Opinion
No. CV 05-4009642
January 3, 2006
MEMORANDUM OF DECISION ON DEFENDANTS' MOTION TO DISMISS AND/OR STAY LITIGATION PENDING ARBITRATION
The plaintiff, Robert S. Goldberg, commenced the above-captioned matter on or about March 7, 2005 by way of a three-count complaint against the Defendants, Goodwill Industries of the Springfield/Hartford Area, Inc. ("Goodwill") and Loring Flint, M.D. ("Flint"). The plaintiff's suit involves the defendants' termination of his employment as Chief Executive Officer ("CEO") for Goodwill and is based upon breach of contract, breach of the covenant of good faith and fair dealing, and a claim for wages pursuant to Conn. Gen. Stat. § 31-72, for failure to pay the plaintiff accrued benefits upon termination as required by Conn. Gen. Stat. § 31-76k.
On or about May 5, 2005, the defendants filed a motion to dismiss the complaint or stay the litigation pending arbitration pursuant to Practice Book § 10-30 and General Statutes § 52-409. Defendants assert lack of personal and subject matter jurisdiction as the basis for their motion to dismiss.
I
"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." (Internal quotation marks omitted.) Blumenthal v. Barnes, 261 Conn. 434, 442, 804 A.2d 152 (2002). "A motion to dismiss tests, inter alia, whether, on the face of the record, the court is without jurisdiction." (Internal quotation marks omitted.) Dyous v. Psychiatric Security Review Board, 264 Conn. 766, 773, 826 A.2d 138 (2003). "Although the filing of an appearance on behalf of a party, in and of itself, does not waive that party's personal jurisdiction claims, any [defendant] wishing to contest the court's jurisdiction, may do so . . . by filing a motion to dismiss within thirty days of the filing of an appearance." (Internal quotation marks omitted.) Connor v. Statewide Grievance Committee, 260 Conn. 435, 445, 797 A.2d 1081 (2002).
"In ruling upon whether a complaint survives a motion to dismiss, a court must take the facts to be those alleged in the complaint, including those facts necessarily implied from the allegations, construing them in a manner most favorable to the pleader." (Citation omitted; internal quotation marks omitted.) Dyous v. Psychiatric Security Review Board, supra, 264 Conn. 773. "The motion to dismiss admits all facts which are well pleaded, invokes the existing record and must be decided upon that alone . . . Where, however . . . the motion is accompanied by supporting affidavits containing undisputed facts, the court may look to their content for determination of the jurisdictional issue and need not conclusively presume the validity of the allegations of the complaint." (Citation omitted; internal quotation marks omitted.) Ferreira v. Pringle, 255 Conn. 330, 346-47, 766 A.2d 400 (2001).
"If a challenge to the court's personal jurisdiction is raised by a defendant, either by a foreign corporation or by a nonresident individual, the plaintiff must bear the burden of proving the court's jurisdiction." Knipple v. Viking Communications, Ltd., 236 Conn. 602, 607, 674 A.2d 426 (1996). Therefore, in order to satisfy its jurisdictional burden, plaintiff Goldberg must show that: 1) the assertion of jurisdiction is authorized under the appropriate Connecticut longarm statute; and 2) if the statutory requirements are met, that the exercise of jurisdiction over the defendants would not violate constitutional principles of due process. Id., at 606-07.
II
Under Connecticut law, defendant Goodwill Industries is a nonprofit foreign corporation incorporated under the laws of Massachusetts, a state other than Connecticut. (See Conn. Gen. Stat. § 33-1002(15), defining a nonprofit foreign corporation under Connecticut law.) As a nonprofit foreign corporation, a court in Connecticut cannot exercise jurisdiction over defendant Goodwill unless there is a longarm statute that subjects it to suit in this state. Conn. Gen. Stat. § 33-1219(f), the longarm statute that applies to nonprofit foreign corporations, affords the court jurisdiction over Defendant Goodwill Industries. This longarm statute provides in relevant part:
Every foreign corporation shall be subject to suit in this state . . . on any cause of action arising as follows: (1) Out of any contract made in this state or to be performed in this state; (2) out of any solicitation in this state by mail or otherwise if the corporation has repeatedly so solicited . . . (3) out of the production, manufacture or distribution of goods by such corporation with the reasonable expectation that such goods are to be used or consumed in this state and are so used or consumed . . . or (4) out of tortious conduct in this state, whether arising out of repeated activity or single acts, and whether arising out of misfeasance or nonfeasance.
Conn. Gen. Stat. § 33-1219(f).
Applying the above jurisdictional factors to this case, this court can exercise personal jurisdiction over defendant Goodwill Industries under the Connecticut longarm statute. As alleged in the plaintiff's complaint and affidavit, the plaintiff states he is a resident of Connecticut. The plaintiff's First and Second Counts, (breach of contract and breach of the covenant of good faith and fair dealing), are both based upon an employment agreement which he claims was executed in Connecticut and required the regular performance of duties within Connecticut.
Under Conn. Gen. Stat. § 33-1219(f)(1), personal jurisdiction is granted over any foreign corporation for "any cause of action arising . . . out of any contract made in this state or to be performed in this state." In this case, the court has jurisdiction under both prongs of this section.
First, the employment agreement is alleged to have been partially executed in Connecticut. Plaintiff asserts that he was provided an original of the employment agreement already signed by the defendant Goodwill's Chairman, that he reviewed it with his Connecticut counsel, signed it in Connecticut and returned it to the defendant Goodwill. (Affidavit of Goldberg, par. 17.)
Second, plaintiff claims the employment agreement was meant to encompass and has required the plaintiff to perform significant duties within Connecticut. The plaintiff, throughout his tenure, as CEO, was present in Connecticut to supervise and manage Goodwill's Connecticut operations, and to negotiate and fulfill service contracts with agencies and business located throughout Connecticut.
In cases interpreting the provisions of the precursor to General Statutes § 33-1219, General Statutes § 33-411(c), the expansive scope of the contracting provisions of the longarm statute have been made clear. "With respect to the second prong of 33-411(c)(1), i.e., contracts `to be performed in this state,' the [courts] have rejected any argument that such language is to `be given limited construction to require performance in this state by the party over whom jurisdiction is sought.' "(Citation omitted.) Coan v. Bell Atlantic Systems Leasing Intern, Inc., 813 F.Sup. 929, 943 (D.Conn. 1990). "[W]here the contract `contemplated and required' performance in the state by plaintiff, defendant . . . [is] subject to jurisdiction under 33-411(c)(1)." (Citation omitted.) Id. at 944. The plaintiff's allegations in this case state clearly that Goodwill contemplated and required the plaintiff to perform substantial duties in Connecticut. Goodwill's full legal name reflects its operations within Connecticut, including the lease of properties, and the solicitation, negotiation, and provision of service contracts for a vast array of governmental agencies located throughout Connecticut.
Plaintiff's allegations establish sufficient general or specific contacts with Connecticut to satisfy constitutional due process requirements. Plaintiff claims Goodwill has engaged in, for years, the very kind of "continuous and systematic [specific and] general business contacts" that appropriately subjects it to the jurisdiction of Connecticut courts. Thomason v. Chemical Bank, 234 Conn. 281, 288 661 A.2d 505 (1995). The minimum contacts requirement is satisfied by the allegations of Goodwill's long-standing purposeful activity including the lease and use of properties for commercial and residential purposes, the solicitation, negotiation, and provision of service contracts for a vast array of governmental agencies located throughout Connecticut, and general business functions relating thereto. See Thomason v. Chemical Bank, supra; Hart, Nininger Campbell Assoc. v. Roger, 16 Conn.App. 619, 548 A.2d 758 (1988); Milne v. Catuogno Court Reporting Services, Inc., 239 F.Sup.2d 195 (2002).
Corporations conducting business in multiple jurisdictions are appropriately and constitutionally subjected to the laws of those various states so long as the minimal due process requirements are met.
The next inquiry focuses on whether the exercise of personal jurisdiction violates principles of constitutional due process.
"The twin touch stones of due process analysis under the minimal contacts doctrine are foreseeability and fairness. `[T]he foreseeability that is critical to due process analysis . . . is that the defendant's conduct and connection with the forum state are such that he should reasonably anticipate being haled into court there.'" United States Trust Co. v. Bohart, 197 Conn. 34, 38-39, 495 A.2d 1034 (1985); quoting World-Wide Volkswagen Corporation v. Woodson, 444 U.S. 286, 297, 100 S.Ct. 559, 62 L.Ed.2d 490 (1980); Hart, Nininger Campbell Assoc. v. Rogers, supra, 16 Conn.App. 625-26.
From the facts of this case, it is not difficult to conclude that the defendants should have foreseen the potential of defending this case in the Connecticut courts. Even though the employment contracts were silent as to an agreed-upon forum for litigation arising from the contract, the many business-related contracts these parties had with this state cannot be ignored. In this case, personal jurisdiction in connection is not granted "in such a way as to make litigation `so gravely difficult and inconvenient' that a party unfairly is at a `severe disadvantage' in comparison to his opponent." The defendant's main office is located right over the Connecticut border in Springfield, Massachusetts. Burger King Corporation v. Rudzewicz, 471 U.S. 462, 478, 195 S.Ct. 2174, 85 L.Ed.2d 528 (1985).
III
The defendant, Loring Flint, is a medical doctor and resident of Massachusetts whose sole connection to the State of Connecticut, if any, is in his representational capacity as Chairman of the Board at Goodwill Industries. Defendant Flint does not allegedly own or use any property in Connecticut.
A plaintiff cannot hail a nonresident individual into a Connecticut court unless that individual meets the requirements of Connecticut's longarm statutes, as well as the due process requirements under federal law. Knipple v. Viking Communications, Ltd., 236 Conn. 602, 607, 674 A.2d 426 (1996). For nonresident individuals in Connecticut, the longarm statute that applies is General Statutes § 52-59b(a). It states in relevant part: ". . . a court may exercise personal jurisdiction over any nonresident individual . . . who in person or through an agent: (1) Transacts any business within the state; (2) commits a tortious act within the state . . . (3) commits a tortious act outside the state causing injury to person or property within the state . . . (4) owns, uses or possesses any real property situated within the state; or (5) uses a computer, as defined in subdivision (1) of subsection (a) of section 53-451, or a computer network, as defined in subdivision (3) of subsection (a) of said section, located within the state." Conn. Gen. Stat. § 52-59b(a).
The plaintiff at oral argument indicated he is relying solely on subsection (a)(3) of the above statute to assert longarm jurisdiction over the defendant Flint individually. He claims that his action against Flint, pursuant to General Statutes § 31-72, the Connecticut failure to pay wages law, sounds in tort and properly subjects the defendant Flint to Connecticut's jurisdiction because Flint, in previously deciding not to pay the plaintiff certain accrued benefits, committed "a tortious act outside the state that caused injury to the person or property of the plaintiff within the state."
There is no basis under § 52-59b(a)(1) for claiming that Flint transacts business in Connecticut which would subject him to suit in the present action. In regards to the "transacting any business" prong of this provision, the Connecticut courts have been consistent in their approach to individual corporate defendants and as a general rule hold that there is "no personal jurisdiction over nonresident officers . . . where the contact with the state was only in their [representative] capacity . . ." See, e.g., Whalley Glass Co. v. Nielson Co., Superior Court, judicial district of Stamford/Norwalk at Stamford No. CV 000176028S (May 18, 2001, Hickey, J.); UConn v. Atlantic Coast Conference, Superior Court judicial district of Tolland, No. X07-CV03-0082695S (February 23, 2004, Sferrazza, J.).
In his complaint, Goldberg alleges that Flint's failure to pay accrued benefits upon termination violates § 31-76k, which states in relevant part: "If an employer policy or collective bargaining agreement provides for the payment of accrued fringe benefits upon termination, including but not limited to paid vacations, holidays, sick days and earned leave, and an employee is terminated without having received such accrued fringe benefits, such employee shall be compensated for such accrued fringe benefits . . ." This statute is enforced through § 31-72, which provides in relevant part that when "any employer fails to . . . compensate an employee in accordance with section 31-76k . . . such employee . . . may recover, in a civil action, twice the full amount of such wages . . ."
In his memorandum of law in opposition, Goldberg cites the following cases for the proposition that an individual agent or officer of a corporation may be liable in tort as an employer, regardless of whether the corporation is also liable as an employer: Butler v. Hartford Technical Institute, Inc., CT Page 200 243 Conn. 454, 463-64 (1997); Petronella v. Venture Partners, Ltd., 60 Conn.App. 205, 214 (2000), appeal dismissed, 258 Conn. 453 (2001); Scribner v. O'Brien, Inc., 169 Conn. 389, 404 (1975); Kilduff v. Adams, Inc., 219 Conn. 314, 341 (1991). None of these cases, however, involves a Connecticut employee's claim against an out-of-state employer. They shed no light on why or how Flint, a director of a Massachusetts nonprofit corporation, can be liable in tort for violating a Connecticut wage statute. Goldberg provides no authority that either Goodwill or Flint is subject to the Connecticut wage statute. However, neither party has adequately briefed this question, which is in fact, more appropriately the subject of a motion to strike or a motion to dismiss for lack of subject matter jurisdiction.
The question is whether as an employee of a Massachusetts employer, may avail himself of the protections of §§ 31-76k and 31-72. "[I]ndividuals employed outside the state of Connecticut are subject to the wage payment laws of the states in which they are employed and are not afforded the protection of the Connecticut statute." (Internal quotation marks omitted.) Osborn v. Knights of Columbus, United States District Court, Docket No. 7486 (N.D. Ohio March 1, 2005); see also Kubas v. The Hartford Financial Services Co., Superior Court, judicial district of Tolland, Docket No. CV 00-0073192 (July 19, 2000, Bishop, J.) ( 27 Conn. L. Rptr. 565). The court therefore denies the motion to dismiss the third count without prejudice to the defendants.
IV
As stated previously, "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." (Emphasis in original; citation omitted; internal quotation marks omitted.) Gurliacci v. Mayer, 218 Conn. 531, 544, 590 A.2d 914 (1991). The motion to dismiss shall be used to assert lack of jurisdiction over the subject matter. Practice Book 10-31(a)(1).
"Jurisdiction of the subject-matter is the power [of the court] to hear and determine cases of the general class to which the proceedings in question belong." (Citations omitted; internal quotation marks omitted.) Doe v. Roe, 246 Conn. 652, 661, 717 A.2d 706 (1998). "A claim that [the] court lacks subject matter jurisdiction [may be raised] at any time." (Internal quotation marks omitted.) Dowling v. Slotnik, 244 Conn. 781, 787, CT Page 201 712 A.2d 396 (1998). "Once the question of lack of jurisdiction of a court is raised, [it] must be disposed of no matter in what form it is presented . . . and the court must fully resolve it before proceeding further with the case." (Citations omitted; internal quotation marks omitted.) Figueroa v. CS Ball Bearing, 237 Conn. 1, 4, 675 A.2d 845 (1996).
In Connecticut, "arbitration is the favored means of settling differences . . ." (Internal quotation marks omitted.) State v. AFSCME, Council 4, Local 387, AFL-CIO, 252 Conn. 467, 473, 747 A.2d 480 (2000). "It is designed to avoid litigation and secure prompt settlement of disputes and favored by the law." (Internal quotation marks omitted.) Green v. Connecticut Disposal Service, Inc., 62 Conn.App. 83, 86, 771 A.2d 137, cert. denied, 256 Conn. 912, 772 A.2d 1124 (2001). "[A] person can be compelled to arbitrate a dispute only if, to the extent that and in the manner in which, he has agreed so to do." (Internal quotation marks omitted.) White v. Kampner, 229 Conn. 465, 471, 641 A.2d 1381 (1994). "[A]rbitration and its scope remain dependent on the contract. The courts are empowered to direct compliance with the provisions of arbitration agreements, but no one may be compelled to arbitrate a dispute outside the scope of the agreement . . ." Gary Excavating, Inc. v. North Haven, 164 Conn. 119, 122, 318 A.2d 84 (1972).
The defendants' argument seeking dismissal, rather than a stay, of the plaintiff's claims, based upon the language of paragraph 13 of the employment agreement, ignores well established principles of Connecticut law.
"Where a contract contains a stipulation that the decision of arbitrators on certain questions shall be a condition precedent to the right of action on the contract itself, such a stipulation will be enforced and, until arbitration has been pursued or some sufficient reason given for not pursuing it, no action can be brought on the contract. Whether an agreement makes arbitration a condition precedent to an action in court depends on the language of the arbitration clause . . . For arbitration to be a condition precedent, the agreement to arbitrate must be expressly so stipulated, or it must necessarily be implied from the language used." (Citations omitted.) Multi-Service Contractors, Inc. v. Vernon, 181 Conn. 445, 447-48, 435 A.2d 983 (1980).
Paragraph 13 of the alleged employment contract contemplates settlement by arbitration. (Brief of Defendants, Exhibit A.)
The defendants do not claim that the language of paragraph 13 of the alleged contract expressly or impliedly makes arbitration a condition precedent. They merely reject the reasoning of Connecticut courts and seek to substitute the rationale from other jurisdictions.
The language at issue in this case, however, is not materially different from that found in Multi-Service Contractors, Inc. v. Vernon ("all claims, disputes and other matters in question between the contractor and owner arising out of or relating to, the Contract Documents or the breach thereof . . . shall be decided by arbitration"), to not be a condition precedent to court action. See also Mayron's Bake Shops, Inc. v. Arrow Stores, Inc., 149 Conn. 149, 152, 176 A.2d 574 (1961); Bohen v. Chase Manhattan Automotive Finance Corporation, Superior Court, judicial district of New Haven at New Haven, Docket No. CV 02-0461384 (June 8, 2004, Skolnick J.) ( 37 Conn. L. Rptr. 226); Kleszczewski v. Alibigi, Superior Court, judicial district of Waterbury, Docket No. CV 98-0146404 (May 4, 1999, Gill, J.). Therefore dismissal is inappropriate and this case may only be stayed pursuant to Conn. Gen. Stat. § 52-409.
Connecticut law favors settlement of disputes through arbitration. According to General Statutes § 52-408, "An agreement in any written contract . . . to settle by arbitration any controversy thereafter arising out of such contract, or out of the failure or refusal to perform the whole or any part thereof . . . shall be valid, irrevocable and enforceable, except when there exists sufficient cause at law or in equity for the avoidance of written contracts generally." Where a party subject to an arbitration agreement files a suit in court, Connecticut law provides a mechanism so that the litigation can be stayed pending the outcome of the arbitration.
Section 3 of the Federal Arbitration Act, (FAA), 9 U.S.C. 53, states, in part: "If any suit or proceeding be brought in any of the courts of the United States upon any issue referable to arbitration under an agreement in writing for such arbitration, the court in which such suit is pending, upon being satisfied that the issue involved in such suit or proceeding is referable to arbitration under such an agreement, shall, on application of one of the parties, stay the trial of the action until such arbitration has been had in accordance with the terms of the agreement . . ." Similarly, General Statutes § 52-409 provides that, "[i]f any action for legal or equitable relief or other proceeding is brought by any party to a written agreement to arbitrate, the court in which the action or proceeding is pending, upon being satisfied that any issue involved in the action or proceeding is referable to arbitration under the agreement shall, on motion of any party to the arbitration agreement stay the action or proceeding until an arbitration has been had in compliance with the agreements, provided the person making application for the stay shall be ready and willing to proceed with the arbitration." "To establish its right to a stay of proceeding under this statute, a movant must establish the following facts: (1) that both it and the plaintiff in the action sought to be stayed are parties to a written arbitration agreement; (2) that at least one issue involved in the actions sought to be stayed is referable to arbitration under the agreement; and (3) that the movant is ready and willing to proceed with the arbitration." American Materials Corp. v. Eagle Crusher, Co., Superior Court, judicial district of Hartford at Hartford, Docket No. CV 03 0827738 (December 16, 2003, Sheldon, J.).
Under both state and federal law, the court must grant the defendant's motion for stay if it finds that at least one issue is referable to arbitration. Although the parties' written arbitration agreement broadly defines disputes which can be referred to arbitration, the court need not decide whether the plaintiff's claims are disputes that must be referred to arbitration. "Whether a particular dispute is arbitrable is a question for the court, unless, by appropriate language, the parties have agreed to arbitrate that question also . . . The intention to have arbitrability determined by an arbitrator can be manifested by an express provision or through the use of broad terms to describe the scope of arbitration, such as all questions in dispute and all claims arising out of the contract or any dispute that cannot be adjudicated." (Citations omitted; internal quotation marks omitted.) Welch Group, Inc. v. Creative Drywall, Inc., 215 Conn. 464, 467, 576 A.2d 153 (1990); see also Levine v. Advest, Inc., 244 Conn. 732, 749-50, 714 A.2d 649 (1998) (discussing the determination of arbitrability of a dispute under the Federal Arbitration Act). In that the written agreement to arbitrate expressly provides that "any claim or controversy that arises out of or relates to this agreement, or the breach of it, shall be settled by arbitration . . ." the requirements of both 9 U.S.C. 53, § 3 and General Statutes § 52-409 have been satisfied and this action should be stayed pending arbitration.
The defendants, the parties making application for a stay, are ready and willing to proceed with the arbitration. Under Connecticut law "the arbitrability of a dispute is a legal question for the court; unless the parties have clearly agreed to submit that question to arbitration . . . In determining if a particular dispute is subject to the arbitration provisions of a contract, the judicial inquiry must be strictly confined to the question whether the reluctant party agreed to arbitrate the grievance . . ." (Citations omitted; internal quotations omitted.) Rapaport Benedict, P.C. v. Stamford, 39 Conn.App. 492, 501, 664 A.2d 1193 (1995). In this case, all the issues raised in the complaint, including questions of arbitrability, are clearly within the scope of the arbitration agreement. Paragraph 13 states that any claim which "arises out of" or "relates to" the employment agreement or "the breach of it" shall be settled by arbitration in accordance with the rules of the American Arbitration Association. In the case at bar, plaintiff filed a complaint against defendants arising from the alleged breach of the employment contract and the terms and conditions of plaintiff's employment while working as CEO for defendant Goodwill. Payment of accrued benefits is clearly related to the employment agreement. The Plaintiff indicated at oral argument that the claimed accrued unpaid benefits relate only to the term of employment by the plaintiff as CEO of Goodwill. All three of the claims fall squarely within the ambit of the agreement's arbitration provision.
In addition to contractually agreeing that the subject matter that is the basis for this complaint would be settled in arbitration, in agreeing to paragraph 13 of the alleged employment agreement, the plaintiff also agreed that the scope of the arbitration clause would cover questions regarding arbitrability. Because the language of the arbitration agreement here is essentially identical to the broad language Connecticut courts have found require arbitration of arbitrability questions, this proceeding may be stayed as a matter of law.
The court does not find the arbitration provision's failure to address costs and fees, an issue which can also be the subject of arbitration, renders the provision so unconscionable as to warrant its nonenforcement. The plaintiff, who admits consulting with counsel before he signed the employment agreement, cites no persuasive authority for this position, and he is not an unsophisticated employee. There is no indication here of a risk that the employee would be required to bear unreasonable costs or that Goodwill imposed the arbitration provision on a "take it or leave it" basis. See McManus v. CIBC World Markets, 109 Cal.App.4th 76, 93, 134 Cal.Rptr. 24 446 (2003). Paragraph 13 of the employment agreement contemplates an arbitration pursuant to the rules of the American Arbitration Association, whose protocols provide that the arbitrator should have the authority to provide for fee reimbursement in whole or in part, as part of the remedy.
CONCLUSION
For the foregoing reasons the motion to dismiss the complaint is DENIED as to Counts One and Two and DENIED WITHOUT PREJUDICE as to Count Three. The motion for a stay of this action is granted pending the outcome of arbitration in compliance with paragraph 13 of the employment agreement.