Opinion
CV116010917.
12-21-2012
Brian GATES v. David CARTWRIGHT.
UNPUBLISHED OPINION
MARTIN, J.
FACTS
On July 13, 2012, following a request to revise, the plaintiff, Brian Gates, filed a six-count third revised complaint against the defendants, David Cartwright, the Cartwright Corporation and Iron Horse Auto, LLC (Iron Horse) alleging two counts of breach of contract, violation of the Connecticut Unfair Trade Practices Act (CUTPA), General Statutes § 42-110a et seq., civil theft, breach of fiduciary duty and a demand for an accounting. On August 23, 2012, the defendants filed a motion to strike counts three and four. The defendants move to strike count three on the ground that the plaintiff fails to state a claim upon which relief can be granted because breach of an employment contract does not give rise to a claim under CUTPA. The defendants move to strike count four on the grounds that the plaintiff's claim is legally insufficient to support a cause of action for statutory theft because it fails to allege the intent to deprive and an allegation of an unpaid sum of money cannot serve as a basis for a claim of statutory theft. The defendants also move to strike corresponding CUTPA prayers for relief three and four, as well as, prayers for relief two, five, seven, eight and nine on the grounds that these prayers for relief are legally insufficient because the plaintiff has not alleged intentional, reckless or wilful conduct required for an award of common-law punitive damages, that failure to pay net profits does not constitute a failure to pay wages pursuant to General Statutes § 31-71a and prejudgment interest cannot be awarded without a determination that money is both due and payable.
In count three of the revised complaint the plaintiff alleges the following facts. Central Ford and Central Mazda are operated by the defendant Cartwright Corporation, Central Hyundai is operated by the defendant Iron Horse and all of these entities are controlled and owned by defendant Cartwright. In or about February 2007, Cartwright hired the plaintiff as the general manager of Central Ford and Central Mazda with an agreed upon compensation of $1500 per week and a 15 percent share of the net profits. In early 2008, Cartwright created Iron Horse which began operating as Central Hyundai. The plaintiff was instrumental in acquiring this Hyundai franchise through his connections and as a result the franchise agreement reflected the plaintiff as a 30 percent owner with his ownership interest increasing 3 percent each year until he attained a 50 percent ownership interest in the Central Hyundai franchise. As a 30 percent owner, the plaintiff was entitled to 30 percent of the net profits of Central Hyundai.
The plaintiff further alleges that while he was employed as general manager of Central Ford and Central Mazda, he discovered that his 15 percent share of profits was being diluted by order of Cartwright and that Cartwright was using the profits of both Central Ford and Central Mazda to pay for various personal expenses. As a result, the plaintiff demanded an accounting of each business at the end of 2009, and demanded that prior entries be corrected to reflect the true net profit. On several occasions, Cartwright represented that he would make the plaintiff whole as to his employment agreement and his ownership interests, however, Cartwright did not take the agreed upon action. Soon after, Cartwright claimed that there were no profits to be distributed as they were used to pay off Central Hyundai's capital loan. The plaintiff advised Cartwright that he would not return to work until he was paid. Cartwright made statements to the plaintiff that there had been no profit from the business for years, that the plaintiff did not deserve the compensation he was promised and that Cartwright would keep any profits for himself. The defendants breached their employment contract with the plaintiff and that by failing to pay him the required compensation he is entitled to damages.
Additionally, the plaintiff alleges, that the defendants are engaged in commerce as defined by CUTPA and that the defendants' actions in misrepresenting net profits, failing to pay off loans on " trade ins" in a timely manner and misrepresenting intentions to pay according to their agreement to keep the plaintiff working are all acts that are either immoral, unethical, oppressive or unscrupulous, that these acts offend public policy, that these acts caused the plaintiff substantial injury and as a result of that injury the plaintiff suffered an ascertainable loss and this constitutes a violation of CUTPA. In count four the plaintiff alleges that by refusing to pay wages, bonus and percentage interest of the plaintiff's ownership, Cartwright wrongfully retained the plaintiff's property, that this constitutes civil theft pursuant to General Statutes § 52-564 and that the plaintiff has been damaged.
The defendants' motion to strike is accompanied by a memorandum of law. The plaintiff filed a memorandum in opposition on September 19, 2012. The matter was heard at short calendar on October 3, 2012.
DISCUSSION
" A motion to strike challenges the legal sufficiency of a pleading, and, consequently, requires no factual findings by the trial court." (Internal quotation marks omitted.) New London County Mutual Ins. Co. v. Nantes, 303 Conn. 737, 747, 36 A.3d 224 (2012). " It is fundamental that in determining the sufficiency of a complaint challenged by a defendant's motion to strike, all well-pleaded facts and those facts necessarily implied from the allegations are taken as admitted." (Internal quotation marks omitted.) Coe v. Board of Education, 301 Conn. 112, 116-17, 19 A.3d 640 (2011). " [P]leadings must be construed broadly and realistically, rather than narrowly and technically." (Internal quotation marks omitted.) Connecticut Coalition for Justice in Education Funding, Inc. v. Rell, 295 Conn. 240, 253, 990 A.2d 206 (2010). " [W]hat is necessarily implied [in an allegation] need not be expressly alleged." Coppola Construction Co. v. Hoffman Enterprises Ltd. Partnership, 134 Conn.App. 203, 207, 38 A.3d 215, cert. granted on other grounds, 304 Conn. 923, 41 A.3d 663 (2012). " Practice Book ... § 10-39, allows for a claim for relief to be stricken only if the relief sought could not be legally awarded." Pamela B. v. Ment, 244 Conn. 296, 325, 709 A.2d 1089 (1998).
The defendants argue that count three is legally insufficient to state a claim upon which relief can be granted because breach of an employment agreement does not give rise to a claim under CUTPA. They move to strike count three and the corresponding prayers for relief. The plaintiff counters that he has alleged sufficient aggravating factors to elevate his claim for a breach of employment agreement in count three to an act that meets the requirements of a CUTPA claim because the defendants' actions are immoral, unethical, oppressive or unscrupulous.
With regard to a CUTPA claim, " [General Statute § ]42-110b(a) 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. It is well settled that in determining whether a practice violates CUTPA we have adopted the criteria set out in the cigarette rule by the federal trade commission for determining when a practice is unfair: (1)[W]hether the practice, without necessarily having been previously considered unlawful, offends public policy as it has been established by statutes, the common law, or otherwise in other words, it is within at least the penumbra of some common law, statutory, or other established concept of unfairness; (2) whether it is immoral, unethical, oppressive, or unscrupulous; (3) whether it causes substantial injury to consumers, [competitors or other businesspersons] ... All three criteria do not need to be satisfied to support a finding of unfairness. A practice may be unfair because of the degree to which it meets one of the criteria or because to a lesser extent it meets all three ... Thus a violation of CUTPA may be established by showing either an actual deceptive practice ... or a practice amounting to a violation of public policy." Harris v. Bradley Memorial Hospital & Health Center, 296 Conn. 315, 350-51, 994 A.2d 153 (2010).
General Statutes § 42-110a(4) provides: " ‘ Trade and commerce’ means the advertising, the sale or rent or lease, the offering for sale or rent or lease, or the distribution of any services and any property, tangible or intangible, real, personal or mixed, and any other article, commodity, or thing of value in this state." Our Appellate Court in Quimby v. Kimberly Clark Corp., 28 Conn.App. 660, 670, 613 A.2d 117 (1992), rejected the plaintiff's CUTPA claim when " [t]he plaintiff does not allege that the defendant committed these acts in the conduct of any trade or commerce ... The relationship ... is not between a consumer and a commercial vendor, but rather between an employer and an employee. There is no allegation in the complaint that the defendant advertised, sold, leased or distributed any services or property to the plaintiff." Id.
" It is well settled that purely intracorporate conflicts do not constitute CUTPA violations ... Our Supreme Court has distinguished, however, internal corporate actions that also have the effect of usurping the customers, employees or assets of one business in favor of another business ... [T]he plaintiffs did not allege that the defendants personally engaged in any business or commercial activity in competition with the plaintiffs. Accordingly, the present matter involves purely intracorporate matters, and the plaintiffs failed to allege any facts in their revised complaint that would satisfy CUTPA's requirement that the defendants' conduct implicated trade or commerce." (Citations omitted; internal quotation marks omitted.) Metcoff v. Lebovics, 123 Conn.App. 512, 519, 2 A.3d 942 (2010).
In the present case, the plaintiff alleges in count three a violation of CUTPA for conduct associated with a breach of an employment agreement, misrepresentation of intentions with regard to profits to which the plaintiff claims he is entitled and alleged questionable business practices by the defendants in paying off loans for cars received as trade ins. Although the plaintiff alleges that these acts are either immoral, unethical, oppressive or unscrupulous, the plaintiff fails to allege any facts to support that the defendants engaged in any business or commercial activity in competition with the plaintiff or that the defendants' conduct implicates trade or commerce with the plaintiff. In this case, the acts alleged by the plaintiff involve conduct occurring solely within the confines of the employer-employee relationship. The plaintiff's allegations involve purely intracorporate matters that do not meet the exception set out by our Supreme Court permitting claims for business or commercial activity that places the defendant in competition with the plaintiff. See Metcoff v. Lebovics, supra, 123 Conn.App. at 519.
The plaintiff further argues that he has alleged sufficient facts to meet the substantial aggravating circumstances test such that the court may hold that this was not a simple breach of contract, but a course of conduct by the defendants to deprive him of profits. The complaint alleges that " all the [d]efendants are engaged in trade or commerce as defined by Connecticut General Statutes Section 42-110a et seq." but it fails to allege facts sufficient to support that the relationship of the parties is one between a consumer and a commercial vendor, rather than between an employer and an employee. Absent factual allegations to support that such a relationship exists, the plaintiff's claim in count three is legally insufficient as it fails to implicate trade or commerce pursuant to CUTPA. See Quimby v. Kimberly Clark Corp., supra, 28 Conn.App. at 670. As the " conduct of any trade or commerce" pursuant to CUTPA is a threshold matter, the plaintiff's claim as to CUTPA is legally insufficient. As a result, the defendants' motion to strike count three and the corresponding prayers for relief three and four must be granted.
As to count four, the defendants argue that it is legally insufficient because (1) it fails to allege the intent to deprive and (2) the plaintiff has merely claimed the defendants failed to pay him a sum of money allegedly owed and an allegation of an unpaid sum of money cannot serve as a basis for a claim of statutory theft. The plaintiff counters that allegations in the complaint form the basis for the intent to steal monies from the defendant and clearly pleads theft, thus is legally sufficient.
Section 52-564 provides: " Any person who steals any property of another, or knowingly receives and conceals stolen property, shall pay the owner treble his damages." With regard to a claim under § 52-564 " [t]he elements that the plaintiffs must prove to obtain treble damages under the civil theft statute, § 52-564, are the same as the elements required to prove larceny, pursuant to General Statutes § 53a-119 ... A person commits larceny when, with intent to deprive another of property or to appropriate the same to himself or a third person, he wrongfully takes, obtains or withholds such property from an owner ... It must be shown that (1) there was an intent to do the act complained of, (2) the act was done wrongfully, and (3) the act was committed against an owner ... The essential cause of action is a wrongful exercise of dominion over personal property of another." Kosiorek v. Smigelski, 138 Conn.App. 695, 713 (2012).
Our Supreme Court set forth " the general rule that, [an] action for conversion of funds may not be maintained to satisfy a mere obligation to pay money ... It must be shown that the money claimed, or its equivalent, at all times belonged to the plaintiff and that the defendant converted it to his own use ... Thus, [t]he requirement that the money be identified as a specific chattel does not permit as a subject of conversion an indebtedness which may be discharged by the payment of money generally ... A mere obligation to pay money may not be enforced by a conversion action ... and an action in tort is inappropriate where the basis of the suit is a contract, either express or implied ... Consistent with this rule, in our case law sustaining a cause of action wherein money was the subject of the conversion or theft, the plaintiffs in those cases at one time had possession of, or legal title to, the money." (Citations omitted; internal quotation marks omitted.) Deming v. Nationwide Mutual Ins. Co., 279 Conn. 745, 772, 905 A.2d 623 (2006). The court, however, goes further and states that " [t]he term owner is one of general application and includes one having an interest other than the full legal and beneficial title ... The word owner is one of flexible meaning, and it varies from an absolute proprietary interest to a mere possessory right ... It is not a technical term and, thus, is not confined to a person who has the absolute right in a chattel, but also applies to a person who has possession and control thereof." Id., at 770.
Pursuant to § 52-564 the defendants argue that the plaintiff's claim as to statutory theft in count four is legally insufficient because the complaint fails to allege the intent to deprive the plaintiff. The defendant asserts that the plaintiff unequivocally failed to allege in count four that the defendants acted with intent. The plaintiff argues in response that he has alleged that despite the obligation to pay him, for reasons completely unrelated to employment performance, that Cartwright stated he was going to keep the profits. The plaintiff's complaint contains allegations " that regardless of the agreement ... Cartwright was going to keep the profit." This allegation, even if it does not expressly state that Cartwright acted with the intent to deprive, provides sufficient implication as to Cartwright's intent to deprive that a reasonable inference can be drawn. In determining the defendants' motion to strike, construing the pleadings broadly and in the light most favorable to the plaintiff, the facts implied from the allegations are taken as admitted. See Coppola Construction Co. v. Hoffman Enterprises Ltd. Partnership, supra, 134 Conn.App. at 207. The plaintiff has alleged sufficient facts in his complaint with regard to the defendants' intent, however, to determine if the claim of statutory theft is legally sufficient the court must examine the remaining elements of a legally sufficient statutory theft claim.
As to the remaining prongs of statutory theft, the plaintiff must allege sufficient facts as to the wrongfulness of the defendant's actions and that the acts were committed against an owner. In his complaint, the plaintiff alleges, inter alia, that he was entitled to a 30 percent share of profits based on his 30 percent ownership share in Central Hyundai, and that Cartwright was using profits to pay for personal expenses. The plaintiff further alleges that the defendants have unlawfully retained his property, and that by Cartwright's refusal to pay wages, bonus and percentage interest of the plaintiff's ownership in Central Hyundi he has wrongfully retained the plaintiff's property.
Finally, with regard to count four, the court addresses the defendant's argument that the plaintiff's claim for statutory theft is legally insufficient because the plaintiff has " merely" claimed the defendants failed to pay him a sum of money allegedly owed and an allegation of an unpaid sum of money cannot serve as a basis for a claim of statutory theft. The defendants cite Deming v. Nationwide Mutual Ins. Co., supra, 279 Conn. at 745, to support their argument that the plaintiff cannot sustain a claim for statutory theft. The defendants' reliance on Deming, however, is misplaced as in that case the court applied this rule to conclude that the plaintiff's claims of conversion and theft failed because they had not alleged, or represented to the court that they ever possessed or owned legal title to the disputed funds, but had at best merely alleged the defendants were obligated to pay the money. Deming v. Nationwide Mutual Ins. Co., supra, 279 Conn. at 773. Additionally, the court in Deming described ownership as a flexible concept that varies from an absolute proprietary interest to a mere possessory right. Id., at 770. In the present case, the plaintiff has gone beyond mere allegations of monies owed. He has alleged, inter alia, that the defendants wrongfully detained his property by refusing to pay him according to his ownership interest, that he is entitled to these profits as a result of his ownership interest and that the defendants used profits for personal expenses. As a result, the defendants' motion to strike count four and prayer for relief five requesting treble damages pursuant to § 52-564 must be denied.
The defendants also move to strike prayers for relief two, seven, eight and nine. With regard to prayer for relief two, which seeks common-law punitive damages, the defendants argue that it is legally insufficient because the plaintiff's allegations do not reveal a reckless indifference to the rights of others or an intentional or wanton violation of those rights. The plaintiff counters that paragraph thirty-three of his complaint clearly states the defendants' acts were intentional and wanton because Cartwright was planning on keeping the profits owed to the plaintiff.
The law with regard to punitive damages in breach of contract cases is well-settled. " Punitive damages are not ordinarily recoverable for breach of contract ... This is so because punitive or exemplary damages are assessed by way of punishment, and the motivating basis does not usually arise as a result of the ordinary private contract relationship." (Citations omitted; internal quotation marks omitted.) Barry v. Posi-Seal International, Inc., 40 Conn.App. 577, 584, 672 A.2d 514, cert. denied, 237 Conn. 917, 676 A.2d 1373 (1996). " Breach of contract founded on tortious conduct may allow the award of punitive damages. Such tortious conduct must be alleged in terms of wanton and malicious injury, evil motive and violence, for punitive damages may be awarded only for outrageous conduct, that is, for acts done with a bad motive or with a reckless indifference to the interests of others." (Internal quotation marks omitted.) L.F. Pace & Sons v.. Travelers Indemnity Co., 9 Conn.App. 30, 48, 514 A.2d 766, cert. denied, 201 Conn. 811, 516 A.2d 886 (1986).
In the present case, with regard to punitive damages, the defendants argue that the plaintiff failed to allege reckless indifference to the rights of others or an intentional or wanton violation of those rights. The plaintiff alleges that the defendants intentionally withheld profits to which he was entitled, however, the complaint fails to allege conduct by the defendants sufficient to raise his claim to the level of outrageous conduct necessary such that the extraordinary remedy of punitive damages is available. In his complaint, the plaintiff merely alleges the retention of profits by the defendants and it is absent allegations of fact that the defendants' conduct is wanton, malicious, outrageous or done with bad motive or reckless indifference. The plaintiff's allegations are insufficient to support a claim of common-law punitive damages in a case sounding in a breach of contract. As a result, the defendants' motion to strike prayer for relief two must be granted.
The defendants also argue that prayers for relief seven and eight should be stricken because allegations of failure to pay net profits does not constitute a failure to pay wages as defined in General Statutes § 31-72 and as a result there is no statutory violation. The plaintiff argues that under the statute an agreement to pay a certain percentage is considered wages and prayers for relief seven and eight should not be stricken.
Section 31-72 provides in relevant part: " When any employer fails to pay an employee wages in accordance with the provisions of sections 31-71a ... such employee or labor organization may recover, in a civil action, twice the full amount of such wages, with costs and such reasonable attorneys fees as may be allowed by the court, and any agreement between him and his employer for payment of wages other than as specified in said sections shall be no defense to such action." Section § 31-71a(3) provides: " ‘ Wages' means compensation for labor or services rendered by an employee, whether the amount is determined on a time, task, piece, commission or other basis of calculation. Our Supreme Court concluded in Weems v. Citigroup, Inc., 289 Conn. 769, 782, 961 A.2d 349 (2008), " bonuses that are awarded solely on a discretionary basis, and are not linked solely to the ascertainable efforts of the particular employee, are not wages under § 31-71a(3)." Id. In Ziotas v. Reardon Law Firm, P.C., 296 Conn. 579, 588, 997 A.2d 453 (2010), the court concluded that the bonus was not wages pursuant to § 31-71a because the bonus was discretionary and " not calculated on the basis of any particular percentage of the [law firm's] income." (Internal quotation marks omitted.) Id.
More recently in Association Resources v. Wall, 298 Conn. 145, 176, 2 A.3d 873 (2010), the court held a bonus to be wages under § 31-71a when " under the employment agreement, [the bonuses] were entirely nondiscretionary, both as to whether they would be awarded, and the amount thereof." Id. Additionally, in that case, the court cited a New Hampshire case where an automobile dealership manager's entitlement to percentage of dealer profits was found to be wages because it was obvious that the parties' agreement for a share of profits was intended to provide compensation for the manager's labor and services, and it could fall within the wage statute's reference to compensation calculated on some other basis. Id., at 179-80.
In the present case, the plaintiff alleges, inter alia, that his " compensation was $1, 500 per week and 15 percent of the profits of both Central Ford and Central Mazda, " and that he was employed as general manager of Central Ford and Central Mazda. The implication of these allegations is that these amounts were compensation for labor or services rendered pursuant to § 31-71a(3). This case is distinguished from Weems v. Citigroup, Inc., supra, 289 Conn. at 782, and Ziotas v. Reardon Law Firm, P.C., supra, 296 Conn. at 588, in that the plaintiff in the present case, alleges sufficient facts that the amounts owed to him by the defendants are nondiscretionary as to whether they would be awarded and as to amount since it is based on a particular percentage of the companies' profits. See Association Resources v. Wall, supra, 298 Conn. at 179-80. The plaintiff's complaint, when construed broadly and in the light most favorable to the plaintiff, alleges sufficient facts to support a claim that net profits due to him are wages pursuant to § 31-71a(3). Therefore, the defendants' motion to strike prayers for relief seven and eight must be denied.
Lastly, the defendants move to strike prayer for relief nine on the ground that prejudgment interest cannot be awarded without a determination that any money owed is both due and payable, and there has been no such determination in this case. The plaintiff argues that the amounts at issue have been owed to the plaintiff since 2008, and should remain as part of the complaint until the case is tried.
General Statutes § 52-91 provide in relevant part: " There shall be one form of civil action. The first pleading on the part of the plaintiff shall be known as the complaint and shall contain a statement of the facts constituting the cause of action and, on a separate page of the complaint, a demand for the relief, which shall be a statement of the remedy or remedies sought." General Statutes § 37-3a provide in relevant part: " [I]nterest at the rate of ten percent a year, and no more, may be recovered and allowed in civil actions ... as damages for the detention of money after it becomes payable." " Under § 37-3a, an allowance of prejudgment interest turns on whether the detention of the money is or is not wrongful under the circumstances." (Internal quotation marks omitted.) Associated Catalog Merchandisers, Inc. v. Chagnon, 210 Conn. 734, 748, 557 A.2d 525 (1989). " A trial court must make two determinations when awarding compensatory interest under § 37-3a: (1) whether the party against whom interest is sought has wrongfully detained money due the other party; and (2) the date upon which the wrongful detention began in order to determine the time from which interest should be calculated." Advanced Financial Services, Inc. v. Associated Appraisal Services, Inc., 79 Conn.App. 22, 31, 830 A.2d 240 (2003). " An award of prejudgment interest under § 37-3a is an equitable determination lying within the discretion of the trial court." Cohen v. Meyers, Superior Court, judicial district of Middlesex, Docket No. CV 11 5008047 (August 27, 2012, Morgan, J.), citing Ballon v. Law Offices Howard Lee Schiff, P.C., 304 Conn. 348, 363, 39 A.3d 1075 (2012).
Pursuant to § 37-3a damages are recoverable for money owed after it becomes payable as allowed by § 37-3a and pursuant to § 52-91 pleadings shall contain, inter alia, a demand for relief in the form of the remedies sought. In the present case, the facts alleged by the plaintiff include that he is owed money by the defendants and that this money has been wrongfully detained by them. The plaintiff has included in the complaint a statement of the remedies sought in the form of prejudgment interest. Pursuant to the foregoing statutes as well as case law, the plaintiff has alleged legally sufficient facts to allow a remedy in the form of prejudgment interest. As a result, the defendant's motion to strike as to prayer for relief nine must be denied.
CONCLUSION
For the foregoing reasons, the defendants' motion to strike is granted as to count three, and prayers for relief two, three and four. The defendants' motion to strike is denied as to count four, and prayers for relief five, seven, eight and nine.