Opinion
No. HHD-CV-08-5019254S
November 4, 2010
MEMORANDUM OF DECISION ON PLAINTIFFS' MOTIONS TO STRIKE SUBSTITUTE SPECIAL DEFENSES
I. INTRODUCTION/PROCEDURAL HISTORY
The plaintiffs — Arthur Beckenstein, individually and as executor of the Estate of Henry Beckenstein ("the Arthur Beckenstein plaintiffs"), and Roz-Lynn Beckenstein, individually, as executrix of the Estate of Robert J. Beckenstein, and as successor co-trustee of the Robert J. Beckenstein Amended and Restated Trust dtd. March 11, 1999 ("the Roz-Lynn Beckenstein plaintiffs") — commenced this action on or about April 21, 2008 by serving a two-count complaint upon defendants Jeffrey and Andrea Naier, both individually and as co-trustees of the Eleanor Naier Revocable Trust. On December 16, 2008, the plaintiffs filed a two-count substitute complaint against the same defendants. The substitute complaint ("Complaint"), which is now the operative, alleges the following facts.
A. THE OPERATIVE COMPLAINT 1. First Count — Breach of Contract
The First Count, which presents a claim for breach of contract, alleges that in 1997, Jeffrey Naier, Andrea Naier and Eleanor Naier (collectively, "the Naiers") commenced a lawsuit ("the 1997 lawsuit") against the following defendants: Robert J. Beckenstein, in his individual capacity and as executor of the Estate of Henry Beckenstein; Arthur Beckenstein, as co-executor of the Estate of Henry Beckenstein; and Fleet Bank a/k/a Fleet National Bank ("Fleet"), as trustee of the Rose W. Beckenstein Trust ("the Rose Trust"). In the 1997 lawsuit, the Naiers accused the defendants of breaches of fiduciary duty and mismanagement of two partnerships known as Tolland Enterprises and Wintonbury Associates (collectively, "the Partnerships"). At the time of the 1997 lawsuit, the Estate of Henry Beckenstein and the Rose Trust each had a 50% ownership interest in each of the two Partnerships.
The First Count alleges that in October 1993, the Naiers executed a settlement agreement with Henry Beckenstein and Robert Beckenstein, releasing them and their respective representatives, agents, heirs and assigns from all claims of wrongdoing, with respect to the Partnerships, in connection with certain then-pending probate and civil proceedings which involved similar allegations to those made in the 1997 lawsuit. A copy of that agreement and release ("the 1993 Settlement Agreement") is attached to the Complaint as Exhibit A.
After the 1997 lawsuit had been pending for over three years, Robert Beckenstein died. Thereafter, Roz-Lynn Beckenstein became executrix of the Estate of Robert Beckenstein and Arthur G. Beckenstein became the sole executor of the Estate of Henry Beckenstein. Ultimately, on or about August 30, 2000, the parties to the 1997 lawsuit entered into a written settlement agreement and release ("the 2000 Settlement Agreement" or "the Settlement Agreement"). A copy of the 2000 Settlement Agreement is attached to the Complaint as Exhibit B.
The 2000 Settlement Agreement provided for the making of the following payments: (a) to the Rose Trust, the sum of $6.8 million; (b) to Jeffrey Naier individually, the sum of $300,000; and (c) to Andrea Naier, individually, the sum of $300,000. The latter payments were made expressly for the purpose of buying out the Naiers' individual interests in an unrelated partnership named the Beckenstein-Naier Real Estate Partnership (the "Real Estate Partnership").
Pursuant to the 2000 Settlement Agreement, the parties took the following actions: (a) they made all of the above-listed payments; (b) Fleet assigned the Rose Trust's interests in the Partnerships to Roz-Lynn Beckenstein and Arthur Beckenstein; and (c) Jeffrey and Andrea Naier assigned their interests in the Real Estate Partnership to Roz-Lynn Beckenstein and Arthur Beckenstein. Upon the taking of those actions, all of the parties' obligations under the 2000 Settlement Agreement were fully performed.
Eleanor Naier died in 2002. Her will allegedly appointed all of the assets of the Rose Trust to the Eleanor Naier Revocable Trust, of which Jeffrey Naier and Andrea Naier are co-trustees.
On or about October 16, 2007, defendants Jeffrey and Andrea Naier commenced another lawsuit against the plaintiffs ("the 2007 lawsuit") on substantially the same grounds as those presented in the 1997 lawsuit, all of which had been resolved by the 2000 Settlement Agreement. The plaintiffs claim that, by bringing the 2007 lawsuit, the defendants: (a) breached their obligation under the 2000 Settlement Agreement not to sue the plaintiffs, and acted contrary to the release provided to the plaintiffs in that Agreement; (b) disavowed and repudiated the representations, covenants, promises and releases they had made in the 2000 Settlement Agreement, upon which the plaintiffs had reasonably relied to their detriment; and (c) breached the express terms of the 2000 Settlement Agreement.
2. Second Count — Breach of Implied Covenant of Good Faith and Fair Dealing
The Second Count, which states a claim for breach of the implied covenant of good faith and fair dealing under the 2000 Settlement Agreement, incorporates the allegations of the First Count, and alleges that the plaintiffs reasonably expected to receive the benefits of the 2000 Settlement Agreement and reasonably relied upon the defendants' covenants, representations, promises and agreements, as set forth therein. On that score, it alleges, inter alia, that the defendants intentionally or recklessly: (a) ignored, disavowed and repudiated their covenant, agreement and representation not to institute any action or other proceedings against the plaintiffs, as provided in the 2000 Settlement Agreement; and (b) ignored, disavowed and repudiated their release of all claims against the plaintiffs, as set forth in the 2000 Settlement Agreement. By such conduct, claim the plaintiff, the defendants caused them damages.
The Second Count finally alleges that, by commencing the 2007 lawsuit against them, the defendants attempted, unilaterally and in bad faith, to rescind the 2000 Settlement Agreement. Such conduct, claim the plaintiffs, constituted a breach of the implied covenant of good faith and fair dealing arising under the 2000 Settlement Agreement.
3. Relief Requested
As remedies for the defendants' alleged breaches, as aforesaid, the plaintiffs ask this Court: (a) to enjoin them from commencing or continuing to prosecute any lawsuits relating to the 2000 Settlement Agreement; and (b) to award them the following additional relief: money damages, costs and expenses, and reasonable attorneys fees, both for breach of the 2000 Settlement Agreement and for breach of the implied covenant of good faith and fair dealing; plus (c) interest and other appropriate relief.
B. THE DEFENDANTS' ORIGINAL ANSWER AND SPECIAL DEFENSES TO THE OPERATIVE COMPLAINT AND THE PLAINTIFFS' INITIAL MOTIONS TO STRIKE
On April 20, 2009, the defendants filed their Answer and Special Defenses to the plaintiffs' Complaint. Their Special Defenses were based on the following grounds: the First, on fraud in the inducement; the Second, on mootness or collateral estoppel; the Third, on judicial estoppel; and the Fourth, on equitable estoppel.
On June 5, 2009, the Roz-Lynn Beckenstein plaintiffs filed a Motion to Strike, pleading number 148, in which they sought to strike all four of the defendants' Special Defenses. On June 26, 2009, the Arthur Beckenstein plaintiffs filed a Motion to Strike, pleading number 154, in which they too sought to strike all of the defendants' Special Defenses.
On October 13, 2009, the Court (Wagner, J.T.R.) issued a Memorandum of Decision granting the plaintiffs' Motions to Strike all four of the defendants' Special Defenses for failure to plead the factual basis for each such Special Defense with sufficient precision to state a claim upon which relief could be granted.
C. THE DEFENDANTS' SUBSTITUTE ANSWER AND SPECIAL DEFENSES TO THE OPERATIVE COMPLAINT
On October 27, 2009, the defendants responded to Judge Wager's ruling by filing a Substitute Answer and Special Defenses to the plaintiffs' Substitute Complaint, pleading number 175. The four Substitute Special Defenses, which are now operative, allege the following facts.
1. First Substitute Special Defense — on the Ground of Fraud in the Inducement
The First Substitute Special Defense alleges that the claims set forth in the Complaint, both of which are based upon alleged breaches of the 2000 Settlement Agreement, are barred because the defendants were fraudulently induced to enter into that Agreement by misrepresentations made to them by the plaintiffs or their agents. The First Substitute Special Defense specifically alleges that the plaintiffs made the following fraudulent representations.
First, during the pendency of the 1997 lawsuit, the plaintiffs allegedly caused the defendants or their counsel to be provided with certain materially misleading financial information relating to the Partnerships ("Partnership Financial Information"). As part of such Partnership Financial Information, Robert Beckenstein or Arthur Beckenstein, directly or through their agents, orally represented to the defendants or their agents that certain properties owned by the Partnerships would soon be exchanged for "like-kind property." The effect of such a like-kind exchange of Partnership properties would have been to defer indefinitely a cash sale of those properties, the liquidation of each partner's interests in the Partnerships, and thus a payout to the partners of the value of their Partnership interests. One partner of both Partnerships was the Rose Trust, of which Jeffrey and Andrea Naier were beneficiaries.
Notwithstanding the foregoing representations, the plaintiffs never intended to make a like-kind exchange of any of the Partnership properties. Instead, they allegedly made the challenged representations to the defendants or their counsel about the impending like-kind exchange of Partnership properties in order to induce the defendants: (a) to believe that a cash sale of those properties would not occur in the foreseeable future; (b) to believe on that basis that the Rose Trust's interests in the Partnerships would not soon be liquidated; (c) to believe, accordingly, that payouts to the Rose Trust of the value of its interests in the Partnerships would not occur; and thus (d) to settle the 1997 lawsuit, or sell their interests in the Partnerships to the plaintiffs, for less money than the defendants would have received for such interests upon the liquidation of the Partnerships through a sale of the Partnership properties to third parties in arm's-length transactions.
The First Substitute Special Defense further alleges that, in furtherance of their scheme to misrepresent their intentions with respect to the disposition of Partnership properties, the plaintiffs caused language providing that the purchasers would cooperate with the sellers in effectuating a like-kind exchange of such properties to be inserted into the purchase and sale agreements for some or all of those properties, or caused to be produced to the defendants forged copies of one or more of those purchase and sale agreements, which forged copies contained language expressing the sellers' intent to engage in a like-kind exchange, although no such language existed in the actual contract executed by the purchaser and seller.
The defendants also allege that, as part the Partnership Financial Information, the plaintiffs represented or provided documentation to the defendants which misallocated to the Partnerships overhead and expenses properly allocable to non-Partnership properties owned by other entities in which the plaintiffs had an interest. Additionally, they claim that certain expenses incurred in connection with work performed at Robert J. Beckenstein's personal residence were allocated to or paid by the Partnerships. The purpose of such misallocations and misrepresentations as to Partnership assets was allegedly: (a) to devalue the Partnerships and increase the value of other partnerships and entities owned and controlled by Beckenstein Enterprises; (b) to induce the defendants to believe that the value of the Partnerships was less than it actually was; and, by so doing, (c) to induce the defendants to settle the 1997 lawsuit, or sell their interests in the Partnerships to the defendants, for less money than such interests were actually worth.
In reliance upon the plaintiffs' misrepresentation that most of the Partnership properties would soon become the subject of a like-kind exchange, the defendants agreed to settle the 1997 lawsuit. In settling, the defendants were allegedly injured by receiving less money than they would have received upon the liquidation of the Partnerships through the sale of Partnership properties.
The First Substitute Special Defense concludes by alleging that the plaintiffs ultimately caused all of the Partnership properties to be sold, leaving none of them to become the subject of a like-kind exchange. The plaintiffs allegedly had a fiduciary or special relationship with the Rose Trust, and thus to the defendants as its beneficiaries, which imposed a continuing duty upon them to disclose their acts and omissions to the defendants, which the plaintiffs failed to honor. In particular, the plaintiffs allegedly owed the defendants a duty of loyalty, a duty to render true accounts, and a duty to provide them with full and accurate financial information. The defendants claim that the plaintiffs breached each of these duties, both before and after executing the 2000 Settlement Agreement.
2. Second Substitute Special Defense — on the Ground of Mootness or Collateral Estoppel
In their Second Substitute Special Defense, the defendants allege that the plaintiffs' claims against them are barred by mootness or collateral estoppel because this Court, McWeeny, J., dismissed their complaint in the 2007 lawsuit based upon their supposed lack of standing to prosecute any claims under the 2000 Settlement Agreement. Claiming that Judge McWeeny's dismissal of that lawsuit "effectively . . . wrote the[m . . . ] out of the 2000 Settlement Agreement by refusing to allow them to enforce its terms," the defendants allege, by a parallel logic, that that ruling "also effectively wrote the[m . . . ] out of any provisions of the [A]greement prohibiting the filing of a lawsuit." Here, then, since the plaintiffs' claims against them are based upon their alleged breach of the covenant not to sue set forth in the 2000 Settlement Agreement, the defendants claim that they cannot be found liable on either such claim because, under Judge McWeeny's ruling, they are not bound by the 2000 Settlement Agreement.
3. Third Substitute Special Defense — on the Ground of Judicial Estoppel
In their Third Substitute Special Defense, the defendants allege that the plaintiffs' claims against them are barred by the doctrine of judicial estoppel because the plaintiffs' position before this Court in the 2007 lawsuit, urging Judge McWeeny to dismiss that lawsuit on the ground that the defendants lack standing to assert claims under the 2000 Settlement Agreement, is materially inconsistent with their position in this action that the defendants are bound by the Agreement's covenant not to sue and violated that covenant by commencing the 2007 lawsuit. Such inconsistent positions have allegedly been taken to mislead this Court and take unfair advantage of the defendants in this proceeding by eliminating their right to raise and rely on their First and Fourth Substitute Special Defenses of fraud in the inducement and equitable estoppel.
4. Fourth Substitute Special Defense — on the Ground of Equitable Estoppel
In their Fourth Substitute Special Defense, the defendants allege that the plaintiffs' claims against them are barred by the doctrine of equitable estoppel. In support of this claim, they simply incorporate by reference all the allegations of their First Substitute Special Defense, as described in Part II.A.4 above.
CT Page 21537
D. THE PLAINTIFFS' MOTIONS TO STRIKE THE DEFENDANTS' SUBSTITUTE SPECIAL DEFENSES
On December 2, 2009, the Arthur Beckenstein plaintiffs and the Roz-Lynn Beckenstein plaintiffs filed separate Motions to Strike the defendants' Substitute Special Defenses, pleading numbers 178 and 180, respectively, together with supporting memoranda of law. Attached to the latter memorandum were the following exhibits: (a) a copy of Judge McWeeny's May 13, 2008 decision on the plaintiffs' motion to dismiss in the 2007 lawsuit; and (b) a copy of Judge Wagner's October 13, 2009 decision on the Roz-Lynn Beckenstein plaintiffs' previous Motion to Strike Special Defenses.On April 28, 2010, the defendants filed an Objection to the plaintiffs' Motions to Strike. The Arthur Beckenstein plaintiffs and the Roz-Lynn Beckenstein plaintiffs responded to the defendants' Objection by filing separate reply memoranda on May 25, 2010 and June 16, 2010, respectively.
The Motions to Strike were heard together at the short calendar on June 22, 2010. Following oral argument, this Court granted the parties two weeks to file simultaneous supplemental post-argument memoranda. All parties filed supplemental memoranda on July 6, 2010. Attached to the Roz-Lynn Beckenstein plaintiffs' supplemental memorandum were: (a) a copy of Judge McWeeny's May 12, 2009 articulation of his May 13, 2008 decision dismissing 2007 lawsuit for lack of standing; and (b) a copy of the Judge McWeeny's November 25, 2009 decision on the defendants' motion for reconsideration and further articulation of his prior ruling on the motion to dismiss the 2007 lawsuit.
II. ANALYSIS A. STANDARD OF REVIEW
"Generally speaking, facts must be pleaded as a special defense when they are consistent with the allegations of the complaint but demonstrate, nonetheless, that the plaintiff has no cause of action. Practice Book § 10-50; . . . The fundamental purpose of a special defense, like other pleadings, is to apprise the court and opposing counsel of the issues to be tried, so that basic issues are not concealed until the trial is underway." (Citation omitted; internal quotation marks omitted.) Almada v. Wausau Business Ins. Co., CT Page 21538 274 Conn. 449, 456, 876 A.2d 535 (2005). "Unlike a counterclaim, a special defense is not an independent action; rather, it is an attempt to plead facts that are consistent with the allegations of the complaint but demonstrate, nonetheless, that the plaintiff has no cause of action." (Internal quotation marks omitted.) Valentine v. LaBow, 95 Conn.App. 436, 447 n. 10, 897 A.2d 624, cert. denied, 280 Conn. 933, 909 A.2d 963 (2006).
"Whenever any party wishes to contest . . . the legal sufficiency of . . . any special defense . . . that party may do so by filing a motion to strike[.]" Practice Book § 10-39(a)(5); see Bender v. Bender, 292 Conn. 696, 722 n. 23, 975 A.2d 636 (2009) (Practice Book § 10-39(a)(5) permits a party to file a motion to strike a special defense); Barasso v. Rear Still Hill Road, LLC, 64 Conn.App. 9, 13, 779 A.2d 198 (2001) ("[a] party wanting to contest the legal sufficiency of a special defense may do so by filing a motion to strike").
"In ruling on a motion to strike [a special defenses], the court must accept as true the facts alleged in the special defenses and construe them in the manner most favorable to sustaining their legal sufficiency." Barasso v. Rear Still Hill Road, LLC, supra, 13; see also Connecticut National Bank v. Douglas, 221 Conn. 530, 536, 606 A.2d 684 (1992) ("[i]n . . . ruling on the . . . motion to strike, the trial court recognized its obligation to take the facts to be those alleged in the special defenses and to construe the defenses in the manner most favorable to sustaining their legal sufficiency"). "A motion to strike admits all facts well pleaded; it does not admit legal conclusions or the truth or accuracy of opinions stated in the pleadings." (Emphasis in original; internal quotation marks omitted.) Faulkner v. United Technologies Corp., 240 Conn. 576, 588, 693 A.2d 293 (1997).
"[A] motion to strike is essentially a procedural motion that focuses solely on the pleadings . . . It is, therefore, improper for the court to consider material outside of the pleading that is being challenged by the motion . . . Nonetheless . . . [a pleading] includes all exhibits attached thereto." (Citations omitted; internal quotation marks omitted.) Tracy v. New Milford Public Schools, 101 Conn.App. 560, 566, 922 A.2d 280, cert. denied, 284 Conn. 910, 931 A.2d 935 (2007); see also Commissioner of Labor v. C.J. M. Services, Inc., CT Page 21539 268 Conn. 283, 293, 842 A.2d 1124 (2004) ("[w]here 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]). "A speaking motion to strike is one improperly importing facts from outside the pleadings." Mercer v. Cosley, 110 Conn.App. 283, 292 n. 7, 955 A.2d 550 (2008).
B. THE PARTIES' CLAIMS
The plaintiffs seeks to strike the defendants' Substitute Special Defenses on the following grounds: (a) as to the First and Fourth Special Defenses, (I) that, by claiming fraud in the inducement, the defendants have effectively attempted to rescind the 2000 Settlement Agreement, for which they assertedly are required, but here have failed, to plead that they have either returned, or offered to return, all consideration they received pursuant to the rescinded Agreement; (ii) that the defendants are collaterally estopped from asserting any claims concerning Partnership property and Partnership Financial Information on account of Judge McWeeny's May 13, 2008 dismissal of their complaint in the 2007 lawsuit for lack of standing; (b) as to paragraphs ten through fifteen of their First and Fourth Special Defenses, that the defendants fail to allege sufficient facts to establish that the plaintiffs breached any fiduciary duty owed to them with respect to the Rose Trust or the 2000 Settlement Agreement; (c) as to the Second Substitute Special Defense, that the defendants fail to allege sufficient facts to demonstrate that Judge McWeeny's May 13, 2008 decision in the 2007 lawsuit precludes the plaintiffs' present claims; and (d) as to the Third Substitute Special Defense, that the defendants fail to allege sufficient facts to establish that the plaintiffs' legal claims in this action are inconsistent with plaintiffs' legal position in the 2007 lawsuit.
The Court will consider the legal sufficiency of the defendants' substitute special defenses individually.
C. FIRST SUBSTITUTE SPECIAL DEFENSE: FRAUDULENT INDUCEMENT 1. Fraud as a Special defense
Practice Book § 10-50 provides, in relevant part, to reiterate, that: "No facts may be proved under either a general or special denial except such as show that the plaintiff's statements of fact are untrue. Facts which are consistent with such statements but show, notwithstanding, that the plaintiff has no cause of action, must be specially alleged. Thus . . . fraud . . . must be specially pleaded . . ." (Emphasis added.)
"Fraud in the inducement to enter a contract is a well established equitable defense." Connecticut National Bank v. Voog, 233 Conn. 352, 367, 659 A.2d 172 (1995), citing Texaco, Inc. v. Golart, 206 Conn. 454, 459, 538 A.2d 1017 (1988). A special defense of fraudulent inducement to enter a contract may be either an equitable or a legal defense. Id., 459 n. 5. In order to sufficiently plead fraud as a special defense, all of the elements of a cause of action in fraud must be alleged. See Cadle Co. v. Ginsberg, 70 Conn.App. 748, 769-70, 802 A.2d 137, cert. denied, 262 Conn. 905, 810 A.2d 271 (2002); Beckenstein v. Naier, Superior Court, judicial district of Hartford, Docket No. CV 08 501925 (October 13, 2009, Wagner, J.T.R.).
"Fraud vitiates all contracts, written or verbal and sealed or unsealed." (Internal quotation marks omitted.) Pacelli Bros. Transportation, Inc. v. Pacelli, 189 Conn. 401, 409, 456 A.2d 325 (1983). A cause of action sounding in fraud has been addressed under many names in Connecticut courts, including: fraud; Leonard v. Commissioner of Revenue Services, 264 Conn. 286, 296, 823 A.2d 1184 (2003); fraudulent inducement; Harold Cohn Co. v. Harco International, LLC, 72 Conn.App. 43, 50-51, 804 A.2d 218, cert. denied, 262 Conn. 903, 810 A.2d 269 (2002); and fraudulent misrepresentation; Centimark Corp. v. Village Manor Associates Ltd. Partnership, 113 Conn.App. 509, 522, 967 A.2d 550, cert. denied, 292 Conn. 907, 973 A.2d 103 (2009).
"The essential elements of a cause of action in fraud are: (1) a false representation was made as a statement of fact; (2) it was untrue and known to be untrue by the party making it; (3) it was made to induce the other party to act upon it; and (4) the other party did so act upon that false representation to his injury . . . All of these ingredients must be found to exist; and the absence of any one of them is fatal to a recovery." (Internal quotation marks omitted.) Harold Cohn Co. v. Harco International, LLC, supra, 72 Conn.App. 51; accord Leonard v. Commissioner of Revenue Services, supra, 264 Conn. 296. "Additionally, [t]he party asserting such a cause of action must prove the existence of the first three of [the] elements by a standard higher than the usual fair preponderance of the evidence, which higher standard we have described as clear and satisfactory or clear, precise and unequivocal." (Internal quotation marks omitted.) Harold Cohn Co. v. Harco International, LLC, supra, 72 Conn.App. 51.
2. Whether the Defendants Must Allege Return of or an Offer to Return the Consideration Received Under the 2000 Settlement Agreement in Order to State a Valid and Sufficient Special Defense of FraudIn moving to strike the defendants' First Substitute Special Defense, the plaintiffs claim that, by pleading fraud in the inducement to enter into the 2000 Settlement Agreement as a special defense, the defendants are implicitly seeking to rescind that Agreement, and thus that they must plead that they have returned or offered to return all consideration received by them under the Settlement Agreement in order to establish their entitlement to such relief. The plaintiffs contend that the First Substitute Special Defense must be stricken because the defendants have failed to so allege.
The defendants have responded that they are not required to allege that they have returned or offered to return the consideration they received pursuant to the Settlement Agreement to plead fraud in the inducement as a special defense, because by interposing that special defense they are not seeking affirmative relief of any kind, but only seeking to avoid and defeat the plaintiffs' affirmative claims for relief against them under a contract they were fraudulently induced to enter into.
Connecticut appellate courts have held that, "[f]raud in the inducement of a contract ordinarily renders the contract merely voidable at the option of the defrauded party, who also has the choice of affirming the contract and suing for damages . . . If he pursues the latter alternative, the contract remains in force . . ." (Citation omitted.) A. Sangivanni Sons v. F.M. Floryan Co., 158 Conn. 467, 472, 262 A.2d 159 (1969); accord Harold Cohn Co. v. Harco International, LLC, supra, 72 Conn.App. 50; see also Kim v. Magnotta, 49 Conn.App. 203, 223, 714 A.2d 38 (1998), overruled on other grounds by 249 Conn. 94, 733 A.2d 809 (1999) ("[t]he party defrauded has the option of electing either to rescind the contract or to claim damages for the breach of the contract").
The plaintiffs' argument recognizes that, "[a]s a matter of common law, a party to a contract . . . may rescind that contract and avoid liability thereunder if that party's consent to the contract was procured either by the other party's fraudulent misrepresentations, or by the other party's nonfraudulent material misrepresentations." Munroe v. Great American Ins. Co., 234 Conn. 182, 188 n. 4, 661 A.2d 581 (1995). "A definite election to rescind a contract is final and operates as a waiver of any claim for damages for any breach of the contract." (Internal quotation marks omitted.) Duksa v. Middletown, 192 Conn. 191, 197, 472 A.2d 1 (1984). "Rescission of a contract is an appropriate remedy if there has been a material misrepresentation of fact upon which a party relied and which caused [her] to enter the contract . . . Rescission, simply stated, is the unmaking of a contract. It is a renouncement of the contract and any property obtained pursuant to the contract, and places the parties, as nearly as possible, in the same situation as existed just prior to the execution of the contract." (Citation omitted; internal quotation marks omitted.) Dorsey v. Mancuso, 23 Conn.App. 629, 635, 583 A.2d 646 (1990), cert. denied, 217 Conn. 809, 585 A.2d 1234 (1991).
The plaintiffs' argument also recognizes that, "[u]nder Connecticut law, as a condition precedent to rescission, the parties to a contract must be restored to their original position as nearly as possible." Barco Auto Leasing Corp. v. House, 202 Conn. 106, 113, 520 A.2d 162 (1987). Thus, in the context of a sales contract, for example, our Supreme Court has noted that, "[i]n restoring the parties to their respective positions prior to the contract, courts generally order the seller to refund the amounts paid by the buyer for the goods and the buyer to return the goods to the seller." Id.
In each of the above-cited cases, however, the party required by law to plead and prove the return of or an offer to return all consideration received under the challenged contract was one who had affirmatively sought to rescind the contract based upon the other party's fraud. None was a party who had merely pleaded fraud as a special defense to defeat another party's affirmative claim against him under the challenged contract. To draw the inference that, by claiming fraud in the inducement as a special defense without filing a counterclaim for rescission, he was effectively claiming rescission nonetheless, not only ignores the limitations of his pleading, but makes an unwarranted assumption about which affirmative remedy he would elect if he sought affirmative relief at all. Our law makes it clear that a victim of fraud in the inducement who wishes to pursue an affirmative remedy can seek either rescission or money damages, at his option.
In fact, one of the most basic principles of equity jurisprudence is that a party is not entitled to relief for breach of a contract which he has procured by fraud. To avoid the enforcement of such a fraudulently procured contract, our law makes it clear that a party must simply plead all the essential elements of fraud, and nothing more. See Cadle Co. v. Ginsberg, supra, 70 Conn.App. 769-70; Beckenstein v. Naier, supra, Superior Court, Docket No. CV 08 501925. The plaintiffs do not argue that the defendants have failed to allege the elements of a cause of action in fraud. Not surprisingly, then, an examination of the forms published in 12A Am.Jur. Pleading and Practice Forms for the pleading of rescission based upon fraud in the inducement and the special defense of fraud in the inducement differ in one crucial respect. Whereas the former sets forth allegations of return or offer to return all consideration received pursuant to the contract sought to be rescinded, the latter, which does not seek rescission, does not. Id., §§ 195 ("Complaint, petition, or declaration — For rescission — Misrepresentations as to income from and expenses of rental property"), 203 ("Answer — Defense — Written agreement procured by fraud").
It has already been stated that, in ruling on a motion to strike, "[t]he role of the trial court [is] to examine the [challenged pleading], construed in favor of the [nonmoving party], to determine whether the [nonmoving party has] stated a legally sufficient cause of action." (Internal quotation marks omitted.) Dodd v. Middlesex Mutual Assurance Co., 242 Conn. 375, 378, 698 A.2d 859 (1997). "In ruling on a motion to strike, the court is limited to the facts alleged in the [challenged pleading]." (Internal quotation marks omitted.) Faulkner v. United Technologies Corp., supra, 240 Conn. 580.
Here, the defendants do not plead in their special defense that they seek any remedy at all, whether it be rescission or affirmation of the 2000 Settlement Agreement. This approach to pleading the special defense by the defendants is consistent with the purposes underlying a special defense, which, unlike a counterclaim, is not an independent action. See Valentine v. LaBow, supra, 95 Conn.App. 447 n. 10.
Because the defendants have not pled that they have rescinded, intend to rescind, or seek rescission as part of their special defense, and because there is no authority that requires them to do so, the Court will not require them, in order to plead the special defense of fraudulent inducement, to allege the return or an offer to return the consideration received as a result of the Settlement Agreement they were allegedly fraudulently induced to enter, or to otherwise restore the plaintiffs to their original position prior to the agreement. Therefore, the defendants' First Substitute Special defense of fraudulent inducement is legally sufficient as pleaded.
It is noted that although the defendants are not required to plead rescission, when rescission is raised as a defense it should be pleaded as a special defense. See Mainolfi v. Brazee, supra, 135 Conn. 437. Therefore, if the defendants were to assert that they are entitled to rescission of the contract as a defense to the plaintiffs' action at a later date, the plaintiffs may have grounds to move for summary judgment.
In light of this determination, the Court need not reach the defendants' alternative ground for denying the plaintiffs' Motions to Strike their First Substitute Special Defense, to it: that pleading rescission would be futile.
3. Collateral Estoppel
The plaintiffs also argue that the defendants' First Substitute Special Defense must be stricken on grounds of collateral estoppel based upon Judge McWeeny's prior decision dismissing the defendants' complaint in the 2007 lawsuit. Previous Superior Court decisions, however, have rejected such arguments as legitimate bases for granting motions to strike, because they depend upon the consideration of facts outside the challenged pleadings. In Garcias v. Dostie, Superior Court, judicial district of New Haven, Docket No. CV 07 5011410 (August 11, 2008, Holden, J.) ( 46 Conn. L. Rptr. 129), for example, the defendants moved to strike the plaintiff's complaint seeking damages for alleged breach of a promissory note on grounds of res judicata and collateral estoppel. In denying the motion, the Court ruled as follows: "Notwithstanding the defendants' invitation to look beyond the four corners of this motion to judicially notice the disposition of related issues between the same parties in a previous judicial proceeding, the court declines to do so because claims of res judicata and collateral estoppel are not appropriately considered in a motion to strike as they require the court to consider material outside the relevant pleading. See also Commissioner of Labor v. C.J. M. Services, Inc., [ supra, 268 Conn. 293] (`[w]here the legal grounds for such a motion 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]); Tracy v. New Milford Public Schools, [ supra, 101 Conn.App. 566] (`[a] motion to strike is essentially a procedural motion that focuses solely on the pleadings . . . It is, therefore, improper for the court to consider material outside of the pleading that is being challenged by the motion' [internal quotation marks omitted]); Hoydic v. Genesco, Inc., Superior Court, judicial district of Ansonia-Milford, Docket No. CV 07 5003291 (April 10, 2008, Levin, J.) (`[r]es judicata and collateral estoppel cannot be raised by a motion to strike'); Trumbull v. Palmer, Superior Court, judicial district of Fairfield, Docket No. CV 05 5004063 (August 24, 2007, Maiocco, J.T.R.) (`[a] motion to strike is not the proper method by which to raise the issue of res judicata and collateral estoppel' [internal quotation marks omitted]); cf. Practice Book § 10-50 (res judicata must be specially pleaded); see also Silano v. Granfors, Superior Court, judicial district of Fairfield, Docket No. CV 02 0395209 (February 27, 2004, Stevens, J.) ( 36 Conn. L. Rptr. 591) (`when confronted with a movant attempting to use judicial notice to establish facts in a motion to strike, courts have declined to take judicial notice')." Garcias v. Dostie, Superior Court, judicial district of New Haven, Docket No. CV 07 5011410 (August 11, 2008, Holden, J.) ( 46 Conn. L. Rptr. 129-30).
For the foregoing reasons, this Court must reject any argument based upon collateral estoppel as a legitimate basis for striking the defendants' First Substitute Special Defense of fraud in the inducement.
4. Fiduciary Duty
As a final basis for their Motion to Strike the defendants' First and Fourth Substitute Special Defenses, the Roz-Lynn Beckenstein plaintiffs challenge paragraphs ten through fifteen of those Special Defenses on the ground that they attempt, but fail sufficiently, to allege a separate special defense of breach of fiduciary duty. The defendants contend that, in those paragraphs, they have sufficiently pleaded that breaches of fiduciary duties owed to them by the plaintiffs.
The Arthur Beckenstein plaintiffs, while also moving to strike the First and Fourth Substitute Special Defenses, do not separately identify paragraphs ten through fifteen or make any arguments related to a breach of fiduciary duty defense.
Initially, it must be noted that, "[a]lthough there is a split of [opinion], most trial courts follow the rule that a single paragraph of a pleading is subject to a motion to strike only when it attempts to set forth all of the essential allegations of a cause of action or defense . . . [O]nly an entire count of a counterclaim or an entire special defense can be subject to a motion to strike, unless the individual paragraph embodies an entire cause of action or defense . . . Arguably under the present rules, a motion to strike may properly lie with respect to an individual paragraph in a count . . . However, the weight of [opinion] in the Superior Court is that the motion does not lie, except possibly where the subject paragraph attempts to state a cause of action." (Internal quotation marks omitted.) Maysonet v. Cogdell, Superior Court, judicial district of New Haven, Docket No. CV 08 5024267 (June 8, 2009, Wilson, J.); see also Zamstein v. Marvasti, 240 Conn. 549, 553, 692 A.2d 781 (1997) (noting that trial court "struck paragraph twenty-eight of the plaintiff's complaint because the court construed it as a claim for loss of filial consortium . . ."
Here, the Roz-Lynn Beckenstein plaintiffs and the defendants agree that paragraphs ten through fifteen of the defendants' First and Fourth Substitute Special Defenses attempt to set forth all of the essential allegations of a separate special defense sounding in breach of fiduciary duty. Therefore, the Court will examine those paragraphs to determine if they sufficiently allege such a special defense.
The Roz-Lynn Beckenstein plaintiffs assert that paragraphs ten through fifteen fail to state sufficient facts to allege that the plaintiffs owed a fiduciary duty to the defendants or had any special relationship with them, by "failing to allege that the plaintiffs possessed a unique degree of trust and confidence between them and the defendants; or that any of the plaintiffs had a superior knowledge, skill, or expertise; or that the plaintiffs owed the defendants a duty to represent the defendants in connection with the Settlement Agreement."
"Connecticut courts have specifically refused to define a fiduciary relationship in precise detail and in such a manner as to exclude new situations . . . Instead, a fiduciary relationship exists where there is a justifiable trust confided on one side and a resulting superiority and influence on the other . . . A fiduciary relationship is characterized by a unique degree of trust and confidence between the parties, one of whom has superior knowledge, skill or expertise and is under a duty to represent the interest of the other . . . The superior position of the fiduciary or dominant party affords him great opportunity for abuse of the confidence reposed in him." (Citations omitted; internal quotation marks omitted.) Southbridge Associates, LLC v. Garofalo, 53 Conn.App. 11, 18, 728 A.2d 1114, cert. denied, 249 Conn. 919, 733 A.2d 229 (1999).
Paragraph ten of the First and Fourth Substitute Special Defenses alleges that each of the plaintiffs "had a fiduciary duty and/or special relationship with the trust and with the defendants as beneficiaries thereof, which gave rise to a continuing obligation on the part of the plaintiffs to disclose their acts and omissions . . ." This allegation, however, alleging the existence of a fiduciary duty or special relationship, merely contains legal conclusions, which are not properly considered by a court on a motion to strike. See Faulkner v. United Technologies Corp., supra, 240 Conn. 588.
The defendants argue that this Court can find that they have sufficiently alleged the existence of a fiduciary duty and a subsequent breach of that duty by considering all of the allegations contained in the defendants' special defenses, read together with the plaintiffs' allegations in the Complaint, as well as the exhibits submitted by the parties. But as has previously been explained, a court, on a motion to strike, can only consider the allegations of the challenged pleading itself — here, the defendants' First and Fourth Substitute Special Defenses. Paragraphs ten through fifteen do not plead facts that would support an allegation that the plaintiffs owed the defendants a fiduciary duty. Nor do the defendants point to any other allegations of the First and Fourth Substitute Special Defenses that would support such a claim. Moreover, it would be inappropriate for this Court to consider the exhibits submitted by the parties along with their legal memoranda.
Therefore, the Court concludes that paragraphs ten through fifteen of the First and Fourth Substitute Special Defenses do not plead the existence of a fiduciary relationship between the plaintiffs and the defendants, and thus fail as well to allege any actionable breach of fiduciary duties by them. Those Counts must therefore be stricken, with respect to the Roz-Lynn Beckenstein plaintiffs only, to the limited extent that they might otherwise be claimed to support an independent special defense of breach of fiduciary duty.
D. SECOND SUBSTITUTE SPECIAL DEFENSE: MOOTNESS
In their Motion to Strike, the Roz-Lynn Beckenstein plaintiffs have described the defendants' Second Substitute Special Defense as a claim of mootness. They have moved to strike that Substitute Special Defense on the ground that it fails to state any facts to differentiate it from the earlier special defense previously stricken by Judge Wagner, or to describe facts and circumstances demonstrating that the conclusions of the Court, McWeeny, J., in dismissing the 2007 lawsuit, preclude the plaintiffs from prosecuting the present action. The Arthur Beckenstein plaintiffs similarly argue that the Second Substitute Special Defense must be stricken because the defendants' lack of standing to prosecute the 2007 lawsuit, as found by Judge McWeeny, does not undermine the plaintiffs' right to claim in this action that the defendants brought the 2007 lawsuit against them in violation covenant not to sue in the 2000 Settlement Agreement.
The defendants argue, in opposition to the plaintiffs' Motions to Strike, that the Second Substitute Special Defense is legally sufficient because "it is axiomatic" that, if the defendants lacked standing to bring the 2007 lawsuit against the plaintiffs for the plaintiffs' alleged breach of the 2000 Settlement Agreement, then they themselves cannot be sued for breach of the 2000 Settlement Agreement and the related claim of the breach of the covenant of good faith and fair dealing. Put another way, the defendants argue that if they did not have standing to sue under the 2000 Settlement Agreement, then they cannot be bound by any part of that Settlement Agreement, including its covenant not to sue.
The Roz-Lynn Beckenstein plaintiffs have responded that Judge McWeeny's dismissal of the 2007 lawsuit concluded only that the defendants lacked standing with respect to the particular claims the defendants raised in that lawsuit, and did not conclude that the defendant were not parties to the 2000 Settlement Agreement or were not bound by its terms. The Arthur Beckenstein plaintiffs have also responded that the law of the case doctrine should be applied to the Second Substitute Special Defense, which should now be stricken for the same reasons as the previous version of that special defense was stricken by Judge Wagner.
At the short calendar, the plaintiffs argued that the Second Substitute Special Defense contained no new allegations when compared to the original Second Special Defense. The defendants disagreed, contending that it did indeed contain new allegations. The parties did not address the Second Substitute Special Defense in their supplemental memoranda.
In considering the plaintiffs' Motions to Strike as to the defendants' Second Substitute Special Defense, it is reiterated that "a motion to strike is essentially a procedural motion that focuses solely on the pleadings . . . It is, therefore, improper for the court to consider material outside of the pleading that is being challenged by the motion." (Citations omitted; emphasis in original; internal quotation marks omitted.) CT Page 21549 Tracy v. New Milford Public Schools, supra, 101 Conn.App. 566. Therefore to the extent that the plaintiffs argue that Judge McWeeny's dismissal of the defendants' (in this case, plaintiffs in that case) complaint in the 2007 lawsuit makes the Second Substitute Special Defense legally insufficient, it is improper for this Court to consider Judge McWeeny's decision, other than as described in that Special Defense itself. Therefore, this Court does not consider on these Motions either Judge McWeeny's decision, as attached to the Roz-Lynn Beckenstein plaintiffs' memorandum, or the grounds for that decision, other than as alleged in the challenged Special Defense.
The defendants' Second Substitute Special Defense simply alleges that the decision by Judge McWeeney dismissed their complaint in the 2007 lawsuit for lack of standing to prosecute that lawsuit. It contains further allegations that: (a) the defendants were parties to and signatories of the 2000 Settlement Agreement; (b) that Judge McWeeney concluded that the defendants did not have standing to enforce the terms of the 2000 Settlement Agreement; (c) that based on that conclusion, Judge McWeeney "essentially held that the defendants effectively were not parties to the Settlement Agreement — indeed, did not have standing to be parties to the Settlement Agreement;" (d) that Judge McWeeny's ruling wrote the defendants out of the Settlement Agreement by refusing to allow them to enforce its terms; and (e) that, in so doing, Judge McWeeney "effectively wrote the defendants out of any provisions of the agreement prohibiting the filing of a lawsuit." Id.
The plaintiffs argue that the defendants' Second Substitute Special Defense is legally insufficient because Judge McWeeny's decision did not have the effect of rendering the defendants non-parties to the 2000 Settlement Agreement, or of making the 2000 Settlement Agreement's covenant not to sue unenforceable against them. The actual grounds or effects of Judge McWeeny's decision cannot be considered by this Court on the plaintiffs' Motions to Strike because that would call for the Court to make legal conclusions based on facts that are not contained within either the plaintiffs' or defendants' pleadings in this case. The only facts regarding Judge McWeeny's decision that may be considered are those that have been pleaded, namely, that Judge McWeeny's decision dismissed the defendants' complaint in the 2007 lawsuit.
Instead of considering external facts the plaintiffs have attempted to introduce, the court must "accept as true the facts alleged in the special defenses and construe them in the manner most favorable to sustaining their legal sufficiency." Barasso v. Rear Still Hill Road, LLC, supra, 64 Conn.App. 13. Further, "[a] motion to strike admits all facts well pleaded; it does not admit legal conclusions or the truth or accuracy of opinions stated in the pleadings." (Emphasis in original; internal quotation marks omitted.) Faulkner v. United Technologies Corp., supra, 240 Conn. 588.
The defendants' Second Substitute Special Defense predominantly states legal conclusions. The only facts it alleges are that the 2007 lawsuit was dismissed by Judge McWeeny and that the defendants were parties to and signatories of the 2000 Settlement Agreement. Thereafter, the defendants make only legal conclusions, stating: "Judge McWeeny essentially held that the defendants effectively were not parties to the Settlement Agreement . . . Judge McWeeny's ruling wrote the defendants out of the Settlement Agreement by refusing to allow them to enforce its terms, the decision also effectively wrote the defendants out of any provisions of the agreement prohibiting the filing of a lawsuit. Simply stated, the courts cannot[.]"
Therefore, this Court concludes that the defendants' Second Substitute Special Defense is legally insufficient because it is based primarily on legal conclusions, and lacks sufficient factual allegations to establish that the dismissal of the 2007 lawsuit precludes the plaintiffs from obtaining relief in this action as a matter of law.
Because the Court has found the defendants' Second Substitute Special Defense is legally insufficient, the Court need not consider the plaintiffs' argument regarding the law of the case doctrine.
E. THIRD SUBSTITUTE SPECIAL DEFENSE: JUDICIAL ESTOPPEL
The Arthur Beckenstein plaintiffs argue, as to the Third Substitute Special Defense, that the doctrine of judicial estoppel requires, inter alia, the taking of an inconsistent position in prior litigation, which the defendants have failed to allege. The Roz-Lynn Beckenstein plaintiffs argue, as to the Third Substitute Special Defense, that the defendants have failed to allege a prior inconsistent legal position because their alleged legal position in the 2007 lawsuit that the defendants (in this case, plaintiffs in that case) lacked standing to raise their alleged claims under the 2000 Settlement Agreement is not inconsistent with their present breach of contract claims against the defendants, alleging that the defendants violated the 2000 Settlement Agreement's covenant not to sue.
The defendants argue that their Third Substitute Special Defense is legally sufficient because the plaintiffs' position in the 2007 lawsuit that the defendants had no standing to assert their claims under the 2000 Settlement Agreement is inconsistent with their present position that the defendants can be sued for violating the terms of the 2000 Settlement Agreement.
Initially, the Arthur Beckenstein plaintiffs argued that the doctrine of judicial estoppel had never been officially recognized in Connecticut, but thereafter, by letter to the court, noted that it has since been recognized by our Supreme Court in Association Resources, Inc. v. Wall, 298 Conn. 145, 2 A.3d 873 (2010). In Association Resources, Inc., the doctrine of judicial estoppel was first raised as a ground for granting a motion to dismiss a revised counterclaim. Association Resources, Inc. v. Wall, 298 Conn. 145, 155, 2 A.3d 873 (2010). The trial court denied that motion. Id. Thereafter, judicial estoppel was pleaded as special defense to an amended counterclaim. Id., 157-58. At trial, the Court rejected all of the special defenses to the counterclaim, including judicial estoppel. Id., 158. On appeal to the Supreme Court, it was claimed that the trial court had improperly denied the motion to dismiss, in part, on the ground of judicial estoppel. Id., 160. The Supreme Court recognized that the case "present[ed] the first opportunity for [the Supreme Court] or the Appellate Court to consider the doctrine of judicial estoppel as a matter of Connecticut law;" id., 169; but "turn[ed] for guidance to the significant body of federal case law addressing [the] doctrine . . ." in recognizing the doctrine. Id.
"[J]udicial estoppel prevents a party in a legal proceeding from taking a position contrary to a position the party has taken in an earlier proceeding . . . [J]udicial estoppel serves interests different from those served by equitable estoppel, which is designed to ensure fairness in the relationship between parties . . . The courts invoke judicial estoppel as a means to preserve the sanctity of the oath or to protect judicial integrity by avoiding the risk of inconsistent results in two proceedings . . ."Typically, judicial estoppel will apply if: 1) a party's later position is clearly inconsistent with its earlier position; 2) the party's former position has been adopted in some way by the court in the earlier proceeding; and 3) the party asserting the two positions would derive an unfair advantage against the party seeking estoppel . . . We further limit judicial estoppel to situations where the risk of inconsistent results with its impact on judicial integrity is certain . . . Thus, courts generally will not apply the doctrine if the first statement or omission was the result of a good faith mistake . . . or an unintentional error . . ."
"Because the rule is intended to prevent improper use of judicial machinery . . . judicial estoppel is an equitable doctrine invoked by a court at its discretion . . ." (Citations omitted; internal quotation marks omitted.) Id., 169-71. The Supreme Court ultimately concluded that the trial court had not abused its discretion by declining to invoke the doctrine of judicial estoppel. Id., 172. Although the certified question before the Supreme Court regarding judicial estoppel was only addressed in the context of the motion to dismiss in that case, and not explicitly in the context of the special defense, the plaintiffs do not contend that the pleading of judicial estoppel as a special defense is improper or invalid, and thus this Court does not reach that conclusion.
Turning, then, to consideration of whether the defendants' Third Substitute Special Defense alleging judicial estoppel is legally sufficient, it must be noted here again that on a motion to strike, a trial court need not consider whether the defendants can or have actually proved the three elements of judicial estoppel articulated by the Supreme Court; see id., 170; but only whether they have pleaded facts which, if assumed to be true and construed in their favor, would satisfy all of those elements. To establish judicial estoppel as a special defense, the defendants must plead: (a) that the plaintiffs' position in the present case is clearly inconsistent with its position in an earlier judicial proceeding; (b) that the plaintiffs' inconsistent position in that earlier proceeding was in some way adopted by the court; and (c) that the plaintiffs, by asserting the two inconsistent positions, would derive an unfair advantage against the defendants. See id.
The defendants attempt to plead the first element of their Third Substitute Special Defense by alleging as follows: "The defendants state that plaintiffs claimed in the 2007 lawsuit that the defendants lacked standing to raise their alleged claims under the Settlement Agreement and release dated August 30, 2000. The plaintiffs' assertion in that proceeding that the defendants lacked standing to assert the claims under the Settlement Agreement and release is an intentionally inconsistent position of law or fact in this proceeding in that the plaintiffs now maintain that, despite lack of standing to sue under the 2000 Settlement Agreement, the defendants can be sued for breach of the 2000 Settlement Agreement in this proceeding." In sum, the defendants' special defense alleges that the plaintiffs argued in the 2007 lawsuit that the defendants lacked standing to present claims under the 2000 Settlement Agreement, essentially, were unable to enforce the terms of the contract against the plaintiffs, but now argue that the plaintiffs can enforce the terms of the contract against the defendants. The plaintiffs correctly argue that the fact that a party lacked standing to allege certain claims under a contract once, does not necessarily mean that the party will always lack standing to allege all claims under that contract, and, conversely, does not necessarily mean that the same party cannot have the contract enforced against them. A party initiating an action may lack standing for any number of reasons.
Nevertheless on a motion to strike, a court is to assume the truth of all of the non-moving party's allegations and construe them broadly, in the non-moving party's favor. Here, assuming the truth of the defendants' allegations and construing them broadly in their favor, the Court concludes that the plaintiffs' position in the 2007 lawsuit that the defendants lacked standing to enforce the terms of the Settlement Agreement against the plaintiffs in that action could be inconsistent with their position in this proceeding that the defendants can have the terms of the Settlement Agreement enforced against them. Therefore, the defendants sufficiently allege an inconsistent position.
To successfully allege facts satisfying the third element of judicial estoppel, the defendants must allege that, by asserting the two inconsistent positions, the plaintiffs would derive an unfair advantage against the defendants. By alleging that the plaintiffs' inconsistent positions "are made to mislead the court and obtain unfair advantage against the defendants in this proceeding by seeking to eliminate the defendants' right to raise their special defenses of fraud in the inducement and equitable estoppel;" the defendants have successfully alleged facts to satisfy the third element of judicial estoppel.
To allege facts satisfying the second element of judicial estoppel, the defendants must allege that the plaintiffs' position has been adopted in some way by the court in the earlier proceeding. The defendants' Third Substitute Special Defense contains no allegations as to how the Court regarded the plaintiffs' position in the 2007 lawsuit. For that reason, the defendants have failed to allege facts satisfying the second element, and therefore, the defendants have failed to sufficiently allege judicial estoppel as a special defense.
It is noted that the defendants did allege in their Second Substitute Special Defense that the 2007 lawsuit was dismissed by the court, McWeeny, J., in 2008 after concluding that the defendants lacked standing to enforce the terms of the Settlement Agreement. That allegation, however, was not explicitly adopted or incorporated into the Third Substitute Special Defense.
F. FOURTH SUBSTITUTE SPECIAL DEFENSE: EQUITABLE ESTOPPEL
In their Fourth Substitute Special Defense, the defendants allege that the plaintiffs' claims are barred by equitable estoppel. In support thereof, the defendants incorporate by reference the allegations of their First Substitute Special Defense, alleging fraud in the inducement.
The plaintiffs first argue that the defendants' Fourth Substitute Special Defense should be stricken for the same reasons as their First Substitute Special Defense, because the Fourth adopts and relies in material part upon the allegations of the First. Because the Court has already concluded that the First Substitute Special Defense is legally sufficient and not vulnerable to legal challenge on grounds of collateral estoppel, it is persuaded that the Fourth Substitute Special Defense should not be stricken on that basis either.
The plaintiffs, however, also argue that the Fourth Substitute Special Defense should be stricken because it fails to allege either that the defendants "exercised due diligence to ascertain the truth," or that they "did not know the truth but lacked any reasonably available means of acquiring knowledge." "[I]n Connecticut, the doctrine of equitable estoppel . . . requires proof of two essential elements: [first] the party against whom estoppel is claimed must do or say something calculated or intended to induce another party to believe that certain facts exist and to act on that belief; and [second] the other party must change its position in reliance on those facts, thereby incurring some injury . . . It is fundamental that a person who claims an estoppel must show that he has exercised due diligence to know the truth, and that he not only did not know the true state of things but also lacked any reasonably available means of acquiring knowledge." (Citation omitted; internal quotation marks omitted.) Celentano v. Oaks Condominium Assn., 265 Conn. 579, 614-15, 830 A.2d 164 (2003).
The plaintiffs do not contend that the defendants have failed to allege the "two essential elements" of equitable estoppel set forth above, but only that they have failed to allege that they exercised due diligence to know the truth of the facts that the plaintiffs allegedly misrepresented. While a number of Connecticut cases have similarly quoted the due diligence language used by the Supreme Court in Celentano v. Oaks Condominium Assn., supra, 265 Conn. 579; see Connecticut National Bank v. Voog, supra, 233 Conn. 367; Spear-Newman, Inc. v. Modern Floors Corp., 149 Conn. 88, 91-92, 175 A.2d 565 (1961); the plaintiffs have failed to cite any cases in which a court, in deciding a motion to strike, has required a party asserting equitable estoppel to plead that it exercised due diligence. Instead, the due diligence requirement is only an evidentiary requirement for prevailing on a claim of equitable estoppel, not a pleading requirement to state such a claim. Indeed, it is well settled in this State that a defendant need not plead equitable estoppel at all, but instead can raise the defense as a matter of equity to defeat a claim asserted against him at trial. See, e.g., Fields v. Metropolitan Life Ins. Co., 132 Conn. 588, 592 (1946).
This conclusion is supported by the many Connecticut cases that have used the "two essential elements" language to describe the requirements for raising a claim for equitable estoppel. See, e.g., Glazer v. Dress Barn, Inc., 274 Conn. 33, 59, 873 A.2d 929 (2005); W. v. W., 248 Conn. 487, 496, 728 A.2d 1076 (1999); Doe v. Doe, 244 Conn. 403, 445, 710 A.2d 1297 (1998); Rosenfield v. Metals Selling Corp., 229 Conn. 771, 793-94, 643 A.2d 1253 (1994); Johnnycake Mountain Associates v. Ochs, 104 Conn.App. 194, 208, 932 A.2d 472 (2007), cert. denied, 286 Conn. 906, 944 A.2d 978 (2008); Riscica v. Riscica, 101 Conn.App. 199, 205, 921 A.2d 633 (2007); LaSalle National Bank v. Freshfield Meadows, LLC, 69 Conn.App. 824, 838, 798 A.2d 445 (2002).
The plaintiffs cite to Row-Carr Carpentry, LLC v. Yale Mall Partnership, Superior Court, Judicial District of New Haven, Docket No. CV 08 5024608 (May 15, 2009, Abrams, J.) ( 47 Conn. L. Rptr. 794), as supporting their position that the defendants must plead the due diligence requirement, but in that case, the Court was not confronted with a motion to strike for which it had to determine the legal sufficiency of the plaintiffs' equitable estoppel claim, but with a motion to dismiss for which it made only jurisdictional determinations. The plaintiffs also cited O'Connor v. Waterbury, 286 Conn. 732, 945 A.2d 936 (2008), but that case dealt with municipal estoppel, which is not the type of estoppel at issue in this case.
The Court concludes that, although a claim of equitable estoppel need not be specially pleaded, the defendants here have pleaded sufficient facts in their Fourth Substitute Special Defense to raise such a claim at trial, and thus that the plaintiffs' Motions to Strike that Special Defense must be denied.
III. CONCLUSION
For all the foregoing reasons, the Court concludes that the plaintiffs' Motions to Strike as to the defendants' First Substitute Special Defense, alleging fraudulent inducement; and as to the defendants' Fourth Substitute Special Defense, asserting a claim of equitable estoppel, must be DENIED, but that the Roz-Lynn Beckenstein plaintiffs' Motion to Strike the claim of breach of fiduciary duty purportedly set forth in paragraphs ten through fifteen of the First and Fourth Substitute Special Defenses must be GRANTED. The Court further concludes that the plaintiffs' Motions to Strike as to the defendants' Second Substitute Special Defense, alleging mootness or collateral estoppel, and as their Third Substitute Special Defense, claiming judicial estoppel, must also be GRANTED.
IT IS SO ORDERED this 4th day of November 2010.