Opinion
FSTCV166027341
10-21-2016
Peter L. Getz, Individually and on Behalf of BI Partners, LLC v. William J. Riek, III et al
UNPUBLISHED OPINION
MEMORANDUM OF DECISION RE DEFENDANTS' MOTIONS TO DISMISS AND TO STRIKE (NOS. 116, 118 AND 120)
Hon. Charles T. Lee, J.
This action comes before the court on defendants' motions to dismiss the claims in the Amended Complaint asserted on behalf of plaintiff Peter Getz (Getz) in his individual capacity and to strike three of the five counts of the complaint. As more fully set forth below, the court grants the defendants' motions to dismiss all claims asserted by plaintiff Getz in his individual capacity for the reason that they are more properly considered derivative claims on behalf of plaintiff BI Partners, LLC (BIP). As a result, Getz has no standing to assert them, and the court lacks subject matter jurisdiction over them. With respect to the motion to strike filed by defendant William Reik (Reik), the court grants the motion to strike Count Two, for breach of fiduciary duty, and Count Three, for unjust enrichment, but denies the motion to strike Count Five, asserting a claim for violation of the Connecticut Unfair Trade Practices Act (CUTPA), General Statutes § § 42-110a et seq.
Procedural History
On December 31, 2015, plaintiff Getz, in his individual capacity, caused the initial complaint to be served on the defendants, Reik and Sprott Asset Management USA, Inc. (Sprott). The plaintiff alleged that Getz and Reik entered into a limited liability company agreement, which formed BI Partners, LLC (BIP) as a Delaware limited liability company in which each owned a fifty percent membership interest. The purported purpose of BIP was to establish an investment management company to provide investment strategies focused on trading gold and its equity equivalents and the equity securities of precious metal miners.
In the original complaint, Count One asserted breach of contract as to Reik for leaving BIP and working for its competitor, Sprott. Count Two asserted breach of fiduciary duty as to Reik. Count Three asserted unjust enrichment as to Reik and Sprott. Count Four asserted tortious interference with contract as to Sprott, and Count Five asserted violation of CUTPA as to Reik and Sprott.
On February 18, 2016, Sprott filed a motion to dismiss for lack of subject matter jurisdiction on the ground that the plaintiff lacked standing in his individual capacity to bring direct claims against it because the claims are derivative in that any harm to the plaintiff resulted solely from his interest in BIP. On February 24, 2016, Reik filed a comparable motion to dismiss based on the same ground.
On May 31, 2016, the court granted plaintiff leave to file an Amended Complaint alleging the same counts as in the original complaint, both directly on behalf of plaintiff Getz and derivatively on behalf of BIP. On June 10, 2016, Sprott again filed a motion, accompanied by a memorandum of law, to dismiss all claims asserted by the plaintiff in his individual capacity against Sprott on the ground that the plaintiff lacks standing to assert those claims directly. On the same day, Reik filed an analogous motion to dismiss the direct claims alleged by Getz against Reik and, simultaneously, Reik filed a motion to strike Counts Two, Three and Five for legal insufficiency. Reik's combined motion to dismiss and motion to strike was accompanied by a memorandum of law. On July 20, 2016, the plaintiff filed objections to Sprott's motion and to Reik's motions to dismiss and to strike, accompanied by legal memoranda. The motions were heard at short calendar on August 8, 2016.
" [T]he trial court ha[s] discretion to overlook the simultaneous filing of the motion to dismiss and the motion to strike and to consider the motion to dismiss." Sabino v. Ruffolo, 19 Conn.App. 402, 405, 562 A.2d 1134 (1989). In the present case, the court, in its discretion, will first consider both motions to dismiss and then address Reik's motion to strike.
Background
The following facts are alleged in the Amended Complaint or relate to terms in the LLC Agreement attached thereto:
On June 15, 2009, Getz and Reik entered into a limited liability company LLC Agreement (the LLC Agreement) forming BIP under the laws of Delaware. Located in Darien, BIP's only two members were Getz and Reik. Reik served as Chief Investment Officer of BIP and Getz as Chief Marketing Officer. All fees earned from precious metals related strategies advised or participated in by either Getz or Reik were to be considered fees of BIP. The concept was that any fees generated from the financial strategies or positions taken by any member belonged to BIP. BIP was to remain in place and serve its exclusive purpose until December 31, 2038, or unless dissolved per Delaware's Limited Liability Act, neither of which occurred. Any net profit or loss was to be allocated to each member per their capital account balance. Getz and Reik at all times carried an equal account balance; thus, any net profit or net loss to BIP was " supposed to be split 50/50 between" the two. The LLC Agreement provided that it was to be governed by, and construed under, Delaware law.
No profit has been distributed to Getz since the end of 2012. Since BIP's formation, Getz has raised several hundred million dollars in funds on its behalf, and, at its height, BIP had assets under management in excess of $500 million. Over the " past few years, " Getz asked Reik to forward certain records of BIP to him, including, but not limited to, financial records, profit and loss statements, credit card statements, distribution statements, bank records, contracts, and tax returns. Reik maintains all of the BIP records, but has refused to share them or to provide access to such records to Getz. Since 2014, Getz has received no documents related to BIP that were maintained by Reik, with the exception of a K-1 tax report.
On March 18, 2015, Reik joined Sprott, a competitor of BIP, as a senior portfolio manager and precious metal strategist. Sprott was aware of the LLC Agreement prior to Reik joining the company. Reik did not seek permission from Getz prior to joining Sprott. The work being performed by Reik at Sprott is similar or related to the work that Reik was supposed to do at and on behalf of BIP. After Reik became associated with Sprott, Reik and Sprott requested that BIP's investors move their funds and investments from BIP to Sprott. Additionally, Reik and Sprott shifted BIP's assets over to Sprott, including funds, equipment, furniture, computers, and supplies.
Discussion
A. The Motions to Dismiss
" A motion to dismiss . . . properly attacks the jurisdiction of the court, essentially asserting that the plaintiff cannot as a matter of law and fact state a cause of action that should be heard by the court . . . A motion to dismiss tests, inter alia, whether, on the face of the record, the court is without jurisdiction . . . [I]n determining whether a court has subject matter jurisdiction, every presumption favoring jurisdiction should be indulged." (Citation omitted; internal quotation marks omitted.) Conboy v. State, 292 Conn. 642, 650, 974 A.2d 669 (2009).
The defendants argue that the plaintiff lacks standing to assert claims in his individual capacity, and thus, the court lacks subject matter jurisdiction over such direct claims. In reply, the plaintiff argues that his claims are properly brought directly, as well as derivatively.
" The issue of standing implicates subject matter jurisdiction and is therefore a basis for granting a motion to dismiss. Practice Book § 10-31(a). [I]t is the burden of the party who seeks the exercise of jurisdiction in his favor . . . clearly to allege facts demonstrating that he is a proper party to invoke judicial resolution of the dispute." (Internal quotation marks omitted.) McWeeny v. Hartford, 287 Conn. 56, 63-64, 946 A.2d 862 (2008).
The choice of law in a case involving a Delaware corporation is a threshold issue, and a Connecticut superior court has recently collected relevant authority establishing the analytical framework for resolving it. Mercaldo v. Exulans Corp., Superior Court, judicial district of New Haven, Docket No. CV-12-6034237-S, (July 16, 2015, Fischer, J.): " Before addressing the substantive issue of standing, a choice of law issue must first be resolved because the action involves a Delaware corporation. '[T]he traditional approach to choice of law issues applies the law of the forum state in all procedural matters while applying applicable foreign law as to substantive matters.' Mariculture Products Ltd. v. Certain Underwriters at Lloyd's of London, 142 Conn.App. 484, 493-94, 70 A.3d 92, cert. denied, 309 Conn. 911, 69 A.3d 307 (2013). In the corporate law context, '[t]he law of the state of incorporation normally determines issues relating to the internal affairs of a corporation because application of that body of law achieves the need for certainty and predictability of result while generally protecting the justified expectations of parties with interests in the corporation.' Capgrowth Partners v. V.P. Watsa, Superior Court, judicial district of Stamford-Norwalk, Complex Litigation Docket, Docket No. X08-CV-09-6002152-S, (December 30, 2010, Jennings, J.); see also May v. Coffey, 291 Conn. 106, 113 n.6, 967 A.2d 495 (2009) ('Both parties, as well as the trial court, relied heavily on the laws of other states, particularly Delaware, in analyzing the plaintiffs' claims. Because the company is incorporated in the state of Connecticut, we apply the laws of this state to resolve the plaintiffs' claim.'), citing Annot., 93 A.L.R.2d 1354 (1964) (standing to maintain stockholder's derivative action determinable by the law of the state of incorporation)."
In the present case, Getz and Reik formed BIP in accordance with the Limited Liability Company Act of the State of Delaware. Therefore, Connecticut law will be applied to the procedural issues and Delaware law will be applied to the substantive issues.
With regard to the plaintiff's ability to bring a derivative suit on behalf of BIP, " the only explicit standing requirement . . . is that the plaintiff be a stockholder of the corporation at the time of the transaction of which he complains . . ." Youngman v. Tahmoush, 457 A.2d 376, 379 (Del.Ch. 1983). Here, the plaintiff's standing to bring a derivative claim on behalf of BIP as an owner with a 50 percent membership interest is not at issue. The contested issue is whether the plaintiff has individual standing to bring the alleged claims directly on his own behalf.
The Delaware Supreme Court set forth the applicable test for determining whether a claim is to be considered direct or derivative in Tooley v. Donaldson, Lufkin & Jenrette, Inc., 845 A.2d 1031, 1033 (Del. 2004): to determine " whether the complaint alleges a direct or derivative claim . . . [t]hat issue must turn solely on the following questions: (1) who suffered the alleged harm (the corporation or the suing stockholders, individually); and (2) who would receive the benefit of any recovery or other remedy (the corporation or the stockholders, individually)?" (Emphasis in original.)
" [C]ase law governing corporate derivative suits is equally applicable to suits on behalf of an LLC . . ." Kelly v. Blum, Delaware Court of Chancery, Docket No. CIV.A. 4516-VCP, 2010 WL 629850, 2010 Del.Ch. (February 24, 2010).
Our Appellate Court, applying Tooley, explained: " If the corporation alone, rather than the individual stockholder, suffered the alleged harm, the corporation alone is entitled to recover, and the claim in question is derivative. Conversely, if the stockholder suffered harm independent of any injury to the corporation that would entitle him to an individualized recovery, the cause of action is direct." (Internal quotation marks omitted.) Retirement Program for Employees of the Town of Fairfield v. Madoff, 130 Conn.App. 710, 717, 26 A.3d 93 (2011).
The Madoff court further stated that: " Where all of a corporation's stockholders are harmed and would recover pro rata in proportion with their ownership of the corporation's stock solely because they are stockholders, then the claim is derivative in nature. The mere fact that the alleged harm is ultimately suffered by, or the recovery would ultimately inure to the benefit of, the stockholders does not make a claim direct . . . In order to state a direct claim, the plaintiff must have suffered some individualized harm not suffered by all of the stockholders at large . . . To maintain a direct claim, a stockholder must demonstrate that the duty breached was owed to the stockholder and that he or she can prevail without showing an injury to the corporation." (Citation omitted; internal quotation marks omitted.) Id., 717-18.
In his opposition memoranda, under the first prong of the Tooley test, the plaintiff claims a direct injury in the form of a breach of the LLC Agreement. Under the second prong of the Tooley test, the plaintiff claims that the benefit from any recovery would not necessarily go to BIP, particularly because courts have questioned the propriety of awarding damages to an LLC where the alleged wrongdoers owned a significant stake in the LLC. In their reply memoranda, the defendants argue that the plaintiff's claims of injury are derivative to BIP and that there is no blanket exception to derivative claims for closely held corporations.
Count One of the Amended Complaint alleges breach of the LLC Agreement as to Reik. Count One makes the following additional allegations. Getz and Reik entered into the LLC Agreement for the creation of BIP and the sharing of fees and other revenue stemming from investments related to precious metals as described in the LLC Agreement. The plaintiff alleges that the LLC Agreement provides that Reik was not permitted to work for Sprott, and Reik was to devote significant time to the business of BIP. In direct breach of his obligations, plaintiff alleges Reik breached the LLC Agreement by accepting the position with Sprott and frustrated the purpose of BIP. As a result of Reik's breach of contract, Getz and BIP have been injured and damaged in a substantial amount.
Paragraph eleven of the LLC Agreement provides that " [a]ny net profits or net losses received by the Company as a result of the Company's management of investment in funds or separate accounts shall be allocated to the Members in accordance with their Capital Account balances. All other net profits or net losses received by the Company, including any incentive allocations from any and all funds or separate accounts, shall be allocated to the Members in proportion to the Participating Percentages of the Members in effect for that year." Paragraph fourteen provides, in part, that " [t]he members agree that all precious metals related strategies advised or participated in by either member, for which advisory fees are earned, will be considered fees of BI Partners LLC until such time as the Managing Members unanimously agree otherwise, in writing."
Based on the allegations in the complaint and the undisputed terms the LLC Agreement, the plaintiff has failed to establish that his injuries were direct or that Reik owed him separate contractual duties. The evidence shows that all profits and losses were due to BIP and that any net profits or losses would flow through the LLC to the individual members. The members' duties were to BIP, and these allegations of breach are classically derivative. The claim is derivative in nature because, if a breach occurred, all of BIP's members would be harmed and all would recover pro rata in proportion with their ownership interest in BIP. The mere fact that the plaintiff alleges that he suffered the brunt of the harm does not make his claim direct. The plaintiff failed to state a claim that he suffered some individualized harm not suffered by all of the members at large. The plaintiff failed to demonstrate that the duty allegedly breached by Reik was owed to Getz and that the plaintiff can prevail without showing an injury to BIP.
Likewise, the allegations in Count Two, breach of fiduciary duty as to Reik, Count Three, unjust enrichment as to Reik and Sprott, Count Four, tortious interference with contracts as to Sprott, and Count Five, CUTPA violation as to Reik and Sprott, are all derivative because they assert breaches of duty owed to BIP and harm suffered initially by BIP. The plaintiff is unable to show any personal injury without first demonstrating the financial harm caused to BIP as a result of the defendants' alleged wrongdoing. The consequences of the defendants' alleged wrongful acts would necessarily flow through BIP itself. The plaintiff's allegations that he suffered harm are dependent on the injuries allegedly suffered by BIP. At its foundation, Reik's wrongful conduct, as alleged, is a contract breach as to BIP, which would be the party to receive the benefit from any recovery.
The plaintiff argues in his opposition memoranda that the court should disregard the usual direct-derivative distinction under the facts of this case because BIP is a closely held corporation and the defendants' conduct directly harmed Getz, not BIP. The defendants argue in their reply memoranda that there is no general exception to derivative claims for closely held corporations.
The court agrees with defendants on this point. Our Supreme Court in Fink v. Golenbock, 238 Conn. 183, 202-03, 680 A.2d 1243 (1996) cited favorably to J. Welch, " Shareholder Individual and Derivative Actions: Underlying Rationales and the Closely Held Corporation, " 9 J.Corp. L. 147 (1984) as instructive in analyzing the injury criterion when resolving shareholder individual and derivative actions involving closely held corporations: " [T]he injury criterion can be most misleading in cases involving closely held corporations. If followed literally, this criterion would convert almost all actions by the shareholders of closely held corporations into individual actions, since the impact of almost any injury to such corporations will fall heavily upon its shareholders." (Internal quotation marks omitted.) Fink v. Golenbock, supra, 238 Conn. 202-03. In Fink, our Supreme Court did not determine whether the plaintiff could have brought a personal action because the plaintiff did not bring direct claims, but nevertheless held that the derivative action was appropriate.
The Welch article further notes, " In sum, a general exception for closely held corporations is not defensible. Most courts do not entertain such an exception. Those which do either rely uncritically on rhetoric about injury or have relied on doubtful authority . . ." Welch, supra, 9 J. Corp. L., 179.
The basis for the plaintiff's claim of injury is a wrong to BIP, and must be brought as a derivative action. Getz's claims against the defendants are therefore indirect and necessarily derive from the defendants' alleged harmful conduct to BIP. For that reason, the plaintiff lacks standing in his individual capacity to bring them. Accordingly, the court dismisses all of the plaintiff's purported direct claims against the defendants for the reason that Getz lacks standing to assert them and the court lacks subject matter jurisdiction over them.
B. The Motion to Strike
Pursuant to Practice Book § 10-39, Reik filed a motion to strike Counts Two, Three and Five of the Amended Complaint for failure to state legally cognizable claims. " The purpose of a motion to strike is to contest . . . the legal sufficiency of the allegations of any complaint . . . to state a claim upon which relief can be granted . . . A motion to strike challenges the legal sufficiency of a pleading, and, consequently, requires no factual findings by the trial court . . . We take the facts to be those alleged in the complaint . . . and we construe the complaint in the manner most favorable to sustaining its legal sufficiency . . . Thus, [i]f facts provable in the complaint would support a cause of action, the motion to strike must be denied . . . A motion to strike is properly granted if the complaint alleges mere conclusions of law that are unsupported by the facts alleged." (Citations omitted; internal quotation marks omitted.) Fort Trumbull Conservancy, LLC v. Alves, 262 Conn. 480, 498, 815 A.2d 1188 (2003).
1. Count Two (Breach of Fiduciary Duty)
Count Two asserts breach of fiduciary duty as to Reik. Count Two realleges by reference the allegations of the previous contract count and claims (1) that as a result of the above-referenced acts, Reik breached a fiduciary duty owed to BIP and to his 50-50 business partner, Getz; and (2) that as a direct result of Reik's breach of fiduciary duty, Getz and BIP have been injured and damaged in a substantial amount.
Reik argues that (1) the breach of fiduciary duty claim repeats the breach of contract claim and should be stricken as duplicative under applicable Delaware law, and (2) the breach of fiduciary duty claim must be stricken because the plaintiff has failed to allege conduct constituting gross negligence. The court agrees with the first contention.
" The . . . managers of a Delaware limited liability company owe traditional fiduciary duties of loyalty and care to the members of the LLC, unless the parties expressly modify or eliminate those duties in the operating LLC Agreement." William Penn Partnership v. Saliba, 13 A.3d 749, 756 (Del. 2011) " It is a well-settled principle that where a dispute arises from obligations that are expressly addressed by contract, that dispute will be treated as a breach of contract claim. In that specific context, any fiduciary claims arising out of the same facts that underlie the contract obligations would be foreclosed as superfluous." Nemec v. Shrader, 991 A.2d 1120, 1129 (Del. 2010). " [A] contractual claim will preclude a fiduciary claim, so long as the duty sought to be enforced arises from the parties' contractual relationship. This is due to the primacy of contract law over fiduciary law in matters involving essentially what amounts to contractual rights and obligations . . . [The] question . . . is whether there exists an independent basis for the fiduciary duty claims apart from the contractual claims, even if both are related to the same or similar conduct. If so, the fiduciary duty claims will survive." (Internal quotation marks omitted.) PT China, LLC v. PT Korea LLC, No. CIV.A. 4456-VCN, 2010 WL 761145, at *7 (Del.Ch. Feb. 26, 2010).
In the present case, the plaintiff's breach of fiduciary duty claim is based on the same underlying conduct that is alleged in the breach of contract claim. Count Two, breach of fiduciary duty, incorporates by reference the same allegations against Reik used to support Count One, breach of contract. The LLC Agreement provides, inter alia, for (1) the allocation of net profits and losses of BIP, (2) assignments and non-competition, and (3) the liability of members. The fiduciary duty claims in the Amended Complaint arise from contractual rights and obligations created by the LLC Agreement. BIP's rights to profits, assets, and recovery of damages are derived solely from the LLC Agreement. Thus, any fiduciary duty claims against Reik are foreclosed, and the court grants Reik's motion to strike Count Two of the Amended Complaint. As a result, the court does not need to address Reik's alternative ground, i.e., that the plaintiff has failed to alleged conduct constituting gross negligence.
2. Count Three (Unjust Enrichment)
Count Three of the Amended Complaint asserts unjust enrichment as to Reik and Sprott. Count Three incorporates by reference all previous paragraphs of the complaint and alleges that Getz complied with all the obligations and duties owed by him to BIP and to his business partner, Reik, including working in good faith toward the development and growth of the business and investments of time and capital into BIP. In contrast, Reik acted in bad faith, incurring unnecessary and excessive expenses with BIP funds and then obtaining a position with Sprott, resulting in significant personal monetary gain to Reik, while at the same time causing financial harm to BIP.
The Delaware Chancery Court has held, " Unjust enrichment is the unjust retention of a benefit to the loss of another, or the retention of money or property of another against the fundamental principles of justice or equity and good conscience. A claim for unjust enrichment is not available if there is a contract that governs the relationship between parties that gives rise to the unjust enrichment claim. In other words, if the contract is the measure of [the plaintiff's] right, there can be no recovery under an unjust enrichment theory independent of it. Thus, [w]hen the complaint alleges an express, enforceable contract that controls the parties' relationship . . . a claim for unjust enrichment will be dismissed." (Internal quotation marks omitted.) Kuroda v. SPJS Holdings, LLC, 971 A.2d 872, 891 (Del.Ch. 2009).
In the present case, in Count One of the Amended Complaint, the plaintiff brings a claim for breach of contract against Reik. Plaintiff contends that Getz and Reik entered into the LLC Agreement for the creation of BIP and for the sharing of fees and other revenue stemming from investments related to precious metals described in the LLC Agreement. In Count Three, plaintiff contends that Reik incurred improper expenses for BIP and shifted assets from BIP to Sprott, with the result of significant personal monetary gain to Reik. It is therefore apparent from the face of the complaint that the plaintiff's relationship with Reik is governed by the LLC Agreement. Accordingly, the court grants Reik's motion to strike Count Three.
3. Count Five (CUTPA)
Count Five of the Amended Complaint asserts violation of CUTPA as to Reik and Sprott. Count Five alleges that the conduct of Reik and Sprott in scheming to steal Getz's financial strategies and the fees and profits therefrom was perpetrated by defendants in the course of their trade or business. Their conduct constitutes a violation of CUTPA because (1) it offends public policy, (2) it violates established concepts of fairness, (3) it constitutes unfair and deceptive practices, which are illegal, immoral, unethical, oppressive or unscrupulous, and (4) it has caused the plaintiff damages.
Our Supreme Court in Ulbrich v. Groth, 310 Conn. 375, 409-10, 78 A.3d 76 (2013) recently repeated the so-called cigarette rule for determining a violation of CUTPA: " [General Statutes § ]42-110b(a) provides that [n]o person shall engage in unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce. It is well settled that in determining whether a practice violates CUTPA we have adopted the criteria set out in the cigarette rule by the [F]ederal [T]rade [C]ommission for determining when a practice is unfair: (1) [W]hether the practice, without necessarily having been previously considered unlawful, offends public policy as it has been established by statutes, the common law, or otherwise--in other words, it is within at least the penumbra of some common-law, statutory, or other established concept of unfairness; (2) whether it is immoral, unethical, oppressive, or unscrupulous; (3) whether it causes substantial injury to consumers, [competitors or other businesspersons] . . . All three criteria do not need to be satisfied to support a finding of unfairness. A practice may be unfair because of the degree to which it meets one of the criteria or because to a lesser extent it meets all three . . . Thus a violation of CUTPA may be established by showing either an actual deceptive practice . . . or a practice amounting to a violation of public policy . . . In order to enforce this prohibition, CUTPA provides a private cause of action to [a]ny person who suffers any ascertainable loss of money or property, real or personal, as a result of the use or employment of a [prohibited] method, act or practice." (Internal quotation marks omitted.) Harris v. Bradley Memorial Hospital & Health Center, Inc., 296 Conn. 315, 350-51, 994 A.2d 153 (2010)."
Our Supreme Court recently addressed the continuing viability of the cigarette rule in Artie's Auto Body, Inc. v. Hartford Fire Ins. Co., 317 Conn. 602, 622 n.13, 119 A.3d 1139 (2015), noting that " Approximately ten years ago in Glazer v. Dress Barn, Inc., 274 Conn. 33, 873 A.2d 929 (2005), this court observed that, '[a]lthough we consistently have followed the cigarette rule in CUTPA cases . . . when interpreting 'unfairness' under CUTPA, our decisions are to be guided by the interpretations of the Federal Trade Act by the Federal Trade Commission and the federal courts. See General Statutes § 42-110b[b]. Review of those authorities indicates that a serious question exists as to whether the cigarette rule remains the guiding rule utilized under federal law . . .' Recently, in Ulbrich v. Groth, 310 Conn. 375, 422-29, 78 A.3d 76 (2013), we declined to review a claim that we should abandon the cigarette rule in favor of the substantial unjustified injury test because the claim was not preserved. Since Glazer, the legislature has given no indication that it disapproves of our continued use of the cigarette rule as the standard for determining unfairness under CUTPA, notwithstanding the federal courts' abandonment of that rule in favor of the substantial unjustified injury test and the legislative directive in § 42-110b(b) that we are to be guided by federal law when construing CUTPA . . . Because of the likelihood that this court will be required to address this issue in a future case, however, the legislature may wish to clarify its position with respect to the proper test." In the meantime, in light of appellate precedent, this court will apply the cigarette rule in analyzing the present CUTPA claim.
" This court and the Appellate Court . . . repeatedly have held breach of contract may form the basis for a CUTPA claim." Id., 410. " . . . CUTPA was intended to provide a remedy that is separate and distinct from the remedies provided by contract law when the defendant's contractual breach was accompanied by aggravating circumstances." Id., 411. Nevertheless, " not every contractual breach rises to the level of a CUTPA violation." Hudson United Bank v. Cinnamon Ridge Corp., supra, 81 Conn.App. at 571, 845 A.2d 417; see also Lydall, Inc. v. Ruschmeyer, 282 Conn. 209, 247, 919 A.2d 421 (2007) (defendant employee's breach of employment LLC Agreement and attempted takeover of plaintiff publicly traded corporation was insufficient to establish CUTPA violation in absence of showing that employee's attempted takeover was in and of itself unlawful); IN Energy Solutions, Inc. v. Realgy, LLC, 114 Conn.App. 262, 274-75, 969 A.2d 807 (2009) (breach of sales contract did not constitute CUTPA violation when trial court specifically found that [the plaintiff] did not prove that [the defendant's] conduct in failing to pay commissions [pursuant to the contract] was unethical, unscrupulous, willful or reckless)." Naples v. Keystone Building & Development Corp., 295 Conn. 214, 228, 990 A.2d 326 (2010).
In the present case, the plaintiff, on behalf of BIP, alleges that defendants committed unfair and deceptive acts by scheming to steal Getz's strategies, fees and profits from BIP, and diverting the company's assets to its competitor, Sprott. " Although purely intracorporate conflicts do not constitute CUTPA violations, actions outside the scope of the employment relationship designed 'to usurp the business and clientele of one corporation in favor of another . . . fit squarely within the provenance of CUTPA.' Fink v. Golenbock, 238 Conn. 183, 212, 680 A.2d 1243." Ostrowski v. Avery, 243 Conn. 355, 379, 703 A.2d 117 (1997). The allegations of Count Five describe intentional conduct by the defendants to the plaintiffs' detriment which amount to contractual breach accompanied by aggravating circumstances. Accordingly, the court denies the motion to strike Count Five of the Amended Complaint.
CONCLUSION
As a result of the foregoing, the court grants the defendants' motions to dismiss all claims asserted by the plaintiff, Getz, in his individual capacity, for the reason that they are properly considered to be derivative and not direct claims. Accordingly, the plaintiff lacks standing to assert them, and the court is deprived of subject matter jurisdiction to adjudicate them. Additionally, the court grants defendant Reik's motion to strike Counts Two and Three, but denies the motion as to Count Five.