Opinion
No. FST CV 04 0200508 S
July 15, 2011
MEMORANDUM OF DECISION
The plaintiffs brought this action seeking damages from the defendant, a certified public accountant. They claim that the defendant improperly assisted their brother, Kenneth Stuart, Jr., who was the executor of the estate of their father, Kenneth Stuart, Sr., and trustee of trusts created by their parents, in utilizing trust and estate money for the personal benefit of Kenneth Stuart, Jr. The first count alleges fraud. The second count alleges negligent misrepresentation. The third count alleges accounting malpractice. The fourth count alleges a violation of the Connecticut Unfair Trade Practices Act, General Statutes § 42-110a et seq. (CUTPA).
The prior history of this case is set forth in this court's decision of July 9, 2008. In that decision, the court granted the defendant's motion to strike all counts of the plaintiffs' complaint. The first count, alleging fraud, was stricken because the court found that the plaintiffs failed to allege, with the requisite specificity, the manner in which the plaintiffs claim to have relied on the defendant's alleged fraudulent misrepresentations. The second count, alleging negligent misrepresentation, was similarly stricken for failure to allege the manner in which the plaintiffs claim to have relied on the defendant's alleged negligent misrepresentations. The third count, alleging professional malpractice, was stricken after the court found that the plaintiffs had failed to allege the manner in which the plaintiffs were alleged to have been damaged by the purported malpractice. Finally, the court struck the fourth count alleging CUTPA violations because of the plaintiffs' failure to allege that their injuries arose out of the entrepreneurial aspects of the defendant's professional accounting practice. The plaintiffs filed an amended complaint on July 24, 2008. Presently before the court is the defendant's motion for summary judgment dated May 3, 2011 that is directed to the plaintiffs' amended complaint. That motion was heard on short calendar on May 23, 2011.
THE DEFENDANT'S MOTION FOR SUMMARY JUDGMENT
Attached to the memorandum in support of the motion for summary judgment are: (1) the defendant's affidavit; (2) authenticated excerpts from depositions of the plaintiffs and (3) the authenticated complaint in the action that the plaintiffs brought against their brother, Kenneth Stuart, Jr. Also attached to the memorandum is a copy of the decision of the Superior Court in the case the plaintiffs brought against their brother in which the court awarded damages to the estate of Kenneth Stuart, Sr. in the amount of $2,375.528.38. The defendant also directs the court's attention to Stuart v. Snyder, 125 Conn.App. 506 (2010), cert. denied, 300 Conn. 921 (2011), in which the Appellate Court upheld a decision of the Superior Court, Pavia, J., granting summary judgment in favor of the attorney who represented Kenneth Stuart, Jr. in his fiduciary capacities.
The court decided that the case against Attorney Synder was barred by the statute of limitations. The defendant in the present case makes no claim that the plaintiffs' claims against him are barred by any statute of limitations.
The defendant's affidavit states that he is a certified public accountant who, in the fall of 1994, was engaged by Kenneth Stuart, Jr. to assist him and his attorney, Robert Slavitt, with probate accountings in connection with the estate of Kenneth Stuart, Sr. The defendant's work also included the completion of tax returns and financial statements for Kenneth Stuart, Jr. in his capacities as executor of his father's estate, trustee of a living trust established by his father and as a member of Stuart Sons limited partnership. The defendant states that he provided copies of his work product only to Kenneth Stuart, Jr. and Slavitt and did not provide copies to anyone else. The defendant further states that prior to the fall of 1994 he had not been engaged by Kenneth Stuart, Jr. or by any member of the Stuart family. In his affidavit, the defendant states that nothing in his work product was false and that his work product was prepared based on information provided to him by Kenneth Stuart, Jr. He claims that, to the best of his knowledge, he properly accounted for all funds that passed through the hands of Kenneth Stuart, Jr. of which he was aware until he was replaced as accountant in September 2001. Finally, he states that he never met either of the plaintiffs, that neither of the plaintiffs engaged him professionally, that he never provided either of the plaintiffs with accounting services, that neither of the plaintiffs were ever billed by him for his services and that neither of the plaintiffs ever paid him for his services.
The deposition of the plaintiff, Jonathan Stuart, was taken by the defendant's counsel on November 10, 2010. According to the excerpts of the transcript of that deposition attached to the defendant's motion for summary judgment, Jonathan Stuart testified: (1) that he did not look at or rely on any documents prepared by the defendant and (2) that he was aware that his brother Kenneth Stuart, Jr. was mismanaging his father's estate and misappropriating money as early as 1993.
The deposition of the plaintiff, William Stuart, was taken by the defendant's counsel on November 11, 2010. According to the excerpts of the transcript of that deposition attached to the defendant's motion for summary judgment, William Stuart testified that he never met the defendant and he did not rely on any documents produced by the defendant.
In his brief, the defendant addresses the plaintiffs' claims that they relied on documents produced by the defendant to their detriment. Such reliance is, of course, an essential element of the plaintiffs' claims of fraud and negligent misrepresentation. (Counts one and two of the plaintiffs' amended complaint.) The defendant points out that the only detriments alleged in the amended complaint are that the plaintiffs delayed in acting to remove Kenneth Stuart, Jr. as fiduciary and delayed asserting claims against Kenneth Stuart, Jr. The defendant notes that the plaintiffs filed litigation against Kenneth Stuart, Jr. in late 1993, nearly a year before the defendant was engaged as an accountant to assist Kenneth Stuart, Jr. and his attorney. The defendant argues that there is an inescapable conclusion that the plaintiffs could not have relied upon the defendant's subsequent conduct as a reason for delaying bringing their claims against Kenneth Stuart, Jr.
The defendant also points out that the plaintiffs have not alleged any basis on which the defendant owed a professional duty to the plaintiffs. The plaintiffs were not his clients. He never provided any documents or information to the plaintiffs. There is no claim that he certified the accuracy of false accounting statements to the public or to the plaintiffs in particular. In the absence of a professional duty to which the defendant owed to the plaintiffs there can be no claim for professional malpractice. Moreover, the only damages alleged to flow from the alleged professional malpractice are the claimed delay in pursing the removal of Kenneth Stuart, Jr. and the delay in bringing litigation against him. As noted above, these damages were incurred, if at all, prior to the defendant's engagement by Kenneth Stuart, Jr. and his counsel.
Finally, the defendant points out that the fourth count of the amended complaint fails to allege facts supporting a claim arising out of the entrepreneurial aspects of the defendant's professional practice. The only allegation is that the defendant's "conduct, including without limitation his billing practices falls within the entrepreneurial except to the Connecticut Unfair Trade Practices Act." (Amended complaint ¶ 87.) Moreover, the defendant points out that there is no claim that the plaintiffs ever paid fees to the defendant or received a bill from him.
PLAINTIFFS' UNTIMELY FILING OF THEIR OPPOSITION TO SUMMARY JUDGMENT
Practice Book § 17-45 provides in relevant part: "Any adverse party shall at least five days before the date the motion [for summary judgment] is to be considered on the short calendar file opposing affidavits and other available documentary evidence." As the motion was placed on the short calendar of May 23, 2011, the plaintiffs were required to file their opposition no later than Wednesday, May 18, 2011. The plaintiffs' memorandum of law in opposition bears the date of May 19, 2011; however, it was not filed with the court until the morning of the May 23, 2011, the very day of the hearing. The plaintiffs did not file a motion to extend the time to file their opposition or for the court to entertain their opposition despite the late filing.
"The motion for summary judgment is designed to eliminate the delay and expense of litigating an issue when there is no real issue to be tried." Wilson v. New Haven, 213 Conn, 277, 279 (1989). The purposes of the motion and the provisions of the Practice Book would be frustrated if counsel for non-moving parties ignore the time limitations of the Practice Book. In this case, the plaintiffs' counsel offered two excuses for the untimely filing. First, that she never received the defendant's motion. This explanation, while perhaps literally true, ignores the fact that plaintiffs' counsel received an e-mail copy of the defendant's motion on the day it was filed. The second excuse offered by plaintiffs' counsel was that she did not realize that she could not e-file her opposition because of the age of the case. The court finds the second excuse to be somewhat disingenuous.
The plaintiffs' counsel stated: "The reason the opposition papers weren't filed until today is because I still to this day have not received the original motion for summary judgment." The defendant's counsel made it clear that his office had mailed the motion to the plaintiffs' counsel at the address she had on file with the court and, because past experience with the plaintiffs' counsel, had sent a duplicate copy to her e-mail address. The defendant's counsel pointed out that the plaintiffs' counsel does not deny receiving the motion via e-mail and had, in fact, responded to the e-mail on May 16, 2011.
The plaintiff's counsel: "I filed these papers this morning. I actually tried to file them on Friday electronically. I didn't realize that we could not file electronically in this case. So they would have had them prior to that time."
When the court inquired as to why the plaintiffs' counsel did not send her opposing papers to the defendant's counsel using the e-mail address she had, she stated: "I could have, but then I did some further revisions over the weekend." In fact, all three affidavits attached to the plaintiffs' opposition were executed on Saturday, May 21 or Sunday, May 22. Those three affidavits and the exhibits attached thereto comprise the only documents submitted by the plaintiffs in support of their opposition to the motion for summary judgment.
When the motion was heard at short calendar on May 23, 2011, the defendant's counsel initially asked the court to "take the papers" on his motion for summary judgment. Counsel then asked for forty-eight hours to read the materials submitted by the plaintiff's counsel that morning and to file responsive papers. The court offered the defendant's counsel a continuance so that his motion could be argued after all papers were before the court. However, the defendant's counsel asked the court to hear argument and then permit him to file a response to the opposition filed by the plaintiffs' counsel. It was only after the court rejected that proposal, that the defendant's counsel asked the court to refuse to consider the plaintiffs' opposition because of its untimely filing. The defendant's counsel did not make any claims that he or his client had suffered actual prejudice as a result of the late filing of the opposition papers.
In Barile v. LensCrafters, Inc., 74 Conn.App. 283 (2002), the trial court granted the defendants' motion for summary judgment on the grounds that the plaintiff had failed to comply with the Practice Book in that he did not file an opposition within the time set forth in § 17-45. The Appellate Court upheld the trial court finding that it was not an abuse of discretion to enforce the time periods set forth in the Practice Book. Shortly thereafter, in Martinez v. Zovich, 87 Conn.App. 766, cert. denied, 274 Conn. 908 (2005), the Appellate Court held that the late filing of papers in opposition to a motion for summary judgment does not require the granting of the motion. The court stated: "In Barile, this court affirmed the judgment of the trial court granting the defendant's motion for summary judgment on the ground that the plaintiff failed to comply with Practice Book § 17-45 . . . We recognized that § 17-45 provides in relevant part that `[t]he adverse party shall at least five days before the date the motion is to be considered on the short calendar file opposing affidavits and other available documentary evidence.'" (Citation omitted; emphasis in original; internal quotation marks omitted.) Id., 770 n. 3. "In the present case, because the defendant did not demonstrate that the plaintiffs' delay in filing their memorandum of law in opposition to the motion for summary judgment was prejudicial to his defense of the matter, the court chose not to grant the defendant's motion on that procedural ground." Id.
Superior Court judges have relied on Martinez to allow them discretion whether to consider late filed papers in opposition to a motion for summary judgment where no clear prejudice has been shown. Chamberlain v. Irving, Superior Court, judicial district of Tolland, Docket No. 4001394 (October 26, 2006, Hurley, J.T.R.); Tinian Trust Holdings v. International Paper Co., Inc., Superior Court, judicial district of Hartford, Docket No. CV 05 4007049 (August 12, 2005, Shapiro, J.).
However, Martinez does not rewrite the Practice Book to permit untimely filing of oppositions to motions for summary judgment in any case that the moving party cannot demonstrate actual prejudice. Accurately read, the case stands for the proposition that, where the moving party does not show prejudice, a trial court may exercise its discretion and consider untimely filed oppositions to motions for summary judgment.
Practice Book § 17-45 requires that any motion for summary judgment be placed on a short calendar to be held not less than fifteen days following the filing of the motion. This section further provides that the adverse party "shall at least five days before the date the motion is to be considered on the short calendar file opposing affidavits and other available documentary evidence." This timing sequence allows the non-moving party a period of no less than ten days after the filing of the motion to prepare an opposition. If the non-moving party finds that period insufficient, the section allows for an automatic extension of at least thirty days. The purpose of the timing requirements set forth in this section is clear. The non-moving party is allowed ample time to oppose the motion for summary judgment and the moving party is to have any opposition in hand no less than five days before the court considers the motion.
If the non-moving party can demonstrate good cause, one or more extensions can be granted by the judicial authority.
In this case, the court does not approve of the plaintiffs' untimely filing of their opposition, nor does the court consider the explanations offered by the plaintiffs' counsel to be either credible or sufficient. Nevertheless, in the absence of a claim of prejudice, the court will, in the interest of justice, consider the plaintiffs' opposition and the material submitted therewith.
THE PLAINTIFFS' OPPOSITION TO SUMMARY JUDGMENT
Attached to the plaintiffs' opposition to the defendant's motion for summary judgment are: (1) an affidavit signed by the plaintiff, William Stuart; (2) an affidavit signed by John D. Dempsey, the plaintiffs' expert witness and (3) an affidavit signed by the plaintiffs' attorney authenticating excepts from the depositions of her clients.
In his affidavit, William Stuart states that he and his brother Jonathan Stuart brought successful litigation against their brother Kenneth Stuart, Jr. and proved that, while acting as the executor of the estate of their father, Kenneth Stuart, Sr., he had "illegally co-mingled funds of the Estate, stole monies from the Estate for his personal use and unduly influenced our father when he was mentally incompetent." The affidavit further states that during the course of the litigation against Kenneth Stuart, Jr., the defendant was the accountant for the estate and "its related entities" and that the defendant regularly assisted Kenneth Stuart, Jr. and his counsel in preparing accounting reports for the estate and related entities.
The affidavit states that some of the reports prepared by the defendant were false and facilitated Kenneth Stuart, Jr.'s theft of estate funds. The affidavit also claims that the defendant, on at least one occasion, prepared different versions of the same report that were used by Kenneth Stuart, Jr. to further his thefts. He further alleges that the defendant created a "web of deceit" that cost the plaintiffs over $400,000 in forensic accounting fees to untangle.
With respect to the issue of reliance, the affidavit states that William Stuart relied on the defendant to provide accurate accounting information for the estate and related entities and that as a result of that reliance he and his brother, Jonathan Stuart, suffered damages "as we delayed pursuing removal of [Kenneth] Stuart, Jr. as executor of the estate."
The affidavit of John D. Dempsey reveals that he is the forensic accountant referred to in William Stuart's deposition. Dempsey attests that the work product and accounting records of the defendant fell short of the "typical standard I would expect from a Certified Public Accountant." He further states that on October 21, 2003, he testified that he believed that the defendant's records were "designed to hide, rather than disclose the truth." Finally, he states that due to the inadequate accounting, there were documents that were never produced that precluded him from establishing additional damages that he believes existed.
Dempsey's affidavit fails to disclose whether he still holds the same opinion regarding the defendant's work. The court will infer that he does.
The deposition excerpts from the November 11, 2010 deposition of plaintiff, William Stuart, which are authenticated by plaintiff's attorney reveal the following: (1) that William Stuart claims that he "indirectly engaged" the defendant because he was paid by funds from the estate of Kenneth Stuart, Sr. that otherwise would have gone to him; (2) that he considers the defendant and Kenneth Stuart, Sr. to be "partners in crime"; (3) that the false representations he claims the defendant made to him included all the reports and papers the defendant generated and (4) that the false entries began in 1994 and ended in "2000 and something, whenever he stopped."
Paragraph twelve of the plaintiffs' complaint alleges that the defendant was employed by Kenneth Stuart, Jr. "from 1994 through the first nine months of 2001."
The deposition excerpts from the November 10, 2010 deposition of plaintiff, Jonathan Stuart, which are authenticated by the plaintiffs' attorney reveal the following: (1) that Jonathan Stuart claims that the defendant in collusion with Kenneth Stuart, Jr. produced fraudulent books for the estate so that Kenneth Stuart, Jr. could steal money from the estate and (2) that Jonathan Stuart claims that the defendant inflicted mental, physical, emotional and financial damages on him as the result of his actions.
DISCUSSION STANDARD OF REVIEW
"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 (2007). "[S]ummary judgment is appropriate only if a fair and reasonable person could conclude only one way . . . [A] summary disposition . . . should be on evidence which a jury would not be at liberty to disbelieve and which would require a directed verdict for the moving party." (Citations omitted; internal quotation marks omitted.) Dugan v. Mobile Medical Testing Services, Inc., 265 Conn. 791, 815 (2003). 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 (2006).
A party opposing summary judgment "must provide an evidentiary foundation to demonstrate the existence of a genuine issue of material fact." Hertz Corp. v. Federal Ins. Co., 245 Conn. 374, 381 (1998). "A material fact has been adequately and simply defined as a fact which will make a difference in the result of the case." (Internal quotation marks omitted.) United Oil v. Urban Redevelopment Commission, 158 Conn. 364, 379 (1969).
With these standards in mind, the court will consider the defendant's motion for summary judgment as it relates to each of the four counts of the plaintiffs' amended complaint dated July 24, 2008.
FIRST COUNT — FRAUD
"Under the common law . . . it is well settled that the essential elements of fraud are: (1) a false representation was made as a statement of fact; (2) it was untrue and known to be untrue by the party making it; (3) it was made to induce the other party to act upon it; and (4) the other party did so act upon that false representation to his injury . . . All of these ingredients must be found to exist." (Internal quotation marks omitted.) Duplissie v. Devino, 96 Conn.App. 673, 681, cert. denied, 280 Conn. 916 (2006). Additionally, "[b]ecause specific acts must be pleaded, the mere allegation that a fraud has been perpetrated is insufficient." (Internal quotation marks omitted.) Whitaker v. Taylor, 99 Conn.App. 719, 730 (2007). Finally, in Visconti v. Pepper Partners Ltd. Partnership, 77 Conn.App. 675, 683 (2003), the court noted that "the plaintiff must . . . [allege] sufficient facts to demonstrate his reliance on the statement made by [the defendant]."
The court finds that the materials submitted by the plaintiffs in opposition to the motion for summary judgment are sufficient to raise issues of material fact as to whether financial statements and reports prepared by the defendant were false. The court also finds that it could be inferred from the evidence produced by the plaintiffs that the defendant knew that the statements and reports were false. It could also be argued that, having been engaged by a fiduciary to prepare statements and reports for the estate entrusted to the fiduciary, the defendant should have known that persons having a beneficial interest in the estate might rely upon the information set forth in the statements and reports.
The weakness of the plaintiffs' fraud claims lie in their allegations of actual reliance upon any materials produced by the defendant. In the first count of their amended complaint, the plaintiffs make the following allegations regarding their reliance upon the defendant's false statements:
Paragraph 72. the plaintiffs relied on [the defendant's] misrepresentations, in that they, including without limitation, delayed pursuing the removal of [Kenneth] Stuart Jr. from his position as fiduciary of the Estate Entities because they believed [the defendant's] statements to be true, and in that they delayed pursuing their claims in Superior Court against [Kenneth] Stuart Jr. in reliance on [the defendant's] misrepresentations.
This paragraph sets forth the only two allegations of reliance on the alleged fraudulent misrepresentations of the defendant. First, that the plaintiffs delayed pursing the removal of Kenneth Stuart, Jr. from his position as fiduciary of the estate; and second, that the plaintiffs delayed pursuing their claims in the Superior Court against Kenneth Stuart, Jr. According to the undisputed facts in this case, the defendant was not hired by Kenneth Stuart, Jr. until the fall of 1994 to perform accounting services for the estate of Kenneth Stuart, Sr. At that time, the plaintiffs had already instituted a lawsuit in 1993 against Kenneth Stuart, Jr. The complaint in that 1993 action is attached as an exhibit to this motion for summary judgment, and the court can also take judicial notice of the pleadings filed in another matter when ruling on a motion for summary judgment. See, e.g., Gillum v. Yale University, 62 Conn.App. 775, 780 n. 4, cert. denied, 256 Conn. 929 (2001).
In the 1993 action against Kenneth Stuart, Jr., the plaintiffs' first prayer for relief requested that the court issue "[a] temporary and permanent injunction preventing the defendant, Kenneth J. Stuart, Jr. . . . from spending, selling, conveying, giving, transferring, hypothecating, converting, encumbering or wasting assets of the Trust created by Kenneth James Stuart, Sr. without the consent of the Plaintiff beneficiaries of the Trust." The plaintiffs also asked the court to impose a constructive trust for their benefit regarding the assets that Kenneth Stuart, Jr. was allegedly misappropriating. Accordingly, the undisputed facts indicate that the plaintiffs had already brought a legal action to remove Kenneth Stuart, Jr. as the fiduciary of their father's estate before the defendant was hired to do accounting work for the estate. Given this chain of events, it is impossible to see how the plaintiffs could have relied on the defendant's alleged fraudulent misrepresentations in the manner that is alleged in the amended complaint. Without such reliance, the plaintiffs cannot maintain a fraud cause of action. Therefore, the court determines that the plaintiffs have failed to raise a genuine issue of material fact as to count one, and it grants summary judgment in favor of the defendant.
SECOND COUNT — NEGLIGENT MISREPRESENTATION
In the memorandum of law in support of his motion for summary judgment, the defendant advances the following arguments as to why he is entitled to judgment as a matter of law on count two sounding in negligent misrepresentation. First, the defendant argues that he did not provide any accounting reports to the plaintiffs. The defendant's support for this position stems from attestations made in the defendant's affidavit and certain excerpts from the plaintiffs' depositions. Additionally, the defendant argues that he is entitled to summary judgment as to this count because: (1) the plaintiffs did not rely on any of the representations allegedly made by the defendant; (2) the defendant did not owe the plaintiffs any legal duty; (3) none of the information prepared by the defendant was false and (4) the plaintiffs suffered no injury as a result of the alleged misrepresentations. The plaintiffs respond that the evidence attached to their motion for summary judgment raises sufficient questions of material fact on these issues such that the court is precluded from granting summary judgment.
"Traditionally, an action for negligent misrepresentation requires the plaintiff to establish (1) that the defendant made a misrepresentation of fact (2) that the defendant knew or should have known was false, and (3) that the plaintiff reasonably relied on the misrepresentation, and (4) suffered pecuniary harm as a result . . . Whether evidence supports a claim of . . . negligent misrepresentation is a question of fact." (Internal quotation marks omitted.) Centimark Corp. v. Village Manor Associates Ltd. Partnership, 113 Conn.App. 509, 518, cert. denied, 292 Conn. 907 (2009). "Our Supreme Court has long recognized liability for negligent misrepresentation . . . The governing principles [of negligent misrepresentation] are set forth in similar terms in § 552 of the Restatement (Second) of Torts (1977): One who, in the course of his business, profession or employment . . . supplies false information for the guidance of others in their business transactions, is subject to liability for pecuniary loss caused to them by their justifiable reliance upon the information, if he fails to exercise reasonable care or competence in obtaining or communicating the information." (Internal quotation marks omitted.) Rafalko v. University of New Haven, 129 Conn.App. 44, 52 (2011). In the specific context of whether an accountant has a duty of care to non-clients, multiple Connecticut Superior Court judges have adopted the following rule espoused by the New York Court of Appeals: "Before accountants may be held liable in negligence to noncontractual parties who rely to their detriment on inaccurate financial reports, certain prerequisites must be satisfied: (1) The accountants must have been aware that the financial reports were to be used for a particular purpose or purposes; (2) in the furtherance of which a known party or parties was intended to rely; and (3) there must have been some conduct on the part of the accountants linking them to that party or parties, which evinces the accountants' understanding of that party or parties' reliance." (Internal quotation marks omitted.) Twin Mfg. Co. v. Blum, Shapiro Co., P.C., 42 Conn.Sup. 119, 120 [ 6 Conn. L. Rptr. 53] (1991), quoting, Credit Alliance Corp. v. Arthur Andersen Co., 65 N.Y.2d 536, 483 N.E.2d 110, 493 N.Y.S.2d 435; see also Schwartz v. Blum, Shapiro Co, P.C., Superior Court, complex litigation docket at Middletown, Docket No. X04 CV 02 0100080 (April 17, 2006, Beach, J.); Rogovan v. Coopers Lybrand, Superior Court, judicial district of New London, Docket No. 519696 (April 3, 1992, Hendel, J.) ( 7 C.S.C.R. 480) [ 6 Conn. L. Rptr. 187] (both cases adopting the same test articulated in Twin Mfg. Co.).
As it is well accepted law that "[t]here can be no actionable negligence . . . unless there exists a cognizable duty of care"; Brule v. Nerac, Inc., 127 Conn.App. 315, 323 (2011); "it makes sense for the court to address first whether the defendant could have owed a duty of care to the plaintiffs, who were not his direct clients. In the attached documentation supporting their memorandum of law in opposition, the plaintiffs present evidence indicating that there are disputed facts regarding whether the defendant knew that the financial reports that he prepared would be viewed by the plaintiffs and the purpose for which the defendant drafted these reports. The plaintiff William Stuart also attests that he had at least one telephone conversation with the defendant in which the two men discussed the estate's accounts. Consequently, there remain outstanding issues of fact as to whether the defendant could have assumed a duty of care to the plaintiffs. Additionally, as indicated previously, the court has determined there are genuine issues of material fact as to whether the financial statements prepared by the defendant were false and the defendant knew that these statements and reports were false. The plaintiffs also claim in their affidavits and deposition transcripts that they suffered pecuniary harm as a result of the defendant's actions in that they lost money that they otherwise would have obtained from their father's estate.
Despite all of these outstanding issues of fact, the plaintiffs, once again, have failed to put forth any evidence indicating that they relied on the alleged misrepresentations made by the defendant. Like count one, in which the plaintiffs alleged fraud, the only allegations involving reliance that are found in count two are that the plaintiffs delayed removing Kenneth Stuart, Jr. from his position as fiduciary of the estate and the plaintiffs delayed pursuing their claims in Superior Court. The undisputed evidence in this case indicates that the plaintiffs had already instituted an action in the Superior Court to remove Kenneth Stuart, Jr. as a fiduciary of the estate before the defendant was hired to do accounting work for the estate. As the plaintiffs have not provided any admissible evidence that would create a genuine issue of material fact regarding whether they relied on the defendant's alleged negligent misrepresentations, the court grants summary judgment in favor of the defendant on the second count.
In reaching this conclusion, it is important to note that the court makes no determination as to whether that the plaintiffs' purported reliance was reasonable. Such a determination would clearly be an issue of fact for the jury to decide. Rather, the court has determined that there is no evidence before the court that the plaintiffs engaged in any reliance (reasonable or not) on the representations allegedly made by the defendant.
THIRD COUNT — ACCOUNTING MALPRACTICE
Next, the defendant moves for summary judgment on count three, in which the plaintiffs state an accounting malpractice claim. The arguments made by the defendant with respect to this count are similar to those that the defendant raised in moving for summary judgment on count two. Specifically, the defendant contends that there is no genuine issue of material fact that the defendant did not provide any information to the plaintiffs, that the defendant did not owe a duty of care to the plaintiffs and that the plaintiffs did not suffer any injury as a result of the defendant's alleged malpractice. In response, the plaintiffs argue that they could succeed on an accounting malpractice claim because the defendant did owe a duty to them and they suffered monetary damages as a result of the defendant's actions.
"There are four essential elements to a malpractice action. They are: (1) the defendant must have a duty to conform to a particular standard of conduct for the plaintiff's protection; (2) the defendant must have failed to measure up to that standard; (3) the plaintiff must suffer actual injury; and (4) the defendant's conduct must be the cause of the plaintiff's injury." LaBieniec v. Baker, 11 Conn.App. 199, 202-03 (1987). Accordingly, in order to succeed on their accounting malpractice claim, the plaintiffs first need to establish that the defendant owed them a legal duty. "The existence of a legal duty is a question of law for the court . . ." Giametti v. Inspections, Inc., 76 Conn.App. 352, 363 (2003). The plaintiffs do not dispute that they never hired the defendant to act as their accountant. Therefore, it is clear that there was no privity of contract between the parties. "[C]ourts generally now permit actions for professional malpractice without reference to privity, so long as the plaintiff is the intended or foreseeable beneficiary of the professional's undertaking . . ." Mozzochi v. Beck, 204 Conn. 490, 499 (1987).
In the related context of legal malpractice actions, the Connecticut Supreme Court has stated that "[d]etermining when attorneys should be held liable to parties with whom they are not in privity is a question of public policy . . . In addressing this issue, courts have looked principally to whether the primary or direct purpose of the transaction was to benefit the third party . . . Additional factors considered have included the foreseeability of harm, the proximity of the injury to the conduct complained of, the policy of preventing future harm and the burden on the legal profession that would result from the imposition of liability." (Citations omitted.) Krawczyk v. Stingle, 208 Conn. 239, 245-46 (1988). Additionally, the Supreme Court has held that the promulgation of professional accounting standards by an organization of accountants did not create a duty of care to an unknown third party who relied on negligently prepared reports. Waters v. Autuori, 236 Conn. 820 (1996). In its Waters decision, the Supreme Court also noted, without disapproval, the trial court's determination that "under existing case law from Connecticut trial courts and from courts in other jurisdictions, a certified public accountant owes a duty of care to a third party only if the accountant and the third party are in privity or have a `relationship sufficiently intimate to be equated with privity.'" Id., 824.
The plaintiffs contend that the defendant voluntarily assumed a duty to them when he provided them with certain financial reports regarding the estate of their father, Kenneth Stuart, Sr. Although this fact may make it conceivable that the plaintiffs would have reviewed these reports, it seems clear that the plaintiffs were not the intended beneficiaries of the work that culminated in the drafting of these reports. Rather, the defendant created these reports in conjunction with his work on the estate of Kenneth Stuart, Sr. As Connecticut's appellate courts have been hesitant to allow malpractice claims when there is no privity between the parties or the plaintiff in the case was not the intended beneficiary of the professional's services, the court concludes that the defendant did not owe a legal duty to the plaintiffs such that they can allege an accounting malpractice claim against him.
The court recognizes the potential inconsistency in concluding that there are outstanding issues of fact regarding whether the defendant had a duty to the plaintiffs with respect to the negligent misrepresentation count while deciding that the defendant had no duty that could allow the plaintiffs to allege a malpractice claim. Nevertheless, the existing case law in this area suggests that an accountant might assume a duty of care in a negligence action based on his conduct, whereas an accountant's professional duty in a malpractice action stems from a privity relationship between the parties or the fact that the plaintiffs were intended beneficiaries of the professional's services.
Moreover, the plaintiffs once again have failed to raise any genuine issues of material fact regarding whether they suffered injuries as a result of the defendant's conduct. In the amended complaint, the plaintiffs allege that: (1) they delayed pursuing the removal of Stuart, Jr. from his position as fiduciary of the estate and (2) they delayed pursuing their claims in the Superior Court against Stuart. As discussed previously, the undisputed evidence is that the plaintiffs could not have relied on the defendant's representations in that manner. Without such reliance, the plaintiffs cannot demonstrate that the defendant's conduct caused their supposed injuries. The court concludes that the plaintiffs have failed to demonstrate that there is any issue of material fact with regard to either the defendant's professional duty to the plaintiffs or as to the absence of detrimental reliance upon the defendant's alleged misconduct. Accordingly, the court grants the defendant's motion for summary judgment on the third count of the plaintiffs' amended complaint.
FOURTH COUNT — CUTPA
Finally, the defendant moves for summary judgment as to count four, which alleges a CUTPA cause of action. The defendant argues that he is entitled to judgment as a matter of law as to this count because the conduct alleged in the plaintiffs' complaint does not implicate the entrepreneurial aspects of the defendant's accounting practice. Simply put, the defendant contends that the CUTPA count is just another attempt for the plaintiffs to assert a malpractice claim against him. The defendant points out that the plaintiffs do not allege that the defendant engaged in false advertising or over-billing, and that the plaintiffs merely allege that he committed fraudulent or negligent accounting practices. In response, the plaintiffs argue that they can succeed on their CUTPA claim because the existence of a legal duty between the parties is not a prerequisite to a legally cognizable CUTPA cause of action. The plaintiffs also contend that the protection from CUTPA claims that is afforded to professionals does not apply here because the plaintiff "cannot have it both ways — either he was acting in a professional capacity, and maybe entitled to protection from CUTPA claims, or he was simply engaging in a trade or business, in which case a CUTPA claim can be successful."
In Haynes v. Yale-New Haven Hospital, 243 Conn. 17, 34 (1997), the Connecticut Supreme Court made clear that in the context of medical professionals, "professional negligence — that is, malpractice — does not fall under CUTPA. Although physicians and other health care providers are subject to CUTPA, only the entrepreneurial or commercial aspects of the profession are covered, just as only the entrepreneurial aspects of the practice of law are covered by CUTPA." Our Supreme Court has also stated that "although all lawyers are subject to CUTPA, most of the practice of law is not. The `entrepreneurial' exception is just that, a specific exception from CUTPA immunity for a well-defined set of activities advertising and bill collection, for example." Suffield Development Associates Ltd. Partnership v. National Loan Investors, L.P., 260 Conn. 766, 782 (2002).
Although the appellate courts of this state have only clearly extended this CUTPA liability exception to the professions of law and medicine, at least one Superior Court judge has ruled that the exception also covers accountants. See Advest Group, Inc. v. Arthur Andersen, LLP, Superior Court, judicial district of Hartford-New Britain at Hartford, Docket No. CV 97 0571417 (July 28, 1998, Aurigemma, J.) ( 22 Conn. L. Rptr. 520, 525) (stating that "the same limited exemption from CUTPA that applies to the practices of law and medicine should apply to the practice of accounting that is, only claims arising out of the commercial or entrepreneurial aspects of accounting should fall under CUTPA").
When it previously granted the defendant's motion to strike the CUTPA claim, this court noted that there were no allegations regarding conduct that implicated the entrepreneurial aspects of the defendant's accounting practice. In the amended complaint, count four simply incorporates all of the allegations from the fraud, negligent misrepresentation and accounting malpractice counts, with the following allegation added: "[the defendant's] conduct, including without limitation his billing practices, falls within the entrepreneurial exception to [CUTPA]." The plaintiffs make this allegation despite the fact that they do not claim that they were billed directly for the defendant's services. In fact, the plaintiff William Stuart admits in his deposition that he was not billed individually for the defendant's services; rather, that the defendant was retained by his brother, Kenneth Stuart, Jr. as fiduciary of the estate. The plaintiffs have also offered no evidence that could raise a genuine issue of material fact as to whether the defendant's alleged conduct implicated the entrepreneurial aspects of his accounting practice. It is apparent that the gravamen of the allegations of the amended complaint and the evidence attached to the plaintiffs' memorandum of law in opposition indicates that the plaintiffs are attempting to assert claims that arise out of the defendant's allegedly fraudulent and sloppy work as an accountant. None of these facts would give rise to a CUTPA cause of action under the law of this state. Therefore, the court grants summary judgment in favor of the defendant as to count four.