Opinion
No. CV 09-6002650
April 29, 2010
MEMORANDUM OF DECISION RE CITY OF DANBURY'S MOTION TO STRIKE, #103
In this case, the plaintiff, Loureiro Contractors, Inc., has brought an action against the defendants, City of Danbury (hereinafter the City), and A.I. Engineers, Inc., claiming breach of contract, negligent misrepresentation, breach of good faith and fair dealing, unjust enrichment, and violation of Connecticut Unfair Trade Practices Act ("CUTPA"), General Statutes § 42-110a et seq., arising out of work and services allegedly performed by it for the City. The services were in connection with a contract, dated October 4, 2007, for a project known as Reconstruction of Rose Hill Avenue Bridge Over Still River. Count five of the plaintiff's complaint is directed against the City and alleges a violation of CUTPA; paragraph four of the plaintiff's prayer for relief seeks attorneys fees. The City has moved to strike count five as well as paragraph four of the prayer for relief on the grounds that, as a municipality, the City is not subject to the provisions of CUTPA, or in the alternative, the plaintiff has not plead sufficient facts to show that the City was engaged in trade or commerce.
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 motion to strike challenges the legal sufficiency of a [complaint] . . . and, consequently, requires no factual findings by the trial court." (Internal quotation marks omitted.) Batte-Holmgren v. Commissioner of Public Health, 281 Conn. 277, 294, 914 A.2d 996 (2007). The role of the trial court in ruling on a motion to strike is "to examine the [complaint], construed in favor of the [plaintiff], to determine whether the [pleading party has] stated a legally sufficient cause of action." (Internal quotation marks omitted.) Dodd v. Middlesex Mutual Assurance Co., 242 Conn. 375, 378, 698 A.2d 859 (1997). "In ruling on a motion to strike, the court is limited to the facts alleged in the complaint." (Internal quotation marks omitted.) Faulkner v. United Technologies Corp., 240 Conn. 576, 580, 693 A.2d 293 (1997). "[I]f facts provable in the complaint would support a cause of action, the motion to strike must be denied." (Internal quotation marks omitted.) Batte-Holmgren v. Commissioner of Public Health, supra, 294.
In the fifth count of the complaint, the plaintiff alleges that the City violated provisions of CUTPA. The City has moved to strike this count on the ground that the City of Danbury, as a municipality, is exempt from liability under CUTPA, or alternatively, the plaintiff has not sufficiently alleged that the City was engaging in trade or commerce.
General Statutes § 42-110b provides, in part, that "(a) No person shall engage in unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce." A "person" is defined to mean, "a natural person, corporation, limited liability company, trust, partnership, incorporated or unincorporated association, and any other legal entity." General Statutes § 42-110a(3). Trade and commerce means "the advertising, the sale or rent or lease, the offering for sale or rent or lease, or the distribution of any services and any property, tangible or intangible, real, personal or mixed, and any other article, commodity, or thing of value in this state." General Statutes § 42-110a(4). Assuming that a municipality could be a legal entity for the purposes of this statute, its activities in the conduct of any trade or commerce may fall within the broad parameters of CUTPA. See, Manchester v. United Stone America, Co., Superior Court, complex litigation docket at Tolland, Docket No. X 07 CV 980070702 (June 15, 2000) ( 27 Conn. L. Rptr. 414).
Connecticut's appellate courts have never expressly held that municipalities in general are not subject to CUTPA. Ippoliti v. Ridgefield, Superior Court, judicial district of Danbury, Docket No. CV 990337600 (August 7, 2000) ( 27 Conn. L. Rptr. 629). The two principal appellate decisions that address potential liability of municipalities and municipal agencies under CUTPA found that the municipalities were exempt under particular circumstances. See Connelly v. Housing Authority, 213 Conn. 354, 365, 567 A.2d 1212 (1990) ("a municipal housing authority is exempted from liability under CUTPA when it leases subsidized rental units to low income tenants"); and Danbury v. Dana Investment Corp., 249 Conn. 1, 20, 730 A.2d 1128 (1999) (a municipality is not subject to CUTPA in the assessment or collection of real estate taxes). Both of those decisions appear to hinge on whether the activity the municipality is engaging in that is the claimed CUTPA violation is an exempted activity pursuant to § 42-110c. In both Connelly, and Dana Investment Corp., the municipalities were acting pursuant to statutes and regulations, and therefore, were found not subject to CUTPA. ("[W]e are aware of [no cases] in which CUTPA has been applied to a municipality that is acting pursuant to statute . . ." Danbury v. Dana Investment Corp., supra 249 Conn. 20.
General Statutes § 42-110c(a)(1) provides in pertinent part, that CUTPA shall not apply to "[t]ransactions or actions otherwise permitted under law as administered by any regulatory board or officer acting under statutory authority of the state or of the United States . . ."
Subsequent to those two cases, numerous Superior Court decisions have held that CUTPA does not apply to municipalities. See, Ippoliti v. Ridgefield, supra at 27 Conn. L. Rprt. 629 (The "great weight of Superior Court decisions have relied upon Connelly and Dana Investment, to support the conclusion that CUTPA does not apply to municipalities. See, e.g., Nettleton Mechanical Contractors, Inc. v. Meriden, Superior Court, judicial district of Waterbury, Docket No. CV 0146838 (February 3, 2000) ( 26 Conn. L. Rptr. 493); Colon v. GEICO Casualty Co., Superior Court, judicial district of New Haven, Docket No. CV 980419197 (July 28, 1999); Laclair v. East Hartford Housing, Superior Court, judicial district of Hartford-New Britain at Hartford, Docket No. CV 970574379 ( 21 Conn. L. Rptr. 359; Barnes v. General Electric Co., Superior Court, judicial district of Hartford-New Britain at Hartford, Docket No. CV 930529354 (July 25, 1995) ( 14 Conn. L. Rptr. 455); Stratford v. Siciliano, Superior Court, judicial district of Bridgeport, Docket No. 296847 (September 13, 1993) ( 9 Conn. L. Rptr. 507)").
Some Superior Court decisions have gone so far as to say that CUTPA is inapplicable to governmental action as a matter of law. In Capital Property Associates v. Capital City Economic Development Authority et al., Superior Court, judicial district of Tolland, Docket No. X 07 CV 044001293 (January 18, 2006) [ 40 Conn. L. Rptr. 590], the court reasoned that, "[a] private cause of action under CUTPA arises only if the alleged unfair or deceptive practices `were the conduct of trade or commerce.'" Jackson v. R.G. Whipple, Inc., 225 Conn. 705, 726 n. 15, 627 A.2d 374 (1993). It appears, however, that this reliance on Whipple, id., is not warranted. The Supreme Court has disavowed the dictum in Whipple that "a CUTPA claimant must possess at least some type of consumer relationship with the party who allegedly caused harm to him or to her" and reaffirmed the "position that a consumer relationship is not a prerequisite to having standing to assert a CUTPA violation." See Larsen Chelsey Realty Co. v. Larsen, 232 Conn. 480, 495-96, 656 A.2d 1009 (1995).
"Whether the defendant is subject to CUTPA is a " question of law, not fact." (Emphasis added; internal quotation marks omitted.) Muniz v. Kravis, 59 Conn.App. 704, 712, 757 A.2d 1207 (2000), quoting Connelly v. Housing Authority, supra, 213 Conn. 364-65. Recently there have been Superior Court decisions which reflect a shift towards specifically applying the factors set forth in Connelly. See, e.g, Guarco Construction, Inc. v. C R Dev. Co., Superior Court, judicial district of Hartford at Hartford, Docket No. CV 064021195 (October 16, 2006) ( 42 Conn. L. Rptr. 187), Frillici v. Westport Shellfish Commission of Town of Westport, Superior Court, judicial district of Stamford-Norwalk at Stamford, Docket No. X05 CV 00 0176696 (October 12, 2001) ("After a careful review of Connelly, Dana, and the trial court decisions, this court holds that there is no blanket immunity for municipalities from CUTPA and the factors of Connelly, must be applied to find that a municipality is exempt."), and Manchester v. United Stone America Co., supra, ( 27 Conn. L. Rptr. 414).
Connelly considered four factors to determine whether CUTPA was applicable, including the following: (1) The agency is a creature of statute and is expressly authorized and regulated by both the State and Federal government; (2) Both federal regulations and state law provide carefully balanced procedural and substantive remedies for tenants in a variety of situations; (3) Those regulatory remedies carefully balance the rights and obligations of the agency and its tenants; and this balance might be upset by providing a CUTPA remedy; and (4) There has been no instance in which the Federal Trade Commission Act has been applied to a local housing authority. Connelly does not make it clear that all of these factors are essential to this analysis. In each case, the Supreme Court found authorization and pervasive regulation of the activity at issue by state and federal statutes.
Thus, in determining whether there is municipality liability under CUTPA, the first inquiry appears to be whether the municipality is engaged in an activity which is exempted from CUTPA, as in Connelly and Dana Investment. If the activity is not one that is specifically exempt, the courts look to whether the purportedly unfair or deceptive act was undertaken in the conduct of trade of commerce as required by the provisions of CUTPA. Baker v. Cheshire, Superior Court, judicial district of New Haven, Docket No. CV 07 5013602 (April 24, 2008) [ 45 Conn. L. Rptr. 452].
One trial court decision which examined the issue of whether an allegedly unfair or deceptive was undertaken in the conduct of "trade" and "commerce" was Town of Manchester v. United Stone America, Inc., supra. The plaintiff brought an action seeking damages for the defendant's alleged failures to its obligation to construct alterations and additions to the Manchester Town Hall. The defendant brought a counterclaim alleging, in pertinent part, that the plaintiff municipality had engaged in trade and commerce within the state, that it contracted with the defendant to conduct trade or business within the state, and that its various enumerated acts and omissions constituted a violation of CUTPA. The municipality argued that it was exempt from the proscriptions of CUTPA. The court was "unconvinced" that a municipality is exempt from the proscriptions of CUTPA, and employed an analysis of the activities alleged to determine whether they constituted "trade" or "commerce" as defined in the act. The court found that ". . . notwithstanding the label given to [the counterclaims] . . . the described activities on the part of the Town do not constitute `trade' or `commerce.' Neither contracting with the defendant or the alteration and addition of the Town Hall, nor the specified activities associated with performance of the contract constitute the conduct of trade or commerce as defined in General Statutes § 42-110(4)." Id.
The plaintiff in this case argues that contracting for labor, materials, and equipment on a construction project constitutes "trade and commerce" under CUTPA, and cites to several trial court decision involving private construction actions or contracts. None of these cases cited involve claims regarding municipalities. "Most trial courts have held that CUTPA is inapplicable to the actions of a governmental entity, as a matter of law, even if that conduct, performed by a private person, might be considered to have commercial overtones." Capital Property Associates v. Capital City Economic Development Authority, supra. The court in Baker v. Cheshire, supra, examined the law of Massachusetts which has similar unfair trade practices laws for guidance in order to further define "trade" and "commerce." "Whether a municipality is acting in a business context depends on the nature of the transaction, the character of the parties involved, and [their] activities . . . and whether the transaction [was] motivated by business . . . reasons . . . [A] party is not engaging in trade or commerce . . . when its actions are motived by legislative mandate." (Citations omitted; internal quotation marks omitted.) Park Drive Towing, Inc. v. Revere, 442 Mass. 80, 86, 809 N.E.2d 1045 (2004). "When determining whether a municipalities' conduct takes place in the business context, Massachusetts courts have also considered whether the action taken was merely incidental to a primary government function; see id.; and whether the municipality sought to profit from its action." Baker v. Cheshire, supra.
The plaintiff's allegations in the present case are that defendant entered into a contract as a result of its governmental authority pursuant to an invitation to bid. There are no allegations or indications that the City was doing anything more than acting "incidentally to a primary government function" in utilizing the competitive bidding process for the Reconstruction of Rose Hill Avenue Bridge Over Still River-Bridge for the benefit of the citizens of the City of Danbury. There was no indication or allegation that the City sought or received any monetary benefit or profit from this contract which the City entered into solely in performance of its governmental obligation. See, General Statutes § 7-148(c)(6)(C).
Assuming that the legislature intended by using the phrase "any other legal entity" to include municipalities under CUTPA, I conclude that, in this transaction, the City is not subject to the provisions of CUTPA. Even though the activity is not exempt and provisions of Connelly and Dana Investment do not apply, for the plaintiff to succeed in a CUTPA action, it must show that it is an activity involving trade or commerce. Here the City was engaged in performing a governmental function — not an activity engaged in trade or commerce which would implicate the remedial provisions of CUTPA.
There is nothing in the record indicating that the activity was a transaction or activity administered by a regulatory board or acting under statutory authority of the state.
CONCLUSION
Accordingly, for the foregoing reasons, the motion to strike count 5 and paragraph 4 of the prayers for relief is granted.