Opinion
FSTCV176031855S
10-23-2017
David Lee et al. v. C-CO Technology, Inc. et al
UNPUBLISHED OPINION
MEMORANDUM OF DECISION RE DEFENDANTS' MOTION TO DISMISS [#101]
Irene P. Jacobs, J.
FACTS
On April 20, 2017, the plaintiffs, David Lee and IT-Technology Services, Inc. (IT Tech), filed a nine-count complaint against four defendants: C-CO Technology, Inc. (C-CO), Gregory Cinicolo, Russell Cinicolo, and SLC Properties, LLP (SLC).
For ease of discussion, the court will herein refer to the defendants Gregory and Russell Cinicolo by their first names.
On May 8, 2017, the defendants filed the present motion to dismiss the plaintiffs' complaint on the grounds of (1) lack of standing, (2) lack of subject matter jurisdiction, (3) insufficiency of service of process, and (4) lack of personal jurisdiction. On May 23, 2017, the plaintiffs filed an amended complaint [#102], an objection to the defendants' motion to dismiss [#103], and a request for leave to amend the return date [#104]. On May 26, 2017, the defendants filed an objection to both the plaintiffs' amended complaint [#106] and a request for leave to amend the return date [#107]. The court heard oral argument from the defendants on their motion to dismiss at short calendar on June 26, 2017.
Although counsel for the defendants represented that both parties were aware that the motion to dismiss was scheduled for argument at short calendar on June 26, 2017, the plaintiff was not present and could not be reached by phone. Therefore, the court heard oral argument solely from the defendants and thereafter took the papers on the motion.
In their complaint, the plaintiffs allege the following facts. The plaintiff Lee is the majority owner of the plaintiff IT-Tech, which deals in the design, installation, and maintenance of computers, internal computer networks, and phone systems in business offices. The defendants Gregory and Russell are directors of the defendant C-CO, which deals in the design and installation of cable structures and wiring for computers, networks, and phone systems in office buildings. The defendants Gregory and Russell are also the owners and/or controlling shareholders of the defendant SLC. On or about June 2014, the plaintiff IT-Tech began contracting wiring work to the defendant C-CO and thereafter, in December 2014, the defendants Gregory and Russell engaged the plaintiff Lee in discussions regarding the potential integration of the two businesses, wherein the plaintiff Lee would receive a one-third partnership interest in the defendant C-CO and maintain a yearly salary in exchange for the transfer of the plaintiff IT-Tech's employees, accounts receivables, maintenance contracts, assets, good will, customer lists, and future business and customers. In addition, the defendant C-CO would pay for various business expenses including rent for a satellite office, advertising, and a car allowance.
The plaintiffs allege that the defendants Gregory and Russell, acting on behalf of the defendant C-CO, entered into an " integration agreement" for the merger of the plaintiff IT-Tech and the defendant C-CO effective April 1, 2016. On or about April 5, 2016, the two businesses merged bank accounts. Thereafter, the defendants failed to pay the rent for the satellite office, the advertising expenses, or the car allowance; failed to pay the plaintiff Lee for unused sick time and unused vacation time; and improperly transferred money from the merged bank account to the defendant SLC. On or about July 30, 2016, the defendant Gregory terminated the plaintiff Lee's employment. In counts one, two, three, four, five, six, and seven, the plaintiffs assert causes of action for breach of contract, unjust enrichment, fraud, promissory estoppel, negligent misrepresentation, negligence, and piercing the corporate veil, respectively, against the defendant C-CO. In count eight, the plaintiffs assert a cause of action for piercing the corporate veil against the defendant SLC. In count nine, the plaintiffs assert a cause of action for defamation against the defendants C-CO and Gregory.
DISCUSSION
" [A] motion to dismiss . . . properly attacks the jurisdiction of the court, essentially asserting that the plaintiff cannot as a matter of law and fact state a cause of action that should be heard by the court." (Internal quotation marks omitted.) Santorso v. Bristol Hospital, 308 Conn. 338, 63 A.3d 940 (2013). " A court deciding a motion to dismiss must determine not the merits of the claim or even its legal sufficiency, but rather, whether the claim is one that the court has jurisdiction to hear and decide." (Internal quotation marks omitted.) Hinde v. Specialized Education of Connecticut, Inc., 147 Conn.App. 730, 84 A.3d 895 (2014).
In their memorandum of law in support of their motion to dismiss, the defendants argue that the plaintiffs lack standing to bring suit against any of the named defendants because the asserted causes of action must be brought by a stockholder derivatively on behalf of either C-CO or IT-Tech. Finally, the defendants maintain that the plaintiffs lack standing to sue the defendants SLC and Gregory. Specifically, with respect to the defendant SLC, the defendants argue that the plaintiffs have not alleged any particular aggrievement between the parties and therefore, the plaintiffs lack standing to bring suit. With respect to the defendant Gregory, the defendants contend that he should have been sued in his capacity as an officer of the defendant C-CO and not in his individual capacity and accordingly, the plaintiffs lack standing.
The defendants assert that service of process was defective as to the defendants C-CO and Russell and thus, dismissal is warranted. The plaintiffs argue that the amended complaint filed May 23, 2017, cures (1) the lack of standing defect as to the defendants C-CO, Gregory, and Russell, by including allegations that the plaintiff Lee is bringing the suit derivatively as a shareholder, (2) the lack of service defect as to the defendants C-CO and Russell, by amending the return date, and (3) the lack of standing defect as to the defendant SLC, by including negations of unlawful transfers from the merged bank account to the defendant SLC.
Before addressing the parties' arguments, the court must first determine whether the original complaint filed April 20, 2017, or the amended complaint filed May 23, 2017, is the operative complaint for purposes of the defendants' present motion to dismiss.
" [A] party must have standing to assert a claim in order for the court to have subject matter jurisdiction over the claim . . . Standing is the legal right to set judicial machinery in motion. One cannot rightfully invoke the jurisdiction of the court unless he has, in an individual or representative capacity, some real interest in the cause of action, or a legal or equitable right, title or interest in the subject matter of the controversy." (Internal quotation marks omitted.) Lewis v. Slack, 110 Conn.App. 641, 955 A.2d 620, cert. denied, 289 Conn. 953, 961 A.2d 417 (2008). " [B]ecause the issue of standing implicates subject matter jurisdiction, it may be a proper basis for granting a motion to dismiss." Electrical Contractors, Inc. v. Dept. of Education, 303 Conn. 402, 35 A.3d 188 (2012). " It is axiomatic that once the issue of subject matter jurisdiction is raised, it must be immediately acted upon by the court." (Emphasis in original; internal quotation marks omitted.) Burton v. Connecticut Siting Council, 161 Conn.App. 329, 127 A.3d 1066 (2015), cert. denied, 320 Conn. 925, 133 A.3d 459 (2016). " Whenever the absence of jurisdiction is brought to the notice of the court . . . cognizance of it must be taken and the matter passed upon before it can move one further step in the cause; as any movement is necessarily the exercise of jurisdiction." (Internal quotation marks omitted.) Federal Deposit Ins. Corp. v. Peabody, N.E., Inc., 239 Conn. 93, 680 A.2d 1321 (1996). See also Gurliacci v. Mayer, 218 Conn. 531, 590 A.2d 914 (1991) (" by considering the motion to amend prior to ruling on the challenge to the court's subject matter jurisdiction, the court acted inconsistently with the rule that, as soon as the jurisdiction of the court to decide an issue is called into question, all other action in the case must come to a halt until such a determination is made").
In Dauti v. Stop & Shop Supermarket Co., 90 Conn.App. 626, 879 A.2d 507, cert. denied, 276 Conn. 902, 884 A.2d 1025 (2005), the Appellate Court suggests that where an amended complaint is filed " as of right, " pursuant to General Statutes § 52-128 and Practice Book § 10-59, instead of through a motion o amend, the amended complaint serves as the operative complaint for the purposes of any pending motion to dismiss. In Dauti v. Stop & Shop Supermarket Co., supra, 640, the defendant filed a motion to dismiss the plaintiffs' original complaint on the ground that the court lacked subject matter jurisdiction. Subsequent to the filing of the motion to dismiss, the plaintiffs filed an amended complaint captioned " Amended complaint as of right pursuant to Connecticut Practice Book Section 10-59, " within the statutory thirty days of the return date. Id. The Appellate Court determined that because the amended complaint was filed " as of right" in accordance with § 52-128 and Practice Book § 10-59, it took effect " ab initio" and thus, the defendant's motion to dismiss " should have been considered in relation to the amended complaint or the motion should have been revised." Id., 641 n.14.
General Statutes § 52-128 provides: " The plaintiff may amend any defect, mistake or informality in the writ, complaint, declaration or petition, and insert new counts in the complaint or declaration, which might have been originally inserted therein, without costs, within the first thirty days after the return day and at any time afterwards on the payment of costs at the discretion of the court; but, after any such amendment, the defendant shall have a reasonable time to answer the same."
Practice Book § 10-59 provides: " The plaintiff may amend any defect, mistake or informality in the writ, complaint or petition and insert new counts in the complaint, which might have been originally inserted therein, without costs, during the first thirty days after the return day."
In the present case, the plaintiffs filed their original complaint on April 20, 2017, with a return date of April 25, 2017. The defendants filed their motion to dismiss on May 8, 2017. Thereafter, on May 23, 2017, the plaintiffs filed an amended complaint, an objection to the defendants' motion to dismiss, and request for leave to amend the return date. Although it is true that the amended complaint was technically filed within thirty days of the return date of April 25, 2017, it is also true that the defendant C-CO was never actually served with the original complaint by that return date. See Pl.'s Request for Leave to Amend Return Date, entry #104 (" on April 24, 2017, State Marshal 'Tasillo' attempted service but failed to properly serve defendant C-Co"). Therefore, in order for the plaintiffs to properly serve the defendant C-CO with the amended complaint, the court would first have to grant the request for leave to amend the return date, which would constitute an impermissible exercise of jurisdiction in light of the pending motion to dismiss challenging the court's subject matter jurisdiction.
The instant case is distinguishable from Dauti v. Stop & Shop Supermarket Co., supra, 628, wherein there were no such issues related to the service of the initial complaint upon the defendant, nor were there any outstanding requests to amend the return date made simultaneously with the filing of the amended complaint " as of right." Accordingly, based on the particular circumstances of the present case, the court will view the original complaint filed April 20, 2017, as the operative complaint for purposes of the defendants' motion to dismiss.
The defendants assert that the plaintiffs lack standing to bring the present case, as each of the asserted causes of action must be brought derivatively on behalf of the plaintiff IT-Tech. Since this ground may be dispositive of the entirety of the plaintiffs' complaint, the court will address it first. " [T]he law [permits] shareholders to sue derivatively on their corporation's behalf under appropriate conditions . . . [I]t is axiomatic that a claim of injury, the basis of which is a wrong to the corporation, must be brought in a derivative suit, with the plaintiff proceeding secondarily, deriving his rights from the corporation which is alleged to have been wronged . . . [I]n order for a shareholder to bring a direct or personal action against the corporation or other shareholders, that shareholder must show an injury that is separate and distinct from that suffered by any other shareholder or by the corporation . . . It is commonly understood that [a] shareholder--even the sole shareholder--does not have standing to assert claims alleging wrongs to the corporation." (Internal quotation marks omitted.) Scarfo v. Snow, 168 Conn.App. 482, 146 A.3d 1006 (2016). Thus, " [a] shareholder's derivative suit is an equitable action by the corporation as the real party in interest with a stockholder as a nominal plaintiff representing the corporation . . . It is designed to facilitate holding wrongdoing directors and majority shareholders to account and also to enforce corporate claims against third persons." (Citations omitted.) Barrett v. Southern Connecticut Gas Co., 172 Conn. 362, 374 A.2d 1051 (1977).
In the present case, the causes of action asserted in the plaintiffs' complaint all stem from the alleged integration agreement between the plaintiff IT-Tech and the defendant C-CO. As a result, the plaintiff IT-Tech, as the allegedly harmed corporation, is the real party in interest rather than the plaintiff Lee individually. Each count alleges injuries that are not separate and distinct from that suffered by the corporation, namely, the plaintiff IT-Tech, and therefore must be brought derivatively. Although the plaintiff Lee alleges that he was also harmed personally, his harms are not separate and distinct from those suffered by the plaintiff IT-Tech. The operative complaint, filed April 20, 2017, contains no allegations that the present action is being brought derivatively on behalf of the plaintiff IT-Tech rather than individually by the plaintiff Lee and accordingly, the present plaintiffs lack standing to bring suit. Therefore, the court grants the defendants' motion to dismiss as to the entirety of the plaintiffs' complaint on the grounds of lack of standing.
CONCLUSION
The defendants' motion to dismiss as to the entirety of the plaintiffs' April 20, 2017 is granted.