Opinion
FSTCV136020625S
02-22-2016
Gramercy Advisors, LLC et al. v. BDO USA, LLP
UNPUBLISHED OPINION
MEMORANDUM OF DECISION MOTION TO STRIKE (#133)
Hon. Charles T. Lee, J.
On December 5, 2013, the plaintiffs, Gramercy Advisors, LLC, Gramercy Financial Services, LLC, Gramercy Asset Management, LLC, Gramercy Investment Advisors, LLC, Gramercy Financial Group, LLC, Gramercy Investment Management, LLC, Tall Ships Capital Management, LLC, and Robert Koenigsberger (Gramercy) filed an eleven count complaint against the defendant, BDO USA, LLP (BDO), seeking indemnification, including money damages, declaratory relief, attorneys fees, expenses, and court costs from the defendant in connection with lawsuits arising out of the defendant's creation of a variety of tax shelters. The tax shelters were later determined to be unlawful by the relevant authorities--a determination which led to a variety of civil and criminal litigation nationwide in which plaintiffs were involved. The plaintiffs' complaint was the subject of a motion to dismiss, filed by the defendant on May 28, 2014, which sought dismissal of several counts of the plaintiffs' complaint for lack of subject matter jurisdiction. This court issued a ruling on the defendant's motion to dismiss in Gramercy Advisors, LLC v. BDO USA, LLP, Superior Court, judicial district of Stamford-Norwalk at Stamford, Docket No. CV-13-6020625-S, (April 9, 2015, Lee, J.) (Gramercy I ), which granted the defendant's motion as to counts one and four, and denied the defendant's motion as to counts two, three, five, and six of the plaintiffs' complaint. Subsequently, the plaintiffs filed a twelve count first amended complaint on May 19, 2015.
On June 23, 2015, the defendant filed a motion to strike with an accompanying memorandum of law against portions of count one, and the entirety of counts four and seven, of the plaintiffs' amended complaint. On August 6, 2015, the plaintiffs filed an objection to the defendant's motion and a memorandum in opposition. The defendant replied on September 6, 2015, and the plaintiffs filed a surreply in opposition to the defendant's reply on October 13, 2015. In response to the plaintiffs' surreply, the defendant filed a supplemental memorandum in support of its motion on October 23, 2015. This matter was heard at short calendar on October 26, 2015.
As more fully set forth below, the court dismisses portions of count one and all of count four for lack of subject matter jurisdiction, denies the defendant's motion to strike against the plaintiffs' remaining claims in count one, and grants the defendant's motion to strike count seven.
BACKGROUND
This court set forth the following relevant facts, which were derived from the allegations of the plaintiffs' complaint, in Gramercy I :
The defendant designed, developed, marketed, sold, and implemented distressed debt shelters. The distressed debt shelters in this case are the result of a series of transactions that involve collecting deeply discounted debt from foreign entities and contributing it into a domestic limited liability company (LLC), in which a domestic investor invests, thereby becoming a stakeholder. The object is to trigger a tax loss when the LLC sells or exchanges the distressed debt for cash and/or other assets that are worth less than the debt. This tax loss is passed onto the stakeholder to be claimed on their tax returns. Despite the fact that the transactions discussed in the complaint involved millions of dollars, counsel at oral argument advised that the parties did not enter into any written contract between themselves relating to the transactions, including a written contract of indemnification. The stakeholders in the distressed debt shelters were clients of the defendant. The plaintiffs located and obtained discounted debt assets to be used in the distressed debt shelters, and executed transactions as requested by defendant and by the stakeholders. The tax losses claimed by the stakeholders from the distressed debt shelters, however, were invalidated by the Internal Revenue Service. As a result, the stakeholders have filed several lawsuits across the country against the defendant and the plaintiffs.
In count one of the plaintiffs' amended complaint, the plaintiffs seek indemnification from the defendant for settlement costs, attorneys fees, and other related litigation expenses incurred in the plaintiffs' defense of thirteen separate third-party claims and threatened claims brought against the plaintiff's by various stakeholders who were allegedly harmed by the defendant's tax shelter transactions. In support of count one, the plaintiffs allege that the defendant's misrepresentations regarding its tax shelters were the primary cause of any harm to the various stakeholders who have commenced action, or threatened to commence action, against the plaintiffs, that any wrongdoing attributable to the plaintiff's is secondary to that attributable to the defendant, and that the defendant was in exclusive control of the situation which allegedly caused harm to various stakeholders. Count four of the plaintiffs' amended complaint seeks a declaratory judgment against the defendant stating that, regardless of the disposition of any threatened or pending litigation against the plaintiff's relating to the tax shelter transactions, the defendant will be liable for all related costs and legal fees incurred by the plaintiff's in defending all related threatened or pending third-party claims. In count seven, the plaintiffs seek recovery of settlement payments, attorneys fees, and litigation costs from the defendant under a theory of " wrongful involvement in litigation."
The defendant asserts that the plaintiffs seek indemnification from eleven third-party claims, but there are thirteen claims for indemnification alleged by the plaintiffs in count one. Seven of these claims, set forth in paragraphs 38 and 39 of the plaintiffs' amended complaint, are characterized as " concluded lawsuits, " and six of these claims, set forth in paragraph 43 of the plaintiffs' amended complaint, are characterized as " threatened claims."
The defendant has moved to strike nine of the plaintiffs' thirteen claims for indemnification in count one, on the ground that the plaintiffs have not pleaded a cause of action for common law indemnification for the following reasons: (1) one of the underlying claims was settled beyond the statute of limitations for indemnification claims; (2) four of the underlying claims have not concluded by judgment or settlement, as is required to make a viable common law indemnification claim, because they were procedurally dismissed; and (3) four of the underlying claims were not claims at all, but rather, threatened actions, and the plaintiffs have not pleaded that the threatened actions were resolved by a settlement supported by consideration. With respect to count four of the plaintiffs' amended complaint, the defendant contends that the plaintiffs' claim for a declaratory judgment remains unripe, as previously determined by this court in Gramercy I, and should be stricken. Lastly, the defendant contends that count seven should be stricken because " wrongful involvement in litigation" is not a recognized tort in Connecticut.
DISCUSSION
" 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." (Internal quotation marks omitted.) Fort Trumbull Conservancy, LLC v. Alves, 262 Conn. 480, 498, 815 A.2d 1188 (2003). " [A] a motion to strike challenges the legal sufficiency of a pleading and, consequently, requires no factual findings by the trial court . . . [The court] construe[s] 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 . . . Moreover, [the court notes] that [w]hat is necessarily implied [in an allegation] need not be expressly alleged . . . It is fundamental that in determining the sufficiency of a complaint challenged by a defendant's motion to strike, all well-pleaded facts and those facts necessarily implied from the allegations are taken as admitted. Indeed, pleadings must be construed broadly and realistically, rather than narrowly and technically." (Internal quotation marks omitted.) Coppola Construction Co. v. Hoffman Enterprises Ltd. Partnership, 309 Conn. 342, 350, 71 A.3d 480 (2013). " If any facts provable under the express and implied allegations in the plaintiff's complaint support a cause of action . . . the complaint is not vulnerable to a motion to strike." Bouchard v. People's Bank, 219 Conn. 465, 471, 594 A.2d 1 (1991).
I. The Plaintiffs' Claims for Indemnification in Count One
In Count One, the plaintiffs seek indemnification from the defendant in connection with thirteen separate third-party actions. The defendant challenges nine of the plaintiffs' claims for indemnification. As a preliminary matter, there is a procedural issue raised by the plaintiffs' pleading and the defendant's motion with respect to count one, namely, the plaintiffs' inclusion of multiple separate causes of action for indemnification within the same count in contravention of Practice Book § 10-26, and the defendant's challenges directed against portions, but not the entirety, of a single count. Most Superior Court decisions which have addressed this issue in the context of a motion to strike have held that it is appropriate to consider the merits of the defendant's motion when the motion targets distinct and separable causes of action pleaded within the same count. See, e.g., DeCarlo v. Dupuis, Superior Court, judicial district of New Haven, Docket No. CV-12-6032268-S (October 14, 2014, Nazzaro, J.) (recognizing split and siding with majority). Similarly, when individual portions of a count fail for lack of subject matter jurisdiction, " the court may dismiss portions of a complaint, including individual paragraphs within counts." Cavaciuti v. Gnesda, Superior Court, judicial district of Hartford, Docket No. CV-14-6050720-S (May 28, 2015, Peck, J.) , relying on Paragon Construction Co. v. Dept. of Public Works, 130 Conn.App. 211, 221, n.10, 23 A.3d 732 (2011). Accordingly, in the interests of judicial efficiency, the court will consider the defendant's motion in lieu of requiring the parties to replead and thereby avoid delaying a decision in this matter.
Practice Book § 10-26 provides: " Where separate and distinct causes of action, as distinguished from separate and distinct claims for relief founded on the same cause of action or transaction, are joined, the statement of the second shall be prefaced by the words Second Count, and so on for the others; and the several paragraphs of each count shall be numbered separately beginning in each count with the number one."
a. Statute of Limitations
The defendant first moves to strike one of the plaintiffs' claims for indemnification from count one, which pertains to the third-party action asserted against the plaintiffs in Thompson v. BDO, a Florida case, on the ground that the Thompson action was settled outside of the three year statute of limitations applicable to indemnification claims. The defendant argues that the plaintiffs have pleaded that the Thompson action settled on April 30, 2010, and that, regardless of whether the filing date for the original complaint--November 27, 2013--or the amended complaint--May 19, 2016--is used as a measuring stick, both complaints were filed beyond the three year statute of limitations imposed by § 52-598a. In response, the plaintiffs contend that the Thompson action is still relevant to the plaintiffs' other claims for relief, and as such, remains valid. Further, the plaintiffs argue that at a status conference the defendant indicated its intent to file a comprehensive motion to dismiss at a later date, which would address all statute of limitations grounds pertaining to the plaintiffs' amended complaint. The plaintiffs indicate that, at that time, they will raise defenses based on the fraudulent concealment and prior pending action doctrines, and thus all issues related to the statute of limitations can and should be fully briefed if, and when, the defendant chooses to file that contemplated motion.
While it does not impact the court's decision in this matter, the court notes that in Connecticut, the filing date for a complaint is irrelevant to the determination of whether the plaintiffs have complied with the statute of limitations. Our Supreme Court " has long held that an action is brought once the writ, summons and complaint have been served upon a defendant." Rana v. Ritacco, 236 Conn. 330, 337, 672 A.2d 946 (1996). It is the date of service, and not the filing date, which controls the application of the statute of limitations.
" [O]rdinarily, [a] claim that an action is barred by the lapse of the statute of limitations must be pleaded as a special defense, not raised by a motion to strike." (Internal quotation marks omitted.) Greco v. United Technologies Corp., 277 Conn. 337, 344 n.12, 890 A.2d 1269 (2006). " [T]here are . . . exceptions to that holding. Those exceptions relate to situations in which a motion to strike, filed instead of a special defense of a statute of limitations, would be permitted." Girard v. Weiss, 43 Conn.App. 397, 415, 682 A.2d 1078, cert. denied, 239 Conn. 946, 686 A.2d 121 (1996). One exception occurs " when [t]he parties agree that the complaint sets forth all the facts pertinent to the question [of] whether the action is barred by the [s]tatute of [l]imitations and that, therefore, it is proper to raise that question by [a motion to strike] instead of by answer." (Internal quotation marks omitted.) Forbes v. Ballaro, 31 Conn.App. 235, 239, 624 A.2d 389 (1993).
The parties do not dispute that the complaint sets forth the relevant facts regarding the application of the statute of limitations to the Thompson claim, and for that reason, the defendant's motion to strike on the issue is proper. General Statutes § 52-598a provides, in relevant part, that " an action for indemnification may be brought within three years from the determination of the action against the party which is seeking indemnification by either judgment or settlement." In this case, the plaintiffs have pleaded that the Thompson action settled on or about April 30, 2010. The marshal's return of service indicates that the defendant was served with the plaintiffs' original complaint on November 27, 2013. Accordingly, the plaintiffs have not pleaded a valid claim for indemnification for the Thompson action because the claim was not brought within three years of the settlement date.
The court acknowledges the defendants' argument that the plaintiffs did not seek indemnification for the Thompson action in the original complaint, and that it was not until the filing of the amended complaint that the plaintiffs raised the Thompson indemnification claim, but this is a distinction without difference. Regardless of which version of the complaint is used to determine the relevant date for the statute of limitations, the plaintiffs' action still fails.
The plaintiffs' arguments regarding future filings and possible defenses on this issue are unavailing. Notwithstanding any talk between the parties regarding future motion practice, the defendant has properly raised the argument in the present motion, the facts as alleged within the amended complaint indicate that the plaintiffs' action is time-barred, and the plaintiffs, through their arguments, have not disputed any of the underlying facts. Further, the defendant has waived the right to file another motion to dismiss in this matter, in accordance with " Practice Book § § 10-6 and 10-7 [which] stipulates that a motion to dismiss must be filed prior to the defendant's . . . motion to strike . . . [and] any pleading filed out of the order set forth in § 10-6 waives the right to file any of the pleadings that preceded it in the order." (Citation omitted.) Foster v. Bridges-A Community Support System, Inc., Superior Court, judicial district of New Haven, Docket No. CV-07-5012759-S, (July 28, 2011, Zoarski, J.T.R).
b. The Plaintiffs' Claims for Indemnification From Procedurally Dismissed Claims
Next, the defendant moves to strike the plaintiffs' claims for indemnification from four third-party actions which have been procedurally dismissed in other courts, namely one New York case, CHELSEA v. Gramercy, and three Illinois cases, Kaufman v. BDO, Coe v. BDO, and Howard v. BDO (collectively, procedurally dismissed claims), on the ground that the plaintiffs have not pleaded sustainable claims for indemnification because these cases have not resulted in a final judgment or a settlement against the plaintiffs. Specifically, the defendant asserts that Connecticut law affords common law indemnity rights only to those parties who are compelled by law to make a payment to an injured party, and only then, incidental to that determination, may a plaintiff seek indemnification for attorneys fees and costs. In response, the plaintiffs argue that they have successfully pleaded causes of action for implied contractual indemnification, as well as either common law or implied-in-law indemnification, for the procedurally dismissed claims. The plaintiffs insist that an entity which is subject to third-party litigation through no fault of its own is entitled to indemnification for its litigation costs from the party that caused the third-party litigation, irrespective of whether the plaintiffs are first found liable via judgment or settlement, or prevail in the underlying third-party actions. In reply, the defendant argues that regardless of whether the plaintiffs seek recovery under a theory of implied contractual indemnification or common law indemnification, the plaintiffs' claims fail with regard to the procedurally dismissed claims because, under either theory, a party must incur a final judgment or settlement before indemnity rights accrue.
" The logic and rationale underlying our indemnity case law are based on the premise that an action for indemnification is one in which one party seeks reimbursement from another party for losses incurred in connection with the first party's liability to a third party." Amoco Oil Co. v. Liberty Auto & Electric Co., 262 Conn. 142, 148, 810 A.2d 259 (2002). " [T]he concept of indemnity usually involves an indemnitor, A, and an indemnitee, B, who enter into a contract whereby A agrees to indemnify B for any money B becomes legally obligated to pay to a third party." Id., 149. Thus, under a theory of contractual indemnification, " indemnity agreements fall broadly into two classes, those [in which] the contract is to indemnify against liability and those [in which] the contract is to indemnify against loss. In the first, the cause of action arises as soon as liability is incurred, but in the second it does not arise until the indemnitee has actually incurred the loss . . . [U]nder an agreement to indemnify against loss only, it is theoretically impossible for an indemnitee to have an actionable claim against the indemnitor until the indemnitee actually has paid something he is legally obligated to pay." (Citations omitted; internal quotation marks omitted.) Id. 149-50.
In the absence of an express agreement to indemnify, " a party is entitled to indemnification . . . only upon proving that the party against whom indemnification is sought either dishonored a contractual provision or engaged in some tortious conduct." Burkert v. Petrol Plus of Naugatuck, Inc., 216 Conn. 65, 74, 579 A.2d 26 (1990). As our Supreme Court explained in Kaplan v. Merberg Wrecking Corp., 152 Conn. 405, 207 A.2d 732 (1965), the seminal case on the subject:
Ordinarily, there is no right of indemnity or contribution between joint tortfeasors . . . But this rule has certain exceptions . . . Parenthetically it perhaps should be pointed out that both an implied obligation to indemnify and contribution are based on equitable principles . . . But indemnity involves a claim for reimbursement in full from one on whom a primary liability is claimed to rest . . .
The plaintiff in an action claiming an implied obligation of indemnity against an independent contractor cannot recover unless he proves that the active negligence and wrong which caused the injury were the negligence and wrong of the defendant [independent contractor] or, in other words, that the defendant was the party primarily liable for the wrongful act which occasioned the injury in respect of which the plaintiff has been compelled to pay damages. (Citation omitted; internal quotation marks omitted.) Id., 412, 415-16.
Under Kaplan, to assert a claim for common law indemnification, " an out-of-pocket defendant must show that: (1) the party against whom the indemnification is sought was negligent; (2) that party's active negligence, rather than the defendant's own passive negligence, was the direct, immediate cause of the accident and the resulting [injury]; (3) the other party was in control of the situation to the exclusion of the defendant seeking reimbursement; and (4) the defendant did not know of the other party's negligence, had no reason to anticipate it, and reasonably could rely on the other party not to be negligent." (Citation omitted; emphasis omitted.) Smith v. New Haven, 258 Conn. 56, 66, 779 A.2d 104 (2001).
Applying the foregoing principles to the plaintiffs' claims for indemnification in connection with the procedurally dismissed claims, regardless of what theory the plaintiffs seek to employ, the plaintiffs have not alleged a cause of action for indemnification because their liability has not yet been determined. Put another way, the procedurally dismissed claims have yet to conclude by either a judgment or a settlement. The establishment of liability as a prerequisite to an indemnification claim, be it a claim based in contract, tort, or otherwise, is a consistent theme throughout the decisions of our Supreme Court. The court's discussion in Amoco Oil makes it clear that, in the context of contractual indemnification, a party's right to indemnification does not arise until a determination of liability has been made--unless the parties explicitly contracted otherwise by including, for example, an obligation to defend, rather than an obligation to indemnify, as a part of their agreement. In any event, the plaintiffs have not alleged as much in the amended complaint. With regard to a claim for common law indemnification, Kaplan makes it clear that a plaintiff must first be compelled to pay damages--" out of pocket" --prior to seeking indemnification. A procedural dismissal in third-party litigation does not equate to a determination of liability, nor does it compel the plaintiffs to pay damages out of pocket.
The plaintiffs make much of the fact that, despite being innocent of any wrongdoing, the actions of the defendant have " enmeshed" them in costly litigation and, therefore, have created an avenue by which the plaintiffs may seek indemnification. In other words, the plaintiffs' argument suggests that their incurred litigation costs are out of pocket damages under our indemnification jurisprudence. While it is apparent from the pleadings in this case that the plaintiffs have incurred substantial litigation costs in a variety of on-going third-party actions, these litigation costs alone, in the absence of a contractual agreement to the contrary, neither establish a right to indemnification, nor do they create a route around the fundamental tenet that parties are generally responsible for their own litigation costs. Under " [t]he general rule of law known as the 'American rule' . . . attorneys fees and ordinary expenses and burdens of litigation are not allowed to the successful party absent a contractual or statutory exception." (Internal quotation marks omitted.) 24 Leggett Street Ltd. Partnership v. Beacon Industries, Inc., 239 Conn. 284, 311, 685 A.2d 305 (1996). While it is a recognized exception to the general rule that " an indemnitee is entitled to recover from an indemnitor, as a part of its damages , attorneys fees, costs and expenses; " (emphasis added) Id., 311; the right to the costs of litigation in an indemnification action arises only after the indemnification plaintiff has established a right to recover any damages paid by way of a judgment or a settlement. Accordingly, the plaintiffs cannot state claims for indemnification on the basis of litigation costs alone, and in the absence of a final judgment or settlement, the plaintiffs' claims for indemnification in connection with the procedurally dismissed claims must fail.
The court recognizes that the defendant moves to strike from count one the plaintiffs' claims for indemnification in connection with the procedurally dismissed claims, however, the gist of the defendant's challenge is more properly considered to be one of ripeness. " [R]ipeness is a sine qua non of justiciability . . . An issue regarding justiciability . . . must be resolved as a threshold matter because it implicates [the] court's subject matter jurisdiction . . . If it becomes apparent to the court that such jurisdiction is lacking, the [cause of action] must be dismissed." (Internal quotation marks omitted.) Liberty Mutual Ins. Co. v. Lone Star Industries, Inc., 290 Conn. 767, 812, 967 A.2d 1 (2009). Our Supreme Court " has often stated that the question of subject matter jurisdiction, because it addresses the basic competency of the court, can be raised by any of the parties, or by the court sua sponte, at any time." (Internal quotation marks omitted.) Town of New Hartford v. Conn. Res. Recovery Auth., 291 Conn. 511, 518, 970 A.2d 583 (2009). As this court stated in Gramercy I, " a cause of action for indemnity does not arise until the determination of the underlying action against the party seeking indemnity." (Internal quotation marks omitted.) There has been no determination of liability in the procedurally dismissed claims, and therefore, rather than grant the defendant's motion to strike, the court dismisses these four claims for indemnification from count one as unripe.
In their briefs, the plaintiffs assert that in the time elapsed between the filing of the amended complaint and the defendant's motion, the Coe action has settled, and is therefore no longer a procedurally dismissed claim. While that fact, if true, could alter this court's decision with regards to the ripeness of the plaintiffs' claim for indemnification from the Coe action, the plaintiffs have put forth no evidence, besides an unsupported assertion, which would allow the court to consider whether the plaintiffs' claim is ripe. In any event, even if the court could determine that the plaintiffs' claim for indemnification from Coe is ripe in light of the supposed settlement, the claim would still be subject to the defendants' motion to strike. In ruling on a motion to strike, the court's review is constrained to the pleadings, and in the amended complaint the plaintiffs have pleaded that the Coe action was procedurally dismissed. The plaintiffs have chosen not to amend their allegations in the amended complaint, and accordingly, the result for the plaintiffs' claim related to Coe is the same as the result for the remaining procedurally dismissed claims.
c. The Plaintiffs' Claims for Indemnification from Tolled Third-Party Actions
Two of the plaintiffs' indemnification claims alleged in Count One pertain to monetary payments, attorneys fees, and costs incurred in the execution of two separate tolling agreements pertaining to threatened third-party actions against the plaintiffs (tolled claims). While not challenged by the defendant's motion, the court's reasoning regarding the ripeness of the procedurally dismissed claims applies equally to the plaintiffs' claims for indemnification from costs incurred in connection with the tolled claims. These actions are not ripe for indemnification, because a tolling agreement does not constitute a judgment or settlement. Therefore, the court dismisses these two indemnification claims for lack of subject matter jurisdiction, because the plaintiffs' claims for indemnification from costs incurred in connection with the tolled claims are unripe.
The relevant allegations appear in paragraph 38 of the plaintiffs' amended complaint. The first tolling agreement is alleged to have been executed by Gramercy with Richard and Laura Benedek, NPESO, LLC, PATACO, LLC, SARNAC, LLC, and Benedek Investment Group, LLC. The second tolling agreement is alleged to have been executed by Gramercy with John Baldwin, Sunset Management, LLC, and Sunset Recovery, LLC.
d. The Plaintiffs' Claims for Indemnification from Threatened Claims
Finally, the defendant moves to strike from count one the plaintiffs' claims for indemnification for monetary payments, attorneys fees and other costs paid to settle threatened litigation by the following third parties: (1) Robert Cuillo and EPARS LLC; (2) Guisan, LLC; (3) Dulwich, LLC; and (4) Barry Connor and St. Jean, LLC (threatened claims). The defendant argues that the plaintiffs are not entitled to indemnification for any costs incurred in connection with the threatened claims because the plaintiffs have not alleged that the threatened claims were settled, and further, that the plaintiffs have not alleged that they paid any consideration for the supposed release of the threatened claims. In reply, the plaintiffs argue that they have pleaded that the threatened claims were settled and that the releases of the threatened claims were secured by contractual payments. Clearly, the plaintiffs reason, a party that gives valuable consideration in exchange for the release of a threatened claim has reached a settlement, and is thereby entitled to bring an indemnification claim.
The defendant's arguments are without merit, for a brief review of the amended complaint reveals that the plaintiffs have sufficiently pleaded that they have reached settlements supported by consideration in connection with the threatened claims. A party that enters into a voluntary settlement or a stipulated judgment can seek recovery under a theory of common law indemnification. See Bristol v. Dickau Bus Co., 63 Conn.App. 770, 773-74, 779 A.2d 152 (2001). In paragraph 44 of the amended complaint, the plaintiffs allege that they have " been damaged in the amount of the costs of contractual payments to secure the releases of certain of the [t]hreatened [c]laims . . . [The plaintiffs] [have] incurred additional damages in the form of attorneys fees and other related costs of responding to each of the [t]hreatened [c]laims." In contrast to the procedurally dismissed claims and the tolled claims, where the plaintiffs failed to plead the existence of a settlement or other determination of liability that would give rise to a valid indemnification claim, the plaintiffs have successfully pleaded the existence of a settlement associated with the threatened claims and therefore, the plaintiffs may seek indemnification for the costs incurred in connection with the settlement of the threatened claims.
II. The Plaintiffs' Claim for a Declaratory Judgment in Count Four
The defendant also seeks to strike or dismiss count four of the plaintiffs' amended complaint, which seeks a declaratory judgment that, to the extent the plaintiffs incur a judgment or settlement in the tolled claims or a number of pending third-party claims, the defendant will be liable for all costs associated with any judgment or settlement, including all legal fees and litigation costs incurred by the plaintiffs. The defendant argues that the plaintiffs' claim for a declaratory judgment regarding indemnification is unripe because the underlying third-party actions have not concluded by judgment or settlement. The defendant points to this court's ruling in Gramercy I whereby this court dismissed a similar claim for a declaratory judgment from the plaintiffs' original complaint, as dispositive of the plaintiffs' present claim in count four. In response, the plaintiffs attempt to distinguish this court's ruling in Gramercy I by arguing that this court never addressed the plaintiffs' argument that the existence of both pending and concluded third-party actions allows for subject matter jurisdiction over the plaintiffs' claim for a declaratory judgment. The plaintiffs assert that this court in Gramercy I construed the plaintiffs' original complaint to seek relief only as to pending, and not concluded, actions, and that because some of the plaintiffs' claims for indemnification are ripe, this court has subject matter jurisdiction over the entirety of the plaintiffs' claim for declaratory relief in count four.
The plaintiffs' attempts to parse the language of this court's ruling in Gramercy I are unavailing. The Gramercy I decision is as applicable to count four of the plaintiffs' amended complaint as it was to count four of the plaintiffs' original complaint, and the plaintiffs' claim for a declaratory judgment regarding the defendant's indemnity obligations remains unripe. As this court explained in Gramercy I :
An action for declaratory judgment is subject to dismissal on the ground of ripeness if the declaration sought requires the court to presume that a party will succeed in a related underlying action. In Hamilton v. United Services Automobile Assn., 115 Conn.App. 774, 974 A.2d 774, cert. denied, 293 Conn. 924, 980 A.2d 910 (2009), the Appellate Court affirmed the trial court's decision to dismiss the plaintiffs action for declaratory judgment because the underlying action, upon which the declaratory judgment was premised, had not yet been determined. The plaintiff sought a declaration against the insurance company of the defendant in the underlying action that the insurance company had a duty to indemnify the defendant for the underlying action. Id., at 776. The Appellate Court held that the case was not yet ripe, and stated that, although the allegations of the underlying action were known, without knowing the evidence and jury verdict, it was impossible to determine whether the insurance company had an obligation to indemnify the defendant, " [t]he action therefore [sought] the answer to a hypothetical question, which is not the purpose of a declaratory judgment action." Id., at 785-86.
In the present case, the plaintiffs seek a declaration that " [t]o the extent Gramercy owes any monies to plaintiffs in connection with litigation brought by . . . [the stakeholders of the distressed debt shelters, ] [the] [d]efendant will liable to [the plaintiffs] for all amounts owed by [the plaintiffs] . . ." This is a request for a declaration of indemnification. However, the plaintiffs do not allege that the underlying lawsuits have concluded or that a judgment has been entered against the plaintiffs in any of the underlying lawsuits. Whether the defendant should indemnify the plaintiffs is dependent upon facts to be established in the trials of the underlying lawsuits and the theory under which judgment is entered, which are unknown to the court at this time and will not be presumed by the court. Accordingly, the plaintiffs' claim for declaratory judgment is unripe.
In count four the plaintiffs' amended complaint, the plaintiffs continue to seek a declaration of indemnification against the defendant for third-party actions that have not concluded--specifically the pending actions and the tolled claims. The plaintiffs have not pleaded that either the pending actions or the tolled claims have resolved by judgment or settlement, and, as discussed in the previous section, a claim for indemnification cannot arise before the underlying action on which the claim for indemnity is based has been determined. To be clear, each action from which the plaintiffs seek indemnification must be resolved by either a judgment or settlement before an indemnification claim may be brought based on that action. The fact that other third-party claims asserted against the plaintiffs, which may pertain to a similar subject matter, have been resolved by settlement does not insulate the plaintiffs' claim for a declaratory judgment from a ripeness challenge. In the absence of a determination in the pending actions and the tolled claims, " [t]he court would be required to presume a particular resolution in the underlying [actions], which it cannot do at this time. Accordingly, the plaintiffs' claim for a declaratory judgment is not ripe; " Gramercy I; and the court dismisses count four of the plaintiffs' amended complaint for lack of subject matter jurisdiction.
III. The Plaintiffs' Claim for Wrongful Involvement in Litigation in Count Seven
Lastly, the defendant has moved to strike count seven of the plaintiffs' amended complaint, whereby the plaintiffs seek recovery of attorneys fees and other litigation costs incurred in third-party litigation from the defendant under a theory of " wrongful involvement in litigation." The defendant asserts that wrongful involvement in litigation is not a recognized tort in Connecticut, existing remedies available to the plaintiffs provide sufficient redress, and that there is not growing judicial receptivity to the new cause of action, either in Connecticut or in other jurisdictions, sufficient to justify the creation of a wrongful involvement in litigation tort. In reply, the plaintiffs insist that this court should recognize a new cause of action, because allowing a party to recover litigation costs when it is wrongfully involved in litigation due to the conduct of another is wholly consistent with (1) Connecticut's purported recognition of the exception to the American Rule, which allows for the recovery of attorneys fees by a party who is forced to litigate due to the wrong of another, and (2) the equitable principle that an innocent party should be entitled to recover from a wrongdoer. In response, the defendant points out that the principles of indemnification do allow for an innocent party to recover attorneys fees and litigation costs under appropriate circumstances, specifically when the innocent party suffers a judgment or settlement, and, had plaintiffs desired greater protection from the risks of third-party litigation, they could have negotiated an agreement with the defendant that would have included appropriate indemnification and defense provisions.
" A motion to strike is the proper procedural vehicle . . . to test whether Connecticut is ready to recognize some newly emerging ground of liability . . . The judiciary [has] the inherent authority, pursuant to the state constitution, to create new causes of action . . . Moreover, it is beyond dispute that [courts] have the power to recognize new tort causes of action, whether derived from a statutory provision or rooted in the common law . . . ATC Partnership v. Coats North America Consolidated, Inc., 284 Conn. 537, 552-53, 935 A.2d 115 (2007). While Connecticut case law reveals no hard and fast test that courts apply when determining whether to recognize new causes of action; id., 552; a number of guiding principles can be found. The first relevant guideline is that courts look to see if the judicial sanctions available are so ineffective as to warrant the recognition of a new cause of action. Id., 553. Second, courts are mindful of growing judicial receptivity to the new cause of action; id.; taking into account the judicial trend . . . Mendillo v. Board of Education, 246 Conn. 456, 494, 717 A.2d 1177 (1998). [T]he ultimate decision comes down to a matter of judgment in balancing the competing interests involved. Id., 495." (Citations omitted; internal quotation marks omitted.) DelPrete v. Senibaldi, Superior Court, judicial district of New Haven, Docket No. CV-11-6024795-S (December 23, 2013, Nazzaro, J.) .
Having considered the relevant guiding principles, the court concludes that there is no reason to recognize the tort of wrongful involvement in litigation in this case. Established indemnification principles provide an adequate remedy for the plaintiffs--a remedy which may include attorneys fees and the costs of litigation in the event the plaintiffs first suffer an adverse judgment or settlement in third-party litigation, and then subsequently prevail in a claim for indemnification against the defendant. It is true that, under these existing remedies, in the event the plaintiffs prevail in third-party litigation, they are not entitled to indemnification from the defendant for the significant attorneys fees and costs of litigation associated with that victory. This remains true even if it turns out that the defendant's wrongdoing was the sole cause of the third-party litigation against the plaintiffs. See, e.g., Leggett Street Ltd. Partnership v. Beacon Industries, Inc., supra, 239 Conn. 311 (in indemnification action, award of attorneys fees and costs is incidental to recovery of damages paid by indemnification plaintiff to third-party in form of adverse judgment or settlement). Nevertheless, this is not so inequitable a result as to warrant the creation of a new cause of action which would allow litigants in our system to recover attorneys fees in a large swath of litigation--a result which would nullify the American Rule and its principle that parties are generally responsible for their own litigation costs.
The solution for the plaintiffs' predicament rests more in private contracting than it does with judicial activism associated with the creation of a new cause of action. In short, if the plaintiffs were concerned about the substantial costs of litigation in situations where they successfully fend off third-party claims brought against the plaintiffs on account of their activities with the defendant, the proper solution would have been to contract with the defendant to account for this concern. The plaintiffs elected not to do so in this case, and therefore, the recovery of attorneys fees and litigation costs expended in third-party litigation rests on the plaintiffs' ability to prevail in an indemnification action against the defendant. Therefore, the court declines to recognize a cause of action for " wrongful involvement in litigation, " and grants the defendant's motion to strike count seven for failure to state a claim.
CONCLUSION
Accordingly, for the reasons set forth above, the court grants the defendant's motion to strike the plaintiffs' claim for indemnification in connection with the Thompson action from count one because it violates the statute of limitations, dismisses the plaintiffs' claims for indemnification in connection with the procedurally dismissed actions and the tolled claims from count one for lack of subject matter jurisdiction because they are unripe, denies the defendant's motion to strike the plaintiffs' claims for indemnification in connection with the threatened claims from count one because the plaintiffs have adequately pleaded a cause of action, dismisses the plaintiffs' claim for a declaratory judgment regarding indemnification in count four for lack of subject matter jurisdiction because it is unripe, and grants the defendant's motion to strike the plaintiffs' claim for wrongful involvement in litigation in count seven because no such tort exists in Connecticut and the court declines to recognize a new cause of action in this case.