Opinion
No. CV03-040 68 58 S
February 22, 2005
MEMORANDUM OF DECISION
Before the court is the defendant's, Amrik Singh and Klair, LLC Motion to strike the first, fourth, fifth and eighth counts of plaintiff's second revised complaint dated February 25, 2004.
The plaintiffs, Ramon Patel and Chandrakant Patel, commenced this action by service of process on October 7, 2003 and subsequently filed a one-count complaint on October 14, 2003. Following the defendants' second request to revise, the plaintiffs filed an eight-count second revised complaint on February 25, 2004. The complaint alleges that the plaintiffs and Amrik Singh (Singh) were co-owners of a limited liability company known as Ambica, L.L.C. (Ambica) and as such held the asset known as Krauszer's Food Store (Krauszer's) in Stratford, CT. Ambica "net leased [Krauszer's] to a third party, Alyssa, L.L.C. (Alyssa) at a monthly rental of $4,000 per month." This action arises out of the alleged conversion of the Krauszer's lease and the rental income by the two defendants, Singh and Klair, L.L.C. (Klair), the limited liability company that Singh allegedly formed.
In the first and fifth counts the plaintiffs allege fraud by Singh and Klair. In the fourth and eighth counts they allege a violation of the Connecticut Unfair Trade Practices Act (CUTPA) by Singh and Klair.
On March 12, 2004, the defendants filed a motion to strike the first, fourth, fifth and eighth counts of the plaintiffs' second revised complaint, accompanied by a memorandum in support of the motion. No memorandum of law in opposition to the motion has been filed by the plaintiff.
"Prior to the amendment of . . . Practice Book § [10-42 in 1989], a party who failed to timely file a memorandum of law in opposition to a motion to strike was deemed to have consented to the granting of the motion. With the deletion of the foregoing provision from section [10-42], the failure to timely file an opposing memorandum will not necessarily be fatal and the court may therefore address the merits of the motion. However, despite the amendment to . . . Practice Book § [10-42], the filing of a memorandum in opposition to a motion to strike is mandatory and the failure to file such may still serve as a ground for granting a motion to strike." (Emphasis in original.) K Builders Remodelers, Inc. v. Curioso, Superior Court, judicial district of New London, Docket No. 559213 (April 18, 2002, Martin, J). The instant motion to strike will be addressed by the court on its merits.
"The purpose of a motion to strike is to contest the legal sufficiency of the allegations of any complaint . . . to state a claim upon which relief can be granted." (Internal quotation marks omitted.) Fort Trumbull Conservancy, LLC v. Alves, 262 Conn. 480, 498, 815 A.2d 1188 (2003). "It is fundamental that in determining the sufficiency of a complaint . . . all well-pleaded facts and those facts necessarily implied from the allegations are taken as admitted." (Internal quotation marks omitted.) Commissioner of Labor v. C.J.M Services, Inc., 268 Conn. 283, 292, 842 A.2d 1124 (2004). The court "must construe the complaint in the manner most favorable to sustaining its legal sufficiency." (Internal quotation marks omitted.) Heim v. California Federal Bank, 78 Conn.App. 351, 359, 828 A.2d 129, cert. denied, 266 Conn. 911, 832 A.2d 70 (2003). "[I]f facts provable in the complaint would support a cause of action, the motion to strike must be denied." (Internal quotation marks omitted.) Broadnax v. New Haven, 270 Conn. 133, 173, 851 A.2d 1113 (2004). "A motion to strike is properly granted if the complaint alleges mere conclusions of law that are unsupported by the facts alleged." Novametrix Medical Systems, Inc. v. BOC Group, Inc., 224 Conn. 210, 215, 618 A.2d 25 (1992).
COUNTS FIRST AND FIFTH
The defendants move to strike the first and fifth counts on the grounds that the plaintiffs "fail to allege fraud with sufficient particularity." In support of the motion, the defendants argue that the essential elements of common-law fraud must be set forth in the complaint and that the plaintiffs failed to allege all the essential elements. They argue that the plaintiffs did "not allege that the defendants made a false statement of material fact." They maintain that the plaintiffs failed to "assert facts that the defendants made a false statement for the purposes of inducing the plaintiffs to act upon it." (Emphasis added.) They further maintain the plaintiffs did not allege they were "induced to take any action as a result of a false statement or that they did in fact act on the false statement." (Emphasis added.)
The defendants, on pages four, five and six of their memorandum of law in support of their motion to strike, incorrectly refer to the plaintiffs' second count when arguing in support of striking the first and fifth counts of the plaintiffs' complaint. It is clear from the heading of the argument on page three of the defendants' memorandum, the paragraphs cited from the plaintiffs' complaint, and the motion to strike, that the defendants intended to refer to the first and fifth counts of the plaintiffs' second revised complaint, not to the plaintiffs' second count.
"Fraud involves deception practiced in order to induce another to act to her detriment, and which causes that detrimental action . . . The four essential elements of fraud are (1) that a false representation of fact was made; (2) that the party making the representation knew it to be false; (3) that the representation was made to induce action by the other party; and (4) that the other party did so act to her detriment." (Internal quotation marks omitted.) Chase Manhattan Mortgage Corp. v. Machado, CT Page 3447 83 Conn.App. 183, 188, 850 A.2d 260 (2004).
In the present case, the plaintiffs failed to allege the third and fourth elements of an action in fraud. Paragraph 5 of the first count alleges that Singh made a false representation of fact which was " made to deceive the plaintiffs." (Emphasis added.) This statement necessarily implies that Singh knew that the representation was false. "[I]n determining the sufficiency of a complaint . . . all well-pleaded facts and those facts necessarily implied from the allegations are taken as admitted." (Internal quotation marks omitted.) Commissioner of Labor v. C.J.M. Services, Inc., supra, 268 Conn. 292. Though the court may infer that Singh knew that the representation was false, the plaintiffs' complaint fails to allege that either Singh or Klair made a false statement for the purpose of inducing the plaintiffs to act. The complaint also fails to allege that the plaintiffs actually acted as a result of a false representation. "Because specific acts must be pleaded, the mere allegation that a fraud has been perpetrated is insufficient." Chase Manhattan Mortgage Corp. v. Machado, supra, 83 Conn.App. 188. The first and fifth counts of the complaint fail to allege specific acts by the defendants that induced the plaintiffs to act and also fail to allege any resulting action taken by the plaintiffs. Therefore, the plaintiffs' first and fifth counts of their second revised complaint are stricken for failing to allege the essential elements of fraud.
COUNTS FOURTH AND EIGHTH
Defendants move to strike the fourth and eighth counts on the grounds that they "do not properly allege a violation of the Connecticut Unfair Practices Act." In support of the motion, the defendants argue that the plaintiffs failed to properly plead a violation under CUTPA. The defendants argue that because the plaintiffs did not allege a violation of a statute the so-called "cigarette rule" must apply to the CUTPA claim. They maintain that the "cigarette rule" has not been satisfied because the fourth and eighth counts "fail to allege that the defendants engaged in a practice that is unlawful or offends public policy. Nor do they assert that the defendants engaged in a practice that was immoral, unethical, oppressive or unscrupulous." They further maintain that the counts also fail to allege a "substantial injury to consumers, competitors or other businessmen" and that the plaintiffs "provide no factual allegations to support" a CUTPA claim. Finally, the defendants argue that "the plaintiffs have not pleaded with enough particularity to allow for evaluation of which legal theory their CUTPA claim is based upon."
As to the defendants' motion to strike the fourth and eighth counts of the plaintiffs' second revised complaint, the defendants' motion should be denied because the plaintiffs have alleged facts that if proven could support a claim under CUTPA. General Statutes § 42-110b(a) provides that "[n]o person shall engage in unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce." "It is well settled that in determining whether a practice violates CUTPA [Connecticut courts] have adopted the criteria set out in the cigarette rule by the federal trade commission for determining when a practice is unfair: (1) [W]hether the practice, without necessarily having been previously considered unlawful, offends public policy as it has been established by statutes, the common law, or otherwise — in other words, it is within at least the penumbra of some common law, statutory, or other established concept of unfairness; (2) whether it is immoral, unethical, oppressive, or unscrupulous; (3) whether it causes substantial injury to consumers, [competitors or other business persons] . . . All three criteria do not need to be satisfied to support a finding of unfairness. A practice may be unfair because of the degree to which it meets one of the criteria or because to a lesser extent it meets all three." (Emphasis added; internal quotation marks omitted.) Updike, Kelly and Spellacy, P.C. v. Beckett, 269 Conn. 613, 655-56, 850 A.2d 145 (2004).
The fourth and eighth counts of the plaintiffs' second revised complaint expressly alleges a violation of the "Unfair Trade Practices Act of the Connecticut General Statutes" yet incorrectly invoke § "52-110a" as the corresponding statute, where they should have invoked § 42-110a et seq. Similarly, the defendants, in their motion to strike, cite to § "41-110a et seq." as the Connecticut General Statutes relating to CUTPA, where they should have cited § 42-110a et seq.
The court finds that the plaintiffs have pleaded sufficient facts in the fourth and eighth counts to satisfy the cigarette rule. The plaintiffs have incorporated by reference into the fourth and eighth counts paragraphs one through nine of the first and fifth counts. As the defendants point out on page two of their memorandum in support of their motion to strike, "all causes of [the plaintiffs'] action arise out of a claim that lease payments to an entity known as `Alyssa' were `converted' by one or more of the defendants to lease payments to the defendant, Klair, L.L.C., without the consent of the plaintiffs." In the fourth and eighth counts the plaintiffs allege facts relating to the conversion. The factual allegations are as follows: that the plaintiffs and Singh were co-owners of Ambica; that Ambica owned Krauszer's; that Ambica leased Krauszer's to a third party, Alyssa, and received rental income from Alyssa in return; that Singh formed the defendant company, Klair; that Singh falsely represented that the plaintiffs were equitable owners of Klair; that Singh, without consent of the plaintiffs, converted the lease between Ambica and Alyssa to a lease between Klair and Alyssa; that beginning with the April 1, 2003 payment made by Alyssa, Singh refused to pay the plaintiffs their share of the rental income from the Krauszer's lease and furthermore, that Singh refused to acknowledge the plaintiffs' interest in Krauszer's.
"[T]he first prong of the cigarette rule can obviously be satisfied by proof that [a] defendant's alleged conduct offends public policy as it has been established by . . . the common law . . . Accordingly, and not at all surprisingly, plaintiffs' verdicts on CUTPA claims have frequently been upheld in cases where common-law claims were also successfully prosecuted. See, e.g., Thames River Recycling v. Gallo, 50 Conn.App. 767, 720 A.2d 242 (1998) (affirming judgment for the plaintiff on claims of breach of contract, breach of fiduciary duty, breach of implied covenant of good faith and fair dealing, conversion and misrepresentation as well as violation of CUTPA)." (Citation omitted, internal quotation marks omitted.) Weisman v. Auto Body Assn. of Connecticut, Inc., Superior Court, judicial district of Hartford, Docket No. CV 04 0830345 (June 25, 2004, Sheldon, J.). The plaintiffs have alleged conduct that is actionable at common law, thus, they have satisfied the first prong of the cigarette rule.
As stated earlier, the "plaintiffs [need] to establish only one of the cigarette rule criteria . . ." Meyers v. Cornwell Quality Tools, Inc., 41 Conn.App. 19, 36, 674 A.2d 444 (1996). The plaintiffs, however, have also satisfied the third prong of the cigarette rule which requires substantial injury to consumers, competitors or other businesspersons. By alleging an ascertainable loss, i.e., the rental income from the net lease of Krauszer's and the loss of the lease to Klair, the plaintiffs satisfy the third prong. See Pape v. Goldbach, Superior Court, judicial district of Waterbury, Docket No. CV 99 0150578 (January 5, 2000, Pellegrino, J.) (plaintiffs' allegations of suffering an ascertainable loss satisfied third prong of the cigarette rule).
The court need not determine whether the plaintiffs have met the second prong of the cigarette rule because "[a]ll three criteria do not need to be satisfied to support a finding of unfairness." (Internal quotation marks omitted.) Updike, Kelly and Spellacy, P.C. v. Beckett, supra, 269 Conn. 656.
Furthermore, the Supreme Court has described the kind of conduct alleged in the plaintiffs' complaint as "[fitting] squarely within the provenance of CUTPA." Fink v. Golenbock, CT Page 3450 238 Conn. 183, 212, 680 A.2d 1243 (1996). In Fink, the plaintiff, an owner of 50 percent of a professional corporation, alleged that the owner of the other 50 percent of the corporation had "wrongfully converted the assets of the corporation, had tortiously interfered with the reasonable business expectancies of the corporation . . . and had violated the Connecticut Unfair Trade Practices Act . . ." Id., 185. In the present case, as in Fink, "the defendant took certain actions designed to usurp the business . . . of one corporation in favor of another." Id., 212. This is precisely the type of conduct to which CUTPA is applicable. Id.
The defendants further argue that "the plaintiffs have not pleaded with enough particularity to allow for evaluation of which legal theory their CUTPA claim is based upon." The defendants rely on S.M.S. Textile Mills, Inc. v. Brown, Jacobson, Tillinghast, Lahan King, P.C., 32 Conn.App., 786, 797, 631 A.2d 340, cert. denied, 228 Conn. 903, 634 A.2d 296 (1993). After S.M.S., however, the Supreme Court addressed the issue of CUTPA pleadings in Macomber v. Travelers Property Casualty Corp., 261 Conn. 620, 644, 804 A.2d 180 (2002). In Macomber, the Supreme Court stated: "[t]he defendants make no claim that the plaintiffs' allegations, if taken as true, fail to satisfy [the cigarette rule]. Rather, the defendants suggest that, because the plaintiffs . . . did not rephrase their pleadings to conform to the three prongs of the cigarette rule, we should consider their CUTPA cause of action as factually unsupportable. We are unpersuaded that there is any special requirement of pleading particularity connected with a CUTPA claim, over and above any other claim. We, therefore, reject this contention of the defendants." Id., 644.
For the foregoing reasons, this court finds that the plaintiffs have alleged facts sufficient to satisfy the cigarette rule and that if proven could support a claim under CUTPA. Accordingly, the defendants' motion to strike the fourth and eighth counts of the plaintiffs' second revised complaint is denied.
SKOLNICK, J.