Opinion
No. DBD CV-06-5000468 S
May 22, 2009
MEMORANDUM OF DECISION RE MOTION FOR SUMMARY JUDGMENT (#162)
FACTS AND PROCEDURAL BACKGROUND
On March 19, 2006, the plaintiff, Peter Rowan, filed this action against the defendants, Geotelec, Inc., Vernon Pearl, Kurt Neubauer, Francis Brogan and Computil, LLC. The plaintiff's six-count amended complaint dated November 18, 2008, alleges the following facts. In August 1987, the plaintiff, Pearl, and three non-party individuals formed Geotelec, which operated as a closely held corporation. Pearl was the controlling shareholder and director of Geotelec, while the plaintiff was allocated a minority percentage of shares of Geotelec's corporate stock. The plaintiff alleges that "[t]he founders had a common expectation and understanding that the newly formed company Geotelec, Inc., would provide them employment during their active involvement with the corporation for the duration of their professional careers or until the business failed or they otherwise voluntarily chose to retire or resign from the company."
On March 19, 2009, the plaintiff withdrew his claims against Neubauer, Brogan and Computil, LLC, leaving Geotelec and Pearl as the only remaining defendants. Accordingly, all subsequent references to "the defendants" in this memorandum will only refer to Geotelec and Pearl.
Geotelec hired the plaintiff to work as a systems manager on December 1, 1987 at the starting annual salary of $35,000. Moreover, between 1996 and 1998, Geotelec hired Brogan as an independent consultant and Neubauer as an employee. During the period between August 2004 and the spring of 2005, Pearl, Neubauer and Brogan began discussions regarding Pearl's impending retirement from Geotelec. These three individuals agreed that Neubauer and Brogan would purchase Geotelec and transfer its assets, existing contracts, customer lists and software licenses to a newly formed company, Computil. As part of this plan, the plaintiff alleges that Pearl, Neubauer and Brogan planned to "freeze him out" of the sale of Geotelec's assets to Computil. Accordingly, on May 17, 2005, Geotelec terminated the plaintiff's employment, and on December 20, 2005, Geotelec transferred most of its assets to Computil. The payment plan was structured as a "subcontract" with payments made to Geotelec, but the plaintiff alleges that "in substance . . . [it was] a payment to Pearl because he was the only one of the Founders left at Geotelec and therefore the only one who profited from the payments made by Computil in exchange for Geotelec's assets." The plaintiff contends that before commencing this sale, Pearl failed to provide notice to shareholders as required by Connecticut law, and, therefore, the plaintiff did not make a demand for payment of his shares because he believed that such a demand would be futile. The plaintiff also refused any termination package after being let go from Geotelec.
Plaintiff further alleges that following this transaction, Geotelec operated as a "shell corporation" with less than 25 percent of its original operating assets. Geotelec provided some services to Computil, but they were of "a very modest nature in exchange for the payments made by Computil. In effect, Pearl converted the last remaining value of Geotelec into a personal distribution of assets to himself in the form of salary to the exclusion of Rowan and the other shareholders." Complaint, ¶ 25.
Consequently, in his amended complaint, the plaintiff alleges claims for: (1) breach of contract for employment, (2) deferred compensation/outstanding accrued salary of $39,506.14 plus interest, (3) breach of fiduciary duty by Pearl, (4) breach of the implied covenant of good faith and fair dealing by Pearl, (4) intentional interference with economic relations by Neubauer, and (5) intentional interference with economic relations by Brogan. Specifically, count three alleges that Pearl breached his fiduciary duties because he engaged in one or more of the following activities: (1) he precipitated a fundamental corporation transaction without shareholder approval, (2) breached the corporate opportunity doctrine, (3) engaged in self-dealing, (4) breached his duty of loyalty; and (5) wrongly freezed out the plaintiff.
As the plaintiff has withdrawn his claims against Neubauer, Brogan and Computil, LLC, only the first four counts remain in the present case.
On February 6, 2009, the defendants filed a motion for summary judgment and memorandum of law in support. The defendants argue that there are no genuine issues of material fact regarding their liability in the present case, and, therefore, they are entitled to judgment as matter of law as to counts one through four. In support of their motion, the defendants have attached a certified affidavit of Pearl and excerpts from the depositions of the plaintiff and Brogan. The plaintiff filed a memorandum of law in opposition on March 20, 2009, which attached the plaintiff's certified affidavit and twenty-one additional pieces of evidence. On April 13, 2009, the defendants filed a reply memorandum and attached certified excerpts of the depositions of the plaintiff and Brogan. This matter was heard at short calendar on April 20, 2009, and is scheduled for trial on June 18, 2009.
Normally, "only evidence that would be admissible at trial may be used to support or oppose a motion for summary judgment." (Internal quotation marks omitted.) New Haven v. Pantani, 89 Conn.App. 675, 678-79, 874 A.2d 849 (2005). "However, our Supreme Court has stated that parties may `knowingly waive compliance with the procedural provisions of the Practice Book relating to motions for summary judgment.' CT Page 8411 Krevis v. Bridgeport, 262 Conn. 813, 824, 81 A.2d 628 (2003). Also, our Supreme Court has stated, `[w]e previously have afforded trial courts discretion to overlook violations of the rules of practice and to review claims brought in violation of those rules as long as the opposing party has not raised a timely objection to the procedural deficiency.' Schilberg Integrated Metals Corp. v. Continental Casualty Co., 263 Conn. 245, 273, 819 A.2d 773 (2003). Here, where each party has asked the court to consider uncertified documents, and no objection was raised on that basis to their consideration, the court, in the exercise of its discretion, has reviewed the exhibits submitted by each side." Fabrizio v. Bristol Housing Authority, Superior Court, judicial district of New Britain, Docket No. CV 05 5000208 (October 21, 2005, Shapiro, J.). Likewise in this case, the court has been asked to consider uncertified documents. Excerpts from depositions of the plaintiff and Brogan attached to the memorandum of law in support of the summary judgment motion do not contain a certification page although defendants have attached different pages of the same depositions to their reply memorandum and these documents are properly certified. And, with the exception of the plaintiff's affidavit and the deposition transcripts, none of the plaintiff's additional pieces of evidence are properly certified or otherwise authenticated. However, as in Fabrizio, neither party has objected to the admissibility of such uncertified documents, therefore this memorandum will analyze the evidence as though it has been properly certified or authenticated in the interest of judicial economy and fairness.
CT Page 8402
DISCUSSION
"Practice Book § 17-49 provides that summary judgment shall be rendered forthwith if the pleadings, affidavits and any other proof submitted show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. In deciding a motion for summary judgment, the trial court must view the evidence in the light most favorable to the nonmoving party." (Internal quotation marks omitted.) Provencher v. Enfield, 284 Conn. 772, 790-91, 936 A.2d 625 (2007). The burden is on the moving party to demonstrate an absence of any triable issue of material fact and "[t]o satisfy his burden the movant must make a showing that it is quite clear what the truth is, and that excludes any real doubt as to the existence of any genuine issue of material fact . . . Once the moving party has met its burden, however, the opposing party must present evidence that demonstrates the existence of some disputed factual issue . . . It is not enough, however, for the opposing party merely to assert the existence of such a disputed issue. Mere assertions of fact . . . are insufficient to establish the existence of a material fact and, therefore, cannot refute evidence properly presented to the court under Practice Book § [17-45]." (Internal quotation marks omitted.) Zielinski v. Kotsoris, 279 Conn. 312, 318-19, 901 A.2d 1207 (2006). "A material fact has been defined adequately and simply as a fact which will make a difference in the result of the case." (Internal quotation marks omitted). Buell Industries, Inc. v. Greater New York Mutual Ins. Co., 259 Conn. 527, 556, 791 A.2d 489 (2002). "[S]ummary judgment is appropriate only if a fair and reasonable person could conclude only one way." (Internal quotation marks omitted.) Dugan v. Mobile Medical Testing Services, Inc., 265 Conn. 791, 815, 830 A.2d 752 (2003).I COUNT ONE: BREACH OF CONTRACT FOR EMPLOYMENT
The defendants first move for summary judgment on count one, "breach of contract for employment." In their memorandum of law, the defendants argue that there are no genuine issues of material fact regarding that the plaintiff was an at-will employee and that the plaintiff's termination of employment was proper and unrelated to the Computil transaction. Therefore, the defendants argue they are entitled to judgment as a matter of law. The plaintiff responds by arguing that there is still an issue of fact as to whether he was an at-will employee.
"Generally, Connecticut follows the rule that employment is at-will and terminable by either the employee or the employer with impunity." CT Page 8403 Campbell v. Plymouth, 74 Conn.App. 67, 74, 811 A.2d 243 (2002). Nevertheless, "[p]ursuant to traditional contract principles . . . the default rule of employment at will can be modified by the agreement of the parties." Torosyan v. Boehringer Ingelheim Pharmaceuticals, Inc., 234 Conn. 1, 15, 662 A.2d 89 (1995). On page fifty-six of volume one of his deposition, the plaintiff admits that there was no written employment agreement that guaranteed future employment. Defendants' Exhibit 1. Therefore, if the plaintiff is to be deemed more than an at-will employee, it must be via an implied contract. "Typically, an implied contract of employment does not limit the terminability of an employee's employment but merely includes terms specifying wages, working hours, job responsibilities and the like." Id., 14. "Accordingly, [t]o prevail on the count of his complaint [that] alleged the existence of an implied agreement between the parties, the plaintiff ha[s] the burden of proving by a fair preponderance of the evidence that [the employer] had agreed, either by words or action or conduct, to undertake [some] form of actual contract commitment to him under which he could not be terminated without just cause." (Internal quotation marks omitted.) Id., 15.
In his memorandum of law in opposition, the plaintiff points to the following evidence as establishing a genuine issue of material fact as to whether he had an implied contract for continued employment with Geotelec: (1) the resignation letters of Kan Moy and William Cunningham (Plaintiff's Exhibits 3, 4), (2) attestations in his affidavit (Pleading number 169) and (3) the report of the plaintiff's expert witness, Eric Gouvin. The plaintiff's affidavit attests the following relative to count one: "When the founders of Geotelec came together, myself included, we had in mind establishing our own business that would last and take on a life of its own. We would have a place to work until we quit, it was sold, or it failed. We were partners in a business venture designed to use everyone's talents and keep everyone employed.
Although it is referenced in the plaintiff's memorandum of law in opposition, the plaintiff has failed to attach Gouvin's expert report. Moreover, as count one alleges a claim for "breach of contract for employment," and Gouvin's report addresses the issue of whether there was an implied employment contract between the parties, this report is an opinion on the "ultimate issue" of count one. Under Connecticut law, expert "[t]estimony in the form of an opinion is inadmissible if it embraces an ultimate issue to be decided by the trier of fact, except that . . . an expert witness may give an opinion that embraces an ultimate issue where the trier of fact needs expert assistance in deciding the issue." Conn. Code Evid. § 7-3(a). Consequently, there is a serious question as to whether this report would be admissible at trial. For both of these reasons, the court will not consider Gouvin's report.
. . . We all had a reasonable expectation that Pearl would act with an ongoing duty of good faith towards me and the business . . . We did this so we would have a place to work without risk of getting fired. I had a job until I quit, or the company was sold, or failed. I had a reasonable expectation of ongoing employment, and I believe this raises me above the status of at will employee."
The plaintiff's affidavit raises genuine issues of material fact as to the intent of the founders of Geotelec when they formed the company. As the plaintiff attests that the founders of Geotelec formed a business that would employ each of them until they decided to quit, the plaintiff has presented sufficient evidence to raise a question as to whether he had an implied contract with his employer. The attestations in the plaintiff's affidavit are further supported by the statements of Moy and Cunningham in their resignation letters. In both of these documents, Moy and Cunningham describe an cooperative employment venture where each of the founders would have a say as to how the business was run. Under these circumstances, a trier of fact could conclude that the plaintiff had an implied employment agreement with Geotelec.
Moreover, if the plaintiff is able to establish the existence of an implied employment contract at trial, the defendants would be in breach of this agreement if they fired the plaintiff without cause. While the defendants argue that they had a valid business reason to terminate the plaintiff's employment, such a determination is best left for the trier of fact, as otherwise the court would be required to examine the intent and motivations of the defendants. For these reasons, the plaintiff has raised a genuine issue of material fact regarding whether an implied employment contract existed and whether his employment was terminated for good cause. Accordingly, the defendants' motion for summary judgment as to count one is denied.
II COUNT TWO: DEFERRED COMPENSATION/OUTSTANDING ACCRUED SALARY
In count two, the plaintiff requests that the court award him deferred salary in the amount of $39,506.14 plus interest, pursuant to "his original employment agreement." Pearl first moves that the court grant summary judgment in his favor on count two because he never had a personal obligation to pay the plaintiff compensation. Notably, in his memorandum of law in opposition, the plaintiff does not rebut Pearl's position that Pearl has no individual liability on any deferred compensation. However, the plaintiff has produced the subject salary agreement, which is dated December 1, 1987. Plaintiff's Exhibit 7. By its terms, this agreement was only between the plaintiff and Geotelec, and was signed both by the plaintiff individually and by Pearl "on behalf of the corporation." Consequently, as a non-party to the agreement, Pearl never had an obligation to pay the plaintiff in his individual capacity. The plaintiff has failed to produce any additional evidence suggesting that Pearl had an individual obligation to pay him deferred compensation or that he was owed compensation from any source outside the salary agreement. There is no evidence to establish a genuine issue of material fact as to Pearl's liability or obligation under such an agreement. Accordingly, summary judgment shall enter in Pearl's favor on count two.
Geotelec also moves for summary judgment on count two. It first argues that all claims for deferred compensation were extinguished pursuant to a 1995 debt reduction plan, and, therefore, it is entitled to judgment as a matter of law under the doctrine of accord and satisfaction. Secondly, Geotelec argues that any deferred compensation claim is barred by the applicable statute of limitations. The plaintiff's position is that he is still owed deferred compensation because the debt reduction plan only applies if Geotelec met certain profitability targets and the salary agreement provides that payment is not determined until the end of the plaintiff's employment with Geotelec. In their reply memorandum, the defendants contend that the plaintiff's argument misconstrues the import of the debt reduction plan. Moreover, in the alternative, the defendants argue that even if the debt reduction plan does not apply, any claim for deferred compensation is barred by the statute of limitations stemming from the salary agreement.
The documentation submitted by the parties reveals the following undisputed facts. On July 1, 1987, the plaintiff and Geotelec signed a "salary agreement" (Plaintiff's Exhibit 7), which stated that the plaintiff would receive fifty percent of his salary for 1987 and 1988, with the remaining fifty percent accruing as salary payable at a later date. This deferred salary would bear interest starting January 1, 1988, at the rate of twelve percent per annum. According to the salary agreement, "[t]he payment of accrued salary earned will be determined jointly between the employee/founder and the officers of GEOTELEC, Inc. or when association with GEOTELEC terminates." As further provided in the addendum to the salary agreement, "[r]epayment of deferred salary for Peter Rowan will occur on the earliest of the following events: (1) July 1, 1989, (2) one month after interest payments are not made according to salary agreement, (3) bankruptcy or insolvency."
In 1995, the plaintiff, as well as the other Geotelec employees, signed a "Debt Reduction Plan (Plaintiff's Exhibit 2)," where the signatories agreed that Geotelec would repay $75,000 in back salaries and the rest of the $75,000 in back debt would be forgiven. If Geotelec increased its profit by 10% above 1995 levels during the years the 1997 and 1998, then the signatories would be paid $100,000 in back debt, with $50,000 forgiven. At the bottom of the debt reduction plan, there is a sentence which states that "[t]his plan is dependent on the Company's continued profitability."
Pearl's affidavit attests that while Geotelec made a profit in 1997, it was below 1995 levels, and the company suffered a loss in 1998. Consequently, Geotelec argues that the repayment contingency did not occur, and, therefore, any debt owed was extinguished via an accord and satisfaction. The plaintiff, however, argues that "[n]owhere does the debt reduction plan say the deferred compensation will be forfeited if the targets are not met." Indeed, the plain language of the debt reduction agreement indicates that it was "dependent on the Company's continued profitability." As the Pearl affidavit establishes that Geotelec did not meet its profit targets for the years 1997 and 1998, it is arguable that the debt reduction agreement is no longer applicable. While Geotelec may be correct that it is counter-intitutive to argue that the debt reduction agreement would not apply if profitability targets were not met, which in turn would make Geotelec liable for the full amount owed, the plain language of the debt reduction agreement indicates that it is contingent on Geotelec's future profitability. That Geotelec did not reach its profitability targets in 1997 and 1998 is not disputed by the plaintiff. As to Geotelec's claim that it is entitled to judgment in its favor under the doctrine of accord and satisfaction, there remains a genuine issue of material fact between the parties.
Geotelec also argues that the plaintiff is prohibited from succeeding on count two due to the statute of limitations. It suggests two possible statutes of limitations as being applicable, the general six-year contract statute under General Statutes § 52-576, or the two-year statute for "Actions for payment of remuneration of employment" under General Statutes § 52-596. In considering both statute of limitation arguments, the defendants' summary judgment motion must be read in a light most favorable to the plaintiff. Geotelec argues that the statute of limitations commenced on January 1, 1999, when the re-payment conditions of the debt reduction plan failed. Since this action was commenced by service of process on February 23, 2006, it argues that the statute of limitations has expired. As indicated previously, however, there is still a question regarding the applicability of the debt reduction plan. Therefore, there remains a genuine issue between the parties, as matter of law, as to whether the plaintiff's cause of action accrued in 1999.
Moreover, General Statutes § 52-596 only applies to "action[s] for the payment of remuneration for employment payable periodically . . ." It is unclear from the evidence presented whether any deferred compensation would be paid periodically or in a lump sum.
In the alternative, Geotelec argues that if the debt reduction plan does not apply, then, pursuant to the terms of the salary agreement, the statute of limitations began to run on July 1, 1989. Under Connecticut law, "[w]hile the statute of limitations [in § 52-576] normally begins to run immediately upon the accrual of the cause of action, some difficulty may arise in determining when the cause or right of action is considered as having accrued. The true test is to establish the time when the plaintiff first could have successfully maintained an action." (Internal quotation marks omitted.) Amoco Oil Co. v. Liberty Auto Electric Co., 262 Conn. 142, 153, 810 A.2d 259 (2002). Geotelec argues that the plaintiff could have successfully maintained an action on July 1, 1989, as the salary agreement indicates that the plaintiff was due payment by "the earliest of the following events: (1) July 1, 1989, (2) one month after interest payments are not made according to salary agreement, (3) bankruptcy or insolvency." In response, the plaintiff points out that the salary agreement indicates "the payment of accrued salary will be determined jointly between the employer/employee and the officers of GEOTELEC, Inc. or when association with GEOTELEC terminates." Since the plaintiff's employment with Geotelec did not end until 2005, the plaintiff contends that this action was timely commenced.
From the evidence presented, the subject salary agreement ostensibly provides two different dates as to when the plaintiff could have demanded payment of his deferred compensation, either July 1, 1989, or upon the end of his employment with Geotelec. As a result, there remains a genuine issue of material fact as to whether the statute of limitations began to run on July 1, 1989, as opposed to 2005 when Geotelec terminated the plaintiff's employment.
II COUNT THREE: BREACH OF FIDUCIARY DUTY
The defendants next move for summary judgment on count three, breach of fiduciary duty, on the ground that the court lacks subject matter jurisdiction because this count should have been brought as a shareholder derivative action, as opposed to by the plaintiff in his individual capacity. In response, the plaintiff argues that he can bring count three in his individual capacity because he suffered an injury that is separate and distinct from the harm suffered by other shareholders. Here, the defendants contend the plaintiff has no standing because the injury alleged is to the corporation and not to the individual shareholder. Although the issue of jurisdiction should usually be raised in a motion to dismiss, "[s]tanding . . . implicates a court's subject matter jurisdiction, which may be raised at any point in the proceedings." Stamford Hospital v. Vega, 236 Conn. 646, 656, 674 A.2d 821 (1996).
General Statutes § 33-720 provides: "(1) `Derivative proceeding' means a civil suit in the right of a domestic corporation or, to the extent provided in section 33-727, in the right of a foreign corporation. (2) `Shareholder' includes a beneficial owner whose shares are held in a voting trust or held by a nominee on the beneficial owner's behalf."
General Statutes § 33-721 provides: "A shareholder may not commence or maintain a derivative proceeding unless the shareholder: (1) was a shareholder of the corporation at the time of the act or omission complained of or became a shareholder through transfer by operation of law from one who was a shareholder at that time; and (2) fairly and adequately represents the interests of the corporation in enforcing the right of the corporation."
General Statutes § 33-722 provides: "No shareholder may commence a derivative proceeding until: (1) A written demand has been made upon the corporation to take suitable action; and (2) ninety days have expired from the date the demand was made unless the shareholder has earlier been notified that the demand has been rejected by the corporation or unless irreparable injury to the corporation would result by waiting for the expiration of the ninety-day period."
Our Connecticut Supreme Court recently addressed the issue of when a claim against a corporation and its shareholders must be brought as a derivative suit. "Generally, individual stockholders cannot sue the officers at law for damages on the theory that they are entitled to damages because mismanagement has rendered their stock of less value, since the injury is generally not to the shareholder individually, but to the corporation — to the shareholders collectively . . . In this regard, it is axiomatic that a claim of injury, the basis of which is a wrong to the corporation, must be brought in a derivative suit, with the plaintiff proceeding secondarily, deriving his rights from the corporation which is alleged to have been wronged. It is, however, well settled that if the injury is one to the plaintiff as a stockholder, and to him individually, and not to the corporation, as where an alleged fraud perpetrated by the corporation has affected the plaintiff directly, the cause of action is personal and individual. In such a case, the plaintiff-shareholder sustains a loss separate and distinct from that of the corporation, or from that of other shareholders, and thus has the right to seek redress in a personal capacity for a wrong done to him individually . . . Thus, where an injury sustained to a shareholder's stock is peculiar to him alone, and does not fall alike upon other stockholders, the shareholder has an individual cause of action . . . [However] a shareholder — even the sole shareholder — does not have standing to assert claims alleging wrongs to the corporation." (Citation omitted; internal quotation marks omitted.) May v. Coffey, 291 Conn. 106, 114-15 (2009).
In count three, the plaintiff alleges that "Pearl's conversion of Geotelec Inc.'s assets in favor of Computil, LLC was a direct and deliberate breach of his fiduciary duties to Geotelec, Inc. and its shareholders . . ." Count three then proceeds to allege the following specific malfeasances that the plaintiff believes that Pearl committed: (1) he precipitated a fundamental corporation transaction without shareholder approval, (2) breached the corporate opportunity doctrine, (3) engaged in self-dealing, (4) breached his duty of loyalty, and (5) wrongly "freezed-out" the plaintiff. In determining whether count three alleges a derivative or independent action, Smith v. Snyder, 267 Conn. 456, 839 A.2d. 589 (2004), is instructive. In Smith, our Supreme Court dismissed claims brought by shareholders in their individual capacity when the complaint merely alleged that the defendants had breached a fiduciary duty owed to the corporation. Id., 462. Similarly, in the present case, count three alleges that Pearl "breach[ed] his fiduciary duties to Geotelec, Inc, and its shareholders . . ." The plain language of count three alleges that Pearl owed a duty to Geotelec, not to the plaintiff individually.
Though the plaintiff has argued that he suffered a unique injury because of an alleged "freeze-out," page ninety-seven of his deposition (Defendants' Exhibit 1 to reply memorandum) reveals the plaintiff admits that he still owns stock in Geotelec. Under Connecticut law, a "freeze-out" is defined as "any action by those in control of the corporation which results in the termination of a stockholder's interest in the enterprise, with the purpose of forcing a liquidation or sale of the shareholder's share, not incident to some other wholesome business goal . . ." Yanow v. Teal Industries, Inc., 178 Conn. 262, 272 n. 6, 422 A.2d 311(1979). As the plaintiff still retains stock in Geotelec, there has been no "freezeout." To the extent the plaintiff alleges a distinct injury from a devaluation of his Geotelec stock, our Supreme Court has expressly ruled that a low valuation of stock is an injury to the corporation and must be brought in a derivative action. See May v. Coffey, supra, 291 Conn. 106. From a review of the allegations and supporting evidence submitted by the parties, plaintiff has not put into issue whether he suffered an injury sufficiently unique to take his claim outside of these principles of law. Accordingly, the plaintiff has no individual standing to bring an action against Pearl for breach of fiduciary duty owed to Geotelec. Any action in this regard should have been brought as a shareholder derivative action.
As a result, not only is there no genuine issue of material fact between the plaintiff and Pearl, the court also lacks subject matter jurisdiction over the claim.
IV COUNT FOUR: BREACH OF THE COVENANT OF GOOD FAITH AND FAIR DEALING
Finally, the defendants move for summary judgment on count four, breach of the covenant of good faith and fair dealing. In their memorandum of law in support of the summary judgment motion, the defendants argue that the court lacks subject matter jurisdiction over this claim because it should have been brought as a shareholder derivative action. The defendants' reply memorandum offers a different argument, however. In it they contend that they are entitled to summary judgment because this claim requires an underlying contract. The plaintiff does not directly address the legal elements of this cause of action, but merely indicates that the court has subject matter jurisdiction to hear it.
In count four, the plaintiff alleges that "[t]he defendant PEARL was under an obligation, vis-a-vis the agreement and ROWAN, to act in good faith . . . Pearl's defrauding of Rowan, as set forth above, is a direct and deliberate breach of his duty to act in accordance with the implied covenant of good faith and fair dealing." Although it is somewhat unclear precisely what specific malfeasances that count four alleges Pearl engaged in (it fails to list what specific paragraphs that it is incorporating from counts one through three of the complaint), the defendants cannot completely defeat this count by arguing that it should have been brought as a shareholder derivative action. The language of count four alleges that Pearl breached a contractual duty owed to the plaintiff as opposed to a duty owed to the corporation. While the alleged fraud presumably stems from the actions taken by Pearl in regards to the corporation, this count also mentions an "agreement," which is either the employment contract alleged in count one, or the deferred salary agreement. Consequently, in order to receive summary judgment on count four, the defendants must be successful in the argument raised in their reply memorandum, in that the plaintiff cannot prove his claim because there is no contract between the parties.
"It is axiomatic that the . . . duty of good faith and fair dealing is a covenant implied into a contract or a contractual relationship . . . [T]he existence of a contract between the parties is a necessary antecedent to any claim of breach of the duty of good faith and fair dealing." (Internal quotation marks omitted.) Macomber v. Travelers Property Casualty Corp., 261 Conn. 620, 638, 804 A.2d 180 (2002). Because of the vagueness of the allegations relative to the agreement referred to in count four, and because of the court's duty to consider the motion in the light most favorable to the plaintiff as the non-movant, and having found there remains a genuine issue of material fact as to the nature and existence of an employment agreement between the parties, there also therefore remains a genuine issue of material fact as to the allegations of count four.
CONCLUSION
For the reasons stated above, the defendants' motion for summary judgment is denied as to counts one and four. As to count two, summary judgment is granted as to Pearl but denied as to Geotelec. Summary judgment is granted as to count three.