Opinion
No. CV07 501 22 73 S
December 19, 2008
MEMORANDUM OF DECISION
FACTS
On November 27, 2007, the plaintiff, John Marcinczyk, commenced this action by service of process on the defendants, Miamogue Yacht Club, Paul Lengyel, Frank Rega III, Nick Kopcik, Nancy Peart and Ken Pellicci. The complaint alleges the following. The plaintiff, a former member and treasurer of the yacht club, claims that his membership was improperly terminated by the defendants. At the time the plaintiff was expelled from the yacht club, each of the individually named defendants were members of the yacht club's board of governors, and, additionally, defendants Lengyel and Pellicci served as the yacht club's commodore and treasurer respectively. The plaintiff's nine-count complaint states claims for: (1) retaliatory termination; (2) civil conspiracy; (3) failure to disclose; (4) unjust enrichment; (5) failure to account for funds; (6) breach of fiduciary duty; (7) willful breach; (8) intentional infliction of emotional distress; and (9) relief under the Connecticut Unfair Trade Practices Act (CUTPA).
The complaint alleges that in or about January 2004, the plaintiff was assigned to audit the yacht club's fishing committee. In that role, he discovered, in approximately May 2004, missing funds that totaled approximately $800. In approximately July 2004, commodore Lengyel assumed control of the fishing committee audit and the plaintiff resigned his position as treasurer. Later on in 2004, the plaintiff also learned that the yacht club had a gasoline shortage. Upon inquiring of Lengyel and the board of governors as to the missing gasoline, the plaintiff was told that the matter was resolved. In April 2005, the plaintiff again learned of a gasoline shortage, of 2000 gallons; his inquiry to the board of governors went unanswered, and his inquiry to Lengyel received an indifferent response. In January 2006, the yacht club began constructing new docks in order to accommodate additional boats. During May 2007, the plaintiff inquired of the Bridgeport city tax assessor's office and discovered that the yacht club had failed to obtain the necessary paperwork and/or permits to build these docks. As a result of this failure to submit proper paperwork, the yacht club improperly filed its 2006 income tax return. Following the plaintiff's investigation, the Bridgeport tax assessor reassessed the yacht club's taxes, and the yacht club received a correct tax bill for the next billing cycle. During June 2007, commodore Lengyel agreed to call a hearing to investigate the plaintiff's conduct. On August 9, 2007, the plaintiff received a letter from the defendant Nancy Peart, secretary to the board of governors, indicating that his membership had been terminated. The plaintiff contends that he was expelled from the yacht club in retaliation for his inquiry into the yacht club's tax returns.
On March 20, 2008, the defendants filed a combined motion to dismiss and motion to strike and a memorandum of law in support. As grounds, the defendants argue that the entire complaint must be dismissed because the plaintiff lacks standing to bring these claims and, therefore, the court lacks subject matter jurisdiction to hear them. In the alternative, the defendants move to dismiss counts three and five on the ground that the plaintiff, as a private individual, lacks standing to bring these claims. On September 16, 2008, the plaintiff filed a memorandum of law in opposition. The defendants filed a reply memorandum and a supplemental memorandum on October 15, 2008, and November 6, 2008, respectively.
The only issue heard at oral argument involved standing and subject matter jurisdiction; the defendants were instructed to file a separate motion to strike following this ruling. As such, this decision only addresses the portions of the defendants' memorandum of law that involve issues of standing and subject matter jurisdiction. The court rejects the plaintiff's argument that as a threshold matter, the defendants' motion to dismiss must be denied because the order of pleadings outlined in Practice Book § 10-6 states that a motion to dismiss must be filed before a motion to strike, or the pleading is waived pursuant to Practice Book § 10-7. While there is some Superior Court authority that suggests this result, see, e.g., Batts v. Garner Facility (CCI), Superior Court, judicial district of New Haven, Docket No. CV 05 4006926 (August 3, 2006, Pittman, J.) ( 41 Conn. L. Rptr. 783), the law is clear that subject matter jurisdiction, and therefore standing, can never be waived. "[I]t is a fundamental rule that a court may raise and review the issue of subject matter jurisdiction at any time . . . Subject matter jurisdiction involves the authority of the court to adjudicate the type of controversy presented by the action before it . . . [A] court lacks discretion to consider the merits of a case over which it is without jurisdiction . . ." (Internal quotation marks omitted.) Ferguson Mechanical Co. v. Dept. of Public Works, 282 Conn. 764, 770-71, 924 A.2d 846 (2007). Since the defendants' motion to dismiss is based on standing and subject matter jurisdiction, these issues can never be waived, and accordingly this argument is rejected.
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 . . . A motion to dismiss tests, inter alia, whether, on the face of the record, the court is without jurisdiction." (Internal quotation marks omitted.) Beecher v. Mohegan Tribe of Indians of Connecticut, 282 Conn. 130, 134, 918 A.2d 880 (2007). "When a . . . court decides a jurisdictional question raised by a pretrial motion to dismiss, it must consider the allegations of the complaint in their most favorable light . . . In this regard, a court must take the facts to be those alleged in the complaint, including those facts necessarily implied from the allegations, construing them in a manner most favorable to the pleader." (Internal quotation marks omitted.) Cogswell v. American Transit Ins. Co., 282 Conn. 505, 516, 923 A.2d 638 (2007). "The grounds that may be asserted in [a motion to dismiss] are (1) lack of jurisdiction over the subject matter; (2) lack of jurisdiction over the person; (3) improper venue; (4) insufficiency of process; and (5) insufficiency of service of process." Zizka v. Water Pollution Control Authority, 195 Conn. 682, 687, 490 A.2d 509 (1985), citing Practice Book § 10-31. Moreover, "[t]he issue of standing implicates subject matter jurisdiction and is therefore a basis for granting a motion to dismiss." St. George v. Gordon, 264 Conn. 538, 544, 825 A.2d 90 (2003). As a result, "[t]he proper procedural vehicle for disputing a party's standing is a motion to dismiss." (Internal quotation marks omitted.) D'Eramo v. Smith, 273 Conn. 610, 615 n. 6, 872 A.2d 408 (2005). Finally, "[t]he plaintiff bears the burden of proving subject matter jurisdiction, whenever and however raised." (Internal quotation marks omitted.) Fort Trumbull Conservancy, LLC v. New London, 265 Conn. 423, 430 n. 12, 829 A.2d 801 (2003).
In their memorandum of law, the defendants argue that the entire complaint should be dismissed because the plaintiff lacks standing, and, therefore, and the court lacks subject matter jurisdiction. Specifically, the defendants contend that the plaintiff cannot bring this case and the court cannot hear it because public policy and the applicable portions of the Connecticut Revised Nonstock Corporation Act (the act), General Statutes § 33-1000 et seq., dictate that courts will not interfere in the affairs of private clubs. The defendants further argue that the plaintiff has not alleged that his expulsion was the result of a violation of any of the club's bylaws or that he was removed in violation of the bylaws. Next, the defendants argue that there is no common law, statutory or constitutionally protected right to membership in a private club that permits the plaintiff to bring this action. Lastly, the defendants argue that the plaintiff lacks standing because not all affected persons are parties to the proceeding and the monetary relief he is seeking is outside the purview of the act. In response, the plaintiff counters that the court has the power to rule that a private club's actions are against the bylaws or that its bylaws are unreasonable and, since the yacht club failed to provide the plaintiff with evidence requested as to his expulsion, this in of itself implies a violation of the bylaws. Further, the plaintiff argues that the courts have interpreted the statutes that govern nonstock corporations to allow a removed member to challenge his termination and recover damages, and since he is not seeking equitable relief, he does not have to bring in all the affected parties to the proceedings.
I STANDING AND SUBJECT MATTER JURISDICTION
As alleged in the complaint, and agreed to by both parties, the yacht club is a private, non-profit corporation; as a result, it is governed by the act. Section 33-1056(a) establishes the statutory rules for membership in nonstock corporations. It provides in relevant part: "Membership shall be governed by such rules of admission, retention, withdrawal and expulsion as the bylaws shall prescribe, provided all such bylaws shall be reasonable, germane to the purposes of the corporation, and equally enforced as to all members." While there have been very few appellate cases that have interpreted this statute or its previous version, General Statutes § 33-459, the two main ones have, interestingly, both involved yacht clubs. Recently, the Appellate Court in Williams v. Black Rock Yacht Club, Inc., 90 Conn.App. 27, 32-33, 877 A.2d 849, cert. denied, 276 Conn. 908, 886 A.2d 424 (2005), articulated that, "[i]t is well established in both our jurisprudence and that of other states that generally courts should be reluctant to intervene in the affairs of private clubs . . . The primary exception to the general rule occurs when a member of a club has been sanctioned or expelled in violation of the club's bylaws." (Citations omitted; internal quotation marks omitted.) Id., 32-33. In determining whether a nonstock corporation's bylaws are reasonable, our Supreme Court stated in Sterner v. Saugatuck Harbor Yacht Club, Inc., 188 Conn. 531, 535, 450 A.2d 369 (1982), that the predecessor of § 33-1056(a), § 33-459(a), "adopt[ed] common law standards of fair play and [form] the basis for bylaws to be challenged by a member where they are not reasonable." (Internal quotation marks omitted.) Id., 535. The court further articulated that "[m]embership in [a] club is required by statute to be governed by bylaws that are reasonable. Bylaws reasonable on their face may not be unreasonably applied. Though a bylaw should provide a member with notice and an opportunity to be heard, the club may not apply such bylaw to expel a member unreasonably . . . The statutory requirement of reasonable bylaws requires a hearing that is meaningful and a sanction that is reasonable . . ." (Citation omitted.) Id., 536.
Given this statutory language and case law, it becomes apparent that while, as the defendants contend, Connecticut has a strong policy that favors non-interference with the actions of private clubs, a court has the power to hear a case where a plaintiff is alleging a violation of the nonstock corporation's bylaws, that the bylaws were unreasonably applied, or that the bylaws were per se unreasonable. Here, the plaintiff, in his complaint only mentions the yacht club's bylaws in paragraph forty-one, which states: "On or about July 19, 2007, the Board of Governors sent a letter to the plaintiff accusing plaintiff of violating `some Bylaws' and that the violations would be presented at the next General Body Meeting." Additional paragraphs of the complaint further allege that during the next month the plaintiff received a letter from the yacht club's governing board stating that his membership was terminated, and that two subsequent requests for clarification as to why he was expelled went unanswered by the board. While the defendants are correct in their contention that the complaint does not directly allege that the yacht club violated its bylaws, if viewed in a light most favorable to the plaintiff, such an allegation can certainly be inferred, since the plaintiff is stating a claim that he was wrongfully expelled from the club, and paragraph forty-one directly pleads that a violation of the bylaws were the purported reason why the plaintiff's membership was terminated. It necessarily follows that the basis of the plaintiff's claim is that the defendant, in wrongfully expelling the plaintiff for violation of the by-laws, either did not follow the by-laws, or that the by-laws were unreasonable. As such, it is reasonable to infer from the plaintiff's allegations regarding the termination procedure, that the plaintiff is contending either that the bylaws were not followed or that they were unreasonable. The plaintiff has therefore pleaded sufficient facts to show that he is challenging the legality of the yacht club's bylaws or the procedure under which his membership was terminated. Notwithstanding the defendants' submission of numerous attachments in an attempt to show that the termination proceedings comported with the yacht club's bylaws, such evidence, if considered, can only prove that the bylaws were adhered to; it does not speak to whether the bylaws were unreasonable or unreasonably followed.
"The motion to dismiss . . . invokes the existing record and must be decided upon that alone . . . Where, however . . . the motion is accompanied by supporting affidavits containing undisputed facts, the court may look to their content for determination of the jurisdictional issue . . ." Cogswell v. American Transit Ins. Co., 282 Conn. 505, 516, CT Page 20117 923 A.2d 638 (2007).
The defendants also argue that the plaintiff lacks standing to bring an action against a private club where there is no common-law statutory or constitutionally protected right to membership in a club. First, the defendants point out that the act does not provide any statutory authority for the plaintiff to challenge his membership expulsion. While it is true that there is no direct statutory language authorizing such a cause of action, this argument is undermined by the fact that Connecticut courts have allowed such actions to proceed under § 33-1056 of the act. See, e.g., Williams v. Black Rock Yacht Club, Inc., supra, 90 Conn.App. 33; DeBernado v. Pinewood Lake Ass'n, Inc., 46 Conn.Sup. 265, 283, 747 A.2d 1076 (1999) ("bylaws must comport with the applicable statute, § 33-1056. Since the plaintiffs have been deprived of their property rights under a bylaw . . . the plaintiffs have proven an injury . . . and this court finds that injunctive relief is warranted"). Consequently, the lack of any express language in the statute authorizing a cause of action does not bar this claim.
In a challenge to the court's subject matter jurisdiction, the defendants argue that the act only allows for the plaintiff to seek equitable relief, and not damages. Section 33-1038(b) provides in relevant part: "A corporation's power to act may be challenged: (1) In a proceeding by a member or director against the corporation to enjoin the act." Additionally, subsection (c) of § 33-1038 states: "In a member's or director's proceeding . . . to enjoin an unauthorized corporate act, the court may enjoin or set aside the act, if equitable and if all affected persons are parties to the proceeding, and may award damages for loss, other than anticipated profits, suffered by the corporation or another party because of the enjoining of the unauthorized act." Although this statutory language could imply that a plaintiff can only obtain equitable relief, the Appellate Court has expressly stated that "[o]ne wrongfully expelled from such an organization may be restored by mandamus . . . Or he may bring an action for damages. (Emphasis omitted; internal quotation marks omitted). Williams v. Black Rock Yacht Club, Inc., supra, 90 Conn.App. 34, quoting Trautwein v. Harbourt, 40 N.J.Super. 247, 259-60, 123 A.2d 30, cert. denied, 22 N.J. 220, 125 A.2d 233 (1956); see also Lahiff v. St. Joseph's Total Abstinence Benevolent Society, 76 Conn. 648, 653, 57 A. 692 (1904) (a member who claims he was wrongfully expelled from an unincorporated association can sue for damages). The defendants assert that this language from Williams is simply quoting New Jersey law, and since there has been no Connecticut case that has directly held that a plaintiff can obtain damages for expulsion from a club, it does not apply in this instance. While this quoted language from Williams is dicta, it does indicate that the Appellate Court is willing to allow a claim for damages to go forward when a plaintiff contends that he has been wrongfully expelled from a yacht club.
Finally, the defendants argue that this case cannot proceed against the individual defendants because § 33-1038(b) does not authorize a lawsuit to be brought against individual yacht club members. Section 33-1038(b)(2) provides that: "A corporation's power to act may be challenged . . . in a proceeding by the corporation, directly, derivatively or through a receiver, trustee or other legal representative, against an incumbent or former director, officer, employee or agent of the corporation." Although there have been no cases that have directly interpreted § 33-1038(b)(2), some courts have analyzed the statute's previous version, § 33-429(2), which had essentially the same language. As articulated by one Superior Court judge as to § 33-429(2), "Connecticut has codified the common-law right of a member to proceed against his corporation or its directors in the event of an ultra vires act." Cross v. Midtown Club, Inc., 33 Conn.Sup. 150, 154, 365 A.2d 1227 (1976) (allowing lawsuit by member of nonstock corporation against board of directors). Since the present complaint alleges that the plaintiff was a member in good standing of the defendant nonstock corporation, and all the individual defendants, via their roles on the yacht club's board of governors, were acting as directors of the corporation, the plaintiff may bring this lawsuit against the individual defendants. Consequently, the defendants' motion to dismiss the entire complaint due to the plaintiff's lack of standing and the court's lack of subject matter jurisdiction is denied.
General Statutes (Rev. to 1995) § 33-429(2) provided that a nonstock corporation's "lack of capacity or power to do such act may be asserted . . . in a proceeding by the corporation, whether acting directly or through a receiver, trustee or other legal representative, or through members in a representative suit, against any incumbent or former officer or director of the corporation."
CT Page 20113
II
In the alternative, the defendants argue that count three, alleging failure to disclose, and count five, alleging failure to account for funds, should be dismissed because the relevant statutes do not allow for causes of action brought by private individuals. Specifically, as to count three, the defendants argue that the plaintiff as a private individual does not have standing to enforce any obligations of an organization to make its tax returns available for public inspection or to sue an organization for failure to do so. Further, as to count five, the defendants posit that the plaintiff also has no standing to enforce any obligations of an organization to give an accounting or to sue an organization for its alleged failure to do so. The plaintiff counters that as a member of the club he is actually an interested party with a financial stake hold in the yacht club, and, therefore, should be able to bring a lawsuit under these statutes. In addition, the plaintiff argues that he is willing to amend these counts to further clarify his claims.FAILURE TO DISCLOSE
In count three, the plaintiff claims that the defendants have improperly failed to disclose the yacht club's tax returns pursuant to 26 U.S.C. § 6104, which requires tax exempt organizations to make available certain tax return documents for inspection. The complaint alleges that "the plaintiff wrote to the IRS EO Classification requesting assistance in obtaining the [yacht club's] 2006 990 tax return "which he was "completely within his rights to request," and as a result of this request "[t]he plaintiff was ostracized, humiliated, and slandered in front of the General Membership by the members of the Board of Governors . . ." In their memorandum of law, the defendants point to two federal court of appeals cases that stand for the premise that there is no private cause of action to enforce 26 U.S.C. § 6104. See Tax Analysts v. Internal Revenue Service, 214 F.3d 179, 186 (D.C. Cir. 2000); Schuloff v. Queens College Fund, 165 F.3d 183, 184 (2d Cir. 1999).
In response, the plaintiff first argues that as a member of the club he was not just a private individual but an interested stockholder with a financial stake in the club, and that Schuloff and Tax Analysts are not controlling precedent because they are not Connecticut state cases. Although the cited decisions are both federal, one of them comes from the Second Circuit Court of Appeals to which Connecticut belongs, and they are both interpreting federal statutory law, under which this claim is based. Consequently, these cases are persuasive authority. In Tax Analysts, the Court of Appeals for the District of Columbia makes it clear that while the text of 26 U.S.C. § 6104 does not specifically include a remedy for a violation of this statute, "Congress [has] provided an enforcement mechanism of IRS-imposed civil fines and penalties for § 6104" and these are the sole remedy. Tax Analysts v. IRS, supra, 214 F.3d 186. In his memorandum of law, the plaintiff further argues that the defendants have misconstrued the claim found in count three, as he is not seeking damages for the defendants' alleged violation of 26 U.S.C. § 6104, but is really asking for relief because he was "ostracized, humiliated, and slandered" when he asked for the tax returns. While count three does mention how the plaintiff was allegedly affected following the denial of his request to see the tax returns, it is evident that the crux of this count is the "failure to disclose," as count three is actually titled. Since Tax Analysts holds that civil fines are the exclusive remedy under this statute, and the plaintiff has failed to cite any cases where a court has allowed for what essentially amounts to emotional damages stemming from the defendants' alleged violation of the public disclosure statute, the plaintiff lacks standing to bring this claim.
FAILURE TO ACCOUNT
In count five, the plaintiff states a claim for "failure to account for funds." This count alleges that the defendants "have repeatedly failed to account for missing funds when requested by plaintiff . . . [and] [d]espite repeated requests for accounting made by members, the Defendants at all times failed or refused to give an accounting as to where the missing gasoline was spent or where maintenance fees/common charges were being applied and otherwise failed to provide financial reports to shareholders and to the Secretary of State consistent with C.G.S. § 13-1243 and C.G.S. § 13-1244." In his memorandum of law, the plaintiff acknowledges that these cited statutes do not exist. As both parties are in agreement that the plaintiff intended to rely on General Statutes § 33-1243 and § 33-1244, and both sides fully briefed the issue, this court will address the issue based on those two statutes. Moreover, since the complaint and the plaintiff's memorandum of law only cite § 33-1243 and § 33-1244 as support for his cause of action for failure to account, as opposed to any common law right, the analysis will only focus on the statutorily based failure to account claim.
Section § 33-1243 provides in relevant part that: "Each domestic corporation [subject to exceptions not relevant here] . . . shall file an annual report with the Secretary of State." As further provided in Section § 33-1244: "Any corporation required to file annual reports as provided in Section 33-1243, which fails to file its annual report on or before the due date thereof, shall be in default in respect thereof until the same is filed . . ." At this point in time, there have been no Connecticut cases interpreting the scope of these two statutes. Nevertheless, by their plain language, § 33-1243 and § 33-1244 do not mention a private right of enforcement. Consequently, the defendants argue that individuals do not have standing to bring a cause of action for an alleged violation of these statutes. In his memorandum of law in opposition, the plaintiff acknowledges that § 33-1243 and § 33-1244 do not expressly provide a right for private individuals to sue, but instead argues that this claim can continue as these statutes allow for an implied private cause of action.
Under Connecticut law, there is a "well settled fundamental premise . . . that private enforcement does not exist unless expressly provided in the statute. In order to overcome that presumption, the plaintiff bears the burden of demonstrating that such an action is created implicitly in the statute." Provencher v. Enfield, 284 Conn. 772, 777-78, 936 A.2d 625 (2007). Our Supreme Court has established a three-part test to determine if a cause of action can be implied. "First, is the plaintiff one of the class for whose . . . benefit the statute was enacted . . . ? Second, if there any indication of legislative intent, explicit or implicit, either to create such a remedy or to deny one? . . . Third, is it consistent with the underlying purposes of the legislative scheme to imply such a remedy for the plaintiff?" (Internal quotation marks omitted.) Asylum Hill Problem Solving Revitalization Ass'n. v. King, 277 Conn. 238, 247, 890 A.2d 522 (2006), quoting Napoletano v. CIGNA Healthcare of Connecticut, 238 Conn. 216, 249, 680 A.2d 127 (1996). "Consistent with the dictates of General Statutes § 1-2z, however, [courts] do not go beyond the text of the statute and its relationship to other statutes unless there is some textual evidence that the legislature intended, but failed to provide expressly, a private right of action. Textual evidence that would give rise to such a question could include, for example, language granting rights to a discrete class without providing an express remedy or language providing a specific remedy to a class without expressly delineating the contours of the right." Provencher v. Enfield, supra, 778.
By their plain language, § 33-1243 and § 33-1244 only create a duty for nonstock corporations to file a report with the secretary of state. There is no mention of any obligation to account to third parties. If the General Assembly had intended to require nonstock corporations to account to entities or individuals other than the secretary of state, it is logical to assume that it would have included such a directive in the statute. Since the statutory language establishes that the only intended beneficiary of this reporting obligation is the secretary of state, the plaintiff cannot claim that these statutes require that the yacht club had an obligation to account to him, and, therefore, it is apparent that the legislature never intended for private parties to be able to sue under § 33-1243 and § 33-1244. In addition, there is no evidence in the legislative history of these two statutes that the General Assembly ever intended a private cause of action. Accordingly, the defendants' motion to dismiss count five for lack of standing is granted.
CONCLUSION
For the reasons stated above, the defendants' motion to dismiss the entire complaint on the grounds of lack of standing and subject matter jurisdiction is denied. The defendants' motion to dismiss count three, failure to disclose, and count five, failure to account, is granted, because the plaintiff lacks standing to bring these claims.