Opinion
CV175012366S
10-30-2018
James Barbara et al. v. Colonial Surety Company
UNPUBLISHED OPINION
Judge (with first initial, no space for Sullivan, Dorsey, and Walsh): Stevens, Barry K., J.
MEMORANDUM OF DECISION ON THE DEFENDANT’S MOTION TO DISMISS OR MOTION TO STAY
STEVENS, J.
STATEMENT OF THE CASE
On June 15, 2007, Phoenix Contracting Group, Inc. (Phoenix), owned and operated by the plaintiffs, James and Lina Barbara, executed a subcontract to supply and install window wall, and other fenestration products (subcontract) for the construction of a twenty-six-story hotel in New York (project). Prior to May 2008, Phoenix applied for a payment and performance bond on the project with the defendant, Colonial Surety Company (Colonial). The defendant required that Phoenix and the plaintiffs sign an indemnity agreement agreeing to reimburse the defendant for payments made on the bond (indemnity agreement). Phoenix and the plaintiffs signed the indemnity agreement and the defendant issued the bond. The plaintiffs signed the bond and sent it to Gotham Greenwich Construction (Gotham), the owner under the bond and the construction manager on the project. The project was delayed, and issues arose surrounding the performance of the subcontract. In October 2010, Gotham sued Phoenix in New York for breach of contract (Gotham Litigation). The defendant defended Phoenix during the Gotham Litigation. In the Gotham Litigation, Phoenix denied that it breached the subcontract and asserted defenses and counterclaims.
On October 28, 2010, the defendant sued Phoenix and the plaintiffs in New Haven for repayment of the bond expense pursuant to the indemnity agreement (Indemnity Suit). Phoenix did not appear and was defaulted. On October 15, 2013 and on November 11, 2013, the plaintiffs asserted special defenses in the Indemnity Suit. On both occasions, the defendant moved to strike the plaintiffs’ special
defenses and the court, Fisher, J., granted the defendant’s motion to strike.
On April 20, 2015, the plaintiffs learned that the defendant settled the Gotham Litigation for $100,000 and, in the process of settling, released the plaintiffs’ affirmative claims against Gotham. According to the plaintiffs, the settlement involved a deceptive, self-serving deal in which Colonial withdrew Phoenix’s affirmative claims in order to curry Gotham’s favor for future business.
In the Indemnity Suit, on June 21, 2016, the plaintiffs filed a request to amend their answer, add affirmative defenses and counterclaims, and allow further discovery in order for them to pursue claims against Colonial for its bad faith settlement of the Gotham Litigation. Relevant to the issue presently before the court, the plaintiff raised two counterclaims in their request. In the first counterclaim, the plaintiffs alleged a breach of the indemnity agreement and bond. The plaintiffs also alleged that the defendant acted in bad faith and had an improper motive of maintaining future work with Gotham. The plaintiffs alleged that such breaches were so material and abusive that the bond and indemnity agreement should be declared void. The second counterclaim claimed that the plaintiffs should be allowed to pursue recovery against Colonial for Phoenix’s affirmative claims that Colonial forfeited in bad faith by entering into the settlement agreement with Gotham. On July 22, 2016, the defendant filed an objection to the plaintiff’s request, which the court, Robinson, J., sustained without articulation and without reaching the merits of the counterclaims. A primary ground for the objection was procedural, namely, that the request to assert the counterclaims was not timely made and made after the pleading and discovery deadlines had passed.
On April 4, 2017, the plaintiffs instituted the present action against Colonial in a two-count complaint. The first count seeks money damages for breach of contract based on the allegation that Colonial acted in bad faith and violated its obligations under the indemnity agreement and bond. The second count seeks a declaratory judgment declaring the indemnity agreement void based on Colonial’s egregious behavior.
Pending before the court is Colonial’s motion filed on April 27, 2018, to dismiss the present action under the prior pending action doctrine, or in the alternative to stay the present proceedings. On April 27, 2018, the defendant filed a memorandum in support of its motion. On June 15, 2018, the plaintiffs filed a memorandum in opposition. The defendant filed a reply memorandum on July 9, 2018. Oral arguments were heard on July 16, 2018.
The court provides the following additional information about the procedural history of the present case. The defendant filed its appearance in this action on April 18, 2017, and the present motion to dismiss based on the prior pending action doctrine was filed on April 27, 2018. Consequently, the motion to dismiss appears to have been filed outside the time parameters of Practice Book § 10-30(b), which states that a motion to dismiss contesting the court’s jurisdiction should be filed within thirty days after the filing of the movant’s appearance. Although a motion to dismiss based on the prior pending action doctrine does not implicate the court’s subject matter jurisdiction; see Kleinman v. Chapnick, 140 Conn.App. 500, 503 n.5, 59 A.3d 373 (2013); it appears that such a motion invokes a jurisdictional question in that it questions whether the court should exercise its authority over a matter for which it has jurisdiction. Such a "jurisdictional" motion appears to come within the thirty-day time requirement of Practice Book § 10-30(b). The case law on this issue is unclear and conflicting. Compare East Lyme v. New England National, LLC, Superior Court, judicial district of New London, Docket No. 547594 (November 9, 2000, Hendel, J.) (28 Conn. L. Rptr . 629, 630) (holding that defendants waived their prior pending action argument by not filing a timely motion to dismiss prior to filing an answer) with Danbury v. ARC IceSports Danbury, Inc., Superior Court, judicial district of Danbury, Docket No. CV-00-0162973-S (February 8, 2001, Hodgson, J.) (29 Conn. L. Rptr . 422, 422-23) (court held that the 30-day rule does not bar the filing of a late motion to dismiss on the prior pending doctrine). Because the plaintiffs have not contested the timeliness of the motion to dismiss under Practice Book § 10-30(b), the issue has not been addressed or joined by the parties, and the court declines to reach it.
The defendant argues that the court should grant its motion to dismiss the present action pursuant to the prior pending case doctrine on the ground that the claims and request for relief made by the plaintiffs in the present case are essentially the same as the counterclaims asserted in the Indemnity Suit. The defendant argues that the plaintiffs brought the present action as a means to circumvent the enforcement of negative rulings in the prior action and to collaterally attack and undermine the same, instead of pursuing a proper appeal in the Indemnity Suit. In response, the plaintiffs contend that the two actions are not virtually alike because their claims in the Indemnity Suit were not adjudicated on their merits, and on appeal, the objection to their claims may be affirmed on procedural grounds. Alternatively, should the court find that the actions are virtually alike, the plaintiffs contend that the court should exercise its discretion not to apply the doctrine by emphasizing that their counterclaims were filed late in the Indemnity Suit because the defendant’s bad faith conduct in settling the Gotham Litigation happened after the deadline date for pleading and discovery in the Indemnity Suit had passed, and as a consequence, they have been precluded from conducting discovery and pursuing their claims regarding the defendant’s alleged wrongdoing. For the following reasons, the defendant’s motion to dismiss, or in the alternative, motion for stay is denied.
As part of its argument under the prior pending action doctrine, Colonial refers to the special defenses asserted by the plaintiffs in the Indemnity Action. Special defenses plead facts consistent with the allegations of the complaint, but allege, notwithstanding, that the complaint fails to assert a cause of action. P.B. § 10-5. In evaluating the defendant’s prior pending action argument, the court focuses on the counterclaims asserted by the plaintiffs in the Indemnity Action because a "special defense" does not constitute an "action" within the meaning of the prior pending action doctrine. Luongo Construction and Development, LLC v. MacFarlane, Superior Court, judicial district of Middlesex, Docket No. CV-11-5008096-S (December 27, 2012, Morgan, J.) (55 Conn. L. Rptr . 238, 239) ("[t]he argument of the defendant ... that the claims made by the plaintiff herein are the same as those being made by it in the [prior action] by way of its answer and special defense do not affect the court’s analysis [because] [t]he answer and special defenses in the [prior case] are neither claims nor counterclaims, and ... do not affect the prior pending action doctrine analysis"); Connecticut Housing Finance Authority v. Tobin, Superior Court, judicial district of Fairfield at Bridgeport, Docket No. CV-93-0302988-S (May 9, 1995, Rodriguez, J.) (holding that prior pending action only applies to claims which set forth a cause of action and not to special defenses); see also Gurliacci v. Mayer, 218 Conn. 531, 546-57, 590 A.2d 914 (1991) (Internal quotation marks omitted.) ("[a] cause of action is that single group of facts which is claimed to have brought about an unlawful injury to the plaintiff and which entitles the plaintiff to relief ... a right of action at law arises from the existence of a primary right in the plaintiff, and an invasion of that right by some delict on the part of the defendant").
DISCUSSION
I
Motion to Dismiss
"[A] motion to dismiss is the proper vehicle to raise the issue of a prior pending action, [although] the doctrine does not truly implicate subject matter jurisdiction." (Internal quotation marks omitted.) Bayer v. Showmotion, Inc., 292 Conn. 381, 403, 973 A.2d 1229 (2009). "[T]he prior pending action doctrine permits the court to dismiss a second case that raises issues currently pending before the court. The pendency of a prior suit of the same character, between the same parties, brought to obtain the same end or object, is, at common law, good cause for abatement." (Internal quotation marks omitted.) Id., 395. "The only certain rule on this subject ... is, where the parties are the same and the second suit is for the same matter, cause and thing, or the same object is to be attained, as in the first suit and in the same jurisdiction, the second shall abate and be dismissed ..." (Internal quotation marks omitted.) Id., 397.
"The prior pending action doctrine permits the court to dismiss a second case that raises issues currently pending before the court. The pendency of a prior suit of the same character, between the same parties, brought to obtain the same end or object, is, at common law good cause for abatement. It is so, because there cannot be any reason or necessity for bringing the second, and, therefore, it must be oppressive and vexatious. This is a rule of justice and equity, generally applicable, and always, where the two suits are virtually alike, and in the same jurisdiction ... The policy behind the prior pending action doctrine is to prevent unnecessary litigation that places a burden on our state’s already crowded court dockets." (Citations omitted; internal quotation marks omitted.) Bayer v. Showmotion, Inc., supra, 292 Conn. 395-96.
"[T]he trial court must determine in the first instance whether the two actions are: (1) exactly alike, i.e., for the same matter, cause and thing, or seeking the same remedy and in the same jurisdictions; (2) virtually alike, i.e., brought to adjudicate the same underlying rights of the parties, but perhaps seeking different remedies; or (3) insufficiently similar to warrant the doctrine’s application. In order to determine whether the actions are virtually alike, [the court] must examine the pleadings ... [in both actions] to ascertain whether the actions are brought to adjudicate the same underlying rights of the parties." (Citations omitted; emphasis in original; internal quotation marks omitted.) Id., 397-98. "If the two actions are exactly alike ... the trial court has no discretion [and] ... the court must dismiss the second action ... Where the actions are virtually, but not exactly alike, however, the trial court exercises discretion in determining whether the circumstances justify dismissal of the second action." Id., at 398. "We must examine the pleadings to ascertain whether the actions are ‘virtually alike’ ... that is, whether upon examination, the pleading reveals that the party seeks to ‘obtain the same end or object’ ... and to adjudicate the same underlying rights." (Citations omitted; internal quotation marks omitted.) Northern Homes Distributors, Inc. v. Grosch, 22 Conn.App. 93, 96, 575 A.2d 711, cert. granted, 216 Conn. 810, 550 A.2d 58 (1990).
Our Appellate Court has held that abatement is inappropriate where the remedy sought in the second action is not available in the first, "or where the plaintiff’s only alternative would be time-consuming and might well have cost him the opportunity of assuring ... the collection of any judgment he might obtain." (Internal quotation marks omitted.) Kolodney v. Kolodney, 2 Conn.App. 697, 700, 483 A.2d 622 (1984); see also Marshall v. Marshall, Superior Court, judicial district of Stamford-Norwalk at Stamford, Docket No. FA-07-4012382 (February 27, 2008, Munro, J.) (45 Conn.L.Rptr. 139, 142) (for abatement purposes, the causes of action are the same only where relief sought in second action may be fully obtained in prior action), rev’d on other grounds, 119 Conn.App. 120, 988 A.2d 314 (2010); Ying Shun Corp. v. Cruz, Superior Court, judicial district of New Haven, Docket No. SPNH 95-0342439-S (April 27, 1995, Levine, J.) (same). "Where, however, the plaintiffs could have so easily procured the advantage ... which they did obtain in the second action by getting an order ... in the first action ... the second action ... was unreasonable." Kolodney v. Kolodney, supra, 2 Conn.App. 700.
In the first counterclaim of the Indemnity Suit, the plaintiffs allege the following. The indemnification agreement contained a provision which permitted the defendant to spend monies in handling claims that in good faith it believed was necessary or advisable. The bond agreement contained conditions precedent that had to be met prior to liability arising out of the bond. The defendant knew that there was no liability on the bond because Gotham failed to satisfy the conditions precedent on the bond, but chose to forego moving to dismiss because it wanted to obtain future business from Gotham. The defendant chose to settle the Gotham Litigation rather than move for summary judgment, despite telling the plaintiffs numerous times that it would move for summary judgment after discovery, because it had an improper motive of trying to obtain future business from Gotham. The defendant had to use the "hammer clause" in the indemnity agreement to settle Phoenix’s action because Phoenix refused to consent. When the defendant settled the Gotham Litigation by paying $100,000 and releasing Phoenix’s affirmative claims against Gotham it knew it had no liability under the performance bond and that it would have succeeded on a motion for summary judgment. By not moving for a pre-answer dismissal or summary judgment, the defendant materially breached the performance bond and indemnity agreement and acted in bad faith. The plaintiffs were damaged by the material breaches because it became liable for unnecessary, extensive legal and investigative fees incurred by the defendant. Pursuant to the terms of the indemnity agreement, the plaintiffs should not be held liable to the defendants for any fees that were incurred by the defendant through deceptive, self-serving conduct, including the $100,000 that the defendant allegedly paid to Gotham as part of the bad faith transaction. Additionally, the plaintiffs claimed that they were damaged because of the defendant’s bad faith decision to withdraw rather than pursue Phoenix’s affirmative claims asserted in the Gotham Litigation. Finally, such breaches were material and abusive and the bond and indemnity agreement should be declared void. The second counterclaim, among other things, seeks authority for the plaintiff to pursue recovery for the affirmative claims that the defendant forfeited in bad faith.
In the present action, the plaintiffs’ allegations mirror those set forth in the prior action. The allegations in the present action, however, are more detailed as to the alleged wrongdoing of the defendant and Gotham. The first claim seeks money damages for breach of contract (i.e., the indemnity agreement and the bond). The second claim seeks a declaratory judgment declaring the indemnity agreement void because of the defendant’s wrongful conduct.
Although, the defendant appropriately emphasizes the factual similarity of the plaintiffs’ claims in the two actions, the point of significance is their procedural dissimilarities. See generally, Northern Homes Distributors, Inc. v. Grosch, supra, 22 Conn.App. 97-98 (in making a determination about whether the prior pending action doctrine applies, the court may consider a plaintiff’s argument that the remedy in the original action would be incomplete or inadequate); Construction Services of Bristol, Inc. v. Sanseer Mill Associates Limited Partnership, Superior Court, judicial district of Middlesex, Docket No. CV-64273-S (March 17, 1992, Arena, J.) (6 Conn.L.Rptr. 208, 209) (same). The plaintiffs’ claims in the Indemnity Suit were not adjudicated on their merits and there is no certainty that they ever will be. Under the particular circumstances here, this difference is a distinction having legal significance in the application of the prior pending action doctrine. On the facts presented here, the Indemnity Suit was instituted by the defendant, not the plaintiffs, and the defendant’s alleged wrongful conduct occurred after that suit was instituted and after the pleading and discovery deadlines of that suit had expired. The sustaining of the defendant’s objection to the plaintiff’s motion to file the counterclaims may very well have been well within the trial court’s discretion because of the timing of the motion’s filing, but the counterclaims could not have been asserted earlier, when the defendant instituted the suit, because the defendant’s conduct forming the basis of the counterclaims had not yet occurred. Consequently, there is no certainty that the substantive merits of the plaintiffs’ counterclaims against the defendant will be adjudicated in the Indemnity Suit, which is a consequence clearly to the disadvantage of the plaintiffs, and clearly to the advantage of the defendant, the alleged wrongdoer, especially if the present action is dismissed, as the defendant seeks, under the prior pending action doctrine.
Consequently, the court concludes that this action and the Indemnity Suit are virtually alike, but not exactly alike, and the reasonable exercise of the court’s discretion warrants a denial of the defendant’s motion to dismiss under the prior pending action doctrine. The plaintiffs emphasize that the basis for their bad faith claims against the defendant did not arise until after the defendants entered into the settlement with Gotham, releasing Phoenix’s affirmative claims against Gotham and paying Gotham $100,000 for which the plaintiffs must indemnify the defendant pursuant to the indemnification agreement. As previously explained, the prior pending action doctrine is a rule of justice and equity to avoid circumstances where duplicative litigation is oppressive and vexatious and "to prevent unnecessary litigation that places a burden on our state’s already crowded court dockets." Bayer v. Showmotion, Inc., supra, 292 Conn. 395-96. The application of the prior pending action doctrine in the manner asserted by the defendant here cannot be viewed as being consistent with any notion of justice and equity particularly under the circumstances where adjudication of the plaintiffs’ claims can only be assured by the prosecution of the present action in light of the timing of the defendant’s institution of the Indemnity Suit vis-a-vis when its alleged wrongful acts occurred. In the eyes of equity, a case is not vexatious and should not be dismissed under the prior pending action doctrine where the court determines that the action was brought in order for the plaintiff to obtain full and fair adjudication of the plaintiff’s rights and not for purposes of harassment and oppression. See Gaudio v. Gaudio, supra, 23 Conn.App. 297. Precisely for these reasons, the cases on which the defendant relies are distinguishable and inapplicable.
The present case is distinguishable from Beaudoin v. Town Oil Co., Inc., 207 Conn. 575, 584-88, 542 A.2d 1124 (1988), in which our Supreme Court held that the claims were virtually alike, and the prior pending action was applicable. In Beaudoin, our Supreme Court recognized that "all of the issues raised in [the appeal] of the trial court’s ruling [granting the motion to strike the plaintiff’s complaint in the second action] were raised in the previous third-party complaint that was stricken by the trial court [in the first action] and already preserved for appeal." Id., 588. The Beaudoin case is distinguishable from the procedural facts presented here because in Beaudoin, as compared to the present case, the merits of the plaintiff’s claims were reached in the first action through the trial court’s ruling on a motion to strike, and therefore, a disposition of the merits of the plaintiff’s claims were fully joined and preserved for appeal.
The situation in the present case is more similar to Construction Services of Bristol, Inc. v. Sanseer Mill Associates Limited Partnership, supra, 6 Conn.L.Rptr. 208. In that case, the court reasoned that "[a]lthough the ultimate goal of both actions [was] identical, the differences in the parties and the types of relief sought are more than superficial because the timing of the present action against [the defendant was] allegedly essential to the plaintiff’s ability to secure its desired remedy. Given that the prior pending action doctrine is a rule of justice and equity and not of unbending rigor, it [was] decided that the plaintiff should be allowed to pursue what it [deemed] to be the most efficacious method of collecting its debts. It [was] therefore found that the motion to dismiss based on the prior pending action doctrine should be denied." Id., 210. As in Construction Services of Bristol, Inc., if the plaintiffs were forced to wait until the Appellate Court makes a decision on whether the trial court in the Indemnity Suit properly sustained the defendant’s objection to preclude the plaintiffs’ assertions of their counterclaims, the plaintiffs would (1) not be able to effectively or fully defend themselves in the Indemnity Suit because judgment would have to enter, without benefit of discovery as to claims of breach of contract and bad faith, and (2) they might have to bring these claims again at some time in the unknown distant future, which would be inefficient. These are more than superficial differences warranting a denial of the defendant’s motion to dismiss under the prior ending action doctrine. See Gaudio v. Gaudio, supra, 23 Conn.App. 296. Therefore, the defendant’s motion to dismiss under the prior pending action doctrine is denied.
The court also notes that on March 20, 2018, the defendant filed a request to revise to which the plaintiffs filed an objection on April 13, 2018. Because the defendant’s present motion to dismiss under the prior pending action doctrine does not implicate the court’s subject matter jurisdiction and was filed on April 27, 2018, after the filing of its request to revise, the motion was not filed in accordance with the sequence for the filing of pleadings under Practice Book § 10-6. Consequently, under Practice Book § 10-7, the defendant’s filing of the request to revise would operate as a waiver of the defendant’s right to file this motion to dismiss. Although such a waiver could operate as an alternative basis for denying the defendant’s motion to dismiss, the plaintiffs do not assert this waiver argument as part of their objection to the motion.
II
Motion to Stay
In the alternative, the defendant moves for a stay of this action in its entirety until both the Indemnity Suit and the action entitled Phoenix Contracting Group, Inc. v. Colonial Surety Company, currently pending in the Supreme Court of the State of New York, County of New York (New York Action) are fully and finally resolved, including the disposition of any and all appeals filed by the parties thereto.
The defendant argues that the motion to stay should be granted for all of the same reasons that the motion to dismiss should be granted. Additionally, the defendant argues that the present action should be stayed pending final resolution of the New York Action for several other reasons, including: (1) both actions were commenced on the same date; (2) the claims alleged by Phoenix in its complaint in the New York Action are the same as those alleged by the plaintiffs in the present case; (3) the plaintiffs and Phoenix seek the same or overlapping judgments for money damages based on the same alleged injury; and (4) concurrent litigation of both the present action and the Indemnity Suit would create a real threat of inconsistent rulings and outcomes.
The plaintiffs argue that the motion to stay should be denied because (1) if the court stays this action until the resolution of the other two cases then the defendant will win because there is no way for the plaintiffs to obtain any discovery in order to prove the egregious conduct by the defendant; and (2) the defendant is inaccurate in its contention that the New York Action is the one that should be addressed first as it would resolve all the issues rather than just some.
"In the absence of a statutory mandate, the granting of an application or a motion for a stay of an action or proceeding is addressed to the discretion of the trial court ... [T]he power to stay proceedings is incidental to the power inherent in every court to control the disposition of the causes on its docket with economy of time and effort for itself, for counsel, and for litigants. How this can best be done calls for the exercise of judgment, which must weigh competing interests and maintain an even balance ...
"In making a determination as to whether to issue a stay, the court is required to balance the equities ... While approving a general balancing of the equities test as the benchmark for granting or denying a motion for stay, [our Supreme Court] also recites a list of non-exclusive factors that a court may consider including the likely outcome on appeal, whether the movant faces irreparable prospective harm from the enforcement of the judgment, and the effect of the delay occasioned by a stay upon the non-moving parties." (Citations omitted; internal quotation marks omitted.) Recycling, Inc. v. Milford, Superior Court, judicial district of Ansonia-Milford at Milford, Docket No. CV-13-6013854-S (November 28, 2017, Stevens, J.).
After considering the parties’ positions and these factors and in the reasonable exercise of its discretion, the court concludes that the granting of a stay in this action would be inappropriate and not judicious for similar reasons justifying the denial of the motion to dismiss.
Syferlock is correct in pointing out that at least some of the plaintiffs’ claims in the present case are separate from the bad faith claim, but because the court has concluded that the bad faith claims should proceed, there should not be a stay or dismissal as to the remaining claims so that all of the claims can be adjudicated together.
CONCLUSION
For the foregoing reasons, defendant’s motion to dismiss, or in the alternative to stay, is denied.