Opinion
No. CV02 0282643-S
February 24, 2004
MEMORANDUM OF DECISION RE MOTION FOR SUMMARY JUDGMENT #110
FACTS
On November 6, 2002, Roosevelt and Darlene Bowen filed a two-count complaint against defendants: 707 On Main, and Scott and Laurie Champagne (referred to as "the individual defendants"). On March 18, 2003, the plaintiffs filed an amended complaint: count one for breach of contract and count two for fraud. The following facts are alleged therein. On May 3, 2002, the plaintiffs entered into an agreement with 707 On Main to have it host their wedding reception on July 13, 2002, with a pre-selected menu to cost $6,276.08. On the day of the reception following service to two tables, 707 On Main ran out of food and substituted the pre-selected menu with other less desirable foods, which took a long time to prepare. Other changes also were made that deviated from the contract, such as serving guests only on one side of the buffet table, failing to hang up tent walls during the cocktail hour for taking pictures of the wedding party, failing to ensure an operational water fountain as a background for the pictures and failing to serve the head table. These acts of 707 On Main and the individual defendants constitute a breach of contract. The plaintiffs further allege that the conduct of 707 On Main and that of the individual defendants was fraudulent because they were robbed of "a once in a lifetime" experience and were embarrassed in front of their family and friends.
The individual defendants filed their answer on July 29, 2003. LS Monroe Restaurant Management doing business as 707 On Main filed its answer with a two-count counterclaim also on July 29, for breach of contract and unjust enrichment. Seven-hundred seven On Main counters therein that the plaintiffs paid for 123 adult persons at a rate of $29 per person but that it served 135 persons and the plaintiffs owe additionally $348. On August 4, 2003, the plaintiffs filed an answer to the counterclaim.
This is the only reference to "LS Monroe Restaurant Management." All other papers and pleadings refer to "ZD Restaurant Group, L.L.C.," as doing business as 707 On Main.
On September 12, 2003, the individual defendants filed their motion for summary judgment accompanied by a memorandum of law. In support of the motion, they included their affidavits and other documents. The plaintiffs filed a memorandum of law in opposition accompanied by three exhibits. The motion was heard on the short calendar on November 17, 2002.
The individual defendants included an affidavit of Scott Champagne, Articles of Organization of ZD Restaurant Group, L.L.C. doing business as 707 On Main dated September 23, 1998, the agreement for the wedding reception signed by the plaintiff, Roosevelt Bowen and Darlene Guajardo, as representative of 707 On Main dated May 3, 2002, an affidavit of Laurie Champagne, another copy of the Articles of Organization and an authenticated Trade Name certificate dated June 3, 1999.
Exhibit A is a copy of an authenticated Trade Name certificate; Exhibit B, a copy of Scott Champagne's affidavit; and Exhibit C, a copy of Laurie Champagne's affidavit.
DISCUSSION
"Practice Book § 17-49 provides that summary judgment shall be rendered forthwith if the pleadings, affidavits and any other proof submitted show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. In deciding a motion for summary judgment, the trial court must view the evidence in the light most favorable to the nonmoving party . . . The party moving for summary judgment has the burden of showing the absence of any genuine issue of material fact and that the party is, therefore, entitled to judgment as a matter of law." (Internal quotation marks omitted.) Gould v. Mellick Sexton, 263 Conn. 140, 146, 819 A.2d 216 (2003).
"In ruling on a motion for summary judgment, the court's function is not to decide issues of material fact, but rather to determine whether any such issues exist." Nolan v. Borkowski, 206 Conn. 495, 500, 538 A.2d 1031 (1988). "As the party moving for summary judgment, the [movant] is required to support its motion with supporting documentation, including affidavits." Heyman Associates No. 1 v. Insurance Co. of Pennsylvania, 231 Conn. 756, 796, 653 A.2d 122 (1995). "[T]he party opposing . . . a motion [for summary judgment] must provide an evidentiary foundation to demonstrate the existence of a genuine issue of material fact." (Internal quotation marks omitted.) Schilberg Integrated Metals Corp. v. Continental Casualty Co., 263 Conn. 245, 252, 819 A.2d 773 (2003). "It is not enough . . . for the opposing party merely to assert the existence of . . . a disputed issue. Mere assertions of fact . . . are insufficient to establish the existence of a material fact and, therefore, cannot refute evidence properly presented to the court [in support of a motion for summary judgment]." (Internal quotation marks omitted.) Id., 252-53. "Only evidence that would be admissible at trial may be used to support or oppose a motion for summary judgment." (Internal quotation marks omitted.) Great Country Bank v. Pastore, 241 Conn. 423, 436, 696 A.2d 1254 (1997), citing Practice Book § 17-46.
The individual defendants move for summary judgment on the ground that since they were not parties to the agreement between 707 On Main and the plaintiffs, there exists no genuine issue of material fact as to their liability, and, therefore, they are entitled to judgment as a matter of law. They argue that as members of a limited liability company that owns and operates ZD Restaurant Group, L.L.C. (ZD), they cannot be held liable in their individual capacities for any judgment against 707 On Main for breach of contract and any tort, such as fraud, arising from the liability of ZD.
In their memorandum of law, the plaintiffs counter on the grounds that "material issues of fact exist with respect to whether the protections afforded members of limited liability companies should be disregarded under the instrumentality rule or, in the alternative, with respect to [the] plaintiffs' allegations that [the individual defendants] are liable for their alleged, individual misrepresentations to [the] plaintiffs." The plaintiffs argue that based on the doctrine of piercing the corporate veil, specifically, the instrumentality test, it is proper to disregard the protections given to members of limited liability companies under General Statutes § 34-133(a) and, in the alternative, they are seeking to hold the individual defendants liable for their direct misrepresentations.
Section 34-133 states: "(a) Except as provided in subsection (b) of this section, a person who is a member or manager of a limited liability company is not liable, solely by reason of being a member or manager, under a judgment, decree or order of a court, or in any other manner, for a debt, obligation or liability of the limited liability company, whether arising in contract, tort or otherwise or for the acts or omissions of any other member, manager, agent or employee of the limited liability company."
In count two, the plaintiffs claim that the individual defendants held themselves out falsely as wedding planner professionals, that they could accommodate a wedding party of more than 100 persons, and that these misrepresentations constitute fraudulent conduct.
A breach of contract by 707 On Main, by itself, is not sufficient to impose liability on its managing members, the individual defendants. See General Statutes § 34-133. To hold a member of the limited liability company liable for the company's alleged breach of contract, some additional factors must be "proven to provide a factual basis for circumventing the statutory protection against individual liability, i.e., to pierce the corporate veil." (Internal quotation marks omitted.) McGovern Capital v. Papic, Superior Court, judicial district of Stamford/Norwalk at Stamford, Docket No. CV 02 0190931 (May 21, 2003, Adams, J.).
Courts "may disregard the fiction of a separate legal entity to pierce the shield of immunity afforded by the corporate structure in a situation in which the corporate entity is so controlled and dominated that justice requires liability to be imposed on the real actor." (Internal quotation marks omitted.) Mountview Plaza, Inc. v. World Wide Pet Supply, Inc., 76 Conn. App. 627, 632-33, 820 A.2d 1105 (2003). "The principle of piercing the corporate veil, "also is applicable to limited liability companies and their members. General Statutes § 34-133." Litchfield Asset Management Corp. v. Howell, 70 Conn. App. 133, 147, 799 A.2d 298, cert. denied, 261 Conn. 911, 806 A.2d 49 (2002). "[T]he determination of whether to pierce the corporate veil . . . to disregard the protections afforded a limited liability company requires the same analysis [as that of a corporate entity]." KLM Industries, Inc. v. Tylutki, 75 Conn. App. 27, 28 n. 2, 815 A.2d 688, cert. denied, 263 Conn. 916, 821 A.2d 770 (2003).
"When determining whether piercing the corporate veil is proper, our [courts have] endorsed two tests: the instrumentality test and the identity test. The instrumentality rule requires . . . proof of three elements: (1) Control, not merely majority or complete stock control, but complete domination, not only of finances but of policy and business in respect to the transaction attacked so that the corporate entity as to this transaction had at the time no separate mind, will or existence of its own; (2) that such control must have been used by the defendant to commit fraud or wrong, to perpetuate the violation of a statutory or other positive legal duty, or a dishonest or unjust act in contravention of the plaintiff's legal rights; and (3) that the aforesaid control and breach of duty must proximately cause the injury or unjust loss complained of." (Internal quotation marks omitted.) Mountainview Plaza, Inc. v. World Wide Pet Supply, Inc., supra, 633-34. "The identity rule has been stated as follows: If a plaintiff can show that there was such a unity of interest and ownership that the independence of the corporations had in effect ceased or had never begun, an adherence to the fiction of separate identity would serve only to defeat justice and equity by permitting the economic entity to escape liability arising out of an operation conducted by one corporation for the benefit of the whole enterprise." (Internal quotation marks omitted.) Litchfield Asset Management Corp. v. Howell, supra, 156.
"The concept of piercing the corporate veil is equitable in nature and courts should pierce [it] only under exceptional circumstances." (Internal quotation marks omitted.) Hershey v. Lonrho, 73 Conn. App. 78, 87, 807 A.2d 1009 (2002). Such exceptional circumstances would include instances "where the corporation is a mere shell, serving no legitimate purpose, and used primarily as an intermediary to perpetuate fraud or promote injustice." (Internal quotation marks omitted.) SFA Folio Collections, Inc. v. Bannon, 217 Conn. 220, 230, 585 A.2d 666, cert. denied, 501 U.S. 1223, 111 S.Ct. 2839, 115 L.Ed.2d 1008 (1991).
In the present case, the plaintiffs seek to pierce the corporate veil of ZD for the purpose of reaching the assets of the individual defendants. The court notes that ZD was formed as a Connecticut limited liability company on September 23, 1998. "One of the principal reasons to use an L.L.C. is that the owners and managers, if the owners so elect, have limited liability from contract and tort claims of third parties. M. Pruner, A Guide to Connecticut Liability Companies, § 3.1.1, p. 9 (1995)." Stone v. Frederick Hobby Assoc. II, Superior Court, judicial district of Stamford/Norwalk at Stamford, Docket No. CV 00 0181620 (July 10, 2001, Mintz, J.). The individual defendants have met their prima facie case of showing the absence of any genuine issue of material fact as to their liability as individuals. The agreement between the plaintiffs and 707 On Main was signed, not by the defendants, but by the plaintiffs and an individual acting on behalf of the limited liability company.
"No hard and fast rule, however, as to the conditions under which the entity may be disregarded can be stated as they vary according to the circumstances of each case." (Internal quotation marks omitted.) Angelos Tomasso v. Armor Construction Paving, Inc., 187 Conn. 544, 555-56, 447 A.2d 406 (1982). The "issue of whether the corporate veil [should be] pierced presents a question of fact." (Internal quotation marks omitted.) Litchfield Asset Management Corp. v. Howell, supra, 148. "The complaint, however, must contain sufficient factual allegations for a court to pierce the corporate veil." Mazzella v. Reed, Superior Court, complex litigation docket at Stamford, Docket No. X05 CV 02 0190929 (August 14, 2003, Rogers, J.). The plaintiffs, in the present case, have neither pleaded a sufficient factual basis for piercing the corporate veil nor put forth an evidentiary foundation as required by the Practice Book §§ 17-45 and 17-46 to withstand summary judgment on this basis.
For the above reasons, the individual defendants' motion for summary judgment is granted.
BY THE COURT
Tanzer, Judge