No. TTD CV 07-4007051-S
September 15, 2008
This case is an action by a son, plaintiff Christopher T. Ladd, against his parents seeking, inter alia, a dissolution of the family business known as Ladd Construction, LLC. The gravamen of the complaint is that the plaintiff has been illegally excluded from participation in the running of the business and of its profits. Pending before the court are the plaintiff's Motion to Join the mother as a party defendant (Docket No. 111.00); his Motion to Amend (Docket No. 113.00); the defendants' Motion to Dismiss (Docket No. 116.00) and defendants' First Motion to Strike (Docket No. 118.00). For convenience, the parties requested the court to hear and decide all of the motions simultaneously. For the following reasons, the Motion to Join is granted, the Motion to Amend is granted, the Motion to Dismiss is denied and the First Motion to Strike is granted as to the Third and Fifth Counts and denied as to the First and Fourth Counts.
In his Motion to Add Party Defendant, the plaintiff seeks to add his mother as a defendant, adding a Seventh Count to his Complaint alleging civil theft based on the claim that she wrote checks on the account of Ladd Construction LLC to pay for, inter alia, personal expenses. Defendants oppose the motion on the grounds that the mother, who is not a member or manager in the LLC, is not a necessary party because she has no legal interest in Ladd Construction; and that the plaintiff lacks standing to complain because any lost profits claim belongs to the limited liability company, not the individual members, citing General Statutes § 34-187. Those arguments, however, raise factual issues going to the merits of the case. In this motion, plaintiff need only establish that his mother is part of the controversy and that a complete determination cannot be had without her presence. General Statutes § 52-107. To add a claim against his mother in the complaint, plaintiff need only show that she could have been inserted in the lawsuit originally. General Statutes § 52-128. A new party can be added if they have an interest in the controversy, and who ought to be made parties, in order that the court may act on that rule which requires it to decide on, and finally determine the entire controversy, by adjusting the rights involved in it. 1542 Highland Associates, LLC v. Fohl, 62 Conn.App. 612, 772 A.2d 1128, cert. denied, 256 Conn. 919, 774 A.2d 137 (2001). Statutes allowing amendments to complaints are liberally construed. Crowell v. Middletown Savings Bank, 122 Conn. 362, 370, 189 A. 172 (1937). Applying these liberal standards, the son has made a sufficient showing to add his mother to the case at this stage. Thus, the Motion to Join is granted.
General Statutes § 34-187 provides as follows:
(a) Except as otherwise provided in an operating agreement, suit on behalf of the limited liability company may be brought in the name of the limited liability company by: (1) Any member or members of a limited liability company, whether or not the articles of organization vest management of the limited liability company in one or more managers, who are authorized to sue by the vote of a majority in interest of the members, unless the vote of all members shall be required pursuant to subsection (b) or section 34-142; or (2) any manager or managers of a limited liability company, if the articles of organization vest management of the limited liability company in one or more managers, who are authorized to sue by the vote required pursuant to section 43-142.
(b) In determining the vote required under section 34-142 for purposes of this section, the vote of any member or manager who has an interest in the outcome of the suit that is adverse to the interest of the limited liability company shall be excluded.
In his Motion to Amend, plaintiff also seeks to add a Sixth Count alleging civil theft against his father, claiming that the father illegally participated in the misuse of funds for, inter alia, personal use. Defendants similarly argue that the Amendment should be rejected for lack of standing because the new allegation states a harm to the LLC, not to the son. The court does not agree. The claim is for civil theft. If a member or manager of a limited liability company commits a tortious act while on company business, he may be personally liable to an injured party. General Statutes § 34-133(a); M. Pruner, A Guide to Connecticut Limited Liability Companies, § 188.8.131.52 (Conn. Law Tribune, 1995); see also § 7.14.4 citing Kilduff v. Adams, Inc., 219 Conn. 314, 593 A.2d 478 (1991). Liability extends to the obligations of the members and managers to one another. See Nawrot v. Daly, Superior Court, judicial district of Hartford, Docket No. CV 06-4026586 (March 13, 2007, Stengel, J.) (finding authority for both derivative and direct actions by members against members under the Connecticut Limited Liability Company Act); A Guide to Connecticut Limited Liability Companies, supra, § 7.14.5. Statutes allowing amendments to complaints are liberally construed. Crowell v. Middletown Savings Bank, supra, 122 Conn. 370. Considering the liberal standards for amending complaints, the son has made a sufficient showing to add the claim against his father at this stage. Thus, the Motion to Amend is granted.
Defendants' Motion to Dismiss raises the claim that this lawsuit should be dismissed because the Operating Agreement for Ladd Construction, LLC, dated November 2, 2001, has a provision for arbitration in the event of a disagreement between the members of the company. Defendants argue that the lawsuit should be dismissed due to their son's failure to seek arbitration, or, in the alternative, that this litigation should be stayed pending arbitration. The Motion is denied.
Under the allegations of the complaint and the uncontested submission of the parties in this case, the members of the subject LLC are the son and the father. Each has a fifty percent interest in the company, resulting in the mutual checkmate they now face. The parties, on formation of the company, anticipated this problem. Their solution was to name the plaintiff's mother as the arbitrator:
Arbitration of Deadlock. If any vote is required on any matter under this Agreement, and there are neither sufficient votes to approve or disapprove of the matter, then and in such event, the parties agree that JOANNE F. LADD shall be designated as an Arbitrator to resolve the deadlock, and her vote shall be a binding, final and concluding resolution of the deadlock.
Operating Agreement, Sec. 13.16
Ordinarily, it is entirely appropriate to stay litigation if any issue in the case is referable to arbitration. Indeed it is statutorily required. General Statutes § 52-409. The agreement to arbitrate "shall be valid, irrevocable and enforceable, except when there exists sufficient cause at law or in equity for the avoidance of written contracts generally." General Statues § 52-408 (emphasis added). Plaintiff argues that he should not be required to have this dispute resolved by his mother because she cannot be impartial. Considering the fact that the court has permitted her to be sued in this case, if she did not before, she now has a direct interest in the outcome of this matter. A less impartial arbitrator could hardly be imagined. Due process requires that individuals who serve as arbitrators be impartial. State Farm Mut. Auto. Ins. Co. v. Gautam, Superior Court, judicial district of Middlesex, Docket No. CV 07-4007110 S, (August 14, 2007, McWeeney, J.) [44 Conn. L. Rptr. 10] citing Rado v. Board of Education, 216 Conn. 541, 556, 583 A.2d 102 (1990). Indeed, lack of impartiality is grounds for vacating an arbitrator's decision. General Statutes § 52-418(a)(2); Cf. Alexson v. Foss, 276 Conn. 599, 617, 887 A.2d 872 (2002). Under the circumstances, the court will not require this matter be sent to arbitration before the plaintiff's mother.
General Statutes § 52-409 provides:
If any action for legal or equitable relief or other proceeding is brought by any party to a written agreement to arbitrate, the court in which the action or proceeding is pending, upon being satisfied that any issue involved in the action or proceeding is referable to arbitration under the agreement, shall, on motion of any party to the arbitration agreement, stay the action or proceeding until an arbitration has been had in compliance with the agreement, provided the person making application for the stay shall be ready and willing to proceed with the arbitration.
On another point in the Motion to Dismiss, defendants argue that at least the plaintiff's Second Count — for a judicial accounting pursuant to General Statutes § 34-144 — should be dismissed as moot because they represent that they have provided an accounting and all of the financial records for the company to the plaintiff already. However, plaintiff contends that the materials are incomplete. Due to the unresolved factual dispute, the lack of evidence necessary for resolution, and considering the burden on the movants to prove their point, the court cannot, at this stage of litigation, find for the defendants on this point.
Accordingly, the defendants' Motion to Dismiss must be denied.
Finally, defendants have filed a Motion to Strike against plaintiff's Revised Complaint of April 24, 2008. In particular, the motion addresses the First, Third, Fourth and Fifth Counts. The Sixth and Seventh Counts are not addressed because they had not yet been added at the time the Motion to Strike was filed, but the parties have requested a ruling on the points raised in the existing motion. The Second Count was addressed, supra, in the defendants' Motion to Dismiss.
"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." (Citations omitted; internal quotation marks omitted.) Fort Trumbull Conservancy, LLC v. Alves, 262 Conn. 480, 498, 815 A.2d 1188 (2003). "A motion to strike challenges the legal sufficiency of a pleading . . . and, consequently, requires no factual findings by the trial court." (Citations omitted; internal quotation marks omitted.) Greco v. United Technologies Corp., 277 Conn. 337, 347, 890 A.2d 1269 (2006). "A motion to strike admits all facts well pleaded; it does not admit legal conclusions or the truth or accuracy of opinions stated in the pleadings." (Emphasis in original; citation omitted; internal quotation marks omitted.) Faulkner v. United Technologies Corp., 240 Conn. 576, 588, 693 A.2d 293 (1997). "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." (Citations omitted; internal quotation marks omitted.) Asylum Hill Problem Solving Revitalization Ass'n v. King, 277 Conn. 238, 246, 890 A.2d 522 (2006).
The First Count is for judicial dissolution of the LLC pursuant to General Statutes § 34-207. The statute provides:
On application by or for a member, the superior court for the judicial district where the principal office of the limited liability company is located may order dissolution of a limited liability company whenever it is not reasonably practicable to carry on the business in conformity with the articles of organization or operating agreement.
General Statutes § 34-207
In his complaint, plaintiff alleges that the members of Ladd Construction, LLC consist of Christopher Ladd and his father, Chester Ladd, who each own 50 percent interest in the company. Rev. Complaint, First Count, para. 3. Since January 2004, Chester Ladd has wrongfully excluded the plaintiff from participation in the company and has failed and refused to compensate the plaintiff or otherwise permit him to obtain his proportionate share in the profits or value of the company. Rev. Complaint, First Count, para. 4. It is further alleged that the assets of Ladd Construction, LLC have been used to pay the personal expenses of Chester Ladd and others in violation of the Operating Agreement thereby depriving the plaintiff of his proportionate distribution. Rev. Complaint, First Count, para. 5. The plaintiff also alleges that the defendant, through Chester Ladd, has excluded the plaintiff from the premises where the defendant maintains operations and removed the plaintiff from the defendant's bank accounts and further refused to account to the plaintiff relative to the defendant's activities. Rev. Complaint, para. 6.
Defendants argue that those disputes do not effect the functioning of the company, or its ability to carry on business, because, under the Operating Agreement, the father is the sole manager and he alone is responsible for running the company. That may be a defense for resolution by the fact finder at trial, but it raises a factual issue not alleged in the complaint. At this stage, the court only tests the allegations of the complaint for legal sufficiency. If facts provable in the complaint would support a cause of action, the motion to strike must be denied. Faulkner v. United Technologies Corporation, supra, 240 Conn. 580. The allegations in the instant complaint describe a once shared business that is no longer being shared. That it may still be running does not detract from the claim that it is not running as it was expected to when it was created, and it may not be operated lawfully. The claim is expressed with legal sufficiency. It will be the burden of the plaintiff to prove the truth of that claim at trial. The Motion to Strike the First Count is denied.
The Third Count is for breach contract. As defendants point out, "[t]he elements of a breach of contract action are the formation of an agreement, performance by one party, breach of agreement by the other party and damages. (Internal quotation marks omitted; citation omitted.) Rosato v. Mascardo, 82 Conn.App. 396, 411, 844 A.2d 893 (2004); accord, 16 Conn. Practice Series, Connecticut Elements of an Action (2007-08 Ed.) § 4:1. Defendants argue that the plaintiff has failed to state a cause of action because he has failed to allege that he has performed, has failed to specify how his father breached the agreement, and he has failed to indicate what damages he has suffered. The court finds that the plaintiff has sufficiently pled that the defendant breached the agreement. The breaches are described in detail in Rev. Complaint, Third Count, paras. 4-6, 10 and 11. He alleges specifically how he has been damaged. See Rev. Complaint, Third Count, paras. 4-6. However, the court agrees that plaintiff has failed to allege that he has performed. Accordingly, the defendant's Motion to Strike the Third Count is granted for that reason only.
In the Fourth Count, plaintiff alleges unjust enrichment, claiming that his father appropriated business opportunities and assets belonging to Ladd Construction, LLC to himself and other businesses he owns or controls, all to the detriment of the plaintiff's right to receive his share of the profits of Ladd Construction, LLC. Rev. Complaint, Fourth Count, para. 14. Defendants argue that this count should be stricken because, essentially, it alleges that Chester Ladd wrongfully took things belonging to Ladd Construction, LLC, and they allege that plaintiff lacks standing to bring a cause of action in his individual capacity against Chester Ladd for alleged wrongful appropriation of company assets, citing General Statutes § 34-187 discussed supra. The objection, in other words, is that any such claim of misappropriation of Ladd Construction assets belongs to Ladd Construction, not plaintiff. However, as the court observed supra, if a member or manager of a limited liability company commits a tortious act while on company business, he may be personally liable to an injured party. General Statutes § 34-133(a); M. Pruner, A Guide to Connecticut Limited Liability Companies, § 184.108.40.206 (Conn. Law Tribune, 1995); see also § 7.14.4 citing Kilduff v. Adams, Inc., 219 Conn. 314, 593 A.2d 478 (1991). Liability extends to the obligations of the members and managers to one another. See Nawrot v. Daly, Superior Court, judicial district of Hartford, Docket No. CV 06-4026586 (March 13, 2007, Stengel, J.) (finding authority for both derivative and direct actions by members against members under the Connecticut Limited Liability Company Act); A Guide to Connecticut Limited Liability Companies, supra, § 7.14.5. Therefore, plaintiff has standing.
Nevertheless, to state a claim for unjust enrichment, a plaintiff must plead and prove (1) that the defendant was benefitted, (2) that the defendant unjustly did not pay the plaintiff for the benefits, and (3) that the failure of payment was to the plaintiff's detriment. Hartford Whalers Hockey Club v. Uniroyal Goodrich Tire Co., 231 Conn. 276, 283, 649 A.2d 518 (1994). This count contains those allegations. To whatever extent plaintiff may have a good objection to other parts of the count where harm is alleged to the LLC and not to the plaintiff, it is of no avail. "[A] Motion to Strike addressed to the entire count fails if it does not reach all of the causes pleaded." 1 Stephenson's Connecticut Civil Procedure (3rd Ed., 1997) § 72(1) citing Wachtel v. Rosol, 159 Conn. 496, 499, 271 A.2d 84 (1970). Therefore, the Motion to Strike the Fourth Count is denied.
The Fifth Count is a claim for tortious interference with business expectations. "[I]n order to recover for a claim of tortious interference with business expectancies, the claimant must plead and prove that: (1) a business relationship existed between the plaintiff and another party; (2) the defendant intentionally interfered with the business relationship while knowing of the relationship; and (3) as a result of the interference, the plaintiff suffered actual loss." (Citation omitted; internal quotation marks omitted.) Lawton v. Weiner, 91 Conn.App. 698, 706, 882 A.2d 151 (2005). It is "clear that not every act that disturbs a contract or business expectancy is actionable . . . [F]or a plaintiff successfully to prosecute such an action it must prove that the defendant's conduct was in fact tortious. This element may be satisfied by proof that the defendant was guilty of fraud, misrepresentation, intimidation or molestation . . . or that the defendant acted maliciously." (Citations omitted; internal quotation marks omitted.) Blake v. Levy, 191 Conn. 257, 260-61, 464 A.2d 52 (1983). "In the terminology of the Restatement [(Second) of Torts], the test is whether the actor's behavior is improper." (Internal quotation marks omitted.) Id., 261. "The plaintiff in a tortious interference claim must demonstrate malice on the part of the defendant, not in the sense of ill will, but intentional interference without justification." Daley v. Aetna Life Casualty Co., 249 Conn. 766, 805, 734 A.2d 112 (1999). (Quoting 4 Restatement (Second), Torts § 766, comment (s) (1979)).
On this point, defendants argue that plaintiff has failed to plead any facts relating to a business relationship between himself and any third party, that the father knew of that business relationship and intentionally interfered with that relationship or that the plaintiff suffered any actual damages. They also claim that there are no facts pled to establish improper motive or improper means employed by the father. The court agrees with the defendants on this point. Plaintiff's allegations on this point are as follows:
17. Since the plaintiff was excluded from Ladd Construction, LLC, he has attempted to work in the construction industry but has been prevented from performing certain work due to influence exerted by Chester Ladd to prevent others from working with the plaintiff all to the further loss and detriment of the plaintiff.
18. The refusal of Chester Ladd to provide the plaintiff with his share of the profits has prevented him from acquiring the vehicles and equipment necessary for the plaintiff to perform excavation or sewer work.
Rev. Complaint, Fifth Count, paras. 17 and 18.
These allegations fail to state a claim of intentional interference with any particular, existing business relationship; fail to indicate whether the father knew of it; and fail to provide any factual basis for permitting proof of malice. Thus, the Motion to Strike the Fifth Count is granted.
In sum, the Motion to Strike is granted with respect to the Third and Fifth Counts. It is denied as to the First and Fourth Counts.
For all of the foregoing reasons, the plaintiff's Motion to Join Party Defendant is granted; the plaintiff's Motion to Amend is granted; the Defendants' Motion to Dismiss is denied; as to the Defendants' Motion to Strike, it is granted as to the Third and Fifth Counts and denied as to the First and Fourth Counts of the Revised Complaint dated April 24, 2008.
CT Page 14983