Opinion
No. X08-CV04-4002173S
August 2, 2010
Procedural Background
This civil action was brought against the two corporations and a limited liability company and three individual defendants claiming injuries and damages the plaintiffs allegedly sustained and/or will sustain from environmental contamination of real property at 23 Platt Street in Norwalk, adjoining the Norwalk River (the "Property") purchased in October 2002 from the defendants (or some of them). The Property was developed and used at the time of sale as a residential condominium and a marina, and included undeveloped land for additional condominium units. As amended, the complaint was brought in eighteen counts, two of which (Counts V and XIII) have been stricken by the Court (Adams, J.) [ 40 Conn. L. Rptr. 859], and this court has granted summary judgment in favor of all defendants as to Count X and in favor of the defendant Donald Scalise only as to Counts XVII and XVIII. The active counts are: Count I: fraudulent misrepresentation (against the defendants OBC Associates, Inc., R G Industries, Inc., Dickmonth Realty Associates, LLC and Richard Scalise); Count II: fraudulent nondisclosure; Count III: negligent misrepresentation; Count IV: violation of the Transfer Act (Defendants OBC Associates, Inc., R G Industries, Inc., Dickmont Realty Associates, and Donald Scalise); Count VI: CUTPA violations; Count VII: violation of the Water Pollution Control Act; Count VIII: common-law indemnification; Count IX: private nuisance; Count XI: negligence; Count XII: negligence per-se; Count XIV: Nondisclosure as required by the Common Interest Ownership Act (CIOA); Count XV: Breach of CIOA warranties; Count XVI: piercing the corporate veil (against the defendant Richard Scalise); Count XVII: recoupment of distributions of dissolved corporations, Conn. Gen. Stat. § 33-887 (against the defendants Richard Scalise, and Eleanor Mihailidis) and Count XVIII: imposition of constructive trust (against the defendants Richard Scalise and Eleanor Mihailidis). The defendants have pleaded thirteen special defenses. By order of June 6, 2008, however, the court has stricken the First and Eighth Special Defenses [ 45 Conn. L. Rptr. 753], leaving the following outstanding special defenses which, except as otherwise indicated, are directed at all fifteen active counts of the complaint: (1) [stricken]; (2) causation by conduct of others; (3) causation by independent unforeseeable, superceding and/or intervening causes; (4) statutes of limitation; (5) failure to mitigate damages; (6) waiver, estoppel, and laches; (7) assumption of risk; (8) [stricken] (9) claims precluded by terms of contract and condominium public offering statement; (10) caveat emptor; (11) unclean hands; (12) setoff from collateral sources; (13) As to counts I, II, IV, VI, X, XIV, and XV — failure to state a cause of action for attorneys fees, punitive damages, and/or exemplary damages; as to Count VII — lack of entitlement to reimbursement of costs pursuant to Conn. Gen. Stat. § 22a-452 as to costs which have not yet been expended.
Unless otherwise indicated all the active counts are directed against those defendants: OBC Associates, Inc., R G Industries, Inc., Dickmonth Realty Associates, LLC and Richard Scalise.
After several continuances the case was scheduled to commence jury trial on the bifurcated liability issues only on June 8, 2008. Shortly before trial, however, the court approved the joint motion of the parties to stay all proceedings in the case for purposes of submitting the liability issues to voluntary arbitration under the Commercial Arbitration Rules of the American Arbitration Association including Procedures for Large, Complex Commercial disputes. The parties entered into an Agreement to Arbitrate (the "Submission") by which they submitted for binding arbitration to a single arbitrator, Atty. James K. Robertson of the firm of Carmody Torrance in Waterbury, all the open liability issues in the case. Paragraph 2 of the agreement provided, in part that,
The remediation costs of the PCBs found in the soil at the Property will depend on the nature and scope of the plan of remediation as approved by the Department of Environmental Protection working in conjunction with the federal Environmental Protection Agency, which has not yet occurred. Depending on the extent of remediation ordered, the cost could range from about $2.2 million to more than $20 million. The uncertainty as to the scope of remediation and its cost was the primary reason that the court bifurcated the issues of damages from the issues of liability.
The Arbitrator will have the power to decide and determine the liability issues of all claims asserted by Plaintiff against Defendants in [this case] together with applicable defenses thereto, except those claims asserted by Plaintiffs in which summary judgment is entered by the trial court and those special defenses which are ordered stricken by the trial court.
The submission was not unrestricted. Paragraph 8 provides, in part:
The Arbitration award shall be final and binding upon the parties, subject only to the provisions of C.G.S. § 52-418 and § 52-419, and the right of any party to appeal and seek full judicial review of questions of law (but not questions of fact), and may be entered as a judgment in any court of competent jurisdiction.
Conn. Gen. Stat. § 52-418(a) provides: "Upon the application of any party to an arbitration, the superior court . . . shall make an order vacating the award if it finds any of the following defects:
(1) if the award has been procured by corruption, fraud or undue means; (2) if there has been evident partiality or corruption on the part of any arbitrator; (3) if the arbitrators have been guilty of misconduct in refusing to postpone the hearing on sufficient cause shown or in refusing to hear evidence pertinent and material to the controversy or of any other action by which the rights of any party have been prejudiced; or (4) if the arbitrators have exceeded their powers or so imperfectly executed them that a mutual, final and definite award upon the subject matter was not made."
Conn. Gen. Stat. § 52-419 provides: "(a) Upon the application of any party to an arbitration, the superior court . . . shall make an order modifying or correcting the award if it finds any of the following defects: (1) If there has been an evident material miscalculation of figures or an evident material mistake in the description of any person, thing or property referred to in the award; (2) if the arbitrators have awarded upon a matter not submitted to them unless it is a matter not affecting the merits of the decision upon the matters submitted; or (3) if the award is imperfect in matter of form not affecting the merits of the controversy. (b) The order shall modify and correct the award, so as to affect the intent thereof and promote justice between the parties."
After hearing extensive evidence over eight days in the fall of 2008, the arbitrator issued an award on April 21, 2009. (Following the hearing, but before the award was issued, the plaintiffs had withdrawn Counts VII, VIII, IX, XI And XII, leaving ten counts to be decided.) The arbitrator found for the defendants on all but three counts of the ten at issue and he found Count XVII to be non justiciable. The arbitrator found for the claimant East Greyrock, LLC against the transferor defendants on Count IV imposing strict liability against R G Industries, Inc. and OBC Associates, Inc. for failure to file disclosure forms with the Commissioner of Environmental Protection as required under the Connecticut Transfer of Hazardous Waste Establishments Act, Conn. Gen. Stat § 22a-134 et seq., (Transfer Act). He also found for the plaintiffs as against R G Industries, Inc. and OBC Associates, Inc. on the two Common Interest Ownership Acts (CIOA) claims: Count XIV, for failure to disclose "unusual and material" environmental information as required by § 47-264(19), and Count XV, the implied warranty section of CIOA, § 47-275. The arbitrator in effect dismissed Count XVII, which sought to establish a right of recovery against the individual defendant shareholders of a dissolved defendant corporation to the extent of their pro rata share of the corporate distributions to them per Conn. Gen. Stat § 33-887. The arbitrator found no justiciable controversy presented by Count XVII for purposes of the "liability only" arbitration, declaring that it was a remedy, not a cause of action and appropriate only to the damages phase of the controversy.
Count XIV was dismissed as to the individual defendants because plaintiffs failed to prove "willfulness" as required by § 42-278; however, the arbitrator found against the corporate defendants as the declarants of the condominiums at the Property.
Now before the court is Defendants' Motion to Confirm Arbitration Award in Part and to Vacate, Modify and Correct Arbitration Award in Part ("the Motion") seeking to confirm those arbitration findings in their favor, and to modify or vacate the four with which they disagree. They also seek to modify the award to correct certain minor errors which both parties acknowledge. Also before the court is Plaintiff's Objection to the Motion of the defendants, and Plaintiffs' Application for Order Confirming Arbitration Award [in toto]. Plaintiffs have not moved to vacate or modify any part of the Award.
On January 6, 2010, the court entered by consent a clarified order confirming the arbitrator's award as to Counts 1, 2, 3, 6, 7, 8, 9, 11, 12, 16, 18, and Count 14 insofar as the arbitrator found no wilful violation of any duty by the defendant [Richard] Scalise, being all the counts found in defendants' favor by the arbitrator. And the court hereby grants without objection the portion of the Motion seeking to correct three claimed typographical errors in the Award: (1) in Finding 57 the statutory reference is corrected to Section 47-278 instead of 42-278; (2) in Finding 63 the date of sale is corrected to October 7, 2002 instead of October 7, 2004; and (3) in Finding 18 the reference to "Paragraph 82" is corrected to "Paragraph 83." The only part of defendants' Motion to be adjudicated herein is therefore the motion to vacate, modify or correct the arbitrator's decision on Counts IV, XIV, and XV where he found for the plaintiffs, and Count XVII which was found to be non-justiciable. As to each of those four counts the Motion alleges in identical language that ". . . the arbitrator decided questions of law erroneously (Exhibit A. Agreement to Arbitrate, paragraph 8), exceeded his powers or so imperfectly executed them that a mutual, final and definite award on the subject matter submitted was not made (Conn Gen Stat. § 52-418(a)(4)), ruled on the constitutionality of a statute, and acted arbitrarily, capriciously, irrationally, and in manifest disregard of law . . . Defendants also move to modify and correct this portion of the award for the reasons set forth in Conn. Gen. Stat. § 52-419(a) . . .". There are 24 specifications of error on Count IV (lettered a through x); 14 specifications on Count XIV (a through s); 16 on Count XV (e through t), and 14 on Count XVII (a through m). Although some of the 68 specifications claim error in concluding or failure to conclude matters of law, many other claims are directed to "deciding" or "failing to decide" matters with factual components. In their Memorandum of Law supporting the Motion, defendants additionally claim via a footnote that the arbitrator did not adjudicate a "Motion to Dismiss for Failure to Make Out a Prima Facie Case" which they filed with the arbitrator after the claimant had rested. The Defendants argue that the arbitrator exceeded his powers in violation of § 52-418(a)(4) by not adjudicating that motion. Different standards of review apply to different alleged deficiencies of the arbitration award and the overlapping and inconsistent pleadings greatly complicate a reasoned evaluation of the claims of error.
Finding 18 is the first finding in the Arbitrator's decision of the Transfer Act claim, Count IV. Finding 18, uncorrected, reads: "The Claimants have proved by a preponderance of the evidence the allegations set forth in paragraphs 82 through 86 of their Amended Substituted Complaint, dated September 21, 2007." Paragraph 82 is the first allegation of Count IV of the complaint, and it "repeats and re-alleges the allegations contained in Paragraphs 1 through 67 as though fully set forth herein." Paragraphs 1 through 67 set forth the general factual background and facts alleged in support of Count I (fraudulent misrepresentation) including the allegation of ¶ 66 that the plaintiffs relied upon false representations made by defendant Richard Scalise to their detriment. Since the arbitrator found that the claimants did not prove the allegations of Count I by clear and convincing evidence, and specifically found (Finding 5) a failure to prove reliance on Mr. Scalise's representations, it is clear that the arbitrator did not mean in Finding 18 to say that the claimants had proved all the allegations of ¶¶ 1 through 67 as incorporated into ¶ 82 of the complaint. The court therefore concurs with the suggestion of both parties that the reference in Finding 18 to ¶ 82 of the complaint was a typographical error and was meant to be ¶ 83, which is the first allegation of the complaint specifically regarding the Transfer Act claim.
For example, Section VIII of the Memorandum is titled "The arbitrator erred as a matter of law by failing to decide and conclude that the plaintiff's Transfer Act Claim was barred by the Economic Loss Doctrine." Within that section, defendants allege that the arbitrator's failure to adjudicate their Economic Loss Doctrine defense with regard to Count IV was an error of law and also an excess of authority. In Section XIV, they allege that, "for the reasons set for in Section VIII," the failure to adjudicate this special defense with regard to Count XVII amounts to the arbitrator exceeding his authority. In Section XXVII (Count XIV) and Section XXXIV (Count XV), defendants argue that "for the same reasons set out in Section VIII," this failure was merely an error of law.
In their objection to the Motion plaintiffs characterize the defendants' multiple claims of error as a "disdain for the arbitral process" and a "remarkably broad interpretation" of ¶ 8 of the Agreement to Arbitrate allowing for "judicial review of questions of law (but not questions of fact." (Plaintiff's Objection, p. 2). "The Defendants ask this Court to review de novo literally dozens of factual findings by recasting them as pure issues of law." Id. The court will therefore consider as a threshold matter the proper scope of review of claims of arbitrator error under the particular circumstances of this case.
Discussion 1. Scope of Review A. Non-Statutory Review
The scope of judicial review of arbitration awards resulting from unrestricted submissions (submissions without an agreement purporting to enlarge the scope of judicial review, as here) is well settled:
Judicial review of arbitral decisions is narrowly confined . . . When the parties agree to arbitration and establish the authority of the arbitrator through the terms of their submission, the extent of our judicial review of the award is delineated by the scope of the parties' agreement . . . When the scope of the submission is unrestricted, the resulting award is not subject to de novo review even for errors of law so long as the award conforms to the submission . . . Because we favor arbitration as a means of settling private disputes, we undertake judicial review of arbitration awards in a manner designed to minimize interference with an efficient and economical system of alternative dispute resolution.
Where the submission does not otherwise state, arbitrators are empowered to decide factual and legal questions and an award cannot be vacated on the grounds that . . . the interpretation of the agreement by the arbitrators was erroneous. Courts will not review the evidence nor, where the submission is unrestricted, will they review the arbitrator's decision of the legal questions involved . . . In other words, [u]nder an unrestricted submission, the arbitrator's decision is considered final and binding; thus, the courts will not review the evidence considered by the arbitrators nor will they review the award for errors of fact or law.
(Citation omitted.) McCann v. Commissioner of Environmental Protection, 288 Conn. 203, 214-15 (2008).
There are recognized exceptions to the foregoing standard of review, when (1) the award rules on the constitutionality of a statute, (2) the award violates clear public policy, and (3) the award contravenes one or more of the statutory proscriptions of Conn. Gen. Stat. § 52-418. In those situations there is a "heightened standard of review." HH East Parcel, LLC v. Handy and Harman, Inc., 287 Conn. 189, 197 (2008) citing Garrity v. McClaskey, 223 Conn. 1, 6 (1992). In this case the defendants are arguing to the court that Conn. Gen. Stat. § 1-2z is unconstitutional, but there is no indication that the issue of constitutionality was presented to the arbitrator and the award makes no finding on any claimed unconstitutionality. The defendants do make multiple claims for review under Conn. Gen. Stat. § 52-118 which will be considered and discussed herein.
Under this standard there is no doubt but that most of defendants' claims of error in this case — pleaded with page after page of references to the evidence — would not be reviewable. The issue therefore becomes to what extent the permissible scope of judicial review has been enlarged by the agreement in the Submission that the award of the arbitrator shall be final and binding subject to ". . . the right of any party to appeal and seek judicial review of questions of law (but not of fact)." The defendants take the position that "questions of law" encompasses not only questions of law but also "mixed questions of law and fact," and that all the alleged arbitral errors were made either on questions of law or on mixed questions of law and fact, and are therefore reviewable. With emphasis on the words "but not of fact" the plaintiffs argue that the limited enlargement of judicial review extends only to what they have called "pure" issues of law as opposed to mixed issues of law and fact. A "mixed question of law and fact" has been defined as ". . . the application of the controlling legal standard to the historical facts [as found by the court] . . .; State v. Mitchell, 296 Conn. 449, 459 (2010); or "the application of historical facts to questions of law . . ." Michael T. v. Commissioner of Correction, 112 Conn.App. 416, 426 (2010) (dissenting opinion of Judge Beach). In the typical litigation scenario there are three distinct issues for a court to resolve in the application of principles of law to the facts and claims in a particular case. The first is clearly factual: what were the historical circumstances of the event or transaction at issue? The second is strictly legal. What is the controlling legal standard governing the situation? The third is the "mixed issue:" Applying the controlling legal standard to the historical facts as found, to reach an ultimate finding or conclusion. In Superior Court litigation, the factual findings are reviewed on a "clearly erroneous" standard. The definition of the controlling standard and the application of that standard to the facts as found are both reviewed de novo. In an unrestricted submission arbitration all three are unreviewable except for arbitrator misconduct or other deficiencies under § 52-418. But does the Agreement to Arbitrate among these parties change that result? Clearly yes for the issues of law; clearly no for the issues of fact. As to the third category of the mixed issue of law and fact, the court holds that they are not covered by the expanded judicial review clause. Although the two cases cited above are recent, they are based on a long line of cases discussing the concept of a "mixed issue of law and fact" Mitchell, supra, cites State v. Canales, 281 Conn. 572, 584-85 (2007), decided prior to the September 12, 2008 Agreement to Arbitrate. Earlier cases articulating the same concept of a mixed issue of fact and law include In re Haley B., 262 Conn.406, 411 (2003), and United Parcel Service, Inc. v. Administrator, 209 Conn 381, 388 (1988). The concept is a well-defined term of art in Connecticut jurisprudence. If defendants, represented by competent counsel at the time of entering into the Agreement to Arbitrate, wanted to subject those mixed question issues to the expanded judicial review of paragraph 8, it was incumbent upon them to get "mixed issues of law and fact" expressly stated in the agreement. It is not something that can just slide in under the agreement regarding "issues of law." As plaintiffs point out, the Agreement to Arbitrate was entered into on the eve of trial after four years of litigation. If the arbitrator's decisions on mixed questions of law and fact were to be reviewable de novo along with issues of law, virtually every decision made by the arbitrator could come back for plenary review before the same court that would have tried the case. The perceived efficiency and finality benefits of submitting the liability issues to arbitration would be illusory. If de novo review of those issues was the defendants' intent in entering into the agreement, it failed to negotiate and memorialize that intent in language of the agreement. Mixed issues of law and fact are therefore not reviewable, except in the context of a § 52-418 claim.
The U.S. Supreme Court held in Hall Street Associates, LLC v. Mattel, Inc., 552 U.S. 576, 128 S. Ct. 1396 (2008) that the statutory provisions of the Federal Arbitration Act for vacating or modifying an arbitration award are exclusive, and cannot be expanded by contract. The court expressly limited its holding to a construction of the federal act, leaving open the question of expanded review by contract being permitted under state statutes "where judicial review of a different scope is arguable." Id. at 590. That question has been answered in the affirmative in California. Cable Connection Inc. v. Direct TV Inc., 44 Cal 4th 1334 (2008) (The Federal Arbitration Act does not preempt the California Arbitration Act, and under that act parties may agree explicitly that arbitration awards can be reviewed for legal error.) The same answer presumptively applies under the Connecticut statute. In HH East Parcel, LLC v. Handy Harman, Inc. ( supra, n. 8) 287 Conn. 189 (2008) — released about two months after Hall Street Associates — the court said in dictum at footnote 16, page 204, that "Parties to agreements remain, however, free to contract for expanded judicial review of an arbitrator's findings. See Stutz v. Shepard, 279 Conn. 15, 124, 901 A2d 33 (2006) (parties `mutually agreed upon' application of `clearly erroneous' review)" Paragraph 8 of the Agreement to Arbitrate will therefore be treated herein as an enforceable provision, endowing this court with the power of de novo judicial review of "questions of law (but not issues of fact)." See United Illuminating Co v. Wisvest-Connecticut LLC, 259 Conn. 665 (2001), a pre- Hall Street Associates case where the court accepted and applied an expanded jurisdiction clause very similar to the one agreed to by the parties in this case.
B. Statutory Review (Conn. Gen. Stat. § 52-418 and 52-419)
Rather than a direct review of the arbitrator's award, the statutory authorizations for vacating (§ 52-418, quoted in part at fn. 3) and modifying or correcting (§ 52-419, quoted at fn. 4) an arbitration award focus on "defects" in the conduct of the hearing before the arbitrator. They go to the process of reaching a result as opposed to the substantive validity of the result. All 68 claims of error alleged by the defendants are pleaded in conclusory terms to include alleged violations of both statutes, but only several of those claims have been specifically briefed in statutory terms. The others will not be addressed. Since the court has granted the portion of the Motion seeking to correct three typographical errors in the award and no other requests for correction or modification have been made, the court will focus exclusively on the claims of defects under § 52-418. And since there is no claim of corruption, fraud or undue means (subsection (a)(1)) or partiality or corruption on the part of the arbitrator ((a)(2)) or arbitrator misconduct in refusing a continuance or refusing to hear pertinent or material evidence ((a)(3)), the inquiry herein will be limited to claims under subsection (a)(4): "if the arbitrators have exceeded their powers or so imperfectly executed them that a mutual, final, and definite award was not made."
The scope of review of claims under § 52-418(a)(4) was stated in McCann v. Dept. of Environmental Protection, supra, quoting from Industrial Risk Insurers v. Hartford Steam Boiler Inspection and Ins. Co., 273 Conn. 86, 94-95:
CT Page 15806
[In construing § 52-418(a)(4)] we have, as a general matter looked to a comparison of the award with the submission to determine whether the arbitrators have exceeded their powers . . . We have also recognized, however, that an arbitrator's egregious misperformance of duty may, however, warrant rejection of the resulting award. In Darien Education Assn. v. Board of Education, 172 Conn.434, 437-38, 3744 A.2d 1081 (1977), we noted that [i]f the memorandum of an arbitrator revealed that he had reached his decision by consulting a Ouija board, surely it should not suffice that the award conformed to the submission . . .
An award that manifests an egregious or patently irrational application of the law is an award that should be set aside pursuant to § 52-418(a)(4) because the arbitrator exceeded [his] powers or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made. We emphasize, however, that the manifest disregard of the law ground for vacating an arbitration award is narrow and should be reserved for circumstances of an arbitrator's extraordinary lack of fidelity to established legal principles . . .
In Garrity [v. McCaskey, 223 Conn. 1, 7-8, 612 A 2d 742 (1992)] we adopted the test enunciated by the United States Court of Appeals for the Second Circuit in interpreting the federal equivalent of § 52-418(a)(4) . . . The test consists of the following three elements, all of which must be satisfied in order for a court to vacate an arbitration award on the ground that the arbitration panel manifestly disregarded the law: (1) the error was obvious and capable of being readily and instantly perceived by the average person qualified to serve as an arbitrator, (2) the arbitration panel appreciated the existence of a clearly governing legal principle, but decided to ignore it; and (3) the governing law alleged to have been ignored by the arbitration panel is well defined, explicit, and clearly applicable. (Internal quotation marks omitted.) McCann, at 220-21.
The court will apply the foregoing standard of review in evaluating defendants' claims under § 52-418(a)(4).
The claims of error will be separately considered under the foregoing principles of law, keeping in mind Connecticut's strong policy favoring arbitration as a means of resolving civil disputes. Stratford v. International Assn. of Firefighters, 248 Conn. 108, (1999), and the deference to be afforded in judicial review to an arbitration award: "In applying the general rule of deference to an arbitrator's award, every reasonable presumption and intendment will be made in favor of the arbitral award and of the arbitrator's acts and proceedings." State v. Connecticut State Employees Assn., 258 Conn. 258, 270 (2008). The court will first review the claims of abuse of arbitral power under § 52-418, followed by allegations of error claimed to be reviewable as questions of law.
2. Claims of Arbitral "Defects" under Conn. Gen Stat. § 52-418 A. Economic Loss Doctrine Defense
This is a claim of a defect under § 52-418 which is a question of law to be reviewed de novo. McCann, supra, at 214.
The "economic loss doctrine" is a judicially created principle which prohibits recovery in tort (and perhaps other non-contract causes of action) where the basis of the claim arises out of a contractual relationship between the parties and the damages are limited to purely economic losses as opposed to personal injury or damages. Although there were earlier Connecticut Supreme Court cases which dealt with that concept, the only Connecticut appellate case to address the concept by name is Flagg Energy Development Corp. v. General Motors Corp., 244 Conn. 126 (1998), which was a breach of contract/breach of warranty dispute between the buyers and seller of gas turbine engines which allegedly failed to operate efficiently and economically. The buyers sued for breach of contract with additional counts including a tort claim for negligent misrepresentation and a claim for violation of the Connecticut Unfair Trade Practices Act (CUTPA) based on the alleged misrepresentation. The trial court had granted a motion to strike the misrepresentation and CUTPA counts "because the plaintiffs are seeking recovery for commercial loss, and, as a result, are limited to the remedies provided by the Uniform Commercial Code." Id. 151. The Supreme Court upheld the striking of those counts under the economic loss doctrine, saying: "We agree with the holdings of cases in other jurisdictions that commercial losses arising out of the defective performance of contracts for the sale of goods cannot be combined with negligent misrepresentation." Id. 153. Since the Flagg Energy case came down in 1998 a split of authority has developed among superior courts as to whether or not the economic loss doctrine is limited to disputes over the sale of goods under Article 2 of the Uniform Commercial Code, or if it applies generally to other types of disputes between parties who are in a contractual relationship. There are multiple unreported decisions espousing both the narrow view and the broader view. The same debate is evident in cases coming from other states. In 2008 I held in Hoydic v. B E Juices, Inc., Docket No. X08CV-034010104S, Superior Court, Complex Litigation Docket at Stamford, (February 27, 2008, Jennings, J.), 208 Ct.Sup. 3570 that the narrower view was correct. In that opinion I cited the superior court decisions on both sides of the issue which had been decided to that point (some twenty cases in all). Since then, more cases have been decided including Dart Chart Systems v. Kettle Brook Care Center, LLC., No VC09-5025871S, Superior Court, Judicial District of Hartford (June 5, 2009, Aurigemma, J.), 2009 WL 1959487 (Conn.Super.), cited by the defendants. Plaintiffs point to the recent decision of the Supreme Court of Wisconsin, Stuart v. Weisflog's Showroom, 308 Wis.2d 103, 746 N.W.2d 762 (2008) holding that the economic loss doctrine was inapplicable to a claim under the Wisconsin Home Improvement Act and a claim of negligence in providing home improvement services.
See D'Ulisse-Cupo v. Board of Directors of Notre Dame High School, 202 Conn. 206, 218-19 (1977), and Williams Ford Inc. v. Hartford Courant Co., 232 Conn. 559, 579 (1995).
Although defendants refer to the economic loss doctrine (ELD) as a "defense" to all plaintiffs' claims in this litigation because of the underlying contractual relationship between the parties as the buyer and seller of the Property pursuant to the sales agreement between them, no ELD special defense has been filed in the case, nor was ELD raised by defendants in the motions for summary judgment filed by them in 2007 and 2008. Defendants "asserted" the ELD defense to the arbitrator and he agreed that ELD was properly raised by defendants and did not have to be pled as a special defense.
Plaintiffs have not sued for breach of contract.
The defendants are not asking the court to review any ELD ruling made by the arbitrator. They are claiming a § 52-418(a)(4) violation in that there is no mention at all of ELD in the arbitrator's written award and he therefore failed to adjudicate this issue in accordance with the Arbitration Agreement, and thereby "exceeded his powers." As an alternative to vacating the award, defendants suggest that the court might remand the case back to the arbitrator for him to decide the issue. Plaintiffs claim that it is obvious the arbitrator considered and resolved each issue presented and, further, that as to the statutory claims he resolved in plaintiffs' favor (Counts IV, XIV, and XV) he expressly or implicitly rejected defendants' countervailing arguments.
Paragraph 2 of the Agreement to Arbitrate submits to the Arbitrator" . . . the power to decide and determine the liability issues of all claims asserted by Plaintiffs against Defendants . . . together with applicable defenses thereto."
Rule R-42 of the American Arbitration Association Commercial Arbitration Rules provides:
Form of Award (a) Any award shall be in writing and signed by a majority of the arbitrators. It shall be executed in the manner required by law. (b) The arbitrator need not render a reasoned award unless the parties request such an award in writing prior to the appointment of the arbitrator or unless the arbitrator determines that a reasoned award is appropriate.
Paragraph 8 of the Agreement to Arbitrate provides, in part:
Within forty-five days after the Arbitration hearing is closed, the Arbitrator shall issue a written reasoned award setting forth his findings of fact, reasoning and conclusions on the issues.
Finally, in the preface to his Award, the arbitrator says:
The briefs exceed several hundred pages and the exhibits and transcripts exceed several thousand pages. An Award that fully summarizes all the issues, evidence, and arguments would itself exceed several hundred pages. I do not believe it is necessary or appropriate to write such a lengthy Award. Instead, I will articulate those findings of fact and conclusions of law that are essential to the decisions applicable to each count and defense, and I will supplement those facts as necessary in addressing later counts.
The court holds that the permission given by the arbitrator to assert the ELD defense followed by his failure to address ELD in his Award is an abdication of his duty under Rule R-42 and Paragraph 8 of the Agreement to Arbitrate to set forth his findings of fact and conclusions of law essential to his decisions on each count and defense. ELD is an issue of law, subject to de novo review by this court. But I must have something to review. I have no jurisdiction at this point to decide any issue of fact or law ab initio. The parties litigated this issue in arbitration. ELD, if applicable to any count, would be a total defense as a matter of law to that count. If it is applicable to all of Counts IV, XIV and XV, it would a total defense to the case, since there is no breach of contract count to fall back on. The parties are entitled to know if the ELD was considered, and the arbitrator's reasoning regarding the ELD defense. In McCann, supra, the Supreme Court reversed a trial court holding vacating an award because, inter alia, the arbitrator had "not considered any clearly established right of the plaintiff to progressive discipline." The arbitrator there, however, had at least mentioned the concept of "adequate warning and opportunity for corrective action "(which the parties agreed was the proper construction of the collective bargaining agreement — instead of a right to progressive discipline). The Supreme Court conceded that "reasonable minds might disagree" as to whether the admonition found by the arbitrator was effectively a warning and opportunity for corrective action, but the court found that his "implicit conclusion that the department had complied with the requirements was not obviously and egregiously wrong" McCann, 288 Conn. at 221-22. Here, however, it is not just a question of filling in the gaps with implications. There is no reasoning on ELD at all. It could be implied as plaintiffs claim that the award for the plaintiffs is consistent with a rejection of the defense, but that is what a party to arbitration gets without a reasoned award. This arbitration was entered into with the parties' expectation that reasons would be expressed. They are entitled to no less. See Employers Insurance v. Jeffries Co., 985 F.2d 258 (9 Cir. 1992). (Award vacated under equivalent provision of Federal Arbitration Act for arbitrators' failure to articulate their reasoning.)
Rather than vacate the award, the court accepts the defendants' alternate suggestion of remanding the case to the arbitrator to decide and indicate his reasoning on the ELD defense. Conn. Gen. Stat. § 52-418(b) permits a reviewing court which has vacated an award to direct a rehearing by the arbitrators "if the time within which the award is required has not expired." Here, the 45 days to render the award expired long ago, but under Hartford Steam Boiler Inspection and Insurance Company v. Underwriters at Lloyd's and Companies Collective, 271 Conn. 474 (2004) cert. denied, 544 U.S. 974 (2005) a court which has not vacated an award may remand the case for clarification or to adjudicate an issue that was part of the submission, but not decided, even after the time for rendering an award has expired.
B. Failure to Adjudicate Defendant's Motion to Dismiss for Failure to Make out a Prima Facie Case
Defendants claim that they made to the arbitrator a Motion to Dismiss for Failure to Make Out a Prima Facie Case after the plaintiffs had rested, and the arbitrator exceeded his powers by failing to rule on the motion. This claim is rejected. Although the Connecticut Practice Book § 15-8 does permit such a motion to be made in a civil action tried to the court, Connecticut trial procedure obviously does not apply at an arbitration hearing. Paragraph 6 of the Agreement to Arbitrate specifies that "[t]he substantive and evidentiary law of the State of Connecticut shall apply during the arbitration proceeding . . ." But the fourth "Whereas" clause on page one of the agreement recites the agreement of the parties that the arbitration will be conducted pursuant to the "Commercial Arbitration Rules, including Procedures for Large, Complex Commercial Disputes of the American Arbitration Association," which are rules of procedure. The court has reviewed those rules and there is no provision comparable to Practice Book § 15-8. In fact Rule R-30(a) implies that any such motion is not permitted: "The claimant shall present evidence to support its claim. The respondent shall then present evidence to support its defense." (Emphasis added.) Not only was the arbitrator's failure to rule on the unauthorized motion not "egregious misperformance" of his duties or a "manifest disregard of applicable law," it was not a misperformance or disregard of law at all.
C. Not Finding Count XVII in Favor of the Individual Defendants
This claim is presented both as claim of the arbitrator exceeding his powers in violation of Conn. Gen Stat. § 52-418, and as an error on a question of law. The former claim will be discussed at this point.
Count XVII of the complaint alleges that the defendant corporations R G Industries, Inc. and OBC Associates, Inc. were dissolved on November 21, 2002, that the individual defendants Richard Scalise and Eleanor Mihailidis were shareholders of the defendant corporations at the time of dissolution, and that pursuant to C.G.S. § 33-887(d), the claims asserted herein are enforceable against defendants Richard Scalise, and Eleanor Mihailidis to the extent of each of their pro rata share of the claim of the corporate assets distributed to each of them.
The court entered summary judgment on this count in favor of the defendant Donald Scalise on the ground that there was no evidence that he was a shareholder of either of the defendant corporations.
Conn Gen. Stat. § 33-887 is a section of the Connecticut Business Corporation Act entitled "Unknown claims against dissolved corporation." As the arbitrator found:
Section 33-887 provides that a dissolved corporation may publish notice of its dissolution, requesting that persons with claims against the corporation present them in accordance with the notice. Claims against the corporation are thereafter barred if presented more than three years after the publication of said notice. The statute also provides that claims against a dissolved corporation, whose assets have been distributed to shareholders, may be enforced against those shareholders to the extent of their pro-rata share of the distributed assets. The statute further provides that it does not by its own terms extend any otherwise applicable statute of limitations. (Finding No. 70.)
The arbitrator further found that the corporations were dissolved as alleged on November 21, 2002, that the individual defendants were shareholders in one or the other of the corporations at the time of dissolution, and that the corporations failed to publish notice of dissolution as permitted by the statute. (Findings Nos. 69, 71.) The arbitrator then concluded that,
This statute does not establish a cause of action. It permits a claimant to satisfy a judgment or award rendered against a dissolved corporation by proceeding against the corporation's shareholders, but only to the extent of their pro-rata share of the distributed assets of the dissolved corporation. (Finding No. 72.)
Consequently, there is at this time no justiciable controversy at issue in this arbitration arising out of this statute. The statute provides a remedy that may, or may not be, implicated as a consequence of the damages phase of this controversy. (Finding No. 73.)
Defendants challenge the finding of non-justiciability, and assert that the arbitrator should have found that the individual defendants have no liability under § 33-887 primarily on the basis of another provision of the Business Corporation Act, § 33-673(b) entitled "Liability of shareholders" Subsection (b) provides "Unless otherwise provided in the certificate of incorporation, a shareholder of a corporation is not personally liable for the acts or debts of the corporation except that he may become personally liable by reason of his own acts or conduct." Defendants link that that provision to the arbitrator's finding No. 57 made in connection with his ruling for the plaintiffs under Count XIV which is the claim of violation of the Common Interest Ownership Act (CIOA) for failure to disclose all unusual and material circumstances, features, and characteristics of the common interest community. Finding No. 57 is that "The claimants have not proven that the Declarants' failure was `wilful' within the meaning of Sec. 42-278," which was one of the findings confirmed by the court on January 6, 2010 by motion on consent. Tying all of this together defendants' claim that there is a final judgment of no wilful conduct by the shareholders which, under § 33-673(b) would exempt them from liability under § 33-887(d). Suffice it to say for present purposes that the argument makes some "leaps" from topic to topic which are of doubtful validity, and raises genuine issues of law, particularly the premise that shareholder liability under § 33-887(d) requires a finding of wrongdoing by a shareholder. The arbitrator's finding and conclusion fall short by a landslide of being "an award that manifests an egregious or patently irrational application of the law" or "an error obvious and capable of being readily and instantly perceived by the average person qualified to serve as an arbitrator" (Section 1B of this Memorandum, supra.) Clearly there was no manifest disregard of the law in the arbitrator's ruling on Count XVII, and the § 52-418 claim for not ruling in favor of the individual defendants is without merit.
There is no Section 42-278 in the Connecticut General Statutes. This is one of the typographical errors corrected by the court's order of modification. The correct reference is to Section 47-278 which authorizes punitive damages and an award of attorneys fees for wilful violations of CIOA.
D. Failing to Rule on Other Claimed Defenses to Count XVII
Defendants also claim that the arbitrator exceeded his powers by not ruling on their claims that (1) the contractual exculpatory clauses barred plaintiffs' claim for violation of § 33-887(d); (2) that plaintiffs were barred from recovery pursuant to § 33-887 because they failed to prove that they incurred any environmental remediation costs or other damage or harm relating to the Property; and that the claims under the Seventeenth Count are barred by the statute of limitations. These claims will be included in a remand to the arbitrator. See Section 3A of this memorandum, infra.
E. Failing to Rule on Count XIV and XV Defenses
The defendants state that the claim of failure to make disclosures under the Common Interest Ownership Act (CIOA) as alleged in Count XIV and of violation of CIOA warranties as alleged in Count XV are barred by Conn. Gen. Stat. § 52-577c(b), and the arbitrator failed to adjudicate those claims. Defendants also claim that their defense based on the exculpatory clauses of the sales agreement was directed at all counts. The arbitrator ruled with respect to Count IV, but not Counts XIV and XV.
The case is remanded to the arbitrator to adjudicate those issues
3. Claims of Errors of Law A. Finding Count XVII to be Non-Justiciable
This is a continuation of the discussion in Parts 2C and D, above, but here relating to the defendant's claim that the arbitrator erred on a question of law in holding Count XVII nonjusticiable and in failing to rule that the shareholder defendants have no liability under § 33-887. As indicated, the arbitrator found" . . . there is at this time no justiciable controversy at issue in this arbitration." (Finding 73.) Justiciability goes to the court's subject matter jurisdiction, which is a question of law for the court. Astoria Federal Mortgage Corp. v. Matschke, 111 Conn.App. 462, 464 (2008). "A case that is non justiciable must be dismissed for lack of subject matter jurisdiction . . ." Id. A finding of nonjusticiability can only be made as a ruling of this court on a motion to dismiss properly raising the issue, or sua sponte.
The arbitrator, however, does have the power to decide which issues are arbitrable under the submission, MBNA America Bank v. BOATA, 283 Conn. 381, 393 (2007), and the finding of non-justiciability may have been intended as a ruling of that nature. (See the BOATA opinion for a detailed discussion of the confusion caused by use of the term "subject matter jurisdiction" when referring to arbitration proceedings.) The court is therefore remanding the consideration of Count XVII back to the arbitrator for clarification. On remand, the arbitrator shall also consider the claims itemized above in Section 2D that he failed to adjudicate certain defendants' arguments relating to Count XVII.
B. The Arbitrator's Interpretation of Conn. Gen. Stat. § 22a-134(3)(B)
Defendants claim that the arbitrator misinterpreted § 22a-134(3)(B) of the Transfer Act by holding that it applies to hazardous waste generated at a different location that came onto the Property prior to November 19, 1980, and that the Property was therefore an "establishment" on October 7, 2002 when it was sold to the plaintiffs. Defendants maintain that subsection B of the statute (which has no express temporal limitation for the transfer of hazardous waste onto the property) should be read as if the November 19, 1980 temporal limitation in subsection A (for generating hazardous waste at the property) appeared also in subsection B. This is a question of statutory interpretation which is a question of law for the court. Florian v. Lange, 91 Conn.App. 268, 276 (2005). As such, under the submission agreement, the arbitrator's interpretation of the statute in subject to de novo review.
To bring the issue into sharper focus, the plaintiffs' Transfer Act count (Count IV) claims that defendants-sellers are strictly liable to the plaintiff buyers for remediation costs and other damages at the Property because defendants failed to provide to plaintiffs and file with the Commissioner of Environmental Protection any Transfer Act forms at the time of sale in November 2002. Since Transfer Act forms are only required to be filed if the property transferred is an "establishment" at the time of sale, the statutory definition of "establishment" is crucial. In this case any temporal limitation in the definition is also crucial because the only allegation of hazardous waste being brought upon the property is that hazardous waste (PCBs and other substances) was transported to and disposed of at the property from 1969 to 1972 when the Property was used as a barrel/drum reconditioning facility, prior to the ownership of the Property by the defendants.
Section 22a-134b of the Transfer Act provides: "Failure of the transferor to comply with any of the provisions of sections 22a-134 to 22a-13e, inclusive, entitles the transferee to recover damages from the transferor, and renders the transferor of the establishment strictly liable, without regard to fault, for all remediation costs and for all direct and indirect damages."
Except for some special use properties (dry cleaning, furniture stripping, or vehicle body repair) not involved in this case, there are essentially just two ways a property can become an establishment: by "generating" a certain amount of hazardous waste at the property, or by hazardous waste generated at a different location being brought onto the property. The exact statutory definition is set forth in § 22a-134(3) of the Transfer Act:
"Establishment" means any real property at which or any business operation from which (A) on or after November 19, 1980, there was generated, except as the result of remediation of polluted soil, groundwater, or sediment, more than one hundred kilograms of hazardous waste in any one month, [or] (B) hazardous waste generated at a different location was recycled, reclaimed, reused, stored, handled, treated, transported or disposed of . . .
The arbitrator found:
The undersigned does not agree with Respondents' claim that Sec. 22a-134(3)(B) applies only if hazardous waste generated at a different location came onto the property on or after November 19, 1980. The undersigned concludes instead, as a matter of law, that the temporal limitation "on or after November 19, 1980, applies only to Subsection "A;" it does not apply to Subsection "B." (Finding 19.)
The arbitrator also found that hazardous waste (which included polychlorinated biphenyls (PCBs) in concentrations greater than fifty parts per million) generated at a different location was recycled, reclaimed, reused, stored, handled, treated, transported, or disposed of at the property, not the result of the remediation of the polluted soil; that the conveyance of the hazardous waste was not exempt from the Transfer Act; and that the Respondents did not submit to the Claimants or file with the DEP a Form I, II, III, or IV as required by Sec. 22a-134a. Based on those findings the arbitrator found the Respondents R G Industries, Inc. And OBC Associates, Inc. as transferors strictly liable to East Greyrock, LLC as transferee under Count IV. (Findings 20-25; 31.)
Before considering the propriety of the arbitrator's interpretation of § 22a-134(3), it is useful to review the history of the statutory language. When first enacted in 1985, there were no separate "A" and "B" parts to the definition and no temporal limitations. It read: "Establishment means any establishment which generates more than one hundred kilograms of hazardous waste per month or which recycles, reclaims, reuses, stores, handles, treats or disposes of hazardous waste which is generated by another person or municipality." The definition was amended in 1987 to apply to operations which generated, recycled, reclaimed, reused, restored, handled, treated, transported, or disposed of hazardous wastes on or after May 1, 1967. In 1995 the Legislature amended the definition by changing the temporal limitation to November 19, 1980 and moving it within the sentence so that it read:
"Establishment" means any real property at which or business operation from which (A) on or after November 19, 1980, there was generated, except as a result of remediation activities, more than one hundred kilograms of hazardous waste in any one month or which recycled, reclaimed, reused, stored, handled, treated, transported or disposed of hazardous waste generated by another person or municipality . . .
The definition was further amended in 1996, which for the first time separated the "generation" part of the definition into subsection (A) and the "disposal of hazardous waste generated by another person" part into subsection (B):
"Establishment" means any real property at which or from which (A) on or after November 19, 1980 there was generated . . . more than one hundred kilograms of hazardous waste in any one month, or (B) hazardous waste generated by another person or municipality was recycled, reclaimed, reused, stored, handled, treated, transported, or disposed of.
There were several technical amendments after 1996 which did not alter the definition in any way meaningful to this issue. The present definition, as quoted first above, has been in place since 2001.
The principles of statutory construction have been recently reiterated in Middlesex Mutual Assurance Company v. Carmody, 120 Conn.App. 117, 124, 125 (2010):
Issues of statutory construction raise questions of law . . . The process of statutory interpretation involve the determination of the meaning of the statutory language as applied to the facts of the case, including the question of whether the language does so apply . . . When construing a statute [o]ur fundamental objective is to ascertain and give effect to the apparent intent of the legislature . . . In other words, we seek to determine, in a reasoned manner, the meaning of the statutory language as applied to the facts of [the] case . . . In seeking to determine that meaning General Statutes § 1-2z directs us to first consider the text of the statute itself and its relationship to other statutes, If, after examining such text and considering such relationship, the meaning of such text is plain and unambiguous and does not yield absurd or unworkable results, extratextual evidence of the meaning of the statute shall be considered.
Defendants urge an interpretation of the 1996 amendment (which is essentially the present statute for these purposes) that "[a]lthough . . . as a result, the November 1980 date was not separately repeated in the newly created subdivision (B) with respect to facilities which `recycled, reclaimed . . . or disposed of hazardous waste' generated by another person, the critical 1980 date continues to modify both provision (A) with respect to generating facilities as well as provision (B) with respect to recycling, etc. facilities" (Emphasis in original.) (Def. Memo. 39, 40.) Defendants urge the court to consider the legislative history of some of the amendments and to consider other extratextual statements and memos of DEP/EPA personnel that they consider the November 1980 date to modify both part (A) and part (B) of the definition.
Although there was no (A)(B) breakdown, it does not necessarily follow that the November 19, 1980 date of the earlier (1995) version modified both the generation of waste and the recycling, reuse, storing, disposal, etc of waste. The first part is very susceptible to a temporal analysis. Any month ending after November 19, 1980 during which more than 100 kilograms was generated is a "bright line" measuring point. It is not so clear how one would measure the timing of recycling, reclaiming, reusing, etc. What would be the measuring point, bringing it on the property, or recycling or reusing it? The second part as written in 1995 does not readily lend itself to a time analysis.
The court holds, as I did in 2008 in ruling on defendants' motion for summary judgment, that the meaning of the statute is plain and unambiguous. The date is in part (A). It is not in Part (B). The date does not apply to part (B). It has been that way for fourteen years during which the definition has been amended at least once, and the legislature has not changed it. When the meaning is plain and unambiguous, there is no authority in that event to consult extratextual materials. Conn. Gen. Stat. § 1-2z.
"[W]hen a statute, with respect to one subject, contains a given provision, the omission of such provision from a similar statute concerning a related subject . . . is significant to show that a different intention existed." Saunders v. Firtel, 293 Conn. 515, 527 (2009), In re Ralph M., 211 Conn 289, 306-07 (1989). "The use of different words [or the absence of repeatedly used words in the context of] the same [subject matter] must indicate a difference in legislative intention." Doe v. Marselle, 236 Conn. 845, 861 (1996) citing Plourde v. Liburdi, 207 Conn. 412, 416 (1988).
It is true that courts sometimes rely on an agency's interpretation of a statute which the agency administers or enforces, but only when the agency's interpretation has been formally articulated and applied for an extended period of time, and that interpretation is reasonable. Connecticut Association of Not-for Profit Providers for the Aging v. Department of Social Services, 244 Conn. 378, 390, n. 18 (finding no deference warranted to agency interpretation when agency had failed to make public declaration of interpretation and had applied interpretation for only four years). Even if reference to extratextual materials were appropriate, the DEP/EPA materials defendant urges the court to consider do not include any "official" agency interpretation of long standing by the DEP or the EPA.
Defendants argue, as they did in support of summary judgment, that the November 19, 1980 is significant and necessary because that was the effective date of the federal RCRA definitions including the definition of "hazardous waste" used for Transfer Act purposes, and that operations taking place before that date could not therefore involve hazardous waste. But there was an earlier federal definition of "hazardous waste" set forth in § 6903 of the RCRA statute itself, which pre-dated the promulgation of the 1980 regulations, and, with respect to PCBs, which is the specific hazardous waste found by the arbitrator to have been brought onto the Property, the Transfer Act definition in § 22a-134(4)(C) is independent without reference to RCRA or the RCRA regulations.
Although I agreed with plaintiffs' (and now also the arbitrator's) interpretation, I did not grant defendants' motion for summary judgment, giving the defendant a chance to prove at trial that the statutory definition yields "absurd or unworkable" results. The case has now been heard and the arbitrator has made no such finding, which would be factual. It is not appropriate, as defendants request, that this court make such a finding based on the evidence.
Although this issue has been couched in terms of "interpretation" of the statutory definition, the defendant's position would actually involve the court making an "addition" to subsection (B) by adding or inserting the date November 19, 1980 into that subsection where it does not presently exist. Also the court would have to decide where to insert the date — to apply the temporal restraint as of the date the hazardous waste is brought on the property (transported), or the "generation elsewhere," or the date that the reuse, recycling, disposal, etc. takes place, or any of the foregoing. Those would be legislative decisions and acts, not properly made by a court.
Legislative intent is to be found not in what the legislature intended to say, but in the meaning of what it did say . . . We must construe a statute without reference to whether we feel it might be improved by adding to it or interpreting it differently . . . It is our duty to apply the law, not to make it. (Citations omitted.) Commissioner of Administrative Services v. Gerace, 40 Conn.App. 829, 832-33 (1996), appeal dismissed, 239 Conn. 791 (1997).
Defendants have by footnote in their memorandum suggested that the court should not be guided by Conn. Gen. Stat. § 1-2z because it was enacted in 2003, after the 2002 transaction in this case. Conn. Gen. Stat. § 55-3 provides that "No provision of the general statutes not previously contained in the statutes of the state which imposes any new obligation on any person or corporation shall be considered to have a retroactive effect." As a corollary, procedural or remedial statutes, in the absence of clear legislative intent to the contrary, are intended to apply retroactively. Mead v. Commissioner of Correction, 282 Conn. 317. Section 1-2z is a procedural statute and there is no expression therein that it was intended to apply prospectively only. Since § 1-2z took effect on October 1, 2003, it has frequently been applied in cases where the operative events took place before 2003. See, e.g., Sikorsky Aircraft Corp. v. Commissioner of Revenue Services, 297 Conn. 540 (2010) (construction of tax exemption statute as applied to 1995 through 2002 audits); State v. Leak, 297 Conn. 524 (2010) (construction of insanity defense statute re offenses committed in 1979 and 1981); and Ziotas v. The Reardon Law Firm, (construction of employment statute re 1998 termination of employment). The claim re § 1-2z being wrongfully applied to a 2002 transaction has no merit.
Defendants also claim by footnote that § 1-2z is unconstitutional as a violation of separation of powers, and the construction of Conn. Gen Stat. § 22a-134(3) should therefore be governed by the rules of construction as expressed in State v. Courchesne, 262 Conn. 537 (2003). (Permitting reference to extratextual materials even in the absence of ambiguity.) There is no indication that this argument was advanced before the arbitrator. The whole argument consumes about a quarter of one page and cites but two cases: Pasquariello v. Stop Shop, Inc., 281 Conn. 565, 664 where the court said by footnote that it was unnecessary to consider the constitutional issue in that case, and a Superior Court opinion, Wachovia Bank v. Hennessey, Docket No. CV05-4016481, Superior Court, Judicial District of Hartford (October 25, 2007, Satter, J.), 2007 Ct.Sup. 18324, 44 Conn. L. Rptr. 420, where the court said in a single paragraph, in dictum (because it found under § 1-2z that there was an absurd and unworkable result), with minimal analysis, that § 1-2z violated the doctrine of separation of powers. The only citation of authority was to the concurring opinion in Kinsey v. Pacific Employers Insurance Company, 277 Conn. 398 (2006), where the concurring Justice raised and discussed the issue sua sponte, and concluded by saying ". . . I have not reached any conclusion about that question [the constitutionality of § 1-2z]." Id. 419. This is insufficient briefing for this court to consider holding a statute duly enacted into law to be unconstitutional and unenforceable, and the court is surprised that counsel would even raise such a serious issue on such a cursory basis. Where a claim is asserted but receives only cursory attention in the brief without substantive discussion it is deemed to be abandoned. Lefebvre v. Zarka, 106 Conn.App. 30, 40 n. 5 (2008). The court declines consideration of the claim of unconstitutionality of § 1-2z.
It is interesting that defendants ask that their 2002 transaction have its statutory aspects construed pursuant to a case decided in 2003 when they have claimed that construction pursuant to a statute passed in 2003 would be improper.
The plaintiffs do not even mention the issue in their reply brief.
C. Contention That the Exculpatory Clauses of the Sales Agreement Bar the Transfer Act Claim
The 2002 Sales Contracts between the parties providing for the purchase of the Property by the plaintiffs from the defendants contained several provisions which the defendants claim amount to a waiver which would bar the plaintiffs from claiming under the Transfer Act. Defendants primarily rely on the provision which says:
Buyer acknowledges and agrees that no stockholder, officer, or director of Seller shall have any liability in connection with any obligations hereunder, whether now existing or hereafter arising and Buyer hereby releases and discharges each stockholder, officer, and director of Seller.
The Arbitrator found that: "As a matter of both law and fact, the cause of action codified in the Transfer Act is not barred by the exculpatory clauses of the Agreements between the parties." (Finding No. 26.)
Defendants now challenge that interpretation of the Sales Agreement by the Arbitrator. It is clear, however, that "[w]here the submission does not otherwise state, the arbitrators are empowered to decide factual and legal questions and an award cannot be vacated on the grounds that . . . the interpretation of the agreement by the arbitrators was erroneous . . . As we have noted: as long as the arbitrator is even arguably construing or applying the contract and acting within the scope of authority, the award must be enforced." Comprehensive Orthopaedics, LLC v. Axtmayer, 293 Conn. 748, 759-60 (2009). The arbitrator's interpretation of the exculpatory clauses of the Sales Agreements, was not an "issue of law" entitled to de novo review. It is a nonreviewable issue of fact.
D. Claim that the Transfer Act Claim is Barred by the Statute of Limitations, Conn. Gen. Stat. § 52-577c(b)
Defendants have pleaded a special defense of statute of limitations to all counts of the complaint. With regard to Count IV, the Transfer Act Claim, they contend that the claim is barred by Conn. Gen Stat. § 52-577c(b) which provides:
Notwithstanding the provisions of sections 52-577 and 52-577a, no action to recover damages for shall be brought but within two years from the date when the injury or damage complained of is discovered or in the exercise of reasonable care should have been discovered.
The arbitrator made detailed findings and conclusions on this issue:
This statute [52-577c] is inapplicable to the proof, as a matter of law, because this statute applies to situations in which the plaintiffs are injured or damages by exposure to contaminants, not to situations such as this, in which Respondents sold already contaminated property to Claimants, who are now seeking damages for diminution in value and/or reimbursement for clean up costs. K S Nan LLC v. Corso . . . A.P. Dev. Serv. Corp. v. St. John . . . [Superior Court decisions]. The Respondent's reliance upon Liss v. Milford Partners [Superior Court decision] . . . is not persuasive because in that case, Judge Berger was addressing the allegations of the complaint, not the evidence presented at a hearing, and the plaintiffs had alleged in their complaint a diminution of property value as a result of exposure to certain chemicals. He declined to enter summary judgment because there were genuine issues of material fact. (Citations omitted; emphasis in original.) (Finding 28.)
This statute is inapplicable to the proof, as a matter of fact, because the action was commenced within two years from the date the damage complained of was discovered or in the exercise of reasonable care should have been discovered. The action was commenced, according to the Respondents and upon review of Ex. R69, on October 22, 2004. In determining when the contamination should have been discovered by the Claimants, I have considered (as did Judge McWeeny) "the knowledge or experience of the purchaser, the relationship of the purchase price to the value of the property if uncontaminated, commonly known or reasonably ascertainable information about the property, the obviousness of the presence or the likely presence of the contamination of the property, and the ability to detect such contamination by appropriate inspection." Visconti v. Pepper Partners Ltd. Partnership, 2002 Conn. Super LEXIS 1627 (2002). (The Appellate Court did not address these factors when it reviewed the case.) (Finding 29.)
The following facts are found which are relevant to this consideration:
a. The closing occurred on October 7, 2002;
b. The Rider to the Sales Agreement (Ex. C202) states, in part:
(ii) Seller has never received any complaint or notice of any governmental investigation relating to any violation or claimed violation of any environmental law . . . and to the best of its knowledge, there are none threatened or pending.
CT Page 15823
(iii) During Seller's ownership, there have been no spills . . . or contaminants . . . affecting the property . . .
c. The property appeared upon visual inspection to be uncontaminated and had functioned for many years as a functioning condominium complex and marina.
d. The Weston Report and the other documents provided by Mr. Scalise to Mr. Effron indicated that a further investigation as to the environmental condition would be prudent (as found in connection with the Second and Third Counts) but they did not indicate that the property was in fact contaminated.
e. Mr. Scalise did not inform the Claimants that the property was contaminated and testified that he did not know it was contaminated at the time of the closing.
f. Experts engaged by the government and by the Claimants did not learn of the existence or the scope of the contamination until after substantial underground excavations and until after an eyewitness to the contaminating events directed their efforts. (Finding 30.)
The arbitrator has made a legal conclusion that § 52-577c does not apply to this case, and a factual finding (supported by detailed references to the record) that, even if § 52-577c did apply, it would not bar this action because this case was commenced (served) within the two-year period from the date when the injury or damage complained of was discovered or in the exercise of reasonable care should have been discovered. The legal conclusion is reviewable. The factual findings are not.
The court concurs with the arbitrator's legal conclusion that § 52-577c does not apply to this case. There is no claim in this case of personal injury or property damage caused by exposure to a hazardous chemical substance or mixture or hazardous pollutant released into the environment. Section 52-577(a) defines "exposure" as "any contact, ingestion, inhalation, or assimilation, including irradiation." There is no allegation of anything like that in the complaint in this case. To the extent that Judge Berger held that § 52-577c would apply to a case such as this in Liss v. Milford Partners, Inc., Docket No. X07CV04-4025123S, Superior Court (February 20, 2008, Berger, J.) 2008 Conn.Super LEXIS 401 [ 45 Conn. L. Rptr. 89], this court disagrees for the reasons stated by the arbitrator, and finds more persuasive the holdings of A.P. Dev. Servs. Corp. v. St. John, Docket No CV93-0129171, Superior Court (February 20, 1998, Lewis, J.) 1998 Conn.Super LEXIS 439 at *3 (holding that § 52-577c does not apply where "the plaintiff's action is not based on personal injury or property damage caused by exposure to a hazardous substance"); and K S Nam, LLC v. Corso, Docket No. CV07-5002376, Superior Court (May 30, 2008, Ripley, J.) 2008 Conn.Super. LEXIS 1398 at *3 [ 45 Conn. L. Rptr. 647] (holding that § 52-577c is not applicable to a case claiming contamination of property caused by the presence of perchloroethylene, and not exposure to perchloroethylene). Section 52-577c is not the statute of limitations applicable to this claim.
The Transfer Act has no "built-in" statute of limitations. It is not necessary at this time to decide which statute of limitations does apply in Transfer Act cases such as this where § 52-577c does not apply, since § 52-577c is the only statute of limitations alleged by the defendants to bar this Transfer Act claim.
Even if § 52-577c did apply, the arbitrator's non-reviewable factual findings establish that this action was timely commenced under § 52-577c, and the defendants cannot prevail on the special defense of statute of limitations directed to Count IV.
E. Claim that Count XV is Barred by the Statute of Limitations, Conn. Gen. Stat. § 47-277(b)(2)
Defendants claim that Count XV alleging a violation of warranties under the Common Interest Ownership Act. is barred by Conn. Gen. Stat. § 47-277 which provides that:
(a) Unless a period of limitation is tolled under section 47-253, a judicial proceeding for breach of any obligation arising under section 47-274 or 47-275 shall be commenced within three years after the cause of action accrues.
(b) Subject to subsection (c) of this section, a cause of action for breach of warranty of quality, regardless of the purchaser's or association's lack of knowledge of the breach, accrues; (1) As to a unit, at the time the purchaser to whom the warranty is first made enters into possession if a possessory interest was conveyed or at the time of the acceptance of the instrument of conveyance if a nonpossessory interest was conveyed; and (2) as to each common element, at the time the common element is completed and first used by a bona fide purchaser.
CT Page 15825
(c) If a warranty of quality explicitly extends to future performance or duration of any improvement or component of the common interest community, the cause of action accrues at the time the breach is discovered or at the end of the period for which the warranty explicitly extends.
"The accrual date depends on whether the defects complained of are contained in units or common elements." A cause of action accrues as to "units" when "the purchaser to whom the warranty was first made enters into possession . . ." General Statutes (Rev. to 1995) § 47-277(b)(1). A cause of action accrues as to common elements "at the time the common element is completed and first used by a bonafide purchaser." General Statutes (Rev. to 1995) § 47-277(b)(2). Willow Springs Condominium Ass'n, Inc. v. Seventh BRT Development Corp., 245 Conn. 1, 28 (1998) (emphasis in original).
The arbitrator found:
59. Section 42-275(b) [47-275(b)] provides that "a declarant impliedly warrants to a purchaser that a unit and the common elements in the common interest community are suitable for the ordinary uses of real property of its type . . ."
Bracketed entries indicate corrections of typographic errors acknowledged by both parties.
60. Claimants have proven by a preponderance of the evidence that among the "ordinary uses" of the common elements of this property were the development of additional condominium units.
61. Claimants have proven by a preponderance of the evidence that they cannot develop the property because of the environmental condition of the property.
62. The respondents have asserted in their Fourth Special Defense that "Plaintiffs' claims are barred by the applicable statutes of limitation." Section 47-277 provides in part: ". . . a judicial proceeding for breach of any obligation arising under . . . section 47-275 shall be commenced within three years after the cause of action accrues."
63. The declarant Respondents sold the property to the Claimant East Greyrock, LLC on October 7, 2004 [2002]. This proceeding was commenced on October 22, 2004 which is within three years after the cause of action accrued.
Defendants argue that since the contaminated part of the property that could not be developed as additional units was part of the common elements, the cause of action accrued under § 47-277(b)(2)" . . . at the time the common element is completed and first used by a bona fide purchaser." The defendants say that the common elements were completed and first used by a bona fide purchaser in 1995. The theory seems to be correct. The problem is that the arbitrator didn't find it that way. There is no finding if or when the common elements now contaminated were "completed" or if and when they were first "used" by a bona fide purchaser. In finding No 63 the arbitrator found that the declarant Respondents sold the property [which has to refer to the contaminated property] to the Claimant East Greyrock, LLC on October 7, 2004 [2002]. If that is an error, it a factual error not reviewable under paragraph 8 of the Agreement to Arbitrate, and under McCann, supra, it would be inappropriate for this court to delve into the record to correct any errors or supplement any facts. If an error was made, then, it was made in the factual findings, or in applying § 47-277 to the facts as found, which would be a mixed question of law and fact. There was no error of law. The arbitrator made reference to the correct statute, and correctly quoted the relevant provisions in his findings.
I can infer that the contaminated land is common element land from the finding that plaintiffs are unable to develop additional units on that land. Additional units could not be built on existing units.
Therefore the motion to vacate this ruling must be denied.
F. Claims of Lack of Standing
The defendants claim that plaintiffs Greyrock at Oysterbend, LLC and Jeffrey Effren, Trustee lack standing to make their claims under Count XVII. They further claim that GreyRock at Oysterbend, LLC and Jerry Effren, Trustee lack standing to make claims under Count XIV and Count XV. All issues of standing implicate the court's subject matter jurisdiction and are questions of law to be addressed to the court. They are not arbitrable. They must be raised by a motion to dismiss addressed to the court.
G. Other Claims of Error Not Discussed
The court has addressed many of defendants' 68 specifications of error in the arbitration proceedings, but other issues have not been discussed, because the court has reviewed them and found that they are addressed either to findings of fact or rulings on mixed issues of law and fact which are not reviewable. Included in this category are the claims made in the following sections of defendants' brief: V, VI, VII, XV, XX, XXI, XXII, XXVIII, XXX, XXXI, (2nd part), XXXII (2nd part), and XXXVI.
4. ORDER
For the reasons herein stated the case is remanded back to the arbitrator, James K. Robertson, Jr. for further proceedings and/or consideration as to the matters identified in Parts 2A, 2E, 2D and 3A of the foregoing memorandum of decision. The arbitrator, in consultation with counsel for all parties, shall decide on the form of any further proceedings.
Upon receipt of the arbitrator's supplemental report or findings, the court shall enter rulings on Defendants' Motion to Confirm Arbitration Award in Part and to Vacate, Modify and Correct Arbitration Award in Part, Plaintiffs' Objection to Defendants' Motion to Confirm Arbitration Award in Part and to Vacate, Modify and Correct Arbitration Award in Part, and Plaintiffs' Application for Order Confirming Arbitration Award, which shall be consistent with the partial rulings and orders made herein.