No. CV 07-5013346
May 16, 2008
MEMORANDUM OF DECISION RE DEFENDANTS' MOTION TO STRIKE #117
On August 17, 2007, the plaintiff, Christopher Evans, filed a four-count complaint against the defendants, Tiger Claw, Inc. (Tiger Claw), David Hartmann, David Martel and Donald Martel. The plaintiff alleges the following facts. Tiger Claw sells various hardware devices. Hartmann serves as Tiger Claw's CEO, while David Martel and Donald Martel are Hartmann's "partner[s] in the Tiger Claw business."
The complaint includes the following additional allegations. In early January 2003, the defendants hired the plaintiff as a commission salesman, and the plaintiff began working on January 11. On January 14, the parties agreed to expand the plaintiff's duties to include administrative tasks for a wage of $20/hour. The defendants then offered to withhold and use the plaintiff's wages to purchase corporate shares for the plaintiff, and the plaintiff accepted the offer believing it was an investment opportunity made in good faith. In February 2003, when the plaintiff produced his first commission sale, he and the defendants agreed to invest the plaintiff's sales commissions in the same way that the plaintiff was investing his wages, with the distinction that investment of the sales commissions would be limited to $10,000. It was Hartmann's responsibility to determine the value of the plaintiff's corporate shares by consulting with an accountant and an attorney.
In April 2003, Evans took on additional duties without a corresponding pay raise, motivated by his ambition to increase the value of the Tiger Claw business and thus the value of his investment. On April 1, 2004, the plaintiff advised Donald Martel that as of January 4, 2004, his commissions had reached the $10,000 maximum for investment purposes. Sometime in 2004, the defendants agreed to increase the plaintiff's hourly wage to $25/hour, effective January 1, 2004. The defendants also agreed to pay the plaintiff $40/hour during a two-week period, with "payment to be made in current funds or invested in the corporate shares."
On December 6, 2004, Hartmann stated that he would pay only 5% commission on future sales; previously, the plaintiff's commission had been 10%. Accordingly, on December 23, the plaintiff received a 5% commission on an order that he had spent eighteen months developing. On February 11, 2005, the defendants altered their accounting system such that the plaintiff could not determine the amount of his commissions or when those commissions were due. On March 16, 2005, the plaintiff gave Donald Martel his work statements for 2003, 2004 and 2005. At that time, the plaintiff asked him to explain how he could obtain his corporate shares. On April 20, 2005, the plaintiff received a letter from an attorney stating that the plaintiff had been discharged. Following his discharge, the plaintiff asked the defendants to deliver his shares and to account for his earnings. The defendants did not follow either directive.
Count one sounds in breach of contract. In count two, the plaintiff alleges that the defendants converted his hourly earnings and sales commissions to their own use in violation of General Statutes § 52-564. Count three is a civil conspiracy claim. In count four, the plaintiff alleges violations of the Connecticut Unfair Trade Practices Act (CUTPA), General Statutes § 42-110b et seq.
On September 7, 2007, the defendants filed a request to revise. On November 21, 2007, the court, Skolnick, J.T.R., sustained the plaintiff's objection. After the defendants filed a motion for clarification on December 7, the court provided a short handwritten note on January 16, 2008 in which it again sustained the objection.
On February 6, 2008, the defendant filed a motion to strike. Specifically, the defendants moved to strike count one on the ground that the plaintiff failed to allege all of the elements of a breach of contract claim, count two on the ground that the plaintiff failed to allege facts demonstrating his possession and control over the monies and stock that were allegedly stolen, count three on the grounds that the plaintiff failed to allege either the elements of civil conspiracy or an underlying tort as required for civil conspiracy claims, and count four on the ground that CUTPA does not apply to an employer-employee relationship and the plaintiff has not pleaded facts demonstrating that he had a consumer relationship with the defendants. Additionally, the defendants raised the argument that the plaintiff failed to set forth facts sufficient to pierce the corporate veil, and therefore none of the counts are sufficiently pleaded to allow findings of individual liability. The plaintiff filed a memorandum in opposition to the motion on March 24, 2008, as well as a supplemental memorandum on March 26 specifically addressing the defendants' corporate veil piercing argument. On April 7, 2008, the defendants filed a supplemental memorandum in support of their motion. The court heard oral argument on March 24 and April 7.
"The purpose of a motion to strike is to contest . . . the legal sufficiency of the allegations of any complaint . . . to state a claim upon which relief can be granted." (Internal quotation marks omitted.) Fort Trumbull Conservancy, LLC v. Alves, 262 Conn. 480, 498, 815 A.2d 1188 (2003). "It is fundamental that in determining the sufficiency of a complaint challenged by a defendant's motion to strike, all well-pleaded facts and those facts necessarily implied from the allegations are taken as admitted." (Internal quotation marks omitted.) Violano v. Fernandez, 280 Conn. 310, 318, 907 A.2d 1188 (2006). "The court must construe the facts in the complaint most favorably to the plaintiff." (Internal quotation marks omitted.) Faulkner v. United Technologies Corp., 240 Conn. 576, 580, 693 A.2d 293 (1997). "[I]f facts provable in the complaint would support a cause of action, the motion to strike must be denied." (Internal quotation marks omitted.) Batte-Holmgren v. Commissioner of Public Health, 281 Conn. 277, 294, 914 A.2d 996 (2007). By contrast, "[a] motion to strike is properly granted if the complaint alleges mere conclusions of law that are unsupported by the facts alleged." (Internal quotation marks omitted.) Fort Trumbull Conservancy, LLC v. Alves, supra, 498.
I. Corporate Veil
As an initial matter, the defendants assert that all counts against the individual defendants must be stricken because those defendants are all Tiger Claw officers, and the plaintiff has not alleged any facts that would justify piercing the corporate veil. The plaintiff argues that there is no need to pierce the corporate veil because he has not alleged derivative liability based on an alleged agreement with the corporate defendant, but has instead alleged that the individual defendants are liable based on "an agreement made in their own right."
A natural reading of count one, the breach of contract claim, is that the individual defendants were personally bound by various agreements with the plaintiff. Indeed, the plaintiff repeatedly alleges that David Hartmann acted "on behalf of himself," as well as on behalf of the other defendants, both individual and corporate. Thus, there is nothing for the court to pierce.
As for the remaining counts, even if the court takes at face value the assertion that the individual defendants are all Tiger Claw officers, it is unnecessary to pierce the corporate veil if the individual being sued has allegedly committed a tort. See Kilduff v. Adams, Inc., 219 Conn. 314, 331-32, 593 A.2d 478 (1991) ("[i]t is black letter law that an officer of a corporation who commits a tort is personally liable to the victim regardless of whether the corporation itself is liable"); Scribner v. O'Brien, Inc., 169 Conn. 389, 404, 363 A.2d 160 (1975) ("[w]here . . . an agent or officer commits or participates in the commission of a tort, whether or not he acts on behalf of his principal or corporation, he is liable to third persons injured thereby"); Meneo v. Patrick, Superior Court, judicial district of Hartford, Docket No. CV 06 5004523 (March 23, 2007, Elgo, J.) (noting that the court need not pierce the corporate veil in order to address various tort claims). With the exception of the breach of contract claim, the plaintiff's claims against the individual defendants sound in tort. See, e.g., Macomber v. Travelers Property Casualty Corp., 277 Conn. 617, 640, 894 A.2d 240 (2006). Accordingly, the defendants' argument is inapplicable to the plaintiff's statutory theft, civil conspiracy and CUTPA claims, and the motion to strike the counts against the individual defendants on this ground is denied.
II. Breach of Contract
Additionally, the defendants assert that the first count must be stricken because it fails to allege sufficient facts to support a breach of contract claim. The plaintiff responds that all elements of a breach of contact claim are present in the complaint. The court agrees with the plaintiff.
"The elements of a breach of contract action are the formation of an agreement, performance by one party, breach of the agreement by the other party and damages." (Internal quotation marks omitted.) Sullivan v. Thorndike, 104 Conn.App. 297, 303, 934 A.2d 827 (2007), cert. denied, 285 Conn. 907, 942 A.2d 415 (2008). In count one, the plaintiff alleges that David Hartmann, on behalf of himself and the other defendants, offered to withhold and use the plaintiff's hourly earnings to purchase corporate shares for the plaintiff, and the plaintiff accepted the offer. The plaintiff then allegedly performed his duties without receiving his hourly compensation. The plaintiff further alleges that in February 2003, he made an agreement with David Hartmann, who was again acting on behalf of himself and the other defendants, to invest up to $10,000 of his sales commissions in the same way he was investing his hourly earnings. The plaintiff allegedly performed his duties without receiving his commissions. The plaintiff next alleges that from March 16, 2005 (when the plaintiff first asked for his corporate shares) to the present, the defendants gave him neither the corporate shares they had agreed to purchase on his behalf nor the commissions that he earned in excess of $10,000, and the plaintiff was thereby damaged.
While the plaintiff could have articulated more precisely the nature of these alleged agreements, as well as the dates and locations of formation and breach, the alleged trajectory of events is clear. Moreover, as the plaintiff notes, the discovery process may yield more detailed information. Accordingly, the court finds that formation, performance by one party, breach by the other party and damages are all adequately addressed in the complaint. The motion to strike count one is therefore denied.
The court must also address another dispute regarding count one. During oral argument, the plaintiff was reluctant to characterize count one as solely a breach of contract claim, suggesting that it could be read to include a breach of fiduciary duty claim. On that point, the following analysis in United Components, Inc. v. Wdowiak, 239 Conn. 259, 264, 684 A.2d 693 (1996) is instructive: "[T]he interpretation of pleadings is always a question of law for the court . . . We have pointed out that [t]he burden [is] upon the pleaders to make such averments that the material facts should appear with reasonable certainty; and for that purpose [the pleaders] were allowed to use their own language. Whenever that language fails to define clearly the issues in dispute, the court will put upon it such reasonable construction as will give effect to the pleadings in conformity with the general theory which it was intended to follow, and do substantial justice between the parties." (Emphasis in original; internal quotation marks omitted.)
While the plaintiff has clearly defined a breach of contract claim in count one, he has not outlined adequately a breach of fiduciary duty claim. See Pergament v. Green, 32 Conn.App. 644, 651, 630 A.2d 615, cert. denied, 228 Conn. 903, 634 A.2d 296 (1993) ("a plaintiff must allege breach of fiduciary duty with specificity before liability can attach on such grounds"). If the plaintiff is attempting to include a breach of fiduciary duty claim, the court agrees with the defendants that he must do so in a separate count. See Practice Book § 10-1; Walker Manor Environmental Trust v. Oyster Landing Condominium Ass'n., Superior Court, judicial district of Ansonia-Milford at Derby, Docket No. CV 06 4006038 (December 22, 2006, Esposito, J.).
Moreover, not every employer-employee relationship is fiduciary in nature; see Pergament v. Green, supra, 32 Conn.App. 653; and the defendants contend that the plaintiff's allegations touching on fiduciary issues are merely bald assertions. The court agrees that the plaintiff, who at oral argument acknowledged that only one paragraph in his complaint attempts to address the elements of fiduciary status, has not alleged sufficient facts to support his claim that the individual defendants were his fiduciaries.
Although the plaintiff asserts that the defendants cannot challenge his fiduciary status allegations, the court is unpersuaded. During oral argument on March 24, the plaintiff raised issues related to fiduciary status, embezzlement and other topics. These issues were not obvious to either the defendants or the court. The court therefore gave both parties the option of preparing supplemental memoranda in order to address these issues more fully, and the defendants cannot be faulted for exercising that option.
III. Statutory Theft
The parties also dispute whether count two, which alleges that the defendants converted the plaintiff's hourly earnings and sales commissions to their own use, properly sets forth a statutory theft claim. According to the defendants, count two is foreclosed by a recent Connecticut Supreme Court case, Mystic Color Lab, Inc. v. Auctions Worldwide, LLC, 284 Conn. 408, 934 A.2d 227 (2007). The plaintiff counters that Mystic Color is inapplicable because the plaintiff has alleged that the defendants were his fiduciaries.
In Mystic Color, the defendant had agreed to sell the plaintiff's photo processing equipment at auction and to pay all proceeds due to the plaintiff within fifteen days after the auction. Id., 410-11. 11. After the auction, the defendant failed to pay the proceeds within the fifteen-day window. Id., 412. The plaintiff sued the defendant for statutory theft under General Statutes § 52-564, among other things. Id., 413. It did not allege that the parties had either a fiduciary or an agency relationship. Id., 415. Following a trial, the Superior Court ruled in the plaintiff's favor with respect to that claim and awarded treble damages. Id.
On appeal, the Connecticut Supreme Court made the following observation: "Conversion is an unauthorized assumption and exercise of the right of ownership over property belonging to another, to the exclusion of the owner's rights. Similarly, statutory theft is the stealing of another's property or the knowing receipt and concealment of stolen property. Statutory theft, however, requires an element over and above what is necessary to prove conversion, namely, that the defendant intentionally deprived the complaining party of his or her property. Nonetheless, to prevail on either claim, the party alleging conversion or statutory theft must prove a sufficient property interest in the items in question. Accordingly, a claim for conversion may be brought when the relationship is one of bailor and bailee but not when it is one of debtor and creditor." (Citations omitted; internal quotation marks omitted.) Id., 418-19.
The Court further elaborated that "[a] debtor-creditor relationship arises from a debt owed by one party to another. The debt owed arises from an obligation, often contractual, on the part of the debtor, not from a preexisting property interest of the creditor." Id., 419. By contrast, "[a] relationship of bailor-bailee arises when the owner, while retaining general title, delivers personal property to another for some particular purpose upon an express or implied contract to redeliver the goods when the purpose has been fulfilled, or to otherwise deal with the goods according to the bailor's directions . . . In bailment, the owner or bailor has a general property [interest] in the goods bailed, . . . The bailee, on the other hand, has mere possession of items left in its care pursuant to the bailment.' A bailment therefore contemplates redelivery of goods entrusted to the bailee, whereas a debtor-creditor relationship contemplates the payment of an obligation defined by agreement between the parties." (Citations omitted.) Id., 419-20. The Court also remarked that "[i]f the purported bailee is not bound to return the same items that were delivered to him by the bailor, but may deliver any other item or items of equal value, there is no bailment." Id., 420.
Based on the foregoing, the current plaintiff cannot make out a claim for statutory theft. As he defendants properly note, the plaintiff has alleged a debtor-creditor rather than a bailor-bailee relationship. He has not alleged that his hourly earnings or commissions were ever in his possession or control, so there can be no redelivery of those items. Although the plaintiff argues that the defendants must be viewed as fiduciaries, rather than creditors, the court has already explained that he has not adequately alleged fiduciary status. Additionally, the plaintiff's citations to Connecticut Probate Practice are not relevant to the current scenario, which does not involve a probate issue. Accordingly, the motion to strike count two is granted.
IV. Civil Conspiracy
In count three, the plaintiff incorporates the allegations in count one, and further alleges that "[t]he defendants' actions resulted from and constituted a conspiracy and scheme to deliberately defraud the plaintiff, as a result of which the plaintiff has been deprived of his compensation, sales commissions and investment expectancies." The defendants posit that the civil conspiracy count is legally insufficient because it fails to allege adequately the elements of civil conspiracy and the elements of the underlying tort of fraud.
"`The [elements] of a civil action for conspiracy are: (1) a combination between two or more persons, (2) to do a criminal or an unlawful act or a lawful act by criminal or unlawful means, (3) an act done by one or more of the conspirators pursuant to the scheme and in furtherance of the object, (4) which act results in damage to the plaintiff.' There is, however, `no independent claim of civil conspiracy. Rather, [t]he action is for damages caused by acts committed pursuant to a formed conspiracy rather than by the conspiracy itself . . . Thus, to state a cause of action, a claim of civil conspiracy must be joined with an allegation of a substantive tort.'" (Citation omitted; emphasis in original.) Macomber v. Travelers Property Casualty Corp., supra, 277 Conn. 635-36.
The court first notes that the plaintiff has failed to allege the elements of civil conspiracy with any specificity. Even the most attentive reader would be hard-pressed to determine exactly which allegations the plaintiff relies on to support his claim that the defendants were conspirators and that they committed acts in furtherance of the conspiracy.
Moreover, the plaintiff's failure to outline properly the underlying tort is fatal to his claim. Based on the allegation that the defendants' acts "constituted a conspiracy and scheme to deliberately defraud," the defendants understandably interpreted the substantive tort alleged to be fraud. "The four essential elements of fraud are (1) that a false representation of fact was made; (2) that the party making the representation knew it to be false; (3) that the representation was made to induce action by the other party; and (4) that the other party did so act to her detriment . . . Because 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, 916 A.2d 834 (2007). Here, the defendants argue, and the court agrees, that the plaintiff has failed to allege the elements of fraud. "[W]here the plaintiff is unable to establish the underlying cause of action for fraud, the cause of action for conspiracy to defraud must also fail." Litchfield Asset Management Corp. v. Howell, 70 Conn.App. 133, 140, 799 A.2d 298, cert. denied, 261 Conn. 911, 806 A.2d 49 (2002).
The plaintiff insists that the language in its civil conspiracy count is broad enough to encompass breach of fiduciary duty, obtaining property by false pretenses or embezzlement as the underlying tort. Nevertheless, the fact that the plaintiff favors a particular reading of his complaint does not mean that the court must adopt that same reading. See United Components, Inc. v. Wdowiak, supra, 239 Conn. 264. Here, the most logical construction of count three is that the plaintiff has attempted to allege only fraud as the substantive tort. Any other interpretation would be unfair to the defendants, requiring them to engage in guesswork in order to determine what tort or torts are purportedly alleged in count one, the breach of contract claim. The plaintiff's reliance on Pepe Co. v. Apuzzo, 98 Conn. 807, 120 A. 681 (1923), for the contrary view is misplaced. In Pepe Co., the court determined that allegations of a conspiracy to "cheat and defraud" were superfluous because the count clearly alleged a conspiracy to rob the plaintiff. Id., 810. By contrast, once stripped of the allegation of a "conspiracy and scheme to deliberately defraud," the count currently before the court is devoid of any allegations outlining the nature of the conspiracy. The motion to strike count three is therefore granted.
In count four, the plaintiff alleges that "[t]he defendants' actions, including but not limited to their agreement to retain the plaintiff's earnings to purchase an equity interest in the Tiger Claw business," violated CUTPA. The defendants argue that CUTPA does not apply to issues stemming from an employer-employee relationship, and that the plaintiff has not alleged a consumer relationship with the defendants. Conversely, the plaintiff asserts that a consumer relationship is not required under CUTPA and that his CUTPA count is based on allegations unrelated to employer-employee status.
The defendants cite Jackson v. R.G. Whipple, Inc., 225 Conn. 705, 627 A.2d 374 (1993) to buttress their claim that the plaintiff was required to allege a consumer relationship. In Larsen Chelsey Realty Co. v. Larsen, 232 Conn. 480, 495-96, 656 A.2d 1009 (1995), however, the Connecticut Supreme Court clarified that "[a]lthough we acknowledge the presence of dicta in Jackson pertaining to consumer relationships, our holding in that case was merely that allowing a plaintiff to sue her opponent's attorney under CUTPA would infringe on the attorney-client relationship," and that "CUTPA imposes no requirement of a consumer relationship." Accordingly, the plaintiff's failure to allege a consumer relationship is not fatal to his claim.
The defendants also rely on Quimby v. Kimberly Clark Corp., 28 Conn.App. 660, 613 A.2d 838 (1992), to support their position that the CUTPA count is legally insufficient. In affirming the grant of a motion to strike a CUTPA count, the Quimby court remarked that "[t]he relationship in this case is not between a consumer and a commercial vendor, but rather between an employer and an employee." Id., 670. The fact that the plaintiff was allegedly employed by the defendants, however, is not dispositive. Even if an employer-employee relationship exists, the court must examine whether the defendants' alleged conduct falls outside the confines of that relationship and within CUTPA's ambit. See Fink v. Golenbock, 238 Conn. 183, 214, 680 A.2d 1243 (1996); Larsen Chelsey Realty Co. v. Larsen, supra, 232 Conn. 491; High v. Stamford Health System, Inc., Superior Court, judicial district of Stamford-Norwalk at Stamford, Docket No. CV 05 5000134 (August 14, 2006, Lewis, J.T.R.) [41 Conn. L. Rptr. 853] ("[t]he mere existence of [an employer-employee] relationship . . . does not proscribe a CUTPA claim and the court should consider the defendant's activities outside the employer-employee relationship"). In this instance, the court is persuaded that it does not.
In Reynolds, Pearson Co., LLC v. Miglietta, Superior Court, judicial district of Hartford, Docket No. CV 00 0801247 (March 27, 2001, Berger, J.), the Superior Court stated the following: "This court . . . focuses on the conduct of the defendants alleged to be in violation of CUTPA. The allegations show that the complained of activities of the defendants all arise out of or are related to, first, the defendants' refusal to honor the terms of Reynolds' employment contract by giving him an ownership interest in the company . . ." The court added that "[t]he allegations all arise out of or are related to an alleged breach of the terms of an employment contract and the subsequent activities of the parties to resolve the dispute. It is hard to imagine anything more closely arising out of an employment relationship than the formation and terms of the employment. This court thus finds that these allegations cannot support a cause of action under CUTPA." Id.
Notwithstanding the plaintiff's insistence that the alleged agreement to convert his earnings and commissions into stock falls within CUTPA's purview because it purportedly involves trade or commerce, this court has been provided no compelling reason to deviate from the logic employed in Reynolds. See also Tanner v. Darly Custom Tech, Inc., Superior Court, judicial district of Danbury, Docket No. CV 00 0340177 (February 8, 2001, Adams, J.) (29 Conn. L. Rptr. 415, 417) (finding that "acts within the employment relationship are not committed as part of a business' trade or commerce," and "even when unfair acts within trade or commerce are alleged, if the ultimate injury for which redress is sought occurs within the zone of the employment relationship, a claim under CUTPA will not lie"). Even when read in the light most favorable to the plaintiff, the plain meaning of the allegations is that the plaintiff is seeking payment for work performed. Accordingly, the court cannot conclude from the face of this count that the alleged breach was outside the employment agreement. The motion to strike count four is granted.
For the foregoing reasons, the motion to strike count one is denied and the motion to strike counts, two, three and four is granted.