Opinion
No. CV 04 4002237S
December 20, 2007
MEMORANDUM OF DECISION RE MOTION FOR ENFORCEMENT OF STIPULATED JUDGMENT (MOTION #123)
The Risdon International, Inc. claimed Successor-in-interest to Plaintiff Crown Risdon USA, Inc. has filed a Motion for Enforcement of Stipulated Judgment dated September 10, 2007 (Motion #123) claiming that the defendant violated orders of a Stipulated Judgment entered into and approved by the court on October 8, 2004.
The Stipulated Judgment was entered into by Crown Risdon USA Inc ("Crown") and the two defendants Mony Vann and HCP Packaging USA, Inc ("HCP"). The relevant terms of the October 8, 2004 Stipulated Judgment are as follows:
(1) Paragraph 2 — HCP USA agrees that it will not contact, solicit or consult with, any employee of Crown Risdon during the period of that employee's employment with Crown Risdon.
(2) Paragraph 3 — HCP USA agrees that it will not contact, solicit, consult with, hire or otherwise retain any former Crown Risdon employees except as expressly excepted below:
a. With respect to any former Crown Risdon employee who has not signed a noncompetition protection agreement ("such former employee"), HCP may hire such former employee twelve months after such employees late date of paid employment with Crown Risdon. Beginning on October 5, 2009, HCP USA may hire any such former employee, who has not signed a noncompetition or business protection agreement, without regard to the twelve (12) month prohibition in this paragraph 3 (a), provided HCP USA has not solicited such former employee in violation of paragraph 2 of this Agreement.
(3) Paragraph 4 — With respect to any such former employee not subject to a non-competition or business protection agreement, upon HCP's written notice to Crown Risdon of its intention to hire, HCP USA may hire any such former employee provided Crown Risdon has granted HCP USA written consent for it to do so. Crown Risdon's consent will not be unreasonably withheld. In any case where Crown Risdon has terminated any such former employee for "cause," consent will not be withheld.
(4) Paragraph 5 — Nothing in this Stipulated Judgment shall adversely affect Crown Risdon's rights and remedies against it current or former employees, independent of this Stipulated Judgment and its terms, for claims by contract, statute or at common law.
(5) Paragraph 7 — A Judgment of Permanent Injunction, pursuant to the terms set forth herein shall enter, consistent with this Stipulation.
(6) Paragraph 8 — Crown Risdon shall be entitled to attorneys fees for a successful action based on a breach of this Stipulated Judgment.
Crown and its subsidiaries were purchased by RII International ("RII"). Per the terms of that purchase dated November 16, 2006 all of Crown's employees ceased to be employed by Crown and were offered employment with RII.
HCP claims that RII purchased certain assets of Crown and not all assets. It is the position of HCP that RII did not obtain the Stipulated Judgment of this matter.
RII never filed a motion with the court in this case to have it substituted as the named plaintiff.
Therefore, the first question the court must address is whether or not RII has standing to enforce the Stipulated Judgment.
It is the argument of RII that it does not need to move for a formal substitution of the named party plaintiff. It argues that at this stage of the proceedings substitution would be a mere formality. It further argues that HCP has not raised this issue to date, but if it does so in its post-hearing memorandum, the Court has ample authority to order a substitution. It cites Practice Book Section 9-18, 9-20 and Engelman v. Zink, Superior Court, judicial district of Ansonia/Milford at Milford, Docket No. CV 93 0042735S (June 2, 1998) (Curran, S.T.R.).
HCP does raise the issue of standing in its post-hearing memorandum. Therefore, the court must first address this issue.
"[A] party must have standing to assert a claim in order for the court to have subject matter jurisdiction over the claim . . . Standing is the legal right to set judicial machinery in motion. One cannot rightfully invoke the jurisdiction of the court unless he has, in an individual or representative capacity, some real interest in the cause of action, or a legal or equitable right, title or interest in the subject matter of the controversy . . . [Our Supreme Court] has often stated that the question of subject matter jurisdiction, because it addresses the basic competency of the court, can be raised by any of the parties, or by the court sua sponte, at any time . . . [T]he court has a duty to dismiss, even on its own initiative, any appeal that it lacks jurisdiction to hear . . . Moreover, [t]he parties cannot confer subject matter jurisdiction on the court, either by waiver or by consent . . . Standing [however] is not a technical rule intended to keep aggrieved parties out of court; nor is it a test of substantive rights. Rather it is a practical concept designed to ensure that courts and parties are not vexed by suits brought to vindicate nonjusticiable interests and that judicial decisions which may affect the rights of others are forged in hot controversy, with each view fairly and vigorously represented." (Citations omitted; internal quotation marks omitted.) Webster Bank v. Zak, 259 Conn. 766, 774, 792 A.2d 66 (2002). "Where a party is found to lack standing, the court is consequently without subject matter jurisdiction to determine the cause." (Internal quotation marks omitted.) Blakeney v. Commissioner of Correction, 47 Conn.App. 568, 574, 706 A.2d 989, cert. denied, 244 Conn. 913, 713 A.2d 830 (1998)." Cimmino v. Household Realty Corp., 104 Conn.App. 392, 394-95 (2007).
In Wilson v. Zema, 49 Conn.Sup. 542, 896 A.2d 860 (2004), Judge Corradino did an extensive review of the issue of standing. He discussed case law, the Practice Book sections 9-18 and 9-20 and Connecticut General Statues section 52-109.
This court concludes that it is appropriate to first determine whether substitution is appropriate under § 52-109. This requires the court to engage in a two-part analysis. First the court must determine whether the incorrect party was named by mistake. And, second, the court must determine whether substitution is required in order to determine the "real matter in dispute." First, was RII listed as party-plaintiff by mistake? "[M]istake is not defined in § 52-109. The court in Dilieto notes that there is no legislative history and proceeds to analyze what the word was taken to mean in analogous common law and statutory provisions meant to ameliorate other harsh pleading dictates at common law . . . [The DiLieto court] infers that the words `through mistake' in § 52-109 mean `an honest conviction, entertained in good faith and not resulting from the plaintiff's own negligence that she is the proper person to commence the lawsuit.'" (Citations omitted.) Wilson v. Zemba, supra at 549.
Therefore, the first question is, does RII have an honest conviction, entertained in good faith and not resulting from it's own negligence that it is the proper entity to be enforcing this Stipulated Judgment? The answer comes from a reading of the Stock and Asset Purchase Agreement, dated November 16, 2006.
In Connecticut, "[t]he law of contract interpretation militates against interpreting a contract in a way that renders a provision superfluous." United Illuminating Co. v. Wisvest-Connecticut, L.L.C., 259 Conn. 665, 674 (2002) ( citing Kelly v. Figueiredo, 223 Conn. 31, 36 (1992)). This interpretive rule flows from the understanding that "[p]arties generally do not insert meaningless provisions in their agreements and therefore every provision must be given effect if reasonably possible." Hatcho Corporation v. Della Pietra, 195 Conn. 18, 23 (1985); see also, Connecticut Co. v. Division 425, 147 Conn. 608, 617 (1960). This presumption in favor of giving effect to every provision is even stronger in the case of contracts between two commercial entities, drafted with advice of counsel. Tallmadge Bros., Inc. v. Iroquois Gas Transmission System, L.P., 252 Conn. 479, 496-97 (2000).
RII claims that under Article II, Section 2.1(n) the Stipulated Judgment was an asset of Crown which was purchased and transferred to RII. Section 2.1(n) reads as follows:
(n) any causes of action, lawsuits, judgments, claims and demands of any nature that arose or arise or relate to events that occurred prior to the date hereof or that occur prior to, at or following the Closing if the same arose or arise, as the case may be, out of or are related to any of the Transferred Assets or Assumed Liabilities, whether arising by way of counterclaim or otherwise (other than any such causes of action, lawsuits, judgments, claims and demands against Seller, IP Subsidiary or their respective Affiliates;
There are schedules attached to the Purchase Agreement. HCP argues that since the Stipulated Judgment is not listed as a Transferred Asset, it was not transferred. However paragraph 3 of the Introduction to the Schedules reads as follows:
Matters reflected in the attached Schedules are not necessarily limited to matters required by the Agreement to be reflected therein and the inclusion of such matters shall not be deemed as admission that such matters were required to be reflected in the attached Schedules. Such additional matters are set forth for informational purposes only.
Schedule 3.4 is entitled Assets. It lists 8 items. This matter is not listed herein.
Schedule 3.4(b) is entitled Assets necessary and sufficient for operation of business. It lists 6 items. This matter is not listed herein.
Schedule 3.5 is entitled Litigation. It lists 11 items. This matter is not listed herein.
Schedule 3.5(b) is entitled litigation during the past three years. It lists 8 items, the first being this matter.
The only place in the Purchase Agreement which mentions Schedule 3.5 (b) is in Article III, entitled Representations and Warranties of Seller, in Section 3.5. entitled Litigation, in subsection (b). This section reads as follows:
(b) To the Knowledge of the Seller, Schedule 3.5(b) sets forth a true, correct and complete list of any material action, suit or proceeding against the Business, the Transferred Assets, the Transferred Companies, or with respect to the Business, Seller or IP subsidiary during the past three years.
The informative language in the Purchase Agreement is "any causes of action, lawsuits, judgments, claims and demands of any nature that arose or arise or relate to events that occurred prior to the date hereof or that occur prior to, at or following the Closing if the same arose or arise, as the case may be, out of or are related to any of the Transferred Assets or Assumed Liabilities."
Second, is substitution of the party-plaintiff required in order to determine the real matter in dispute? "`Where substitution is necessary for the determination of the real matter in dispute, the issues of substitution may be addressed under the reasoning that the courts should liberally interpret the rules of practice in any case where it shall be manifest that a strict adherence to them would work injustice.' (Internal quotation marks omitted.) Lupinacci v. Stamford, supra, 48 Conn.Sup. 3. The rules of practice `are to be construed so as to alter the harsh and inefficient result that attached to the mispleading of parties at common law.' Federal Deposit Ins. Corp. v. Retirement Management Group, Inc., 31 Conn.App. 80, 84, 623 A.2d 517, cert. denied, 226 Conn. 908, 625 A.2d 1378 (1993). Moreover, `[a]s long as [the] defendant is fully apprised of a claim arising from specified conduct and has prepared to defend the action, his ability to protect himself will not be prejudicially affected . . .' (Internal quotation marks omitted.) DiLieto v. County Obstetrics, supra, Superior Court, Docket No, X02 CV 97150435 [ 26 Conn. L. Rptr. 345]. Thus, if the defendant has notice of the conduct that gave rise to the claims and substitution is necessary to determine the real matter in dispute, a motion to substitute may be granted over a motion to dismiss." Doyan v. Ladson, supra.
Based upon the above analysis, the court finds that substitution of the party-plaintiff is required in order to determine the real matter in dispute and therefore orders that RII be substituted for Crown as the successor plaintiff in this matter.
Therefore the next inquiry by the court is whether or not HCP violated the terms of the Stipulated Judgment.
HCP's view of the facts are as follow. On or about December 5, 2006, Gary Fagan, formerly an employee of Crown and subsequently RII, resigned from RII and started work for HCP, with the understanding that the prior policies of Crown Risdon regarding non-competition were void, as indicated by various documents sent to employees of Crown Risdon, generally, and Gary Fagan, in particular, prior to and following the stock and asset purchase. (See, Def's Ex. D; see also, Def's Ex. B.) At the time that Gary Fagan went to work for HCP, he had not executed, and therefore was not bound by, a Business Protection Agreement with RII.
HCP hired Gary Fagan with the understanding that the October 2004, Stipulated Judgment was no longer in effect because the corporate entity Crown, with whom the judgment had been executed, no longer existed. (Pl's Ex. 10 at 20:7-12; 48:11-17.) This belief was furthered by RII's communications to Gary Fagan and the other employees at RII that the former policies and restrictions of Crown were no longer in effect. HCP's resulting belief that the Stipulated Judgment was no longer in effect was substantiated when, after the hiring of Gary Fagan, RII made no effort to enforce the Stipulated Judgment as to HCP, despite the fact that Gary Fagan did not have a business protection agreement with the new corporate entity, RII.
Approximately eight months after Gary Fagan joined HCP, HCP hired Chad Garrison, having learned through a client, L'Oreal, that he was looking to leave his position at RII. (Pl's Ex. 10 at 7:23-8:1.) Chad Garrison, like Gary Fagan, was hired by HCP based upon an understanding that the prior policies of Crown were void as to RII and its employees and with the further belief that the Stipulated Judgment was no longer in effect based both upon its non-enforcement as to Gary Fagan and the dissolution of Crown.
RII's view of the facts are as follows. HCP violated the terms of the Stipulated Judgment by soliciting Mr. Garrison without the consent of RII and hired him in violation of the Stipulated Judgment.
In order for the court to rule in favor of the plaintiff, the plaintiff has the burden of proving that HCP knew that RI was the successor to Crown, and knew that RII acquired the Stipulated Judgment in its purchase of Crown's assets. The plaintiff has not sustained its burden of proof as to these issues. If RII had at the time of its purchase of Crown, moved to substituted itself into this file, then HCP would have been on notice. When the agreement was entered into between Crown and RII, there was no notice sent to HCP as to the fact that it was also purchasing the Stipulated Judgment. The testimony at the hearing was two-fold: (1) that RII did not raise the issue of the Stipulated Judgment as to Mr. Fagan and (2) that Mr. Levin, president of HCP, never saw the purchase agreement between Crown and RII until this matter was in court. The court finds this testimony credible.
Therefore, the court finds for the defendant on this Motion to Enforce.