Opinion
No. X05 CV10-6007313S
September 13, 2011
MEMORANDUM OF DECISION ON THE DEFENDANT'S MOTION TO DISMISS (#112) AND ITS MOTION TO STRIKE (#114)
Before the court are the defendant law firm's motions to dismiss and to strike certain allegations brought against the firm by a former client. This litigation is part of the fallout from the enormous securities fraud perpetrated by Bernard L. Madoff and his firm, Bernard L. Madoff Investment Securities, LLC (Madoff). In December 2008, in connection with criminal charges for which he is currently incarcerated, Madoff admitted that he had orchestrated a massive Ponzi scheme. Essentially, Madoff admitted that funds which were entrusted to him were not actually invested, but, rather, were utilized to pay other investors' requests for the redemption of principal and profits, and to fund his extravagant lifestyle.
A Ponzi scheme has been described as "a pyramid scheme where earlier investors are paid from the investments of more recent investors, rather than from any underlying business concern, until the scheme ceases to attract new investors and the pyramid collapses." (Citation omitted.) Retirement Program for Employees v. Madoff, 130 Conn.App. 710, n. 3 (2011).
The plaintiff Orthopaedic Specialty Group, P.C. (OSG), is a Fairfield, Connecticut-based musculoskeletal medical practice that maintains a qualified retirement plan (Plan). The employees of OSG have participated in the Plan for more than twenty years. Other plaintiffs here include five doctors who are members of the OSG group practice. These doctors also acted as trustees of the Plan during the relevant time frame. The defendant Day Pitney LLP is a full-service law firm with offices in Connecticut and several other states, including Washington, DC. The plaintiffs claim that the defendant provided legal representation and advice to the OSG Plan trustees on issues related to their obligations under ERISA, which is the acronym for a federal statutory scheme entitled the Employee Retirement Income Security Act of 1974, as amended, 29 U.S.C. § 1000, et seq.
These five doctor plaintiffs became part of the case only after the instant motions were filed. The original complaint had included the plaintiffs' pension Plan itself as a party. A motion to substitute parties (#120) was granted by agreement, substituting these five individual trustees of the Plan as plaintiffs in lieu of the Plan.
In its motion to dismiss, the defendant law firm seeks to dismiss all claims against it based on negligent investment advice it purportedly gave the Plan trustees on the grounds that if such claims are to be brought at all, the claim must be made in federal court pursuant to ERISA. In its motion to strike, the defendant seeks to strike the claims against the firm which are based on an alleged breach of fiduciary duty. Before it discusses the contentions of the parties with respect to these two motions, the court will first summarize the allegations in the plaintiffs' complaint. It will then discuss the differing legal standards applicable to the two motions.
In its motion to dismiss as filed, the defendant had asserted as an additional grounds that the purported plaintiff pension Plan is not a legal entity with the capacity to bring the action. In light of the granting of the motion to substitute parties referenced in footnote 2 above, this portion of the defendant's motion to dismiss has been withdrawn.
The Allegations
The allegations in the complaint sound in four counts: two counts each of legal malpractice, and two counts each of breach of fiduciary duty. There are two separate counts under both of these two causes of action because one set of allegations is made on behalf of OSG, the group medical practice itself, while the second set is asserted by the five individual doctor trustees of the OSG Plan. The allegations as to legal malpractice may be summarized as follows: For many years, continuing through 2009, the defendant law firm provided legal representation and advice to the plaintiff trustees concerning corporate issues, pension requirements, structure, operation and obligations of the trustees under ERISA, with respect to the OSG Plan. The vast majority of the legal advice and the management of the Plan's legal needs was provided by a paralegal employed by the defendant. The plaintiff trustees followed that advice and operated in reliance upon it. In 2008, a substantial portion of the Plan's assets were lost in the Madoff Ponzi scheme. The plaintiffs had maintained the funds of the Plan with Madoff based on advice provided by the defendants.
The operative complaint is the Second Amended Complaint dated March 7, 2011. At the time of filing, the defendant's motions to dismiss and to strike were directed at an earlier complaint (the Revised Complaint), which has since been superseded due to the motion to substitute parties. However, no causes of action are asserted in the Second Amended Complaint that are not also present in the Revised Complaint. Therefore, the substitution in the complaint of certain Plan trustees as plaintiffs does not affect the substantive arguments of the parties on these issues of law.
After the Madoff scandal, Joseph R. Simone (Simone), a partner in the defendant firm, advised the trustees to make a number of structural changes to the Plan. These recommendations included altering the manner in which the Fund was invested and managed; changing the Plan's committee structure; changing the Plan to a "self-directed" vehicle with access to wide ranging, safer investments; adding a new supplemental retirement benefit for certain OSG employees; obtaining fiduciary liability insurance for Plan trustees; changing the Plan to obtain indemnity from OSG; and bringing suit against certain brokers that had provided advice to the Plan. The plaintiffs claim that these recommendations were never conveyed to the plaintiffs prior to the Madoff scandal, despite standards of practice and law that required the defendant firm to make such recommendations and provide such advice to the plaintiffs. The plaintiffs claim that these acts and omissions of the defendant, including the delayed and tardy provision of advice with regard to the Plan, represent negligence on the part of the defendant and its agents, and are deviations from the appropriate standard of care applicable to lawyers who handle these types of matters. The plaintiffs further claim that the substantial financial losses suffered by the Plan (allegedly over $30 million) were the proximate result of the defendant's negligence, including its delayed and tardy provision of advice.
Although this attorney is mentioned by name in the complaint, as well as an unnamed paralegal at the firm, and despite the fact that the complaint makes repeated reference to "the defendants," there is only a single defendant in this case. It is the law firm itself, a limited liability partnership (LLP).
With respect to the two counts of breach of fiduciary duty, one as to OSG and one as to the Plan trustees, the plaintiffs incorporate the allegations summarized above. They also claim that as the attorney for the plaintiffs, the defendant owed the plaintiffs fiduciary duties in accordance with the Rules of Professional Conduct. The plaintiffs allege that these duties were breached by virtue of the sub-standard representation provided by the law firm. The plaintiffs contend that as a proximate result of this breach, they sustained substantial financial losses, and seek both compensatory and punitive damages.
In attacking the validity of the complaint, the defendant focuses on paragraph four of the complaint, which is also incorporated by reference into each of the four counts. Paragraph four is found under count one, in which the plaintiff OSG accuses the defendant law firm of legal malpractice. That paragraph begins by alleging that, "The plaintiffs had maintained the funds of the Plan with Madoff based on advice provided by the defendants." The defendant argues that when this phrase is coupled with the other charging allegations of the complaint, the claim amounts to one for loss suffered as the result of bad investment advice provided by retained professionals over many years. Accordingly, the defendant maintains that the plaintiffs' claim is preempted by ERISA, and cannot be brought in Superior Court. It argues that OSG's bad investment advice claim in paragraph four of count one (legal malpractice) should be dismissed; and, if the remaining counts of the complaint are not dismissed in their entirety for other reasons, the counterpart claims in those other counts should be dismissed as well. Essentially, the defendant contends that the plaintiffs lack standing to bring this claim in state court, and it should therefore be dismissed for lack of subject matter jurisdiction.
Motion to Dismiss for Lack of Standing — Legal Principles
"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." (Internal quotation marks omitted.) Gurliacci v. Mayer, 218 Conn. 531, 544 (1991). `The motion to dismiss shall be used to assert (1) lack of jurisdiction over the subject matter . . ." (Internal quotation marks omitted.) Sadloski v. Manchester, 235 Conn. 637, 645-46 n. 13 (1995). "Standing . . . implicates a court's subject matter jurisdiction, which may be raised at any point in judicial proceedings." Stamford Hospital v. Vega, 236 Conn. 646, 657 (1996). Because the court's subject matter jurisdiction is implicated, a finding of a lack of standing is therefore a proper basis for granting a motion to dismiss. See May v. Coffey, 291 Conn. 106, 112-13 (2009); Connecticut State Medical Society v. Oxford Health Plans, 272 Conn. 469, 475 (2005). "The plaintiff bears the burden of proving subject matter jurisdiction, whenever and however raised." Fink v. Golenbock, 238 Conn. 183, 199 n. 13 (1996). "If a party is found to lack standing, the court is without subject matter jurisdiction to determine the cause . . . Subject matter jurisdiction [implicates] the authority of the court to adjudicate the type of controversy presented by the action before it . . . [A] court lacks discretion to consider the merits of a case over which it is without jurisdiction . . ." Fort Trumbull Conservancy, LLC v. New London, 282 Conn. 791, 802 (2007). "[O]nce the question of lack of jurisdiction of a court is raised, [it] must be disposed of no matter in what form it is presented . . . and the court must fully resolve it before proceeding further with the case." (Internal quotation marks omitted.) Simmons-Cook v. Bridgeport, 285 Conn. 657, 665 n. 7 (2008).
The court must first address this issue of standing, because it presents a question of the court's subject matter jurisdiction. Ragin v. Lee, 78 Conn.App. 848, 859 (2003). "Standing is the legal right to set judicial machinery in motion. One cannot rightfully invoke the jurisdiction of the court unless he has, in an individual or representative capacity, some real interest in the cause of action, or a legal or equitable right, title or interest in the subject matter of the controversy . . . When standing is put in issue, the question is whether the person whose standing is challenged is a proper party to request an adjudication of the issue . . . Standing requires no more than a colorable claim of injury; a [party] ordinarily establishes . . . standing by allegations of injury. Similarly, standing exists to attempt to vindicate arguably protected interests . . . Standing is established by showing that the party claiming it is authorized by statute to bring suit or is classically aggrieved." May v. Coffey, supra, CT Page 19918 291 Conn. 112. Whether a party has standing based on a given set of facts is a question of law for the court to decide. Ganim v. Smith Wesson Corp., 258 Conn. 313, 348 (2001). "Standing is not a technical rule intended to keep aggrieved parties out of court; nor is it a test of substantive rights. Rather it is a practical concept designed to ensure that courts and parties are not vexed by suits brought to vindicate nonjusticiable interests and that judicial decisions which may affect the rights of others are forged in hot controversy, with each view fairly and vigorously represented . . . These two objectives are ordinarily held to have been met when a complainant makes a colorable claim of direct injury he has suffered or is likely to suffer, in an individual or representative capacity. Such a personal stake in the outcome of the controversy . . . provides the requisite assurance of concrete adverseness and diligent advocacy." (Internal quotation marks omitted.) Fort Trumbull Conservancy, LLC v. New London, supra, 282 Conn. at 802-03.
The standard governing a trial court's review of a motion to dismiss is well established. "The motion to dismiss . . . admits all facts which are well pleaded, invokes the existing record, and must be decided on that alone." Ferreira v. Pringle, 255 Conn. 330, 346 (2001). Therefore, in ruling upon whether a complaint survives a motion to dismiss, a court must take the facts to be those alleged in the complaint, including those facts necessarily implied from the allegations, and construe them in a manner most favorable to the pleader. As previously stated, the defendant moves to dismiss the plaintiffs' complaint on the ground that the plaintiffs do not have standing to bring their claims. Specifically, the defendants contend that the plaintiffs' claims are preempted by ERISA. The ultimate question of whether the plaintiffs have standing, and whether a Connecticut court therefore has subject matter jurisdiction over this controversy, is a matter of both Connecticut and federal law and regulations.
Preemption
In its brief in support of its motion to dismiss, the defendant posits the question as follows: Does ERISA require that a claim based on loss to an ERISA Plan allegedly caused by a law firm's bad investment advice be brought only in federal court? It goes on to answer that inquiry in the affirmative, arguing that regardless of how each count is captioned and named as sounding in legal malpractice, all four counts of the complaint actually include a claim that alleges that the defendant law firm provided inadequate investment advice related to the investment of ERISA Plan funds. The defendant argues that these claims are completely preempted by ERISA, and cannot be brought in Superior Court, and must therefore be dismissed.
"The question of preemption is one of federal law, arising under the supremacy clause of the United States constitution." (Internal quotation marks omitted). Hackett v. J.L.G. Properties, LLC, 285 Conn. 498, 504 (2008). As the Connecticut Supreme Court has noted, "[d]etermining whether Congress has exercised its power to preempt state law is a question of legislative intent." (Internal quotations omitted.) Cox Cable Advisory Council v. Dept. of Public Utility Control, 259 Conn. 56, 62, cert. denied, 537 U.S. 819, 123 S.Ct. 95, 154 L.Ed.2d 25 (2002). The supremacy clause states in relevant part: "This Constitution, and the Laws of the United States which shall be made in Pursuance thereof . . . shall be the supreme Law of the Land; and the Judges in every State shall be bound thereby, any Thing in the Constitution or Laws of any State to the Contrary notwithstanding." U.S. Const., art. VI, cl. 2.
The Connecticut Supreme Court has outlined the three circumstances in which state law may be preempted by federal law. It is to those circumstances, and the reasonable inferences to be drawn therefrom, that this court looks to for guidance. It consists of both direct and circumstantial evidence. First, when "Congress has made its intent known through explicit statutory language . . ." Connecticut Coalition Against Millstone v. Connecticut Siting Council, 286 Conn. 57, 70 (2008), citing English v. General Electric Co., 496 U.S. 72, 78, 110 S.Ct. 2270, 110 L.Ed. 65 (1990). Second, in the absence of explicit statutory language, state law is pre-empted where it "regulates conduct in a field that Congress intended the [f]ederal [g]overnment to occupy exclusively." (Internal quotation marks omitted.) Id. Third, when "it is impossible for a private party to comply with both state and federal law . . . and where under the circumstances of [a] particular case, [the challenged state law] stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress." (Internal quotation marks omitted.) Id., 71. More recently, in Rodriguez v. Testa, 296 Conn. 1 (2010), the Connecticut Supreme Court reaffirmed these three criteria. As is apparent from these three possible circumstances, the doctrine of preemption may be found to be applicable pursuant to the express provisions of a federal law, or preemption may reasonably be implied by an existing federal statutory or regulatory scheme.
"Express preemption occurs to the extent that a federal statute expressly directs that state law be ousted to some degree from a certain field." Bell Atlantic Mobile, Inc. v. Department of Public Utility Control, 253 Conn. 453, 471 (2000). When a federal statute contains an express preemption clause, "the task of statutory construction must in the first instance focus on the plain wording of the clause, which necessarily contains the best evidence of Congress' pre-emptive intent. Where the language of the statute plainly indicates that Congress intended preemption, we must give effect to the plain language unless there is good reason to believe Congress intended the language to have some more restrictive meaning. If the text of the statute is ambiguous, either as to Congress's intent to preempt at all or as to the extent of an intended preemption, the meaning of the statute may be gleaned from its context and from the statutory scheme as a whole, or by resort to the normal canons of construction and legislative history." (Internal quotation marks omitted.) In re PepsiCo, Inc., 588 F.Sup.2d 527, 530-31, (S.D.N.Y. 2008). "When Congress has made its intent known through explicit statutory language, the courts' task is an easy one." Mullin v. Guidant, 114 Conn.App. 279, 288, cert. denied, 292 Conn. 921 (2009), citing English v. General Electric Co., supra, 496 U.S. 78-79.
If the court finds that ERISA by its terms does not expressly preempt the plaintiff's claim, it is not the end of the inquiry. The court must also consider the possibility of implied preemption. Implied preemption occurs "either when the scope of a statute indicates that Congress intended federal law to occupy a field exclusively . . . or when state law is in actual conflict with federal law. [The United States Supreme Court] has found implied conflict pre-emption where it is impossible for a private party to comply with both state and federal requirements . . . or where state law stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress." (Internal quotation marks omitted.) Dowling v. Slotnik, 244 Conn. 781, 794 (1998). "Absent an explicit statement that Congress intends to preempt state law, courts should infer such intent where Congress has legislated comprehensively to occupy an entire field of regulation, leaving no room for the [s]tates to supplement federal law . . . or where the state law at issue conflicts with federal law, either because it is impossible to comply with both . . . or because the state law stands as an obstacle to the accomplishment and execution of congressional objectives . . ." Hackett v. J.L.G. Properties, LLC, supra, 285 Conn. 504. "The intent to occupy a particular field may be inferred from a scheme of federal regulation . . . so pervasive as to make reasonable the inference that Congress left no room for the states to supplement it, or where an act of Congress touches a field in which the federal interest is so dominant that the federal system will be assumed to preclude enforcement of state laws on the same subject." (Internal quotation marks omitted.) Connecticut Coalition Against Millstone v. Connecticut Siting Council, supra, 286 Conn. 70.
Discussion
In their opposition to the defendant's motion to dismiss, the plaintiffs raise a procedural issue at the outset. They maintain that such motions are properly addressed only to pleadings or counts as a whole, not to individual paragraphs contained within a count, like paragraph four. They argue that the only exception to this rule arises when the challenged paragraph "embodies an entire cause of action or defense," which the plaintiffs point out is not the case here. See, e.g., Beckenstein v. Naier, Superior Court, judicial district of Hartford, Docket No. CV 08 5019254 (November 4, 2010, Sheldon, J.); Maysonet v. Cogdell, Superior Court, judicial district of New Haven, Docket No. CV 08 5024267 (June 8, 2009, Wilson, J.); Trimachi v. Connecticut Workers' Compensation Commission, Superior Court, judicial district of New Haven, Docket No. 97 0403037 (June 14, 2000, Devlin, J.) ( 27 Conn. L. Rptr. 469); Wright v. 860 Main, LLC, Superior Court, judicial district of Hartford, Docket No. 06 5007079 (May 21, 2007, Tanzer, J.) ( 43 Conn. L. Rptr. 458). The plaintiffs contend that in light of this rule, the defendant may not seek to strike or dismiss paragraph four, because that paragraph does not embody the entire cause of action set out in any count of the plaintiffs' complaint. The defendant replies that the cases relied upon by the plaintiffs concern motions to strike, not motions to dismiss for lack of subject matter jurisdiction. Such a motion may be made at any time, and when it is made it must be addressed before proceeding further. As such, the motion is not subject to the same procedural constraints, and the defendant invites the court to dismiss the specific claim by ordering the deletion of paragraph four from the complaint because of its preemption by ERISA.
The plaintiffs are correct that paragraph four is not dispositive of the entire complaint, or of even a single count in the complaint. However, the court also accepts the defendant's premise that such a motion challenging subject matter jurisdiction places it on a fundamentally different footing than motions to strike a portion of a complaint, or even motions for summary judgment as to a portion of a complaint. Both of these latter types of motions are improper. See Artie's Auto Body, Inc. v. Hartford Fire Insurance Company, Superior Court, complex litigation docket at Stamford, Docket No. X08 CV03 0196141 (September 22, 2009, Jennings, J.). ("There is no authority for granting summary judgment for a defendant on just one `claim' of a count. A plaintiff need only prevail on one of multiple allegations of liability in a count, but a defendant, to be entitled to judgment on a count, must prevail on all allegations of liability made against him in that count; consequently there is no procedure under Connecticut law for granting summary judgment for a defendant on only some of the allegations contained in a count").
However, despite believing that it has the authority to do so, the court is not persuaded by the defendant's basic argument that paragraph four should be dismissed because it is a claim preempted by ERISA. "ERISA is a comprehensive regulation of employee and welfare and pension benefit plans." Napoletano v. CIGNA Healthcare of Connecticut, Inc., 238 Conn. 216, 233 (1996), overruled on other grounds by Batie-Holmgren v. Commissioner of Public Health, 281 Conn. 277 (2007). ERISA contains its own civil enforcement scheme in ERISA § 502, 29 U.S.C. § 1132(a). With limited exceptions not relevant to this case, the remedies of that section are exclusive, and may be sought only in the district courts of the United States. ERISA § 502(e); 29 USC § 1132(e); 29 U.S.C. § 1132(e). The defendant argues in its brief that because of the "complete preemption" of § 502, a state law cause of action that has the effect of providing an alternative enforcement mechanism to ERISA § 502 cannot be maintained. However, the court is not convinced that paragraph four in this complaint has the effect of providing an alternative enforcement mechanism to ERISA. In order for ERISA preemption to apply, the state law cause of action must be both preempted by ERISA, and `within the scope' of the civil enforcement provisions of ERISA § 502(a), 29 U.S.C. § 1132(a). Plumbing Indus. Bd., Plumbing Local Union No. 1 v. E.W. Howell Co., Inc., 126 F.3d 61, 65 (2d Cir. 1997).
The Court must apply a two-prong analysis to determine whether a state law claim is preempted by ERISA. Plumbing Indus. Bd., 126 F.3d at 65. First, ERISA preempts a cause of action when a state law refers to ERISA plans "in the sense that the measure acts immediately and exclusively upon ERISA plans or where the existence of ERISA plans is essential to the law's operation." Id. at 67. (Internal quotations omitted.) Second, ERISA also preempts a cause of action when a state law "has a clear connection with a plan in the sense that it mandates employee benefit structures or their administration or provides alternative enforcement mechanisms." Id. (Internal quotations omitted.) If neither of these prongs is satisfied, however, there is a considerable presumption against preemption. Id.
The plaintiffs here bring a claim for legal malpractice under state law. While the legal representation does concern an ERISA plan, this claim does not rely upon ERISA's existence. The court cannot conclude that the plaintiffs' claims do not "refer" to ERISA plans such that preemption is warranted. As to the second prong of the ERISA preemption analysis, whether state law has a clear connection with a plan, ERISA does not preempt ordinary state-law claims against non-fiduciaries. See Gerosa v. Savasta Co., Inc., 329 F.3d 317, 323 (2d Cir. 2003) (stating that "run-of-the-mill," "garden-variety," and "unexceptional" state-law claims against non-fiduciaries, including professional negligence claims, are not preempted by ERISA). Here, legal malpractice is a typical state law cause of action that does not on its face have a clear connection to ERISA. The defendant seeks to use a single sentence in the language of paragraph four of the complaint to transform itself into a fiduciary under ERISA. However, courts employ a functional analysis in determining whether a fiduciary relationship exists. See Haddock v. Nationwide Fin. Servs., Inc., 262 F.R.D. 97, 122-23 (D.Conn. 2009); see also 29 U.S.C. § 1002(21)(A). It is this functional analysis which is not helpful to the defendant's position here. ERISA defines a fiduciary, in relevant part, as a person who "renders investment advice for a fee or other compensation, direct or indirect, with respect to any moneys or other property of such plan . . ." 29 U.S.C. § 1002(21)(A)(ii). Thus, the focus is on whether the defendant rendered "investment advice" within the meaning of the federal statute.
The defendant also urges the court in its brief to look beyond the face of the complaint "to determine whether the real nature of the claim is federal, regardless of plaintiff's state law characterization." Danca v. Private Health Care Systems, Inc., 185 F.3d 1, 5 (1st Cir. 1999) (affirming dismissal of health plan beneficiary's state law negligence claims). As previously stated, a motion to dismiss admits all facts in the complaint which are well pleaded, invokes the existing record, and must be decided on that alone. The problem with any invitation to "look beyond the face of the complaint" is that the defendants did not attach any affidavits to their motion containing undisputed facts, such facts which would allow the court to go beyond the complaint itself. Where a motion to dismiss is accompanied by such supporting affidavits, "the court may look to their content for determination of the jurisdictional issue and need not conclusively presume the validity of the allegations of the complaint." (Citation omitted.) Ferreira v. Pringle, 255 Conn. at 346-47. Practice Book § 10-31(a) provides that a motion to dismiss asserting lack of jurisdiction over the subject matter shall, where appropriate, be filed "with supporting affidavits as to facts not apparent on the record." Where such affidavits are not forthcoming, as here, the court will not go beyond the four corners of the complaint.
The first part of the plaintiffs' complaint, including the opening sentence in paragraph four that the defendant asserts gives rise to ERISA preemption, reads as follows:
1. For many years, continuing through 2009, the defendants provided legal representation and advice to the plaintiffs, concerning corporate issues, pension requirements, structure, operation and obligations of the plaintiffs under ERISA, with respect to the Orthopaedic Specialty Group, P.C. (OSG) 401(k) Pension Plan (Plan), through the trustees of the plan, Herbert I. Hermele, Robert V. Dawe, Robert A. Stanton, David F. Bindleglass, and Dante A. Brittis. The vast majority of the legal advice and management of the Plan's legal needs was provided by a paralegal employed by the defendants.
2. The plaintiffs, at all material times, operated in reliance on the advice of the defendants and followed that advice.
3. In 2008, a substantial portion of the Plan's assets were lost to the Bernard Madoff scandal.
4. The plaintiffs had maintained the funds of the Plan with Madoff based on advice provided by the defendants.
The Department of Labor has promulgated extensive regulations which are set forth in the Code of Federal Regulations (C.F.R.) as to the workings of ERISA. One of those regulations defines the meaning of "investment advice" under ERISA, which the court looks to for guidance. It provides as follows:
(1) A person shall be deemed to be rendering " investment advice" to an employee benefit plan, within the meaning of section 3(21)(A)(ii) of the Employee Retirement Income Security Act of 1974 (the Act) and this paragraph, only if:
(I) Such person renders advice to the plan as to the value of securities or other property, or makes recommendation as to the advisability of investing in, purchasing, or selling securities or other property; and
(ii) Such person either directly or indirectly (e.g., through or together with any affiliate) —
(A) Has discretionary authority or control, whether or not pursuant to agreement, arrangement or understanding, with respect to purchasing or selling securities or other property for the plan; or
(B) Renders any advice described in paragraph (c)(1)(1) of this section on a regular basis to the plan pursuant to a mutual agreement, arrangement or understanding, written or otherwise, between such person and the plan or a fiduciary with respect to the plan, that such services will serve as a primary basis for investment decisions with respect to plan assets, and that such person will render individualized investment advice to the plan based on the particular needs of the plan regarding such matters as, among other things, investment policies or strategy, overall portfolio composition, or diversification of plan investments. (Emphasis added.) 29 C.F.R. § 2510.3-21(c)(1).
The first part of the definition of "investment advice" from the C.F.R. which is quoted above seems to fit a fair reading of the allegations. The defendant law firm rendered advice to the Plan as to the value of securities or other property, or made recommendation as to the advisability of investing in, purchasing, or selling securities or other property. However, there is a second part of the definition, one equally necessary and essential to a finding of what constitutes "investment advice" in order to come within ERISA's penumbra. When the regulation is placed alongside the sentence at issue in paragraph four of the complaint, the descriptive contours of such advice in the regulations are not found. The C.F.R. uses the word "and" in the middle of its definition of what constitutes "investment advice." The Supreme Court has reiterated the importance of that conjunction. "As this court repeatedly has noted, "we find significance in the use of the word `and' between . . . two stated conditions." Nicotra Wieler Investment Management, Inc. v. Grower, 207 Conn. 441, 455, 541 A.2d 1226 (1988). For example, in that case, this court reasoned that the use of "and" in a statute clearly and unambiguously meant that the legislature intended the two conditions occur prior to triggering the statutory provisions. Id. Additionally, in Penn v. Irizarry, 220 Conn. 682, 687, 600 A.2d 1024 (1991), this court reiterated the significance of the conjunctive "and." In Penn, this court held that the use of "and" in General Statutes § 9-329a clearly required that the two stated conditions be fulfilled prior to issuing a new primary election. Finally, we recently reaffirmed the significance of the word "and" in State v. Bell, 283 Conn. 748, 796, 931 A.2d 198 (2007). In Bell, we stated that "by its use of the conjunctive `and,' [General Statutes § 53a-40] appears to impose two preconditions for an enhanced sentence to be imposed . . ." Id." Afkari-Ahmadi v. Fotovat-Ahmadi, 294 Conn. 384, 393 (2009).
There is insufficient basis to infer from the language of the complaint that pursuant to the Department of Labor regulations, directly or indirectly, the law firm had discretionary authority or control, whether or not pursuant to agreement, arrangement or understanding, with respect to purchasing or selling securities or other property for the Plan, or that the firm's services would serve as a primary basis for investment decisions with respect to plan assets, and that the firm rendered individualized investment advice to the plan based on the particular needs of the plan regarding such matters as, among other things, investment policies or strategy, overall portfolio composition, or diversification of plan investments. The defendant in its brief concedes under the Department of Labor's regulations, an attorney who renders legal services to a pension plan is not an ERISA fiduciary solely by virtue of the rendering of such services. The court finds that the allegations as drafted do not rise to the level of "investment advice" under the regulations such that the challenged sentence of paragraph four is preempted by ERISA. Therefore, the motion to dismiss is denied.
Motion to Strike: Legal Standard
The defendant's motion to strike is directed at the breach of fiduciary duty claims in count two and count four of the complaint on the grounds that they fail to state a claim upon which relief can be granted. The defendant argues that these counts do not include the necessary factual allegations to state a claim for breach of fiduciary duty by an attorney. Instead, these counts merely incorporate the plaintiffs' claims for legal malpractice. As such, the defendant contends they are insufficient as a matter of law.
"The purpose of a motion to strike is to contest . . . the legal sufficiency of the allegations of any complaint . . . to state a claim upon which relief can be granted." (Internal quotation marks omitted.) Fort Trumbull Conservancy, LLC v. Alves, 262 Conn. 480, 498, (2003). "[A] motion to strike challenges the legal sufficiency of a pleading and, consequently, requires no factual findings by the trial court . . ." (Internal quotation marks omitted.) Connecticut Coalition for Justice in Education Funding, Inc. v. Rell, 295 Conn. 240, 252 (2010). "It is well established that a motion to strike must be considered within the confines of the pleadings and not external documents . . . We are limited . . . to a consideration of the facts alleged in the complaint." (Internal quotation marks omitted.) Zirinsky v. Zirinsky, 87 Conn.App. 257, 268 n. 9, cert. denied, 273 Conn. 916 (2005). "A speaking motion to strike is one improperly importing facts from outside the pleadings." Mercer v. Cosley, 110 Conn.App. 283, 292 n. 7 (2008). "Where the legal grounds for . . . a motion [to strike] are dependent upon underlying facts not alleged in the plaintiff's pleadings, the defendant must await the evidence which may be adduced at trial, and the motion should be denied." (Internal quotation marks omitted.) Commissioner of Labor v. C.J. M. Services, Inc., 268 Conn. 283, 293 (2004).
This court takes "the facts to be those alleged in the complaint . . . and . . . construe[s] the complaint in the manner most favorable to sustaining its legal sufficiency . . . Thus [i]f facts provable in the complaint would support a cause of action, the motion to strike must be denied . . . Moreover, [the court notes] that [w]hat is necessarily implied [in an allegation] need not be expressly alleged . . . It is fundamental that in determining the sufficiency of a complaint challenged by a defendant's motion to strike, all well-pleaded facts and those facts necessarily implied from the allegations are taken as admitted . . . Indeed, pleadings must be construed broadly and realistically, rather than narrowly and technically." (Internal quotation marks omitted.) Connecticut Coalition for Justice in Education Funding, Inc. v. Rell, 295 Conn. 240, 252-53 (2010). "If any facts provable under the express and implied allegations in the plaintiff's complaint support a cause of action . . . the complaint is not vulnerable to a motion to strike." Bouchard v. People's Bank, 219 Conn. 465, 471 (1991). "[I]f facts provable in the complaint would support a cause of action, the motion to strike must be denied." (Internal quotation marks omitted.) American Progressive Life Health Ins. Co. of New York v. Better Benefits, LLC, 292 Conn. 111, 120 (2009).
"A motion to strike admits all facts well pleaded; it does not admit legal conclusions or the truth or accuracy of opinions stated in the pleadings." (Emphasis in original; internal quotation marks omitted.) Faulkner v. United Technologies Corp., 240 Conn. 576, 588 (1997). "A motion to strike is properly granted if the complaint alleges mere conclusions of law that are unsupported by the facts alleged." (Internal quotation marks omitted.) Fort Trumbull Conservancy, LLC v. Alves, CT Page 19929 262 Conn. 480, 498 (2003). The court must "construe the complaint in the manner most favorable to sustaining its legal sufficiency." (Internal quotation marks omitted.) American Progressive Life Health Ins. Co. of New York v. Better Benefits, LLC, supra, 292 Conn. 120. While a complaint also includes any document attached as an exhibit to the complaint, Tracy v. New Milford Public Schools, 101 Conn.App. 560, 566, cert. denied, 284 Conn. 910 (2007), in this case there are no retainer agreements attached to the complaint spelling out the exact terms of the relationship between attorney and client. It would therefore be improper for the court to consider any material outside of the complaint that is being challenged by the motion to strike.
"The purpose and scope of a motion to strike are identical to those of a demurrer under the old rules of practice." (Internal quotation marks omitted.) Brennan v. Fairfield, 255 Conn. 693, 699 n. 4 (2001). The "takeaway" from the foregoing recitation of precedent is that the breach of fiduciary duty counts against the defendant should not be stricken unless it appears certain that the OSG plaintiffs are entitled to no relief under any state of facts which could be proved in support of their claim. Conley v. Gibson, 335 U.S. 41 (1957). With respect to the two counts of breach of fiduciary duty, one as to OSG and one as to the Plan trustees, the plaintiffs incorporate the complaint's allegations of legal malpractice. They also claim that as the attorney for the plaintiffs, the defendant owed the plaintiffs fiduciary duties in accordance with the Rules of Professional Conduct. The plaintiffs allege that these duties were breached by virtue of the sub-standard representation provided by the law firm.
Discussion
The defendants contend that while the facts alleged in the complaint must be admitted for the purposes of this motion to strike, they simply do not support a claim of breach of fiduciary duty. "Professional negligence alone . . . does not give rise automatically to a claim for breach of fiduciary duty." Beverly Hills Concepts, Inc. v. Schatz and Schatz, Ribikoff and Kotkin, 247 Conn. 48, 56 (1998) (reversing judgment for breach of fiduciary duty against lawyer whose conduct was negligent but not disloyal or dishonest). "Professional negligence implicates a duty of care, while breach of a fiduciary duty implicates a duty of loyalty and honesty." Id., at 56-57. (Citations omitted.) Noting that a motion to strike does not admit allegations unsupported by pleaded facts, the defendant argues that a bare conclusory allegation that its attorneys have breached the Rules of Professional Conduct is insufficient to transform a legal malpractice claim into a separate claim for breach of fiduciary duty. The defendant submits that the supposed "breach of fiduciary duty" claims simply incorporate claims of "tardy provision of advice," and do not allege any additional facts that would support a claim that the defendant acted in any way dishonestly, immorally or fraudulently, or engaged in self-dealing or served conflicting interests.
The plaintiffs acknowledge that the trial court opinions cited by the defendant in its brief in support of its motion to strike have held that a breach of fiduciary duty claim requires allegations of fraud, self-dealing, immorality or the like. The plaintiffs argue, however, that there is little or no appellate support for such a view. The plaintiffs cite Dunham v. Dunham, 204 Conn. 303 (1987) for the proposition that the Supreme Court is of the opinion that, "Rather than attempt to define a fiduciary relationship in precise detail and in such a manner to exclude new situations, we have instead chosen 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." (Interior quotations omitted.) Id., 320. The court is not persuaded. Dunham is readily distinguishable, as it involved a trial where there was a genuine issue of fact as to whether an attorney-client relationship between the parties even existed, and it found that the trial court was justified in submitting that issue to the jury. The court also found that the trial court correctly asked the jury to determine whether, even in the absence of an attorney-client relationship, a fiduciary or other confidential relationship existed between the parties, a circumstance which prompted the quoted language about "leaving the bars down" for "new situations."
The plaintiffs argue that it is a question of fact necessarily and appropriately left to the jury whether the facts provable under the complaint demonstrate a level of indolence, incompetence, inattention or casual disregard on the defendant's part in its engagement on the plaintiffs' behalf. They argue that the allegations constitute not merely a failure to satisfy the applicable professional duty of care, but also a breach of the defendant's obligation to serve the plaintiffs' interests with loyalty and undivided commitment. The problem with this argument is that the court finds that the complaint as currently drafted does not adequately support a separate breach of fiduciary duty claim. In Sherwood v. Danbury Hospital, 278 Conn. 163 (2006), the court affirmed a summary judgment for the defendant hospital in a medical negligence case on a breach of fiduciary duty claim because, in part, "the plaintiff has not alleged any facts that would support a claim of fraud, self-dealing, conflict of interest or the like." Id., 278 Conn. at 196-97.
The plaintiffs allege that the defendant law firm breached its fiduciary duties by virtue of the substandard legal representation it provided to OSG and the trustees of the Plan. Substandard legal representation, if provable, may indeed amount to malpractice. One may earnestly attempt to fulfill and discharge a duty to a client and still commit malpractice. A breach of fiduciary duty in the representation of a client requires proof of a dereliction of that duty beyond the mistakes in legal judgment that characterize ordinary malpractice claims. The court finds further support for this position in the fact that the plaintiffs themselves in their complaint seek punitive damages for breach of fiduciary duty. "The rule in this state as to torts is that punitive damages are awarded when the evidence shows a reckless indifference to the rights of others or an intentional and wanton violation of those rights." (Citation omitted.) Whitaker v. Taylor, 99 Conn.App. 719, 730 (2007). Absent claims of fraud, self-dealing, or a conflict of interest on the part of the defendant law firm, these allegations simply do not suffice to also encompass a claimed breach of fiduciary duty. If the plaintiffs have a factual basis for making such additional claims, they may plead over as permitted by Practice Book § 10-44. Such allegations cannot be read into the present pleadings. The motion to strike counts two and four is accordingly granted.
Conclusion
For the reasons set forth herein, the defendant's motion to dismiss (#112) is DENIED. The defendant's motion to strike (#114) is GRANTED.