Opinion
CV156052574S
03-01-2016
Northeast Panel Co., LLC v. Rizzo Corporation et al
UNPUBLISHED OPINION
MEMORANDUM OF DECISION RE MOTION TO STRIKE (#137)
Robin L. Wilson, J.
FACTS
The plaintiff, Northeast Panel Co., LLC, filed a third amended complaint in this action against the defendants, Rizzo Corp. (Rizzo), and Travelers Casualty and Surety Co. (Travelers), on August 26, 2015. In the eight-count complaint, the plaintiff alleges violations of General Statutes § § 49-41a and 49-42, breach of third-party beneficiary contract, breach of the implied covenant of good faith and fair dealing, a violation of the Connecticut Unfair Trade Practices Act (CUTPA) General Statutes § § 42-110a et seq., and the Connecticut Unfair Insurance Practices Act (CUIPA) General Statutes § § 38a-815 et seq. The plaintiff further alleges the following relevant facts.
The plaintiff filed the original complaint in this action on February 9, 2015, and filed an amended complaint on March 18, 2015. The defendants filed a motion to strike both counts of the amended complaint on April 14, 2015, which the court, Wilson, J., granted in part, and denied in part, on August 4, 2015 .
The plaintiff references various exhibits throughout its complaint, however, it has not attached any such exhibits to the complaint.
Section 49-41a, entitled " [e]nforcement of payment by general contractor to subcontractor and by subcontractor to its subcontractors, " provides in relevant part: " (a) When any public work is awarded by a contract for which a payment bond is required . . . the contract for the public work shall contain the following provisions: (1) A requirement that the general contractor, within thirty days after payment to the contractor by the state or a municipality, pay any amounts due any subcontractor, whether for labor performed or materials furnished, when the labor or materials have been included in a requisition submitted by the contractor and paid by the state or a municipality; (2) a requirement that the general contractor shall include in each of its subcontracts a provision requiring each subcontractor to pay any amounts due any of its subcontractors, whether for labor performed or materials furnished, within thirty days after such subcontractor receives a payment from the general contractor which encompasses labor or materials furnished by such subcontractor . . ."
Section 49-42, entitled " [e]nforcement of right to payment on bond. Suit on bond, procedure and judgment, " provides in relevant part: " (a) Any person who performed work or supplied materials for which a requisition was submitted to, or for which an estimate was prepared by, the awarding authority and who does not receive full payment for such work or materials within sixty days of the applicable payment date provided for in subsection (a) of section 49-41a, or any person who supplied materials or performed subcontracting work not included on a requisition or estimate who has not received full payment for such materials or work within sixty days after the date such materials were supplied or such work was performed, may enforce such person's right to payment under the bond by serving a notice of claim on the surety that issued the bond and a copy of such notice to the contractor named as principal in the bond not later than one hundred eighty days after the last date any such materials were supplied or any such work was performed by the claimant . . . The notice of claim shall state with substantial accuracy the amount claimed and the name of the party for whom the work was performed or to whom the materials were supplied, and shall provide a detailed description of the bonded project for which the work or materials were provided. If the content of a notice prepared in accordance with subsection (c) of section 49-41a complies with the requirements of this section, a copy of such notice, served not later than one hundred eighty days after the date provided for in this section upon the surety that issued the bond and upon the contractor named as principal in the bond, shall satisfy the notice requirements of this section . . ."
On or about June 2, 2011, Rizzo, as principal, and Travelers, as surety, entered into a payment contract bond and were bound unto the owner, the state of Connecticut, for the payment of subcontractors who worked on the project known as " Independent Wheel Truing Facility at the New Haven Rail Yard" (project). The plaintiff entered into a subcontract agreement with Rizzo to supply building products on or about March 26, 2012, for use in the project, and Rizzo purchased and ordered building products and supplies from the plaintiff from March 26, 2012, until as recently as June 23, 2015. The building products and supplies were used in the project and have not been paid for.
Despite demand, Rizzo has failed to pay the plaintiff the sum of $196, 268.28, exclusive of interest. Pursuant to the bond, the plaintiff made a claim against the bond by letter dated January 15, 2015, and further amended its claim letter on February 2, 2015. Nonetheless, both Rizzo and Travelers have failed and refused to pay the plaintiff pursuant to its demand on the bond. Further, the plaintiff notified Rizzo that, according to General Statutes § 49-41a(c), the amount of the plaintiff's claim is to be placed in an interest-bearing escrow account. Rizzo, however, has failed to set aside the funds in such an account as required by the statute.
General Statutes § 49-41a(c) provides in relevant part: " If payment is not made by the general contractor or any of its subcontractors in accordance with such requirements, the subcontractor shall set forth its claim against the general contractor . . . through notice by registered or certified mail. Ten days after receipt of that notice, the general contractor shall be liable to its subcontractor . . . for interest on the amount due and owing at the rate of one per cent per month. In addition, the general contractor, upon written demand of its subcontractor . . . shall be required to place funds in the amount of the claim, plus interest of one per cent, in an interest-bearing escrow account in a bank in this state, provided the general contractor . . . may refuse to place the funds in escrow on the grounds that the subcontractor has not substantially performed the work according to the terms of his or its employment . . ."
The defendants filed the present motion to strike on September 25, 2015, on the grounds that counts one, three, six, seven, and eight and that paragraphs 12(4), 11(d), and 8(d) of counts three, five, and seven respectively are improper allegations. The defendants submitted a memorandum of law in support of their motion. The plaintiff filed a memorandum of law in opposition to the motion to strike on November 6, 2015. This matter was heard at short calendar on November 9, 2015.
DISCUSSION
I
Legal Standard
" [I]t is fundamental that in determining the sufficiency of a complaint challenged by a defendant's motion to strike, all well-pleaded facts and those facts necessarily implied from the allegations are taken as admitted . . . 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." (Citation omitted; internal quotation marks omitted.) Coe v. Board of Education, 301 Conn. 112, 116-17, 19 A.3d 640 (2011). " Moreover, [the court notes] that [w]hat is necessarily implied [in an allegation] need not be expressly alleged." (Internal quotation marks omitted.) Connecticut Coalition for Justice in Education Funding, Inc. v. Rell, 295 Conn. 240, 252, 990 A.2d 206 (2010). " [P]leadings are to be construed broadly and realistically, rather than narrowly and technically . . ." (Internal quotation marks omitted.) Downs v. Trias, 306 Conn. 81, 92, 49 A.3d 180 (2012).
II
Count One: General Statutes § § 49-41a and 49-42 Against Both Defendants
It is important to review the procedural history of this case before resolving the defendants' motion on count one. In the plaintiff's first amended complaint, dated March 18, 2015, count one against the defendants alleged failure to pay pursuant to the bond, the defendants moved to strike that count on the ground that the plaintiff failed to state a claim because it had not sufficiently pleaded that it provided timely notice of its claim to the defendants as required by § 49-42, and additionally it failed to allege that Rizzo received payment from the state of Connecticut. This court granted the motion to strike count one, stating: " [W]hile the plaintiff alleges that it sold building materials to the defendant Rizzo Corp., it fails to allege the dates on which its performance began or ended in either the complaint or its attachments. Notice under § 49-42 must be provided 'not later than one hundred eighty days after the last date any such materials were supplied or any such work was performed by the claimant . . .' Because the plaintiff has not pleaded any facts regarding the last date it provided materials or otherwise performed, it cannot be determined if the plaintiff's notice was timely. Thus, the plaintiff has failed to sufficiently plead compliance with the notice provision under § 49-42. Accordingly, the defendants' motion to strike count one is granted." Northeast Panel Co. v. Rizzo Corp., Superior Court, judicial district of New Haven, Docket No. CV-15-6052574-S, (August 4, 2015, Wilson, J.) .
The plaintiff has since remedied the prior defect, which is reflected in the operative complaint. In paragraph three of the first count, the plaintiff alleges that Rizzo " purchased and ordered building products and supplies from the plaintiff from March 26, 2012, until as recently as June 23, 2015 . . ." Moreover, the complaint is dated August 26, 2015, which is within one hundred eighty days from the last date the plaintiff alleges such materials were supplied or any such work was performed by the plaintiff which was June 23, 2015. While the date and notice requirement has been satisfied since the previous motion to strike, the defendants still argue that (1) the plaintiff is required to plead that Rizzo received payment from the state; (2) the plaintiff has failed to state a legally sufficient cause of action against Travelers pursuant to General Statutes § 49-41; and (3) the plaintiff has failed to state a legally sufficient cause of action because the plaintiff has not attached a copy of the requisite notice of the claim on the bond. The plaintiff replies that the first count is legally sufficient because there is no requirement to specifically plead that Rizzo was paid.
" [Section] 49-42 is a remedial statute enacted to provide security for workers and materials suppliers unable to avail themselves of the protection of a mechanic's lien . . . Because [t]he statutory requirement of a bond is designed to protect and benefit those who furnish materials and labor to the contractor on public work, in that they may be sure of payment of their just claims, without defeat or undue delay . . . such statutory provisions are to be liberally construed." (Citation omitted; internal quotation marks omitted.) Okee Industries, Inc. v. National Grange Mutual Ins. Co., 225 Conn. 367, 373, 623 A.2d 483 (1993). Therefore, " [the court has] relied on the rule of liberal construction when the issue was the eligibility for statutory coverage of a particular class of subcontractors . . . or a particular type of supplier of materials." (Citation omitted.) Id., 373-74. " [I]f the statute itself imposes specific constraints, [the Supreme Court has] held these constraints to be mandatory; if the statute leaves room for construction, we have construed its requirements liberally in order to implement the statute's remedial purpose." Id., 374.
" Because § 49-42 was patterned after federal legislation popularly known as the Miller Act . . . we have regularly consulted federal precedents to determine the proper scope of our statute . . . The federal precedents, like our own, counsel liberal construction of statutory requirements other than those relating to specific time constraints . . . [A] requirement which is clearly made a condition precedent to the right to sue must be given effect, but in determining whether a provision is of that character the statute must be liberally construed so as to accomplish its purpose." (Citations omitted; internal quotation marks omitted.) Id.
Although the defendants maintain that the plaintiff is required to allege that Rizzo received payment in order to plead a cause of action under the statute, they do not point to any legal authority to support such a contention. Instead, the defendants directly rely on the language in § 49-41a(a), which provides that " any public work contract shall contain a provision that the general contractor is required to pay any amounts due to subcontractors, whether for labor performed or materials furnished, within thirty days after payment to the general contractor by the state or municipality." There is nothing in the statute or any case law that suggests that the plaintiff is required to plead that Rizzo received payment as a prerequisite to bringing a cause of action under the statute. Additionally, because the statute is remedial in nature, its provisions should not be construed so as to prevent the plaintiff from recovery. The plaintiff has pleaded that it has complied with the written demand provisions of § 49-41a and the notice provision of § 49-42; therefore, it should be allowed to proceed under the statute.
In regard to the defendants' argument that notice of claim on the bond was not attached, this potential defect is not fatal at this stage of the proceedings. " It is well established that a motion to strike must be considered within the confines of the pleadings and not external documents . . . We are limited . . . to a consideration of the facts alleged in the complaint." (Internal quotation marks omitted.) Zirinsky v. Zirinsky, 87 Conn.App. 257, 268-69 n.9, 865 A.2d 488, cert. denied, 273 Conn. 916, 871 A.2d 372 (2005). In this case, the plaintiff is only required to plead that it sent the defendants notice of claim on the bond, which it has done here. Accordingly, the defendants' motion to strike count one on this ground is denied.
Lastly, the defendants argue that the plaintiff has failed to state a legally sufficient cause of action against Travelers. While the plaintiff has not addressed this argument in its memorandum in opposition, it was addressed in part in this court's previous decision on the defendants' prior motion. In that case, the defendants argued that § 49-41a did not give rise to an independent cause of action, and further that even if it did, Travelers, as surety on the bond, was not a proper party under the statute. This court held that while the statute does, in fact, allow for a private cause of action, " an action under § 49-41a is appropriately brought against a general contractor, but not a surety. Rather, an aggrieved party must proceed against the surety under § 49-42."
While the plaintiff's claim is not properly brought against Travelers pursuant to § 49-41a, it can still proceed against Travelers under § 49-42, given it has met the requisite pleading requirements. As this court previously determined, the plaintiff has alleged a violation of the statute, and has pleaded the required notice. Therefore, the defendant's motion to strike count one against Travelers under § 49-42 is denied, and the law of the case applies to the action against Travelers under § 49-41a.
The law of the case " expresses the practice of judges generally to refuse to reopen what has been decided and is not a limitation on their power . . . Where a matter has been previously ruled on interlocutorily, the court in a subsequent proceeding may treat that decision as the law of the case, if it is of the opinion that the issue was correctly decided, in the absence of some new or overriding circumstance." (Citations omitted.)
III
Count Three: Breach of Third-Party Beneficiary Contract
A
Breach of Third-Party Beneficiary Contract Against Travelers
In their memorandum of law in support of the motion to strike, the defendants argue that the plaintiff's allegations of breach of a third-party beneficiary contract are legally insufficient because the plaintiff has a statutory right under § 49-42 to bring a claim against Travelers under the bond. The plaintiff responds, arguing that § 49-42 is not the exclusive remedy for all claims a public works subcontractor may have against a surety.
There is some confusion regarding the exclusivity of § 49-42. The plaintiff has cited a number of Superior Court decisions that have stated that the statute is not a plaintiff's " exclusive remedy." Those cases are distinct however, because unlike the plaintiff in the present case, in those cases, the plaintiffs were not bringing common-law claims to recover directly under the bond. The Superior Court in Paradigm Contract Management Co. v. United States Fidelity & Guaranty Co., Superior Court, judicial district of Stamford-Norwalk, Complex Litigation Docket No. X08-CV-03-4001935-S, (April 10, 2008, Jennings, J.) (45 Conn. L. Rptr. 385), aff'd, sub nom. Paradigm Contract Management Co. v. St. Paul Fire & Marine Ins. Co., 293 Conn. 569, 979 A.2d 1041 (2009), discussed those distinctions at length in addressing a plaintiff's similar arguments. The court observed that, " [t]he plaintiff has misconstrued the statements in several Superior Court decisions that an action under [§ 49-42] 'is not the exclusive remedy' of an unpaid subcontractor or materials supplier to a public works project. In each of those cases the court permitted a plaintiff in the position of [the subcontractor] to maintain one or more tort or tort-related counts against the bond surety in addition to --not in lieu of--a claim on the [b]ond under [§ 49-42]." Id., 389, at *24. See Wolverine Fire Protection Co. v. Tougher Industries, Superior Court, judicial district of Hartford, Docket No. CV-01-0805554-S, (June 20, 2001, Hale, J.) (29 Conn. L. Rptr. 731) (counts sounding in breach of covenant of good faith and fair dealing and CUTPA violation allowed in addition to count on the bond under the Little Miller Act); Blakeslee Arpaia Chapman, Inc. v. United State Fidelity & Guaranty Co., Superior Court, judicial district of New London, Docket No. 520348, (March 4, 1994, Hurley, J.) (11 Conn. L. Rptr. 169) (CUIPA and CUTPA counts allowed in addition to count one, being a Little Miller Act claim on the bond). The cases cited by the Superior Court in Paradigm have allowed tort-related common-law actions arising out of alleged breaches of § 49-42, such as breach of the implied covenant of good faith and fair dealing, and violations of CUTPA. None of those cases, however, stood for the proposition that § 49-42 was not the exclusive remedy with respect to an action directly on a bond. It is apparent from the allegations that the plaintiff in the present case is attempting to bring an action on the bond by alternatively alleging a breach of third-party beneficiary contract claim.
In the third count of the complaint, the plaintiff incorporates paragraphs one through six of the first count, which generally restate the factual allegations of the complaint. Paragraphs seven through thirteen allege the following facts. The plaintiff entered into a subcontract agreement with Rizzo, who in turn entered into a suretyship agreement with Travelers. As a result of the subcontract agreement between Rizzo and the plaintiff, and the suretyship agreement between Rizzo, as principal, and Travelers, as surety, the plaintiff is an intended third-party beneficiary meant to benefit from the bond. As surety, Travelers, under the bond and its suretyship agreement with Rizzo, had a duty to take reasonable action on the plaintiff's behalf if Rizzo failed to perform, including, but not limited to, making prompt payment in response to the plaintiff's claim against the bond, attempting to effectuate prompt settlement of the plaintiff's claim against the bond, and indemnifying the plaintiff for any loss or damage sustained that may have been the result of Rizzo's failure to make payment under the bond and its subcontract agreement with the plaintiff. Travelers breached its duty under the third-party beneficiary contract by failing to take reasonable action on the plaintiff's behalf, including, but not limited to: 1) failing to make prompt payment in response to the plaintiff's claim against the bond; 2) attempting to effectuate prompt settlement of the plaintiff's claim against the bond; 3) indemnifying the plaintiff for any loss or damage sustained; and 4) retaining the same law firm as its principal, Rizzo. As an intended third-party beneficiary of the bond, the plaintiff has a legal right to demand payment from Rizzo and Travelers.
Our Supreme Court has held that a plaintiff is not entitled to bring a common-law action on the bond itself. " [W]hen a surety has executed a bond pursuant to § 49-41, any action on the bond is governed by § 49-42." Paradigm Contract Management Co. v. St. Paul Fire & Marine Ins. Co., supra, 293 Conn. 581. See also Ten Hoeves Brothers, Inc. v. Hartford, Superior Court, judicial district of Hartford, Docket No. CV-93-0704020-S, (May 13, 1996, Corradino, J.) (17 Conn. L. Rptr. 143) (holding that plaintiff may not decline to take advantage of its right to sue surety on the bond under the statute and proceed instead by suing on the bond under common law).
In discussing the exclusivity of § 49-42 in bringing an action on the bond, the Superior Court in Paradigm, stated that, " it would be an odd interpretation of an ameliorative statute to say that because a company in the class of entities sought to be protected by ameliorative legislation doesn't take advantage of the protection afforded by a particular statute then that party cannot resort to common law or equitable remedies that pre-existed the legislation . . . An action on the payment bond of the general contractor did not exist at common law prior to the enactment of [§ 49-42] . . . The clear inference, then, is that [the plaintiff] may not decline to take advantage of its right to sue the surety on the [b]ond under [§ 49-42] and proceed instead by suing on the bond under the common law." (Citation omitted; footnote omitted; internal quotation marks omitted.) Paradigm Contract Management Co. v. United States Fidelity & Guaranty Co., supra, 45 Conn. L. Rptr. 389-90.
The Superior Court in
The plaintiff in the present case alleges that as an intended third-party beneficiary of the bond, it has a legal right to demand payment from the defendants. Although the plaintiff characterizes count three as a breach of third-party beneficiary contract, the plaintiff nonetheless is attempting to enforce payment of the contract pursuant to the bond. As the Supreme Court affirmed in Paradigm, the plaintiff cannot bring a common-law claim on the bond, since such action is governed exclusively by § 49-42. Accordingly, the defendants' motion to strike count three as it relates to Travelers is granted.
B
Breach of Third-Party Beneficiary Contract Against Rizzo
The defendants also move to strike count three against Rizzo on the ground that the plaintiff has a direct contractual relationship with Rizzo. The plaintiff responds, arguing that, while it does have a contractual relationship with Rizzo, it is a third-party beneficiary to the contract between the state of Connecticut and Rizzo under the bond, and can still bring a third-party beneficiary claim despite a statutory provision governing payments by sureties. In support of this argument, the plaintiff relies in part on Casey Electric, LLC v. Construction Management Service, United States District Court, Docket no. 3:09-CV-00469 (PCD), (D.Conn. November 17, 2009), where the court found that the plaintiff was a third-party beneficiary to the payment bond for the purposes of maintaining a CUTPA claim and a claim for breach of the covenant of good faith and fair dealing. Nevertheless, the court observed that: " Section 49-42 is the exclusive means for recovering the balance of [the subcontractor's] contract with [the general contractor] from [the surety]." Id.
The plaintiff may be correct in its assertion that it is a third-party beneficiary for the purposes of maintaining tort or tort-related claims in addition to its claim on the bond, however, the plaintiff is attempting to recover payment from Rizzo pursuant to the bond. (Emphasis added.) In addition to the above-listed allegations in count three, the plaintiff specifically alleges the following facts against Rizzo. As principal, Rizzo, under the bond and its subcontract agreement with the plaintiff, had a duty to make payment to the plaintiff for building products and supplies furnished for the project. Rizzo breached its duty under both the bond and subcontract agreement with the plaintiff when it failed to make payment to the plaintiff for building products and supplies furnished for the project. The plaintiff further alleges that as an intended third-party beneficiary under the bond, it has a legal right to demand payment from Rizzo.
As previously discussed, the plaintiff's exclusive remedy to recover under a bond issued pursuant to § 49-41, is found in § 49-42; the plaintiff has no common-law cause of action in this case. As a result, the defendant's motion to strike count three of the complaint against Rizzo is granted.
IV
Individual Paragraphs
The defendants move to strike the following paragraphs from the complaint: paragraph 12(4) of the third count; paragraph 11(d) of the fifth count; and paragraph 8(d) of the seventh count. These individual paragraphs allege a breach of the implied covenant of good faith and fair dealing and a violation of CUTPA against Travelers, on the ground that it retained the same law firm as its principal, Rizzo did. The defendants maintain that there is nothing improper about a surety tendering the defense of a lawsuit to a principal, and under the terms of the general agreement of indemnity, Travelers has a right to do so. The plaintiff does not address this argument in its memorandum in opposition to the motion.
The defendants moved to strike paragraph 12(4) in count three of the complaint; however, since the court has granted the motion to strike count three in its entirety, it is not necessary for the court to address separately the motion to strike the paragraph contained therein.
As a general matter, " most trial courts follow the rule that a single paragraph of a pleading is subject to a motion to strike only when it attempts to set forth all of the essential allegations of a cause of action or defense . . . Arguably under the present rules, a motion to strike may properly lie with respect to an individual paragraph [or paragraphs] in a count . . . However, the weight of authority in the Superior Court is that the motion does not lie, except possibly where the subject paragraph [or paragraphs] attempts to state a cause of action." (Internal quotation marks omitted.) Weingarden v. Milford Anesthesia Associates, P.C., Superior Court, judicial district of New Haven, Docket No. CV-11-6016353, (May 30, 2013, Wilson, J.).
" Prior case law ought not to be read for the proposition that clearly improper allegations upon which relief may not be granted as a matter of law must remain in a complaint indefinitely, leading to confusion for the court, the parties and the jury, just because there are aspects of the complaint that are otherwise valid. If the motion to strike has merit as to certain allegations of the complaint . . . the proper course for the court is to strike those allegations only . . ." (Internal quotations marks omitted.) Coe v. Board of Education, supra, 301 Conn. 112, 121 n.5. " Under prior case law and earlier versions of the Practice Book, it was generally improper to [move to strike] a paragraph of a complaint unless the paragraph purported to state a separate cause of action . . . Since 1978, however, the Practice Book has not contained such a constraint." (Internal quotation marks omitted.) Id.
In the present case, the plaintiff has not provided a response to the defendants' argument, and thus, no authority that supports the contention that the defendants' actions in retaining the same firm were improper. Moreover, allowing those paragraphs to remain would possibly lead to confusion as to the rest of the allegations in those respective counts. Thus, the motion to strike the individual paragraphs is proper and is granted.
V
Counts Six and Seven: Violation of CUTPA Against Both Defendants
The defendants move to strike the sixth and seventh counts of the complaint on the ground that the plaintiff has failed to allege the existence of aggravating circumstances necessary to support a CUTPA violation. The plaintiff responds that its allegations are sufficient to support a CUTPA claim against both defendants.
" [General Statutes § ]42-110b(a) provides that [n]o person shall engage in unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce. It is well settled that in determining whether a practice violates CUTPA [our Supreme Court has] adopted the criteria set out in the cigarette rule by the federal trade commission for determining when a practice is unfair: (1) [W]hether the practice, without necessarily having been previously considered unlawful, offends public policy as it has been established by statutes, the common law or otherwise- in other words, it is within at least the penumbra of some common law, statutory, or other established concept of unfairness; (2) whether it is immoral, unethical, oppressive, or unscrupulous; (3) whether it causes substantial injury to consumers, [competitors or other businesspersons] . . . All three criteria do not need to be satisfied to support a finding of unfairness. A practice may be unfair because of the degree to which it meets one of the criteria or because to a lesser extent it meets all three." (Internal quotation marks omitted.) Ventres v. Goodspeed Airport, LLC, 275 Conn. 105, 154-55, 881 A.2d 937 (2005), cert. denied, 547 U.S. 1111, 126 S.Ct. 1913, 164 L.E.2d 664 (2006). " A claim under CUTPA must be pleaded with particularity to allow evaluation of the legal theory upon which the claim is based." (Internal quotation marks omitted.) S.M.S. Textile Mills, Inc. v. Brown, Jacobson, Tillinghast, Lahan & King, P.C., 32 Conn.App. 786, 797, 631 A.2d 340, cert. denied, 228 Conn. 903, 634 A.2d 296 (1993).
A
CUTPA Claim Against Travelers
Count seven of the plaintiff's complaint generally alleges violations of CUTPA against Travelers based on its alleged violations of § 49-42. Notwithstanding the criteria set forth in the cigarette rule, " [t]he Connecticut supreme court has determined that statutory violations, other than violations of CUIPA may give rise to a CUTPA cause of action." Blakeslee Arpaia Chapman, Inc. v. United States Fidelty & Guaranty Co., supra, 11 Conn. L. Rptr. 169. " Connecticut courts have held that a surety's failure to comply with the notice provisions of Section 49-42 can give rise to a CUTPA claim. In Premier Roofing Co. v. Insurance Co. of North America, [Superior Court, judicial district of Danbury, Docket No. 312438, (March 3, 1995, Leheny, J.)] , the subcontractor brought suit against the surety for violations of [§ 49-42] and CUTPA after the surety refused to pay the amount allegedly owed pursuant to the bond. In denying the surety's motion to strike the CUTPA claim, the court held that the allegations that the surety violated [§ 49-42] and failed to act in good faith in handling the subcontractor's demand on the bond were sufficient to state a CUTPA claim." Casey Electric, LLC v. Construction Management Services, Inc., supra, Docket No. 3:09-cv-00469.
An additional number of Superior Court cases have allowed a CUTPA claim against a surety under the public policy prong for alleged violations of § 49-42. See, e.g., Blakeslee Arpaia Chapman, Inc. v. United States Fidelty & Guaranty Co., supra, 11 Conn. L. Rptr. 176, (denying defendant's motion to strike CUTPA claim, " [i]n view of the remedial aspects contained in both § 49-42 and CUTPA, and in light of the liberal construction afforded these statutes"); Wolverine Fire Protection Co. v. Tougher Industries, Superior Court, judicial district of Hartford, Docket No. CV-01-0805554-S, (June 20, 2001, Hale, J.) (29 Conn. L. Rptr. 731, 734) (CUTPA claim may be maintained arising out of alleged violations of § 49-42); DSM, Inc. v. Sentry Select Ins. Co., Superior Court, judicial district of Litchfield, Docket No. CV-01-0085405-S, (March 22, 2002, DiPentima, J.) (31 Conn. L. Rptr. 650, 654) (denying defendant's motion to strike where CUTPA claim was based on alleged violations of § § 49-41 and 49-42); Brico, LLC v. Travelers, Superior Court, judicial district of Fairfield, Docket No. CV-09-5023993-S, (December 29, 2010, Dooley, J.) (51 Conn. L. Rptr. 161, 163) (denying defendant's motion to strike where plaintiff's CUTPA claims were based on alleged violations of § 49-42).
In the present case, the plaintiff alleges that while engaged in trade and commerce, Travelers has engaged in unfair trade practices in violation of CUTPA by: (1) failing to make prompt payment in response to the plaintiff's bond claim letter pursuant to § 49-42; (2) not attempting to effectuate prompt settlement of claims in which liability is reasonably clear as established by § 38a-816(6); (3) and failing, as surety on the bond, to indemnify the plaintiff for any loss or damage sustained. The plaintiff further maintains that as a result of Travelers' unfair trade practices, the plaintiff has sustained ascertainable loss and damage. As previously noted, all three prongs of the cigarette rule do not have to be satisfied in order to maintain a CUTPA claim, and the Superior Court has repeatedly allowed such claims for alleged violations of § 49-42. Here, because the plaintiff's claim against Travelers is largely premised on violations of the statute, the allegations are sufficient to maintain a CUTPA claim. As a result, the defendants' motion to strike count seven of the complaint against Travelers is denied.
B
CUTPA Claim Against Rizzo
The defendants assert the same argument in count six as it does in count seven arguing that the plaintiff cannot maintain a CUTPA claim against Rizzo because it fails to allege aggravating circumstances. The plaintiff's claim in count six, however, is not based on a simple breach of contract claim, rather it is grounded in an alleged violation of § 49-41a(c). As previously noted, courts generally allow a CUTPA claim against a surety for an alleged statutory violation; this has been true in cases against a general contractor as well.
The court in Silktown Roofing v. Haynes Construction, Superior Court, judicial district of Middlesex, Docket No. CV-05-4004864-S, (August 3, 2006, Dubay, J.) (41 Conn. L. Rptr. 770) decided a similar issue as in the present case. In Silktown Roofing, the subcontractor plaintiff brought claims against the defendant general contractor for, inter alia, a violation of § 49-41a and CUTPA. The defendant moved to strike the plaintiff's CUTPA claim on the ground that the plaintiff incorporated into its CUTPA claim the same facts that were the basis for the plaintiff's breach of contract claim, and the plaintiff did not plead facts that would demonstrate aggravating circumstances. The plaintiff responded that the CUTPA claim should survive the motion to strike because it alleged that the defendant violated provisions of § 49-41a, and that a violation of the public policy at the heart of that statute gives rise to a viable CUTPA claim. The court agreed with the plaintiff observing that, " [t]he plaintiff . . . alleges that [the defendant's] refusal of payment represented an unfair and/or deceptive and intentional and/or reasonably calculated harmful business practice by [the defendant]. Under the first prong of the test for a viable CUTPA claim . . . these allegations sufficiently offend public policy as articulated by § 49-41a. Accordingly, the plaintiff has pleaded a legally sufficient cause of action . . ." Id., 772. See also Wolverine Fire Protection Co. v. Tougher Industries, supra, 29 Conn. L. Rptr. 731, (denying defendant's motion to strike CUTPA claim against general contractor due to violations of § 49-42); Petra Construction Co. v. Sacred Heart University, Superior Court, judicial district of Hartford, Complex Litigation Docket. No. X03-CV-09-6013738-S, (May 26, 2011, Miller, J.) (52 Conn. L. Rptr. 83, 86) (denying defendant's motion to strike CUTPA claim where plaintiff alleged violation of statutes and therefore sufficiently alleged violation of established public policy).
In this case, the plaintiff has alleged that while engaged in trade and commerce, the defendants have engaged in unfair and deceptive trade practices in violation of CUTPA by: (1) failing to make prompt payment in response to the plaintiff's bond claim letter pursuant to § 49-41a(c); (2) failing to make prompt payment pursuant to the plaintiff's bond claim letter after being notified by the state several times that payment was due; (3) failing to make prompt payment for change orders that the plaintiff made at the request of Rizzo; (4) making representations regarding payment for change orders that the plaintiff made at the request of Rizzo; and (5) failing to place the amount of the plaintiff's claim into an interest-bearing escrow account in a bank in this state pursuant to § 49-41a(c) after notification of the claim by the plaintiff. The plaintiff further alleges that as a result of Rizzo's unfair and deceptive trade practices, the plaintiff has sustained ascertainable loss and damage. Here, the plaintiff has pleaded facts sufficient for a CUTPA claim against Rizzo based on public policy considerations embodied in § 49-41a. Therefore, the defendant's motion to strike count six of the complaint as well as the corresponding claims for punitive damages and attorneys fees as permitted under counts six and seven is denied.
VI
Count Eight: Violation of CUIPA Against Travelers
The defendants first argue that count eight of the plaintiff's complaint must fail because Connecticut courts have held that CUIPA does not authorize a private cause of action. Alternatively, the defendants argue that even if CUIPA provides for a private cause of action, the eighth count must be stricken because the plaintiff has not pleaded a legally sufficient violation of CUIPA. Specifically, the defendant argues that plaintiff's CUIPA count is legally insufficient in this regard because the plaintiff has improperly alleged unfair settlement practices in relation to a single insurance claim. The plaintiff claims that it has alleged a cognizable CUIPA claim. The plaintiff argues that a private cause of action exists under CUTPA to enforce CUIPA violations. The plaintiff further argues that a private cause of action under CUIPA alone does exist and claims that although the Supreme Court has not addressed this issue, the trial courts have gone either way as to whether CUIPA allows a private cause of action. In opposition to the defendant's claim that the plaintiff has failed to allege that the defendant has committed the alleged wrongful acts with such frequency as to indicate a general business practice, the plaintiff claims that the trial courts are split on the minimum facts required to support a CUIPA claim. The plaintiff relies on those trial court decisions which have been more lenient when a claimant sparsely pleads the facts related to a CUIPA count and have allowed pleading that contain a factual allegation of a specific violation of an insurer's unfair settlement practice.
Although not yet conclusively decided by the Connecticut Supreme Court, most federal and Connecticut state courts have determined that the CUIPA does not provide a private cause of action. See, e.g., Peterson v. Provident Life & Accident Ins. Co., United States District Court, Docket No. 3:96CV2227, (AHN) (D.Conn. July 17, 1997); Casey v. Reliance National Indemnity Co., Superior Court, judicial district of Waterbury, Docket No. CV-97-0140513-S, (April 22, 1998, Kulawiz, J.); Joseph v. Hannan Agency, Inc., Superior Court, judicial district of Danbury, Docket No. 323310, (January 9, 1997, Moraghan, J.) ; Stabile v. Southern Connecticut Hospital Systems, Inc., Superior Court, judicial district of Fairfield, Docket No. 326120, (October 31, 1996, Levin, J.) (18 Conn. L. Rptr. 157); Brothers v. American Home Assurance Co., Superior Court, judicial district of New Haven, Docket No. CV-94-0364725-S, (August 24, 1995, Hartmere, J.) (15 Conn. L. Rptr. 4). While we must defer to the Connecticut Supreme Court on issues of state law, " where there is no decision by the state's highest court then federal authorities must apply what they find to be the state law after giving proper regard to relevant rulings of other courts of the State." Travelers Ins. Co. v. 633 Third Associates., 14 F.3d 114, 119 (2d Cir. 1994) (quoting Commissioner v. Estate of Bosch, 387 U.S. 456, 465, 87 S.Ct. 1776, 18 L.Ed.2d 886 (1967)). " Moreover, in [ Mead v. Burns, 199 Conn. 651, 509 A.2d 11, 15-16 (1986)], the Connecticut Supreme Court characterized CUIPA as a penal statute requiring a construction 'limiting rather than expanding civil liability'--further supporting the proposition that no private cause of action is available under the statute." Lander v. Hartford Life & Annuity Ins. Co., 251 F.3d 101, 118-19 (2nd Cir. 2001).
Neither our Supreme Court nor our Appellate Court have ruled on whether a private right of action exists under CUIPA. While the Superior Courts which have considered the question are divided, a majority have determined that no private right of action exists. Szlachetka v. Mullen, Superior Court, judicial district of New Britain, Docket No. CV-02-0513409-S, (February 25, 2003, Dunnell, J.). The consensus of these courts may be summarized as follows: (1) there is no express authority under CUIPA for private causes of action; (2) CUIPA is not ambiguous; (3) the regulatory scheme under CUIPA contemplates investigation and enforcement actions to be taken by the insurance commissioner; and (4) consequently there is no private cause of action under CUIPA. See, for example, Ginaetti v. Greater Bridgeport Individual Practice Association, Superior Court, judicial district of Fairfield, Docket No. 02-0396581-S, (May 28, 2004, Doherty, J.); Fedora v. Worcester Ins. Co., Superior Court, judicial district of New Haven, Docket No. CV-03-0285288-S, (September 28, 2004, Tanzer, J.).
A number of courts have taken particular note of the express private right of action provided under CUTPA and the absence of similar provisions under CUIPA. 1049 Asylum Ltd. Partnership v. Kinney Pike Ins., Superior Court, judicial district of Hartford, Docket No. CV 02-0816344-S, (May 30, 2003, Booth, J.) (34 Conn. L. Rptr. 723).
" [CUIPA] . . . prohibits unfair or deceptive acts in the business of insurance. [As previously discussed], CUIPA does not provide a private cause of action . . . Although CUIPA does not provide a private cause of action, a plaintiff may bring a CUTPA claim for an alleged violation of CUIPA." (Citations omitted.) Traylor v. Awwa, 899 F.Supp.2d 216, 226 (D.Conn. 2012). " In order to sustain a CUIPA action under CUTPA, a plaintiff must allege conduct that is proscribed by CUIPA." Nazami v. Patrons Mutual Ins. Co., 280 Conn. 619, 625, 910 A.2d 209 (2006).
The plaintiff relies on the Superior Court decision in George's Auto Parts, Inc. v. Providence Washington Ins. Co., Superior Court, judicial district of New Haven, Docket No. CV-00-0439407-S, (February 8, 2001, Munro, J.), which held that a private right of action exists under CUIPA. The CUIPA claim in George's Auto Parts, was brought with allegations of CUTPA. While the Superior Court in that case decided that CUIPA allowed for a private cause of action, authorizing the insurance commissioner to examine the business affairs of those engaged in the insurance practice, it noted that a plaintiff still had to meet the legal standard of an unfair insurance practice to bring such a claim.
" Our Supreme Court has held that a 'private cause of action [exists] under CUTPA to enforce alleged CUIPA violations." Rams II, LLC v. Massachusetts Bay Ins. Co., Superior Court, judicial district of New Haven, Docket No. CV-13-6043177-S, (May 11, 2015, Vitale, J.), citing, Mead v. Burns, 199 Conn. 651, 663, 509 A.2d 11 (1986). This court agrees with the majority and therefore concludes that there is no private right of action under CUIPA alone.
The defendants also maintain that Travelers was acting as a surety, and not in its capacity as an insurer, and therefore a CUIPA claim is not properly brought against it. This is supported by the holding in
However, in reviewing the plaintiff's allegations contained in the CUIPA count, in the light most favorable to the plaintiff, the plaintiff, by incorporating paragraphs 1-8 of the seventh count has alleged that, " [w]hile engaged in trade and commerce, the Defendant Travelers has engaged in unfair trade practices in violation of C.G.S. § 42-110g including, but not limited to . . . not attempting in good faith to effectuate prompt settlement of claims in which liability is reasonably clear as established by C.G.S. § 38a-816(6). The plaintiff further alleges in paragraph nine of count eight that, " [while] engaged in trade or commerce, the Defendant Travelers has engaged in unfair insurance practices in violation of § 38a-816, including, but not limited to . . . failing to make prompt payment in response to the Plaintiff's bond letter claim pursuant to § § 49-42 and 38a-816(6)(m); [and] . . . [n]ot attempting in good faith to effectuate prompt settlement of claims in which liability is reasonably clear as established by C.G.S. § 38a-816(6)(c). Thus, plaintiff has properly alleged its CUIPA claim in conjunction with its CUTPA claim.
Section 38a-816(6), entitled " Unfair claim settlement practices, " defines the following in relevant part as unfair methods of competition and unfair and deceptive acts or practices in the business of insurance: " Committing or performing with such frequency as to indicate a general business practice any of the following: (A) Misrepresenting pertinent facts or insurance policy provisions relating to coverages at issue; (B) failing to acknowledge and act with reasonable promptness upon communications with respect to claims arising under insurance policies; (C) failing to adopt and implement reasonable standards for prompt investigation of claims arising under insurance policies; (D) refusing to pay claims without conducting a reasonable investigation based upon all available information; (E) failing to affirm or deny coverage of claims within a reasonable time after proof of loss statements have been completed; (F) not attempting in good faith to effectuate prompt, fair and equitable settlements of claims in which liability has become reasonably clear; (G) compelling insureds to institute litigation to recover amounts due under an insurance policy by offering substantially less than the amounts ultimately recovered in actions brought by such insureds; [and] . . . (N) failing to promptly provide a reasonable explanation of the basis in the insurance policy in relation to the facts or applicable law for denial of a claim or for the offer of a compromise settlement . . ."
The eighth count of the plaintiff's complaint incorporates the first eight paragraphs of the seventh and alleges in paragraphs 7 and 8 respectively that, " [t]he Defendant Travelers is engaged in trade and commerce in Connecticut [and] [w]hile engaged in trade and commerce, the Defendant Travelers has engaged in unfair trade practices." The plaintiff additionally alleges in paragraph 9 that, " [w]hile engaged in trade and commerce, the Defendant Travelers has engaged in unfair insurance practices in violation of § 38a-816, including, but not limited to: (1) Failing to make prompt payment in response to the Plaintiff's bond claim letter pursuant to C.G.S. § § 49-42 and 38a-816(6)(m); (2) Not attempting in good faith to effectuate prompt settlement of claims in which liability is reasonably clear as established by C.G.S. § 38a-816(6)(c); and (3) Failing, as surety on the bond, to indemnify the [p]laintiff for any loss or damaged sustained." In paragraph 10 of the eight count the plaintiff alleges that " [t]he Defendant Travelers' failure to make prompt payment, lack of good faith to effectuate prompt settlement of claims, and failure to indemnify for loss or damage sustained is a part of a pattern of frequency of similar unfair trade and insurance practices engaged in by the Defendant, where on prior occasions, it has also failed to act in good faith to make prompt payments and settlements."
The defendant claims that the plaintiff has failed to allege specific facts to show that Travelers engaged in such settlement claim practices with such frequency to be considered a general business practice. The issue presented here therefore, is whether the plaintiff has adequately alleged a general business practice in violation of § 38a-816(6) or merely alleged an isolated instance of insurer misconduct.
" [Section] 38a-816(6) requires that a plaintiff allege and prove that the relevant conduct was a part of a general business practice." Capstone Building Corp. v. American Motorist Ins. Co, 308 Conn. 760, 802 n.41, 67 A.3d 961 (2013). Our Supreme Court has explicitly stated, however, that " improper conduct in the handling of a single insurance claim, without any evidence of misconduct by the defendant in the processing of any other claim, does not rise to the level of a 'general business practice' as required by § 38a-816(6)." (Citation omitted.) Lees v. Middlesex Ins. Co., 229 Conn. 842, 849, 643 A.2d 1282 (1994). " [C]laims of unfair settlement practices under CUIPA require a showing of more than a single act of insurance misconduct . . . The definition of unacceptable insurer conduct in [General Statutes] § 38-61 [now § 38a-816] reflects the legislative determination that isolated instances of unfair insurance settlement practices are not so violative of the public policy of this state as to warrant statutory intervention." Mead v. Burns, supra, 199 Conn. 659-66.
" A split of authority exists regarding the degree of specificity required when pleading a general business practice under CUIPA to survive a motion to strike. One line of cases . . . requires that the plaintiff plead specific facts to demonstrate acts of insurer misconduct that go beyond the plaintiff's immediate claim . . . The other line of cases ha[s] held, essentially, that as long as the plaintiff alleges that the insurer misconduct involves other insureds, pleading specific instances of such misconduct is not required." (Citation omitted; internal quotation marks omitted.) Afifi v. Standard Fire Ins. Co., Superior Court, judicial district of New Haven, Docket No. CV-11-6017083, (October 21, 2011, Zoarski, J.T.R.). " The fact that there is a split among Superior Courts on this issue is not surprising: it is a thorny one. On the one hand, there is the burden upon the plaintiff's lawyer, without access to the insurance company's records, to discover somehow the existence of other instances of the same conduct in sufficient quantity to represent the company's 'general business practice.' On the other hand, [there is the issue of] whether a plaintiff should be able to invoke the panoply of pretrial discovery techniques to rummage around in the company's books and records simply by alleging that he has 'knowledge and belief' that it has engaged in the same allegedly unlawful acts with others as it has with the plaintiff, without at least alleging that he has personal knowledge of other cases in which this conduct has occurred." Active Ventilation Products, Inc. v. Property and Casualty Ins. Co. of Hartford, Superior Court, judicial district of Hartford, Complex Litigation Docket, Docket No. X09-CV-08-5023757-S, (July 15, 2009, Shortall, J.).
The better reasoned rule is that a plaintiff need not plead specific instances of insurer misconduct other than those instances specific to the plaintiff so long as the misconduct alleged involves other insureds. This is so because " [u]ntil discovery has been completed . . . the plaintiff is entitled to the opportunity to gather information supporting its claim that the defendants' alleged wrongful conduct has been committed with such frequency as to indicate a general business practice. After discovery a motion for summary judgment would be the appropriate vehicle to test whether the plaintiff can show a general business practice of insurance misconduct." (Internal quotation marks omitted.) Savanella v. Kemper Independence Ins. Co., Superior Court, supra, 53 Conn. L. Rptr. 219; O'Leary Ltd. v. Travelers Property Casualty Co., Superior Court, judicial district of New London at Norwich, Complex Litigation Docket, Docket No. X04-CV-99-0121281-S (May 5, 2001, Koletsky, J.). The plaintiffs here have alleged conduct defined as unfair claim settlement practices that were " frequently committed and a general practice" of the defendants. Specifically, the plaintiffs allege that the defendant Travelers' " failure to make prompt payment, lack of good faith to effectuate prompt settlement of claims, and failure to indemnify for loss or damage sustained is a part of a pattern or frequency of similar unfair trade and insurance practices engaged by the Defendant, where on prior occasions, it has also failed to act in good faith to make prompt payments and settlements." These allegations sufficiently state improper conduct in the handling of more than one insurance claim so as to adequately allege a general business practice in violation of § 38a-816(6). See O'Connor v. QBE, Superior Court, judicial district of New Haven, Docket No. CV-12-6032396-S, (June 26, 2014, Wilson, J.) (this court followed line of cases that held, essentially, that as long as plaintiff alleges that insurer misconduct involves other insureds, pleading specific instances of such misconduct is not required). In light of the foregoing, the plaintiff should be offered an opportunity to prove these allegations or face summary judgment.
Accordingly, the defendants' motion to strike count eight of the complaint is denied.
CONCLUSION
For the foregoing reasons, the defendants' motion to strike counts one, six, seven and eight of the plaintiff's complaint and the corresponding prayers for relief is denied, and the motion to strike count three and the corresponding prayer for relief, paragraph 11(d) of count five, and paragraph 8(d) of count seven is granted.
Breen v. Phelps, 186 Conn. 86, 99, 439 A.2d 1066 (1982).
Paradigm cites to several cases in other states that have statutes similar to § 49-42, and that have barred common-law actions on the bond. Midasco, Inc. v. M.E. Hunter & Associates, United States District Court, Docket No. 2:05CV508 (E.D.Va. February 23, 2006) (holding that there is no common-law right to sue outside statute under which bond is issued); Joseph Hughes & Co., Inc. v. George H. Robinson, Corp., 211 Va. 4, 175 S.E.2d 413 (1970) (same); Philip Carey Manufacturing Co. v. Peerless Casualty Co., 330 Mass. 319, 113 N.E.2d 226 (same); Martin Fireproofing Corp. v. Aetna Ins. Co., 346 Mass. 498, 194 N.E.2d 101 (1953) (same).
Blakeslee Arpaia Chapman, Inc. v. United States Fidelity & Guaranty Co, supra, 11 Conn. L. Rptr. 174, where the court determined that a CUIPA claim against a surety is not maintainable because a bond is not a policy of " insurance" within the meaning of CUIPA. The court first looked at the language set forth in § 38a-315, and then the definition of insurance under General Statutes § 38a-1(10). Section 38a-815 provides in relevant part: " No person shall engage in this state in any trade practice which is defined in section 38a-816 as, or determined pursuant to sections 38a-817 and 38a-818 to be, an unfair method of competition or an unfair or deceptive act or practice in the business of insurance . . ." (Internal quotation marks omitted.) Id., 174. Further, " General Statutes § 38a-1(10) defines 'insurance in the following manner: '[I]nsurance means any agreement to pay a sum of money, provide services or any other thing of value on the happening of a particular event or contingency or to provide indemnity for loss in respect to a specified subject by specified perils in return for a consideration. In any contract of insurance, an insured shall have an interest which is subject to a risk of loss through destruction or impairment of that interest, which risk is assumed by the insurer and such assumption shall be part of a general scheme to distribute losses among a large group of persons bearing similar risks in return for a ratable contribution or other consideration.'" Id. A number of Superior Court decisions decided since then, however, have rejected this contention. See Brico, LLC v. Travelers Casualty & Surety Co., supra, 51 Conn. L. Rptr. 162, (court agreed that surety contract and performance bond at issue fall within definition of insurance for purposes of CUIPA); Travelers Casualty v. F& F Mechanical Contractors, Inc., supra, 29 Conn. L. Rptr. 720 (unfair practices in execution of surety contracts is within the statutory reach of CUIPA); Mountain Laurel Construction, LLC v. Brennan Construction Co., Superior Court, judicial district of Hartford, Docket No. CV-96-0557319-S, (July 1, 1996, Lavine, J.) (insurance companies calling themselves sureties are still insurers for purposes of CUIPA). This court agrees with these trial decisions decided since Blakeslee Arpaia Chapman concluding that sureties are insurers for purposes of CUIPA.