Opinion
No. CV 06-5004384
December 14, 2007
This is a lengthy court trial which commenced sometime in April of this year and has continued with various interruptions for fifty-six days. There have been 174 exhibits, some of which have substantial backup material. The case involves claims by all parties that the other(s) violated their fiduciary duties. The plaintiff (hereinafter also called "Tammy") and the individual defendant (hereinafter also called "Katherine") formed a corporation called Tele-Consult Associates, Inc. (hereinafter also called "TCA") sometime in 1996. The two individuals are equal stockholders, the only two members of the board of directors and during the period covered by this litigation Katherine was president and Tammy was Secretary/Treasurer.
The dispute that has led to this lawsuit developed in 2005 when Katherine allegedly determined that Tammy was violating her fiduciary duties as officer and a director of TCA by convincing TCA clients to leave TCA and to join a new company to be called One Solutions and/or a company called IQ Telcom. When Katherine learned of this alleged malfeasance on the part of Tammy, she, on June 1, 2006, terminated Tammy as an employee.
The plaintiff's complaint seeks dissolution of the corporation and division of the assets and in her complaint accuses Katherine of violation of her fiduciary duties and of terminating Tammy illegally. Tammy also seeks several injunctions in her complaint and prayer for relief. Katherine and TCA have countersued with a cross complaint alleging violation of fiduciary duties by Tammy, tortious interference with a contractual relationship and various other causes of action too numerous to mention here, also seeking injunctive relief. This Court put off, temporarily, the plaintiff's request for a receiver for the corporation and declined to rule on plaintiff's request for dissolution of the corporation because the central issue in this case seems to be the cross claims of the individual parties that the other had violated her fiduciary duties. Since both parties are seeking injunctions, this has become a suit, at least in part, in equity. The Court has heard evidence commencing in April of this year and carrying through to date. The parties agreed that this Court would hear the entire trial rather than just the preliminary motion for a receiver of rent and that this Court would first hear the claims of the parties that Tammy and Katherine had each violated their fiduciary duties since that is a major issue in this case and could well impact the final decision. Although full trial was scheduled for November 2007, the case went into full trial mode early on.
In the meantime, the defendants filed a motion to dismiss the plaintiff's complaint dated July 30, 2007 on the claim that the plaintiff had not been properly forthcoming in answer to discovery and that she did not supply important documents even though ordered to do so. The July 30, 2007 motion to dismiss was accompanied by an affidavit of Katherine. This was followed by an August 9, 2007 supplement to the motion to dismiss with a similar affidavit from Katherine. Katherine then moved to dismiss by pleading dated August 16, 2007, and on September 10, 2007 filed a second supplement to defendants' motion for dismissal for failure to comply with the Court's discovery order and accompanying that second supplement was a memorandum of law dated September 10, 2007. A third supplement to defendants' motion is dated October 16, 2007 with attachments; and then, a supplement to defendants' motions to dismiss dated October 31, 2007 in two parts and a further memorandum November 20, 2007 basically concerning the testimony that was heard in the week of November 5, 6 and 7.
November 5 and 6 were set aside to hear Tammy's testimony in response to defendants' motions to dismiss and to support Tammy's motion to dismiss. She so testified. Katherine then testified on November 7th commencing at 2:30 p.m. in rebuttal.
The plaintiff countered with a motion for order of judgment of dismissal against defendants on August 6, 2007 and on August 6, 2007 filed an objection to defendants' motion to dismiss. On August 13, 2007, the defendants filed an objection to plaintiff's motion for order of judgment of dismissal against defendants and/or motion for sanctions. This was followed on September 11, 2007 by plaintiff's motion for order of judgment of dismissal against defendants and motion for sanctions/costs. On September 14, 2007, the defendants filed an objection to plaintiff's motion for order of judgment of dismissal and sanctions/costs. On September 19, 2007, plaintiff filed a reply to defendants' objection for order of judgment of dismissal and plaintiff's objection to defendants' motion for costs/sanctions. On October 1, 2007, the plaintiff filed an objection to both defendants' supplemental motions to dismiss for failure to comply with discovery and objection to any related motions for costs/sanctions. On October 1, 2007, the plaintiff filed her affidavit in support of the objection to defendants' supplemental motion to dismiss. On October 30, 2007, the plaintiff filed an affidavit in support of her supplemental motion to dismiss. On October 31, 2007, the plaintiff filed a supplemental motion for order of judgment of dismissal against defendants. On November 20, 2007, the plaintiff filed a memorandum concerning the testimony heard on November 5, 6 and 7. Each side filed a total of at least thirteen memoranda concerning the motions to dismiss.
This Court will now decide the plaintiff's Motions to Dismiss and file a separate memorandum deciding defendants' Motions to Dismiss.
STANDARD OF REVIEW
This Court evaluates the credibility of the witnesses and the parties based upon their appearance and demeanor on the witness stand, the consistency or inconsistency of their testimony, their memory or lack thereof of certain events, whether they were candid and forthright or evasive and incomplete, their manner in responding to questions and their interest or lack of interest in the case as well as the exhibits in this case, the memoranda filed by both parties and the documents attached thereto.
The leading case on the issue before the Court is that of Stanley Shenker Associates, Inc. v. World Wrestling Federation Entertainment, Inc., 48 Conn.Sup. 357 (October 16, 2003), Complex Litigation Docket at Stamford, Rogers, J. (hereinafter referred to as " Shenker v. World Wrestling"). Judge Rogers, now Chief Justice Chase Rogers, dismissed the plaintiff's case with prejudice because the plaintiff deliberately concealed and/or otherwise refused to produce critical documents and repeatedly committed perjury during his deposition testimony.
"It is a long and well established principle, both in Connecticut courts and in state and federal courts throughout the country, that where a litigant's conduct abuses the judicial process, whether through flagrant discovery violations or through other serious litigation misconduct, dismissal is an appropriate sanction." See generally National Hockey League v. Metropolitan Hockey Club, 427 U.S. 639, 643, 96 S.Ct. 2778, 49 L.Ed.2d 747 (1976) (dismissal sanction "must be available . . . not merely to penalize but to deter those who might be tempted to such conduct in the absence of such a deterrent"); Barnhill v. United States, 11 F.3d 1360, 1367 (7th Cir. 1993) ("[m]isconduct may exhibit such flagrant contempt for the court and its processes that to allow the offending party to continue to invoke the judicial mechanism for its own benefit would raise concerns about the integrity and credibility of the civil justice system that transcends the interests of the parties immediately before the court"); Aoude v. Mobil Oil Corp., 892 F.2d 1114, 1118 (First Cir. 1989) ("Courts" processes [should be denied] to one who defiles the judicial system by committing a fraud on the court"). Id., 371-72.
"The plaintiff, through its conduct, has intentionally and repeatedly committed a fraud upon this court." Pappas v. Pappas, 164 Conn. 242, 245 (1973) ("False testimony given in deposition constitutes fraud on court)." Id., 372 (emphasis added).
"It is well settled Connecticut policy that courts should `safeguard the proper administration of justice and preserve the public confidence in the purity and efficiency of judicial proceedings.' Usowski v. Jacobson, Superior Court, judicial district of Stamford/Norwalk at Stamford, docket no. (X05) CV 98-0166410S (August 3, 2000, Tierney, J.)." Id., 372.
Connecticut Practice Book Section 13-14 also provides in pertinent part:
(a) If any party has failed to answer interrogatories or to answer them fairly, or has intentionally answered them falsely or in a manner calculated to mislead, or has failed to respond to requests for production . . . or has failed to comply with a discovery order, made pursuant to Section 13-13 or has failed otherwise substantially to comply with any discovery order made pursuant to Section 13-6 through 13-11, the judicial authority, may, on motion, make such order as the ends of justice require.
(b) Such orders may include the following: (1) the entry of a nonsuit or default against the party failing to comply . . . (5) if the party failing to comply is the plaintiff, the entry of a judgment of dismissal.
The Court in Pavlinko v. Yale-New Haven Hospital, 192 Conn. 138, 139, 145 (1984), applied the following test in resolving this issue: "(1) the cause of the opponent's failure to respond to the posed questions, that is, whether it is due to inability rather than the wilfulness, bad faith and fault of the deponent . . . (2) the degree of prejudice suffered by the opposing party, which in turn may depend on the importance of the information requested to that party's case; and (3) which of the available sanctions would under the particular circumstances, be an appropriate response to the disobedient party's conduct." In Pavlinko the Supreme Court addressed the issue of whether dismissal was an appropriate sanction where the plaintiff refused to answer questions at a deposition concerning his removal of hospital records on the grounds of the claim of privilege against self incrimination. The Court found that "dismissal was the only appropriate sanction."
In quoting from Asztalos v. Stop Shop Supermarket, 26 Conn. L. Rptr. 600, Chief Justice Rogers indicated her agreement with the following from that case: "In determining that the plaintiff's conduct warranted the most severe sanction of dismissal, the court also stated: `there is benefit to ordering a judgment of dismissal in this case to deter others who might be tempted to follow in the path of the plaintiff. We have rules of discovery for a purpose. That purpose is completely thwarted when a party lies under oath, withholds discoverable information, intentionally misleads his/her opponent and/or fails to disclose relevant and discoverable information in a timely fashion. In this case, not only did the plaintiff violate our rules of discovery, but she violated the direct orders of this Court. The plaintiff was given many opportunities to comply. Each time, non-compliance is accompanied with excuses.'" Id., 376.
"To allow the present case to continue would be to allow perjury. If the Court were not to dismiss the present case based on the record before it, it would be inviting parties in other cases to take a calculated risk of engaging in deliberate misleading conduct with the knowledge that, if caught, they would only be forced to pay attorneys fees. In sum, while this Court firmly believes and understands that except under the most unusual circumstances, parties should have their day in court, dismissal is the only viable option in the present case." Id., 357.
FINDINGS
1. As to the motion for judgment of dismissal, etc. by the plaintiff dated August 6, 2007, the Court finds that the defendants have essentially complied with the requests for discovery as mentioned in the plaintiff's motion. The defendants supplied approximately 200 e-mails and had Joseph Haddad restore Tammy's e-mails in her computer.
2. On September 11, 2007, the plaintiff again filed a motion for judgment of dismissal, sanctions/costs based upon production by the defendants being untimely and for missing parts of certain credit cards bills/statements. Defendants replied on September 14, 2007 stating that the Court had granted an extension to the defendants to September 11, 2007 and that the defendants had complied with the demands cited by plaintiff. On September 19, 2007, the plaintiff admitted compliance by the defendants.
3. On October 31, 2007, plaintiff filed a supplemental motion to dismiss claiming that Katherine in testimony referred to herself and Tammy and their compensation as being employees' salaries whereas the federal tax filings refer to the money they received as Compensation of Officers. They further claim that it undermines the claim of the defendants that Tammy was a fiduciary by being an officer/director. The Court finds that the designation in the tax returns was probably the actions of the accountant without the knowledge of Katherine. This is basically irrelevant since all parties know and have admitted that Katherine and Tammy were officers and directors of TCA. Additionally, there is no claim by the plaintiff that Katherine ever withheld any of this information. Plaintiff also claimed that some of Tammy's TCA e-mails may have been destroyed because of unexplainable gaps when compared to other productions. Further, is the claim that there was an alteration/withholding of a March 6, 2006 e-mail and a December 31, 2005 e-mail related to an ongoing dispute regarding expenses. This Court concludes that this is not a basis for granting plaintiff's motions to dismiss. Katherine has testified, and the Court believes her, that she had assigned certain employees of TCA to make copies and produce certain documents, and there may have been errors of which she was not aware. In any event, there is not even a claim that these actions or inactions were intentional and the Court finds that they were not intentional. The plaintiff further claims that there was difficulty in production of all of Tammy's TCA e-mails including all subfolders as kept as ordered by the Court. However, based upon disclosure of this information, Mr. Haddad did produce all of the subfolders. Further, the records of TCA and Tammy's computer were always made available to Tammy's attorney who on more than one occasion went to TCA's offices to review documents. Additionally, is the claim that there was a potential failure to preserve a source of evidence on the basis that Mr. Haddad's testimony that he formatted Tammy's TCA computer indicates a certain depth of erasing. However, he did create a July 2006 backup before doing the formatting. Plaintiff claims this at least was negligence in failure to preserve a potential source of evidence for deleted e-mails. However, based upon the facts, there is no claim that anything was intentionally erased or otherwise excluded. Further, the plaintiff complains about an initial failure to produce an electronic version of Quick Books although she admits that they have now been provided. The plaintiff also alleges a failure of the defendants to produce supplemental financial information for August 2007. However, again, the records of TCA have always been available to plaintiff's attorney who has been invited several times to appear at the TCA office to review this information, probably with the redaction of any confidential clients' names. He did accept the invitation and did go there. Finally, plaintiff alleges that Katherine has made inconsistent statements in regard to another court case involving injuries she suffered at her place of business which has produced a court action against TCA's landlord. Plaintiff admits that these allegedly inconsistent positions might seem minor at a cursory glance. The Court does not find these statements to be necessarily inconsistent nor relevant to the present litigation.
4. Tammy's affidavit dated October 30, 2007 is essentially a mirror of the claims made by the plaintiff in her motion to dismiss dated October 31, 2007.
5. The Court has carefully reviewed the final memorandum of the plaintiff dated November 20, 2007 and will address it as follows:
A. "Wayland's misrepresentation concerning status of plaintiff TCA's salary and distributions. Plaintiff points to the alleged inconsistency of Katherine's testimony as to she and Tammy being employees for salary purposes as opposed to the accountant listing the compensation as officers' salaries. The Court previously analyzed this claim but would add that one can be both, an officer and an employee. The two are not inconsistent. Further, plaintiff claims that this undermines defendant's claim that she was a fiduciary. There is no dispute that Tammy was still a director, which alone is a fiduciary position."
B. Plaintiff claims that Wayland significantly altered TCA's financial documents. The Court finds that there is no credible evidence of that, and the claim calls for mere speculation.
C. Wayland's misleading statements concerning reduction of plaintiff's and Wayland's TCA salary. The Court finds that Katherine may have confused the dates as to when the salary was $72,000 and when it was reduced. However, this was certainly not intentional, and also this is only an allegation by the plaintiff as to when the salary was reduced, but no evidence has been put forth by the plaintiff to substantiate that claim.
D. Wayland's likely erasing of Tammy's TCA e-mails. Plaintiff admits she received them in hard copy if not on a disk, and plaintiff has withdrawn this claim.
E. Wayland's alteration of March 6, 2006 e-mail and withholding of December 31, 2005 e-mail. In the body of this section plaintiff refers to a December 31, 2006 e-mail and not a December 31, 2005 e-mail. Plaintiff claims to have found this e-mail in the forensic accountant's binder that he submitted along with his report. Plaintiff, by letter from her attorney to the forensic accountant, sets forth several objections to the report and had planned to bring him in to testify in court. Plaintiff did not do so, and the report and binder were never introduced into evidence. If Wayland had possession of the e-mail and provided it to the forensic accountant, but failed to include it in the production to the plaintiff, there is no indication that this error, if in fact made, was intentional.
F. The defendants' repeated failure to produce TCA's supplemental financial information. Plaintiff complains that as of the date of the memorandum, the defendant has not produced the supplemental financial information for August 2007. The Court is not aware of this and there is no evidence to support the claim. Further, all financial information of TCA was made available to plaintiff's attorney who on more than one occasion was invited to go to TCA's office and review the financial information, and did so.
The Court gave plaintiff's attorney an opportunity to review the November 5, 6 and 7, 2007 transcripts which he did not have in his possession. Plaintiff's attorney highlighted certain portions of the transcripts. The Court has reviewed the pages cited by plaintiff's attorney. The Court finds nothing persuasive on those pages as to the issues on the motions to dismiss.
It should be noted that one of plaintiff's claims that hard copies of documents were produced but not in electronic form does not adversely affect the defendants. The point is that the documents were in fact produced. Also, plaintiff originally claimed that certain documents were not produced, but they were attached to the defendants' offer of proof on their application for a prejudgment remedy. Apparently the plaintiff overlooked those documents.
CONCLUSION
The Court finds that the defendants tried to comply with all discovery requests and eventually did. Further, there is no evidence that any delay or withholding of documents or information by the defendants at any time was intentional nor is there any evidence that the defendants committed perjury. For the foregoing reasons, the plaintiff's motions for judgment of dismissal against the defendants, for sanctions/costs are denied.
Note: The remainder of the plaintiff's memorandum of November 20, 2007 is a response to the defendants' motion for judgment of dismissal and is basically a reiteration of claims already made by the plaintiff.
It should also be noted that all parties have cited the same cases as to the law concerning a motion to dismiss.