Opinion
No. X06-CV04-4001991 S
June 8, 2005
MEMORANDUM OF DECISION
The defendants Roz-Lynn Beckenstein, Beckenstein Enterprises-Prestige Park, LLC, 155 Realty, Riverview Square, LLC, Riverview Square II, LLC, and Tolland Enterprises have moved to strike the second and fifth counts of the plaintiffs' second amended complaint which assert a breach of an implied covenant of good faith and fair dealing and violations of the Connecticut Unfair Trade Practices Act (CUTPA), respectively. I agree with the defendants that the challenged counts should be stricken because each fails to state a claim upon which relief can be granted.
The law governing the court's consideration of a motion to strike is well established. "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. In ruling on a motion to strike, the court is limited to the facts alleged in the complaint. The court must construe the facts in the complaint most favorably to the plaintiff." (Citations and internal quotation marks omitted.) Novametrix Medical Systems v. BOC Group, Inc., 224 Conn. 210, 214 (1992). "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." Suffield Devel. Assoc. L.P. v. National Loan Inv., 64 Conn.App. 192, 197 (2001). "The role of the trial court is to examine the complaint, construed in favor of the plaintiffs, to determine whether the pleading party has stated a legally sufficient cause of action." Dodd v. Middlesex Mutual Assurance Company, 242 Conn. 375, 378 (1997).
In their second amended complaint, the plaintiffs allege that the defendants entered into purchase and sales agreements with the plaintiffs to sell 23 properties to the plaintiffs for $56.9 million. Closings occurred and the plaintiffs subsequently took title to and possession of the properties. In connection with the sales transactions, the plaintiffs sought and received "representations, warranties and assurances as to the authority of the individual defendants to consummate the transactions, execute the deeds, assignments and all other documentation incidental thereto, including the ratification of the purchase and sale agreement." The defendants in a separate action entitled Beckenstein Enterprises-Prestige Park, LLC., et al. v. Keller et al., have brought suit seeking damages against the plaintiffs alleging that they were not fully informed in regards to the real estate transactions.
In the second count of their complaint, the plaintiffs claim that the defendants by filing suit have breached an implied covenant of good faith and fair dealing "which would impose the obligation not to repudiate" the sales contracts. Specifically, the plaintiffs contend that by filing a lawsuit related to the sales contracts the defendants have in effect repudiated those sales contracts and thereby violated the contracts' implied covenant of good faith and fair dealing. As the defendants argue, these allegations fail to state a claim for a breach of the covenant of good faith and fair dealing for two reasons.
First, the plaintiffs fail to allege that the defendants acted in bad faith. "To constitute a breach of [the implied covenant of good faith and fair dealing], the acts by which a defendant allegedly impedes the plaintiff's right to receive benefits that he or she reasonably expected to receive under the contract must have been taken in bad faith." Alexandru v. Strong, 81 Conn.App. 68, 80-81, 837 A.2d 875, cert. denied, 268 Conn. 906, 845 A.2d 406 (2004), citing Gupta v. New Britain General Hospital, 239 Conn. 574, 598, 687 A.2d 111 (1996)." De La Concha of Hartford v. Aetna Life Ins., 269 Conn. 424, 433 (2004). "Bad faith in general implies both actual or constructive fraud, or a design to mislead or deceive another, or a neglect or refusal to fulfill some duty or some contractual obligation, not prompted by an honest mistake as to one's rights or duties, but by some interested or sinister motive . . . Bad faith means more than mere negligence; it involves a dishonest purpose." (Citation omitted; internal quotation marks omitted.) Id. Here, the plaintiffs have merely alleged that the defendants have brought a prior suit seeking damages against the plaintiffs in which the defendants allege that they were not informed of certain facts related to the sale of the property. The plaintiffs allege no fraud, misrepresentation or improper motive on the part of the defendants.
A review of the second amended complaint in Beckenstein Enterprises-Prestige Park, LLC et al. v. Keller et al., Docket No. X06-CV03-0183487S indicates that the defendants allege, inter alia, that the plaintiffs failed to inform them that the plaintiffs had secretly engaged Dennis Smith, an employee and in-house counsel of the defendants, to act on the plaintiffs' behalf in connection with the sales of the subject properties.
At oral argument, the plaintiffs admitted that they were making no claim that the representations, warranties and assurances given by the defendants in connection with the sales contracts were false.
The plaintiffs' claim of a breach of the covenant of good faith and fair dealing also fails because the plaintiffs have not alleged facts which if proven would establish that the defendants repudiated the sales contract. "Repudiation can occur either by a statement that the promisor will not perform or by a voluntary, affirmative act that indicates inability, or apparent inability, substantially to perform." (Internal quotation marks and citations omitted.) Neiman v. Yale University, 270 Conn. 244, 252 (2004). The plaintiffs allege that the sales contract was performed and title passed to designees of the plaintiffs. Although ordinarily whether a repudiation has occurred is a question of fact, a trial court may properly reject a claim of repudiation as a matter of law where, as is the case here, no facts supporting such a claim have been alleged. Id.
In the fifth count, the plaintiffs claim that the defendants by filing their prior lawsuit violated the Connecticut Unfair Trade Practices Act (CUTPA), General Statutes §§ 42-110a et seq. The plaintiffs maintain that the defendants engaged in an unfair trade practice by giving assurances to the plaintiff to induce them to purchase the subject properties and then subsequently challenging the validity of the sale transactions by attacking in a subsequent lawsuit the assurances provided. I agree with the defendants that the allegations of the fifth count of the plaintiffs' complaint do not constitute an unfair trade practice in violation of CUTPA.
"It is well settled that in determining whether a practice violates CUTPA we have adopted the criteria set out in the cigarette rule by the federal trade commission for determining when a practice is unfair: (1) [W]hether the practice, without necessarily having been previously considered unlawful, offends public policy as it has been established by statutes, the common law, or otherwise — in other words, it is within at least the penumbra of some common law, statutory, or other established concept of unfairness; (2) whether it is immoral, unethical, oppressive, or unscrupulous; (3) whether it causes substantial injury to consumers, [competitors or other businesspersons] . . . All three criteria do not need to be satisfied to support a finding of unfairness. A practice may be unfair because of the degree to which it meets one of the criteria or because to a lesser extent it meets all three." (Internal quotation marks omitted.) Votto v. American Car Rental, Inc., 273 Conn. 478, 484 (2005). The plaintiffs do not argue that the alleged trade practice of the defendants falls within the first or third criteria. Their contention is limited to a claim that it is unfair under the second criteria of unfairness. A review of the allegations of the plaintiffs' complaint fails to reveal any arguably "immoral, unethical, oppressive, or unscrupulous" practice.
The plaintiffs maintain that the actions of the defendants constitute a classic "bait and switch," in that the defendants first gave representations, warranties and assurances that they later reneged on. The allegations of the plaintiffs' second amended complaint do not support such a characterization of the defendants' actions. The plaintiffs allege that the plaintiffs sought and received representations, warranties and assurances as to the authority of the individual defendants to consummate the sales transactions, execute the deeds and related documents, and ratify the purchase and sale agreement and that the plaintiffs relied on these representations to purchase the subject properties. The plaintiffs further allege that the defendants subsequently sued the plaintiffs alleging that they were not fully informed as to the terms of the sale transactions, and the status and value of the properties. The only specific representation or assurance identified in the complaint is a representation that the defendants had the authority to consummate the transactions and execute the related documents. Neither the plaintiffs nor the defendants assert that the defendants in fact lacked such authority. Moreover, the sale transactions were consummated. The fact that the defendants subsequently sued the plaintiffs alleging that the plaintiffs had a secret relationship with the defendants' in-house counsel with respect to the sale transactions which wrongfully interfered with the defendants' rights is hardly unfair, unethical or unscrupulous. To find otherwise, would turn every lawsuit challenging a consummated transaction into a violation of CUTPA.
The plaintiffs contend that their CUTPA claim is similar to the claim recognized as a violation of CUTPA in Gebbie v. Cadle Company, 49 Conn.App. 265 (1998). I do not agree. In Gebbie, our Appellate Court affirmed the trial court finding of a CUTPA violation where the defendant refused to honor an agreement which it openly acknowledged it was bound to follow. Id., 279. Here, the defendants are not refusing to honor their sales contracts as the sales have been consummated. Rather, the defendants claim in a subsequent lawsuit that, unbeknownst to them, the plaintiffs had a relationship with the defendants' in-house counsel which interfered with their rights in connection with the sale of the properties.
In light of the above, the defendants' motion to strike the second and fifth counts of the plaintiffs' second amended complaint is hereby granted.
BY THE COURT
Jon M. Alander Judge of the Superior Court