Opinion
FBTCV156053151
05-13-2016
Jolen, Inc. v. Brodie & Stone, PLC et al
UNPUBLISHED OPINION
MEMORANDUM OF DECISION RE MOTION TO STRIKE #101
Michael P. Kamp, J.
Before the court is a motion to strike filed by the defendants, Brodie & Stone PLC and Brodie & Stone International, PLC, against the third count of the complaint filed by the plaintiff, Jolen, Inc., which alleges violations of the Connecticut Unfair Trade Practices Act, General Statutes § 42-110a through 42-110q (CUTPA). The defendants seek to strike count three of the plaintiff's complaint on the ground that the plaintiff has not alleged substantial aggravating circumstances to transform what amounts to a breach of contract claim into a CUTPA claim.
FACTS
The plaintiff commenced this action on October 7, 2015, by service of process of its three-count complaint on the defendants. In its complaint, the plaintiff alleges breach of contract (count one), breach of fiduciary duty (count two), and violations of CUTPA (count three) against the defendants. In support of its claims, the plaintiff alleges the following facts.
The plaintiff, a Delaware corporation, is a producer and manufacturer of skin care goods with its principal place of business in Fairfield. The distribution by the defendants of one of the plaintiff's goods, Jolen Creme Bleach (product), is the subject of this litigation. The defendants, both corporations organized in the United Kingdom, were responsible for distributing the plaintiff's product in the United Kingdom and Ireland (territory) from approximately the 1960s until October of 2014. Despite their longstanding business relationship, the parties did not memorialize the terms of their arrangement in writing until May 1, 1994, when the parties executed a distribution agreement. Under the terms of the distribution agreement, which automatically renewed every four years subject to the parties' option to terminate, the defendants were to be the sole distribution agent of the product in the territory. The plaintiff was to ship the product to the defendants, and the defendants were to handle the sale and distribution of the product to customers in exchange for a commission. Specifically, the defendants were to collect all revenue from the sale of the product, deduct from that revenue any costs incurred by the defendants for, among other things, the shipping and warehousing of the product, and remit the remaining funds to the plaintiff along with an accounting of any incurred expenses on a monthly basis.
Sometime in 2013, the plaintiff noticed that while the amount of the product shipped to the defendants in 2011 and 2012 had remained consistent with past quantities, the warehousing and shipping costs claimed by the defendants had increased in both years. The plaintiff voiced its concerns to the defendants, and thereafter, a separate warehousing and freight account was established to track the defendants' shipping and warehousing costs for the plaintiff's product alone. After the separate account was established, the defendants' reported warehousing and shipping costs reverted to an amount consistent with past levels, although the defendants refused to refund any increased costs from 2011 or 2012 to the plaintiff. On information and belief, the defendants increased the plaintiff's warehousing and shipping costs by surreptitiously charging the plaintiff for storage and shipping costs associated with the defendants' own products.
Additionally, the defendants have breached the distribution agreement in that they have failed to pay the plaintiff at least £ 245, 111 in revenue received from the sale of the product, and have been simultaneously selling a competitor's product since January of 2013. In late 2014, the plaintiff elected not to renew the distribution agreement with the defendants. Subsequently, the defendants refused to return the remaining product packing inventory in the defendants' possession to the plaintiff--in accordance with industry custom--and the defendants' executive has refused to meet with the plaintiff to discuss the end of the parties' relationship. Accordingly, the defendants have breached the terms of the distribution agreement and the fiduciary duty owed to the plaintiff pursuant to the parties' agency relationship, and have violated CUTPA. The plaintiff seeks contractual damages, CUTPA damages, attorneys fees, and interest.
On December 17, 2015, the defendants filed a motion to strike count three of the plaintiff's complaint, which alleges violations of CUTPA, on the grounds that regardless of whether the plaintiff seeks to assert a CUTPA claim under either a deceptive practice or an unfair trade practice theory, the plaintiff's allegations against the defendants sound in breach of contract and not violations of CUTPA. The defendants' motion is accompanied by a memorandum of law. On January 19, 2016, the plaintiff filed a memorandum of law in opposition to the defendants' motion. Thereafter, on January 29, the defendants filed a reply to the plaintiff's opposition. This matter was heard before the court at short calendar on February 8, 2016.
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.) JP Morgan Chase Bank, N.A. v. Winthrop Properties, LLC, 312 Conn. 662, 670, 94 A.3d 622 (2014). " [The court] construe[s] the complaint in the manner most favorable to sustaining its legal sufficiency . . . Thus, [i]f facts provable in the complaint would support a cause of action, the motion to strike must be denied . . . Moreover, [the court notes] that that is necessarily implied [in an allegation] need not be expressly alleged . . . 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 . . . Indeed, pleadings must be construed broadly and realistically, rather than narrowly and technically." (Internal quotation marks omitted.) Coppola Construction Co. v. Hoffman Enterprises Ltd. Partnership, 309 Conn. 342, 350, 71 A.3d 480 (2013). " A motion to strike will . . . not be granted unless the facts alleged in the count and reasonable inferences from those facts, read in the light most favorable to the pleader, cannot support a cause of action." Millennium Developers 2, LLC v. Freytag, Superior Court, judicial district of Hartford, Docket No. CV-04-0833584-S, (December 21, 2004, Beach, J.).
The defendants argue that the plaintiff's CUTPA claim in count three is insufficiently pleaded and should be stricken, regardless of whether the plaintiff attempts to proceed under either a " deceptive trade practice" theory or an " unfair trade practice theory" of liability. The defendants contend that the plaintiff's allegations, if proved true, amount to nothing more than a " garden variety" claim for breach of contract, and that a majority of Connecticut courts have held that allegations of breach of contract--in the absence of additional aggravating circumstances not present on these facts--do not support a CUTPA claim. The insufficiency of the plaintiff's allegations is particularly clear, the defendants insist, with respect to the plaintiff's allegations regarding the inflated warehousing and shipping expenses allegedly charged by the defendants, as the plaintiff has pleaded that the parties subsequently resolved any problems with the defendants' billing practices.
In response, the plaintiff argues that it has sufficiently alleged deceptive practices to substantiate its CUTPA claim in that the improperly and deceptively charged the plaintiff for the defendants' own warehousing and shipping costs. The plaintiff points out that it alleged in its complaint that the defendants made false representations to the plaintiff regarding the amount of the costs that the plaintiff was responsible for, and the plaintiff made payment to the defendants based on those representations to the plaintiff's detriment. The plaintiff argues that the circumstances of this case--given the parties' longstanding business relationship--suggest that the defendants had the means of knowing, should have known, or had a duty to know the actual amount of warehousing and shipping assessable to the plaintiff, and that under these circumstances, even if the defendants' misrepresentations were made innocently, the defendants' conduct could still be a violation of CUTPA. Additionally, the plaintiff argues that it has pleaded multiple breaches of the distribution agreement by the defendants under deceptive circumstances, and further, that the same allegations also allow for the plaintiff's CUTPA claim to proceed under a standalone " unfair trade practice" theory.
Under CUTPA, " no person shall engage in unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce." General Statutes § 42-110b. " Any person who suffers an ascertainable loss of money or property, real or personal, as a result of the use or employment of a method, act or practice prohibited by [S]ection 42-110b, may bring an action . . . to recover actual damages." " CUTPA has come to embrace a much broader range of business conduct than does the common-law tort action . . . Moreover, [b]ecause CUTPA is a self-avowed remedial measure . . . it is construed liberally in an effort to effectuate its public policy goals . . . Indeed, there is no . . . unfair [or] deceptive act or practice that cannot be reached [under CUTPA]." (Alterations in original; citations omitted; internal quotation marks omitted.) Associated Investment Co. Ltd. Partnership v. Williams Associates IV, 230 Conn. 148, 157-58, 645 A.2d 505 (1994).
" [A] violation of CUTPA may be established by showing either an actual deceptive practice . . . or a practice amounting to a violation of public policy." (Citation omitted; internal quotation marks omitted.) Daddona v. Liberty Mobile Home Sales, Inc., 209 Conn. 243, 254, 550 A.2d 1061 (1988); see also Langan v. Johnson & Johnson Consumer Companies, Inc., 95 F.Supp.3d 284, 288 (D.Conn. 2015) (explaining deceptive practice and unfair trade practice claims as separate theories under CUTPA). " The plain statutory language provides that a person violates CUTPA by committing deceptive or unfair acts . . . 'Deceptive' has a more obvious and more narrow meaning than 'unfair'; a practice may presumably be 'deceptive' yet not satisfy the [pleading requirements for an unfair trade practice]. Nevertheless, our case law seems consistently to conflate the concepts." (Citation omitted; footnote added.) Milford Paintball, LLC v. Wampus Milford Associates, LLC, 156 Conn.App. 750, 758 n.5, 115 A.3d 1107, cert. denied, 317 Conn. 912, 116 A.3d 812 (2015).
" [I]n determining whether a practice violates CUTPA we have adopted the criteria set out in the cigarette rule by the [F]ederal [T]rade [C]omission 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." (Alterations in original; internal quotation marks omitted.) Artie's Auto Body, Inc. v. Hartford Fire Ins. Co., 317 Conn. 602, 609 n.9, 119 A.3d 1139 (2015). There is some question as to the continued viability of the cigarette rule given the Federal Trade Commission's abandonment of the rule in favor of a more stringent standard; see id., 622 n.13; in any event, however " [t]his list . . . refers only to practices that are not deceptive." CNF Constructors, Inc. v. Culligan Water Conditioning Co., Superior Court, judicial district of New Haven at Meriden, Docket No. CV-92-0242302-S, (September 9, 1993, Blue, J.).
" A 'deceptive' practice is a CUTPA violation by definition." CNF Constructors, Inc. v. Culligan Water Conditioning Co., Superior Court, judicial district of New Haven at Meriden, Docket No. CV-92-0242302-S, (September 9, 1993, Blue, J.). A plaintiff has sufficiently alleged a CUTPA claim under a deceptive practice theory " if three conditions are met. First, there must be a representation, omission, or other practice likely to mislead consumers. Second, the consumers must interpret the message reasonably under the circumstances. Third, the misleading representation, omission, or practice must be material--that is, likely to affect consumer decisions or conduct." (Internal quotation marks omitted.) Miller v. Guimaraes, 78 Conn.App. 760, 775, 829 A.2d 422 (2003). " [A] competitor or other business person can maintain a CUTPA cause of action without showing consumer injury." (Internal quotation marks omitted.) Thames River Recycling, Inc. v. Gallo, 50 Conn.App. 767, 796, 720 A.2d 242 (1998).
" [N]ot every contractual breach rises to the level of a CUTPA violation." (Internal quotation marks omitted.) Naples v. Keystone Building & Development Corp., 295 Conn. 214, 228, 990 A.2d 326 (2010). If that were the case, " [t]he burdens on and risks inherent in contract formation would be intolerably increased and simple breach of contract claims would turn into windfalls in every case . . . [Nevertheless] [i]t is also true that the same facts that establish a breach of contract claim may be sufficient to establish a CUTPA violation . . . [A]n allegation of breach of contract can make a legally sufficient CUTPA claim as long as there are substantial aggravating circumstances." (Citations omitted; emphasis omitted; internal quotation marks omitted.) Designs on Stone, Inc. v. John Brennan Construction Co., Superior Court, judicial district of Ansonia-Milford, Docket No. CV-97-059997, (April 8, 1998, Corradino, J.) . " [S]ubstantial aggravating circumstances sufficient to support CUTPA claims [include] fraudulent representations, fraudulent concealment, false claims . . . and multiple breaches of contract." (Internal quotation marks omitted.) Murray v. BLP Enterprises, Inc., Superior Court, judicial district of New London, Docket No. CV-11-6008038-S, (November 9, 2011, Martin, J.). " [A] misrepresentation can constitute an aggravating circumstance that would allow a simple breach of contract claim to be treated as a CUTPA violation; it would in effect be a deceptive act . . . [Even an] innocent misrepresentation can amount to a CUTPA violation . . ." Cavaiuolo v. Ahearn, Superior Court, judicial district of New Haven, Docket No. CV-14-6049650-S, (June 17, 2015, Nazzaro, J.); see also Gladstein v. Smithlin, Superior Court, judicial district of Fairfield, Docket No. CV-93-0305659, (September 6, 1994, Pittman, J.) (allegations of single misrepresentation by defendant, though minimal, still sufficient for plaintiff's CUTPA claim to withstand motion to strike). Some Superior Courts have held, however, that " an innocent misrepresentation may be an aggravating circumstance under CUTPA only if the declarant has the means of knowing, ought to know, or has the duty of knowing the truth, " based on principles applicable to negligent misrepresentation claims. See, e.g., Kent Literary Club of Wesleyan University v. Wesleyan University, Superior Court, judicial district of Middlesex, Docket No. CV-156013185, (November 16, 2015, Vitale, J.) quoting Williams Ford, Inc. v. Hartford Courant Co., 232 Conn. 559, 575, 657 A.2d 212 (1995) (applying same principles in context of claim for negligent misrepresentation).
Applying the foregoing authorities to this case, the plaintiff's pleadings satisfy the minimum threshold for a sufficiently pleaded CUTPA claim against the defendants, although admittedly this case presents a close call. The court is not of the opinion, as the defendants' contend, that this is a case in which the plaintiff merely incorporated its breach of contract allegations into a formulaic recitation of the elements of CUTPA. While it is true that the plaintiff did incorporate earlier paragraphs of its complaint to form the basis of its CUTPA claim in count three, the incorporated paragraphs include general allegations that set forth circumstances giving rise to a deceptive practice employed by the defendants. It is true that some of the plaintiff's allegations sound in breach of contract against the defendants, but the plaintiff's allegations with regards to the defendants' misrepresentations of the shipping and warehousing costs assessable to the plaintiff in 2011 and 2012 provide a sufficient basis for the plaintiff's CUTPA claim.
When viewed in the light most favorable to the plaintiff and when giving the plaintiff the benefit of all favorable inferences, as the court must in ruling on a defendant's motion to strike, the following inferences may fairly be drawn from the plaintiff's allegations: 1) the defendants misrepresented the amount of warehousing and shipping costs properly assessable to the plaintiff in 2011 and 2012, a practice that was likely to mislead the plaintiff given the relationship and customs that had existed between the parties since the 1960s, and despite the fact that the defendants were in a position to know the accurate amount of the relevant charges; 2) until the plaintiff discovered the defendants' misrepresentations, the plaintiff reasonably accepted and paid the defendants' charges for two years, given the plaintiff's longstanding business relationship with the defendants; and 3) that the defendants' misrepresentations were material in that they were likely to cause the plaintiff--a business that had partnered with the defendants for decades--to accept them on the basis of that long-standing relationship to the plaintiff's detriment. While the defendants' alleged misrepresentations, if proven true, would also constitute a breach of the distribution agreement between the parties, they are also minimally sufficient to give rise to a CUTPA claim premised on a deceptive practice theory. Thus, on this basis, the plaintiff has sufficiently pleaded a CUTPA claim against the defendants, and therefore, the defendants' motion to strike count three is denied.
Because the plaintiff has sufficiently pleaded a CUTPA claim against the defendants under a deceptive practice theory, the court need not address whether the plaintiff's allegations sufficiently state a CUTPA claim under an unfair trade practice theory, or whether any of the defendants' other actions alleged by the plaintiff transcends the boundaries of an ordinary breach of contract claim against the defendants. " A [motion to strike] addressed simply to the count [in its entirety] will be overruled if any one theory is supported by the allegations in the count." Reynolds v. Owen, 34 Conn.Supp. 107, 112, 380 A.2d 543 (1977). Since at least one theory allows the plaintiff's CUTPA claim to proceed, it is not vulnerable to the defendants' motion to strike.