Opinion
No. CV 04 4000365
June 6, 2006
MEMORANDUM OF DECISION RE MOTION TO STRIKE NO. 124
FACTS
On February 21, 2006, the plaintiff, Riggs-Brewer Industries, Inc., filed a seven-count third amended complaint (complaint) against the following defendants: Shelton Senior Housing, Inc. (Shelton), the United States Department of Urban Housing and Development (Department of Urban Housing), the state of Connecticut, Savarese Schefiliti, Fire Systems, Inc., Buchanan Associates Architects, George Buchanan, individually and Sarah Buchanan, individually (the Buchanans). This action arises from the construction of the Shelton Senior Housing Project (project) in Shelton.
The plaintiff filed an original complaint on August 2, 2004. After the defendant Buchanans' request to revise, which was granted in part and overruled as to the count against the Buchanans, the plaintiff filed an amended complaint on November 21, 2005. On December 16, 2005, the plaintiff filed a second amended complaint. After the Buchanans filed a request to revise count six of the second amended complaint, the plaintiff filed the third amended complaint.
In counts six and seven of the complaint, the plaintiff alleges a breach of contract and negligence, respectively, on the part of the Buchanans. Therein, the following facts are alleged: In October of 1998, the plaintiff and Shelton, the owner of the project, entered into a written contract by the terms of which the plaintiff agreed to build the project, furnish the necessary materials and provide services at the project; the plaintiff fulfilled its contractual obligations to Shelton; the Buchanans were the architects of record for the project; the Buchanans had contractual duties to Shelton; the plaintiff was a beneficiary of the Buchanans' contractual duties to Shelton; the Buchanans possessed knowledge that the plaintiff was a beneficiary of the contract between the Buchanans and Shelton; and the Buchanans failed to perform their contractual duty. In count six, sounding in breach of contract, the plaintiff alleges that, as a result of the Buchanans' breach of their contractual duties to Shelton, the plaintiff suffered damages in the amount of $2,011,883.69. In count seven, sounding in negligence, the plaintiff alleges that, as a result of the Buchanans' negligence, malfeasance or misfeasance in the performance of its duties, the plaintiff suffered damages in the amount of $2,011,883.69.
Count one of the complaint, the foreclosure of a mechanic's lien, is directed against Shelton, the Department of Urban Housing, the state of Connecticut, Savarese Schefiliti, and Fire Systems, Inc.; count two, in breach of contract, is directed against Shelton; count three, in unjust enrichment, is directed against Shelton; count four, in unjust enrichment, is directed against the Department of Urban Housing; and count five, for bad faith, is directed against Shelton.
On February 27, 2006, the Buchanans filed a motion to strike counts six and seven of the complaint on the grounds that the plaintiff, who was not a party to the contract between the Buchanans and Shelton, cannot bring an action against the Buchanans for their performance of that contract (count six), and that the plaintiff's tort claim is barred by the economic loss doctrine (count seven). The Buchanans have submitted a memorandum of law in support of the motion. On March 9, 2006, the plaintiff filed a memorandum of law in opposition. The matter was heard on the short calendar on March 20, 2006.
DISCUSSION
"The purpose of a motion to strike is to contest . . . the legal sufficiency of the allegations of any complaint . . . to state a claim upon which relief can be granted." (Internal quotation marks omitted.) Fort Trumbull Conservancy, LLC v. Alves, 262 Conn. 480, 498, 815 A.2d 1188 (2003). "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.) Asylum Hill Problem Solving Revitalization Assn. v. King, 277 Conn. 238, 246, 890 A.2d 522 (2006). "[I]f facts provable in the complaint would support a cause of action, the motion to strike must be denied." (Internal quotation marks omitted.) Greco v. United Technologies Corp., 277 Conn. 337, 347, 890 A.2d 1269 (2006). "Moreover . . . [w]hat is necessarily implied [in an allegation] need not be expressly alleged . . . Indeed, pleadings must be construed broadly and realistically, rather than narrowly and technically." (Internal quotation marks omitted.) Asylum Hill Problem Solving Revitalization Assn. v. King, supra, 277 Conn. 246. "Where the legal grounds for . . . a motion [to strike] are dependent upon underlying facts not alleged in the plaintiff's pleadings, the defendant must await the evidence which may be adduced at trial, and the motion should be denied." (Internal quotation marks omitted.) Commissioner of Labor v. C.J.M. Services, Inc., 268 Conn. 283, 293, 842 A.2d 1124 (2004). "The court must construe the facts in the complaint most favorably to the plaintiff." (Internal quotation marks omitted.) Faulkner v. United Technologies Corp., 240 Conn. 576, 580, 693 A.2d 293 (1997). CT Page 10528
I. COUNT SIX — BREACH OF CONTRACT
The Buchanans move to strike count six for a breach of contract on the grounds that the plaintiff was neither a party to the contract between the Buchanans and Shelton (the Buchanans/Shelton contract) nor a beneficiary of that contract. In the memorandum of law, they argue that the contract "specifically states the parties' intent that no contractual relationship is established with any other party" by virtue of the Buchanans/Shelton contract. The Buchanans further argue that the plaintiff has not alleged sufficient facts to establish that it was a beneficiary to the Buchanans/Shelton contract because the plaintiff has not pleaded that the Buchanans intended to convey any enforceable contract rights to the plaintiff. The plaintiff counters that the Buchanans' motion to strike relies on facts outside the pleadings; namely, a paragraph within the Buchanans/Shelton contract, and, therefore, these facts may not be considered by the court. In the alternative, the plaintiff argues that the contractual language does evidence the parties' intent to assume a direct obligation to the plaintiff, creating third-party beneficiary rights in the plaintiff."The law regarding the creation of contract rights in third parties in Connecticut is well settled . . . [T]he ultimate test to be applied [in determining whether a person has a right of action as a third-party beneficiary] is whether the intent of the parties to the contract was that the promisor should assume a direct obligation to the third party [beneficiary] and . . . that intent is to be determined from the terms of the contract read in the light of the circumstances attending its making, including the motives and purposes of the parties . . . Although . . . it is not in all instances necessary that there be express language in the contract creating a direct obligation to the claimed third party beneficiary . . . the only way a contract could create a direct obligation between a promisor and a third party beneficiary would have to be . . . because the parties to the contract so intended." (Citations omitted; internal quotation marks omitted.) Dow Condon, Inc. v. Brookfield Development Corp., 266 Conn. 572, 580-81, 833 A.2d 908 (2003).
The Connecticut Supreme Court has stated that "[a] bald assertion that the defendant has a contractual obligation, without more, is insufficient to survive a motion to strike . . ." (Citation omitted, internal quotation marks omitted.) Commissioner of Labor v. C.J.M. Services, Inc., supra, CT Page 10529 268 Conn. 293. Nevertheless, where the plaintiff "set[s] forth a specific contractual obligation and allege[s] that it ha[s] not been met"; id.; "the specific terms of a contract . . . [do not have to be] alleged in order for a claim sounding in contract law to survive a motion to strike." Id., 294. "Whether the terms of the contract support that allegation is a factual question to be determined by the fact finder and, therefore, is not at issue when the trial court considers a motion to strike." Id., 293.
In its complaint, the plaintiff does not allege that it was a party to the contract between the Buchanans and Shelton. Instead, the plaintiff rests its breach of contract claim against the Buchanans on its alleged status of a "direct beneficiary" of the Buchanans/Shelton contract. The plaintiff alleges that the Buchanans had contractual duties to Shelton to inspect the work, approve the requisitions of the plaintiff on a monthly basis so that the plaintiff would be paid, to order extra work when warranted or ordered by Shelton and to approve change orders so that the plaintiff would be paid for extra or additional work as needed; the Buchanans possessed knowledge that the plaintiff was a direct beneficiary of the Buchanans' contractual duties to Shelton and that the plaintiff would rely upon the Buchanans for their contractual obligations as the owner's architect and representative; the Buchanans failed to perform its contractual duty by, inter alia, failing to provide adequate plans and specifications which led to numerous change orders and extra work to be performed by the plaintiff, and failing to properly and timely approve payment applications, causing the plaintiff to experience financial hardships.
In the present case, the plaintiff sets forth the Buchanans' specific contractual obligations and alleges that they have not been met. "[W]hat is necessarily implied [in an allegation] need not be expressly alleged." (Internal quotation marks omitted.) Asylum Hill Problem Solving Revitalization Assn. v. King, supra, 277 Conn. 246. It is implied in the plaintiff's allegations that by obligating the Buchanans to perform certain specific acts in order for the plaintiff to get paid for its work, the Buchanans and Shelton intended the plaintiff to benefit. Therefore, construing broadly, realistically and most favorably to the plaintiff the allegations that its performance and its compensation for the work on the project depended on the Buchanans' performance of its contractual duties to Shelton, the plaintiff's allegations support the inference that the Buchanans/Shelton contract created a direct obligation between the Buchanans and the plaintiff as a third-party beneficiary because the parties to the contract so intended.
Moreover, while the Buchanans base their motion to strike count six of the complaint on the Buchanans/Shelton contract, alleging that the contract "specifically states the parties' intent that no contractual relationship is established with any other party" by virtue of that contract, the plaintiff's complaint is devoid of allegations with respect to that section of the Buchanan/Shelton contract. Therefore, the Buchanans' motion to strike as to count six rests on facts not alleged in the plaintiff's pleadings. "Where the legal grounds for . . . a motion [to strike] are dependent upon underlying facts not alleged in the plaintiff's pleadings, the defendant must await the evidence which may be adduced at trial, and the motion should be denied." (Internal quotation marks omitted.) Commissioner of Labor v. C.J.M. Services, Inc., supra, 268 Conn. 293.
For the foregoing reasons, the Buchanans' motion to strike count six of the plaintiff's complaint is denied.
II. COUNT SEVEN — NEGLIGENCE
The Buchanans move to strike count seven in negligence on the ground that the plaintiff, who was not in privity of contract with the Buchanans, has failed to allege an injury to its person or property. In their memorandum of law in support of the motion, the Buchanans argue that in the absence of privity and without any injury to person or property, the plaintiff has not pleaded a claim legally sufficient to overcome the bar against recovering for purely economic losses in tort claims. In response, the plaintiff counters that the modern trend in Connecticut courts is toward rejecting the economic loss doctrine. As a result, the plaintiff argues that it sufficiently pleaded the existence of a relationship with the Buchanans, a duty by the Buchanans, a breach of that duty and resulting damages, all of which provides a sufficient factual basis to plead negligence, without alleging privity of contract.
The economic loss doctrine is a judicially created doctrine which bars recovery in tort where the relationship between the parties is contractual and the only losses alleged are economic . . . The rationale for this rule appears in Princess Cruises, Inc. v. General Electric Co., 950 F.Sup. 151, 156 (E.D.Va. 1996): [a]lmost every breach of contract involves actions that can be conceived of as a negligent or intentional tort. If left unchecked, the incessant tide of tort law would erode and eventually swallow contract law . . . [I]f tort law and contract law are to fulfill their distinctive purposes, they must be distinguished where it is possible to do so. The economic loss doctrine serves as a basis for such a distinction . . .
The thrust of the common law economic loss rule [therefore] is that in the absence of privity of contract between the plaintiff and the defendant, or, in the absence of an injury to the plaintiff's person or property, the plaintiff may not recover in tort for a purely economic loss . . . While not expressly holding that the economic loss doctrine has been adopted in Connecticut, the Supreme Court . . . applied principles supporting the doctrine in Flagg Energy Development Corp. v. General Motors Corp., [ 244 Conn. 126, 153-54, 709 A.2d 1075 (1998)] . . . Since the decision in Flagg, no appellate authority has addressed whether the economic loss doctrine is recognized in Connecticut . . . Consequently, a split has emerged among the superior courts as to whether the ruling in Flagg bars tort claims for economic loss in non-product liability cases . . . Several superior courts have found that the holding in Flagg amounts to a recognition of the doctrine and warrants an extension of the doctrine well beyond product liability cases."
Greater New Haven Transit District v. Nafis Young Engineers, Inc., Superior Court, judicial district of New Haven, Docket No. CV 02 0469107 (July 1, 2003, Arnold, J.) ( 35 Conn. L. Rptr. 100); Morganti National, Inc. v. Greenwich Hospital Assn., Superior Court, complex litigation docket at Waterbury, Docket No. X06 CV 99 0160125 (September 27, 2001, McWeeny, J.); Worldwide Preservation Services, LLC v. IVth Shea, LLC, Superior Court, judicial district of Stamford/Norwalk at Stamford, Docket No. CV 98 0167154 (February 1, 2001, Tierney, J.) ( 29 Conn. L. Rptr. 7); Amity Regional School District # 5 v. Atlas Construction Co., Superior Court, complex litigation docket at Waterbury, Docket No. X06 CV 99 0153388 (July 26, 2000, McWeeny, J.) ( 27 Conn. L. Rptr. 605).
(Citations omitted, internal quotation marks omitted.) Dunleavey v. Paris Ceramics USA, Inc., Superior Court, judicial district of Fairfield, Docket No. CV 02 0395709 (April 20, 2005, Richards, J.).
"There is also a line of cases that refuses to adopt the economic loss doctrine or adopts the doctrine in limited circumstances." Milltex Properties v. Johnson, Superior Court, judicial district of New London, Docket No. 0565866 (March 15, 2004, Hurley, J.T.R.) ( 36 Conn. L. Rptr. 780, 784).
Imperial Co. v. Encon Construction, Inc., Superior Court, judicial district of Hartford, Docket No. CV 04 4006172 (June 9, 2005, Miller, J.); Dunleavey v. Paris Ceramics USA, Inc., supra, Superior Court, Docket No. CV 02 0395709; Metcoff v. NCT Group, Inc., Superior Court, complex litigation docket at Waterbury, Docket No. X04 CV 04 0184701 (January 10, 2005, Alander, J.); Brandt v. Walker Digital, LLC, Superior Court, complex litigation docket at Stamford, Docket No. X08 CV 03 0194566 (November 1, 2004, Adams, J.) ( 38 Conn. L. Rptr. 182); Santoro, Inc. v. A.H. Harris Sons, Inc., Superior Court, judicial district of Hartford, Docket No. CV 03 0828039 (September 23, 2004, Sheldon, J.) ( 38 Conn. L. Rptr. 4); Smith Craft Real Estate Corp. v. Handex of Connecticut, Inc., Superior Court, judicial district of Ansonia-Milford, Docket No. CV 03 0082188 (June 25, 2004, Ronan, J.T.R.) ( 37 Conn. L. Rptr. 272); Milltex Properties v. Johnson, supra, 36 Conn. L. Rptr. 780; Best Friends Pet Care, Inc. v. Design Learned, Inc., Superior Court, complex litigation docket at Waterbury, Docket No. X06 CV 00 0169755 (December 3, 2003, Alander, J.) ( 36 Conn. L. Rptr. 99); Reynolds, Pearson Co., LLC v. Miglietta, Superior Court, judicial district of Hartford, Docket No. CV 00 0801247 (March 27, 2001, Berger J.) ( 29 Conn. L. Rptr. 481); Carolina Casualty v. 60 Gregory Boulevard, Superior Court, judicial district of Stamford/Norwalk at Stamford, Docket No. CV 98 0169383 (March 20, 2000, Hickey, J.) ( 26 Conn. L. Rptr. 685); Scap Motors, Inc. v. Pevco Systems International, Inc., Superior Court, judicial district of Fairfield, Docket No. CV 97 0348461 (August 12, 1999, Melville, J.) ( 25 Conn. L. Rptr. 283); Darien Asphalt Paving, Inc. v. Newtown, Superior Court, judicial district of New Britain, Docket No. CV 98 0004878 (December 7, 1998, Nadeau, J.) ( 23 Conn. L. Rptr. 495).
"Upon close examination, [the decision in Flagg] cannot be reasonably read to create a general rule barring all tort claims based in whole or in part upon alleged breaches of contract . . . Instead, it can only be read to bar such claims in the particular circumstances there at issue, to wit: where both the plaintiff and the defendant are sophisticated commercial parties, and their dispute arises from the defendant's allegedly defective performance under a contract for the sale of goods." (Emphasis added, internal quotation marks omitted.) Dunleavey v. Paris Ceramics USA, Inc., supra, Superior Court, Docket No. CV 02 0395709.
Furthermore, [t]he holding in Flagg may fairly be read as holding that where a plaintiff claims commercial losses suffered as a result of defective performance of a contract for the sale of goods, such losses are governed by the [Uniform Commercial Code] UCC, which in turn preserves common law actions for fraud and misrepresentation only as long as such actions are consistent with the particular provisions of the UCC . . . The Connecticut Supreme Court specifically found that one such provision, General Statutes § 42a-2-721, was in fact intended to make actions for fraud or misrepresentation presumptively inconsistent with post-acceptance claims for breach of warranty . . . Therefore, the court's affirmance of the trial court's granting of the defendant's motion to strike the plaintiffs' misrepresentation claim was not expressly premised on the economic loss doctrine but rather on the fact that such a claim was incompatible with and thus displaced by the provisions of the UCC.
(Internal quotation marks omitted.) Milltex Properties v. Johnson, supra, 36 Conn. L. Rptr. 784.
"No appellate court in Connecticut has held that a plaintiff may not recover for economic losses when the relationship is contractual in nature other than in actions where the claim is based on product liability and the sale of goods . . . In addition, the Connecticut Supreme Court has expressly rejected the economic loss doctrine as a bar to a claim for negligent misrepresentation. See Williams Ford, Inc. v. Hartford Courant Co., 232 Conn. 559, 579, 657 A.2d 212 (1995)." (Citations omitted, internal quotation marks omitted.) Dunleavey v. Paris Ceramics USA, Inc., supra, Superior Court, Docket No. CV 02 0395709.
The Connecticut Supreme Court has also rejected the argument that "where the controversy concerns purely economic losses allegedly caused . . . during the course of a contractual relationship between businesses, it is contract law, rather than tort law, that should apply." Williams Ford, Inc. v. Hartford Courant Co., supra, 232 Conn. 579. "The [plaintiffs are] not barred from pursuing a negligence claim solely because they also might have had a breach of contract claim." Id.
In the present case, although the plaintiff and the Buchanans are, allegedly, sophisticated commercial parties, their dispute arises out of the Buchanans' allegedly defective performance under a contract for services, not under a contract for the sale of goods. Therefore, the economic loss doctrine should not be applied in the present case, in accord with the majority of the superior court decisions that have not adopted or have restricted the application of the economic loss doctrine.
For the foregoing reasons, the Buchanans' motion to strike count seven of the plaintiff's complaint should be denied.