Opinion
No. CV05 400 75 S
August 25, 2005
MEMORANDUM OF DECISION MOTION TO DISMISS #103
I. FACTS
On February 10, 2004, the plaintiff, Milford Painthall, LLC, (Milford Paintball) signed a lease to use a portion of a building owned by Wampus Milford Associates, LLC (Wampus) as an indoor paintball field. The plaintiff, Kathleen Rorick deposited her check in the sum of $32,083.52 as a security deposit. The building is located on 80 Wampus Lane, Milford, CT.
The building required substantial renovations in order to operate a paintball field. According to the terms of the lease Wampus, as the Landlord, was to make the necessary repairs to prepare the building for Occupancy by Milford Paintball. The plaintiff's alleges that the work was not done and as a result, they have incurred damages.
On February 9, 2005, the plaintiff, Milford Paintball and the plaintiff, Kathleen Rorick (Rorick) filed a four-count complaint against the defendant, Wampus Milford Associates, LLC (Wampus). In addition, the plaintiffs have named Terry Jacobs (Jacobs), Josh Yashar (Yashar) and Jason Cohen (Cohen) as defendants. Jacobs, Yashar and Cohen, are residents of the State of New York and are each individual members of Wampus.
Although the individual defendants are residents of the state of New York, the plaintiffs' complaint alleges that the court has personal jurisdiction over each of the defendants pursuant to General Statutes § 52-59(b) because they (I) have committed tortious acts within the CT Page 11768-fi state and/or have committed tortious acts outside the state causing injury to persons within the state and meet the requirements of §§ 52-59(b)(3)(A) and (B), and (iii) own, use and possess real property situated in this state.
In the first count, the plaintiffs allege that all of the defendants have violated the Connecticut Unfair Trade Practice Act, General Statutes § 42-110b. Counts two and four are brought against Wampus Milford Associates, LLC and allege a breach of the Lease and Restitution, respectively. Count three, filed against all of the defendants, alleges fraud.
In support of these claims, the plaintiffs' complaint alleges that they commenced discussions regarding the rental of a portion of the defendant's building with Jacobs and Yashar during the month of October 2003. In their complaint, the plaintiffs allege that, during the negotiations, the defendants, Jacobs and Yashar represented that Wampus would be ready, willing and able to perform the necessary repairs to the building so that the plaintiffs could successfully operate their paintball business in the said building.
Furthermore, the plaintiffs allege that in reliance on these representations, the plaintiffs signed the lease. In accordance with the terms of the lease, the plaintiff, Rorick, deposited her check in the amount of $32,083.52 as a security deposit. In addition, the plaintiffs allege that pursuant to the terms of the lease, on April 23, 2004, they obtained zoning approval, at their own expense, to use the premises as a paintball business.
Notwithstanding that the lease required the landlord to complete all of the repair work within ninety days of receipt of zoning approval, that is by July 26, 2004, the work was not done. The plaintiffs allege that the individual defendants never intended to perform their obligations under the lease but rather were engaged in a scheme, through Wampus, to enhance the value of their building by securing long-term leases and large security deposits. CT Page 11768-fj
On March 24, 2005, each of the individual defendants, Jacobs, Yashar and Cohen, filed a motion to dismiss the complaint for lack of personal jurisdiction. Wampus Milford Associates, LLC has not filed a motion to dismiss. The individual defendants claim that they are residents of the state of New York and "the only contacts that the individual defendants have with Connecticut are acts that they undertook solely in their capacity as members or authorized representatives of the defendant, Wampus Associates, LLC."
In their motion, the defendants point to a list of Superior Court decisions holding that "a nonresident individual's status as a paid officer or employee of a corporation over which Connecticut has personal jurisdiction is insufficient to confer jurisdiction over the nonresident individual where no allegations or evidence is submitted indicating that the individual has transacted business in Connecticut in an individual capacity and on his or her own behalf." Although the defendants do not specifically describe their argument as one that is raising the Fiduciary Shield Doctrine, this is precisely what it presents.
In addition to a memorandum in support of their motion to dismiss, each of the individual defendants have filed a five-paragraph affidavit. In his affidavit, the defendant, Terry Jacobs, states that he is a member of Wampus, a Connecticut limited liability company with its principal office located in New York.
Furthermore, Jacob avers that he personally does "not own, use or possess any real property located within the state of Connecticut, nor does he have a bank account within the state." He admits that he has "communicated by e-mail, phone, fax and mail with representatives of Milford Paintball, LLC in Connecticut." He asserts, however, that all of this activity was done in his capacity as member of Wampus and not individually.
Yashar's affidavit is essentially identical to Jacobs' affidavit.
Cohen's affidavit is substantially the same as the affidavits of Jacobs and Yashar, however, there is one CT Page 11768-fk difference. Cohen does not identify himself as a member of Wampus, but instead states that he is "related to and have had business relationships with members of Wampus." Cohen also states that all activity undertaken with Paintball was done in his "capacity as an authorized representative of Wampus" and not in his individual capacity.
On May 18, 2005, the plaintiffs filed an objection to the motion to dismiss asserting that "Despite the Defendants' suggestion to the contrary, the Fiduciary Shield Doctrine does not prevent personal jurisdiction over each individual Defendant in this case because the individuals, even acting in a representative capacity, remain personally liable to the victim of their tortious conduct regardless of whether the principal/limited liability company is also vicariously liable." As authority for this position, the plaintiffs cite to Scribner v. O'Brien, 169 Conn. 389, 404 (1975) and to Kilduff v. Adams, Inc., 219 Conn. 314, 331-32 (1991).
On April 20, 2005, the plaintiffs filed a motion for extension of time to file their objection to the motion to dismiss. On May 9, 2005, the court (Licari, J) granted the motion. Thus, the objection is timely.
Pursuant to the practice book requirement the plaintiffs filed a memorandum in support of their objection to the motion to dismiss. In addition, the plaintiffs also filed the fourteen-paragraph affidavit of Tim Rorick, a member of the plaintiff, Milford Paintball, LLC. In this affidavit, he describes himself as a member of the Plaintiff, Milford Paintball, LLC. He details the dates and places that he met with individual members of Wampus. According to his affidavit, he met face-to-face with Yashar in October 2003 in Milford, Connecticut and in December 2003 in Stamford, Connecticut.
Additionally, Rorick avers that he received communications by e-mail, fax, phone, and mail from the defendant Yashar. These communications included representations by Yashar that a builder had already been engaged to perform the repair work on the property as well as discussions of the dates that the interior renovations and repairs would be completed. The representations made to Rorick and relied upon by Rorick, induced him to enter into the lease arrangement, to secure zoning approval, and to deposit a CT Page 11768-fl large sum of money as security for the rental. Rorick also alleges that Yashar knew the representations were false when he made them, or in the exercise of reasonable care, should have known that the representations were false when made.
Rorick's affidavit also details that he met face-to-face with Jacobs on December 22, 2004, in Connecticut. Furthermore, he engaged in eleven (11) telephone conversations with Jacobs from November 25, 2003 through February 2, 2004. During these conversations, Rorick alleges that material misrepresentations concerning the repairs were made by Jacobs to him. As in the case of Yashar, Rorick relied on these misrepresentations.
Regarding Cohen, Rorick avers that he met face to face with him in Milford, Connecticut on three occasions, May 12, 2004, June 10, 2004 and September 10, 2004. According to Rorick, notwithstanding that "no discernable renovation work had yet been performed by Wampus, . . . Cohen, made material misrepresentations concerning the contractor/builder engaged to renovate the subject premises, the work performed, and the remaining work to be performed at the Subject Premises."
On August 4, 2005, the individual defendants filed a reply brief in further support of their motion to dismiss. The matter appeared on the short calendar list of August 15, 2005 and a hearing was held on that date.
II. STANDARD OF REVIEW
"A motion to dismiss . . . properly attacks the jurisdiction of the court, essentially asserting that the plaintiff cannot as a matter of law and fact state a cause of action that should be heard by the court." (Emphasis in original; internal quotation marks omitted.) Gurliacci v. Mayer, 218 Conn. 531, 544, 590 A.2d 914 (1991). "A motion to dismiss tests, inter alia, whether, on the face of the record, the court is without jurisdiction." Upson v. State, 190 Conn. 622, 624, 461 A.2d 991 (1983).
"Because a lack of personal jurisdiction may be waived CT Page 11768-fm by the defendant, the rules of practice require the defendant to challenge that jurisdiction by a motion to dismiss. Knipple v. Viking Communications, Ltd., 236 Conn. 602, 605-06 (1996) citing Standard Tallow Corp. v. Jowdy, 190 Conn. 48, 53-54, 459 A.2d 503 (1983). When a defendant files a motion to dismiss challenging the court's jurisdiction, a two-part inquiry is required. The trial court must first "decide whether the applicable state long-arm statute authorizes the assertion of jurisdiction over the [defendant]. If the statutory requirements [are] met, its second obligation [is] then to decide whether the exercise of jurisdiction over the [defendant] would violate constitutional principles of due process." n. 6, Frazer v. McGowan, 198 Conn. 243, 246, 502 A.2d 905 (1986); see Thomason v. Chemical Bank, 234 Conn. 281, 286, 661 A.2d 595 (1995); Lombard Bros., Inc. v. General Asset Management Co., 190 Conn. 245, 250, 460 A.2d 481 (1983).
III. DISCUSSION
As required by the above cited cases, the court must begin with an inquiry into whether the applicable long-arm statute authorizes the assertion of jurisdiction over the individual defendants.
A. CONNECTICUT'S LONGARM STATUTE, § 52-59(B), AUTHORIZES THE ASSERTION OF JURISDICTION OVER THE INDIVIDUAL DEFENDANTS.
General Statutes Sec. 52-59b states, in relevant part, "(a) As to a cause of action arising from any of the acts enumerated in this section, a court may exercise personal jurisdiction over any nonresident individual, foreign partnership or foreign voluntary association, or over the executor or administrator of such nonresident individual, foreign partnership or foreign voluntary association, who in person or through an agent: (1) transacts any business within the state; (2) commits a tortious act within the state, except as to a cause of action for defamation of character arising from the act; (3) commits a tortious act outside the state causing injury to person or property within the state, except as to a cause of action for defamation of CT Page 11768-fn character arising from the act, if such person or agent (A) regularly does or solicits business, or engages in any other persistent course of conduct, or derives substantial revenue from goods used or consumed or services rendered, in the state, or (B) expects or should reasonably expect the act to have consequences in the state and derives substantial revenue from interstate or international commerce; (4) owns, uses or possesses any real property situated within the state; or (5) uses a computer, as defined in subdivision (1) of subsection (a) of section 53-451, or a computer network, as defined in subdivision (3) of subsection (a) of said section, located within the state.
The parties in this case did not request an evidentiary hearing, therefore the court must accept all undisputed factual allegations. "Because an evidentiary hearing was not requested in this case by either party, we will accept, as the trial court should, all undisputed factual allegations for the purpose of determining whether the plaintiffs have sustained their burden of proving that the court had personal jurisdiction over either or both of the defendants under the longarm statutes." Knipple v. Viking Communications, Ltd., supra, 608-09.
Standard Tallow Corporation v. Jowdy, supra, 53, stands for the proposition that a plaintiff seeking to initiate an action in Connecticut bears the burden of proof on the issue of whether Connecticut courts may properly exercise personal jurisdiction over the defendant. Packer Plastics, Inc. v. Laundon, 214 Conn. 52, 55 (Conn. 1990).
The plaintiff's first basis for personal jurisdiction over the individual defendants is § 52-59b(a)(2), which allows jurisdiction to be exerted over a non-resident individual who in person or through an agent "commits a tortious act within the state." The complaint alleges fraud.
"It is also settled law that `"[t]he essential elements of an action in fraud . . . are: (1) that a false representation was made as a statement of fact; (2) that it was untrue and known to be untrue by the CT Page 11768-fo party making it; n. 15 (3) that it was made to induce the other party to act on it; and (4) that the latter did so act on it to his injury. Paiva v. Vanech Heights Construction Co., 159 Conn. 512, 515, 271 A.2d 69 (1970); Clark v. Haggard, 141 Conn. 668, [673,] 109 A.2d 358 (1954); Helming v. Kashak, 122 Conn. 641, 642, 191 A. 525 (1937); Bradley v. Oviatt, 86 Conn. 63, 67, 84 A. 321 (1912); Barnes v. Starr, 64 Conn. 136, 150, 28 A. 980 (1894).". . .' Maturo v. Gerard, 196 Conn. 584, 587, 494 A.2d 1199 (1985); D. Wright J. Fitzgerald, Connecticut Law of Torts (2d Ed.) § 135." Kilduff v. Adams, Inc., 219 Conn. 314, 329 (1991).
The plaintiffs allege in their complaint that "the representations of the Wampus Principals . . . were false when made, or made . . . with reckless disregard for the truth . . . were made under circumstances which induced the Plaintiffs to rely upon such representations. The Plaintiffs relied upon the Defendants' misrepresentations . . . As a result of the misrepresentations . . . the Plaintiffs have suffered financial loss."
In their brief, the individual defendant's argue that the complaint contains "no factual allegations as to any `tortious acts' committed by any of the individual defendants in their individual capacities. Rather all of the alleged acts of the individual defendants . . . relate to alleged statements made by the individual defendants relating to Milford Paintball's leasing of a portion of the building from Wampus."
According to the defendants, since the complaint fails to allege the personal participation of any of the individual defendants in their individual capacities, the allegations in the complaint can only be attributed to Wampus. Under this interpretation, the individual defendants would be insulated from personal jurisdiction, notwithstanding that the court would have jurisdiction over Wampus.
"It is black letter law that an officer of a corporation who commits a tort is personally liable to the victim regardless of whether the corporation itself is liable. n20 Donsco, Inc. v. Casper Corporation, CT Page 11768-fp 587 F.2d 602, 606 (3d Cir. 1978); Scribner v. O'Brien, Inc., 169 Conn. 389, 404, 363 A.2d 160 (1975); First National Bank Trust Co. v. Manning, 116 Conn. 335, 340, 164 A. 881 (1933); Semple v. Morganstern, 97 Conn. 402, 404, 116 A. 906 (1922); H. Henn J. Alexander, Laws of Corporations (3d Ed. 1983) § 230; 19 Am.Jur.2d, Corporations § 1882. The same rule would impose personal liability on a shareholder as well. Wyatt v. Union Mortgage Co., 24 Cal.3d 773, 785, 598 P.2d 45, 157 Cal. Rptr. 392 (1979); 13A W. Fletcher, Cyclopedia of the Law of Private Corporations (Perm. Ed. 1985) § 6214. Kilduff v. Adams, Inc., 219 Conn. 314, 331-32 (1991).
While it is true, as the defendants assert (citing Cadle Co. v. Sydorowycz, 2001 WL 1336375, at 4 (Conn.Super. 2001), ( 30 Conn. L. Rptr. 202) and many others), that there exists in Connecticut a significant number of Superior Court decisions that hold that "a nonresident individual's status as a paid officer or employee of a corporation over which Connecticut has personal jurisdiction is insufficient to confer jurisdiction over the nonresident individual where no allegations or evidence is submitted indicating that the individual has transacted business in Connecticut in an individual capacity and on his or her own behalf"; it is also true that a significant number of Superior Court decisions hold otherwise.
When faced with a similar situation, the court (Jones, J.) in American Protective Services v. Brady, 2001 WL 1661590 (Conn.Super 2001) ( 30 Conn. L. Rptr. 755), stated that "Section 52-59b(a)(2) authorizes jurisdiction where a tort has been committed in Connecticut. In Knipple v. Viking Communications, Ltd., 236 Conn. 602 (1996), our Supreme Court ruled that "false representations entering Connecticut by wire or mail constitute tortious conduct in Connecticut under § 33-411(c)(4). Id. at 610. Connecticut General Statutes § 33-411(c)(4) addressed long arm jurisdiction for foreign corporations."
This court accepts this reasoning and accepts it as the better rule. CT Page 11768-fq
The plaintiff's complaint clearly alleges that the individual defendants, as well as the limited liability company, made false representations to the plaintiffs. These false representations induced the plaintiffs to enter into a lease with the defendants which ultimately resulted in their financial loss. This activity makes the individual defendants subject to this court's longarm jurisdiction under § 52-59(b)2. There are sufficient allegations of fact, that if proven at a trial, can support a finding that a "tortious act" within the meaning of § 52-59b(2) was committed.
B. THE EXERCISE OF JURISDICTION DOES NOT VIOLATE DUE PROCESS
"`The due process clause protects an individual's liberty interest in not being subject to the binding judgments of a forum with which he has established no meaningful contacts, ties, or relations. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 471-72, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1984). The United States Supreme Court has held that the test to be applied in considering the reach of personal jurisdiction is whether (1) the nonresident party has created a substantial connection to the forum state by action purposefully directed toward the forum state or otherwise invoking the benefits and protections of the laws of the state, and (2) the exercise of jurisdiction based on those minimum contacts would not offend traditional notions of fair play and substantial justice. Asahi Metal Industry Co. v. Superior Court, 480 U.S. 102, 111-12, 107 S.Ct. 1026, 94 L.Ed.2d 92 (1987); Burger King Corp. v. Rudzewicz, 471 U.S. at 475-76; Hanson v. Denekia, 357 U.S. 235, 253, 78 S.Ct. 1228, 2 L.Ed.2d 1283 (1958). As long as it creates a substantial connection with the forum state, even a single act can support jurisdiction. McGee v. International Life Ins. Co., 355 U.S. 220, 223, 78 S.Ct. 199, 2 L.Ed.2d 223 (1957).' Cashman v. Cashman, 41 Conn.App. 382, 389, 676 A.2d 427 (1996)." Tri-State Tank Corp. v. Higganum Heating, Inc., 45 Conn.App. 798, 802-03, 699 A.2d 201 (1997). Panganiban v. Panganiban, 54 Conn.App. 634, 638-39 (1999). Given each of the individual defendants business transactions in the state of Connecticut, the court's exercise of personal jurisdiction over each of them, CT Page 11768-fr comports with due process and does not offend traditional notions of fair play. The individual defendants cannot express surprise and claim that submitting to the jurisdiction of the Connecticut courts would create an act of injustice.
The individual defendants have established a substantial connection with the state of Connecticut. They chose to participate in a business that would operate in Connecticut. The property is located in Connecticut, the tenants of the building are in Connecticut, zoning approval was to be obtained in Connecticut and presumably witnesses for the trial will be from Connecticut. Given the factual allegations in this case, the individual defendants should reasonably anticipate and expect being held accountable for their actions in a Connecticut state court.
"Thus where the defendant "deliberately" has engaged in significant activities within a State, or has created "continuing obligations" between himself and residents of the forum, he manifestly has availed himself of the privilege of conducting business there, and because his activities are shielded by "the benefits and protections" of the forum's laws it is presumptively not unreasonable to require him to submit to the burdens of litigation in that forum as well." Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475-76 (U.S. 1985).
Accordingly, the motion to dismiss is denied and the objection to the motion to dismiss is sustained.
Lopez, J.