Opinion
FBTCV195040458
06-27-2019
Frank CANELAS et al. v. PURSUIT CAPITAL MANAGEMENT FUND I, L.P. et al.
UNPUBLISHED OPINION
KAMP, J.
FACTS
The plaintiffs, Frank Canelas and Anthony Schepis, filed an application for a prejudgment remedy (#110.31) against Pursuit Capital Management Fund I, L.P., and Pursuit Opportunity Fund I, L.P.- the non-appearing defendants on April 5, 2019. On April 26, 2019, Claridge Associates, LLC; Jamiscott, LLC; Leslie Schneider; and Lillian Schneider filed a motion to intervene (#102) for the limited purpose of seeking the dismissal of the present case. The intervening defendants’ motion was accompanied by a memorandum of law (#103). The plaintiffs filed a memorandum of law in opposition to the motion to intervene (#105). On May 13, 2019, the court, Bellis, J., granted the motion to intervene (#102.10). Shortly thereafter, on May 20, 2019, the intervening defendants filed a motion to dismiss (#107) on the ground that the collusive nature of the present case deprives the court of subject matter jurisdiction. The motion to dismiss was accompanied by a memorandum of law (#108) as well as a memorandum of law replying to the plaintiffs’ objection to their intervention (#109). The parties presented their arguments before the court on May 22, 2019, at which time the court reserved judgment.
DISCUSSION
"[T]he question of subject matter jurisdiction, because it addresses the basic competency of the court, can be raised by any of the parties, or by the court sua sponte, at any time." (Internal quotation marks omitted.) New Hartford v. Connecticut Resources Recovery Authority, 291 Conn. 511, 518, 970 A.2d 583 (2009). Furthermore, "[i]t is beyond peradventure that the challenge to the court’s subject matter jurisdiction must be resolved before the court can consider [a plaintiff’s] application for prejudgment remedies or, indeed, take any other action in the case." Taccogna v. Turner, Superior Court, judicial district of Litchfield, Docket No. CV-12-5007399-S (February 14, 2013, Danaher, J.) ; see also Building Technologies, Inc. v. Harley-Davidson of Danbury, Inc., Superior Court, judicial district of Danbury, Docket No. 326733 (May 16, 1997, Moraghan, J.) (19 Conn.L.Rptr. 521).
In their motion to dismiss, the intervening defendants argue that this case is not justiciable. Specifically, the intervening defendants contend that the present case is a "collusive suit" because the plaintiffs have unilateral control over the non-appearing defendants. As a result of this control, the intervening defendants argue that there is no controversy to be adjudicated; rather, the intervening defendants contend that the plaintiffs are improperly seeking that the court deliver a predetermined result. The intervening defendants further contend that the commencement of a collusive suit subjects the plaintiffs to an order of contempt. In addition to requesting that the court dismiss the present case, the intervening defendants also request that the court exercise its inherent authority to sanction bad faith pleadings by awarding the Schneiders their attorneys fees.
In response, the plaintiffs argue that the present case is not collusive. The plaintiffs contend that the limited partnership agreements governing the non-appearing defendants grant the plaintiffs indemnification rights, and that the control that provides the plaintiffs with the right to seek indemnification cannot, logically, also preclude them from bringing the present case, which seeks to secure that right. The plaintiffs concede that they control both of the non-appearing defendants, but emphasize that the non-appearing defendants are separate legal entities. The plaintiffs therefore argue that the court has subject matter jurisdiction over its prejudgment remedy application.
"[J]usticiability comprises several related doctrines ... that implicate a court’s subject matter jurisdiction and its competency to adjudicate a particular matter ... A case that is nonjusticiable must be dismissed for lack of subject matter jurisdiction." (Internal quotation marks omitted.) Janulawicz v. Commissioner of Correction, 310 Conn. 265, 270, 77 A.3d 113 (2013). "Justiciability requires (1) that there be an actual controversy between or among the parties to the dispute ... (2) that the interests of the parties be adverse ... (3) that the matter in controversy be capable of being adjudicated by judicial power ... and (4) that the determination of the controversy will result in practical relief to the complainant." (Internal quotation marks omitted.) Board of Education v. Naugatuck, 257 Conn. 409, 416, 778 A.2d 862 (2001).
"The first ... factor- the requirement of an actual controversy- is premised upon the notion that courts are called upon to determine existing controversies, [and therefore] may not be used as a vehicle to obtain judicial opinions on points of law." (Internal quotation marks omitted.) Board of Education v. Naugatuck, supra, 257 Conn. 416. "In addition to the presence of an actual controversy ... the interests of the parties [must] be adverse before a matter is justiciable ... The requirement of adversity ensure[s] that ... judicial decisions which may affect the rights of others are forged in hot controversy, with each view fairly and vigorously represented." (Citation omitted; internal quotation marks omitted.) Id., 423-24.
Collusive suits implicate the first two prongs of justiciability: controversy and adversity. "A ‘collusive action’ or ‘collusive suit’ is one brought by seemingly adverse parties under secret agreement and cooperation, with a view to have some legal question decided which is not involved in a real controversy between them ... In accordance with the principle that the function of a judicial tribunal is to hear and determine real controversies, and the principle that court proceedings contemplate an adversary situation ... the object of every action should be to settle a real controversy existing between the parties and involving adverse interests, and therefore an action or suit cannot be maintained if it appears that it has not such an object, but is fictitious or collusive ...
"An action cannot be maintained, as being fictitious or collusive, where its real object is to procure an advisory opinion of the court, without an actual contest ... A court’s power extends only to the cases and controversies brought before it ... An action not founded upon an actual controversy between the parties to it, and brought for the purpose of securing a determination of a point of law, is collusive and will not be entertained." (Footnotes omitted.) 1A C.J.S. 326, Actions § 70 (2016). Accordingly, "[a]n action will be precluded, as being fictitious or collusive, where its real purpose is for one party to control both sides of the lawsuit so as to bring about a predetermined, desired result ..." Id.
A Superior Court decision, Tao v. Probate Court for the Northeast District #26, Superior Court, judicial district of Windham, Docket No. CV-14-5005838-S (December 14, 2015, Boland, S.J.). discussed collusive suits. The court, Boland, S.J., noted that "[c]ollusive suits are forbidden. One such suit ... was United States v. Johnson, 319 U.S. 302, 63 S.Ct. 1075, 87 L.Ed. 1413 (1943) ... The Supreme Court ... dismissed the action, upon uncontroverted indications that the nominal plaintiff had no genuine stake in the outcome of the case, and that no judgment should be allowed to stand where one of the parties had dominated the conduct of the suit. The situation patently exhibited the absence of a genuine adversary issue between the parties, without which a court may not safely proceed to judgment ... The Court held that ... honest and actual antagonistic assertion of rights [is] a safeguard essential to the integrity of the judicial process, and ... [w]henever, in the course of litigation, such a defect in the proceedings is brought to the court’s attention, it may set aside any adjudication thus procured and dismiss the cause without entering judgment on the merits ..." (Citation omitted; internal quotation marks omitted.) Id.
In the present case, it is undisputed that the plaintiffs control both sides of the litigation. The plaintiffs represented to the court at the hearing held pursuant to the motion to dismiss that the plaintiffs are in "complete control" of the non-appearing defendants, and indeed, that the non-appearing defendants are non-appearing because the plaintiffs have elected not to arrange for their counsel. The plaintiffs also acknowledged that the non-appearing defendants will not oppose the prejudgment remedy application.
In light of the foregoing, the court lacks jurisdiction over the plaintiffs’ prejudgment remedy application because there is no actual controversy in dispute and that the parties are not adverse. The plaintiffs control the non-appearing defendants, who will not be represented in the present case and will not oppose the plaintiffs’ claims. As the plaintiffs’ application therefore seeks the court’s approval of a predetermined result, it is apparent that there is no actual controversy. For the same reasons, the requirement of adversity is not met, because the plaintiffs and the non-appearing defendants do not have opposing interests. The plaintiffs’ argument that the non-appearing defendants are separate legal entities does not demonstrate that the parties are adverse; adversity concerns inquiry into the parties’ interests, not merely whether the parties are separate legal entities capable of suing or being sued. As there is no controversy and no adversity, the court lacks subject matter jurisdiction and the present case must be dismissed.
Although the lack of controversy and adversity in the present case does raise the specter of a collusive suit, there is some indication that the present case may not meet all the criteria required. In particular, whether the present case "is one brought by seemingly adverse parties under secret agreement and cooperation"; 1A C.J.S., supra, p. 326; is unclear. The intervening defendants argue, for instance, that the plaintiffs’ pleadings establish that the plaintiffs have unilateral control over the non-appearing defendants, thereby demonstrating the collusive nature of the present case. Indeed, in their reply memorandum, the intervening defendants distinguish the present case from United States v. Johnson, supra, by noting that "[w]hereas in Johnson the parties attempted to create the air of adversity, there is no such pretense here." The secretive element to the present case, in the intervening defendants’ view, appears to be that the plaintiffs did not notify the Schneiders, who are limited partners in the Pursuit Capital Management Fund, about this litigation. Given the plaintiffs’ transparency with regard to their control over the non-appearing defendants and the fact that the plaintiffs did not misleadingly appoint counsel for the non-appearing defendants, it is uncertain whether the application for prejudgment remedies was filed pursuant to a secret agreement between parties who are not adverse. Regardless of whether the present case meets all the criteria of a collusive suit, however, it lacks controversy and adversity, and is therefore not justiciable. Furthermore, even if the present case does not qualify as a collusive suit, that fact is not dispositive as to the intervening defendants’ contention that the present case was filed in bad faith.
Having determined that the present case must be dismissed, the next issue concerns the intervening defendants’ arguments concerning contempt, sanctions, and the awarding of attorneys fees. The intervening defendants argue that, pursuant to Lord v. Veazie, 49 U.S. 251, 255, 12 L.Ed. 1067 (1850), attempting to secure the court’s opinion in the absence of an actual controversy is punishable by contempt. In Lord, the court provides that "any attempt, by a mere colorable dispute, to obtain the opinion of the court upon a question of law which a party desires to know for his own interest or his own purposes, when there is no real and substantial controversy between those who appear as adverse parties to the suit, is an abuse which courts of justice have always reprehended, and treated as a punishable contempt of court." Id. Nevertheless, our Appellate Court has indicated that, in the absence of a court order, a judgment of contempt will not stand. See Forcier v. Sunnydale Developers, LLC, 84 Conn.App. 858, 863, 856 A.2d 416 (2004). In the present case, the intervening defendants have not argued that the plaintiffs violated any particular court order, bringing into question the applicability of contempt. Accordingly, it appears that a discussion of the court’s authority to sanction bad faith pleadings may be more appropriately tailored to the present case.
It is well established that "the court has the inherent authority to impose sanctions against an attorney and his client for a course of claimed dilatory, bad faith and harassing litigation conduct where there is no specific rule or order of the court that the plaintiff is claimed to have violated." Fattibene v. Kealey, 18 Conn.App. 344, 359-60, 558 A.2d 677 (1989); see also ACMAT Corp. v. Greater New York Mutual Ins. Co., 282 Conn. 576, 591 n.13, 923 A.2d 697 (2007). "Although the court has such inherent powers, the sanctioned party has certain procedural rights. As a procedural matter, before imposing any ... sanctions, the court must afford the sanctioned party or attorney a proper hearing on the ... motion for sanctions. There must be fair notice and an opportunity for a hearing on the record ... This limitation ... is particularly appropriate with respect to a claim of bad faith or frivolous pleading by an attorney, which implicates his professional reputation ... Like other sanctions, attorneys fees certainly shall not be assessed lightly or without fair notice and an opportunity for a hearing on the record." (Citation omitted; emphasis omitted; internal quotation marks omitted.) Przekopski v. Zoning Board of Appeals, 131 Conn.App. 178, 198, 26 A.3d 657 (2011) (trial court abused discretion where plaintiff was not provided meaningful opportunity to respond to motion for sanctions and attorneys fees).
In the present case, although the intervening defendants requested attorneys fees in their memorandum of law filed in support of their motion to intervene, the issue was not addressed in detail at the hearing held pursuant to their motion to dismiss and the plaintiffs do not appear to have responded in writing to this argument. Essentially, the intervening defendants have argued that there are indications that the present case was brought "for the purposes of securing financial cover for litigation costs arising out of [the plaintiffs’] prior and ongoing looting" of the non-appearing defendants, and that the indemnification question should have been raised in a pending action in Stamford. The only response the plaintiffs appear to have offered is counsel’s representation at the hearing that the application for prejudgment remedies was filed in Bridgeport rather than Stamford because the plaintiffs’ counsel lives in Fairfield, which made Bridgeport more convenient. Based upon the record before the court, the request for sanctions is denied.
CONCLUSION
For the foregoing reasons, the intervening defendant’s motion to dismiss is granted.