No. 98 Civ. 8462 (AGS).
February 5, 2001.
OPINION AND ORDER
This action arises out of the purported wrongful termination by defendants of a contract in which they agreed to purchase from plaintiff a 21.6 acre tract of land at the Wallingford Plaza, a shopping center in Wallingford, Connecticut. The transaction was unsuccessful because the parties could not agree on the allocation of costs for stormwater management construction, which defendants claim was required to obtain the permits necessary to build a retail store on the premises. Currently before the Court are (i) defendants' motion for partial summary judgment as to certain of plaintiff's claims, (ii) defendants' motion to strike plaintiff's expert report, and (iii) plaintiff's cross-motion for leave to amend its expert report. For the reasons set forth below, defendants' motion for partial summary judgment is granted. Because the Court dismisses all of plaintiff's non-contract claims, and the parties have agreed to liquidate damages on its contract claim, the motions related to plaintiff's expert report are denied as moot.
I. Factual Background
A. The Parties, the Plaza, and the Agreement
Plaintiff Wallingford Shopping L.L.C. ("WSL") is a New York limited liability company organized for the sole purpose of owning and operating the Wallingford Plaza (the "Plaza"). (Def. 56.1 ¶ 3; Pl. 56.1 Resp. ¶ 3.) The Plaza is operated and managed for WSL by Philips International Holding Corporation, a managing agent which operates and manages approximately 40 such shopping centers. (Def. 56.1 ¶ 4; Pl. 56.1 Resp. ¶ 4.) The Plaza consists of a 13.89 acre site situated along Connecticut State Route 5, and includes five detached commercial structures: one large strip shopping center (formerly occupied by Shaw's Supermarket ("Shaw's"), Kmart, and other small retail tenants), one smaller satellite building, and three freestanding buildings which house a restaurant, a bank, and a vacant gasoline station. A small portion of the Plaza's leasable area is currently occupied, 27 percent as of September 1, 1999. (Def. 56.1 ¶ 10; Pl. 56.1 Resp. ¶ 10.) Adjacent to and upgradient from the Plaza is the Barnes Industrial Park. (WSL Mem. at 4; Lowe's Mem. at 3-4.) Since the 1970s, the Plaza has been plagued by severe flooding problems, caused by the unmanaged flow of water onto the premises from off-premises locations, in particular the Barnes Industrial Park. (Lowe's Mem. at 3-4; Memorandum from Jeffery Newman and Paul Josephson to the Town of Wallingford dated July 23, 1998 ("July 23, 1998 memorandum") at 1, Kolovos Aff. Tab 15.)
Previous to the negotiation of the Agreement at issue in this case, officials from the Town of Wallingford had written to WSL's predecessor, Wallingford Shopping Associates, notifying it that the Plaza was in violation of the Town's zoning requirements because of inadequate drainage on the premises. (Letters from Linda Bush to WSA dated June 21, 1993 and Sept. 8, 1993, Kolovos Aff. Tab 8; Bush Dep. at 76, Olinksky Aff. Tab 14.)
Defendants Lowe's Home Centers, Inc. and Lowe's Companies, Inc. (collectively, "Lowe's") are corporations organized under the laws of the State of North Carolina, both with their principal place of business in Wilkesboro, North Carolina. Lowe's operates "big box" retail home improvement centers, catering to "do it yourself" homeowners and commercial business customers. (Def. 56.1 ¶ 2; Pl. 56.1 Resp. ¶ 2.) On August 15, 1997, WSL and Lowe's entered into an Agreement to Sell and Purchase Real Estate (the "Agreement") in which Lowe's agreed to purchase from WSL the rear portion of the Plaza (8.48 acres), and certain adjacent property (13.08 acres) that WSL arranged to purchase from a third party, in order to construct and operate a Lowe's store. (Def. 56.1 ¶¶ 1, 11; Pl. 56.1 Resp. ¶¶ 1, 11.) The Agreement was negotiated by sophisticated commercial parties, represented by experienced counsel, between May 16, 1997 and the date of signing. (Def. 56.1 ¶ 28; Pl. 56.1 Resp. ¶ 28; Tr. 38-40.) WSL was to retain ownership of that portion of the Plaza and the adjacent property not to be purchased by Lowe's under the Agreement (the "Retained Land"), and was to redevelop the Retained Land for its own commercial purposes as a separate commercial enterprise. There was to be no sharing of profits or losses between Lowe's' and WSL arising out of the Agreement. (Def. 56.1 ¶ 12; Pl. 56.1 Resp. ¶ 12; Agreement ¶ 1(a).) As security for its obligation to perform under the Agreement, Lowe's paid $400,000, five percent of the $8.25 million purchase price, as a deposit to an escrowee. (Def. 56.1 ¶ 13; Pl. 56.1 Resp. ¶ 13; Agreement ¶¶ 1(a), 4.)
WSL was represented by Leonard Gold, and Lowe's by Andrew Cohn, both attorneys with significant experience in real estate. (Tr. 6; Levine Dep. at 150:15-151:8, 155:3-8, Kolovos Aff. Tab 5.)
Pursuant to Paragraph 8(a) of the Agreement, Lowe's was required, as a condition of its purchase, to obtain all governmental permits and approvals necessary for the development of the Lowe's store (the "Project Permits"), as well as a Building Permit. (Agreement ¶ 8(a).) Paragraph 3 of the Agreement required Lowe's to use "all reasonable efforts" to obtain the Project Permits and to keep WSL informed of Lowe's' progress thereto, and Paragraph 9(b) required Lowe's to proceed diligently in obtaining the Building Permit, and to prepare and file all relevant construction and architectural plans. (Agreement ¶¶ 3, 9.) In Paragraph 8(d), WSL agreed that it would obtain, at its sole cost and expense, the requisite governmental approvals necessary for the redevelopment of the Retained Land. (Id. ¶ 8(d).) That paragraph also provided that the parties would agree on a reciprocal easement and operating agreement (the "REA") governing parking and access rights and the expansion of buildings at the Plaza, which would be drafted by WSL at its sole cost and expense. (Id.) The parties further agreed that each would be "solely responsible for the maintenance and upkeep of their respective properties." (Id.) Paragraph 8(e) required that WSL tender title to the premises acceptable to Lowe's and "free and clear of all mortgages and tenancies." (Id. ¶ 8(e).)
Under Connecticut law, a new development on a given premises may not cause a net increase in the peak stormwater runoff from the premises compared to pre-development levels. (WSL Mem. at 4; Collins Dep. at 178:3-23, 179:9-18, Conf. Olinksy Decl. Tab I; Collins Dep. at 189:3-190:12, Olinksy Del. Tab 3B; Smith Dep. at 29-32, Olinsky Decl. Tab 10.) During the negotiation of the Agreement, the parties were apparently concerned about this so-called "no net increase" requirement, particularly in light of the historical flooding problems at the Plaza. The parties were also concerned about the increased traffic on Route 5 that would be the inevitable consequence of the further commercial development of the Plaza. Both the traffic and stormwater issues were addressed, while the Agreement was still being negotiated, at a meeting between officials from the Town of Wallingford (the "Town"), Lowe's, and Lowe's engineers on August 6, 1997. The participants discussed the traffic data collection that had occurred to that date; the Town also stated that stormwater detention was required as part of the Lowe's project. (Meeting Minutes, Kolovos Aff. Tab 10.)
Paragraph 8(c) of the Agreement provided for cost sharing for "off-premises" roadwork and stormwater management construction, if, inter alia, such construction was required as a condition precedent to obtaining the Project Permits. Specifically, for expenses up to and including $900,000, Lowe's would pay $250,000 and WSL would pay the remainder; for expenses greater than $900,000, Lowe's had the option to terminate the Agreement and receive a refund of its $400,000 deposit, plus interest, unless WSL elected to assume these excess expenses. (Agreement ¶ 8(c).) The parties agreed in the same paragraph that all "on-premises" stormwater management construction would be paid by Lowe's. (Id.) Thus, the terms of this paragraph provided for sharing of the costs required to bring the Plaza into compliance with government requirements, as well as an exit strategy for Lowe's if those costs were too high. It also reaffirmed Lowe's commitment to manage any possible drainage issues that resulted from construction of its own facility and use of the property.
Finally, pursuant to Paragraph 14(b) of the Agreement, the parties covenanted that WSL's "sole and exclusive remedy" in case of default by Lowe's under the Agreement was "payment of the Deposit and the survey and title commitment cost as full and complete liquidated damages." (Id. ¶ 14(b); Def. 56.1 ¶ 14; Pl. 56.1 Resp. ¶ 14.) Under this paragraph, WSL also "waive[d] and release[d] any right to (and hereby covenants that it shall not) sue [Lowe's]: (i) for specific performance of th[e] Agreement, or (ii) to recover actual damages in excess of [the liquidated damages amount]." (Id.)
B. Lowe's' Assessment and Disclosure of Projected Construction Costs
At an October 1997 meeting, Lowe's, its engineers, and the Town discussed at length Lowe's engineers' plan for stormwater detention. (Meeting Minutes, Kolovos Aff., Tab 11.) In early December 1997, Lowe's filed its site plan applications with local, state and federal agencies, which depicted, inter alia: a 159,161 square foot Lowe's store and an attached garden center, approximately 650 parking spaces; roadwork improvements to Route 5, the main highway bordering the Plaza; and a stormwater management system designed to manage the flow of water onto the Plaza from the upgradient Barnes Industrial Park. (Def. 56.1 ¶ 17; Pl. 56.1 Resp. ¶ 17.) The proposed stormwater management system contained a single, on-site detention pond, and although no cost figures were disclosed in the site plan application, such construction was estimated by its engineers to cost approximately $1.6 million. (Lowe's Mem. at 6-7; Engineering Project Summary, Kolovos Aff., Tab 17; Tr. 17.) After further meetings with the Town in mid-December 1997, Lowe's' engineers studied the possibility of an off-site detention mechanism with multiple ponds, and concluded that the total cost of this solution would be approximately $1.8 million. (Lowe's Mem. at 7; WSL Mem. at 6; Collins Dep. at 238:11-239:3, Olinsky Del. Tab 3B.) Lowe's engineers also came to the conclusion that the off-site detention plan was not practical. (Jan. 27, 1998 letter and report, Olinsky Decl., Tab 26; Collins Dep. at 142:22-143:24, Olinksy Decl. Tab 3A; Morey Dep. at 138:10-139:10; Tr. 18-19, Olinksy Decl. Tab 7.)
The $1.6 million cost estimate was made as early as November 1997. (Letter from William G. Hoffman to Rusty Collins dated Nov. 12, 1997, Olinsky Decl. Tab 21.)
Further, in the mid-December meeting, and in further meetings with the Town in January 1998 and March 1998, Lowe's requested that the Town assume some portion of the stormwater management costs that were required for the project. Such requests were declined. (Lowe's Mem. at 7; Collins Dep. at 133:13-20, 219:21-223:2, 233:1-13, 238:11-239:17, Olinksy Decl. Tabs 3A, 3B; Tr. 13-14.) In addition, Lowe's kept all of its permitting activity and research studies confidential, even from WSL; this decision, according to Lowe's, was "due to the extremely competitive retail environment in which Lowe's operates." (Lowe's Mem. at 6-7; Collins Dep. at 221:15-230:5, Olinksy Decl. Tab 3B; Tr. 19.)
According to WSL, Lowe's overtures were made to the Town because Lowe's' Wallingford project was substantially over the budget allocated to the project managers by Lowe's Real Estate Committee ("REC"). (WSL Mem. at 7.) A Lowe's representative testified at his deposition that Lowe's went to the Town to solicit its financial assistance regarding stormwater costs, and that Lowe's wanted to reduce stormwater costs because "it would be an issue" with WSL. (Collins Dep. at 137:8-17, 215:22-24, Olinksy Aff. Tabs 3A, 3B.)
WSL asserts that, in December 1997 and January 1998, Lowe's discussed the costs of off-premises roadwork with WSL, which was to be performed on the Route 5 in front of the Plaza; but "Lowe's had never shared the stormwater construction costs with WSL, and gave no warning of the extraordinary stormwater cost claim that it would soon seek to foist upon WSL." (WSL Mem. at 8.)
By letter dated March 12, 1998, Lowe's notified WSL that Lowe's was assessing the "very substantial" costs of off-premises roadwork and off-premises stormwater management that was required in connection with the construction of the Lowe's store, and that Lowe's would provide more detailed cost information shortly thereafter so that WSL could determine whether it would assume additional costs under Paragraph 8(c) of the Agreement. (Letter from Andrew H. Cohn to Hugh I. Manke dated March 12, 1998 (the "March 12 Letter"); Def. 56.1 ¶ 37.) On April 2, 1998, an internal Lowe's memorandum, which was not distributed to WSL, reaffirmed the $1.6 million estimate for the production of Lowe's proposed single-pond detention system. (Fax from Bob Bruce to Andrew Cohn dated Apr. 2, 1998, Olinsky Aff. Tab 29; WSL Mem. at 9.) Four days later, on April 6, 1998, WSL representatives attended a public hearing held by the Town's Planning and Zoning Commission, at which Lowe's outlined this detention proposal, without disclosing its costs. (Meeting Minutes, Olinsky Decl. Tab 30; WSL Mem. at 9; Kugelman Dep. at 201:20-202:24, Kolovos Aff. Tab 6.) On April 8, 1998, representatives of WSL and Lowe's met in New Jersey concerning an unrelated business deal. According to WSL, when the conversation shifted to Wallingford, Lowe's suggested the prompt termination of Shaw's lease, because a dispute between Lowe's and Shaw's related to another premises threatened the progress of Lowe's Wallingford project. (WSL Mem. at 9-10; Gold Dep. at 496:16-498:9, Kolovos Aff. Tab 3B.) Two days later, on April 10, 1998, WSL terminated Shaw's lease.
Gold, who negotiated the Agreement for WSL and served as its corporate counsel, did not receive this letter until June 15, 1998, after Lowe's termination of the Agreement. (Def. 56.1 ¶ 37; Gold Dep. at 189:17-190:14, Kolovos Aff. Tab 3C; Tr. 50-51.)
WSL's negotiations with Shaw's concerning the termination of its lease began at Shaw's request in September 1997, and ended with Shaw's executing an agreement in March 1998 that provided for termination to take effect in October 1998. (WSL Mem. at 10; Gold Dep. Ex. 27, Kolovos Aff. Tab 3B.) However, WSL had delayed signing in order "to assure that Lowe's would proceed with its plans." (WSL Mem. at 10; Gold Dep. at 469:10-17, Kolovos Aft Tab 3B.)
By letter dated April 21, 1998, Lowe's finally wrote to WSL with its estimated construction costs for off-premises roadwork and off-premises stormwater management, which Lowe's stated were required by the Town. In particular, Lowe's stated that: (i) off-premises roadwork would cost $1,013,000; and (ii) referring to the off-site proposal, off-premises stormwater management construction would cost $1,811,539, comprising $158,133 for the reconstruction of an existing detention pond; and the construction of three additional ponds at a cost of $326,198, $353,798, and $197,222, respectively. (Letter from Andrew H. Cohn to Len Gold dated Apr. 21, 1998 ("April 21, 1998 letter"), Olinsky Decl. Tab 31.) The letter also stated than an alternative "on-site" system, designed to "handle off-Premises stormwater," (i.e. Lowe's original proposal) was also being considered by the Town and was now estimated to cost $1,542,728. (Id.) Because the estimates for the cost of off-premises roadwork and stormwater management construction exceeded $900,000, Lowe's inquired, pursuant to Paragraph 8(c) of the Agreement, as to whether WSL would elect to assume the costs in excess of $900,000. (Id.) In a follow-up letter to WSL dated April 24, 1998, Lowe's highlighted its view of the meaning of the "off-premises" term in response to WSL's questions, stating that "the town is requiring management of off-Premises stormwater. None of the stormwater that is going into these additional detention systems is on-Premises stormwater." (Letter from Andrew H. Cohn to Len Gold dated Apr. 24, 1998 (the "April 24 letter"), Olinsky Decl. Tab 32.) Lowe's then stated that it was "electing to meet the Town's requirement for off-Premises stormwater management" by adopting the $1.8 million off-site construction proposal, and requested an answer by WSL as to how it wished to proceed within 10 business days, pursuant to Paragraph 8(c). (Id.) (emphasis added).
Emphasizing the distinction, in Lowe's view, between on-and off-premises stormwater management construction implicated by the Agreement, the letter also noted that, regardless of which pond system was selected for management of off-premises stormwater, Lowe's would still pay for the construction of an on-site pond system for on-Premises stormwater that would cost $576,288. (April 21, 1998 letter.)
Lowe's counsel suggested at oral argument that such an election was made by Lowe's attorney Cohn in frustration, derived from the parties' disagreement over the meaning of the term "off-premises." In particular, counsel suggested that the election was made because WSL had refused to pay for any on-site construction designed to detain off-premises stormwater. Lowe's counsel stated: "Cohn then says: If you won't pay for an on-premises system, we will build it off premises, because according to your [i.e. WSL's] reading of the contract, you say you are obliged to pay for that because it is not physically on premises." (Tr. 25.)
The April 24, 1998 letter highlighted an ambiguity which is at the heart of the dispute between the parties concerning Lowe's alleged misrepresentations, that is, whether the adjective "off-premises" in Paragraph 8(c) refers to the origin of the stormwater or the location of the construction. Specifically, while Lowe's asserts that any construction related to stormwater originating off-premises is covered by the parties' cost-sharing arrangement, WSL is of the belief that any construction on the premises would be excluded from such arrangement, regardless of where the water originates. (April 24, 1998 letter; WSL Mem. at 8-9.) For WSL, "under Paragraph 8(c), the critical issue was the location of the `roadwork' or `construction': If performed `on-Premises,' the expense was Lowe's; if performed `off-Premises,' the expense was WSL's after the initial $250,000." (WSL Mem. at 8.)
At oral argument, counsel for WSL stated that, in WSL's view, the stormwater management construction was directly linked to the roadwork construction. Specifically, counsel stated that the negotiating parties' view was that "in conjunction with the [$900,000 of roadwork construction], it was reasonable to assume that there would also be some kind of storm water management construction involved because there are culverts that go under those roads." (Tr. 31.) Counsel also stated that WSL views the phrase "off-premises stormwater management construction" to mean "build[ing] storm management facilities on someone [else]'s private property." (Tr. 33.)
WSL subsequently advised Lowe's, by letters dated May 4, 1998, May 21, 1998 and June 1, 1998, that it would not assume expenses in excess of $900,000, because it was not responsible for such costs under Paragraph 8(c). In particular, WSL asserted that it would not pay for any construction on-premises, "regardless of how much water flowing from other property may be managed" by such construction, and that Lowe's had not been required by any permitting authorities to construct a stormwater management system off-premises as a condition precedent to receipt of permit approvals. (Letters dated May 4, 1998, May 21, 1998, and June 1, 1998, Kolovos Aff. Tab 3C, Exs. 51, 53, 57; Def. 56.1 ¶ 39; Pl. 56.1 Resp. ¶ 39; Compl. ¶ 68.) WSL further stated that "it is Lowe's sole obligation to assume all of the costs of stormwater management." (Letter dated June 1, 1998, Kolovos Aff. Tab 3C, Ex. 57.)
In its May 15, 1998 letter, WSL also stated that it would require more information concerning the cost estimates from Lowe's engineers and the meetings between Lowe's representatives and public officials, before it would further consider whether it had an obligation to pay for any water management construction. (Letter dated May 15, 1998, Kolovos Aff., Tab 3C, Ex. 53.)
As the above events were unfolding, WSL was in the process of terminating the leases of then-existing tenants, and relocating others. For example, Nishi's Dollar Store was informed of the termination of its lease on March 19, 1998, Petland on April 3, 1998, Shaw's Supermarkets on April 10, 1998, Shell Oil on May 12, 1998, and A S Travel was relocated elsewhere in the Plaza. (Def. 56.1 ¶¶ 21-24; Pl. 56.1 Resp. ¶¶ 21-24; Compl. ¶ 43.) Also, on or about May 5, 1998, WSL filed its own application with the Town Planning and Zoning Commission for the redevelopment of a portion of the Retained Land. (Def. 56.1 ¶ 18; Pl. 56.1 Resp. ¶ 18.)
As described in the June 1, 1998 minutes of a hearing before the Wallingford Planning and Zoning Commission during which WSL's redevelopment initiative was considered, the proposed site plan depicted, inter alia 6,000 square foot expansion to the satellite building, an expansion to the freestanding bank, and the conversion of the vacant gasoline station to a freestanding restaurant. (Def. 56.1 ¶ 18; Pl. 56.1 Resp. ¶ 18.)
By letter to WSL and the escrowee dated June 11, 1998, Lowe's invoked Paragraph 8(c) to terminate the Agreement based on WSL's June 1, 1998 letter, and requested that the escrowee return the $400,000 deposit to Lowe's. (Def. 56.1 ¶ 41; Pl. 56.1 Resp. ¶ 41.) By letter to Lowe's and the escrowee dated June 12, 1998, WSL disputed Lowe's' right to terminate the Agreement or receive the deposit funds, declared Lowe's in default of the Agreement, and demanded that the escrowee instead deliver the $400,000 deposit to WSL. (Letter dated June 12, 1998, Kolovos Aff., Tab 3C, Ex. 49; Compl. ¶ 70.) This action was commenced after settlement discussions failed. (Def. 56.1 ¶ 42; Pl. 56.1 Resp. ¶¶ 42.)
WSL, by memorandum to the Town dated July 23, 1998, requested that the Town require the owner of the Barnes Industrial Park to bear the costs of the necessary stormwater management construction. (July 23, 1998 memorandum at 3-4, 12-13.)
C. Instant Action
WSL filed the instant diversity action on December 1, 1998, alleging six claims under Connecticut law for: breach of contract, breach of fiduciary duty, common law fraud, tortious interference with contract and with prospective economic advantage, and a violation of the Connecticut Unfair Trade Practices Act ("CUTPA"), Conn. Gen. Stat. § 42-110 et seq. WSL alleges that Lowe's: (i) failed to use reasonable efforts to obtain the permits required for its store; (ii) failed to keep WSL abreast of its progress in obtaining the required permits and details concerning the Town's stormwater management requirements; (iii) induced WSL to terminate and/or relocate existing tenants in anticipation of the closing of the deal for the Lowe's store, in particular the anchor tenant Shaw's; and (iv) terminated the Agreement without justification and on "pretextual" terms, by claiming that the Town required "off-premises" stormwater construction when an "on-premises" option was available at lower cost. (Compl. ¶¶ 4, 26, 83-129.) WSL asserts that the Town's permitting authorities did not require the more costly off-premises option, and Lowe's' "election" of such option was merely a pretext to shift costs to WSL. (Id. ¶¶ 71-75.) WSL alleges compensatory damages based on lost rents, tenant relocation costs, and diminished property value. It also seeks punitive damages and the $400,000 deposit. Lowe's Amended Answer and Counterclaims asserts that WSL breached its covenant not to sue Lowe's and violated CUTPA, and in addition to damages, seeks a declaratory judgment that Lowe's properly terminated the Agreement under Paragraph 8(c). (First Amend. Answer and Counterclaims ¶¶ 17-47.)
On its motion for partial summary judgment, Lowe's does not directly contest the facts or law that WSL asserts in support of its breach of contract claim, viewing the particulars of that claim as an issue for the trier of fact. (Lowe's Rep. at 2.) Instead, Lowe's contends that (i) WSL's potential recovery on its breach of contract claim should be limited to $400,000, pursuant to the liquidated damages provision contained in Paragraph 14(b) of the Agreement, and (ii) WSL's five non-contractual claims should be dismissed in full, because (a) these claims are based on the same facts as the contract claim, and thereby constitute "a transparent attempt to circumvent the agreed-upon liquidated damages amount and separate covenant not to sue," and (b) in any event, WSL cannot satisfy the elements of any of the claims. (Lowe's Mem. at 1.) The Court held oral argument on Lowe's motion for partial summary judgment on June 26, 2000.
Despite the fact that WSL has set forth legal arguments in its response to Lowe's 56.1 statement, and failed to provide citations for the record for some of its assertions, the Court denies Lowe's motion to strike these portions of WSL's response. (Lowe's Rep. at 14-15.)
The parties both agree that the Agreement, as well as the torts arising out of such Agreement, are governed by Connecticut law. A district court may grant summary judgment only if it is satisfied that "there is no genuine issue as to any material fact and . . . the moving party is entitled to a judgment as a matter of law." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The burden rests on the moving party to demonstrate the absence of a genuine issue of material fact, which may be satisfied if it can point to the absence of evidence necessary to support an essential element of the non-moving party's claim. See Goenaga v. March of Dimes Birth Defects Found., 51 F.3d 14, 18 (2d Cir. 1995); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). All inferences and ambiguities are resolved in favor of the party against whom summary judgment is sought. See Gallo v. Prudential Residential Servs., Ltd. Partnership, 22 F.3d 1219, 1223 (2d Cir. 1994) (citations omitted).
Lowe's assert in its moving papers that Connecticut law governs, and both parties rely solely on Connecticut state cases and statutes to support their respective positions. (Lowe's Mem. at 10-11.) Accordingly, the parties, by implication, agree that there is no dispute on the choice-of-law question. See. e.g., Crouch v. Nat'l Ass'n for Stock Car Auto Racing, Inc., 845 F.2d 397, 398 n. 1 (2d Cir. 1988); Keywell Corp. v. Piper Marbury LLP, No. 96 Civ. 0660E, 1999 WL 66700, at *4 n. 7 (W.D.N.Y. Feb. 11, 1999); Travelers Indemnity Co. v. AMR Services Corp., 921 F. Supp. 176, 178 (S.D.N.Y. 1998). Moreover, the place of performance, the location of the contract's subject matter (i.e. the Plaza), and the public policy interests of Connecticut all favor applying Connecticut law, according to New York's choice of law principles. See Lee v. Bankers Trust Co, 166 F.3d 540, 545 (2d Cir. 1999).
If the moving party meets its burden, the opposing party must produce evidentiary proof in admissible form sufficient to raise a material question of fact to defeat the motion for summary judgment, or in the alternative, demonstrate an acceptable excuse for its failure to meet this requirement. See Kolp v. New York State Office of Mental Health, 15 F. Supp.2d 323, 326 (W.D.N.Y. 1998). When reasonable minds could not differ as to the import of the proffered evidence, then summary judgment is proper. See Anderson, supra, 477 U.S. at 250-52; Bryant v. Maffucci, 923 F.2d 979, 982 (2d Cir. 1991). Moreover, "conclusory allegations, speculation or conjecture will not avail a party resisting summary judgment." Cifarelli v. Village of Babylon, 93 F.3d 47, 51 (2d Cir. 1996).
B. WSL's Contract Claim
WSL's first, and principal, claim is for breach of contract arising out of Lowe's' termination of the Agreement. WSL claims that Lowe's breached: (i) Paragraph 3 of the Agreement by failing to use all reasonable efforts to obtain the Project Permits and by failing to keep WSL informed of its progress in obtaining the Permits; (ii) Paragraph 8(c) by wrongfully imposing costs on WSL that were not permitted under that paragraph; (iii) Paragraph 9 by failing to proceed diligently to obtain the Building Permit; and (iv) implied obligations of good faith and fair dealing by terminating the Agreement without proper cause and failing to accurately, fully, and timely disclose information concerning the permits and Lowe's stormwater management construction cost estimates. (Compl. ¶ 82.)
On its motion for partial summary judgment, Lowe's seeks to limit the damages recoverable by WSL on the contract and other claims by relying on the limitation of remedies contained in Paragraph 14(b) of the Agreement. This paragraph states as follows:
14(b). Buyer's Default. Seller shall be entitled, as its sole and exclusive remedy hereunder, to payment of the Deposit and the survey and title commitment cost as full and complete liquidated damages for such default of Buyer, the parties hereto acknowledging that it is impossible to estimate more precisely the damages which might be suffered by Seller upon Buyer's default. Seller's receipt of the Deposit is intended not as a penalty, but as full liquidated damages. The right to retain such sums as full liquidated damages is Seller's sole and exclusive remedy in the event of default hereunder by Buyer, and Seller hereby waives and releases any right to (and hereby covenants that it shall not) sue Buyer: (i) for specific performance of this Agreement, or (ii) to recover actual damages in excess of such sums.
The Court's determination of the applicability of this Paragraph to the instant case depends upon the relative enforceability and scope of the liquidated damages provision and related covenant not to sue contained therein, to which the Court now turns.
1. The Liquidated Damages Provision is Enforceable
The liquidated damages provision of Paragraph 14(b), according to Lowe's, bars any recovery by WSL for any amount greater than $400,000, and thereby eliminates the need to calculate compensatory damages arising out of its alleged default. WSL contends that the provision is not enforceable, thus entitling it to recover damages greater than $400,000 on its breach of contract claim, and implicitly, to freely pursue its other causes of action against Lowe's.
The Court finds that the provision is enforceable under Connecticut law. Three conditions must be met in order to uphold a contractual provision for liquidated damages: (i) the damages which were to be expected as a result of a breach of contract were uncertain in amount or difficult to prove at the time of contracting; (ii) the parties intended to liquidate damages in advance; and (iii) the amount stipulated is reasonable, and not greatly disproportionate to the amount of damages which the parties assumed at the time of contracting would be sustained in the event of a breach. See Hanson Dev. Co. v. East Great Plains Shopping Center Inc., 485 A.2d 1296, 1300 (Conn. 1985); Wyer v. Sonitrol Sec. Sys. of Hartford Inc., 738 A.2d 1179, 1182-83 (Conn.Sup. 1999) (citing New York Life Ins. Co. v. Hartford Nat'l Bank Trust Co., 477 A.2d 1033 (Conn.App. 1984)). In this case, the liquidated damages provision in Paragraph 14(b) meets all three conditions. First, the actual damages were uncertain at the time of contracting, and both parties explicitly acknowledged this difficulty in drafting the Agreement. (Agreement ¶ 14(b).) Second, the parties clearly and unambiguously intended to liquidate damages in advance, as there is an express contractual provision so indicating. See New York Life, supra, 477 A.2d at 1035 (stating that a court should not interfere when the language of the contract itself indicates that "the parties intended to fix for themselves, without judicial intervention, a sum acceptable to both which would prevail as damages in the event of a breach of contract"). Moreover, the fact that the Agreement was negotiated by sophisticated counsel supports the mutuality of the parties' agreement on liquidated damages. See Hanson, supra, 485 A.2d at 1300. Third, the $400,000 amount was a reasonable estimate of potential damages and not disproportionate to the amount of damages which the parties assumed at the time of their contract would be sustained if the contract were breached. The parties both agreed on the $400,000 provision in advance, and Lowe's was required to pay a $400,000 down payment to the escrowee as security in that pre-determined amount. The deposition testimony of WSL's corporate counsel also indicates that WSL was aware, at the time of contracting, of the type of damages that might result from Lowe's breach, including the cost of tenant relocations and lost rents. (Gold Dep. at 161-62, Kolovos Aff., Tab 3C; Gold Dep. at 678:2-16, Olinksy Decl. Tab 5.)
WSL asserts that Paragraph 14(b), and in particular the liquidated damages provision, is unenforceable because the first and the third conditions of the test are not satisfied. In particular, WSL states that its damages "are not difficult to prove and are greatly disproportionate to the harm" (i.e. actual damages) caused by Lowe's' conduct. (WSL Mem. at 14-15.) However, WSL bases its argument on its current damage estimate, while the inquiry for the purposes of enforceability treats the capacity and judgment of the parties at the time the Agreement was negotiated. The liquidated damages provision itself states that "it is impossible to estimate" the damages more precisely. Moreover, the dispute between the parties concerning WSL's expectation damages, in particular that concerning the "diminished value" of the Plaza, supports the difficulty, even now, of estimating damages. (Lowe's Rep. at 3-4; WSL Mem. Exp. at 4-10; Lowe's Rep. Exp. at 2.) Thus, WSL's arguments, while potentially relevant for the calculation of damages, are unavailing for the purposes of the enforceability of the liquidated damages provision.
WSL refers to Wyer, supra, 738 A.2d at 1183, and Mattegat v. Klopfenstein, 717 A.2d 276, 280 (Conn App. 1999) in contending that its actual damages should be used in assessing disproportionality under the third condition. (WSL Mem. at 14.) However, the legal standard that each case cites reflects the "reasonable expectation" standard enunciated by Lowe's, and by the Connecticut Supreme Court in Hanson, supra. In addition, in both of the cases cited by WSL, the actual damages were wholly, and obviously, disproportionate, which likely led the courts to believe that there was no meeting of the minds at the time of contracting. See Wyer, supra, 738 A.2d at 1183 (finding alleged liquidated damages amount of $198.44 to be "greatly disproportionate" to the actual damages of $6,800); Mattegat, supra. 717 A.2d at 280 (finding that "[t]he inspection fee of $225 falls so far short of the [$19,865 in] damages claimed by the plaintiffs and of the trial court's award of reasonably foreseeable damages that the unreasonableness of the `stipulated' amount is apparent").
The method of estimating the "diminished value" of the property for the purpose of WSL's claimed expectation damages is the subject of Lowe's' motion to strike, discussed infra.
WSL's unsupported reference to a figure of $3.27 million as its actual damages is inadequate to prove disproportionality. (WSL Mem. at 14-15.)
2. The Covenant Not to Sue Is Enforceable and Applies to WSL's Contract Claim
Having found that the liquidated damages provision is enforceable, the Court now turns to the scope of that provision, which is dependent upon the interpretation and enforceability of the covenant not to sue. Under Paragraph 14(b), see supra, WSL specifically covenanted not to sue Lowe's for specific performance of the Agreement, or any actual damages exceeding the liquidated damages amount. (Agreement ¶ 14(b).)
Noting that Connecticut law on the subject is sparse, Lowe's asserts that the covenant is clearly enforceable. Drawing on New York contract law, Lowe's claims that the covenant is valid because (i) the provision is clear and unambiguous, and (ii) the negotiating parties, as well as their real estate counsel, were sophisticated and experienced. (Lowe's Mem. at 14-15.) WSL summarily dismisses Lowe's' arguments on enforceability because they are not based on Connecticut law, and objects to Lowe's broad reading of the covenant's scope. (WSL Mem. at 17 n. 7.)
The Court notes that WSL's submissions contain no substantive arguments contesting the enforceability of the covenant not to sue, only conclusory assertions. The Court finds that the plain meaning of the covenant itself, as well as the liquidated damages provision, are clear and unambiguous, and not in dispute. Moreover, the covenant was negotiated in a commercial context, by experienced parties in equivalent bargaining positions, who were represented by experienced counsel. Therefore, based on traditional contract principles, including the goal of reaching for "fair and reasonable results" in accordance with the intentions of the parties, the Court finds that the covenant is enforceable. Bank of New York v. Amoco Oil Co., 35 F.3d 643, 662 (2d Cir. 1994) (applying New York law); cf. Soc. for the Advancement of Educ., Inc. v. Gannett Co., Inc., No. 98 Civ. 2135, 1999 WL 33023, at *5 (S.D.N.Y. Jan. 21, 1999) (finding that, under New York law, "releases and covenants not to sue — if otherwise validly entered into — are enforceable according to their terms").
WSL states that Paragraph 14(b) was not "specifically negotiated." (WSL Mem. at 14 n. 4.) However, this contention is unavailing (i) in light of WSL's acknowledgment that the Agreement as a whole was negotiated by sophisticated counsel, and (ii) because the deposition testimony it cites for this proposition does not establish that the provision was not specifically negotiated.
As to scope, the parties disagree as to whether the covenant not to sue limits WSL's ability to sue on both its contract and non-contract claims, or merely its contract claim, for the liquidated damages amount. Read in isolation, the scope of the covenant appears broad, as WSL agreed not to sue buyer inter alia, "to recover actual damages in excess of [the liquidated damages amount]." Under a broad reading, the covenant could apply to any conduct relating to the Agreement. However, read in the context of the entire paragraph and the Agreement as a whole, the Court finds that the covenant applies only to damages arising directly from Lowe's default under the Agreement.
Under Connecticut law, "parties to a contract may agree on the remedies available in the event of a breach of contract. If the language of the agreement discloses that the parties intended to limit the remedies to those stated, the agreement will be enforced and the party will be limited to the exclusive remedies outlined in the agreement." Shawmut Bank of Conn. v. Conn. Limousine Serv. Inc., 670 A.2d 880, 885 (Conn.App. 1996) (citations omitted). However, Connecticut law only allows limitations on remedial rights where that limitation is clearly expressed. See id. Moreover, in interpreting a contract, the Court must employ a fair and reasonable construction of the written words, based on their common meaning and usage, and may not add terms to a contract by interpretation. See Gaynor Elec. Co. v. Hollander, 618 A.2d 532, 535-36 (Conn. 1993); Conn. Union of Tel. Workers v. SNET, 169 A.2d 646, 650-51 (Conn. 1961). This Court also takes notice of the rule of construction that, "where contracts are negotiated by counsel for sophisticated commercial parties, courts should interpret ambiguous language to realize the reasonable expectations of the ordinary businessperson." Bank of New York, supra, 35 F.3d at 662.
On its face, Paragraph 14(b) does not clearly limit WSL's ability to sue on the basis of conduct beyond Lowe's default under the Agreement. In fact, the construction of the Paragraph indicates that the parties intended to restrict the limitation to the Agreement alone. Paragraph 14(b) is labeled the "Buyer's Default" clause, which suggests its applicability should be confined to Lowe's failure to perform its obligations under the Agreement. Moreover, the liquidated damages provision states that the "right to retain [the $400,000 deposit] as liquidated damages is Seller's sole and exclusive remedy in the event of [buyer's] default hereunder," that is, Lowe's failure to satisfy its obligations under the Agreement. The covenant not to sue is linked to the liquidated damages amount, as WSL waived the right to recover actual damages in excess of the deposit. Moreover, the covenant's prohibition of suit for specific performance applies solely to "this Agreement." It would be contrary to the clear meaning of the paragraph to read the covenant's prohibition of suits for damages as broader than the scope of the liquidated damages provision to which it is linked and the covenants' own prohibition on suits for specific performance. Accordingly, damages based on alleged conduct beyond Lowe's alleged default, even if such conduct occurred while Lowe's purported to act under the terms of the Agreement, are not encompassed by either the liquidated damages provision or the covenant not to sue.
The Court therefore grants Lowe's motion for partial summary judgment as to the enforceability of the liquidated damages provision and covenant not to sue, and finds that WSL's potential recovery on its breach of contract claim is limited to $400,000. However, Lowe's motion is denied to the extent it requests dismissal of WSL's non-contract claims as encompassed by the liquidated damages provision and covenant not to sue.
C. WSL's Non-Contract Claims
Lowe's contends that WSL's non-contract claims should be dismissed because these claims are based on the same facts as the contract claim, and therefore are encompassed by Paragraph 14(b)'s covenant not to sue. In the alternative, Lowe's claims that these claims should be dismissed for failure to establish the necessary elements of these claims.
1. Breach of Fiduciary Duty
WSL claims that Lowe's breached its fiduciary duty to WSL by failing to advise WSL in a timely manner of the full extent of the costs of the stormwater management construction system, and by electing to pursue a more expensive construction option than was required by the Town. (Compl. ¶ 85). The Complaint specifically alleges the existence of a "fiduciary or confidential relationship between Lowe's and WSL as co-venturers in the redevelopment of the Wallingford Plaza." (Id. ¶ 84.)
In order to establish a breach of fiduciary duty under Connecticut law, a plaintiff must establish that the defendant assumed the duties of a fiduciary with regard to the contract at issue and that it breached the obligations of a fiduciary. See Place v. City of Waterbury, No. CV 960131435S, 2000 WL 765229, at *5 (Conn.Super. June 1, 2000). A fiduciary duty arises not from a simple duty of care, but from a duty of loyalty to the party claiming the fiduciary relationship. See Beverly Hills Concepts, Inc. v. Schatz Schatz, Ribicoff Kotkin, 717 A.2d 724, 730 (Conn. 1998). "[A] fiduciary or confidential relationship is characterized by a unique degree of trust and confidence between the parties, one of whom has superior knowledge, skill or expertise and is under a duty to represent the interests of the other." Konover Dev. Corp. v. Zeller, 635 A.2d 798, 805 (Conn. 1994). A joint venture relationship is often indicative of a fiduciary relationship; as in a partnership, joint venturers undertake fiduciary duties to each other concerning matters within a combined business enterprise. See John Doe v. Yale Univ., 748 A.2d 834, 854 (Conn. 2000). A joint venture cannot exist unless the parties so intend. See Elec. Assocs, Inc. v. Automated Equipment Dev. Corp., 440 A.2d 249, 251 (Conn. 1981).
In this case, WSL has failed to establish the existence of a fiduciary or confidential relationship that would indicate that the parties are indeed, as WSL alleges, "co-venturers." On its face, the Agreement does not mention the terms "joint venture," or "co-venturer," or any similar term in characterizing the nature of the bargain between the parties. Further, the Agreement states that it is the "entire agreement" between the parties, and its integration clause suggests that the parties intended not to create any legal duties or relationships other than as set forth in the Agreement. (Agreement ¶ 27.) Finally, neither the terms of the Agreement nor the dealings between the parties provide the Court with any reason to infer the relationship of trust indicative of a fiduciary relationship. Rather, no more than simple contractual duties are implicated by the Agreement.
WSL contends that a fiduciary relationship is inferrable from Lowe's' obligation, pursuant to Paragraph 3 of the Agreement, to obtain permits for its proposed development of the Premises and to keep WSL informed of its progress in obtaining such permits. (Agreement ¶ 3.) By "controlling the permitting process," Lowe's "put itself in a position of natural superiority." (WSL Mem. at 24.) WSL insists that it "had no choice but to repose its trust in Lowe's, since Lowe's insisted on keeping its permitting activities confidential and refused or delayed its response to many of WSL's requests for information about Lowe's' progress and details of its plans." (Id.) Moreover, WSL claims that the permitting processes for its land and Lowe's land were conducted together, and that ultimately the two premises would be "joined at the hip, functioning as an integrated property." (Id.. at 25.)
These arguments are unavailing. First, there is nothing in the record to indicate that Lowe's controlled the permitting process; although it did agree to obtain the necessary permits for its own development of the Plaza, this is a reasonable business practice not indicative of any duty of loyalty to WSL. Second, the record does not reflect that Lowe's had any control over the permitting process for WSL's redevelopment plans; in fact, WSL filed its own papers with respect to such permits. (Agreement ¶ 8(d); WSL Mem. at 24; Lowe's Rep. at 7.) As Lowe's points out, the parties' respective portions of the parcel were subject to separate permitting processes and each was to be managed separately, not, as WSL suggests, as part of a integrated enterprise. The Agreement, moreover, did not involve the sharing of profits or losses. Third, while the information asymmetry resulting from Lowe's purported failure to communicate certain information to WSL concerning its permitting processes may have constituted a breach of contract, such failure did not create the dependency required for the establishment of a fiduciary relationship.
Because WSL has failed to establish the existence of a fiduciary relationship, its claim for breach of fiduciary duty is dismissed. In alleging such a breach, WSL has merely restated its breach of contract claim in another form.
2. Common Law Fraud
WSL's fraud claim is based on (i) Lowe's alleged failure to timely disclose its stormwater management construction cost estimates, and (ii) Lowe's alleged misrepresentation that the Town required the construction of an off-premises stormwater management system, in particular the $1.8 million option, as a condition precedent to the approval of permits. (Compl. ¶¶ 91, 95; WSL Mem. at 20-21.) WSL states that, as a result of Lowe's misrepresentations and omissions, it was "tricked into terminating and relocating tenants" thereby causing it to suffer damages. (WSL Mem. at 20.) Specifically, WSL states that it terminated Shaw's lease and other leases with then-existing tenants, relocated another tenant, refrained from negotiating a new lease with a further tenant, and refrained from leasing then-vacant portions of the Plaza, leading to the loss of rents, tax contributions and common area maintenance charges, increased legal and engineering costs, and diminished property value. (Compl. ¶¶ 92-93.)
To establish a claim for fraud under Connecticut law, a plaintiff must prove the following elements: (i) a false representation made as to a material statement of fact; (ii) the statement was untrue and known by the defendant to be untrue; (iii) the statement was made to induce the plaintiff to act; and (iv) the plaintiff acted on the false representation to its detriment. See Omega Eng'g v. Eastman Kodak Co., 30 F. Supp.2d 226, 250-51 (D. Conn. 1998) (citing Billington v. Billington, 595 A.2d 1377 (Conn. 1991); Maturo v. Gerard, 494 A.2d 1199 (Conn. 1985)). "Under certain circumstances, there may be as much fraud in a person's silence as in a false statement. Mere non-disclosure, however, does not ordinarily amount to fraud. It will arise from such a source only under exceptional circumstances. To constitute fraud on that ground, there must be a failure to disclose known facts and, in addition thereto, a request or an occasion or a circumstance which imposes a duty to speak. To be actionable for fraud, the non-disclosure must be by a person intending . . . to induce the latter to enter into or refrain from entering into a transaction." Omega, supra, 30 F. Supp.2d at 252 (quoting Egan v. Hudson Nut Products, Inc., 114 A.2d 213 (1955) (citations omitted)).
With regard to Lowe's alleged non-disclosure of its projected stormwater management construction costs, WSL claims that such omission was intended by Lowe's to, and in fact resulted in, the termination and relocation of tenants. Such terminations and relocations, WSL contends, in turn gave Lowe's more leverage over WSL when it attempted to shift costs to WSL. (WSL Mem. at 20-21.) Lowe's denies any such intent, and contends that the termination and relocations resulted from WSL's adherence to its contractual obligation to Lowe's under the Agreement to convey the premises free and clear of encumbrances. (Lowe's Mem. at 20-22.)
The Court finds that there is no basis in the record for WSL's conclusion that Lowe's non-disclosure was intended to induce the termination of WSL's leases or the relocation of tenants, or in fact did induce such terminations or relocations. First, outside of the general obligation in the Agreement that the premises must be provided to Lowe's free and clear of all encumbrances, there is simply nothing in the record to indicate that Lowe's was familiar with specific leasing arrangements, or sought to cause the early termination of such deals. Second, the record reflects that certain tenants, in particular Kmart and Shaw's, themselves initiated termination proceedings before or during the initial stage of Lowe's involvement with WSL. (Gold Dep. at 162:17-164:12, Ex. 27, Kolovos Aff. Tabs 3B and 3C; Tr. 12.). Third, WSL terminated all of the leases it mentions by name in its submissions, those of Shaw's, Nishi's Dollar Store, Petland, and Shell Oil, after (i) its receipt of the March 12, 1998 letter, in which Lowe's stated that its anticipated costs may trigger the provisions of Paragraph 8(c), and/or (ii) the April 6, 1998 public hearing, at which Lowe's aired its stormwater management construction proposal. (Def. 56.1 ¶¶ 21-24; Pl. 56.1 Resp. ¶¶ 21-24; Compl. ¶ 43.) Gold, WSL's corporate counsel, testified at his deposition that the terminations occurred in order to comply with the Agreement. (Gold Dep. at 170:3-9, Kolovos Aff. Tab 3C.) Fourth, during the period of nondisclosure, from January to March 1998, Lowe's was seeking to determine whether the Town would pay for some of the necessary construction costs. (Lowe's Mem. at 7; Collins Dep. at 219:21-223:2; 238:11-239:3; Tr. 13-14). The record reflects that Lowe's primary reason for nondisclosure was to avoid causing the termination of the Agreement or jeopardizing the success of the project while it sought to lower costs and/or pursue funding from the Town.
The fact that WSL's corporate counsel did not receive the March 12, 1998 letter until June 1998 in no way indicates that WSL was not aware of its contents when it ordered the terminations. Moreover, given the contractual relationship between the parties, and the longstanding dealings between WSL and the Town, it was certainly within WSL's ability to inquire further with Lowe's or with Town officials concerning the potential costs of Lowe's' project, including the stormwater management costs.
At most, then, Lowe's alleged non-disclosure of information relating to its permitting efforts led WSL to continue to act under the terms of the Agreement, on the belief that Lowe's, too, was continuing to perform as it had promised. Such allegations are duplicative of those implicated by WSL's breach of contract claim and are not cognizable as fraud under Connecticut law. See Omega, supra, 30 F. Supp.2d at 252 (stating that fraud requires an intent by defendant "to induce [plaintiff] to enter into or refrain from entering into a transaction"); Gen. Elec. Capital Corp. v. DirectTV, 94 F. Supp.2d 190, 202 (D. Conn. 1999) (finding "nothing more" than a breach of contract counterclaim where "plaintiff allegedly misrepresented or led defendants to believe that they were performing the contract in order to induce defendants to continue their contractual obligations," and stating that there is no fraud claim for inducing the continued performance of a contract). The Court therefore dismisses WSL's fraud cause of action based on Lowe's' alleged non-disclosure.
A similar analysis applies to Lowe's alleged misrepresentation concerning the Town's stormwater management requirements. The Court acknowledges that the record is laden with contrasting assertions concerning the Town's requirements as to the detention of stormwater originating from the Barnes Industrial Park, specifically whether it had to be detained by Lowe's as a condition to permitting, and if so, in what manner it should have been detained. Moreover, the disputed meaning of the term "off-premises," as embodied in Paragraph 8(c) of the Agreement, also prevents the Court from determining the truth or falsity of Lowe's statements concerning the Town's requirements. However, even if Lowe's statements were false and known by Lowe's to be so, they would not constitute fraud under Connecticut law, because at most, they caused WSL, acting in accordance with its rights under Paragraph 8(c) of the Agreement, to decline to assume the construction costs in excess of $900,000. Accordingly, the Court dismisses WSL's fraud claim based on Lowe's statements concerning the Town's requirements, because WSL's allegations thereto are merely a restatement of its cause of action for breach of contract based on Paragraph 8(c) of the Agreement.
Particularly noteworthy are conflicting statements by Lowe's. In its moving papers, Lowe's asserts that prior to August 15, 1997, the Town stated that it required certain construction as a condition precedent to permitting; however, at oral argument, Lowe's stated that it "at least believed . . . that there would have to be a provision made to deal with that storm water if Lowe's were going to receive the permits it would need." (Tr. 13.)
3. Tortious Interference with Contract and Prospective Economic Advantage
While WSL alleges separate claims for tortious interference with contract and with prospective economic advantage, the factual allegations of each claim are linked. WSL contends that through the commission of the alleged fraud, Lowe's tortiously interfered with WSL's contracts and relations with its tenants at the Plaza, specifically by inducing WSL to terminate existing leases and relocate tenants in anticipation of Lowe's purchase of the premises. WSL claims that Lowe's conduct, in turn, interfered with WSL's economic advantage by impeding its ability to lease or sell portions of the Plaza to prospective tenants or buyers. (WSL Mem. at 23.) The end goal of this, WSL alleges, was to "gain economic leverage and an unfair advantage over WSL in the hope that Lowe's could then force WSL to assume stormwater management costs properly born by Lowe's under the terms of the Agreement in order to reduce WSL's losses on the Plaza." (Compl. ¶ 104.) Further, WSL also alleges that Lowe's tortiously interfered with WSL's contract with Shaw's by "urg[ing]" WSL to terminate Shaw's lease without disclosing the stormwater management costs or its intent to shift these costs to WSL. (WSL Mem. at 23.)
Under Connecticut law, in order to establish a claim for tortious interference with contract or with prospective business advantage, a plaintiff must prove (i) the existence of a financial relationship or the expectancy of such a relationship; (ii) knowledge by the defendant the relationship; (iii) intentional interference with the relationship by the defendant, (iv) proof that the interference caused harm; and (v) damages to the plaintiff. See Collum v. Chapin, 671 A.2d 1329, 1331-32 (Conn.App. 1996) (describing tortious interference with contract); Dimaria v. Silvester, 89 F. Supp.2d 195, 201 (D.Conn. 1999) (citing Golembeski v. Metichewan Grange No. 190, 569 A.2d 1157 (Conn.App. 1990) (describing tortious interference with economic advantage)). In order to prove that the defendant's conduct was in fact tortious, the plaintiff must establish that the defendant was guilty of fraud, misrepresentation, intimidation or molestation or that the defendant acted maliciously. See Bria v. Ventana Corp., 765 A.2d 239, 241 (Conn.App. 2000) (citing Blake v. Levy, 464 A.2d 52 (Conn. 1983)); see also Couldock Bohan, Inc., 93 F. Supp.2d 220, 235 (D.Conn. 2000). Economic damages resulting from an existing contract falls within a tortious interference with contract claim, while a claim for tortious interference with prospective economic advantage redresses damages suffered as a result of the plaintiff's inability to enter into putative, future contracts.
Although, under Connecticut law, the defendant need not have direct contact with a third party to be liable for tortious interference with a contract between the plaintiff and that party, see Sportsmen's Boating Corp. v. Hansley, 474 A.2d 780, 785 (Conn. 1984); Boulevard Assocs. v. Sovereign Hotels, Inc., 72 F.2d 1029, 1035 (2d Cir. 1995) (stating that a tortious interference occurs "whenever, without justification, [a party] knowingly interferes in the plaintiff's contractual rights"), WSL's allegations fail to rise to the level of tortious interference because it has not established that Lowe's intentionally or maliciously interfered with WSL's leasing arrangements. As noted supra with respect to Lowe's fraud claim, there is simply nothing in the record to indicate that Lowe's was familiar with the existence of WSL's leasing arrangements, let alone the details of specific ones. Moreover, there is no basis in the record for the conclusion that Lowe's sought to cause the early termination of such arrangements.
In deposition testimony, WSL's corporate counsel indicated that apart from Kmart, which was closed by the time the Agreement was signed, and Shaw's, discussed infra, Lowe's had no contact with the Plaza's tenants during the period encompassed by the Agreement. (Gold Dep. at 162:2-163:22, Kolovos Aff. Tab 3C.)
The parties' dispute the facts surrounding the April 8, 1998 meeting at which Shaw's lease was discussed. (Lowe's Mem. at 21-22; Lowe's Rep. at 9-10; WSL Mem. at 9-10.) However, even if, as WSL asserts, Lowe's "urged" the termination of Shaw's lease, nothing in the record suggests that such conduct was tortious, i.e. that it was done in furtherance of a fraud, or with malicious intent. First, the factual context indicates that the termination of Shaw's lease was already inevitable by April 8, 1998. As noted supra, at Shaw's behest, Shaw's and WSL had negotiated a termination agreement, which Shaw's had signed in March 1998. When WSL delayed signing, Shaw's told WSL that it would investigate subleasing its space at the Plaza — an action that would prevent WSL from conveying that space to Lowe's free and clear of encumbrances — if WSL did not promptly execute the termination agreement. (Gold Dep. at 479:16-480:7, Ex. 42, Kolovos Aff. Tabs 3B, 3C.) Second, Lowe's decision to inform WSL of the potential conflict with Shaw's was a reasonable business decision, not a tortious action. The record reflects that Lowe's anticipated that Shaw's would resist termination of its lease at the Plaza, or renege on the existing termination agreement with WSL, once the dispute with Lowe's emerged. Lowe's therefore disclosed the potential conflict to WSL, and indicated that it would be advisable to sign the termination agreement. (Lowe's Rep. at 21-22; Gold Dep. at 496:16-498:9, Kolovos Aff. Tab 3B; Kugelman Dep. at 198:4-199:3, Kolovos Aff. Tab 6; Collins Dep. at 249:16-21, Olinksy Decl. Tab 3B.) This recommendation was made equally for the benefit of Lowe's and WSL, and whether Lowe's merely suggested a course of action or urged such action is immaterial. Indeed, WSL representatives acknowledged in their deposition testimony that the information assisted them in weighing the business risks of signing the termination agreement earlier than they had originally envisioned. (Kugelman Dep. at 200:7-201:7, 202:20-24, Kolovos Aff. Tab 6; Gold Dep. at 469:10-17, 479:16-480:7, 502:2-16, Kolovos Aft Tab 3B.) Because the undisputed facts do not suggest that Lowe's acted to induce the termination of Shaw's lease, or any other lease, the Court grants summary judgment to Lowe's on WSL's claim for tortious interference with contract.
Further, WSL's claim of tortious interference with prospective economic advantage is also insufficient. Specifically, WSL has failed to specify a prospective relationship with an identified third party, e.g. a potential lessee or purchaser, that was obstructed by Lowe's' actions, which is required under Connecticut law. (Gold Dep. at 175:13-176:3, Kolovos Aff. Tab 3C); see Conn. Cooling Total Air, Inc. v. Conn. Nat'l Gas Corp., 738 A.2d 1167, 1170 (Conn.Super. 1999) (citing Solomon v. Aberman, 196 Conn. 359, 364 (1985)); Norden Sys., Inc. v. Gen. Dynamics Corp., No. CV89 0101260S, 1990 WL 264084, at *2-*3 (Conn.Super. Nov. 8, 1990); cf. Purgess v. Sharrock, 33 F.3d 134, 141 (2d Cir. 1994). Construing all inferences and ambiguities in WSL's favor, there is nothing in the record to indicate that any tenant, other than those already existing at the Plaza, considered leasing or purchasing any part of the Plaza during the relevant time period, August 15, 1997 to June 11, 1998, such that there was even a reasonable prospect of business relations with prospective customers. See Hi-Ho Tower v. Com-Tronics, Inc., 761 A.2d 1268, 1273 (Conn. 2000). Accordingly, the Court dismisses this claim.
This claim should not be confused with tortious interference with "business expectancy," a term which some Connecticut courts have used to refer to claims for tortious interference with contractual relations.See. e.g., Conn. Nat'l Bank v. Rytman, 694 A.2d 1246, 1249 (Conn. 1997);Biro v. Hirsch, No. X05CV 980166759S, 1999 WL 203797, at *5 (Coun. Super. Apr. 1, 1999).
WSL's assertion that undefined third parties "express[ed] an interest" and that WSL simply refused to move forward is insufficient to show the requisite prospective business relationship. WSL, in fact, admits that there were "no negotiations with third parties." (WSL Mem. at 23 n. 10.)
WSL claims that Lowe's violated CUTPA by breaching (i) "the duties of good faith and fair dealing," and (ii) "fiduciary and other duties owed to WSL to disclose in a timely manner all material facts concerning the permitting process as they became known to Lowe's," with the goal of inducing the termination of Shaw's lease and shifting construction costs to WSL. (Compl. ¶ 25; WSL Mem. at 19-20.) Specifically, WSL alleges that Lowe's allegedly withheld material information in order to cause the termination of Shaw's and other tenants' leases; then with leverage maximized, Lowe's claimed that the off-premises construction was required in order to get WSL to foot a major part of the bill. When WSL said they would not, Lowe's terminated the deal. (WSL Mem. at 19-20.)
Section 42-110b(a) of the Connecticut General Statutes provides that "[n]o person shall engage in unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce." The Connecticut courts have adopted the Federal Trade Commission's "cigarette rule" as its test for determining whether a business practice violates CUTPA. See Omega, supra, 30 F. Supp.2d at 260. Specifically, the Court must determine whether defendant's conduct: (i) offends public policy as it has been established by statutes, the common law, or otherwise; (ii) is immoral, unethical, oppressive, or unscrupulous; or (iii) causes substantial injury to consumers or other businesses. See id; Sportsmen's Boating Corp., supra, 474 A.2d at 786. The parties' disagreement, and the Court's determination of CUTPA's potential applicability in this case, centers on whether the three-part test is conjunctive or disjunctive, and under the applicable test, whether Lowe's may have violated the Act in this case.
Punitive damages, attorneys fees, and costs to the prevailing party may also be awarded in the Court's discretion, even where the plaintiff has failed to prove actual damages. Conn. Gen. Stat. §§ 110(g)(a), 110(g)(d); Bristol Tech., Inc. v. Microsoft Corp. 114 F. Supp.2d 59, 78 (D. Conn. 2000).
To justify a finding of unfairness based on the third element, the injury must satisfy the following test: "It must be substantial; it must not be outweighed by any countervailing benefits to consumers or competition that the practice produces; and it must be an injury that consumers themselves could not reasonably have avoided." A-G Foods, Inc. v. Pepperidge Farm, Inc. 579 A.2d 69, 77 (Conn. 1990).
Lowe's contends that the test is conjunctive, and that the claim should be dismissed because WSL cannot establish that Lowe's conduct was "immoral, unethical, oppressive, or unscrupulous" in order to satisfy the second element. (Lowe's Mem. at 24.) Lowe's asserts that this dispute revolves around a contract, and Connecticut law is clear that disagreements over "the meaning of a contractual provision" do not implicate CUTPA. (Id.) (citing Boulevard Assocs., supra, 72 F.2d at 1035). However, Connecticut case law indicates that the test is disjunctive, as "all three criteria do not need to be satisfied to support a finding of unfairness." Tech. Gas Prods. LLC v. Barnes Engineering Co., No. CV000372665, 2000 WL 1993770, at *2 (Conn.Super. Dec. 21, 2000) (citing Willow Springs Condominium Assn., Inc. v. Seventh BRT Dev. Corp., 717 A.2d 77 (Conn. 1998)); Cheshire Mortgage Servs., 612 A.2d 1130, 1143-44 (Conn. 1992). Rather, a practice can be unfair under CUTPA because of the degree to which it meets one of the criteria or because, to a lesser degree, it meets all three. See Tech. Gas, supra, 2000 WL 1993770, at *2; see also McLaughlin Ford, Inc. v. Ford Motor, Inc., 473 A.2d 1185, 1190 n. 15 (Conn. 1984). Thus, in this case, in order to establish CUTPA liability, WSL must show that Lowe's conduct strongly satisfied one of the three elements, or all three to a more limited extent.
The Court finds that WSL cannot satisfy the test in this case. Even assuming that WSL satisfies the first element because certain aspects of Lowe's alleged conduct have been designated by the FTC as "unfair", see A-G Foods, supra, 579 A.2d at 77 n. 9 (stating that withholding material information is one of the primary practices that have been prohibited as unfair), the alleged conduct is not indicative of a severe or wanton violation of public policy. In particular, there is nothing about Lowe's alleged actions that would suggest substantial unfairness, as where there is a clear difference in bargaining position between the parties or the presence of significant consumer injury. cf. Cheshire Mortgage Servs., supra, 612 A.2d at 1144-46 (finding public policy violation where mortgagee, in failing to disclose finance charge to mortgagors, violated two statutes "equally strong, yet different, public policies of informing and protecting consumers of credit"); Gebbie v. Cadle Co., 714 A.2d 678, 685 (Conn.App. 1998) (finding that mortgagee's failure to honor agreement with mortgagor violated Connecticut public policy); Bristol Tech., supra, 114 F. Supp.2d 59 (finding CUTPA violation where Microsoft exploited its bargaining power over certain of its contract partners and independent software vendors, among others, in refusing to honor its promise to provide certain technology to such businesses). Moreover, while Lowe's alleged omissions or misrepresentations could, if proven, amount to a breach of contract, and hence be considered deceptive, a reasonable jury could not find them to be "oppressive, unscrupulous, unethical and/or immoral," certainly not to a significant degree. Compare Cheshire Mortgage, supra, 612 A.2d at 1146 (finding that second element was not satisfied in non-disclosure case where record revealed no intent to deceive), and Gen. Elec., supra, 94 F. Supp.2d at 203 ("A breach of contract claim generally does not constitute a CUTPA claim), with Bristol Tech., supra, 114 F. Supp.2d at 81-85 (finding that Microsoft committed deceptive acts or practices through multiple misrepresentations over a period of years concerning its business intentions, which justified punitive damages). Finally, the record is devoid of facts indicating that consumers, or businesses other than WSL itself, have been substantially harmed by Lowe's acts. For example, WSL has set forth no facts indicating that the cancellation of leases resulted in harm to the Plaza's former tenants; no facts showing that competitors did not benefit from such cancellations; and no facts indicating that there was any other business, e.g. a prospective tenant or purchaser, which was harmed as a result of Lowe's actions. Cf. Cheshire Mortgage, supra, 612 A.2d at 1147 (finding particularly harmful mortgagee's failure to disclose costs to mortgagor-consumers); Bristol Tech., supra, 114 F. Supp.2d at 83-85 (finding that Microsoft's omissions and misrepresentations concerning business intentions resulted in harm to other businesses, independent software vendors, and other purported Microsoft customers and users). Thus, because WSL has clearly failed to satisfy the second and third elements of the CUTPA test, and there is no issue of material fact thereto, its CUTPA claim must be dismissed. See A-G Foods, supra, 579 A.2d at 77; cf. Gen. Elec., supra, 94 F. Supp.2d at 204-05 (dismissing CUTPA claim on the ground that "the alleged misrepresentations so closely parallel the breach of contract claims that they are not sufficient to give rise to a CUTPA claim as a matter of law"); id. ("CUTPA was not designed to give wealthy, highly sophisticated corporations yet one more cause of action for their battle chests").
The Court notes in this regard that Lowe's' allegedly wrongful actions arose out of a contractual relationship alone, and contractual duties, rather than a duty of loyalty embodied in a fiduciary relationship, and did not amount to a tortious interference. See Elliot v. Staron, 755 A.2d 902, 909-10 (Conn.Super. 1997), aff'd 736 A.2d 196 (Conn.App. 1999) (linking finding of CUTPA violation to defendant lessor's tortious interference with plaintiff lessees' efforts to sublease their premises).
For the foregoing reasons, the Court (i) finds that the liquidated damages provision and covenant not to sue are enforceable and apply to WSL's contract claim, and (ii) dismisses each of WSL's non-contract claims for failure to establish the necessary elements of those claims. Thus, Lowe's motion for partial summary judgment is granted. Because the parties have agreed to liquidated damages on WSL's contract claim in the amount of $400,000, the parties' motions related to the amendment of WSL's expert report are denied as moot.