.
Unjust Enrichment
"A right of recovery under the doctrine of unjust enrichment is essentially equitable, its basis being that in a given situation it is contrary to equity and good conscience for one to retain a benefit which has come to him at the expense of another . . . With no other test than what, under a given set of circumstances, is just or unjust, equitable or inequitable, conscionable or unconscionable, it becomes necessary in any case where the benefit of the doctrine is claimed, to examine the circumstances and the conduct of the parties and apply this standard . . . Plaintiffs seeking recovery for unjust enrichment must prove (1) that the defendants were benefitted, (2) that the defendants unjustly did not pay the plaintiffs for the benefits, and (3) that the failure of payment was to the plaintiffs' detriment . . ." (Citations omitted; emphasis omitted; internal quotation marks omitted.) Meaney v. Connecticut Hospital Assn., Inc., 250 Conn. 500, 525, 735 A.2d 813 (1999). See also Hartford Whalers Hockey Club v. Uniroyal Goodrich Tire Co., 231 Conn. 276, 282-83, 649 A.2d 518 (1994); Fitzpatrick v. Scalzi, 72 Conn. App. 779, 786-87, 806 A.2d 593 (2002).
Unjust enrichment is a very broad and flexible equitable doctrine that has as its basis the principle that it is contrary to equity and good conscience for a defendant to retain a benefit that has come to him at the expense of the plaintiff. National CSS, Inc. v. Stamford, 195 Conn. 587, 597, 489 A.2d 1034 (1985). "Unjust enrichment applies whenever justice requires compensation to be given for property or services rendered under a contract, and no remedy is available by an action on the contract . . . Indeed, lack of a remedy under the contract is a precondition for recovery based upon unjust enrichment. Not unlike quantum meruit, it is a doctrine based on the postulate that it is contrary to equity and fairness for a defendant to retain a benefit at the expense of the plaintiff." (Citation omitted; internal quotation marks omitted.) Gagne v. Vaccaro, 255 Conn. 390, 401, 766 A.2d 416 (2001).
In this case the court finds that the defendant, MW, was benefitted through the work and efforts of the plaintiff, CISI, who should have been compensated for those efforts. The relationship between the plaintiff and defendant was established to foster new business opportunities which would be of "mutual benefit of all parties hereto." (Exhibit E.) Swanson introduced MW to Coverdell; acted as an intermediary during the negotiations; secured information concerning Coverdell which he provided to MW; and attended meetings around the country between MW and Coverdell. The court finds that these actions were central to MW's acquisition of Coverdell. Swanson did not initiate discussions between Coverdell and MW out of the goodness of his heart; he expected monetary gain for his efforts. Moreover, MW viewed Coverdell's acquisition as an "exceptional strategic fit" (Exhibit BBBB); clearly beneficial to it. (See also Exhibit 24.)
Under these circumstances the court finds that the defendant's failure to compensate the plaintiff for introducing and fostering this valuable business opportunity was unjust and wrong. MW argues that the only basis for compensation contemplated between the parties was commissions on wholesale business; accordingly, the plaintiff is just out of luck. The court finds this position harsh and the absence of any remuneration a detriment to the plaintiff. The purpose of the doctrine of Unjust Enrichment is to avoid this type of result. The plaintiff is entitled to be compensated by an amount commensurate with the benefit which accrued to the defendant. See: Hartford Whalers Hockey v. Uniroyal Goodrich Tire, supra at 285.
The plaintiff argues that a percentage of the revenue derived from Coverdell sales is a proper measure of the benefit MW derived from the acquisition of Coverdell. The court disagrees. Firstly, the plaintiff's calculations do not take into consideration the 18.4 million dollars that MW paid to acquire Coverdell. Secondly, the corporate structure and dynamics between MW and Coverdell dramatically changed after the acquisition, as did the accounting procedures; accordingly, the court does not find the various methods employed by the plaintiff to determine commissions an accurate reflection of the defendant's "benefit." The true benefit to MW was Swanson's "discovery" of Coverdell which led to the acquisition. This comports with Johnson's statement that his own Acquisition Department should have explored the Coverdell prospect. In addition, the draft agreement forwarded by Swanson to MW, dated July 4, 1998, incorporates a provision for a "Finder's Fee." Each party recognized the value to MW of locating Coverdell. Moreover, Swanson, in this draft agreement, provided that compensation in such situations would be a finder's fee, rather than commissions based on inter-company transactions.
In its original complaint, Count Two asserted that MW breached contractual obligations owed to CISI under the confidentiality agreement when it failed to compensate CISI as the broker who introduced MW to Coverdell. This court, Melville J., granted the defendant's Motion to Strike Count Two, noting that the plaintiff did not allege an agreement to pay such a fee; accordingly, the count was legally insufficient. The prior ruling does not preclude this court from determining that the finder's fee is the proper measure of damage as to the defendant's unjust enrichment.
Walter C. King, an accredited business appraiser, with a CPA, MBA and expertise in forensic economics, testified on behalf of the plaintiff. The court credits his testimony that the Lehman Formula is utilized within the industry to establish fees for bringing companies together. The Lehman Formula is a sliding scale fee whereby the finder is entitled to 5% of the first million of purchase price; 4% of the second million of purchase price; 3% of the third million of purchase price; 2% of the fourth million of purchase price, and 1% of every dollar thereafter. (Transcript, 1/8/03, pp. 160-61.)
In this instance, MW purchased Coverdell for 18.4 million dollars. Based on the Lehman Formula, the fee to which CISI is entitled is $284,000.00. While Mr. King applied statutory interest to his calculation, from thirty days after the acquisition, the court does not find interest to be justified in this situation. Presumably, Mr. King was employing Connecticut General Statute § 37-3a, which applies an interest rate of 10 per cent a year as damages "for the detention of money after it becomes payable." The court does not find this statute applicable to the facts in this case, where the court is awarding compensation based on equitable principles, rather for the detention of money by the defendant after it became payable. Based on the above analysis, the court finds in favor of the plaintiff on Counts Four and Seven.
Promissory Estoppel
In Count Six, the plaintiff alleges that the Non-Disclosure and Non-Circumvention Agreement constituted a promise by MW that it would not utilize confidential information or circumvent the efforts of CISI as to Coverdell. Further, CISI justifiably relied on this promise and is now entitled to enforce it. "The doctrine of promissory estoppel is derived from the Restatement of Contracts § 90, which provides in relevant part: `A promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise. The remedy granted for breach may be limited as justice requires.' . . . Promissory estoppel provides an alternative that allows enforcement of a promise even without the usual indicia of conventional bargained for consideration . . . The doctrine serves as a consideration substitute to allow enforcement of contracts whereby one party has detrimentally relied on an express or implied promise even though traditional bargained for legal detriment is not present . . . Promissory estoppel, therefore, is not a separate cause of action available to plaintiffs, but rather serves to allow enforcement of an otherwise validly formed contractual commitment that lacks traditional consideration." (Citations omitted.) Pavliscak v. Bridgeport Hospital, 48 Conn. App. 580, 592-93 n. 5, 711 A.2d 747, cert. denied, 245 Conn. 911, 718 A.2d 17 (1998).
"Under our well-established law, any claim of estoppel is predicated on proof of two essential elements: the party against whom estoppel is claimed must do or say something calculated or intended to induce another party to believe that certain facts exist and to act on that belief; and the other party must change its position in reliance on those facts, thereby incurring some injury . . . It is fundamental that a person who claims an estoppel must show that he has exercised due diligence to know the truth, and that he not only did not know the true state of things but also lacked any reasonably available means of acquiring knowledge." (Internal quotation marks omitted.) Chotkowski v. State, 240 Conn. 246, 268, 690 A.2d 368 (1997).
The court is not persuaded that the doctrine of promissory estoppel is applicable to these facts. Firstly, the court has already determined that the Non-Disclosure and Non-Circumvention Agreement was not an enforceable contract. Moreover, the defendant made no representations to the plaintiff concerning the effect of the acquisition of Coverdell. Swanson did not use due diligence to determine this effect and cannot now claim that he did not know the relationship between MW and CISI would be altered by the acquisition. For these reasons the court finds for the defendant on Count Six.
CUTPA
In Counts Eight and Nine the plaintiff asserts that the actions of the defendant violate the Connecticut Unfair Trade Practices Act. Connecticut General Statute § 42-110a et seq. provides a private cause of action to "any person who has suffered an ascertainable loss of money or property, real or personal, as a result of the use or employment of a prohibited method, act or practice."
"[I]n determining whether a practice violates CUTPA we have adopted the criteria set out in the cigarette rule by the federal trade commission for determining when a practice is unfair: (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 — 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, [competitors or other business persons] . . . All three criteria do not need to be satisfied to support a finding of [a violation of CUTPA]." (Internal quotation marks omitted.) Macomber v. Travelers Property Casualty Corp., 261 Conn. 620, 644, 804 A.2d 180 (2002). "It is well settled that whether a defendant's acts constitute . . . deceptive or unfair trade practices under CUTPA, is a question of fact for the trier . . ." (Internal quotation marks omitted.) Tanpiengco v. Tasto, 72 Conn. App. 817, 819, 806 A.2d 1080 (2002).
In Associated Investment Co. Ltd. Partnership v. Williams Associates IV, 230 Conn. 148, 645 A.2d 505 (1994), Justice Palmer emphasized that the Connecticut Unfair Trade Practices Act should be interpreted broadly, and noted that "the expansive language of CUTPA does not require proof of intent to deceive, to defraud or to mislead." Id. at 158. Despite the statute's liberal interpretation, this court does not find that the defendant's actions rose to the level of a CUTPA violation. While a breach of contract can constitute a CUTPA violation, the majority of Superior Courts have held that a breach of contract does not violate CUTPA unless there are substantial aggravating circumstances. Digicom, Inc. v. AR Robinson Printing, No. CV00-00736295, 2002 Ct. Sup. 14150 Superior Court Judicial District of Ansonia-Milford at Milford (Nov. 5, 2002, Cutsumpas, J.). In this case, the evidence does not support that there was a breach of an enforceable contract. Moreover, Swanson was fully aware of the possibility that MW would acquire Coverdell; yet, he never pursued discussions with MW concerning the effect of such a merger on his interest in the Coverdell account.
The plaintiff cites several cases which it argues provide support for finding a CUTPA violation in this case. In Ostrowski v. Avery, 243 Conn. 355, 703 A.2d 117 (1997), the plaintiff claimed a violation of fiduciary duty by a corporate officer, who had formed a new corporation. The Supreme Court held that where a defendant's fiduciary duty is established, the burden shifts to the defendant to demonstrate that a beneficial transaction was "fair, in good faith and for adequate consideration . . ." Id. at 362. A second case cited by the plaintiff, Fink v. Golenbock, 238 Conn. 183, 680 A.2d 1243 (1996), involved claims by a physician that another physician in his corporate practice breached his fiduciary duty by misusing funds. Larsen Chelsea Realty Co. v. Larsen, 232 Conn. 480, 656 A.2d 1009 (1995), also addressed allegations of breach of fiduciary duty by a former corporate president, as well as claims against the company who subsequently hired him. In that case, the Supreme Court ordered a new trial holding that anti-competitive activities by a prior fiduciary and the company who subsequently hired him constitute activities under CUTPA. In Larsen, the plaintiff alleged that the defendant disseminated false and injurious information concerning it. The court finds the plaintiff's attempts to equate the policy considerations and facts of these cases with the issues here unpersuasive. The only other policy consideration argued by the plaintiff is the "heavy handed treatment of a small business by a large, publically traded entity." (Brief, p. 16.) While the plaintiff was perhaps a smaller entity, it was experienced as "a national provider of consumer related consulting, marketing and sales services . . ." (Exhibit 1.)
This case involves a dispute concerning whether or not the plaintiff should receive commissions for sales occurring after MW purchased Coverdell. The defendant's actions were not "immoral, unethical, oppressive, or unscrupulous"; nor, were there substantial aggravating circumstances sufficient to invoke CUTPA in a contract context. Lastly, evidence of a violation of public policy is lacking; the parties merely disagree. The plaintiffs have not proven their CUTPA claim. For these reasons the court finds in favor of the defendant on Counts Eight and Nine.
While discussions during settlement negotiations on December 21, 1998 were admitted at the time of trial, the court has determined that such discussions are inadmissible and has not considered them in its decision. The test for admitting statements made during settlement discussions "is whether the party making the admission intended to concede a fact hypothetically for the purpose of effecting a compromise, or to declare a fact really to exist." Evans Products Co. v. Clinton Building Supply, Inc., 174 Conn. 512, 517, 391 A.2d 157 (1978). The statements allegedly made at this meeting were not concessions of fact.
Conclusion
As discussed above, the plaintiff has not met its burden of proving that the parties entered into an enforceable contract concerning the Coverdell account, or that the defendant breached a contract. Nor, did the plaintiff meet its burden of proof on the claims of Promissory Estoppel or CUTPA. Accordingly, the court finds in favor of the defendant on Counts One, Two, Three, Five, Six, Eight and Nine.
The court does find that the defendant benefitted through the actions of the plaintiff, who, unjustly, was not compensated for those actions, to CISI's detriment. The plaintiff proved by a preponderance of the evidence that it is entitled to restitution under the theory of Unjust Enrichment. The court awards the Plaintiff $280,000.00; statutory interest to commence on the date of judgment.
WOLVEN, JUDGE.