Opinion
No. CV 01 0804488
November 26, 2003
MEMORANDUM OF DECISION
I
This is a matter involving claims for both common law and statutory vexatious litigation. The defendant law firm, Tyler, Cooper Alcorn ("TCA"), instituted suit on behalf of numerous citizens in their 80's or 90's (or their estates) who had executed certain residency agreements allowing them to live in a continuing care retirement community known as East Hill Woods ("EHW") in Southbury, Connecticut. In 1997, EHW filed bankruptcy and in 1998, suit was filed against a number of defendants on various claims but 53 plaintiffs sued Retirement Centers of America, Inc. ("RCAI"), the predecessor of the plaintiff herein, Falls Church Group, Ltd. ("FCG"). After successfully obtaining summary judgment in that case on January 12, 1999, FCG instituted this action on February 6, 2001.
General Statutes § 52-568 states:
"Any person who commences and prosecutes any civil action or complaint against another, in his own name or the name of others, or asserts a defense to any civil action or complaint commenced and prosecuted by another (1) without probable cause, shall pay such other person double damages, or (2) without probable cause, and with a malicious intent unjustly to vex and trouble such other person, shall pay him treble damages."
East Hill Woods was, of course, immune from suit due to the protections of the bankruptcy statutes.
To distinguish these plaintiffs from the plaintiff herein, the 53 plaintiffs will be referred to as the "Dudrow" plaintiffs.
FCG and TCA have entered into a stipulation of facts which covers much of the background of the underlying case. Other facts, introduced at the hearing, will be discussed throughout this opinion. The parties' stipulation is as follows:
1. On March 1, 1988, East Hill Woods, Inc. (hereinafter "East Hill Woods" or "EHW") contracted with Retirement Centers of America, Inc. (hereinafter "RCAI") pursuant to a Consulting Agreement and a Project Management Agreement, which were subsequently amended, whereby RCAI agreed to provide marketing and consulting services to East Hill Woods relative to the development of the East Hill Woods continuing care retirement community in Southbury, Connecticut. See Exhibits Px19 and Px20.
2. RCAI was to receive a consulting fee, portions of which would be paid after the construction financing for the facility was in place or upon start of construction, whichever was sooner, portions of which would be paid in installments during construction, and portions of which would be paid upon final financing.
3. Prior to establishing residency at East Hill Woods, the residents executed Residence Agreements. Pursuant to these agreements, the residents agreed to pay an entrance fee. The entrance fees ranged in size from $117,000 to over $300,000.
4. These agreements also provided, subject to certain conditions and with certain exceptions, that the residents, or their estates, would receive a refund of 94% of the paid entrance fee when they left East Hill Woods or they died and their unit was sold.
5. The Residence Agreements also provided that the residents would pay a 5% deposit upon execution of the agreement. The deposit was refundable, less $200, if the resident elected not to move into East Hill Woods.
6. RCAI was involved with marketing for East Hill Woods from March 8, 1988 to January 1991. The first East Hill Woods Residence Agreement was signed on July 7, 1988, and the last Residence Agreement during the time RCAI managed marketing was signed in December 1990.
7. Construction of East Hill Woods commenced on August 22, 1989, and the first resident moved in April 1991.
8. [Reserved]
9. On February 6, 1991, East Hill Woods counsel sent RCAI a draft settlement agreement between RCAI and East Hill Woods.
10. RCAI and East Hill Woods entered into a settlement agreement on or about February 21, 1991, with an effective date of January 18, 1991. CT Page 12347
11. Pursuant to the terms of the settlement agreement, East Hill Woods agreed to make future payments to RCAI including a payment of $192,000 pursuant to a promissory note and a payment of $222,403 "upon occupancy of 85% of the living units at EHW's facility."
12. The promissory note required payment in the amount of $6,000 per month from February 15, 1991 until the balance was paid. By its terms, the note called for payments each month for 34 months.
13. On August 21, 1995, East Hill Woods paid RCAI $222,403.
14. RCAI had no contact with any of the underlying plaintiffs or prospective residents in the East Hill Woods facility at any time subsequent to January 18, 1991.
15. Tyler, Cooper Alcom (hereinafter "Tyler, Cooper") was aware of the settlement agreement effective January 18, 1991, prior to the initiation of suit in the underlying action.
16. Tyler, Cooper had no evidence of any contact between RCAI and any of the residents or underlying plaintiffs subsequent to January 18, 1991, at the time it initiated suit in the underlying action.
17. As of January 18, 1991, the East Hill Woods continuing care retirement community was not yet open, and no resident had yet moved in.
18. As of January 18, 1991, each of the plaintiffs in the underlying lawsuit against RCAI could have received all of their money back, with the exception of a $200 non-refundable deposit, if they had canceled their contracts.
19. Tyler, Cooper initiated the underlying action styled as a class action by writ, summons and complaint dated January 7, 1998, with a return date of February 3, 1998. CT Page 12348
20. The initial complaint was filed against RCAI among other defendants, including Ernst Young, Levy Droney, and Cooperative Retirement Services of America (the company which succeeded RCAI following its termination by EHW on January 18, 1991).
21. On or about May 4, 1998, Falls Church Group, Ltd. (hereinafter "Falls Church") was substituted as the defendant for RCAI by the stipulation of the parties with a stipulated date of service for statute of limitations purposes effective May 4, 1998.
22. Falls Church was a successor in interest to RCAI.
23. At the time of filing the action, in the event that the statute of limitations defense was pled, Tyler, Cooper intended to rely on the tolling doctrines, including those asserted later in its opposition to the motion for summary judgment by Falls Church.
24. Prior to filing of the underlying action, Tyler, Cooper had begun legislative efforts, by and through partners and employees, including but not limited to Richard Orr, to effectuate a change in the statute, Conn. Gen. Stat. § 17b-529.
25. Tyler, Cooper was attempting, inter alia, to change the statute of limitations contained in Conn. Gen. Stat. § 17b-529 from six years to seven years; and to change the date that the statute of limitations would begin to run from the date of the signing of the Residence Agreement to the date that the resident actually moved into the residence.
26. During the course of his legislative effort, Attorney Orr wrote various letters to legislators and the Attorney General's Office.
27. On September 8, 1998, Falls Church filed a motion for summary judgment asserting the statute of limitations as a defense, along with exhibits and case law. CT Page 12349
28. On October 9, 1998, Tyler, Cooper, on behalf of the underlying plaintiffs, filed an opposition to the motion for summary judgment, along with exhibits and case law.
29. Thereafter, Tyler, Cooper filed sworn affidavits from 52 of the 53 plaintiffs who had sued RCAI in further opposition to the motion.
30. By ruling dated January 12, 1999, the Court ( Hodgson, J.) granted Falls Church's motion for summary judgment.
31. The Court may take judicial notice of all pleadings and materials filed by either party in the underlying action in connection with Falls Church Group's motion for summary judgment.
As mentioned Judge Hodgson granted summary judgment against the 53 plaintiffs on each of the counts as they applied to RCAI: violation of General Statutes § 17b-529 concerning disclosure statements; negligence and misrepresentation; breach of fiduciary duty; and aiding and abetting the breach of fiduciary duty. Judge Hodgson held that the six-year statute of limitations on § 17b-529(a) precluded any claim based on the disclosure statute as she found that RCAI had not entered into any contracts after January 18, 1991 and that the underlying action was commenced on January 7, 1998. She rejected the claim that RCAI acted as a fiduciary. Judge Hodgson held that the three-year statute of limitations for misrepresentation had expired on January 18, 1994 and that any allegation of fraudulent concealment by other defendants or entities was insufficient to toll the statute. Finally, she held that the underlying plaintiffs provided no legal support for their aiding and abetting claim against RCAI, finding that "[i]t's right to be protected from stale claims is not to be overcome because of actions in which it did not engage." Dudrow v. Ernst Young, LLP, Superior Court, complex litigation docket at Waterbury, Docket No. X01 CV 98 0144211 (January 12, 1999, Hodgson, J.).
General Statutes § 17b-529 states:
"(a) Any person who as, or on behalf of, a provider, enters into a contract for continuing care at a facility without having first delivered a disclosure statement meeting the requirements of section 17b-522 to the person contracting for the continuing care, or enters into a contract for continuing care at a facility with a person who has relied on a disclosure statement that omits to state a material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances under which they are made, not misleading, is liable to the person contracting for the continuing care for damages and repayment of all fees paid to the provider, facility or person, less the reasonable value of care and lodging provided to the resident by or on whose behalf the contract for continuing care was entered into prior to discovery of the violation, misstatement or omission or to the time the violation, misstatement or omission should reasonably have been discovered, together with interest thereon at the legal rate for judgments, and court costs and reasonable attorneys fees. Am action to enforce liability pursuant to this section shall not be maintained unless brought within six years after the execution of the contract for continuing care giving rise to the liability.
(b) Liability under this section for any violation, misstatement or omission exists only if the provider or person liable knew or should have known of the violation, the misstatement or omission.
(c) Nothing contained in sections 17b-520 to 17b-535, inclusive, shall be construed to limit the remedies a person has under any other provision of law."
II A.
In Vandersluis v. Weil, 176 Conn. 353, 356, 407 A.2d 982 (1978), our Supreme Court stated that "[a] vexatious suit is a type of malicious prosecution action, differing principally in that it is based upon a prior civil action, whereas a malicious prosecution suit ordinarily implies a prior criminal complaint. To establish either cause of action, it is necessary to prove want of probable cause, malice and a termination of suit in the plaintiff's favor . . . Probable cause is the knowledge of facts sufficient to justify a reasonable person in the belief that there are reasonable grounds for prosecuting an action . . . Malice may be inferred from lack of probable cause . . . The want of probable cause, however, cannot be inferred from the fact that malice was proven." (Citations omitted.)
As noted by the plaintiff, "[p]robable cause is the knowledge of facts, actual or apparent, strong enough to justify a reasonable man in the belief that he has lawful grounds for prosecuting the defendant in the manner complained of." Shea v. Berry, 93 Conn. 475, 477, 106 A. 761 (1919).
There is no dispute that the prior action terminated in the FCG's favor and thus this prong of the three-part test is not at issue. As to the subject of lack of probable cause, the court held in DeLaurentis v. New Haven, 220 Conn. 225, 252-53; 597 A.2d 807 (1991) that "[w]hether the facts are sufficient to establish the lack of probable cause is a question ultimately to be determined by the court, but when the facts themselves are disputed, the court may submit the issue of probable cause in the first instance to a jury as a mixed question of fact and law." The parties agreed that they would have this court make any factual determinations on the issue of lack of probable cause; factual determinations concerning malice and damages would be left for the jury if this court determined that there was a lack of probable cause.
Prior to the hearing on this case, the plaintiff sought a determination that Judge Hodgson's decision in granting the plaintiff's summary judgment motion was determinative of all the factual issues in this case, including those involving the tolling doctrines, the relationship of the parties and the fiduciary or special relationship claims. Relying on Ancona v. Manafort Bros., Inc., 56 Conn. App. 701, 707, 746 A.2d 184, cert. denied, 252 Conn. 954, 749 A.2d 1202 (2000), this court denied said motion on June 18, 2003. Similar to the argument made in this case, the plaintiff in Ancona argued that the granting of the summary judgment motion in the previous case was proof of the absence of probable cause. That court held that, "[t]he plaintiff asserts that the court's granting of summary judgment in his favor in the underlying action establishes the absence of probable cause for that action and, therefore, the defendant is collaterally estopped from litigating the issue in this case. The plaintiff, however, misconstrues the nature of the summary judgment and the doctrine of collateral estoppel. The plaintiff's motion for summary judgment was based solely on his claim that the parties reached an accord and satisfaction of their contract dispute with the plaintiff's tender and the defendant accepted a check marked final payment. The court, in granting the plaintiff's motion, rendered a judgment on the merits of the defendant's breach of contract action. The parties never raised, nor did the court address, the issue of whether the defendant had probable cause for bringing that action in the first place.
"The court in the present case stated: `The plaintiff also argues that [the court's] deciding for the plaintiff here on a motion for summary judgment reveals the lack of merit in [the] defendant's initial suit and dramatically demonstrates the lack of probable cause for bringing it. The argument is invalid. The fact [that it] was a summary judgment decision is irrelevant. If it were, every summary judgment decision in favor of a defendant could always generate a vexatious suit. The essence is that [the court's] decision did not reach the issue of probable cause for bringing the initial suit.'
"We conclude that the issue of probable cause could not have been fully and fairly litigated in the previous action because it was not raised by the parties." Id., 707-08.
The Ancona rule applies here and Judge Hodgson's ruling on the motion for summary judgment is, therefore, not determinative on the issue of probable cause.
B.
The underlying action was commenced in January 1998, a period of approximately seven years after RCAI's last contact with any of those plaintiffs on January 18, 1991. Anticipating a statute of limitations defense, TCA relied on four different tolling doctrines to avoid the bar of the statute of limitations on its claims against FCG. TCA maintained that the applicable statute of limitations was tolled due to RCAI's fraudulent concealment, its continuing course of conduct, its aiding and abetting other defendants and its fiduciary or special relationship with the underlying plaintiffs. As noted, Judge Hodgson found that the Dudrow plaintiffs did not meet their burden in successfully proving the applicability of these doctrines in the summary judgment motion. The burden of proof in this action, however, is different; FCG must prove that TCA lacked probable cause and "[p]robable cause is the knowledge of facts . . . strong enough to justify a reasonable [person] in the belief that [there are] lawful grounds for prosecuting [an action.]" Shea v. Berry, supra, 93 Conn. 477. Indeed, as noted by TCA, the Supreme Court held in Professional Real Estate Investors, Inc. v. Columbia Pictures Industries, Inc., 508 U.S. 49, 62-63 (1993) that probable cause "requires no more than a `reasonabl[e] belief that there is a chance that [a] claim maybe held valid upon adjudication . . .'" While not expressly stated, implicit in TCA's argument is that EHW was somewhat of a legal fiction; it was conceived, created and dominated by RCAI. This court received substantial documentary evidence and testimony in support of TCA's position that RCAI's involvement with EHW did not end until it received its final payment in 1995.
This court heard testimony that EHW was created by RCAI; that three of the four officers were RCAI employees and that from 1983 to 1989, the EHW trustees were employees of RCAI. In fact, EHW had no employees until 1991. Attorney Fish, a partner in TCA, testified that RCAI had complete control of EHW and had all the financial risk attendant to the development of EHW between 1988 and 1991. He suggested that EHW was nothing more than a concept and a set of drawings and pictures for a continuing care retirement community that would be built in the future assuming RCAI could pre-resell enough units and obtain the required financing.
Much of the testimony thus concerned two agreements between EHW and RCAI: the Project Management Agreement (PMA) and the Consultant Agreement. The PMA, originally dated March 1, 1988, was signed by Donald Amaral for EHW. Mr. Amaral was an employee of Mediplex, the owner of RCAI. The agreement was amended on March 17, 1989 and contains John Lind's signature for EHW. Testimony by FCG vice president and general counsel, Alex Pearl, indicated that Mr. Lind was a vice president of RCAI. The second amendment dated July 13, 1989 was signed by Attorney Joseph Vitale, president of EHW. This court reviewed documents in which Mr. Vitale indicated he was counsel for both EHW and RCAI. The Consultant Agreement, also dated March 1, 1988, was signed by Donald Amaral for EHW. This document was amended on May 1, 1988 and Mr. Amaral signed in his capacity as vice president of EHW. The document was amended again on March 17, 1989 and signed by Mr. Lind in his capacity as secretary for EHW. The agreement was amended for a third time on March 22, 1989 and signed by Attorney Vitale in his capacity as president of EHW. The fourth and fifth amendments, dated June 12, 1989 and July 13, 1989, were likewise signed by Attorney Vitale for EHW.
Mr. Pearl testified that from July 1989 to January 1991, no RCAI employee sat on the EHW board, although he agreed that before he and his partner purchased RCAI, some of its employees were on the board. The first disclosure statement, dated June 1988, indicates in Attachment E, that Dale Neuhaus, the chief executive officer of RCAI was the vice president of EHW; that Clark A. Phillips, the chief financial officer for RCAI was the treasurer of EHW; that John H. Lind, the vice president of RCAI was the secretary of EHW; and that Joseph Vitale, attorney for both RCAI and EHW was the president of EHW.
The thrust of TCA's tolling argument is that RCAI was more than simply a marketing agent for EHW. Rather, TCA maintains first, that RCAI was the alter ego of EHW and second, with that interlocking existence, including RCAI's clear knowledge of EHW's financial existence, that RCAI's relationship with the future residents was not a simple sales-customer arrangement. Prospective residents were required to fill out a confidential data application which included information ranging from assets and income to health problems or conditions. Moreover, TCA argues that the future EHW residents, called clients by the RCAI employees, were all elderly and developed a reliance on the RCAI employees. EHW had no employees when most of the contracts were signed. Thus, TCA maintained that RCAI had a special — if not a fiduciary — relationship with the "clients" and that it never revealed or disclosed the complete financial picture for EHW. RCAI marketing employees including Lori Mitchell, a former RCAI salesperson and marketing director from 1988 through 1991, continued on as EHW employees. Through RCAI, the residents entered into complex contracts for the right to reside and receive care in the facility. They were required to pay a five (5%) percent deposit which would all be refunded, but for $200, if they did not take occupancy. The unit cost ranged from $117,000 to $306,000.
Pearl testified that RCAI had simply a limited involvement with EHW; that it merely acted as a facilitator and courier of information to the state agencies, to Tarlow and Levy, and to Ernst and Young. He noted that Avon had purchased RCAI from Mediplex and FCG purchased it from Avon in July 1989. He testified that even though RCAI was in charge of marketing, it was not encouraging people to sign contracts and that it was not RCAI's duty to have people sign contracts. His partner, Mark Turnbull testified that RCAI had no direct responsibility for any of the bond documents other than to provide the information to the lawyers and the accountants. He noted that RCAI had left the facility before the first resident even moved into EHW.
As noted above, RCAI's chief financial officer was the treasurer of EHW. The documents introduced by both parties, however, indicated that, notwithstanding Mr. Pearl's comments, RCAI did in fact have a clear understanding of all financial aspects of EHW. First and foremost, the Consulting Agreement, which was signed by RCAI officials for both itself and EHW, required RCAI, in terms of planning, to "coordinate the planning, supervision of architectural design, marketing and arranging for financing." RCAI was to "choose the project architect"; "assist in preparing the basic plan for the project"; "recommend . . . the rates for the entrance fees, monthly service fees, and other fees in connection with Project with a view toward establishing fees at a feasible cost to the residents"; "prepare . . . estimates and projections of capital costs for construction, operation expenses and cash flow of the planned project"; "prepare . . . the form residence agreement describing the services to be provided"; "determine municipal, state and federal requirements affecting the development and marketing of the Project"; "prepare . . . the disclosure statement and escrow documents"; "obtain approval of governmental authorities"; and "schedule all of the Project activities." In terms of marketing, RCAI was to "prepare a marketing and advertising program," which included the authority to "hire and train personnel" as its employees. In terms of financing, RCAI was "to recommend . . . [t]he method for financing the project," and, if conventional, "assist in obtaining interim construction and permanent financing" and "assist in the preparation of all loan application documents," including "brochures, in-house feasibility studies and reports [and] financial projections." If financing was by bond issue, RCAI was responsible for "participat[ing] in negotiations with the underwriter, document review, data gathering . . . and coordination of the effort to issue the bonds." RCAI was to recommend the architect, negotiate its agreement and be the project representative.
As compensation, RCAI was to receive 10% of the total project cost based on a complex fee arrangement with a sixty (60%) percent portion paid upon closing of construction financing or commencement of construction. An additional financing fee was also to be paid. RCAI was to pay all the preconstruction expenses estimated to be $1,500,000 and EHW was not to invest (except if less than 10%), or have any interest in any other retirement community within twenty-five miles of EHW. As noted, the agreement was signed by RCAI officials for both it and EHW. The first amendment notes that RCAI's corporate parent purchased the facility site and the second agreement indicates that EHW will pay RCAI $4,100,000 for the land
In the Project Management Agreement, RCAI was responsible for hiring an administrator of the project as its employee, developing procedures, staffing the project, preparing annual operating budgets and preparing occupancy programs. In return, RCAI would receive a management fee of five (5%) percent of gross operating revenues, which as indicated in the first amendment, was $244,000 per year for three years with provisions thereafter.
RCAI's duties were also described in the EHW disclosure statement which reiterates RCAI's obligations. Indeed, in the section discussing the role of the sponsor, the statement reads: "LHRC has signed a Letter of Intent allowing it continuous representation on the EHW Board and the option to assume control for the Center at the time the project has been successfully developed, marketed, constructed and occupied to a level of 85%. This Intent is based on the understanding that all of the new business start-up risk for the project is assumed by RCAI, the developer and manager of the project.
"As sponsor, LHRC generally bears no legal liability during the development period for the project and has been indemnified by the owner and consultant for claims arising out of the promotion or sponsorship of the project."
There is simply no way to reconcile those stated duties with Mr. Pearl's testimony of limited involvement.
Fish described the continuing care retirement community concept and how its financial feasibility is premised on a number of complicated factors. The entrance and monthly fees must cover the lifetime care costs of the residents; this obviously assumes that the required number of residents will purchase contracts. If those residents are unable to sell their own homes, they will be unable to purchase rights in the continuing care retirement community. EHW's viability was thus tied, in part, to real estate market conditions.
TCA maintains that RCAI knew that it was not meeting its marketing projections and despite that knowledge and its complete knowledge of EHW's financial picture, it continued marketing the facility to its elderly clientele without disclosing the current financial picture. Fish testified that the real estate market was softening in the late 1980's and early 1990's and never regained its prior strength. At the heart of this claim is a preliminary financial report dated June 3, 1988, prepared by RCAI, which despite its preliminary nature, became the official June 1988 statutory disclosure statement. Am RCAI memo dated February 10, 1989 actually noted that this information should not have been circulated publicly and yet, it was the financial information used for the one and only disclosure statement until the 1991 statement. Indeed, the memorandum states the following. "If there were any problems or misunderstandings which have occurred I would say that the June RCAI numbers which were stamped First Preliminary — Subject To Change should not have been circulated publicly, until the items that have been mentioned earlier had been reviewed and clarified. Its purpose was as intended, — First Preliminary — Subject To Change."
The 1991 financial disclosure statement was, according to TCA's belief, not based on new data, but rather a cut and paste version of the 1989 Ernst and Young feasibility study without the Ernst and Young disclaimer information. Many of the Dudrow plaintiffs did not receive any updated disclosures, even though they signed their contracts in 1988 and did not take occupancy until years later. TCA attorney William Champlin testified that while many of his clients signed their contacts after the 1988 disclosure statement had been approved, they were not given any new information from RCAI or EHW prior to moving in several years later — even when EHW and RCAI knew in 1991 and thereafter that the marketing and occupancy targets would not be met and that certain financial information had not been accurate. For example, one such representative resident, Eleanor Christie, signed her contract on July 11, 1988 and did not move in until March 26, 1993. She testified about her reliance on RCAI's representatives, Lois Mitchell and Joy Ricci, and stated that she relied on their knowledge, expertise, advice and trusting relationship in this investment decision which involved a substantial portion of her life savings. Others testified in a like manner.
Fish testified that the Connecticut Development Authority bonds dated July 1, 1989 in the sum of $43,535,000 that were used to finance the project expressly stated that the purchase of the bonds involved a high degree of risk stemming from a number of factors. These factors included the failure to achieve or maintain certain occupancy rates, refunds and the need to sell homes. Although known to RCAI, These risks were never disclosed directly or in the disclosure statements. The Dudrow plaintiffs testified, in their affidavits opposing the motions for summary judgment, that they never knew this information. In fact, in 1992-93, EHW realized it could not make its 1994 bond payment but never disclosed this to residents who had not yet moved into the premises.
The 1988 disclosure statement also had problems . . . For instance, it indicates that the Lutheran Home Retirement Corporation was the sponsor of EHW. Yet, that contract was not even signed until February or March 1989. Additionally, even as late as October 1990, the Department on Aging declared that the disclosure statement was not acceptable; was in violation of state law (General Statutes § 17-536); and more important, was not to be used.
Pearl testified that the relationship between RCAI and EHW collapsed in the late Falls of 1990 because EHW felt it could market its property without RCAI's services. He testified that RCAI had no involvement with EHW after it opened in 1991 and though he denied that RCAI had a financial interest in EHW after January 1991, he acknowledged that the settlement agreement called for a payment to FCG of approximately $220,000 when the facility reached 85% occupancy. The 1991 settlement agreement between RCAI and EHW as well as the stipulations of fact actually indicate that RCAI received a substantial payment of $192,000 from EHW together with the large payment at 85% occupancy as previously mentioned. Additionally, RCA] was to receive monthly payments of $6000 for 34 months from February 15, 1991. RCAI also monitored the EHW occupancy rate in the years thereafter. It is unmistakably clear that one could believe that RCAI had a substantial interest in the financial viability of EHW, which only opened in 1991.
III A. 1.
Having discussed the factual background, this court can address the probable cause issue as framed by the parties. As indicated, TCA has claimed that, as counsel, it had a reasonable belief that certain tolling doctrines would apply to the applicable statutes of limitation. First, in terms of the fraudulent concealment claim, General Statutes § 52-595 states, "[i]f any person, liable to an action by another, fraudulently conceals from him the existence of the cause of such action, such cause of action shall be deemed to accrue against such person so liable therefor at the time when the person entitled to sue thereon first discovers its existence." Moreover, "[u]nder our case law, to prove fraudulent concealment, the plaintiffs [are] required to show: (1) a defendant's actual awareness, rather than imputed knowledge, of the facts necessary to establish the plaintiffs' cause of action; (2) that defendant's intentional concealment of these facts from the plaintiffs; and (3) that defendant's concealment of the facts for the purpose of obtaining delay on the plaintiffs' part in filing a complaint on their cause of action." Bartone v. Robert L. Day Co., 232 Conn. 527, 533, 656 A.2d 221 (1995).
There appears to be an unresolved issue as to whether affirmative acts of concealment must always be shown. Fichera v. Mine Hill Corp., 207 Conn. 204, 215, 541 A.2d 472 (1988). TCA argues that case law existed at the time of the commencement of the litigation which eliminated the requirement to prove affirmative acts of concealment if a fiduciary or special duty existed. In Martinelli v. Bridgeport Roman Catholic Diocesan Corp., 989 F. Sup. 110 (D.Conn. 1997), Judge Arterton held that a violation of a fiduciary duty to disclose materials would toll the statute of limitations in a fraudulent concealment matter. Indeed on appeal, the Second Circuit discussed other cases which stand for that proposition. Martinelli v. Bridgeport Roman Catholic Diocesan Corp., CT Page 12358 196 F.3d 409, 423 (2d Cir. 1999). TCA also relies on Manufacturers Hanover Trust Co. v. Stamford Hotel, Ltd. Partnership, No. CV 91 0116971, 1994 WL 720368 at *3-4 (Conn.Super.Ct. Dec. 15, 1994).
Notwithstanding Judge Hodgson's ultimate finding on whether RCAI had a fiduciary relationship with the plaintiffs, from the evidence discussed above, this court finds that an attorney could reasonably believe that such a claim could properly be asserted. Our Supreme Court stated in Dunham v. Dunham, 204 Conn. 303, 322, 528 A.2d 1123 (1987) that "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." (Citations omitted.) In Konover Development Corp. v. Zeller, 228 Conn. 206, 221, 635 A.2d 798 (1994), the Court held that "[t]he plaintiff, as a fiduciary, had the duty to deal fairly with the defendant, not simply to act reasonably based upon the relevant information." The Court, however, "has . . . specifically refused to define a fiduciary relationship in precise detail and in such a manner as to exclude new situations, choosing instead to leave the bars down for situations in which there is a justifiable trust confided on one side and a resulting superiority and influence on the other." (Internal quotation marks omitted.) Alaimo v. Royer, 188 Conn. 36, 41, 448 A.2d 207 (1982).
Thus it has been held that "the fiduciary relationship is not singular. The relationship between sophisticated partners in a business venture may differ from the relationship involving lay people who are wholly dependent upon the expertise of a fiduciary. Fiduciaries appear in a variety of forms, including agents, partners, lawyers, directors, trustees, executors, receivers, bailees and guardians. [E]quity has carefully refrained from defining a fiduciary relationship in precise detail and in such a manner as to exclude new situations." (Citations omitted; internal quotation marks omitted.) Konover Development Corp. v. Zeller, supra, 228 Conn. 222-23.
In this case, there was ample evidence concerning RCAI's complete knowledge and control of EHW's development, the unequal bargaining position, the advanced age of the plaintiffs, the placement of trust and the disclosure of confidential information by the EHW residents that there was probable cause to conclude that a fiduciary relationship could be proven that would toll the statute of limitations. Indeed, TCA's argument becomes even stronger when such evidence as the knowingly inaccurate financial disclosures or the lack of the nonprofit sponsor or the rejection of the disclosure statements by the Department of Aging are taken into account. The EHW residents' affidavits in opposition to the summary judgment motions all spoke of the trust they had placed in RCAI. This is surely not hard to comprehend in light of the advanced age of the residents and the fact that EHW was to be not only their last major investment — one assured to be safe — but their future home and medical care. And this was for a home that existed only on paper.
2.
There is also a dispute over what kind of proof is necessary to satisfy the third prong of the Bartone standard, which states that the concealment must be for the purpose of delaying the filing of a lawsuit. At oral argument, FCG contended that only direct evidence and not circumstantial evidence could be used to prove the intent to delay a lawsuit. FCG bases this argument on the strong emphasis that Bartone places on the need for "clear, precise, and unequivocal evidence" needed to establish the third prong as a mater of law. Bartone v. Robert L. Day Co., supra, 232 Conn. 533, 535. Since TCA had no direct evidence of any intent to delay, FCG concludes that they had no probable cause to raise a fraudulent concealment claim.
This court finds that TCA is entitled to use circumstantial evidence to prove an intent to delay. Prior to Bartone, the Supreme Court specifically held that circumstantial evidence can be used to prove fraudulent concealment, first in Puro v. Henry, 188 Conn. 301, 310-11, 449 A.2d 176 (1982) and again in Aksomitas v. Aksomitas, 205 Conn. 93, 100-01, 529 A.2d 1314 (1987). In Puro, the plaintiff, a surgery patient, sued the defendants, her surgeon and the hospital, for fraudulently concealing a medical malpractice action by failing to disclose that a needle remained inside the patient's abdomen after surgery. The plaintiff offered as evidence the fact that the surgeon and scrub nurse failed to notify anyone that a needle had been missing and the fact that a radiologist who was friendly with the surgeon failed to reveal the presence of the needle in an x-ray until after the limitations period had passed.
The Court held that a jury could conclude that the defendants fraudulently concealed the existence of the negligence on the basis of cumulative inferences from the evidence. Id., 311 n. 4. The Court explained: "The general rule that fraud is not presumed, but must be proved by the party who alleges it, does not mean that it cannot be otherwise proved than by direct and positive evidence; circumstantial evidence may be sufficient . . . The test of the sufficiency of proof by circumstantial evidence is whether rational minds could reasonably and logically draw the inference . . . The proof need not be so conclusive that it precludes every other hypothesis. It is sufficient if the proof produces in the mind of the trier a reasonable belief that it is more probable than otherwise that the fact to be inferred is true (Citations omitted; internal quotation marks omitted.) Puro v. Henry, supra, 188 Conn. 310; see also Aksomitas v. Aksomitas, supra, 205 Conn. 100-01. "Each inferential fact need not be proven by the quantum of proof required to find the ultimate fact. If the jury could reasonably have reached the conclusion that the cumulative effect of the facts they found proven established the fraudulent concealment that would be sufficient." Puro v. Henry, supra, 188 Conn. 310. Puro, therefore, established that circumstantial evidence can prove fraudulent concealment as long as two requirements are met: (1) the inferences themselves must be reasonable; and (2) the cumulative weight of those inferences must meet the "clear, precise and unequivocal" legal standard.
This reading of Puro is entirely consistent with the Court's later decisions in Bound Brook, Connell and Bartone. In Bound Brook Assn. v. Norwalk, 198 Conn. 660, 660-64, cert. denied 479 U.S. 819, 107 S.Ct. 81, 93 L.Ed.2d 36 (1986), the plaintiff homeowners had alleged that the town of Norwalk and its building inspector had fraudulently concealed the poor structural foundation of their dwellings which resulted in their unnatural settlement and collapse. The Court found that none of the plaintiff's evidence could support a reasonable inference that the building inspector was aware of the building's foundation problems at the time when he was alleged to conceal it. Id., 667-70.
The Connell case involved an allegation that the defendant physician fraudulently concealed his negligence by failing to recommend a biopsy to a patient that later died of prostate cancer. Connell v. Colwell, 214 Conn. 242, 243-44, 571 A.2d 116 (1990). The Court found that "there was no evidence submitted to the trial court from which it could be inferred that the defendant misrepresented those facts with the intent necessary to constitute fraudulent concealment." Id., 251.
In Bartone, the plaintiff homeowners sued a number of defendants, including a contractor and subcontractor, for negligently constructing and fraudulently concealing a defective underground septic system on their property. Bartone v. Robert L. Day Co., supra, 232 Conn. 529. The plaintiffs offered evidence that after the limitations period had run, the contractor unburied the tank and replaced a defective pipe in full view of the plaintiffs. Id., 536. The Court, partially quoting its decision in Bound Brook, held that "the intensely public nature of these repairs cannot reasonably be construed as evidentiary of an intent to conceal the problems . . . and thus to delay the plaintiff's discovery of their cause of action." (Internal quotation marks omitted.) Id., 536.
The Court's decisions in all three of these cases are consistent with Puro: if no reasonable inferences of fraud can be presumed from the evidence, then the plaintiff cannot prevail as a matter of law. None of these cases stand for the proposition that circumstantial evidence cannot be used to prove fraudulent concealment. Instead, they speak to the quality of the evidence necessary, not the type of evidence allowed.
At oral argument, however, FCG placed special emphasis on Bartone to argue that circumstantial evidence and inferences could not be used to prove the third prong. Implicit in this argument is that Bartone alone applies to the third prong. This impression is understandable because Bartone is unique in presenting fraudulent concealment as a three-prong test. The Bartone standard for fraudulent concealment, as quoted earlier, is stated without any explanation in the opinion. Bartone v. Robert L. Day Co., supra, 232 Conn. 533. It is prefaced by the phrase "[U]nder our case law" and the cases cited are Connell, Bound Brook and Lippitt v. Ashley, 89 Conn. 451, 480, 94 A. 995 (1915). Id.
The requirement that a plaintiff should prove the purposeful delay of a lawsuit does originate in Lippitt in 1915. At issue in that part of the opinion, though, is the tolling doctrine of equitable estoppel, not fraudulent concealment. The Court noted that "it is manifest that the courts cannot nullify the statute in every case . . . and the cases in which such an estoppel has prevailed over the statute have generally been limited . . . to cases in which the defendant's conduct or representations were directed to the very point of obtaining the delay of which he afterward seeks to take advantage by pleading the statute." (Emphasis added.) Lippitt v. Ashley, supra, 89 Conn. 480. The emphasized text above first appears as an element of fraudulent concealment by the federal district court in Zimmerer v. General Electric Co., 126 F. Sup. 690, 693 (D.Conn. 1954), though it receives no discussion in the case. The Lippitt language is not cited in a Connecticut Supreme Court case again until Bound Brook in 1986 and the issue of fraudulent concealment receives scant attention in the published Connecticut opinions from Zimmerman in 1954 until Bound Brook in 1986. On the occasions it did appear, the courts seemed aware of the requirement, even if they did not discuss it. See Krupa v. Kelley, 5 Conn. Cir. Ct. 127, 130, 245 A.2d 886 (1968); Hamilton v. Smith, 773 F.2d 461, 468 (2d Cir. Conn. 1985). It even appears, as discussed below, that the trial court and the Supreme Court in Puro were aware of the requirement as well. Puro v. Henry, supra, 188 Conn. 309.
With regard to Bound Brook and Connell, it appears that the Court did consider the Lippitt language to be part of the fraudulent concealment test, even if it did not refer to it as the third prong. CT Page 12362 Bound Brook Assn. v. Norwalk, supra, 198 Conn. 665; Connell v. Colwell, supra, 214 Conn. 251; Both require the defendant's actions to be directed to the very point of delaying a lawsuit. Id. A superior court case citing Connell and Bound Brook supports this view by including the Lippitt language within the fraudulent concealment test. See Boyrer-Blucher v. Dime Savings Bank, Superior Court, judicial district of Stamford, Docket No. CV 92 0124281, 8 Conn. L. Rptr. 675 (December 16, 1992, Rush, J.).
The Aksomitas case does not state or analyze the specific elements of fraudulent concealment.
Whether the third prong was directly at issue before the Puro Court is debatable. The Puro decision does not quote the Lippitt language and neither of the parties argued in their briefs that the intent to delay a cause of action needed to be proved. The main issues were whether expert medical testimony was required to prove negligence and fraudulent concealment, not specifically whether the plaintiff intended to delay a lawsuit. Puro v. Henry, supra, 188 Conn. 303. Viewed narrowly, the Puro holding regarding circumstantial evidence directly applies only to the first two prongs, but not to the third prong.
A broader reading of Puro suggests that the holding does apply to the purposeful delay requirement. The Court may not have needed to quote Lippitt because the requirement to prove purposeful delay seems to have been part of the trial court's jury instructions on fraudulent concealment. The Court acknowledged these instructions in the opinion: "The trial court, inter alia, charged in substance that the jury must find . . . that the defendants had actual knowledge of [the] fact . . . and that the defendants having such knowledge did not inform the plaintiff of such information for the purpose of keeping her ignorant so that she would not sue them." (Emphasis added.) Id., 309.
In a footnote, the Court states that it is not approving the trial court instructions because the issue of a continuing tort is not properly before them. Their concern was unrelated to the fraudulent concealment test itself. The Court was worried about implicitly ratifying the date from which the statute of limitations runs in a continuing tort case. The trial court found it to be May 18, 1967, but the Court did not want to reach this issue. Id., 302 n. 3.
In Fenn v. Yale University, United States District Court, Docket No: CV 96 1647 (D.Conn. August 19, 2003), the federal court, noting Puro's holding regarding circumstantial evidence, states that "a reasonable inference that a defendant's acts of concealment were aimed at delaying or preventing legal action is a recognized basis upon which to toll the statute of limitations." In this broad interpretation, Puro is direct authority that allows TCA to prove Bartone's third prong with circumstantial evidence.
Regardless of whether one takes a broad or narrow interpretation of Puro, it would be inconsistent to claim that circumstantial evidence could be used to prove the first two prongs of Bartone but not the third. The American Jurisprudence section quoted by the Puro Court states the reasoning behind the use of circumstantial evidence for fraud: "Fraud in its nature is not a thing susceptible of ocular observation or readily demonstrable physically; it must of necessity be proved in many cases by inferences from the circumstances shown to have been involved in the transaction in question." 37 Am.Jur.2d, Fraud and Deceit § 437 (1968).
This reasoning naturally extends to the third prong. If it is difficult to find direct evidence of actual knowledge and intent to conceal, it follows that it will also be difficult to find direct evidence of the purpose of the concealment. It is unlikely that the Court believes that perpetrators of fraud would hide their actual knowledge and intent to conceal, but not their very reason for doing so. Interpreting Bartone as requiring direct evidence of the fraud's purpose would conflict with Puro's basic reasoning, if not also its holding.
TCA therefore has a legal basis to use circumstantial evidence to prove the purposeful delay of a lawsuit. The inferences from such evidence must be reasonable and the cumulative strength of those inferences must meet the "clear, precise and equivocal" standard. In this case, TCA provided a strong factual basis to support such a reasonable belief. TCA offered evidence that RCAI knew its disclosure statements contained misleading information. TCA also provided evidence that RCAI did not reveal the risky bond purchase in their disclosure statements and that RCAI relied on financial reports that it knew to be preliminary and not intended for the public.
Perhaps most significantly, unlike the plaintiffs in any of the Supreme Court cases mentioned above, TCA could also demonstrate that RCAI knew their actions were legally questionable. RCAI received a letter from the Department of Aging in 1990 that declared the disclosure statement to be illegal, but RCAI never corrected their statement and continued to rely on it. The cumulative inferences from this evidence are sufficient to convince the reasonable attorney that the purposeful delay of a lawsuit could be proven. Though TCA did not ultimately prevail on summary judgment, the reasonable attorney could conclude that they had a legal and evidentiary basis for proving fraudulent concealment.
B.
TCA next argues that the reasonable attorney could believe that sufficient factual evidence existed to support a tolling of the statute of limitations based upon the continuing course of conduct doctrine. In Handler v. Remington Arms Co., 144 Conn. 316, 321, 130 A.2d 793 (1957), our Supreme Court stated, "[w]hen the wrong sued upon consists of a continuing course of conduct, the statute does not begin to run until that course of conduct is completed." The doctrine was discussed in Blanchette v. Barrett, 229 Conn. 256, 275, 640 A.2d 74 (1994), where the Court stated that in its modern formulation, we have held that in order "[t]o support a finding of a `continuing course of conduct' that may toll the statute of limitations there must be evidence of the breach of a duty that remained in existence after commission of the original wrong related thereto. That duty must not have terminated prior to commencement of the period allowed for bringing an action for such a wrong . . . Where we have upheld a finding that a duty continued to exist after the cessation of the `act or omission' relied upon, there has been evidence of either a special relationship between the parties giving rise to such a continuing duty or some later wrongful conduct of a defendant related to the prior act." (Internal quotations omitted.)
TCA relies on the special relationship component and not on wrongful acts after January 1991 to support its claim of tolling. See Fichera v. Mine Hill Corp., supra, 207 Conn. 210. Hence it argues that until RCAI disclosed its prior misrepresentations, the statute of limitations was tolled.
What is intriguing about the mechanics of this continuing care retirement community is that the contracts were formed long before the facility existed. Indeed, RCAI created the facility (on paper), sold the units, obtained the bond financing, received its commissions and contracted for its future payments before the first shovel went into the ground. The Dudrow plaintiffs always had the opportunity to cancel their contracts; indeed, that option continued for many of them until they moved in, which for some was not until at least 1993. Under the TCA theory, because of the special relationship or fiduciary duty, the cause of action would survive a statute of limitations challenge because the commencement date was not January 1991 but rather, the date the contract was truly finalized, i.e., the occupancy date. It is thus unlike the medical malpractice continuing treatment scenario where the injury arises from the course of treatment and the statute of limitations commences when the relationship terminates. Connell v. Colwell, supra, 214 Conn. 254-55. Due to its duty of disclosure prior to occupancy, the January 1991 date would, under this theory, not be controlling. Again the determination for this court is not equivalent to that made by Judge Hodgson. Its task is to determine whether probable cause existed for the reasonable attorney to conclude as such and this court, based on the overwhelming evidence, believes it did.
C.
The Dudrow plaintiffs claimed that RCAI had aided and abetted EHW in failing to disclose certain information and, as discussed earlier, EHW was immune from suit due to the bankruptcy filing. The third tolling doctrine concerns TCA's argument that FCG, as an aider and abettor, should have the same statute of limitations as EHW, the primary violator. TCA acknowledges that there are no Connecticut cases on point but argues, nevertheless, that other jurisdictions have adopted this position. See, Hochfelder v. Midwest Stock Exchange, 503 F.2d 364, 374-75 (7th Cir.), cert. denied, 419 U.S. 875, 95 S.Ct. 137, 42 L.Ed.2d 114 (1974); Continental Assurance Co. v. Geothermal Resources International, Inc., 1991 WL 202378 at *5 (N.D. Ill. Sept. 30, 1991); Schwartz v. Michaels, No. 91 Civ. 3538, 1992 WL 184527, at *16 (S.D.N.Y. July 23, 1992); Laventhol, Krekstein, Horvath Horvath v. Tuckman, 372 A.2d 168, 170 (Del. 1976). TCA argues that under the above-referenced case law, the reasonable attorney would believe that FCG would be subject to the same statute of limitations as EHW because it engaged in the wrongful conduct with EHW and therefore cannot complain if EHW continued that wrongful conduct and subjected itself to a tolled statute.
Judge Hodgson rejected this argument stating, in part, that "its right to be protected from stale claims is not to be overcome because of actions in which it did not engage." Dudrow v. Ernst Young, LLP, supra, Superior Court, Docket No. X01 CV 98 0144211. She had previously found that "it is undisputed that RCAI had no dealings of any kind with any of the plaintiffs after the termination of its contract to market and manage the product." Id. Of course, she found, based on the information supplied to her, that the plaintiffs could not prove a fiduciary relationship. This court conducted a multi-day evidentiary hearing and interprets the evidence with a different result. But this court is only concerned with the probable cause burden and surely in light of the support from both federal and state courts, this court cannot say there was no probable cause, in light of the overwhelming factual evidence, to conclude that such an argument could or should not be asserted. As suggested by TCA, it is not our public policy to subject an attorney to a vexatious litigation suit because he or she advances a legal argument which has not yet been considered by our courts especially — where it has been adopted by other courts and where there is a factual basis.
D.
TCA has also claimed that the statute of limitations would be tolled under the equitable estoppel doctrine. As the Supreme Court noted in Morris v. Costa, 174 Conn. 592, 599, 392 A.2d 468 (1978), "[c]ourts, applying equitable principles, have laid down the doctrine of equitable estoppel by which a defendant may be estopped by his conduct from asserting defenses such as the statute of limitations." Under Connecticut law, "[t]here are two essential elements to an estoppel — the party must do or say something that is intended or calculated to induce another to believe in the existence of certain facts and to act upon that belief, and the other party, influenced thereby, must actually change his position or do some act to his injury which he otherwise would not have done." (Internal quotation marks omitted.) Id.
Similar to the fraudulent concealment doctrine, "equitable estoppel is restricted to conduct or representations which were `directed to the very point of obtaining the delay, of which [the party to be estopped] afterward seeks to take advantage by pleading the statute.' " Consoli v. Clarke, Superior Court, judicial district of Hartford, Docket No. CV 96 0556499 (December 10, 1996, Wagner, J.T.R.) ( 18 Conn. L. Rptr. 363), quoting Lippitt v. Ashley, supra, 89 Conn. 480.
In applying the estoppel elements to cases involving a potential statute of limitations issue, Connecticut courts have looked to the federal doctrines of equitable tolling and equitable estoppel for guidance. See, e.g., Connecticut Ins. Guaranty Assn. v. Yocum, Superior Court, judicial district of Hartford, Docket No. CV 94 0539691, 17 Conn. L. Rptr. 343 (June 6, 1996, Sheldon, J.); Gallop v. Commercial Painting Co., 42 Conn. Sup. 187, 612 A.2d 826 (1992); Consoli v. Clarke, supra, 18 Conn. L. Rptr. 363. At the federal level, "[e]quitable tolling `permits a plaintiff to avoid the bar of the statute of limitations if despite all due diligence he is unable to obtain vital information bearing on the existence of his claim' " Gallop v. Commercial Painting Co., supra, 42 Conn. Sup. 192. This tolling doctrine includes cases where the defendant has fraudulently concealed the cause of action, and for that reason, it has perhaps been subsumed by General Statutes § 52-595. Gallop v. Commercial Painting Co., supra, 42 Conn. Sup. 192; Mennillo v. Tucker, Superior Court, judicial district of Meriden, Docket No. CV 86 0227043 (May 3, 1991, Burns, J.). Federal equitable estoppel, as the Second Circuit Court of Appeals explains, is different: "Unlike equitable tolling, which is invoked in cases where the plaintiff is ignorant of his cause of action . . . equitable estoppel is invoked in cases where the plaintiff knew of the existence of his cause of action but the defendant's conduct caused him to delay bringing his lawsuit." Cerbone v. International Ladies' Garment Workers' Union v. Combustion Engineering, Inc., 768 F.2d 45, 49-50 (2d Cir. 1985).
Relying on Cerbone, Judge Blue noted in Gallop that "equitable estoppel is ordinarily invoked in cases where the defendant misrepresented the length of the limitations period or in some way lulled the plaintiff into believing that it was not necessary for him to commence litigation." (Internal quotation marks omitted.) Gallop v. Commercial Painting Co., supra, 42 Conn. Sup. 195. Furthermore, he notes that the cases in which the Court "has affirmatively applied [equitable estoppel] have involved precisely this situation." Id., citing Morris v. Costa, supra, 174 Conn. 592; International Brotherhood of Electrical Workers Local 35 v. Commission on Civil Rights, 140 Conn. 537, 545, 102 A.2d 366 (1953). There is, of course, no evidence that RCAI misrepresented the limitations period and thus this court cannot find that there was probable cause for relying on this portion of the doctrine.
E.
TCA has also argued that General Statutes § 52-590, which allows for the tolling of the statute of limitations in which a defendant is "without this state," applies to this case because FCC is not a Connecticut entity. As noted by FCC, the plaintiffs simply served FCG's agent at the institution of suit. Were this the only claim to tolling, the outcome of this court's review of probable cause would be different.
F.
This court heard testimony that TCA was clearly aware that the statute of limitations issues might, absent tolling, preclude their claims against RCAI. Nevertheless, members of the firm, including Richard Orr, testified that they not only believed that their tolling arguments would prevail but that, as insurance, tried, in 1998, to have the six-year limitation provision amended in the legislature. Senator Andrew McDonald, an attorney with Pullman and Comley, testified that a lobbyist was hired by RCAI to fight such legislation as a change might have impacted Judge Hodgson's ruling. Indeed, had TCA been successful, an amendment that clarified the meaning of the original statute or lengthened the limitation period would likely have precluded a successful defense based on the statute of limitations. See Connecticut National Bank v. Giacomi, 242 Conn. 17, 40-42, 699 A.2d 101 (1997). Despite the support of the Connecticut Attorney General and approval by the judiciary committee by a 26-3 vote, the efforts ultimately failed. Proponents of the bill attempted again in 1999 to have the six-year rule extended but were unsuccessful.
Rule 3.1 of the Rules of Professional Conduct, which is entitled "Meritorious Claims and Contentions," states, in part, that "[a] lawyer shall not bring or defend a proceeding, or assert or controvert an issue therein, unless there is a basis for doing so that is not frivolous, which includes a good faith argument for an extension, modification or reversal of existing law." TCA argues that because the legislation was not unreasonable and that there was a reasonable belief that the legislation would be passed, it was reasonable for an attorney to rely on such efforts as support for the litigation. FCG argues to the contrary, asserting that TCA's legislative pursuits simply reinforce its claim that TCA knew that it lacked probable cause in pursuing the lawsuit. FCG also argues that rule 3.1 has no applicability to this probable cause issue and that those rules are limited to considerations of ethical issues and not substantive issues. This court agrees. In this case the statute had expired prior to seeking the legislative change. The court is thus, unable to find that TCA's attempts to modify the statute even though momentarily successful, constitute probable cause. As noted, however, this is not their only claim.
IV
For the above reasons, this court finds that the plaintiff has failed to prove that a want of probable cause existed. See, Vandersluis v. Weis, supra, 176 Conn. 356. Accordingly, judgment enters for the defendant TCA.
BERGER, JUDGE.