Opinion
No. X05 CV 06 5002512S
August 29, 2008
MEMORANDUM OF DECISION ON DEFENDANTS' MOTIONS TO STRIKE AND FOR SUMMARY JUDGMENT (234.00, 293.00)
On October 19, 2004 the plaintiff in this case, World Wrestling Entertainment, Inc. (WWE) commenced a lawsuit in the United States District Court for the Southern District of New York against thirteen defendants, including all of the defendants in this case. That case was titled World Wrestling Entertainment v. Jakks Pacific, Inc. et al., 04 CV 8223 (KMK) (the federal action). An amended complaint in the federal action alleged claims arising under the Racketeer Influenced and Corrupt Organization Act, 18 U.S.C. § 1962(c) and (d) (RICO), the Robinson-Patman Act, 15 U.S.C. § 13(c), the Sherman Act, 15 U.S.C. § 1, and various allegations under New York State law of commercial bribery, fraudulent inducement, unjust enrichment, breach of fiduciary duty, tortious interference with contractual relations and conspiracy to engage in these acts. WWE also sought declaratory relief under federal law, 28 U.S.C. § 2201, and to pierce the corporate veil and impose a constructive trust under New York law.
The lengthy amended complaint in the federal action contained 363 numbered paragraphs and hundreds of additional subparagraphs. The plaintiff WWE was, and is, engaged in the development, promotion and marketing of televised and live events related to professional wrestling and the creation of characters whose names and likenesses may be licensed to third parties. The defendants in this case as well as in the federal action, can be divided into four groups: (1) Jakks Pacific Inc., (Jakks), a seller of action figures and toys and Jack Friedman, Stephen Berman and Joel Bennett, officers of Jakks (collectively the Jakks defendants), (2) THQ, Inc. a marketer and seller of video games and Brian Farrell, THQ's chief executive officer, (3) THQ/Jakks Pacific, LLC, a joint venture of THQ and Jakks formed in June 1998, and (4) Stanley Shenker Associates, Inc., (SSAI) a licensing agent for WWE from 1995 to 2000, and Stanley Shenker, the sole owner of SSAI.
Briefly, the amended complaint in the federal action alleged a WWE employee in charge of licensing and merchandising, James Bell, successfully urged WWE to hire SSAI as a non-exclusive agent to negotiate and procure licensing contracts for WWE. Jakks approached Bell and Shenker and obtained a license to make WWE toys in 1995. In 1996 Jakks and Shenker, without informing WWE, entered into an agreement in which Shenker would act as Jakks' agent in negotiations with WWE. WWE alleged that Shenker agreed to accept bribes from Jakks, split them if necessary with Bell, for the purposes of obtaining for Jakks various toy and video game licenses from WWE, and this was done to obtain national and international toy licenses for Jakks in 1996 and 1997. It is also alleged that Shenker and Jakks conspired to obtain a video game license from WWE, and with Bell's help and the illegal cooperation of THQ which, rather than make its own bid, entered a joint venture with Jakks to obtain the license in June 1998. This was accomplished at what is alleged to be below market prices and through various alleged actions such as blocking communications and bids of other competitors for the video game license from getting through to WWE's management. See generally, World Wrestling Entertainment, Inc. v. Jakks Pacific Inc., 425 F.Sup.2d 484, 488-91 (SDNY 2006) ( WWE I); Opinion and Order, dated December 21, 2007 ( WWE II) 4-9 (attached to Affidavit of Frank J. Silvestri, Jr., March 13, 2008, as Exhibit A).
Shenker and Bell have pleaded guilty to federal fraud charges and were incarcerated. Bell is not a defendant in this case, but was a defendant in the federal action.
After extensive briefing and rebriefing necessitated by the amended, more detailed, complaint filed by WWE in the federal action, United States District Judge Kenneth M. Karas in March 2006 dismissed WWE's Sherman Act claim, and the claim of a violation of the Robinson-Patman Act, WWE I, 523, and subsequently in December 2007, dismissed WWE's RICO claims with prejudice and exercised its discretion, pursuant to 28 U.S.C. § 1367(c) to decline to exercise its supplemental jurisdiction over the state law claims. WWE II, 77-78.
The dismissal of the Sherman Act claim was based on the District Court's finding that, assuming WWE had pleaded a per se violation, the plaintiff had not suffered an antitrust injury. WWE I, 519-23. In dismissing the RICO claims the District Court held that while WWE had sufficiently alleged the existence of a RICO enterprise; WWE I, 500; the amended complaint did not sufficiently plead a RICO injury. WWE II, 63. Moreover, the District Court held that the RICO claims were barred by a four-year statute of limitations which began to run when WWE should have discovered the injury. WWE II, 63-74.
II. The Present Law Suit
This case was commenced in October 2006 as a claim by WWE that THQ and THQ/Jakks, LLC had violated the video game license agreement by sub-licensing rights to an entity known as Yukes Co., Ltd. That claim is now only a relatively small part of the present case. On May 8, 2007 Judge Shay granted WWE's motion to amend the original complaint to add the Jakks defendants, Farrell, Shenker and SSAI as parties, and add numerous state law counts relating to the alleged illegal procurement of the toy and video game licenses. The defendants moved for a stay of this case pending disposition of the motions to dismiss in the federal action. A four-month stay was granted by Judge Shay.
Following the dismissal of all of WWE's claims in the federal action, WWE moved to amend its complaint to add additional allegations and state law claims to this case and the motion was granted effective December 28, 2007. The Second Amended Complaint (SAC), embellishing its predecessor, is over 100 pages long and contains nineteen counts, the last four of which, counts sixteen through nineteen, deal with the original claim of illegal sub-licensing to Yukes. The first fifteen counts are based on fact allegations that are virtually identical to those in the WWE amended complaint in the federal action. These fifteen counts, purportedly based on Connecticut law, are: two claims for declaratory judgment seeking to void the video game and toy licenses because they resulted from bribery, illegal acts and conflicts of interest, a claim of fraudulent inducement, two claims of aiding and abetting a breach of fiduciary duty by Shenker and SSAI, a claim of unjust enrichment, a claim seeking a constructive trust, claims of tortious interference with contract and with business relations, a claim under the Connecticut Antitrust Act, General Statutes §§ 35-24 et seq., a claim to pierce the corporate veil of THQ/Jakks, LLC, a claim of statutory theft pursuant to General Statutes § 52-564, a claim of conversion, a claim under the Connecticut Unfair Trade Practices Act General Statutes § 42-110a et seq., (CUTPA) and a claim of conspiracy among all of the defendants to do all of the above.
Indeed, all of the 241 paragraphs of the factual allegations in the federal complaint preceding the First Count in that complaint are included in the SAC.
III. Defendants' Motions
All the defendants except Shenker and SSAI have filed motions to strike and for summary judgment directed at the first fifteen counts of the SAC. These motions were orally argued on May 19, 2008. The major thrust of these motions, primarily briefed by the Jakks defendants, is that WWE's claims are (1) barred by the collateral estoppel effect of United States District Judge Kenneth Karas' two decisions in the federal action dismissing the federal law causes of action and are (2) also barred by the applicable Connecticut statutes of limitations. The defendants' contentions are robustly opposed by WWE which argues inter alia that the doctrine of collateral estoppel is not applicable and the statutes of limitations are tolled by Connecticut's fraudulent concealment statute, General Statutes § 52-595. Because these issues are discussed most fully in the defendants' summary judgment motions those motions will be determined here.
THQ and Farrell have served a separate motion to strike which was not fully briefed at the time of oral argument. WWE's motion for partial summary judgment concerning a defense of release raised by the Jakks defendants, was not argued on May 19, 2008.
IV. Standards 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." Appleton v. Board of Education, 254 Conn. 205, 209 (2000). Summary judgment "is appropriate only if a fair and reasonable person could conclude only one way." Miller v. United Technologies Corp., 233 Conn. 732, 751, (1995). "The party seeking summary judgment has the burden of showing the absence of any genuine issue [of] material facts which, under applicable principles of substantive law, entitle him to judgment as a matter of law." Appleton v. Board of Education, supra, 254 Conn. 209. "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.) United Oil Co. v. Urban Development Commission, 158 Conn. 364, 379 (1969). The trial court, in the context of a summary judgment motion, may not decide issues of material fact, but only determine whether such genuine issues exist. Nolan v. Borkowski, 206 Conn. 495, 500 (1998).
"Although the party seeking summary judgment has the burden of showing the nonexistence of any material fact [question] . . . a party opposing summary judgment must substantiate its adverse claim by showing that there is a genuine issue of material fact together with the evidence disclosing the existence of such an issue. It is not enough, however, for the opposing party merely to assert the existence of such a disputed issue." Maffucci v. Royal Park Ltd. Partnership, 243 Conn. 552, 554 (1998). "[T]he party opposing such a motion must provide an evidentiary foundation to demonstrate the existence of a genuine issue of material fact." Appleton v. Board of Education, supra, 254 Conn. 209.
The granting of summary judgment on the basis of the expiration of the statute of limitations is appropriate. Neuhaus v. DeCholnoky, 280 Conn. 190 (2006); Daily v. New Britain Machine Co., 200 Conn. 562 (1986). Determining the applicability of the doctrine of res judicata or collateral estoppel is also proper on motions for summary judgment. Virgo v. Lyons, 209 Conn. 497 (1988). See generally 1 Connecticut Practice Series, Connecticut Superior Court Civil Rules (2008 ed., Horton, W. and Knox, J.) 842, 860.
V. Collateral Estoppel
The court turns to the motions for summary judgment and first to the issue of collateral estoppel. The Connecticut Supreme Court has suggested that because the doctrines of collateral estoppel and res judicata, if properly raised and sustained, will preclude the trial of an issue or claim respectively it is necessary to determine whether these doctrines are applicable at an early stage of the proceedings. Crochiere v. Board of Education, 227 Conn. 333, 342 (1993). The doctrine of res judicata precludes the relitigation of a claim that has already been decided on the merits; the doctrine of collateral estoppel precludes the relitigation of an issue already decided in a prior law suit. Id., 343.
"The doctrines of res judicata and collateral estoppel protect the finality of judicial determinations, conserve the time of the court, and prevent wasteful relitigation." Virgo v. Lyons, 209 Conn. 497, 501 (1988) [quoting Gionfriddo v. Gartenhaus Café, 15 Conn.App. 392 (1988)]; see also Birnie v. Electric Boat Corporation, 288 Conn. 392, 405 (2008) ("The common-law doctrine of collateral estoppel, or issue preclusion, embodies a judicial policy in favor of judicial economy, the stability of former judgments and finality . . ."). In the federal case WWE has appealed the decision of Judge Karas, but the appeal has not progressed far as there is a pending motion to reconsider before the United States District Court. While there is some attractiveness to the idea of waiting to rule on the defendants' motions until the appeal is completed, the competing, and in the end more compelling, consideration for this court is the desirability of determining whether collateral estoppel bars the relitigation of some or all the issues in this case before the sizeable discovery and other litigation burdens and expenses are fully borne.
The Connecticut Supreme Court has stated that it has held a trial court judgment to be final, despite a pending appeal, when the issue was the applicability of the rules of res judicata. Enfield Federal Savings Loan Ass'n. v. Bissell, 184 Conn. 569, 573 (1981) [citing Salem Park, Inc. v. Salem, 149 Conn. 141, 144 (1961)]. The Appellate Court has held that "a pending appeal does not preclude the application of the narrower doctrine of collateral estoppel." LaBow v. Rubin, 95 Conn.App. 454, 467 (2006) [citing Carnemolla v. Walsh, 75 Conn.App. 319, 327-28, cert. denied, 263 Conn. 913 (2003)].
"The doctrine of collateral estoppel, or issue preclusion, provides that if `an issue of fact or law is actually litigated and determined by a valid and final judgment, the determination is conclusive in a subsequent action between the same parties, whether on the same or different claim' . . . Saporoso v. Aetna Life Casualty Co., 221 Conn. 356, 367 . . . (1992)." Upjohn Company v. Planning Zoning Commission, 224 Conn. 82, 93 (1992). In this case, the defendants focus on the finding in the federal action that WWE's RICO claim was time barred because the injuries to WWE last occurred no later than June 24, 1998 according to WWE's own allegations (when the toy licenses were amended to make them co-terminous with the recently granted video game license). WWE II, 69. Rejecting a claim that the allegedly below market rates from the licenses were a continuing injury, Judge Karas applied a four-year statute of limitations running from discovery of the injury to bar the claims. The defendants contend this finding in the federal action concerning the time of WWE's injury, a finding based on the same factual allegations made in the SAC in this case collaterally estops WWE from relitigating the issue. They assert that since the applicable Connecticut statutes of limitations General Statutes § 52-577 (tort claims) and § 42-110g(f) (CUTPA) — are three years and are "occurrence" statutes and, unlike the RICO limitations period, run from "date of the act or omission" [§ 52-577] or the "violation" [§ 42-110g(f)] the federal court finding estops any further litigation as to when the injury occurred and that the WWE claims are not barred by the Connecticut statutes of limitations.
WWE offers several contentions as to why the decisions in the federal action do not operate as collateral estoppel. At the outset, WWE argues that under Connecticut law "[c]ollateral estoppel, or issue preclusion, prohibits the relitigation of an issue when that issue was actually litigated and necessarily determined in a prior action" quoting Connecticut National Bank v. Rytman, 241 Conn. 24, 38 (1997). WWE then cites Dowling v. Finley Associates, 248 Conn. 364 (1999), which stated that "[a]n issue is necessarily determined if, in the absence of a determination of the issue, the judgment could not have been validly rendered." Id., 374 (emphasis in the original). WWE argues that since the dismissal of the RICO claim in the federal action could have been based on the federal court's finding of a lack of RICO injury alone, the finding on the issue of when the injury occurred was not necessary and thus collateral estoppel does not bar relitigation.
In response to this argument, the defendants point to a string of cases to the effect that federal law, not state law, determines what estoppel effect is to be given to a federal court decision and federal cases hold that if a case is decided on two different grounds, each ground may be used to collaterally estop further litigation on the issue. In Gelb v. Royal Globe Insurance Co., 798 F.2d 38 (2d Cir. 1985), the United States Court of Appeals said, "[t]he general rule in this Circuit is that `if a court decides a case on two grounds each is good estoppel.'" Id., 45 [quoting Irving National Bank v. Law, 10 F.2d 721, 724 (2d Cir. 1926) (L. Hand, J.)]. The Gelb court also held that a state court must apply federal law to determine the preclusive effect of a prior federal question judgment. Gelb, supra, 798 F.2d 41. In Purdy v. Zeldes, 337 F.3d 253 (2nd Cir. 2003), the Second Circuit, in a diversity case, stated that federal law applies to determine the preclusive effect of a prior federal judgment and reiterated that in that circuit each of two alternative independent holdings are given effect for collateral estoppel purposes. Id., nn 5 and 6. In Semtek International Inc. v. Lockheed Martin Corp., 531 U.S. 497, the United States Supreme Court said rather forcefully, "[w]e have long held that States cannot give those [federal court] judgments merely whatever effect they would give their own judgments, but must accord them the effect that this court prescribes." Id., 507. This direction has been followed by the Connecticut Appellate Court. Commission on Human Rights and Opportunities v. Torrington, 96 Conn.App. 313, 318-19 (2006). While the Semtek and Torrington courts dealt with the issue of res judicata, or claim preclusion, rather than collateral estoppel, no rationale has been put forth by WWE, and this court knows of none, why the result should be different in the latter instance.
The court also finds that Dowling v. Finley Associates, Inc., supra, is factually quite different from this case and not supportive of plaintiff's position. In Dowling, the Connecticut Supreme Court was dealing with a general verdict in a prior action that in the court's words signified " either that the plaintiffs had failed to prove [their case] or that, notwithstanding proof of liability or damages, the jury found that recovery was barred by the applicable statute of limitations, or both." 248 Conn. 374-75 (footnote omitted, emphasis in original). The defendant in Dowling had the burden of proving that the jury found in its favor on the limitations issue in the prior case, and the Connecticut Supreme Court held that the general verdict "left open to speculation" whether the jury had done so. Id., 375. In this case there is no doubt that the federal court decided the facts against WWE on the statute of limitations issues of when the injury occurred and when it should have been discovered. Such a clear and indisputable finding makes the holding in Dowling inapplicable to this case. Indeed, Dowling quoted with approval from State v. Aparo, 223 Conn. 384, 406 (1992), cert. denied, 507 U.S. 972 (1993), that "[f]or estoppel to apply, the fact sought to be foreclosed by [the] defendant must necessarily have been determined in his favor in the prior trial; it is not enough that the fact may have been determined in the former trial."
In Dowling the Connecticut Supreme Court stated that its view in that case had "been embraced" by the Restatement (Second) of Judgments § 27 and Comment (I) thereto. 248 Conn. 378. This court finds Comment (I) to be of dubious value. The Comment states, taking a position quite the opposite of the position taken in the prior Restatement, "if a judgment of a court of first instance is based on determinations of two issues, either of which standing independently would be sufficient to support the result, the judgment is not conclusive with respect to either issue standing above. The Reporter's Note to Comment (I) states that Halpern v. Schwartz, 426 F.2d 102 (2d Cir. 1970), is "the basis of this Comment." 1 Restatement (Second) of Judgments § 27, Reporter's Note, p. 279. However, Halpern was limited severely by a subsequent case, Winters v. Lavine, 574 F.2d 46 (2d Cir. 1978), decided several years before the above Restatement was published. In Winters, in an opinion authored by Judge Waterman who was on the Halpern panel, the Second Circuit wrote that Halpern "was not intended to have, without careful case-by-case extension in the future, broad impact outside the specific context, bankruptcy proceedings . . ." Id., 67. Winters held that where the existence of an independent basis for the result in the prior court was an alternative rather than an exclusive reason for a result, both bases could support preclusion of further litigation of the issue. Id. Winters also took specific aim to disagree with one of the rationales underlying Halpern and the subsequent Comment (I) to the Restatement that when two issues provide independent bases for a decision "they may not have been afforded the careful deliberation and analysis normally applied [by a court] to essential issues." Halpern, supra 426 F.2d 105. Having carefully considered the two lengthy, detailed decisions in the federal action, this court finds the implicit criticism contained in the Halpern rationale to be entirely inapplicable to Judge Karas.
In addition to its argument that the statute of limitations issue was not necessarily determined, WWE has made several other arguments against the application of collateral estoppel. First, it contends the issues in the case were not fully and fairly litigated because the federal court declined to exercise discretionary jurisdiction over the state law claims. This argument is not on point. The defendants are not claiming that the state law issues were decided in the federal action, just that the facts supporting the imposition of the statute of limitations were decided.
Second, WWE cites DeLaurentis v. City of New Haven, 220 Conn. 225 (1991), in support of its argument the issue was not fully and fairly litigated. In DeLaurentis the Connecticut Supreme Court took up the issue of the collateral estoppel effect of a dismissal of a case in federal court on a motion pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, a rule allowing a federal court to dismiss a case for failure to state a claim upon which relief can be granted. The dismissal of WWE's claims in the federal action was pursuant to motions under that Rule. Noting the similarity of Fed.R.Civ.P. 12(b)(6) to Connecticut's motion to strike, DeLaurentis said the federal rule required a court to accept as true the facts alleged in the complaint and went on to state "[b]y definition, there can be no collateral estoppel `fact preclusion' based upon a successful 12(b)(6) motion, for no `facts' are either litigated or found." Taken by itself, DeLaurentis might appear helpful to carry the day for WWE even though its analysis, while correct, is incomplete. However, in a subsequent decision the Connecticut Supreme Court has completed the analysis. In Connecticut National Bank v. Rytman, 241 Conn. 24, 38 n. 17 (1997), the court said clearly:
Unlike DeLaurentis, the parties who in this case filed a motion to dismiss under the rule 12(b)(6) do not contend that the federal dismissal serves to preclude any "facts" asserted in the state court pleadings. Rather, they contend that the dismissal precludes relitigation of any identical issues predicated upon those facts. We agree. To the extent that a federal dismissal under rule 12(b)(6) actually and necessarily decides issues identical to those advanced in state court litigation, we conclude that the federal dismissal may serve collaterally to estop that state litigation.
In the federal action, Judge Karas did not find facts but made very clear he was using the facts alleged by WWE in its amended complaint.
Third, WWE contends there was no identity of issues between the dismissed RICO claims and state law claims in this case. It relies on Connecticut National Bank v. Rytman, supra, which overturned a trial court's grant of summary judgment on collateral estoppel grounds based on a prior adverse decision on the Rytman's RICO claim in federal court. The Rytman court stated "[a]t bottom our conclusion that collateral estoppel was improperly applied in this case is a recognition that the RICO action arose under, and was resolved on the basis of, a complex federal criminal statute around which a specialized body of law and procedural limitations has developed." Rytman, supra, 41-42. However, in the prior federal action the federal court found the Rytmans had failed to plead extortion and failed to prove that a bank had attempted to acquire an interest in the Rytmans' enterprise in an unlawful manner as required under RICO. The Connecticut Supreme Court held that neither of these determinations resolved an issue identical to those in the subsequent state court case. As the Rytman court said, "[a]lthough the failure to make such an allegation was fatal to their RICO claim, its absence has no preclusive effect, for the purposes of collateral estoppel, on further litigation on their common-law and statutory claims, which need not allege extortion or criminality." Id., 41.
In this case, however, the findings in the federal action as to when WWE's last injury occurred and when WWE was on notice of its claim, findings based on WWE's own allegations identical to those in the SAC, are findings on the identical issues that are raised in this case as to whether WWE's state law claims are time barred by generally shorter statutes of limitations.
This court has engaged in a thorough review of the facts alleged in the amended complaint in the federal action on which the District Court made its rulings and those alleged in the SAC in this action. As pointed out before, these two sets of allegations are virtually the same. Looked at another way, the allegations that supported the RICO claims in the federal action are the same as those supporting the state tort claims, the equitable claims and the claims for declaratory relief in this action. For the reasons stated above, the determination of the federal court that the plaintiff's RICO claims arose no later than June 1998 collaterally estops WWE from relitigating its claims on that issue in this action.
VI. Statutes of Limitations
The defendants contend that over and above the preclusive effects of the decisions in the federal action, WWE's claims are barred by Connecticut statutes of limitation when applied to the judicially admitted facts alleged in the SAC. General Statutes § 52-577 states that "[n]o action founded upon a tort shall be brought but within three years from the date of the act or omission complained of." The defendants argue that WWE's claims of fraudulent inducement, the two aiding and abetting breach of fiduciary duty counts, the two tortious interference counts, and the statutory theft, conversion and conspiracy (Counts, 3-5, 8-9, 12-13 and 15) are tort claims subject to Section 52-577.
The defendants further argue that the WWE claims for declaratory relief (Counts 1-2), unjust enrichment (Count 6), the imposition of a constructive trust (Count 7) and to pierce the corporate veil of THQ/Jakks, Pacific, LLC (Count 11) arise from alleged fraudulent activity and thus are governed by Section 52-577 as well. WWE's CUTPA claim (Count 14) is governed by its own statute of limitations found at General Statutes § 42-110g(f) stating that an action under CUTPA "may not be brought more than three years after the occurrence of a violation of this chapter." Finally, the claim under the Connecticut Antitrust Act (Count 10) is governed by a four-year statute running from the time the cause of action accrued. General Statutes § 35-40.
As a result, the defendants argue that according to the SAC the latest date when any of WWE's claims accrued was the June 24, 1998 amendment of the toy licenses (SAC ¶ 166) and therefore the limitation periods for all the above claims commenced running on that date. Since WWE's federal claims were first filed in October 2004, and the state claims in May 2007, the defendants contend all were filed after the limitation period had expired.
WWE disputes the defendants' contentions. First, WWE claims that it is improper to rule on statute of limitation issues when just the allegations of a complaint are before the court. Second, WWE argues that its equitable claims are not limited by any statute of limitations. Third, and most importantly, while agreeing that the remaining tort claims and CUTPA claim are governed by occurrence based three-year limitation periods, WWE contends that all of them have been tolled by either General Statutes § 52-595 (the fraudulent concealment statute) or the continuing course of conduct doctrine. The court will attempt to resolve these disparate contentions.
As to the plaintiff's claim that it is premature to rule dispositively based solely on the allegations of the SAC, the court disagrees with this argument on the basis of several recent precedents. The Connecticut Supreme Court has affirmed a grant of summary judgment on statute of limitations grounds when the facts are based on the allegations of a complaint which are irrefutable. Provencher v. Town of Enfield, 284 Conn. 772, 792 (2007) [factual allegations contained in pleadings are judicial admissions and hence irrefutable, citing Edmands v. CUNO, Inc., 277 Conn. 425, 454 (2006)].
The court also disagrees with WWE's position that the equitable claims it has pleaded have no statute of limitations. Taken at face value, WWE's position means that an equitable claim could be commenced at any time after the occurrence giving rise to injury took place. That is not the law. A careful review of the SAC shows that all of WWE's claims, except those involving the allegedly illegal licensing to Yukes, arise from the facts alleged in the first 186 paragraphs of the SAC which set forth the alleged fraudulent conduct of the defendants in obtaining the various licenses from WWE. The Connecticut Supreme Court has held that a declaratory action "must rest on some cause of action that would be cognizable in a non-declaratory suit" and in determining whether a declaratory judgment action is barred by a statute of limitations, a court must examine the "underlying claim or right" and if a statute of limitation would bar claims "for relief other than a declaratory judgment, then the same limitation period will bar the same claim asserted in a declaratory judgment action." Wilson v. Kelley, 224 Conn. 110, 116 (1992). Other courts have reached similar conclusions. In Gager v. Sanger, 95 Conn.App. 632 (2006), the Appellate Court held that when a party seeks equitable relief in circumstances when legal relief is also available, there is concurrent legal and equitable jurisdiction, and the statute of limitations that would bar the legal claim also bars the equitable claim. Id., 641-42. See also Gennetti v. Jetmore, Superior Court, judicial district of New London, CV 05 4001918 (October 3, 2007, Purtill, J.T.R.) [citing D'Agostino v. D'Addio, 6 Conn.App. 187 (1986)].
The first and second counts of the SAC seek declaratory relief against THQ, THQ/Jakks Pacific, LLC, and Jakks Pacific on the basis that the video game and the toy licenses are void because of the defendants' commercial bribery and illegal conduct (First Count) and the conflicts of interest of Shenker and Bell (Second Count). Basically, these claims are founded on allegedly tortious acts, primarily fraud, and this court determines that these two counts are governed by the three-year limitations period of Section 52-577. Even if one were to accept an argument the claims arise out of a written contract, the six-year limitations period of General Statutes § 52-576 would have expired before October 2004.
The claim of unjust enrichment arises out of the various allegations of bribery and fraud and inducing, aiding and abetting these torts. SAC ¶ 267. The claim for a constructive trust arises out of the tort of an alleged breach of fiduciary duty. SAC ¶¶ 270-72. The piercing the corporate veil claim is based on the tort of fraud. SAC ¶ 300. This court determines that these claims (Sixth, Seventh and Eleventh Counts) are governed by Section 52-577. Thus, based on the foregoing discussion, this court finds that all of the first fifteen counts in the SAC — the tort claims, the declaratory judgment and equitable claims, the CUTPA claim and the antitrust claim — are governed by statutes of limitation which expired before suit was filed unless they were tolled or subject to a continuing course of conduct claim.
A much more formidable contention is WWE's assertion that the applicable statutes of limitations have been tolled by operation of General Statutes § 52-595 which reads:
If any person, liable to an action by another, fraudulently conceals from him the existence of the cause of such action, such cause of action shall be deemed to accrue against such person so liable therefor at the time when the person entitled to sue thereon first discovers its existence.
The parties agree that the elements necessary for a plaintiff to succeed on a fraudulent concealment theory have been set out by the Connecticut Supreme Court in Bartone v. Robert L. Day Co., 232 Conn. 527 (1995). They are: (1) a defendant's actual awareness, rather than imputed knowledge, of the facts necessary to establish the plaintiff's cause of action, (2) the defendant's intentional concealment of such facts from the plaintiff, and (3) the concealment of the facts was for the purpose of obtaining delay on the plaintiff's part in filing a complaint. Id., 533. These elements must be proven by clear, precise and unequivocal evidence. Id. Evidence of misrepresentation is not enough per se. The defendant's actions must be directed to the very point of obtaining the delay which afterwards is taken advantage of by pleading the statute of limitations Id. 534 n. 5 [citing Lippitt v. Ashley, 89 Conn. 450, 480 (1915), and Connell v. Colwell, 214 Conn. 242, 251 (1990)].
The facts underlying WWE's fraudulent concealment claim were alleged in the amended complaint in the federal action at Paragraphs 186-241 which allegations were repeated in the SAC at Paragraphs 187-242, and in an affidavit of Linda McMahon, CEO of WWE, dated April 17, 2008. According to WWE the SAC contains at least 55 paragraphs describing specific instances of fraudulent concealment. These include allegations of (1) concealing payments by Jakks to Shenker or SSAI, (2) that Shenker and Bell failed to provide WWE senior management with video game offers from Jakks and THQ competitors, and (3) concealing that Shenker was working on behalf of Jakks while putatively an agent of WWE. SAC ¶¶ 85-88, 95-100, 112-13, 168-69; McMahon Aff., ¶¶ 18-19; various depositions. These events occurred in the period 1996-1998. In addition, WWE points out that Ms. McMahon stated in her affidavit that (1) WWE was unaware of any improprieties in the behavior of Bell, Shenker or SSAI with respect to their work for WWE, (2) WWE relied on Bell's advice in entering into the video game license, (3) Bell concealed information about another license proposal from Activision and interest from THQ, and (4) once WWE knew the video game license with the defendants was "tainted" by bribery and fraud, WWE investigated and prosecuted such conduct.
Essentially, the defendants make two arguments that the fraudulent concealment tolling statute, Section 52-595, does not save WWE's causes of action. The first argument is that many of the allegations relied on by WWE are not allegations of fraudulent concealment but are allegations of actions that made up the initial allegedly fraudulent procurement of the licenses and do not meet the required element established by the Connecticut Supreme Court that the concealment must be "for the purpose of obtaining delay on the plaintiff's part in filing a complaint." Bartone, supra, 232 Conn. 533. The defendants argue that the first allegation of fraudulent concealment made by WWE in the SAC or the McMahon affidavit not part of the alleged underlying fraud, is that Jakks "concealed and did not produce" certain documents and information pursuant to a subpoena dated June 11, 2002. SAC ¶¶ 198-99. The defendants contend that this alleged act of fraudulent concealment occurred almost four years after the alleged injury to WWE occurred, and therefore, the three-year limitations periods of Sections 52-577 and 42-110g(f) had expired.
The court agrees with the defendants. The allegations in the SAC and the McMahon affidavit concerning purported concealment activities either related to the initial obtaining of the WWE licences by fraud or specifically refer to dates four years or more after June 1998. The activities related to the initial fraud were not "directed to the very point of obtaining the delay" in filing a complaint. Bartone, supra, 232 Conn. 534 n. 5. Rather, the actions were for the purpose of furthering the initial underlying alleged fraud. In a well considered and through decision, the late and esteemed Judge William Lewis rejected the argument that the very acts of fraud which he found proven "themselves constitute[d] the affirmative acts of concealment" needed to bring Section 52-595 into play. Johnson v. Wadia, Superior Court, judicial district of Stamford-Norwalk at Stamford, CV 85 0075560 (March 28, 1991, Lewis, J.) (quoting 54 C.J.S., Limitations on Actions, § 84 "fraudulent concealment which will toll the running of the statute of limitations does not depend upon the underlying cause of action being inherently fraudulent, but requires independent acts of fraudulent concealment . . ."). If the initial fraudulent acts were sufficient to activate Section 52-595, all fraud cases would fall outside the purview of Section 52-577, a situation which is not the law in Connecticut.
Certain allegations in the SAC refer to specific dates in late 2002 and 2003, e.g. SAC ¶¶ 200 et seq. Other allegations also concern the underlying alleged fraud or refer to actions which do not constitute concealment such as the termination of the relationships between WWE and Bell and Shenker, and the commencement of a lawsuit. SAC ¶¶ 187-91. Other allegations concern only Bell and Shenker or one of them. SAC ¶¶ 193-95. The bare handful of allegations that arguably might show some level of concealment are notably conclusory and bereft of any dates at all, let alone dates within three years of June 1998, an omission especially remarkable in a pleading so filled with very specific allegations and a myriad of dates. These fall woefully short of clear and convincing evidence of concealment within the applicable limitations period.
The second argument made by the defendants in opposition to WWE's argument that Section 52-595 has tolled the applicable statute of limitations is premised on the contention that Section 52-595 requires a plaintiff to exercise due diligence to discover the facts about a potential claim when presented with enough facts to put a person of ordinary prudence on inquiry. This is a two-pronged argument, relying not only on Connecticut substantive law, but also on the specific holding in the federal action that WWE was on inquiry notice of the RICO claims by 1998.
In Connell v. Colwell, 214 Conn. 242 (1990), the Connecticut Supreme Court declined to decide whether a plaintiff had a duty to exercise due diligence in order to avail himself of the benefits of Section 52-595. Subsequently, in Mountaindale Condominium Association v. Zappone, 59 Conn.App. 311, cert denied, 254 Conn. 947 (2000), the Appellate Court upheld a Superior Court decision that fraudulent concealment did not toll the statute of limitations when "the means of knowledge existed and the circumstances were such as to put a plaintiff of ordinary prudence on inquiry . . . and the plaintiff learned of information that would lead to the discovery of a cause of action through due diligence" Id., 322.
Prior to Mountaindale Judge Lewis required a plaintiff on inquiry notice to exercise due diligence in order to be eligible for the tolling benefits of Section 52-595. Johnson v. Wadia, supra. More recently, other courts have imposed the same requirement. Weiner v. Clinton, Superior Court, judicial district of Hartford CV 04 4006045 (October 19, 2006, Keller, J.) ("tolling only permits a plaintiff to avoid the bar of the statute of limitations if despite all due diligence, he is unable to obtain vital information bearing on the existence of his claim"); Zanker Group, LLC v. Summerville at Litchfield Hills, LLC, Superior Court, judicial district of Waterbury, X10 CV 04 4010223 (March 10, 2007, Munro, J.) (when a plaintiff learns of information that would lead to discovery of a cause of action through due diligence, the statute of limitations runs even if there has been fraudulent concealment); Campbell v. Town of Plymouth, Superior Court, judicial district of New Britain, CV 00 501061 (sic) (June 6, 2001, Shortall, J.) (citing Mountaindale), aff'd, 74 Conn.App. 67 (2002); Hoskins v. Titan Value Equities Group, Inc, Superior Court, judicial district of New Haven, CV 95 0373071 (April 8, 1999) [ 24 Conn. L. Rptr. 391], aff'd on different grounds, 252 Conn. 789 (2000). Therefore, there is appellate authority and persuasive trial court support for the proposition that the tolling benefits of Section 52-595 may only be utilized if a plaintiff has exercised due diligence after being placed on inquiry notice of the existence of a cause of action. This court finds, based on the allegations in the SAC and the McMahon affidavit, that there was sufficient information available to WWE to put it on its guard about the terms and length of the licenses and the purported lack of other bids, and that WWE failed to exercise due diligence.
In the federal action the District Court fully considered the detailed facts alleged by WWE and specifically held that it had "little difficulty in finding that a reasonable person would have been on inquiry notice of the injury [WWE] is alleged to have suffered by no later than June 1998." WWE II, 68; see discussion at id., 65-74. Additionally, the District Court specifically found that WWE "failed to cite anything in its lengthy Amended Complaint that remotely demonstrates due diligence at any point during the granting of the licenses, let alone that it exercised due diligence through the period to be tolled." Id., 73.
Therefore, in addition to holding that WWE's fraudulent concealment arguments failed for several reasons under Connecticut law, this court also determines that WWE is collaterally estopped from relitigating the issue of whether it was on inquiry notice of its claims. For all of these reasons, this court holds that the statutes of limitations governing WWE's claims are not tolled by virtue of Section 52-595.
WWE also argues that its claims are timely by virtue of the "continuing course of conduct" doctrine. Under this doctrine, according to WWE, citing Bellemare v. Wachovia Mortgage Corp., 94 Conn.App. 593 (2006), where a defendant engages in a continuing course of conduct the statute of limitations does not begin to run until the course of conduct is completed. To establish a continuing course of conduct, the defendant must have (1) committed an initial wrong, (2) owed a continuing duty to the plaintiff that was related to the original wrong, and (3) continually breached that duty. Bednarz v. Eye Physicians of Central Connecticut, P.C., 287 Conn. 158, 170 n. 10 (2008). The doctrine, however, may not be invoked on the basis of the defendants' "failure . . . to notify the plaintiff of his wrongdoing." Connell v. Colwell, supra, 214 Conn. 255. In this case the plaintiff alleges that the defendants' continuous course of conduct consists of the very acts which made up, or initially hid, the original alleged wrongdoing and the "continuous concealment, perjury and obstruction of justice by the Defendants, Shenker and Bell." WWE Memorandum, 56. But WWE points to no acts or omission by any of the moving defendants which constituted perjury or obstruction of justice prior to June 2001. Therefore, the continuing course of conduct alleged either consisted of the original alleged wrongdoing, or conduct that occurred after the limitations period had run. These allegations do not support a continuous course of conduct claim.
Furthermore, WWE neither alleges nor argues that there was any continuing duty owed by the defendants to it. In Bednarz, the Connecticut Supreme Court restated the proposition that where it had found a duty continued to exist there was evidence of a special relationship between the parties giving rise to such a duty or some later wrongful conduct by the defendant related to the prior wrongful act. Bednarz, supra, 287 Conn. 170. WWE incorrectly cites Izzarelli v. R.J. Reynolds Tobacco Co., 117 F.Sup.2d 167 (D.Conn. 2000), for proposition that acts designed to conceal wrongdoing are part of a continuing course of conduct. Izzarelli simply said when the original wrong was concealment, further concealment is related conduct and therefore a continuing course of conduct. Id., 177. WWE relies on cases where such a continuing duty clearly existed, e.g. Giulietti v. Giulietti, 65 Conn.App. 813 (2001) (attorney-client relationship). Here WWE does not allege, and the court does not find there was a continuing special relationship giving rise to a duty which is a prerequisite for a continuing course of conduct claim.
VII. Antitrust Claim
In the federal action WWE alleged that all the defendants in this case violated Section 1 of the Sherman Antitrust Act, 15 U.S.C. § 1. WWE alleged that the defendants "agreed and conspired to unreasonably restrain trade, in a per se violation of Section 1 of the Sherman Act . . . by agreeing and conspiring to rig the terms of the bid . . . to WWE for the video game license . . . conspiring to prevent THQ from submitting to WWE an independent bid . . . [which] caus[ed] the licensing terms offered to WWE to be less favorable . . . than the terms that competitive bid would have been." Amended Complaint, Federal Action ¶ 267.
The District Court dismissed the Sherman Antitrust Act claim holding that the allegations of WWE's Amended Complaint, while describing "an extensive and, if true, astounding commercial bribery scheme," failed to allege an antitrust injury and failed to allege that but for the anti-competitive conduct (the joint bid) WWE would not have suffered antitrust injury. 425 F.Sup.2d 520, WWE 1, 520. In this case, the defendants contend that the above holding collaterally estops WWE from re-litigating these issues and therefore, WWE's claim must fail.
On December 21, 2007 Judge Karas denied WWE's motion for Reargument of the dismissal of the Sherman Act claim emphasizing that WWE's claimed injury arose from the alleged bribery scheme not the joint THQ/Jakks bid. Silvestri Affidavit, Exhibit K.
In reaching the decision that WWE suffered no antitrust injury, the federal court assumed that WWE had pleaded a per se violation of 15 U.S.C. § 1. Id., 519. The holding that antitrust injury was required in a private antitrust action was primarily based on Daniel v. American Board of Emergency Medicine, 428 F.3d 408 (2d Cir. 2005), which itself drew on "several" decisions of the United States Supreme Court. Id., 518
Count Ten of the SAC alleges a violation of the Connecticut Antitrust Act, General Statutes § 35-24 et seq. That law incorporates, in modified form and with some notable exceptions, various provisions of federal antitrust laws such as the Sherman and Clayton Acts. Mazzola v. Southern New England Telephone Co., 169 Conn. 344, 347-48 (1975). General Statutes § 35-26 reads "Every contract, combination or conspiracy in restraint of any part of trade or commerce is unlawful" and in essence restates the prohibition of the first sentence of the Sherman Act on interstate commerce. The Connecticut Act also states it is the intention of the General Assembly that, in construing Sections 35-24 through 35-46, the courts of Connecticut "shall be guided by interpretations by the federal courts to federal antitrust statutes." General Statutes § 35-44b. The Connecticut Supreme Court has stated, "[a]ccordingly we follow federal precedent when we interpret the act unless the text of our antitrust statutes or other pertinent state law requires us to interpret it differently." Westport Taxi Service, Inc. v. Westport Transit District, 235 Conn. 1, 15-16 (1995).
As the defendants have pointed out Connecticut trial courts have recognized and adhered to the requirement that in order to obtain damages for even a per se violation of the Connecticut Antitrust Act an "antitrust injury" must be shown. D'Agostino v. Broccoli, Superior Court, judicial district of Hartford, CV 05 5001595 (January 12, 2007, Scholl, J.); Bridgeport Harbor Place, LLC v. Ganim, Superior Court, judicial district of Waterbury, Complex Litigation Docket, X06 CV 04 4008409 (August 23, 2006, Alander, J.) [ 42 Conn. L. Rptr. 6]; Wyatt Energy, Inc. v. Motiva Enterprises, LLC, Superior Court, judicial district of Waterbury, Complex Litigation Docket, X0 CV 0201740905 (Hodgson, J. December 12, 2002, amended January 15, 2003) [ 33 Conn. L. Rptr. 566, 678].
In this case the allegations of the Tenth Count of the SAC specifically referencing the Connecticut Antitrust Act claim are virtually identical to those made in Count III of the Amended Complaint in the federal action which act set forth the federal antitrust claim. The only differences are the references to the Connecticut statute and to trade and commerce in Connecticut rather than interstate commerce. Therefore, the very facts which WWE pleaded with such specificity in the federal action, and which the federal court found insufficient to establish "antitrust" injury under federal law, are now before this court which is mandated by statute and precedent to apply the same legal principles. In opposition, WWE does not contend that the Connecticut law should be interpreted differently than the Sherman Act, but argues that the dismissal of the Sherman Act count in the federal action was based on impermissible fact finding by the federal court which "rejected WWE's numerous allegations that it was injured." WWE Memo, April 21, 2008, 43. This argument is nothing more than stating that the federal court's decision was wrong.
This court concludes that summary judgment should be granted dismissing the claim under the Connecticut Antitrust Act on several grounds. First Connecticut law requires the same type of antitrust injury as required under federal law, and based on the facts alleged by WWE this court concludes, as did Judge Karas, that WWE suffered no antitrust injury. Second, for the reasons set forth in Section V of this memorandum, WWE is collaterally estopped from relitigating the issue of antitrust injury and the issue of when the injury occurred for statute of limitations purpose, both issues which were decided adversely to it. Third, for the reasons set forth in Section VI of the memorandum, this court finds that the four-year statute of limitations period expired before the antitrust claim was brought.
VIII. Conclusion
For the reasons stated above, the pending summary judgment motions of THQ, Inc., THQ/Jakks Pacific, LLC, Jakks Pacific, Inc., and Messrs. Friedman, Berman, Bennett and Farrell to dismiss the First through Fifteenth Counts of the plaintiff's SAC as against them are granted. Those counts are dismissed on the grounds that (1) the doctrine of collateral estoppel precludes relitigation of the issue that the plaintiffs alleged injuries occurred no later than June 1998, and therefore, the applicable Connecticut Statutes of limitation bar the claims, (2) based on the plaintiff's very specific pleadings, which are judicial admissions, the applicable Connecticut Statutes of limitations bar the claims. In addition, the Connecticut Antitrust Act claim (Tenth Count) is dismissed for lack of antitrust injury based on an analysis of the pleadings and on the principles of collateral estoppel.