Opinion
No. CV 06-5007613S
August 20, 2008
DECISION RE MOTION FOR ORDER TO TERMINATE STAY — #139
This is a collection action instituted by an Italian corporation against a Connecticut corporation. Presently before the court is the plaintiff's motion for an order to terminate stay of the action. The motion raises the question of what constitutes transacting business by a foreign corporation making it necessary for the corporation to procure a certificate of authority from the Secretary of State in order to maintain an action as required by Connecticut General Statutes § 33-92(a) or whether the plaintiff falls within the statutory exception as articulated in Connecticut General Statutes § 33-920(b)(6).
On November 30, 2006, the plaintiff, Ross S.R.L., filed an application for a prejudgment remedy against the defendant, Rofren Disc Brake, Inc. On February 15, 2007, the court granted the prejudgment remedy in the amount of $190,000 against the defendant. The plaintiff then filed a two-count complaint dated February 27, 2007, alleging, inter alia, that in February 2003, the parties entered into an agreement whereby the plaintiff agreed to ship to the defendant, and whereby the defendant agreed to purchase from the plaintiff, finished brake pads and friction materials. The plaintiff received and accepted the orders in Italy and shipped the products to the defendant pursuant to orders placed by the defendant in Connecticut. Subsequently, the defendant failed to pay the invoices in full and owed a balance of payment to the plaintiff. On April 4, 2007, the defendant filed a motion to dismiss the plaintiff's collection action on grounds that the plaintiff lacks standing to bring a lawsuit because it is a foreign corporation transacting business in Connecticut without a certificate authorizing it to do so pursuant to § 33-920 33-921. The court (Wagner, J.T.R.) issued a stay on May 16, 2007 until the plaintiff obtained a certificate of authority under § 33-921(c), or, after a hearing, it is determined that the plaintiff is not required to obtain a certificate of authority allowing it to conduct business within the state of Connecticut. The plaintiff filed this motion for an order to terminate stay, along with a supporting memorandum of law on April 24, 2008. The defendant objected by filing a memorandum in opposition on May 8, 2008. An evidentiary hearing was held on August 6, 2008.
Connecticut General Statutes § 32-921(c) provides in relevant part: "A court may stay a proceeding commenced by a foreign corporation, its successor, or assignee until it determines whether the foreign corporation or its successor requires a certificate of authority. If it so determines, the court may further stay the proceeding until the foreign corporation or its successor obtains the certificate."
DISCUSSION
In its memorandum of law in support of the motion for an order to terminate stay, the plaintiff argues that it may bring an enforcement action to collect on prejudgment remedy without a certificate authorizing it to transact business in Connecticut because it qualifies under the exception articulated in § 33-920(b)(6), which excepts from requiring certification in relevant part, any business "soliciting or obtaining orders, whether by mail or through employees or agents or otherwise, if the orders require acceptance outside this state before they become contracts." (Emphasis added.)
The defendant argues that the plaintiff does not fall within the exception articulated in § 33-290(b)(6) because the business relationship between the parties is a joint venture pursuant to a 2003 consulting agreement which licenses to the defendant the process of manufacturing and marketing brake pads, unlike the defendant's previous activities of importing and distributing finished brake pads.
The question of whether a foreign corporation is transacting business so as to require a certificate of authority must be determined on the complete factual picture presented in each case, and that the corporation's activities must be more substantial than those which would suffice to subject it to service of process. 176 Conn. 185, 190 (1978). Eljam Mason Supply, Inc. v. Donnelly Brick Co., 152 Conn. 483, 485 (1965). Relevant considerations are the situs of the contract, the presence of corporate offices and agents in Connecticut, and the extent of business activities in Connecticut. 176 Conn. 185, 190 (1978).
"It is generally held that the soliciting of orders . . . where the orders so obtained are subject to acceptance or rejection by the corporation in another State, does not constitute transacting business within the first named State so as to subject the corporation to statutes prescribing conditions upon foreign corporation for doing business therein." (Citation omitted.) Alfred M. Best Co., Inc. v. Goldstein, 124 Conn., 597, 603, 1 A.2d 140 (1938). A Corporation which is not doing business within this state may bring and maintain a lawsuit without violating the statute. Relevant considerations used to determine whether a party has been transacting business in Connecticut include the site of the contract, the presence of corporate employees or agents in Connecticut and the extent of such business activities here in Connecticut. Kraft Foodservice, Inc. v. Fine Host Corp., Superior Court, judicial district of Stamford-Norwalk at Stamford, Docket No. CV 94 013717S (April 18, 1995, Andrea, J) ( 14 Conn. L. Rptr. 44). It is well established that a contract is considered made when and where the last thing is done which is necessary to create an effective agreement. Alfred M. Best Co., Inc. v. Goldstein, supra, 124 Conn. 602.
On the basis of the evidence presented at the hearing on the motion to terminate stay, I find the defendant and the plaintiff met more than 20 years ago in Italy and began their business relationship. The defendant places orders for brake parts in Italy and sends money for the orders. The plaintiff will not ship the parts until payment is received in Italy. There have been no meetings between the plaintiff and the defendant in Connecticut. Payments to the plaintiff were sent to Italy and were required before orders were filled and shipped to the defendant. The plaintiff maintained no office or place of business in the state. No evidence was offered to show that the plaintiff had other customers in Connecticut or that it had officers or an agent in the state to solicit business. The plaintiff does not have and never had bank accounts, advertising, money, property, an office, agents or resident representatives in Connecticut. The plaintiff's only contact with this state is with the defendant who is a wholesale purchaser within Connecticut. All orders require acceptance in Italy.
As for the defendant's argument that the plaintiff and defendant are in a "joint venture" which constitutes transacting business, the defendant's evidence was insufficient to make such a finding. The agreement itself is in Italian and licenses the defendant to obtain and use know-how about the process of manufacturing and marketing brake pads. The evidence showed that the defendant's employees traveled to Italy for in-person training. There was no evidence that the plaintiff had any contacts with or in Connecticut or that it received any ongoing commissions from sales or any remuneration other than the one-time payment of $200,000 from the defendant for the exclusive licensing agreement. Additionally, the defendant cites no authority to support its contention that the 2003 contract between the parties now constitutes transacting business.
Based on the evidence, I find that the plaintiff was not transacting business in the state and that it's activities fall within the exceptions set forth in § 33-290(b)(6).
Accordingly, the motion to terminate stay is granted.