Opinion
Civil 3:05 CV 954 (CFD).
August 30, 2005
RULING ON DEFENDANT'S APPLICATION FOR A PREJUDGMENT REMEDY
"In order to obtain a prejudgment remedy, the applicant need only establish the validity of [its] claim." Dunican v. Bernhard-Thomas Bldg. Sys., LLC, No. CV030568019S, 2004 WL 574724, at *1 (Conn.Super.Ct. March 10, 2004). "[I]f probable cause is established that judgment will be rendered in the applicant's favor in the amount sought, the prejudgment remedy should be granted." Id.
"Probable cause is nothing more than a bona fide belief of the existence of facts essential under the law for the action, such as would warrant a person of ordinary caution, prudence, and judgment, under the circumstances, to entertain it." Id. at *2. To be entitled to a prejudgment remedy, the applicant must establish probable cause as to both liability and damages. Neely v. The 36 Catoonah Street Co., No. 314574 — AC 13246, 1994 WL 131212, at *2 (Conn.Super.Ct. Apr. 12, 1994) citing McCahill v. Town Country Assocs., Ltd., 185 Conn. 37, 39 (1981). Although mathematical precision is not required in determining the amount of damages, Burkert v. Petrol Plus of Naugatuck, Inc., 5 Conn. App. 296, 301 (1985), the record must nevertheless must be such that the court can make a fair and reasonable estimate of probable damages. In doing so, the court must also take into account any likely defenses and reasonable set-offs which are shown by the opposing party.
Defendant Evolution has established probable cause that it will prevail on its breach of contract counterclaims against the plaintiffs. The Agreement between FlexBen and Evolution was amended in a March 19, 2003 letter. That amendment, which remains in effect to this day, imposes contractual obligations on the parties. Among other things, the March 19, 2003 amendment requires that FlexBen "actively offer only the FexBen/Evolution Benny Card to new and existing customers, and to provide a competitor's card only if a customer so demands by written request and cannot be convinced otherwise." The amendment further covenants that "neither Party will compete for the business of the other . . . at any time." (Plaintiffs' Ex. 2 at 1-2). In addition, the Agreement requires plaintiffs to "make good faith efforts to market and sell Evolution's services to existing and prospective customers." (Plaintiffs' Ex. 1 at 20 ¶ 1.1).
Evolution has adduced evidence showing that the plaintiffs have breached all of these covenants, and are continuing to do so. The "migration" of FlexBen's customers away from Evolution to WageWorks' competing debit card appears to violate both the Agreement and the March 19, 2003 amendment. This is not changed by plaintiffs' euphemistically referring to the breach as a "migration." It is undisputed that, since WageWorks' acquisition of FlexBen, plaintiffs have not offered, or made any attempt to offer, Evolution's debit card. WageWorks instead offers its own, competing debit card in violation of the Agreement and the amendment. Plaintiffs' breach was not in response to anything done by Evolution, but for business reasons; nor did Evolution's breach of the confidentiality clause excuse the plaintiffs' from performing its contractual obligation.
Evolution has also a viable counterclaim for tortious interference arising from WageWorks' interfering with the contractual arrangement between FlexBen and Evolution. The elements of a cause of action for tortious interference are: (1) a business relationship between the plaintiff and another party; (2) the defendant's intentional interference with the business relationship while knowing of the relationship; and (3) as a result of the interference, the plaintiff suffers actual loss.Hi-Ho Tower, Inc. v. Com-Tronics, Inc., 255 Conn. 20, 27 (200). Evolution has introduced evidence satisfying each of these elements.
Although Evolution's proof presently falls short of probable cause to for a claim under the Connecticut Unfair Trade Practices Act, Conn. Gen. Stat. § 42-110 et seq., Evolution certainly has established that plaintiffs' breaches were as brazen as were its own violations of the confidentiality clause. Each side, therefore, can point convincingly to the audacity of the other.
On the present Evolution's application for a prejudgment remedy fails not so much on the merits vel non, but with respect to damages. Here, each party before the court has behaved in a way that could give rise to a damages claim in favor of the other. Each appears to have intentionally breached, or induced the breach, of the Agreement and the March 19, 2003 amendment. On the present record the court cannot reasonably conclude that Evolution's damages are likely to substantially exceed the monetary damages that might be awarded to the plaintiffs as a result of Evolution's remarkably bold breach of the confidentiality agreement. There are, in short, a welter of defenses and potential set-offs that have the real and genuine potential of reducing substantially, if not nullifying completely, the monetary damages claims and counterclaims. How this action is ultimately resolved may well depend on whom the jury likes least. For now, it is the court's role to determine the issue of probable cause based on "its assessment of the legal issues and the credibility of the witnesses." Bank of Boston Connecticut v. Schlesinger, 220 Conn. 152, 156-157 (1991). These reasons alone warrant denial of a prejudgment remedy on this record.
Next, the court notes that a large portion of Evolution's claim for money damages is for lost "interchange fees" and for punitive damages under various theories. The claim for interchange fees appears to be a claim for "indirect," "incidental," or "consequential" damages under Connecticut law. SCP Corp. v. BankBoston, No. X01CV980116198, 1999 WL 185177 at *6 (Conn.Super.Ct. March 18, 1999). Section 10 of the Agreement contains a clause which reads in pertinent part: "NEITHER PARTY WILL BE LIABLE FOR INDIRECT, INCIDENTAL, CONSEQUENTIAL, SPECIAL OR PUNITIVE DAMAGES." (Plaintiffs' Ex. 1 at 7-8). This language may bar Evolution's incidental and punitive damages claims against both FlexBen and WageWorks; at the very least, it adds murkiness to the claims, defenses, and counterlaims. Finally, the court agrees with plaintiffs that at this juncture Evolution's damages are speculative and overstated.
Defendant Evolution's application for a prejudgment remedy (Dkt. # 18) should not be granted on the present record. The defendant may timely seek review hereof in accordance with Rule 72(b) of the Federal Rules of Civil Procedure. Fed.R.Civ.P. 72(b). Failure to do so may bar further review. 28 U.S.C. § 636(b)(1)(B); Small v. Sec'y of Health Human Servs., 892 F.2d 15, 16 (2d Cir. 1989).