Opinion
No. MMX CV 09 5007419 S
April 13, 2011
MEMORANDUM OF LAW RE PLAINTIFF'S MOTION TO STRIKE NO. 129
I. PROCEDURAL HISTORY
The plaintiff American International Specialty Lines Insurance Co. moves to strike a five-count counterclaim filed by the defendant East Coast Welding Contracting, Inc. This case arises from a two-count complaint sounding in negligence filed by the plaintiff on August 17, 2009. The plaintiff filed an amended complaint on August 30, 2010, and therein alleged the following relevant facts. The defendant agreed to construct, assemble and install a boiler, fuel oil pump and fuel oil supply and return lines at the premises of Triram Connecticut, LLC (Triram). The defendant negligently installed this equipment, and as a result fuel discharged from a storage tank and caused $864,256.52 in damages to Triram's property. The plaintiff paid or will pay for Triram's damages, and, as the subrogee and assignee of Triram, asserts a claim of negligence against East Coast.
On October 7, 2010, the defendant filed the following amended counterclaims: (1) violation of the Connecticut Unfair Trade Practices Act (CUTPA); (2) violation of the Connecticut Unfair Insurance Practices Act (CUIPA); (3) breach of the implied covenant of good faith and fair dealing; (4) vexatious litigation; and (5) trade libel. On November 19, 2010, the plaintiff filed a motion to strike accompanied by a memorandum of law. On January 19, 2011, the defendant filed a memorandum of law in opposition. On February 4, 2011, the plaintiff filed a reply to the defendant's memorandum in opposition, and the court heard this matter at the short calendar hearing on February 7, 2011. In its memorandum and at the short calendar hearing, the defendant stated it was withdrawing the vexatious litigation claim.
II. DISCUSSION
The plaintiff's motion challenges the legal sufficiency of the defendant's counterclaims. Practice Book § 10-39(a) provides: "Whenever any party wishes to contest (1) the legal sufficiency of the allegations of any . . . counterclaim . . . to state a claim upon which relief can be granted . . . that party may do so by filing a motion to strike the contested pleading or part thereof." "The purpose of a motion to strike is to contest . . . the legal sufficiency of the allegations of any [cause of action] to state a claim upon which relief can be granted . . . [A] counterclaim is a cause of action existing in favor of the defendant against the plaintiff and on which the defendant might have secured affirmative relief had he sued the plaintiff in a separate action . . . A motion to strike tests the legal sufficiency of a cause of action and may properly be used to challenge the sufficiency of a counterclaim." (Citation omitted; internal quotation marks omitted.) JP Morgan Chase Bank, Trustee v. Rodrigues, 109 Conn.App. 125, 130-31, 952 A.2d 56 (2008).
"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.) Himmelstein v. Windsor, 116 Conn.App. 28, 33, 974 A.2d 820, cert. granted in part, 293 Conn. 927, 980 A.2d 910 (2009). The court must "construe the complaint in the manner most favorable to sustaining its legal sufficiency." (Internal quotation marks omitted.) Sullivan v. Lake Compounce Theme Park, Inc., 277 Conn. 113, 117, 889 A.2d 810 (2006). "[F]or the purpose of a motion to strike, the moving party admits all facts well pleaded." RK Constructors, Inc. v. Fusco Corp., 231 Conn. 381, 383 n. 2, 650 A.2d 153 (1994).
Furthermore, "[t]o survive a motion to strike, the plaintiff's complaint must allege all of the requisite elements of a cause of action." Stancuna v. Schaffer, 122 Conn.App. 484, 489, 998 A.2d 1221 (2010). Accordingly, "[i]f facts provable in the complaint would support a cause of action, the motion to strike must be denied." (Internal quotation marks omitted.) Batte-Holmgren v. Commissioner of Public Health, 281 Conn. 277, 294, 914 A.2d 996 (2007). Conversely, "[a] motion to strike is properly granted if the complaint alleges mere conclusions of law that are unsupported by the facts alleged." (Internal quotation marks omitted.) Metcoff v. Lebovics, 123 Conn.App. 512, 516, 2 A.3d 942 (2010).
The plaintiff argues the defendant's counterclaims are legally insufficient on the following grounds. First, the CUIPA claim alleges unfair practices only with respect to the handling of one claim and does not allege a pattern and practice of unfair acts conducted with such frequency as to constitute a general business practice. Second, the breach of the duty of good faith and fair dealing claim does not allege a contractual relationship between the plaintiff and the defendant. Third, the trade libel claim is legally insufficient because (1) the allegedly untrue and disparaging statements were made in connection with a lawsuit and are absolutely privileged from libel claims, and (2) the defendant has not alleged that untrue statements were published to third parties and does not identify any third parties who read the allegedly defamatory statements. Finally, the defendant has not alleged sufficient facts to satisfy a CUTPA claim. Specifically, the plaintiff argues that (1) when a CUTPA claim is based on the alleged failure to properly investigate an insurance claim, the defendant must allege unfair practices that violate CUIPA, which, for the reasons previously stated, the defendant has not done, and (2) the defendant cannot properly bring a CUTPA claim founded on the plaintiff's allegedly improper litigation until and unless the underlying litigation has terminated in the defendant's favor.
In response, the defendant maintains that its counterclaims are legally sufficient. Specifically, the defendant argues that one instance of misconduct is sufficient for a CUIPA claim if the legal action complained of is a sham lawsuit. Additionally, the defendant argues that the breach of the duty of good faith and fair dealing claim is legally sufficient because the wrong complained of is that of the plaintiff, not Triram. Furthermore, the defendant asserts that it sufficiently pleaded a trade libel claim, and that the allegations of the complaint, although made in the course of a judicial proceeding, are not always absolutely privileged from libel. Finally, the defendant argues that the CUTPA claim is legally sufficient because (1) the underlying CUIPA claim is legally sufficient, and (2) the defendant need not wait until this litigation has terminated to assert a CUTPA claim.
A. CUIPA
The court first addresses whether the defendant's CUIPA counterclaim is legally sufficient. General Statutes § 38a-815 provides in relevant part: "No person shall engage in this state in any trade practice which is defined in section 38a-816 as, or determined pursuant to sections 38a-817 and 38a-818 to be, an unfair method of competition or an unfair or deceptive act or practice in the business of insurance . . ." General Statutes § 38a-816(6) defines unfair settlement practices as "[c]ommitting or performing with such frequency as to indicate a general business practice any of the following . . . (c) failing to adopt and implement reasonable standards for the prompt investigation of claims arising under insurance policies; [and] (d) refusing to pay claims without conducting a reasonable investigation based upon all available information . . ." (Emphasis added.)
"In order to allege properly a CUIPA violation, the plaintiff must allege, inter alia, that the defendant engaged in the allegedly wrongful conduct with such frequency as to indicate a general business practice." (Internal quotation marks omitted.) Quimby v. Kimberly Clark Corp., 28 Conn.App. 660, 669, 613 A.2d 838 (1992), overruled in part on other grounds, Hart v. Carruthers, 77 Conn.App. 610, 823 A.2d 1284 (2003). Thus, "claims of unfair settlement practices under CUIPA require a showing of more than a single act of insurance misconduct." Mead v. Burns, 199 Conn. 651, 659, 509 A.2d 11 (1986).
The plaintiff argues that the defendant failed to allege sufficient facts to support a violation of CUIPA. Specifically, the plaintiff contends that the defendant has alleged only a single instance of alleged unfair conduct and not a pattern of unfair conduct performed with such frequency as to indicate a general business practice. The plaintiff argues, moreover, that the defendant wrongly asserts that a single act of misconduct is sufficient to support a CUIPA claim if the alleged misconduct is sham litigation. Specifically, the plaintiff points out that the authority relied on by the defendant pertains to violations of CUTPA, not CUIPA, and reiterates that regardless of the nature of the misconduct, to plead a legally sufficient violation of CUIPA the defendant must allege a pattern of unfair conduct, which it has not done. The plaintiff also argues that, even if the single act of filing a sham lawsuit was sufficient to support a CUIPA claim, the defendant failed to allege the elements of a sham lawsuit. Lastly, the plaintiff argues that CUIPA does not apply to conduct by an insurer acting as a subrogee. For these reasons, the plaintiff urges the court to strike the defendant's CUIPA counterclaim
The court notes that the plaintiff raised this argument for the first time in its reply brief and did not list it as a reason in its motion to strike. Practice Book § 10-41 specifies that "[e]ach motion to strike raising any of the claims of legal insufficiency . . . shall separately set forth each such claim of insufficiency and shall distinctly specify the reason or reasons for each such claimed insufficiency." In ruling on a motion to strike, the court is generally limited to the grounds stated in the motion and will not consider grounds raised for the first time in the accompanying memorandum of law. Stuart v. Freiberg, 102 Conn.App. 857, 861-62, 927 A.2d 343 (2007). Nevertheless, the defendant did not object to the form of the plaintiff's motion, and, therefore, this noncompliance with the Practice Book is hereby waived. Bouchard v. People's Bank, 219 Conn. 465, 468 n. 4, 594 A.2d 1 (1991).
In response, the defendant argues that a CUIPA counterclaim predicated on a single act of insurance misconduct is legally sufficient if that act is sham litigation. Specifically, the defendant argues that it alleged sufficient facts to indicate the plaintiff's lawsuit is a sham. The defendant points out that the Superior Court has held that CUTPA claims founded on a single sham lawsuit are legally sufficient and argues that the present case is analogous to those cases. Therefore, the defendant argues, this court should adopt the reasoning of those cases and hold that a CUIPA claim founded on a single sham lawsuit is legally sufficient.
"A sham lawsuit is one instituted by [a] plaintiff in bad faith, on grounds so flimsy that no reasonable prudent person could hold a bona fide belief in the existence of facts necessary to prove the case." (Internal quotation marks omitted.) Classic Limousine Airport Service, Inc. v. Alliance Limousine, LLC, Superior Court, judicial district of Stamford-Norwalk at Stamford, Docket No. CV 99 0174911 (August 13, 2002, D'Andrea, J.T.R.).
The defendant alleges the following relevant facts in his second counterclaim. As a subrogee and licensed insurance company seeking to recoup payments, the plaintiff had an obligation to conduct an investigation to determine whether sufficient facts existed to justify bringing a subrogation action against the defendant. The plaintiff either failed to conduct an investigation or conducted an investigation so negligently or recklessly that the facts alleged in paragraphs sixteen through eighteen of the plaintiff's complaint are untrue and groundless and could not have been the product of a responsible investigation. The filing of this lawsuit based on false and groundless facts and evidence caused the defendant substantial financial loss, damages and defense costs and constitutes an unfair insurance practice in violation of CUIPA.
To reiterate, in order to properly allege a violation of CUIPA predicated on unfair settlement practices, the pleading party must allege more than a single act of insurance misconduct. In the present case, the defendant has not alleged more than one act of insurance misconduct. Therefore, the defendant's CUIPA counterclaim is legally insufficient.
The defendant cites two cases where the Superior Court determined that CUTPA claims predicated on a single sham lawsuit are legally sufficient and urges this court to adopt the reasoning of those cases and hold that CUIPA claims predicated on a single sham lawsuit are legally sufficient. This court is unpersuaded. CUTPA and CUIPA are separate causes of action, and while it is clear that CUTPA claims may in some instances be based on a single act of misconduct; Hart v. Carruthers, 77 Conn.App. 610, 619, 823 A.2d 1284 (2003); it is equally clear that CUIPA claims require a showing of more than a single act of insurance misconduct: "In requiring proof that the insurer has engaged in unfair claim settlement practices with such frequency as to indicate a general business practice, the legislature has manifested a clear intent to exempt from coverage under CUIPA isolated instances of insurer misconduct." (Emphasis added; internal quotation marks omitted.) Lees v. Middlesex Ins. Co., 229 Conn. 842, 849, 643 A.2d 1282 (1994).
Bender Plumbing Supplies, Inc. v. S S Services, Superior Court, judicial district of New Haven, Docket No. CV 040287111 (December 14, 2004, Tanzer, J.) and Gamlestaden PLC v. Backstrom, Superior Court, judicial district of Stamford-Norwalk at Stamford, Docket No. CV 92 0128905 (May 16, 1995, Karazin, J.).
As the court finds the defendant's CUIPA counterclaim is legally insufficient for failing to allege more than a single act of insurance misconduct, the court need not address the plaintiff's other grounds for striking it.
Accordingly, the court grants the plaintiff's motion to strike the defendant's second counterclaim.
B. BREACH OF DUTY OF GOOD FAITH AND FAIR DEALING
The court next addresses whether the defendant's counterclaim sounding in breach of the implied covenant of good faith and fair dealing is legally sufficient. "[E]very contract carries an implied duty requiring that neither party do anything that will injure the right of the other to receive the benefits of the agreement . . . To constitute a breach of [the implied covenant of good faith and fair dealing], the acts by which a defendant allegedly impedes the plaintiff's right to receive benefits that he or she reasonably expected to receive under the contract must have been taken in bad faith . . . Bad faith in general implies both actual or constructive fraud, or a design to mislead or deceive another, or a neglect or refusal to fulfill some duty or some contractual obligation, not prompted by an honest mistake as to one's rights or duties, but by some interested or sinister motive." (Citation omitted; internal quotation marks omitted.) Landmark Investment Group, LLC v. Chung Family Realty Partnership, LLC, 125 Conn.App. 678, 693, 10 A.3d 61, cert. denied, 300 Conn. 914, 13 A.3d 1100 (2010).
"[A]n action for breach of the covenant of good faith and fair dealing requires proof of three essential elements, which the plaintiff must duly prove: first, that the plaintiff and the defendant were parties to a contract under which the plaintiff reasonably expected to receive certain benefits; second, that the defendant engaged in conduct that injured the plaintiff's right to receive some or all of those benefits; and third, that when committing the acts by which it injured the plaintiff's right to receive benefits it reasonably expected to receive under the contract, the defendant was acting in bad faith." (Internal quotation marks omitted.) Hernandez v. Vermont Mutual Insurance Co., Superior Court, judicial district of Hartford, Docket No. CV 06 5002352 (April 4, 2008, Bentivegna, J.).
The plaintiff argues that the defendant's third counterclaim is legally insufficient because the defendant has not alleged any contractual relationship between the parties. Furthermore, the plaintiff argues that the defendant fails to allege the plaintiff acted in bad faith. Specifically, the plaintiff argues that the third counterclaim is "devoid of any allegations even remotely alleging dishonesty, improper motive, fraud or other similar conduct exceeding mere negligence." Finally, the plaintiff argues that while a tortfeasor may assert counterclaims against a subrogee plaintiff when the claims arise from the conduct of that plaintiff, such counterclaims need to be legally sufficient. Therefore, the plaintiff argues, the court should strike the defendant's third counterclaim.
The plaintiff did not raise this as a ground in its motion to strike, but the court will nevertheless address it because the defendant did not object to the form of the plaintiff's motion. See footnote 1, supra.
In response, the defendant argues that "it may assert a counterclaim for bad faith where the conduct complained of if that of the insurance company rather than its insured, and the bad faith directly prejudices the defendant by resulting in false allegations against them." Accordingly, the defendant argues, the court should overrule the plaintiff's motion to strike the third counterclaim.
The defendant alleges the following relevant facts in his third counterclaim. The defendant never entered into an agreement with Triram to construct, assemble or install the boiler, fuel oil pump or fuel oil supply and return lines. The plaintiff knew or should have known this and breached the duty of good faith and fair dealing by bringing the present action. As a result, the defendant suffered substantial pecuniary damages and damage to its reputation.
The court first points out that the case relied on by the defendant, Standard Fire Insurance Co. v. Drummey, Superior Court, judicial district of Hartford, Docket No. CV 06 5002071 (January 25, 2007, Hale, J.) [ 42 Conn. L. Rptr. 717], only stands for the proposition that a defendant has a right to counterclaim against a subrogee insurer. In the present case, the plaintiff is not challenging the defendant's right to file a counterclaim. Instead, the plaintiff challenges the legal sufficiency of the defendant's third counterclaim.
Even when construed in a manner favorable to sustaining its legal sufficiency, the defendant's third counterclaim is legally insufficient. Specifically, the defendant has not alleged that a contract existed between the parties under which the defendant reasonably expected to receive certain benefits. Furthermore, the defendant has not sufficiently pleaded the bad faith element because it has not alleged any facts, express or implied, that the plaintiff committed fraud or had a sinister motive in filing the lawsuit against the defendant. Therefore, the defendant has not pleaded a legally sufficient claim sounding in breach of the covenant of good faith and fair dealing. Accordingly, the court grants the plaintiff's motion to strike the third counterclaim.
C. TRADE LIBEL
Turning to the defendant's counterclaim sounding in trade libel, "[d]efamation or disparagement of a business' goods and services may be considered trade libel . . . and is recognized by Connecticut . . . courts as a species of defamation." (Citations omitted.) QSP, Inc. v. Aetna Casualty Surety Co., 256 Conn. 343, 358, 773 A.2d 906 (2001). "The torts of trade libel and commercial disparagement, like defamation, require that the alleged damaging statement be made concerning the plaintiff . . . This is consistent with our treatment of business disparagement like defamation, requiring that the statement that disparages a person's goods or services be made `of and concerning' the person stating the cause of action." (Citations omitted.) Id., 359-60.
The defendant alleges the following relevant facts in his fifth counterclaim. The defendant never entered into an agreement with Triram to construct, assemble or install the boiler, fuel oil pump or fuel oil supply and return lines. Nevertheless, the plaintiff published in its complaint and in letters and memoranda that the defendant constructed, assembled or installed the boiler, fuel oil pump or fuel oil supply and return lines, and that the defendant installed a cast iron elbow and threaded plug on a dead ended fuel return line that allowed water to accumulate at the flange and rupture, causing fuel discharge and pecuniary loss to Triram. The plaintiff knew or should have known these accusations were untrue and disparaged the quality of work performed by the defendant. Furthermore, the plaintiff either intended to cause harm to the defendant by publishing these accusations or should have known that publishing them would cause harm to the defendant. As a result, the defendant suffered substantial pecuniary harm and damage to its reputation.
The plaintiff offers two grounds for striking the defendant's trade libel counterclaim. First, the plaintiff contends the alleged defamatory statements are absolutely privileged from libel claims because they were made in the context of a judicial proceeding. Second, the plaintiff argues that the defendant has not identified any third parties who read the allegedly defamatory statements and has not alleged that the allegedly defamatory statements were published to a third party, and, therefore, the trade libel counterclaim is legally insufficient.
The plaintiff first urges the court to strike the defendant's trade libel claim because the alleged defamatory statements were made in the context of a judicial proceeding, and, therefore, are absolutely privileged from libel claims. "In Connecticut, the doctrine of absolute privilege is a long-standing rule that protects otherwise defamatory statements made in the context of judicial or quasi-judicial proceedings." McKinney v. Chapman, 103 Conn.App. 446, 451, 929 A.2d 355, cert. denied, 284 Conn. 928, 934 A.2d 243 (2007). "The privilege applies also to statements made in pleadings or other documents prepared in connection with a court proceeding." (Internal quotation marks omitted.) Alexandru v. Strong, 81 Conn.App. 68, 83, 837 A.2d 875, cert. denied, 268 Conn. 906, 845 A.2d 406 (2004).
"Privilege is an affirmative defense in a defamation action and must, therefore, be specifically pleaded by the [party asserting the privilege]." Miles v. Perry, 11 Conn.App. 584, 594 n. 8, 529 A.2d 199 (1987). "A motion to strike is not the proper pleading in which to introduce such a defense." (Internal quotation marks omitted.) Suisman v. Howe, Superior Court, judicial district of New Britain, Docket No. 362135 (May 2, 1990, Hennessey, J.) ( 1 Conn. L. Rptr. 566, 567); see also Bahrenburg v. Mills, Superior Court, judicial district of Hartford, Docket No. CV 801630 (March 16, 2001, Wagner, J.T.R.) (merit of privilege defense is not properly addressed in context of motion to strike).
The court will not address the merits of the plaintiff's privilege defense because privilege must be specially pleaded and a motion to strike is not the proper pleading to introduce such a defense. Accordingly, the plaintiff's motion to strike the defendant's trade libel counterclaim on this ground is denied.
The plaintiff next argues that the defendant's trade libel claim is legally insufficient because the defendant has not identified any third parties who read the allegedly defamatory statements and has not alleged that the allegedly defamatory statements were published to a third party. "A defamatory statement is defined as a communication that tends to harm the reputation of another as to lower him in the estimation of the community or to deter third persons from associating or dealing with him . . . To establish a prima facie case of defamation, the plaintiff must demonstrate that: (1) the defendant published a defamatory statement; (2) the defamatory statement identified the plaintiff to a third person; (3) the defamatory statement was published to a third person; and (4) the plaintiff's reputation suffered injury as a result of the statement." (Internal quotation marks omitted.) Spears v. Elder, 124 Conn.App. 280, 287, 5 A.3d 500, cert. denied, 299 Conn. 913, 10 A.3d 528 (2010).
"Moreover, when claiming defamation, [c]ertainty is required in the allegations as to the defamation and as to the person defamed; a complaint for defamation must, on its face, specifically identify what allegedly defamatory statements were made, by whom, and to whom. A complaint is insufficient to withstand dismissal for failure to state a cause of action where, other than the bare allegation that the defendant's actions caused injury to plaintiff's reputation, the complaint set forth no facts of any kind indicating what defamatory statements, if any, were made, when they were made, or to whom they might have been made." (Internal quotation marks omitted.) Parnoff v. Mooney, Superior Court, judicial district of Fairfield, Docket No. CV 04 4001683 (April 8, 2008, Frankel, J.).
Our courts require the plaintiff to plead a defamation claim with specificity so that the defendant has notice of the claims made against him and can thus prepare an effective defense: "Connecticut courts require that a plaintiff must plead a defamation case with specificity because there are a number of special defenses . . . that may be appropriate, depending on the nature of the statements alleged to have been made . . . If the plaintiff's pleadings are nebulous as to the identity of the speaker, audience and the type of statements made, it may be difficult for the defendants to plead any appropriate special defenses . . . Without knowledge of to whom the defendants allegedly spoke these words, the defendants would be unable to appropriately frame their response and raise any possible special defenses such as privilege . . . [W]hile the court is sympathetic to the plaintiff's argument that these details are best flushed out during discovery, that concern is superseded by the admonition that a plaintiff's complaint must put the defendant on notice of the claims made against him so that an effective defense can be advanced." (Citations omitted; internal quotation marks omitted.) Financial Consulting, LLC v. Illinois Mutual Life Insurance Co., Superior Court, judicial district of New London, Docket No. CV 09 5013143 (October 28, 2010, Cosgrove, J.).
The plaintiff argues that the defendant's trade libel counterclaim is legally insufficient because the defendant did not allege that the libelous statements were published to identified third parties. Specifically, the plaintiff argues that the defendant does not allege the "letters and memos" referred to in the allegations were published to a third party and does not identify any third parties to which the statements were published. Furthermore, the plaintiff contends that the defendant's argument in its memorandum of law relies on facts not alleged in the complaint.
In response, the defendant counters that "the plaintiff's own insured admits that it never contracted with the defendant . . . to perform the work [that] the plaintiff in its complaint alleges was the cause of the oil spill [and that] [t]he plaintiff knew this yet it filed the present complaint regardless." Furthermore, the defendant argues that it need not "plead with specificity every memo, letter or instance in which the defendant was disparaged by the plaintiff" and that such information would be gleaned through discovery.
The court finds that the allegations contained in the fifth counterclaim are legally insufficient to support a cause of action for trade libel. The defendant did not identify any third parties to whom the allegedly libelous statements were made nor did it identify any third parties who published those statements. Our courts require the complainant to allege such facts with specificity in order to plead a legally sufficient trade libel claim. Furthermore, the defendant's argument that such facts would be gleaned through discovery is unavailing because the counterclaim must put the plaintiff on notice of the claims against it so that it can mount an effective defense. While recognizing that such facts may best be obtained through discovery, the court points out that the defendant could have requested that the court stay the plaintiff's motion to strike pending limited discovery or objected to it on the ground that it needed the opportunity to plead additional facts, yet it chose not to do so. Violano v. Fernandez, 280 Conn. 310, 325-26, 907 A.2d 1188 (2006). Lastly, in arguing that its trade libel counterclaim is legally sufficient, the defendant improperly relied on facts not alleged in its counterclaim. "In ruling on a motion to strike, the court is limited to the facts alleged in the complaint." (Internal quotation marks omitted.) Faulkner v. United Technologies Corp., 240 Conn. 576, 580, 693 A.2d 293 (1997).
Accordingly, the court grants the plaintiff's motion to strike the defendant's fifth counterclaim.
D. CUTPA
Finally, the court addresses the defendant's CUTPA counterclaim. General Statutes § 42-110b(a) provides: "No person shall engage in unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce." The so-called "cigarette rule" defines what an unfair practice is: "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 [F]ederal [T]rade [C]ommission 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 business persons] . . . 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." (Internal quotation marks omitted.) Naples v. Keystone Building Development Corp., 295 Conn. 214, 227-28, 990 A.2d 326 (2010).
The defendant alleges the following relevant facts in his first counterclaim. Prior to bringing this action, the plaintiff had an obligation to investigate the underlying facts of the incident. Had it done so, the plaintiff would have known that the defendant never entered into an agreement with Triram and was not responsible for the construction, assembly or installation of the boiler, fuel oil pump or fuel oil supply and return lines. Alternatively, the plaintiff ignored facts revealed in its investigation and knew the defendant was not responsible for the construction, assembly or installation of the boiler, fuel oil pump or fuel oil supply and return lines, but nevertheless brought this action "in an attempt to obtain from the defendant . . . money [that] the defendant . . . was under no obligation to pay in order to minimize . . . the claim that [the plaintiff] paid out." By failing to undertake a good faith investigation into the facts or by ignoring facts revealed in the investigation, the plaintiff breached its implied duty of good faith and fair dealing. The plaintiff's actions are immoral, unethical, oppressive, unfair, unconscionable, deceptive and unscrupulous and have caused damages to the defendant's reputation and pecuniary damages. Such actions constitute a deceptive or unfair trade practice or act in violation of CUTPA.
The plaintiff asserts two grounds for striking the defendant's CUTPA counterclaim. First, the plaintiff argues that to the extent the CUTPA counterclaim is predicated on an underlying CUIPA claim, it is legally insufficient because the defendant has not sufficiently pleaded a CUIPA claim. Second, the plaintiff argues that to the extent that it is predicated on vexatious litigation, the defendant may not assert such a claim until and unless the underlying litigation has terminated in its favor.
In its first ground for striking the defendant's CUTPA claim, the plaintiff argues that the defendant's CUTPA claim is legally insufficient because it is based on an alleged violation CUIPA and the defendant has not sufficiently pleaded a CUIPA claim. "[I]ndividuals may bring an action under CUTPA for violations of CUIPA. In order to sustain a CUIPA cause of action under CUTPA, a plaintiff must allege conduct that is proscribed by CUIPA." Nazami v. Patrons Mutual Ins. Co., 280 Conn. 619, 625, 910 A.2d 209 (2006). "[C]laims of unfair settlement practices under CUIPA require a showing of more than a single act of insurance misconduct." Mead v. Burns, supra, 199 Conn. 659. Additionally, "for a plaintiff to allege CUIPA and CUTPA violations successfully the plaintiff must allege more than a singular failure to settle a plaintiff's claim fairly. The plaintiff must allege that the defendant has committed the alleged wrongful acts with such frequency as to indicate a general business practice." Quimby v. Kimberly Clark Corp., supra, 28 Conn.App. 672.
In Hart v. Carruthers, 77 Conn.App. 610, 618-19 n. 5, 823 A.2d 1284 (2003), the Appellate Court clarified this holding and stated that "to the extent that one might read Quimby to stand for the broad proposition that all CUTPA claims require more than a single transaction, we squarely reject that notion." The court affirmed, however, that more than a single failure to settle a claim fairly is required in a situation where a plaintiff has alleged violations of CUTPA and CUIPA against an insurer on the basis of conduct that constitutes an unfair claim settlement practice. Id.
The plaintiff argues that the defendant's CUTPA counterclaim is predicated on an underlying CUIPA claim and is legally insufficient because the defendant failed to allege facts sufficient to support a violation of CUIPA. At the short calendar hearing, the defendant conceded that its CUTPA claim could not stand if its CUIPA counterclaim was deemed legally insufficient.
The court has already determined that the CUIPA counterclaim is legally insufficient. Therefore, to the extent that the defendant's CUTPA counterclaim is predicated on its CUIPA counterclaim, the CUTPA claim is legally insufficient.
Next, the plaintiff argues that to the extent that the CUTPA counterclaim is predicated on vexatious litigation, the defendant cannot assert such a claim until and unless the underlying litigation has terminated in its favor. "Vexatious litigation requires a plaintiff to establish that: (1) the previous lawsuit or action was initiated or procured by the defendant against the plaintiff; (2) the defendant acted with malice, primarily for a purpose other than that of bringing an offender to justice; (3) the defendant acted without probable cause; and (4) the proceeding terminated in the plaintiff's favor." Rioux v. Barry, 283 Conn. 338, 347, 927 A.2d 304 (2007). The Superior Court has recognized that CUTPA claims can be predicated on allegations of vexatious litigation. Raymond Road Associates, LLC v. Taubman Centers, Inc., Superior Court, complex litigation docket at Waterbury, Docket Nos. X02 CV 07 5007877, X02 CV 07 5007876, (March 5, 2009, Eveleigh, J.) ( 47 Conn. L. Rptr. 313, 317).
"In suits for vexatious litigation, it is recognized to be sound policy to require the plaintiff to allege that prior litigation terminated in his favor." (Internal quotation marks omitted.) Somers v. Chan, 110 Conn.App. 511, 542, 955 A.2d 667 (2008). Thus, "under Connecticut law, a counterclaim alleging vexatious litigation may not be brought in the same action as that which the defendant claims is vexatious." Id. Therefore, "CUTPA [counterclaims] based upon the alleged bringing of groundless litigation, no less than claims of vexatious litigation and intentional interference with business relations based upon similar allegations, must not be brought until the underlying litigation in which misconduct allegedly occurred is terminated favorably to the CUTPA claimant." Wes-Garde Components Group, Inc. v. Carling Technologies, Inc., Superior Court, judicial district of Hartford, Docket No. CV 09 5028121 (March 10, 2010, Sheldon, J.) ( 49 Conn. L. Rptr. 671, 677); see also Mangs v. Cowell, Superior Court, judicial district of New London, Docket No. CV 10 6004007 (December 8, 2010, Martin, J.) (recognized split of authority among Superior Courts when faced with CUTPA claims based on vexatious litigation and concluded "[t]he better reasoned Superior Court cases have not allowed a defendant to bring a counterclaim for groundless litigation based on a violation of CUTPA when the `unfair trade practice' complained of is the plaintiff's pending complaint.").
The plaintiff argues that, as a claimant cannot properly file a vexatious litigation suit until after the underlying litigation has terminated in its favor, it follows that a CUTPA claim founded on improper litigation cannot be brought until after the underlying lawsuit has terminated in the claimant's favor. Therefore, the plaintiff argues, the defendant cannot assert a CUTPA claim founded on vexatious litigation in the same suit it claims is vexatious. For its part, the defendant argues that there is a split of authority among the Superior Courts as to whether a defendant can assert a CUTPA counterclaim in an action it claims is a sham, and urges this court to follow those cases that have allowed such actions.
The court acknowledges that there is a split of authority among the Superior Courts when faced with CUTPA claims founded on vexatious litigation. This court follows the better reasoned cases, which hold that a defendant cannot assert a counterclaim based on CUTPA when the unfair trade practice complained of is the plaintiff's pending complaint. In the present case, the defendant's CUTPA counterclaim based on improper litigation is premature and cannot be asserted until and unless this litigation terminates in the defendant's favor. Therefore, to the extent the defendant's CUTPA counterclaim is predicated on vexatious litigation, it is legally insufficient.
Accordingly, the court grants the plaintiff's motion to strike the defendant's CUTPA counterclaim.
III. CONCLUSION
For the foregoing reasons, the court grants the plaintiff's motion to strike in its entirety.
So ordered.