Opinion
No. X-08-CV04-0200344S
August 31, 2007
Memorandum of Decision on Motion for Summary Judgment (No. 128)
Factual and Procedural Background
This is an action by a judgment creditor against the Delaware limited partnership-judgment debtor (the named defendant ("BSB")) and its general partner (the defendant Brickroc Greenwich LLC ("Brickroc")), two members of the general partner (defendants Bruce S. Brickman ("Brickman") and Roderick O'Connor ("O'Connor")) and against defendant Jeffrey Epstein ("Epstein") in his capacity as trustee of International Charitable Interests II Trust (the "Trust"), the limited partner of BSB.
It is undisputed that Johnson Lee (now deceased and represented as substituted plaintiff in this lawsuit by his administratrix Virginia Lee) in April of 2003 obtained a judgment against BSB in the United States District Court for the District of Connecticut in the amount of $1,275,000 plus interest from April 17, 1998 (the "judgment"). The judgment is based on a provision in a 1995 amended stipulated judgment in a federal court foreclosure action in which BSB, the substituted plaintiff, had purchased from FDIC some $30 million in defaulted mortgage indebtedness incurred by Johnson Lee in developing a condominium project, The Waterford at Greenwich ("Waterford"). The 1995 stipulated judgment of strict foreclosure gave title to the Waterford to BSB, but gave Johnson Lee, inter alia, the right to receive back title to the 22nd and final unsold condominium unit for no consideration provided that BSB's gross proceeds from the sale of the first 21 unsold units were cumulatively in excess of $26.5 million. All 22 units had been built and sold by April of 1998. The final 22nd sale was the sale of Unit 1 on April 17, 1998 to a Mr. and Mrs. Duncan for $1,275,000. Lee claimed that the gross sales proceeds of the first 21 units sold came to more than $26.5 million and that he therefore should have received title to Unit 1 for free. BSB claimed that the gross proceeds from the sale of the first 21 units came to $24,764,200 and that the sale to the Duncans was therefore not prohibited. That issue went to litigation on March 31, 1999 when the plaintiff filed a motion for aid of enforcement of the stipulated judgment of foreclosure. A trial occurred before U.S. Magistrate Holly Fitzsimmons who recommended a judgment in favor of BSB on August 14, 2000. Judge Nevas entered judgment for BSB in accordance with the Magistrate's recommendation. Lee appealed to the U.S. Court of Appeals for the Second Circuit which reversed and remanded on October 10, 2001. Lee v. BSB Greenwich Mortgage LP, 267 F.3d 172 (2001). On remand, on April 2, 2003 the District Court entered the judgment of $1,275,000 against BSB (equivalent to the purchase price received by BSB from the Duncans) plus interest from April 17, 1998 (the date unit 1 was sold to the Duncans). It is undisputed that the judgment remains wholly unsatisfied.
Simultaneously with suing BSB, Johnson Lee sued the Duncans in the Superior Court, demanding ownership and possession of their home, Unit 1. Summary Judgment entered for the Duncans on October 31, 2003 which was affirmed on appeal. Johnson Lee v. William M Duncan, et al., 88 Conn.App. 319 (2005), cert. denied. 274 Conn. 902 (2005).
As pleaded in the Revised Complaint of June 16, 2004 this action sounds in seven counts: (1) statutory fraudulent conveyances from BSB to Brickroc and the Trust, and then from Brickroc to Brickman and O'Connor in violation of the Connecticut and/or the Delaware Uniform Fraudulent Transfer Acts; (2) violation of Conn. Gen. Stat. § 52-562 (fraud in contracting debt/concealing property); (3) common-law fraudulent conveyances from BSB to Brickroc and the Trust; (4) common-law fraudulent conveyances from Bricroc to Brickman and O'Connor; (5) avoidance of distributions from BSB under the Delaware Revised Uniform Partnership Act; (6) individual liability of Brickman, O'Connor, and Epstein under the doctrine of piercing the veil; and (7) violation of the Connecticut Unfair Trade Practices Act, ("CUTPA"), Conn. Gen. Stat. § 42-110a et seq. The plaintiff seeks avoidance of all alleged fraudulent transfers, an injunction against further disposition of the transferred assets; compensatory damages; common-law and CUTPA punitive damages; and attorneys fees under CUTPA. Now before the court is the defendants' Motion for Summary Judgment (No. 128) based entirely on their claims (pleaded as special defenses) that by the time this action was commenced in 2004, the applicable statutes of limitation had expired on all counts of the revised complaint. Specifically the defendants claim that all common-law fraud claims are barred by the three-year tort statute of limitations in Conn. Gen. Stat. § 52-577; that the claims of statutory fraudulent conveyance in violation of the Connecticut and/or Delaware Uniform Fraudulent Transfer Acts are barred by either the four-year statute of limitations and/or the one-year statute of limitations in Conn. Gen Stat. § 42-552j, and/or Delaware Code Ann. Title 6 § 1309; that claims of improper distributions under the Delaware Revised Uniform Partnership Act are barred the four-year statute of limitations in Delaware Code Ann. Title 6 § 1309; and that the CUTPA claim is barred by the three-year statute of limitations in Conn. Gen. Stat. § 42-110g(f). The defendants admit for purposes of this action only that the plaintiff could raise an issue of material fact to place in dispute whether fraudulent transfers ever took place. The plaintiff has filed Matters in Avoidance of Special Defenses in which he asserts that: (1) he has diligently pursued his remedies against the defendants and has asserted claims in a timely fashion; (2) the prior proceedings in the District Court were a necessary predicate of the remedies sought in this action and that those proceedings tolled the statute of limitations; and (3) the defendants have engaged in a continuing course of conduct which tolls any applicable statute of limitations. The issue to be decided, then, is limited to whether or not on the record presented any counts of the plaintiff's Revised Complaint are barred by the applicable statute of limitations.
Discussion Standards for Summary Judgment
Summary judgment ". . . shall be rendered forthwith if the pleadings, affidavits, and any other proof submitted show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Practice Book § 17-49. In deciding a motion for summary judgment a trial court must view the evidence in the light most favorable to the non-moving party. Hertz Corp. v. Federal Insurance Company, 245 Conn. 374, 381 (1998). "The party seeking summary judgment has the burden of showing the absence of any genuine issue [of] material facts which, under the applicable principles of substantive law, entitle him to a judgment as a matter of law . . . and the party opposing such a motion must provide an evidentiary foundation to demonstrate the existence of a genuine issue of material fact . . . A material fact . . . [is] a fact that will make a difference in the result of the case . . . Hurley v. Heart Physicians P.C. (Internal quotation marks omitted.) 278 Conn. 305, 314 (2006). A party's conclusory statements in the affidavit and elsewhere may not constitute evidence sufficient to establish the existence of disputed material facts." Gupta v. New Britain General Hospital, 239 Conn. 574, 583 (1996).
"A motion for summary judgment is designed to eliminate the delay and expense of litigating an issue where there is no real issue to be tried." Wilson v. New Haven, 213 Conn. 277, 279 (1989). In ruling on a motion for summary judgment, the court's function is not to decide issues of material fact, but rather to determine whether any issues exist. Nolan v. Borkowski, 206 Conn. 495, 500 (1988). The test used by the court is to determine if the moving party would be entitled to a directed verdict if the same set of facts were presented at trial. CT Page 15063 Connell v. Colwell, 214 Conn. 242, 246-47 (1990).
Undisputed Facts
The relevant facts are undisputed and the outcome of this motion will depend largely on the resolution of legal issues concerning the measuring period of the various statutes of limitation as applied to the undisputed facts. In addition to the facts recited above under "Factual and Procedural Background," there is no dispute as to the following facts:
1. BSB is a Delaware limited partnership formed in March 1995, to acquire (by purchase of mortgages) foreclose upon, and complete construction of The Waterford project and then sell the finished condominium units.
2. The initial capitalization of BSB consisted of $116,745 contributed by Brickroc (funds contributed to Brickroc by Brickman and O'Connor); and $11,558,245 contributed by the Trust.
3. The BSB Agreement of Limited Partnership of March 27, 1995 (Exhibit G to the O'Connor affidavit) provides in Section 3.2 that:
(a) All Net Cash Receipts shall be promptly distributed, and in no event less frequently than quarterly, in the following manner and order of priority: (I) First, to the Partners, in proportion to their respective Unrecovered Capital Contributions, until the amount of such distribution shall equal the Partners' Preferred Return. (ii) Second, to the Partners, in proportion to their respective Unrecovered Capital Contributions, to the extent of the Partners' respective remaining Unrecovered Capital Contributions. (iii) Third, to the Partners, in proportion to their respective Percentage Interests.
(b) A Partner's "Preferred Return" shall be equal to that amount that, on an annual cumulative basis, would provide the Partner with a twelve percent (12%) per annum return on the Partner's Unrecovered Capital Contributions from time to time outstanding, if any, calculated from the date such Capital Contribution was made until the date of distribution for which such determination is made.
(c) A Partner's "Unrecovered Capital Contribution" is the excess, if any, of its aggregate cash Capital Contribution over the amounts distributed to such Partner pursuant to section 3.2(a)(ii) and section 3.2(a)(iii) hereof.
4. As each of the first twenty-one completed Waterford units were sold between March 1995 and February 26, 1998, BSB distributed the net proceeds of sale to the Trust.
5. The final completed Waterford Unit (Unit 1) was sold on April 17, 1998 to a Mr. and Mrs. Duncan for $1,275,000.
6. The net proceeds of the sale of Unit 1 were transferred by BSB as follows: $750,000 to Epstein on April 23, 1998; and $408,841.50 to Brickroc on April 20, 1998.
¶ 23 of the Roderick O'Connor affidavit states that ". . . the sales never generated sufficient net proceeds to allow a distribution to the general partner, Brickroc, under the BSB partnership agreement, and no such distribution was ever made." That conclusory statement is not necessarily inconsistent with the transfer to Brickroc of $408,841.40 on April 20, 1998 which the plaintiff has documented with a Bank of New York wire transfer confirmation obtained in discovery. (Alan R. Spirer affidavit, Ex. E.) The transfer may have been something other than a distribution to the general partner under the partnership agreement.
7. The $408,841.50 transferred to Brickroc on April 20, 1998 was further transferred on April 21, 1998 as follows: $294,841.50 to Brickman; and $114,000 to O'Connor.
8. On April 3, 2000 BSB transferred by wire $485.73 to Bruce S. Brickman Associates, Inc. (O'Connor affidavit, Ex. E.)
Bruce S. Brickman Associates, Inc. ("BSBA") is a corporation controlled by Brickman. The defendants have stipulated ". . . for purposes of this motion only, that Lee would be able to raise an issue of fact as to whether BSBA acted on behalf of Brickman or O'Connor from time to time." (Memorandum of Law in support of Motion for Summary Judgment, August 19, 2005, p. 2, note 1.)
9. On April 3, 2000 BSB additionally transferred by wire $35,445.55 to Bruce S. Brickman Associates, Inc. (O'Connor affidavit, Ex. E.)
10. On April 4, 2000 BSB issued a check to O'Connor in the amount of $147.00. (O'Connor affidavit Ex. E.)
11. On July 12 and November 8, 2002 Bruce S. Brickman Associates, Inc. [see fn 3] ("BSBA") transferred $120,000 into Brickroc for subsequent transfer to BSB which was used by BSB to pay legal fees and settle a dispute with the Waterford Condominium Association. These transfers were credited against loans receivable. (O'Connor affidavit ¶ 18.)
12. In May 2003 Brickman and his wife and BSBA transferred $150,000 into Brickroc for subsequent transfer to BSB (O'Connor affidavit ¶ 15) which was used by BSB to pay real estate commissions and legal fees. (O'Connor affidavit ¶ 16.) Accounting entries were made to reflect that the $150,000 paid into BSB was an offset of loans made by BSB. (O'Connor affidavit ¶ 15, Ex. E F.)
13. On March 30, 2004 the writ, summons and complaint in this action were delivered by plaintiff's counsel to Connecticut State Marshal Joseph L.A. Felner, Jr. for service upon the defendants. Service was made upon the defendants on April 7, 2004.
First Count — Uniform Fraudulent Transfer Act, Conn. Gen. Stat. §§ 52-552a— 52-552l.
Claims under the Connecticut Uniform Fraudulent Transfer Act are governed by the statute of limitations in Conn. Gen. Stat. § 52-552j which provides:
Under the Delaware Uniform Fraudulent Transfer Act, the statute of limitations provisions are identical to Connecticut's. 6 Del. Code Ann. § 1309. See Pereyon v. Leon Constantin Consulting, Inc., No. 20509-NC, 2004 Del.Ch. LEXIS at*2 (April 29, 2004, William B. Chandler III, Chancellor).
A cause of action with respect to a fraudulent transfer or obligation under sections 52-552a to 52-552l, inclusive, is extinguished, unless action is brought: (1) under subdivision (1) of subsection (a) of section 53-552e, within four years after the transfer was made or the obligation was incurred or, if later, within one year after the transfer or obligation was or could reasonably have been discovered by the claimant; (2) under subdivision (2) of subsection (a) of section 53-552e or subsection (a) of section 52-552e within four years after the transfer was made or the obligation was incurred; or (3) under subsection (b) of section 52-552f within one year after the transfer was made or the obligation was incurred.
The plaintiff in the First Count has alleged facts that would bring both the initial transfers from BSB and the subsequent transfers from Brickroc under subsection (a) of § 52-552e (actual intent to hinder, defraud or delay the plaintiff), subsection (b) of § 52-552e (constructive fraud) and subsection (a) of § 52-552f (transfer made while insolvent). The applicable statute of limitations is then the later of four years from the date of the alleged transfers, or one year from the date when the transfers were or could reasonably have been discovered by the plaintiff.
Under Conn. Gen. Stat. § 52-593a ". . . a cause or right of action shall not be lost because of the passage of the time limited by law within which the action may be brought, if the process to be served is personally delivered to a state marshal authorized to serve the process and the process is served, as provided by law, within fifteen days of the delivery." In this case it is undisputed that the process was delivered to a state marshal on March 30, 2004 and served seven days later on April 7, 2004. For statute of limitations purposes, then, this action is deemed to have been commenced on March 30, 2004. Absent any tolling, any fraudulent transfers made on or after March 30, 2000 would not be barred. It is undisputed here that BSB did make transfers on April 3 and 4, 2000 to Bruce S. Brickman Associates, Inc. and to O'Connor in the cumulative amount of $36,078.28. (Items 8, 9, and 10 in the above list of undisputed facts.) These transfers would therefore not be barred by the four-year statute of limitations. The defendants are entitled to summary judgment on this count only if they can show lack of a genuine issue of material fact and that they are entitled to judgment as a matter of law. A defendant who successfully defends against some — but not all — of the allegations of a cause of action does not become entitled to judgment. This is so because a plaintiff who alleges multiple transgressions in a single count is not obliged to prove them all. The plaintiff is entitled to judgment on that count so long as at least one specification of the cause of action is proved. Judgment in that event enters for the plaintiff against the defendant as to the allegations the plaintiff has proved or the defendant was unable to defend against. For that reason it has been held that "Connecticut does not have a procedure for rendering judgment for a defendant on part of a count unless it disposes of all the issues in a count." (Internal quotation marks and citations omitted.) See Electrical Contractors, Inc. v. City of Hartford, Docket Number CV04-0831259S, Superior Court, Judicial District of Hartford at Hartford (Jane S. Scholl, J., March 17, 2006), 2006 Ct.Sup. 5199, 40 Conn. L. Rptr. 878, and multiple authorities cited therein.
Practice Book § 17-51 (discussed in the Electrical Contractors case, supra, as § 386 of the 1978-1997 Edition of the Practice Book) permits discretionary severance of so much of a claim as a defense does not apply to, so as to permit partial summary judgment for a moving plaintiff, but there is no equivalent provision applicable to a moving defendant, who is obliged to negate each and every claim within a count in order to be entitled to judgment on that count.
In an effort to blunt the impact of the three transfers made within the four-year limitations period, the defendants with their reply memorandum of December 16, 2005 submitted an offer of judgment in the amount of $57,000 which has not been accepted by the plaintiff. The defendants citing Vogel v. American Kiosk Management, 371 F.Sup.2d 122 (D.Conn. 2005) claim that this offer of judgment, "being greater than the highest amount that the plaintiff could recover" was sufficient to render the plaintiff's claim moot and to divest the court of subject matter jurisdiction. In that case, Ms. Vogel had filed a six-count complaint against her employer, asserting claims under the federal Fair Labor Standards Act and the labor statutes of Connecticut and three other states where the employer conducted business. Vogel thereafter filed a withdrawal of all but the first two counts, and Judge Hall dismissed the withdrawn counts. The employer made an offer of judgment in an amount that exceeded the maximum statutory relief available to the plaintiff under the two remaining counts, plus attorneys fees and costs. Judge Hall dismissed the remaining two counts, quoting from Rand v. Monsanto Co., 926 F.2d 596, 598 (7th Cir. 1991): "[o]nce the defendant offers to satisfy the plaintiff's entire demand, there is no dispute over which to litigate . . . and a plaintiff who refuses to acknowledge this loses outright . . . because he has no remaining stake." Rand was a securities fraud case brought as a class action. After the District Court had denied class action status, Monsanto offered Mr. Rand the full amount he claimed to have lost on his individual stock as disclosed in his answers to interrogatories. The District Court entered judgment against him, preserving his right to challenge the denial of class status. The seventh Circuit affirmed, as quoted in Vogel. This case, however, is not a Vogel-Rand situation. Mr. Lee's complaint is brought in seven counts, and none of them have been withdrawn. The plaintiff continues to have a "stake" in the outcome of this litigation and there remains a justiciable dispute which is not satisfied by the $57,000 offer of judgment. The offer of judgment therefore does not moot this case or deprive the court of subject matter jurisdiction.
The $57,000 offer represents the cumulative amount of the three post-March 30, 2000 transfers ($36,078.28) plus interest calculated to the date the offer of judgment was filed.
As an alternate ground of decision the court holds that there is a triable issue of fact as to plaintiff's claim of tolling by course of conduct as discussed in detail in the section of this memorandum, infra, regarding the Third and Fourth Counts.
The motion for summary judgment is denied as to the First Count.
Second Count — Violation of Conn. Gen. Stat. § 52-562
In the Second Count, the plaintiff alleges — based on the same factual allegations as the First Count which is incorporated by reference in its entirety — that the defendants have violated Conn. Gen. Stat. § 52-562, which provides:
When any person is guilty of fraud in contracting a debt, or conceals, removes, or conveys away any part of his property, with intent to prevent it from being taken by legal process, or refuses to pay any debt admitted by him or established by a valid judgment, while having property, not exempt from execution, sufficient to discharge the debt, concealed or withheld by him so that the property cannot be taken by legal process, or refuses to disclose his rights of action, with intent to prevent the rights of action from being taken by foreign attachment or garnishment, any creditor aggrieved thereby may institute an action against him, setting forth his debt and the fraudulent particularly in the complaint.
This provision was first enacted in 1842 to repeal a statute of 1838 which permitted the imprisonment of debtors for nonpayment of debt. A proviso to the 1842 act, however, provided for attachment of the body of a debtor who refused to pay an admitted debt or a judgment under circumstances amounting to fraud. See Armstrong v. Ayres, 19 Conn. 540 (1849). In 1927 it was said that "Its [the statute's] effectiveness must almost wholly depend upon the right of attachment of the body, because it presupposes an inability to find property which may be attached." Farley-Harvey Company v. Madden, 105 Conn. 679, 681 (1927). Yet, when the body attachment provision was abolished by 1981 Public Act 410, § 11, the creditor's cause of action was otherwise left intact. The Supreme Court of Errors in Armstrong v. Ayres, supra, noted that "Some of the enactments of that statute are obscure and will probably give rise to dispute hereafter . . ." 19 Conn. at 545. Unfortunately, although there may have been disputes as predicted, few of them have resulted in appellate court guidance. It has been held that the statute's cause of action is "closely akin to a common-law action of fraud . . ." Farley-Harvey, supra, 105 Conn. at 681, and that "Its essence is the wrongful concealment or removal of his personal property by a debtor, so that it may not be subjected to the just demands of his creditor." Id.
The defendants claim that the applicable statute of limitations to a claim under § 52-562 is the general statute of limitations for torts, Conn. Gen. Stat. § 52-577 which provides simply that "No action founded on a tort shall be brought but within three years from the act or omission complained of." The court agrees that § 52-577 is the applicable statute of limitations. A cause of action under § 52-562 is "much more analogous to one lying in tort than one in contract." Farley-Harvey, supra, 105 Conn. at 681, Atwater v. Slepcow, 74 Conn. 671, 673 (1902). To identify the "act or omission complained of" to constitute a valid cause of action under § 52-562 it is necessary to consult the statutory language in the context of the allegations in this case. One part of the statute applies to a person who ". . . refuses to pay any debt admitted by him or established by a valid judgment, while having property . . . concealed or withheld by him so that the property cannot be taken by legal process . . ." There is no debt involved in this case which has at any time been admitted by the defendants. BSB's $1,275,000 (plus interest) obligation to the plaintiff is a judgment debt resulting from contested federal litigation. The judgment entered on remand after appeal to the Second Circuit where the plaintiff prevailed. The judgment entered in the District Court on April 2, 2003, approximately one year before this case was commenced. Since the only debt at issue is a judgment debt and the defendant could not possibly have "refused to pay" that judgment until it had entered, it is clear that at least one of the necessary acts or omissions for a cause of action under § 52-562 is within the three-year period of the statute of limitations. So, also would the requirements of "having property concealed or withheld" fall within the three-year period because the statute requires that the defendant shall have refused to pay the debt " while having property . . . concealed or withheld" (emphasis added). The use of the term "while" can only mean that the defendant must continue to have rights in the concealed or withheld property at the time of refusal to pay the debt, which in this case had to occur on or after April 2, 2003. Although it is undisputed that the BSB made transfers to the other defendants more than three years before this action was commenced, there is a genuine issue of fact as to whether or not BSB retained any legal or equitable rights in that transferred property as of April 2, 2003 and "withheld" those property rights from legal process. The undisputed fact of transfers back into Brickroc and then into BSB as late as November 2002 and May 2003 is a factual predicate of that issue.
The Motion for summary judgment is therefore denied as to the Second Count.
Third and Fourth Counts — Common-law Fraudulent Transfer
When Connecticut adopted the Uniform Fraudulent Transfer Act, it did not abolish the common-law cause of action for fraudulent transfers. Preexisting doctrines of "fraud" were expressly preserved as supplementing the provisions of the uniform act. Conn. Gen. Stat. § 52-552k. The applicable statute of limitations is the general tort three-year statute of limitations in Conn. Gen. Stat. § 52-577. (Quoted, supra.) Einbinder and Young, P.C. v. Soiltesting, Inc., 36 Conn.Sup. 277, 279-80 (1980). The defendant argues that since no transfers made out of BSB (Third Count) or out of Brickroc (Fourth Count) occurred after April 4, 2000 approximately four years before this action was commenced, it is barred by the three-year statute of limitations. The plaintiff makes several arguments in opposition premised on his pleaded Matters in Avoidance. Because the court agrees that there is a material issue of fact as to the Third Matter in Avoidance — tolling by continuing course of conduct — it will not be necessary to address the other arguments advanced.
"When the wrong sued upon consists of a continuing course of conduct, the statute does not begin the run until that course of conduct is completed." Fichera v. Mine Hill Corporation, 207 Conn. 204, 208 (1988) quoting from Handler v. Remington Arms Company, 144 Conn. 316, 321 (1957). To support a finding of "continuous course of conduct" that may toll the statute of limitations there must be evidence of the breach of a duty that remained in existence after the commission of the original wrong related thereto. Fichera, at 209. Where findings of such a continuing breach of duty after the cessation of the act or omission relied upon have been upheld, ". . . there has been evidence either of a special relationship between the parties giving rise to such a continuing duty, or some later wrongful conduct of a defendant related to the prior act." (Emphasis added.) Fichera, id. citing Giglio v. Connecticut Light Power Co., 180 Conn. 230, 242 (1980) (repeated instructions and advice given to the plaintiff by the defendant concerning a furnace it has previously converted and left in a defective condition).
It is undisputed that all the transfers out of BSB to Brickroc and the Trust, and all the subsequent transfers from Brickroc to Brickman and O'Connor occurred more than three years before this suit was commenced. It is also undisputed that at least some reverse transfers from Brickman and or BSBA and O'Connor to Brickrock and from Brickroc to BSB occurred within the three-year period. (November 2002 and May 2003.) Defendants characterize these transfers into BSB as the "anthesis of any fraudulent transfers that Lee claims." (Memorandum in Support of Motion for Summary Judgment, p. 7.) Lee characterizes them as a two-way street of fraudulent transfers: "BSB distributed money to the insider Defendants. The insider Defendants then returned some of the money to BSB as BSB needed funds. The Defendants' transfers represent a continuing course of conduct . . ." (Brief in Opposition, p. 18.)
Keeping in mind that "the continuing course of conduct doctrine is conspicuously fact-bound" Giulerti v. Giuletti, 65 Conn.App. 813, 834, (2001), and that "continuing wrongful conduct may include acts of omission as well as affirmative acts of misconduct." Id. at 835, the court holds that there are genuine issues of material fact to be determined as to whether or not the reverse transfers constituted later wrongful conduct "related to" the original transfers out of BSB. This must be resolved at a full trial where all the facts and circumstances are fully developed including explanation as to why reverse transfers were made into BSB to satisfy other creditors but not to satisfy the plaintiff's judgment.
The Motion for Summary Judgment is denied as to the Third and Fourth Counts.
Fifth Count — Avoidance of Distributions
In the Fifth Count the plaintiff alleges that the "Distributions" from BSB to its limited partner (the Trust) should be avoided under the Delaware Revised Uniform Partnership Act. The defendants cite § 17-607 of that act which states in pertinent part that ". . . unless otherwise agreed, a limited partner who receives a distribution from a limited partnership shall have no liability under this chapter or other applicable law for the amount of the distribution after expiration of 3 years from the date of distribution." Pomeranz v. Museum Partners, L.P., No. 2041, 2005 Del.Ch., LEXIS 10 at *8 n. 7, *31-34 (January 24, 2005, Strine, Vice Chancellor).
By using the capitalized term "Distributions" which is defined in the complaint ¶ 29 only as distributions to the Trust, this count is limited to distributions made to the Trust as the limited partner of BSB
Since this action is deemed to have commenced on March 30, 2004 when process was delivered to the State Marshal, and there is no evidence of any distributions to the Trust on or after March 30, 2001, this count would be barred by § 17-607 of the Delaware act provided that Delaware law applies. On the other hand, if Connecticut law were to be applied, the comparable provision under the Connecticut Uniform Limited Partnership Act is Conn. Gen. Stat. § 34-25a(b): "If a partner has received the return of any part of his contribution in violation of the partnership agreement or this chapter, he is liable to the limited partnership for a period of six years thereafter for the amount of the contribution, without interest, wrongfully returned." Since the proceeds of sale of Unit 1 at the Waterford were distributed by BSB on or about April 20, 1998 and this suit was commenced as of March 30, 2004 there would be at least an issue of fact as to whether or not the distribution could be avoided under Connecticut law. In other words, the choice of law issue could be determinative. Neither party, however, has addressed the choice of law issue. The general rule is that statutes of limitation relate to the remedy as distinguished from the right, and are therefore considered procedural and are governed by the lex loci (here, Connecticut law). Baxter v. Sturm, Ruger Co., 230 Conn. 335, 339 (1994) There is an exception, however, when "the limitation is so interwoven with . . . the cause of action as to become one of the congeries of elements necessary to establish the right, that limitation goes with the cause of action, wherever brought." Id. at 340; Thomas Iron Co. v. Ensign Bickford Co., 131 Conn. 665, 669 (1945). Without briefing or argument of the choice of law issue I am unable to hold that defendants are entitled to judgment as a matter of law on this count and the issue will therefore have to be resolved at trial.
BSB is a limited partnership organized under the law of Delaware.
Sixth Count — Piercing the Veil
In the Sixth Count the plaintiff incorporates all the allegations of the First Count, including claims that BSB and Brickroc were the "mere instrumentality and alter ego" of Brickman and O'Connor and claims: "The Court should pierce the veil created by BSB and Brickroc and hold Brickman, O'Connor and Epstein, Trustee individually liable for the plaintiff's claims" (Revised Complaint, Sixth Count ¶ 66). The only issue involved at this point is whether or not on the record presented this claim is barred by the statute of limitations. The defendants claim that the Sixth Count alleges "piercing the veil" based on the substantive fraudulent transfer claims in the First Count, and that the same statute of limitations that bars the First Count also applies to this Sixth Count. (Memorandum in Support of Motion for Summary Judgment, p. 17.) Assuming this statement to be correct, the Court has denied the motion for summary judgment on the First Count and therefore by defendants' reasoning the motion must also be denied on the Sixth Count. The court does not agree, however, that the Sixth Count is exclusively tied to the fraudulent transfer allegations of the First Count for statute of limitations purposes. The Sixth Count is not limited to the fraudulent transfer claims of the First Count. It incorporates all 65 paragraphs of the First Count including allegations that the plaintiff obtained a judgment against BSB in the amount of $1,275,000 plus interest in April of 2003, and that the judgment remains wholly unsatisfied (¶ 5). Presumably Brickroc as the general partner of BSB is liable under Delaware law for payment of that judgment, but Brickman, O'Connor, and Epstein, Trustee are not liable to pay that judgment unless the plaintiff can successfully "pierce the veil" of Brickman and O'Connor's limited liability status as members of a limited liability company, and the Trust's limited liability as a limited partner of BSB. "Alter ego" (identity) and "Mere instrumentality" are the two theories recognized under Connecticut law for successfully piercing the veil of a corporation, Morris v. Cee Dee, LLC, 90 Conn.App. 403, 414-15 (2005) or a limited liability company, Bastan v. RJM Associates, Docket No. CV99-0593189S, Superior Court, Judicial district of Hartford (June 4, 2001, Beach, J.) [ 29 Conn. L. Rptr. 646], 2001 Ct.Sup. 7733. If the plaintiff has alleged sufficient facts to prevail on either of these theories and is able to prove his case, the defendants would be liable not only for any fraudulent transfers, but would become directly liable for payment of the judgment. The Connecticut statute of limitations for suit on a final judgment is twenty-five years from the date the judgment was entered. Conn. Gen. Stat. § 52-598. The period of the statute of limitations for nonpayment of a judgment is therefore still open.
The sufficiency of the plaintiff's allegations in the Sixth Count or of the factual presentation in his attorney's affidavit are not presently before the court. This motion for summary judgment is limited strictly to statute of limitations issues.
For either of these reasons, then, the Motion for Summary Judgment is denied as to the Sixth Count.
Seventh Count — CUTPA
The CUTPA claim is governed by the statute of limitations within the CUTPA statute itself. Conn. Gen. Stat. § 42-110g(f) provides: "An action under this section may not be brought more than three years after occurrence of a violation of this chapter." In the case of a continuing course of conduct amounting to a CUIPA violation, however, the statute of limitations does not begin to run until that course of conduct is completed. Fichera v. Mine Hill Corporation, supra. As previously indicated above in the discussion of the Third and Fourth Counts, the court holds that there is a triable issue of fact as to plaintiff's claim of tolling by course of conduct. The discussion as to the third and Fourth Counts is equally applicable to this CUTPA count and is incorporated here by reference. The Motion for Summary judgment is therefore denied as to the Seventh Count.
ORDER
For the reasons stated herein the defendant's Motion for summary Judgment is denied.