Opinion
No. HHB CV08 5009794
July 29, 2011
MEMORANDUM OF DECISION ON MOTION FOR SUMMARY JUDGMENT
The plaintiff Direct Mail Jobs, LLC ("DMJ") has commenced this action against the defendants for damages. The plaintiff alleges that the defendant Susan Hughes, its former employee, was a party to a contract obligating her not to compete with the plaintiff should she leave the plaintiff's employ. The contract also obligated her to keep certain of the plaintiff's business information confidential. Hughes left her employment with the plaintiff and began working for the defendant Daniel Cahill and his business DeeJay Enterprises, Inc. The plaintiff claims that Hughes, Cahill, and DeeJay have tortiously interfered with its business and have unfairly used confidential information brought to them by Hughes. The plaintiff asks for money damages.
The defendants admit that Hughes left the employ of the plaintiff but deny that there has been any breach of contract, wrongful use of the plaintiff's confidential information, or tortious interference with the plaintiff's business. The defendants have filed a Motion for Summary Judgment. The plaintiff opposes the motion.
THE STANDARDS FOR SUMMARY JUDGMENT
In deciding a motion for summary judgment, the trial court must view the evidence in the light most favorable to the nonmoving party. Appleton v. Board of Education, 254 Conn. 205, 209, 757 A.2d 1059 (2000). The party seeking summary judgment has the burden of showing the absence of any genuine issue of material fact, such that the party is entitled, under principles of substantive law, to a judgment as a matter of law. Id.
In ruling on a motion for summary judgment, the court's function is not to decide the issues of material fact, but rather to determine whether any such issues exist. Nolan v. Borkowski, 206 Conn. 495, 500, 538 A.2d 1031 (1988). Summary judgment is appropriate only if a fair and reasonable person could conclude only one way, based on the substantive law and the undisputed material facts. Miller v. United Technologies Corp., 233 Conn. 732, 751, 660 A.2d 810 (1995).
In supporting or opposing summary judgment, Conn. P.B. § 17-45 requires that a party file affidavits and other documentary evidence sufficient to establish or refute the existence of a disputed issue of fact. Unadmitted allegations in the pleadings are not considered competent evidence and do not constitute proof of a material fact. New Milford Savings Bank v. Roina, 38 Conn.App. 240, 245, 659 A.2d 1226, cert. denied, 235 Conn. 915, 665 A.2d 609 (1995). Rather, in moving for or opposing summary judgment, a party must submit documentation that would form the basis for evidence admissible at trial. Great Country Bank v. Pastore, 241 Conn. 423, 436, 696 A.2d 1254 (1997). See also Conn. P.B. § 17-46.
THE ALLEGATIONS IN THE COMPLAINT
The operative complaint is the Second Amended Complaint dated December 23, 2010 (#203). It alleges the following:
Count One — Breach of Contract against Hughes
The plaintiff DMJ provides recruitment and job placement services to businesses in the direct mail industry. Hughes worked for DMJ as a recruiter. In 2002, Hughes signed a Confidentiality, Non-Solicitation, and Non-Competition Agreement as part of her employment agreement with DMJ. The agreement prohibits Hughes from using any of DMJ's confidential business information on behalf of any other entity. It also prohibits Hughes from working for a competitor, from soliciting or hiring away employees of DMJ, and from soliciting, diverting or accepting work from businesses who were clients of DMJ, for a period of one year after leaving DMJ.
Hughes left DMJ in September 2007 and was hired by a business run by Daniel Cahill. Cahill is the President and owner of DeeJay Enterprises, Inc. Hobson Associates is a trade name used either by Cahill or by DeeJay. DMJ alleges that Hobson was a direct competitor of the plaintiff. DMJ alleges that, in violation of the agreement, Hughes solicited, diverted, and accepted placement and recruitment business from several businesses who had been clients of DMJ. DMJ alleges that, in so doing, Hughes used DMJ's confidential business information. DMJ also alleges that Hughes solicited Jamie Moshier, an employee of DMJ, to leave DMJ and come to work for Hobson. DMJ alleges that it suffered damages as a result of the business lost to Hobson through Hughes's breach of contract.
Although the entity to which the trade name Hobson Associates attaches is disputed, the court will use the name Hobson throughout this opinion to refer to the defendants Cahill and DeeJay Enterprises, Inc.
Count Two — Conspiracy by all Defendants
DMJ alleges that Hobson knew of Hughes's confidentiality and non-compete agreement, and participated with Hughes in breaching the agreement, thus injuring DMJ.
Count Three — Tortious Interference with DMJ's Business Relationships by all Defendants
DMJ alleges that all defendants tortiously interfered with DMJ's ongoing and substantial business relationships with clients and with candidates and consultants whom DMJ expected to place with those clients.
Count Four — Tortious Interference with DMJ's Contract with Hughes by Hobson
DMJ alleges that Hobson tortiously interfered with DMJ's confidentiality and non-compete agreement with Hughes.
Count Five — Unjust Enrichment (previously stricken) Count Six — Violation of the Connecticut Unfair Trade Practices Act by all Defendants
DMJ alleges that the conduct of the defendants was unethical, unscrupulous, unfair, and deceptive, and constitutes an unfair method of competition in violation of CUTPA, Conn. Gen. Stat. § 42-110a, et seq.
The Answer
The defendants admit that Hughes resigned from DMJ and went to work for Hobson, but they deny that Hughes breached the confidentiality and non-compete agreement or that she and Hobson engaged in any wrongdoing. As a Special Defense, the defendants have asserted that the non-compete agreement is unenforceable.
THE MOTION FOR SUMMARY JUDGMENT OF THE DEFENDANTS
As to Count One, the defendants assert that the undisputed evidence as to the breach of contract is that Hobson was not a competitor of DMJ, that Hughes did not use confidential information, and that Hughes did not cause Moshier to leave DMJ to work for Hobson.
As to Count Two, the defendants assert that there is no evidence of a conspiracy to harm DMJ's business and that the doctrine of intracorporate conspiracy bars success on this count.
As to Counts Three and Four — tortious interference — the defendants assert there is an absence of evidence of wrongfulness or malice, and an absence of evidence of loss.
As to Count Six, the defendants assert that the Unfair Trade Practices claim must fail because it is based on the other four counts which also fail for lack of evidence.
The court will analyze each of these in turn.
THE EVIDENCE REGARDING HUGHES'S BREACH OF CONTRACT
Hughes had previously worked with the defendant David Cahill and Hobson Associates beginning in June 2000. She was hired by the plaintiff in January 2002. That same month, Hughes signed a Confidentiality, Non-solicitation and Non-Competition Agreement.
Hughes was hired by the plaintiff's predecessor company, DirectMailJobs.com, LLC, with a transition to DMJ after it was formed many months later. The confidentiality agreement provides that enforcement of the agreement can be undertaken by a successor company.
The agreement, on a pre-typed form, had in its text the name of Joseph Bilodeau, rather than Susan Hughes, as the signing party, although it was signed by Susan Hughes on January 4, 2002. On July 12, 2002, Susan Hughes's name was substituted over that of Bilodeau on the typed form and initialed by Hughes and Mark Mandell on behalf of DMJ.
Section 1 of the agreement required Hughes to keep confidential all company information, including customer lists. Section 2 of the agreement reads as follows:
During the term of your employment hereunder and for a period of twelve (12) months following the date of expiration or termination of such employment, you shall not directly or indirectly:
a) solicit, hire or take away any employees of the company, either for your own business or for any other person, firm, corporation, association or other entity or
CT Page 16505
b) solicit, divert or accept business relating in any manner to products or services competitive with products or services of the Company from any customers or clients of the Company who have done business with the Company within the twelve (12) month period immediately preceding the expiration or termination of your employment.
c) solicit, hire, divert, or accept business from customers, clients, or partners of DirectMailJobs.com, including individual candidates that have contacted the Company and/or the Company have sought to recruit, place, or assist in any way in gaining employment.
In the Memorandum in Support of Summary Judgment, the defendants argue that there is no evidence that Hughes used or misused any confidential information, and no evidence that Hughes hired Jamie Moshier away from DMJ. They claim that all of the evidence supports the fact that after Hughes left her employment at DMJ, she never solicited any of DMJ's customers to follow her to Hobson, and she never solicited any of DMJ's other employees to follow her to Hobson.
However in bringing the claim for breach of contract, the plaintiff alleges that Hughes was obligated not to "accept business relating in any manner to products or services competitive with products or services of [DMJ]." There is evidence that this clause of the agreement was breached. As an example, Exhibit P, filed by the defendants, is an affidavit of Linda Babish, an employee of a business called Direct Group. The affidavit asserts that Direct Group had previously used DMJ for placement services. Babish, on behalf of Direct Group, contacted DMJ again in September 2007 and was dissatisfied with their response. Babish searched out Hughes, who by that time had left the plaintiff and joined Hobson. Babish had retained Hughes's cell phone number from their prior contacts with one another and called Hughes directly. Babish explained her dissatisfaction with DMJ and made arrangements with Hughes to use Hobson's services for executive search and placement.
The defendants present this affidavit to show that Hughes did not solicit her former contacts. The problem is that the affidavit places squarely in dispute the issue of Hughes's violating the agreement by "accepting business" that tended to compete with that of DMJ. Although the affidavit is silent as to whether Direct Group and Hobson ever closed a placement deal through Hughes's services, the affidavit is evidence of Hughes accepting business from a prohibited contact. And in Exhibit 14, DMJ presents copies of emails from October 2007 as evidence of Hughes's active attempts to revive relationships with contacts formed when she was at DMJ.
While the defendants also attempt to use Babish's affidavit, among other documents, to distinguish the executive position placements, for which Direct Group sought Hughes's services, from positions in the "direct mail" or "direct fulfillment" divisions of Direct Group and other companies, these factual distinctions — that the executive placement field was so different from any potential direct mail or lower end job placement that the two types of recruiting cannot realistically be considered competitive — are not ones that can be made on summary judgment. Indeed the affidavit of Robert Rioux, the CEO of DMJ, states that at and after the time that Hughes left DMJ to join the defendant's company, DMJ was in the business of recruiting and placing employment candidates at all levels of salary and responsibility in the direct mail industry. Exhibit 5. Whether the placement business of DMJ and that of the defendants were sufficiently similar to trigger the non-compete clause of the agreement is a question of fact.
Because there is evidence to support one instance of a breach of contract, the court need not analyze each of the other instances alleged in Count One, such as the Moshier hiring, as constituting a further breach of contract. The defendants assert, however, that it is undisputed that the plaintiff suffered no damages as a result of any claimed breach of contract. The defendants further assert that in order to prevail on a breach of contract action, the plaintiff must establish damages. Defendants' Memorandum of Law in Support of Summary Judgment, page 22. That is not, and has never been, a principle of the common law in Connecticut. See, e.g., Excelsior Needle Company v. Smith, 61 Conn. 56, 65, 22 A. 693 (1891); Kimball v. Hall, 87 Conn. 563, 566, 89 A. 166 (1913). Damages are not an element of a cause of action for breach of contract. See, Hinchcliff v. American Motors Corporation, 184 Conn. 607, 622, 440 A.2d 810 (1981). Even if the plaintiff can prove no actual damages as a result of the breach of contract, the plaintiff may still be entitled to a verdict on that count, with an award of nominal damages.
The fact that there is evidence to support at least one set of facts on which the breach of contract count can proceed to trial means that the court cannot grant summary judgment on Count One.
CIVIL CONSPIRACY
The plaintiff alleges that Cahill and DeeJay conspired with Hughes to have Hughes breach her contract with the plaintiff. Pursuant to Connecticut's jurisprudence, there is, precisely speaking, no independent claim for civil conspiracy. Rather the action is for damages caused by the underlying acts committed pursuant to a conspiracy rather than by the formation of the conspiracy itself. Chapman Lumber, Inc. v. Tager, 288 Conn. 69, 100, 952 A.2d 1 (2008). To prevail on this theory, the plaintiff must prove
(1) a combination between two or more persons, (2) to do a criminal or an unlawful act or a lawful act by criminal or unlawful means, (3) an act done by one or more of the conspirators pursuant to the scheme and in furtherance of the object, (4) which act results in damage to the plaintiff. (Internal quotation marks omitted.) Harp v. King, 266 Conn. 747, 779, 835 A.2d 953 (2003).
Macomber v. Travelers Property and Casualty Corp., 277 Conn. 617, 635-36 (2006).
The purpose of allowing a claim for civil conspiracy is to allow the imposition of liability on one who agrees to join in a tortfeasor's conduct such that the conspirator can be held liable for the ensuing damage, simply by virtue of the agreement to engage in the wrongdoing. Id. The gravaman of an action for civil conspiracy is that there must be some underlying tort in which the conspirator participates that causes damage to the plaintiff.
Breaching a simple employment contract is not a criminal or an unlawful act; it is not a tort. But Hughes's confidentiality and non-compete agreement was more than just a simple employment contract. It obligated Hughes not to divulge certain kinds of information outside her employment at DMJ. If Hughes used confidential information, that is, contact lists that DMJ had gone to pains to develop and protect, against DMJ, that is by cooperating with one of DMJ's competitors to use that information to take business away from DMJ, that might well rise to the level of tortious conduct. See, e.g., American Diamond Exchange, Inc. v. Alpert, 101 Conn.App. 83, 920 A.2d 357, cert. denied, 284 Conn. 901, 931 A.2d 261 (2007).
The plaintiffs may only maintain Count Two to the extent that it rests on evidence in support of Count Four; that is, any civil conspiracy here must consist of the tortious means by which Hobson induced or participated with Hughes in breaching her contract with DMJ. To read Count Two in any other way makes no sense. Indeed, in determining what the standard is for the type of wrongful means by which Hobson on the one hand and Hughes on the other sought to create a breach of Hughes's contract with DMJ, one must look to the elements of tortious interference with contract, infra, and not to the elements of a simple breach of contract.
Moreover the civil conspiracy count can only succeed if it rests on conduct that occurred before Hughes became an employee of Hobson, because of the intracorporate conspiracy doctrine. That doctrine holds that to be liable for a civil conspiracy, a corporation must ordinarily conspire with a person or entity outside the corporation, rather than through the corporation's own agents. See Harp v. King, supra, 782-83. Hobson consisted of Cahill and/or DeeJay. As soon as Hughes signed on with Hobson in September 2007, she too became an intracorporate agent. Until that time, she was arguably an outside person or entity. Once the defendants were all agents of the same business enterprise, they could not, as a matter of law, engage in a civil conspiracy, even though they might have engaged in tortious conduct.
Summary judgment as to Count Two stands or falls on whether there is evidence that Hobson tortiously interfered with DMJ's contract with Hughes before she became Hobson's employee.
TORTIOUS INTERFERENCE WITH CONTRACTUAL RELATIONS
A claim for tortious interference with contractual relations requires the plaintiff to establish (1) the existence of a contractual or beneficial relationship, (2) the defendant's knowledge of that relationship, (3) the defendant's intent to interfere with the relationship, (4) the interference was tortious, and (5) a loss suffered by the plaintiff that was caused by the defendant's tortious conduct. Appleton v. Board of Education, 254 Conn. 205, 212-13, 757 A.2d 1059 (2000). Not every act that disturbs a contractual or business relationship is actionable however.
To succeed, the plaintiff must prove that the defendant's conduct was in fact tortious. This element may be satisfied by proof that the defendant was guilty of fraud, misrepresentation, intimidation or molestation, or that the defendant acted maliciously. (Internal citations omitted.) Blake v. Levy, 191 Conn. 257, 261, 464 A.2d 52 (1983); Daley v. Aetna Life Casualty Co., 249 Conn. 766, 805-06, 734 A.2d 112 (1999). An action for intentional interference with contractual or business relations requires the plaintiff to plead and prove at least some improper motive or improper means. Blake v. Levy, supra, 262. The mere knowledge by a new employer of a new employee's non-compete agreement with a former employer is not sufficient, by itself, to constitute tortious interference. Robert S. Weiss Assoc., Inc. v. Wiederlight, 208 Conn. 525, 536-37, 546 A.2d 216 (1988); nor is the mere motive to improve one's own business. Id. The focus must usually be on whether there was an intent to harm the defendant in the process or an intent to use improper means to gain a competitive advantage.
Using these principles, and applying them to the period before which Hughes became a Hobson employee, there is a dearth of evidence that there was anything tortious involved in the initial hiring of Hughes by Hobson. On the other hand, there is some evidence to support the fact that after Hobson hired Hughes, Hobson 1) discovered that Hughes was still bound by a confidentiality and non-compete agreement; 2) realized that Hughes had information about DMJ's contacts that could be utilized on behalf of Hobson to DMJ's detriment; 3) participated with Hughes in making the most of the information that she and they knew she was contractually prohibited from using; and 4) created a profit for Hobson out of a loss to DMJ. The evidence of these facts, and the inferences that a trier would be entitled to draw from this evidence, is sufficient to prevent summary judgment for the defendants on Count Three. As for Count Four, the same evidence can support that tortious interference claim.
What is missing is evidentiary support for a tortious act in the period before which Hughes became an employee of Hobson. That being so, there could be no civil conspiracy in furtherance of a tort, even though there is evidentiary support for the conimission of a tort after Hughes was hired.
VIOLATION OF CUTPA
The same evidence that supports proof of tortious interference of the defendants with DMJ's contractual and business relations can support proof of a violation of CUTPA. The tort of interference with business relations can overlap an unfair trade practice, since as to the former the plaintiff must prove a malicious or deliberate interference to a competitor's business relations and under the latter it need only prove that the defendants engaged in unfair competition or in an unfair or deceptive act. See, Web Press Services Corp. v. New London Motors, 203 Conn. 342, 363, 525 A.2d 57 (1987). The use of confidential contact information to poach customers during a period in which there was a contractual prohibition on doing so can fit either the tort or the statutory claim.
THE ISSUE OF DAMAGES
An element of either of the tortious interference claims in Counts Three and Four (and, had all the other elements been satisfied, the civil conspiracy claim in Count Two) is that the plaintiff must prove damages. Appleton v. Board of Education, supra. As for the unfair trade practice claim in Count Six, the plaintiff must prove an ascertainable loss, although the loss may be unquantified. Conn. Gen. Stat. § 42-110g(a). The defendants claim that there is no evidence that the plaintiff suffered any loss or damage as a result of any conduct by the defendants.
In contrast the plaintiff presents the affidavit of Robert Rioux, Exhibit 5, that DMJ was ready, willing, and able to make placements, including executive level placements, in the direct mail industry to businesses with which it had dealt in the recent past; and that Hughes generated substantial revenue for Hobson in the year after she left DMJ by successfully placing job candidates at companies with whom DMJ had done business.
This is sufficient evidence of a factual dispute about loss or damage, such that, taking into account all the evidence, a reasonable trier of fact could infer that there is a causal connection between the conduct of the defendants and a monetary loss to the plaintiff.
THE STATUS OF DANIEL CAHILL AS A DEFENDANT
In paragraph 3 of the original Complaint dated September 16, 2008, and in the same paragraph in the First and Second Amended Complaints, Daniel Cahill is alleged to be doing business as Hobson Associates. In the first Answer (#111) dated May 19, 2009, filed by the defendants Hughes and Cahill, the defendants admit the allegations of paragraph 3, that Cahill was doing business as Hobson Associates. The Answers filed in response to the First and Second Amended Complaints deny that allegation, and the defendants now claim it is undisputed that the new defendant cited in, in the Second Amended Complaint — DeeJay Enterprises, Inc. — is in fact the entity that has always been doing business as Hobson Associates. While the defendants are correct that the earlier answer has been superseded and can no longer constitute a judicial admission, Crowell v. Danforth, 222 Conn. 150, 155, 609 A.2d 654 (1992), the admission that Hobson is the d/b/a of Cahill remains an evidentiary admission to be weighed and considered at trial along with the rest of the evidence. Id. Among the other evidence is a Trade Name Certificate, Exhibit 7, filed by Cahill with the Town of Cheshire on May 7, 2001, indicating that he would be conducting business under the name of Hobson Associates, and making no mention of DeeJay Enterprises.
This court is not entitled to weigh the evidence on a motion for summary judgment, but only to determine if there is some evidence on both sides of a disputed issue. The evidentiary admission in the May 19, 2009, Answer, and in the Trade Name Certificate constitute some evidence that Hobson Associates was used by Cahill rather than by DeeJay. That being so, the court cannot grant summary judgment to Cahill on the theory that Hobson was the trade name only of DeeJay Enterprises, Inc.
CONCLUSION
The undisputed facts concerning the initial hiring of Hughes create an inability of the plaintiff to establish the necessary elements of a conspiracy to commit tortious interference with DMJ's contract with Hughes, up to the time she became an employee of Hobson. This has the effect of disposing of Count Two in the favor of the defendants.
As for the other counts, it may be the case that a trier of fact finds the plaintiff's claims to be no more than a case of vigorous but fair competition. It may be that a trier of fact disbelieves the evidence that establishes one or more of the elements of any of the counts alleged. It may be that a trier finds the evidence as a whole to be unpersuasive and insufficiently probative to sustain a finding for the plaintiff. But this court cannot say as a matter of law that there is no evidence from which a trier can conclude that the plaintiff has met its burden of making out a prima facie case on Counts One, Three, Four, and Six.
Accordingly, for the reasons stated above, the court denies the Motion for Summary Judgment as those four counts, and grants the motion as to Count Two only.