Opinion
No. FST CV 11 6010045 S
September 28, 2011
MEMORANDUM OF DECISION RE MOTION TO DISMISS (106.00)
I. Background
This case involves a convoluted and invective-laden dispute already encompassing a lawsuit in Florida as well as this one in Connecticut. It is evidence of the deep-seated ill will that the primary protagonists, Matthew Gelchion, a resident of Florida who has commenced this Connecticut action, and Michel Goldschneider, a Connecticut resident who had commenced suit in Florida, would go so far from home to settle scores. Essentially, Goldschneider alleges that Gelchion and his wholly owned company LWH Associates, LLC (LWH) defrauded Goldschneider and related entities by claiming and receiving unwarranted commissions from Goldschneider entities and misappropriating trade secrets. Gelchion, for his part, claims he was improperly pushed out of Zebulon Industries (Zebulon) a business he jointly owned with Goldschneider and is being improperly deprived of the business's assets and income.
In the Connecticut action Gelchion and LWH have sued Goldschneider and Zebulon Industries (Zebulon) seeking (1) a receiver appointed for and a wind-down of activities of Zebulon; (2) unpaid commissions and damages; and for (3) breach of fiduciary duties, (4) conversion and (5) fraud. In addition, the four Connecticut plaintiffs have sued Goldschneider and Zebulon for vexatious litigation, abuse of process, a violation of the Connecticut Unfair Trade Practices Act, General Statutes §§ 42-110a et seq. (CUTPA) and tortious interference with business and employment relations.
Goldschneider and Zebulon have moved to dismiss Counts Six through Nine and seek a stay of proceedings with respect to the first five counts based on the existence of the lawsuit in Florida. The court will divide the discussion and analysis between the dismissal and stay issues raised by the defendants' motion.
II. Motion to Dismiss CT Page 20649
Count Seven alleges on behalf of all the plaintiffs, that Goldschneider started the Florida case without justification, and for the purposes of harassing and distressing the plaintiffs. This states a claim known as vexatious litigation, and Connecticut law has long required proof of several elements to establish such a claim, one of which is that the subject litigation be terminated in the plaintiff's favor. The defendants correctly cite Rioux v. Barry, 283 Conn. 338, 347 (2007) for this proposition. See also Zeller v. Consolini, 235 Conn. 417, 424 (1995). The Florida case has not been terminated at all and therefore Count Seven must be dismissed because Geichion's and LWH's portion of the claim is not ripe for adjudication and Marubeni and MacDonald, who are not sued in Florida, lack standing to bring the claim. Lack of ripeness and standing are both grounds for dismissal for lack of subject matter jurisdiction. Fort Trumbull Conservancy, LLC v. New London, 282 Conn. 741, 802 (2007) ("if a party is found to lack standing the court is without subject matter jurisdiction"); Keller v. Beckenstein, 122 Conn.App. 438, 443 (ripeness implicates subject matter jurisdiction) cert. granted 298 Conn 921 (2010).
While Count Seven is pleaded on behalf of all plaintiffs, only Gelchion and LWH are defendants in the Florida case.
Count Six alleges a claim of abuse of process arising out of the service of a subpoena for documents in the Florida case on the Connecticut plaintiffs MacDonald and Marubeni who are not parties in that case. In Larobina v. McDonald, 274 Conn. 394 (2005) the Connecticut Supreme Court stated that while success in the litigation in which the subject process was served is not "a prerequisite for an abuse of process claim" the eventual outcome of that litigation and the evidence presented therein "would be relevant in litigating an abuse of process claim." Id., 407; and therefore concluded that the abuse of process "claim is duplicative and premature." Id., 408. That approach is particularly pertinent in this case where the propriety of the subpoena is presently being litigated in Florida. Thus, this court determines that Count Six should be dismissed because it is not ripe for adjudication. Bloom v. Miklovich, 111 Conn.App. 323, 336 (2008); see also Chapman Lumber, Inc. v. Tager, 288 Conn. 69, 86-87 (2008).
Counts Eight and Nine, a CUTPA claim and a tortious interference with business and employment expectancies claim appear, to be in large part, if not entirely, based on the acts alleged in the vexatious litigation and abuse of process claims found in Counts Six and Seven. Counts Eight and Nine to the extent they are pursued by Marubeni and MacDonald are dismissed for the same reasons set forth in the discussion of Counts Six and Seven. See Blake v. Levy, 191 Conn. 257, 263-64 (1983); Norse Systems, Inc. v. Tingley Systems, Inc., 49 Conn.App. 582, 599 (1998). To the extent Counts Eight and Nine are pursued by Gelchion and LWH based on allegations in the complaint preceding Counts Six and Seven (i.e., Paragraphs 1 through 50 of the complaint) they are not dismissed.
III. Motion to Stay
The defendants' motion to stay the litigation of the remaining claims in this case is premised on the existence and nature of the case pending in Florida. There Goldschneider and Zebulon joined by a corporate entity known as Emma Chemicals NV (Emma NV) have sued Gelchion and LWH. Emma NV is apparently a Belgian company and its majority owner is Goldschneider and a minority owner is LWH. However, for a period of time LWH acted as managing director of Emma NV. In the Florida case the plaintiffs allege that Gelchion and LWH improperly caused Emma NV to pay over $300,000.00 in commissions to Zebulon and improperly caused Zebulon to charge Emma NV for services not rendered. Emma NV, Zebulon and Goldschneider have claimed fraud against Gelchion and LWH. Emma NV and Zebulon have claimed tortious interference, and Zebulon has alleged theft of trade secrets against Gelchion.
Connecticut appellate cases concerning stays when two suits are pending in different jurisdictions are sparse. In Sauter v. Sauter, 4 Conn.App. 581 (1985), the Appellate Court noted that where the same parties and subject matter are involved the court where the second action is brought may stay that action. Id. 584-85 (citing Am.Jur.2d and Corpus Juris Secundum). Subsequently, the Appellate Court has stated the power to stay proceedings is incidental to a trial court's power to control its docket with an aim of economy of time and effort for the court, the attorneys and the parties, and the exercise of that power calls for judgment and weighing of competing interests. Lee v. Harlow Adams Friedaman, P.C., 116 Conn.App. 289, 311-12 (2009) [quoting Landis v. North American Co., 299 U.S. 248, 254-55 (1936)].
There are a handful of Superior Court decisions discussing the criteria a court may use in assessing a request for a stay of proceedings. In Lincoln Life Annuity Co. v. Lockwood Pension Services Inc., Superior Court, judicial district of Hartford, CV 08 5019142 (November 28, 2008, Domnarski, J.) the court considered: (1) judicial economy; (2) the similarity of the subject matter in the cases; (3) possible injustice to the plaintiff; (4) whether the foreign suit was commenced to forestall the present case; (5) the possibility of conflicting decisions in the two jurisdictions; (6) the ability of the court to monitor the parallel litigation and if necessary, lift a stay if that is warranted. These criteria were also employed in KI Inc., v. KP Acquisition Partners, LLC, Superior Court, judicial district of Stamford-Norwalk at Stamford, X05 CV 09 6002474 complex litigation docket (September 24, 2010, Blawie, J.) and this court believes they are a suitable starting point in this analysis.
First, the court will consider the issues of judicial economy and similarity of subject matter. There has been no evidence or authority presented as to whether Florida's civil rules of procedure contain a mandatory counterclaim requirement where counterclaims arising out of the subject matter of the complaint must be asserted. That knowledge would be helpful on the subject of judicial economy; nevertheless, the court will rule on what is before it. The claims in the two cases are similar, but certainly not identical. The Florida plaintiffs focus on improper payments made by Emma NV to Zebulon and theft of trade secrets by Gelchion from Zebulon. The Connecticut plaintiffs in the first five counts focus on the deadlock at Zebulon between Goldschneider and Gelchion, and the payment or lack thereof of distributions from Zebulon to Gelchion and LWH. The court finds that the allegations in counts Two through Five of the Connecticut action involve the same general subject matter as claims in the Florida case, i.e. the propriety or lack thereof of the payments, or lack thereof, from Zebulon to Gelchion and LWH. The Connecticut action has no theft of trade secrets claim, and the Florida case does not seek a receiver for, or dissolution of, Zebulon. Therefore, there exists some similarity in the cases and some judicial economy would be gained by a stay.
Second, the court finds there is a possibility of harm to the plaintiffs if this action is stayed in that there appears to be nothing in Florida comparable to Connecticut's prejudgment remedy procedures, and the plaintiffs have expressed concern that Goldschneider, who now appears to be controlling Zebulon, will abscond with the assets and income of that entity. The defendants in this action accuse the plaintiffs of "forum shopping," a contention which the plaintiffs do not try to refute. The court agrees with the plaintiffs. Whatever one thinks of Connecticut's prejudgment remedy procedures — and it usually depends on whether one is a plaintiff or defendant — it is part of Connecticut law, and parties that have established appropriate subject matter and personal jurisdiction are entitled to use them.
Third, while there appears to be plenty of bad blood between the principals, there is no evidence that the Florida case was filed simply to forestall suit in Connecticut. Indeed, the locus of the Florida case is the home state of Gelchion.
Fourth, there is a possibility of conflicting decisions in the two cases particularly as to possibly common factual determinations relating to the parties' business relations and the claim in Connecticut that Zebulon is improperly withholding distributions to Gelchion and LWH.
Fifth, the court sees no reason why it and especially the parties could not monitor the progress of the Florida case and allow the court to take such follow-up steps as justice requires.
Having weighed the above factors, the court determines that the balance of equities tips toward a partial stay of proceedings in this Connecticut case after the parties have had an opportunity to present their arguments and evidence for and against the plaintiffs' application for a prejudgment remedy that is scheduled to be heard on October 17, 2011.
Specifically, the court orders that Counts Two through Five and what is left of the Gelchion's and LWH's claims in Counts Eight and Nine are stayed after a judge has ruled on the plaintiffs' application for a prejudgment remedy. The court expects that proceeding to go forward on October 17, 2011 or at least firm a hearing date scheduled at that time. If there is inordinate delay in bringing the PJR application to a hearing the court will review its decision.
Count One is not stayed. Counts Six, Seven and the claims of Marubeni and MacDonald in Counts Eight and Nine are dismissed.