Opinion
No. CV 09 6005583 S
February 7, 2011
MEMORANDUM OF DECISION RE REQUEST TO AMEND (#177)
PROCEDURAL AND FACTUAL BACKGROUND
This breach of contract action involving unpaid legal fees has been ongoing since June 2004. The plaintiff is a law firm, Goldblatt, Marquette Rashba, P.C. On June 24, 2004, the plaintiff filed a complaint against Yellow Page Consultants, Inc. and Directory Assistants, Inc. (the corporate defendants) that alleged the following underlying facts. The plaintiff represented the corporate defendants from May 2000, to December 2003. The corporate defendants acted through their president, David Ford. The corporate defendants stopped making payments to the plaintiff in February 2004. They owe outstanding unpaid legal fees of $43,189.01.
The plaintiff commenced this action under the name Goldblatt, Keuselias Rashba, P.C. On September 24, 2009, the plaintiff moved to substitute the name Goldblatt, Marquette Rashba, P.C. The court granted the plaintiff's motion on October 4, 2010, over Ford's objection.
On November 15, 2004, the plaintiff amended its original complaint to include allegations against the corporate defendants' president, Ford. The amended complaint alleged violations of the Connecticut Unfair Trade Practices Act (CUTPA) against Ford. On April 4, 2007, Ford moved for a judgment of nonsuit. The court granted that motion on May 7, 2007. On July 9, 2009, the court dismissed the remaining counts against the corporate defendants for failure of the plaintiff to prosecute its claim with reasonable diligence.
The plaintiff then commenced the present case by service of process on the corporate defendants and on Ford on October 21, 2009. The first complaint in this case, filed October 29, 2009, alleged the same underlying facts as in the original action. Specifically, that the corporate defendants owed the plaintiff $43,189.01 in outstanding legal fees. On February 22, 2010, the plaintiff filed a request to amend its complaint and a proposed amendment. None of the defendants filed an objection to that proposed amendment within fifteen days of the requested amendment. The plaintiff's amended complaint expanded on its allegations against Ford, alleging facts to support a piercing-the-corporate-veil theory against Ford.
On December 17, 2009, Ford filed a request to revise. On January 29, 2010, Directory Assistants filed the same request. On February 23, 2010, the plaintiff filed an objection to those requests on the ground that it had filed a proposed amendment to the complaint. The court sustained the plaintiff's objection on March 8, 2010.
Ford filed an objection to the plaintiff's request to amend on March 24, 2010. The court overruled that objection on April 15, 2010, as it was untimely.
Since the plaintiff filed its first amended complaint, Ford has filed two requests to revise that complaint. He filed the first on March 30, 2010. The plaintiff objected to that request on May 27, 2010, and the court sustained that objection on June 22, 2010. On July 13, 2010, Ford again requested that the plaintiff revise the amended complaint. On August 2, 2010, the plaintiff objected to Ford's request to revise, and the court sustained that objection on August 16, 2010.
On September 22, 2010, the plaintiff withdrew its claims as against the corporate defendants. On October 1, 2010, the plaintiff filed a certificate of closed pleadings. On October 13, 2010, the plaintiff filed a second request to amend and a proposed second amended complaint. The plaintiffs proposed second amended complaint alleges the same underlying facts as the other four complaints in this case. In addition, the proposed second amended complaint adds a factual allegation as to how the corporate defendants and Ford came to employ the plaintiff. On October 28, 2010, Ford filed an objection to the plaintiff's request to amend. The court heard the matter at short calendar on November 29, 2010.
DISCUSSION
A. Standard for a request to amend
When a party requests to amend its complaint, the trial court has broad discretion to grant or deny the amendment. LoSacco v. Young, 20 Conn.App. 6, 17, 564 A.2d 610, cert. denied, 213 Conn. 808, 568 A.2d 793 (1989). The Appellate Court has ruled: "Our standard of review of [a trial court's decision to grant or deny a requested amendment] is well defined. A trial court's ruling on a motion of a party to amend its complaint will be disturbed only on the showing of a clear abuse of discretion . . . Whether to allow an amendment is a matter left to the sound discretion of the trial court. [An appellate] court will not disturb a trial court's ruling on a proposed amendment unless there has been a clear abuse of that discretion . . . It is the [defendant's] burden . . . to demonstrate that the trial court clearly abused its discretion." Bosco v. Regan, 102 Conn.App. 686, 691-92, 927 A.2d 325, cert. denied, 284 Conn. 914, 931 A.2d 931 (2007).
In deciding whether to grant a party's request to amend that has been objected to, "[o]ur courts have followed a liberal policy relative to permitting amendments to pleadings after the expiration of the time during which . . . amendments may be filed as a matter of right . . . The essential tests are whether the ruling of the court will work an injustice to either the plaintiff or the defendant and whether the granting of the motion will unduly delay a trial." Smith v. New Haven, CT Page 4401 144 Conn. 126, 132, 127 A.2d 829 (1956).
The appellate courts have offered clues as to the boundaries of the trial court's discretion. For example, in Miller v. Fishman, 102 Conn.App. 286, 292, 925 A.2d 441 (2007), cert. denied, 285 Conn. 905, 942 A.2d 414 (2008), the Appellate Court ruled that the trial court abused its discretion in denying a plaintiff's request to amend their complaint where that request would have mooted the defendant's pending motion for summary judgment. "The defendant's motion for summary judgment rested entirely on the plaintiffs' inability to support the theories of liability set forth in their operative complaint. Had the plaintiffs been allowed to amend their complaint to conform to the facts of their claims, which had been revealed in the course of discovery, the basis for summary judgment would have fallen away . . . Although we recognize the concern that amendments could be used as tactical measures to avoid summary judgment, we conclude that in this case, in light of the potential impact of the request to amend on the motion for summary judgment, the court's failure to exercise its discretion constituted an abuse of discretion and resulted in an injustice to the plaintiffs." Id.; see also Falby v. Zarembski, 221 Conn. 14, 24-25, 602 A.2d 1 (1992) (ruling that the trial court abused its discretion in disallowing an amendment to the plaintiff's complaint during jury selection).
Conversely, in Beckman v. Jalich Homes, Inc., 190 Conn. 299, 303, 460 A.2d 488, 491 (1983), the Supreme Court ruled that the trial court did not abuse its discretion where it denied the plaintiffs' motion to amend their complaint on the eve of trial. In doing so, the court noted that the case "was the oldest nonjury civil case on the court's docket. The motion to amend was filed the day before the case was scheduled for trial. The proposed amendment added counts containing three new theories of legal liability." Id. In those circumstances, where an amendment to the complaint would have delayed the start of the trial, the trial court did not abuse its discretion in denying the requested amendment. Id.; see also Lawson v. Godfried, 181 Conn. 214, 216 435 A.2d 15 (1980) (holding that the trial court did not abuse its discretion in denying a requested amendment to the plaintiffs' complaint at the close of the plaintiffs' presentation of evidence at trial).
In this case, the decision to allow or deny the plaintiff's second request to amend its complaint rests in the sound discretion of the court. This case is not as extreme as either Miller or CT Page 4402 Beckman because the court's decision to grant or deny the plaintiff's requested amendment will neither immediately affect the outcome of the case nor substantially delay a trial.
The only factors relevant to the court's consideration of the current motion are those cited in Smith v. New Haven, discussed above. The defendant's other arguments regarding the legal sufficiency of the proposed amendment are inapposite. "The proper procedural vehicle to challenge the legal sufficiency of a proposed pleading is a motion to strike, rather than an objection to a motion to amend. See Practice Book § 10-39. Thus, even if a proposed pleading is alleged to be insufficient, a [party] should be permitted to file [the amended pleading], so that the issues arising under it may be determined in proceedings properly adapted to that end." (Internal quotation marks omitted.) Rizzuto v. Davidson Ladders, Inc., 280 Conn. 225, 255-57, 905 A.2d 1165 (2006). Indeed, the Supreme Court has held that denying a party's request to amend a complaint on the ground that the requested amendment is legally insufficient is an abuse of discretion. Id. This memorandum will nonetheless address the defendant's remaining arguments regarding the legal sufficiency of the complaint.
B. Necessary parties to a piercing-the-corporate-veil claim
Ford argues that the plaintiff's requested amendment is legally insufficient because it attempts to assert a piercing-the-corporate-veil claim without joining the corporate entities themselves as defendants. Ford cites no authority to support that position.
"The concept of piercing the corporate veil is equitable in nature . . . No hard and fast rule, however, as to the conditions under which the entity may be disregarded can be stated as they vary according to the circumstances of each case . . . Ordinarily the corporate veil is pierced only under exceptional circumstances, for example, where the corporation is a mere shell, serving no legitimate purpose, and used primarily as an intermediary to perpetuate fraud or promote injustice . . . The improper use of the corporate form is the key to the inquiry, as [i]t is true that courts will disregard legal fictions, including that of a separate corporate entity, when they are used for fraudulent or illegal purposes. Unless something of the kind is proven, however, to do so is to act in opposition to the public policy of the state as expressed in legislation concerning the formation and regulation of corporations." (Citations omitted; internal quotation marks omitted.) Naples v. Keystone Building Development Corp., 295 Conn. 214, 233-34, 990 A.2d 326 (2010).
There is little authority addressing the question of whether the corporation itself is an indispensable party in a piercing action. Meneo v. Patrick, Superior Court, judicial district of Hartford, Docket No. CV 06 5004523 (March 23, 2007, Elgo, J.). The few cases that do address the issue, however, do not require the plaintiff to sue the corporation in addition to the individual when asserting a claim for piercing the corporate veil. See, e.g., Id.; Andrews v. Caron Bros., Superior Court, judicial district of Tolland, Docket No. CV 45136 (March 26, 1992, McWeeny, J.) ( 6 Conn. L. Rptr. 214, 218) ("The plaintiffs have pled . . . sufficient facts, which if proven would satisfy each of the elements [of the instrumentality test]. The inclusion of a corporation as a defendant is not a necessary element in an action based on piercing the corporate veil"); Wells Fargo Bank, N.A. v. Konover, 2009 U.S. Dist. LEXIS 18988 at *25 (D.Conn. 2009) ("It is not necessary for an entity to be made a party to an action for a veil-piercing claim to be made with respect to it"); Vertue, Inc. v. Meshkin, 429 F.Sup.2d 479, 505 (D.Conn. 2006) (ruling, under Federal Rule of Civil Procedure 19(a), that corporate entities are not necessary parties to a veil piercing claim). The plaintiff's withdrawal of its complaint against the corporate defendants in this action is therefore not fatal to the legal sufficiency of his veil-piercing claim against Ford.
C. Whether the second amended complaint relates back
Ford finally argues that the court should deny the plaintiff's request to amend his complaint because the proposed amendment is barred by the statute of limitations. The plaintiff filed a complaint in the first action on June 21, 2004. The first action as against the corporate defendants was dismissed for the plaintiff's failure to prosecute its claims with due diligence on July 9, 2009. The plaintiff commenced this action on October 21, 2009.
Under General Statutes § 52-592, the accidental failure of suit statute, the plaintiff may commence a new action within one year of the first action being dismissed. That statute, however, "was not intended to place a delinquent plaintiff in a better position than it would have been in if the action were properly brought within the statute of limitations." Pirone v. New England Railroad Construction, Superior Court, judicial district of Danbury, Docket No. CV 035438 (March 10, 1993, Fuller, J.). The case that the court dismissed on July 9, 2009, was against only the corporate defendants. The case the plaintiff initiated on October 21, 2009, however, was against both the corporate defendants and Ford. The issue Ford attempts to raise, then, is whether the plaintiff's addition of Ford as a defendant relates back to a complaint filed within the statute of limitations.
Section 52-592(a) provides, in relevant part: "If any action, commenced within the time limited by law, has failed one or more times to be tried on its merits because . . . a judgment of nonsuit has been rendered . . . the plaintiff . . . may commence a new action . . . for the same cause at any time within one year after the determination of the original action . . ."
"An amended complaint will be treated as filed at the time of the original complaint if it relates back to the original complaint . . . Our relation back doctrine provides that an amendment relates back when the original complaint has given the party fair notice that a claim is being asserted stemming from a particular transaction or occurrence, thereby serving the objectives of our statute of limitations, namely, to protect parties from having to defend against stale claims . . . Therefore, [w]hile an amendment that corrects a minor defect relates back to the date of the original complaint, one stating a separate cause of action is barred by the statute of limitations. Further, if the amendment is deemed to be a substitution or entire change of a party, it will not be permitted . . . If the amendment does not affect the identity of the party sought to be described in the complaint, but merely corrects the description of that party, the amendment will be allowed . . . The test applied in order to determine whether an amendment is correcting a misnomer as opposed to substituting a new party or claim requires consideration of the following: (1) whether the defendant had notice of institution of the action; (2) whether the defendant knew he was a proper party; and (3) whether the defendant was prejudiced or misled in any way." Palazzo v. Delrose, 91 Conn.App. 222, 225-26, 880 A.2d 169, cert. denied, 276 Conn. 912, 886 A.2d 426 (2005).
In this case, the factors favor allowing the amended complaint to relate back to the date of the original complaint. Ford had notice of the institution of the action because he was a defendant in the original action. Moreover, the plaintiff's complaint alleges that Ford is the alter ego of the corporate defendants. If Ford is indeed the alter ego of the corporate defendants, he must have had notice of the institution of the action against them and that he was a proper defendant. Finally, there is not yet any evidence in the record that the defendant was prejudiced or misled in any way. Accordingly, under the Palazzo factors, the plaintiff's amended complaint relates back to the date of the filing of the original complaint.
At this stage in the proceedings, the record is devoid of evidence. To properly raise a statute of limitations defense, Ford should file an answer and specially plead the statute of limitations as a defense. The court will then be able to decide the issue on summary judgment based on evidence of the factors listed above. The facts mentioned for the purpose of this analysis are drawn from the plaintiff's allegations and the cases' filing history.
CONCLUSION
The court grants the plaintiff's request to amend its complaint. As to the proposed amendment's legal sufficiency, the corporate defendants need not be parties to an action to pierce their corporate veils. Finally, the plaintiff's amended complaint relates back to the original complaint and plaintiff's addition of Ford as a party to this action will likely not run afoul of the statute of limitations because Ford had notice of the pending action, was likely aware that he was the proper party to the action, and was likely not prejudiced by being added as a party.