Opinion
X08FSTCV156025380
04-01-2019
Robert Russo, Executor et al. v. Brett W. Thornton et al.
UNPUBLISHED OPINION
Judge (with first initial, no space for Sullivan, Dorsey, and Walsh): Lee, Charles T., J.
SUPPLEMENTAL RULING
Charles T. Lee, Judge
Background
This case was commenced on or about May 15, 2015 by Attorney Robert Russo as executor of the Estate of Thomas F. Thornton, and by Home Dental Care, Inc. and Thornton International, Inc. against Mr. Brett Thornton, who is the son of the late Mr. Thomas Thornton, and two companies controlled by him, ProxySoft Worldwide, Inc. and ProxySoft Direct, Inc. The operative complaint contains eight counts against Mr. Brett Thornton including (1) breach of fiduciary duty, (2) statutory theft (Gen. Stat. § 52-564), (3) conversion, (4) breach of the Connecticut Uniform Trade Secrets Act (Gen. Stat. § § 35-50 et seq., "CUTSA"), (5) tortious interference with contract and business expectancies, (6) Violation of the Lanham Act (15 U.S.C. 1125(a), (7) common-law injunctive relief, and (8) violation of the Connecticut Unfair Trade Practices Act (Gen. Stat. § § 42-110 et seq., "CUTPA"). Counts Three, Four and Five were also asserted against ProxySoft Worldwide, Inc. and ProxySoft Direct, Inc. All counts arise out of Mr. Thornton’s alleged diversion of corporate opportunities to his ProxySoft entities away from Thornton International while acting as its president, as well as theft of assets and unfair competition.
The first five counts were tried to a jury commencing on October 11, 2017 and concluding on October 25, 2017. The Lanham Act, injunctive relief and CUTPA counts were reserved for trial to the court. The jury awarded damages against Mr. Thornton as follows: breach of fiduciary duty, $1,721,000; statutory theft, $555,000; conversion— zero; breach of trade secrets act— zero; tortious interference with contract and business expectancies, $1,316,000; for a total award of $3,592,000. The jury also authorized recovery of attorneys fees as punitive damages under the conversion count. It did not award any damages against the ProxySoft entities.
On March 22, 2018 , the court issued a revised memorandum of decision on defendants’ motion to set aside the verdict. The court ruled that the verdict was not an improper quotient verdict but held that the verdict was excessive. The court found that the award of $1,316,000 for tortious interference under Count Five was based on the loss of the benefits of business relationships with Thornton International’s clients as diverted by Mr. Thornton, and that this loss was included within the award of $1,721,000 for breach of fiduciary duty under Count One. Applying the principle that a plaintiff may recover damages for the same loss only once; Haynes v. Yale-New Haven Hospital, 243 Conn. 17, 23 (1997); the court granted a remittitur in the amount of $1,316,000, which reduced the total of damages awarded to $2,276,000. Shortly thereafter, the plaintiffs accepted the remittitur.
Prior to trial, the parties had agreed that counts six (Lanham Act), seven (common-law injunctive relief) and eight (CUTPA) would be tried to the court. After trial, the plaintiffs withdrew counts six and seven, leaving only count eight, sounding in CUTPA, and a claim for statutory injunctive relief under count four (Connecticut Uniform Trade Secrets Act).
In post-trial briefing, the plaintiffs indicated that they had rested after the presentation of evidence to the jury and did not seek to offer any further evidence with respect to the counts to be tried to the court. They sought judgment under the CUTPA count and an injunction under CUTSA. Defendants objected, stating that plaintiffs were not in the class of persons protected by CUTPA, and that they sought to submit further evidence with respect to the CUTPA claim. The defendants also objected to any injunctive relief under count four because, among other things, the claim had not been properly preserved. As explained below, the court will allow the defendants to submit additional testimony as to punitive damages during the bench trial of the CUTPA count, and denies judgment as to the requested royalties in lieu of injunctive relief under CUTSA.
Discussion
A. CUTPA
Paragraph 37 of the Eighth Count of the complaint alleges that defendants are liable to plaintiffs for violation of CUTPA because defendants’ conduct was "immoral, unscrupulous and unethical in one or more of the following ways": and specifies (A) breach of fiduciary duty, (B) theft and conversion; (C) interference with business relations; (D) violation of the Lanham Act; and (E) appropriation of trade secrets. The plaintiffs claim compensatory damages in the amount of $1,248,000 "in terms of the [loss of] value of Thornton International, Inc. alone." Pl. Post-Trial Br., at 15.
In ruling on the motion for remittitur, the court found that the loss of value of Thornton International was an element of damages awarded for breach of fiduciary duties under Count One:
Plaintiffs claimed that Mr. Thornton’s breach of fiduciary duty in diverting its business to the ProxySoft entities caused the destruction of Thornton International (TI). In order to monetize the damages from the collapse of Thornton International, plaintiffs’ damage expert, Mr. John M. Leask, CPA, evaluated the fair market value of the company’s common stock as of the date of Mr. Thomas Thornton’s death, February 5, 2014, as of January 1, 2015, and as of April 30, 2015. The expert’s report (Trial Exhibit 36) concluded, "However, because all of TI’s customers appear to have been lost to Proxysoft (sic) by April 30, 2015 through the actions of Brett Thornton, unless TI is successful in the current litigation against him and his companies and its customers return to TI, once these assets have been spent and/or distributed TI will have no value." In short, the loss of its customers is what caused the total loss of value of the company.3/22/18 memorandum of decision, D.N. 249, at 18. As a result, the compensatory damages plaintiffs seek under CUTPA for the diminution of value of Thornton International have already been evaluated and awarded by the jury and construed by the court in its remittitur decision. "Duplicate recoveries must not be awarded for the same underlying loss under different legal theories. Although a plaintiff is entitled to allege alternative theories of liability in separate claims, he is not entitled to recover twice for harm growing out of the same transaction, occurrence or event." (Citation omitted.) Catalina v. Nicolelli, 90 Conn.App. 219, 225 (2005). Accordingly, plaintiffs have not established their entitlement to the compensatory damages they assert under CUTPA and the court denies that claim.
However, CUTPA also provides for the recovery of punitive damages and attorneys fees. The plaintiffs seek an award of punitive damages in the amount of $1,138,000, or fifty percent of the jury’s total award. In Ulbrich v. Groth, 310 Conn. 375, 446 (2013), our Supreme Court stated that, "[i]n order to award punitive or exemplary damages [under CUTPA], evidence must reveal a reckless indifference to the rights of others or an intentional and wanton violation of those rights ... In fact, the flavor of the basic requirement to justify an award of punitive damages is described in terms of wanton and malicious injury, evil motive and violence." (Internal quotation marks omitted.) Id., at 446. The court also stated that the factors that a court should consider in determining the amount of a punitive damages award include "the degree of relative blameworthiness, whether the defendant’s action was taken to maximize profit, whether the wrongdoing was difficult to detect, the extent of the plaintiff’s injuries, the amount of compensatory damages awarded, and whether the punitive damages award would deter the defendant and others from similar conduct, without financially destroying the defendant." Id., at 454.
C.G.S. Section 42-110g(a) provides in pertinent part, "The court may, in its discretion, award punitive damages and may provide such equitable relief as it deems necessary or proper." Section 42-110a(d) provides in pertinent part, "In any action brought by a person under this section, the court may award, to the plaintiff, in addition to the relief provided in this section, costs and reasonable attorneys fees based on the work reasonably performed by an attorney and not on the amount of recovery."
Because factors to be considered in connection with an award of punitive damages include the defendant’s state of mind, motivation and financial situation, among other things, the defendant will be allowed to put in relevant testimony in its defense during the court trial relating to punitive damages and the amount of attorneys fees to be awarded.
However, the court refers to the "defendant" in the singular because the court finds that the plaintiffs have not established a prima facie case against the ProxySoft entities for a violation of CUTPA. This is because the jury, while finding their improper use of Thornton International trade secrets, did not award any damages. Accordingly, with respect to the ProxySoft entities, the court finds that the plaintiffs have not demonstrated "ascertainable loss," which is a necessary element of a cause of action under CUTPA. See Section 42-110g(a).
Finally, defendants contend that CUTPA should not apply to this case because it is in essence an intra-family or intra-corporate dispute and does not involve a consumer or commercial relationship between the parties. While the court does not opine on the validity of this contention at this time, it notes that the scope of CUTPA has been addressed in a profound way by our Supreme Court’s recent decision in Soto v. Bushmaster International, LLC, 331 Conn. 53 (2019). In allowing a CUTPA count, filed by the victims’ parents and survivors, to proceed against the manufacturer, distributor and vendor of the assault weapon used in the murder of Newtown, schoolchildren and teachers, the court stated,
General Statutes § 42-110g(a) creates a private right of action for persons injured by unfair trade practices and provides in relevant part: "Any person who suffers any ascertainable loss of money or property, real or personal, as a result of the use or employment of a method, act or practice prohibited by section 42-110b, may bring an action ... to recover actual damages ..." (Emphasis added.) On its face, the statute plainly and unambiguously authorizes anyone who has suffered an ascertainable financial loss as a result of an unfair trade practice to bring a CUTPA action. Nothing in the text of the statute indicates that the right afforded by § 42-110g(a) is enjoyed only by persons who have done business of some sort with a defendant.
Even if we were to conclude that the statute is ambiguous in this regard, we perceive nothing in the legislative history or purpose of the statute that would support the defendants’ theory that something more than an ascertainable financial loss caused by a prohibited act is necessary to confer standing under CUTPA.Id., 331 Conn. 88-89 (emphasis in opinion). As a result of this recent decision, the defendants may wish to reevaluate what is, in essence, their standing argument.
B. CUTSA
The jury found that both Mr. Thornton and Proxysoft Worldwide had appropriated trade secrets from Thornton International. Jury Interrogatories Nos. 12 and 15. The jury also awarded no damages against either defendant. Id., Nos. 13 and 16. Nevertheless, the jury found the’ predicate elements establishing a violation of the CUTSA. As a result, the plaintiffs might be entitled to injunctive relief upon a proper showing.
In Paragraph 21 of Count Four of the Amended Complaint and in the third claim for relief, the plaintiffs seek "a permanent injunction barring any further use or dissemination of plaintiffs’ trade secrets pursuant to Conn. Gen. Stat. § 35-52." That section, entitled "Injunctive Relief," provides in pertinent part:
(a) Actual or threatened misappropriation may be enjoined upon application to any court of competent jurisdiction. An injunction shall be terminated when the trade secret has ceased to exist, but the injunction may be continued for an additional reasonable period of time in order to eliminate commercial advantage that otherwise would be derived from the misappropriation.
(b) If the court determines that it would be unreasonable to prohibit future use, an injunction may condition future use upon payment of a reasonable royalty for no longer than the period of time the use could have been prohibited.
Plaintiffs correctly contend that they do not need to make a showing of irreparable harm for an award of a statutory injunction. As held by another court of this judicial district, "[T]he authorization of injunctions in CUTSA is a legislative acknowledgment that a damage remedy alone is not sufficient. Therefore, this court finds that [plaintiff] does not have to prove irreparable harm to obtain injunctive relief. Bauer v. Waste Management of Connecticut, Inc., 239 Conn. 515, 532-33, 686 A.2d 481 (1996); Burns v. Barrett, 212 Conn. 176, 193, 561 A.2d 1378 (1989)." General Reinsurance Corp. v. Arch Capital Group, LTD., Superior Court, judicial district of Stamford/Norwalk, Docket No. X05 CV 074011668S , 2007 WL 3121766, at *11 (October 17, 2007, Adams, J.) .
As provided in subsection (b) cited above, the court finds it would be unreasonable, and unnecessary, to enjoin the defendants from future use of Thornton International’s trade secrets, because Thornton International is out of business. In that case, subsection (b) permits the court to "condition future use upon payment of a reasonable royalty for a period of time no longer than the period of time the use could have been prohibited." The plaintiffs request an award of royalties for three years in the amount of $11,000 per month, calculated by applying ten percent to the gross earnings of Thornton International in 2014, its last full year of operation.
The court declines to do so for the following reasons: First, the plaintiffs did not seek or mention royalties in their complaint or during trial. It would be patently unfair to subject the defendants to an additional award of $396,000 without any warning, which might have influenced, their interest in settlement, among other things. Second, the plaintiffs have provided the court with: no evidence relating to the reasonable rate of any royalties in the relevant industry during the relevant period or why the royalties should be awarded for a three-year period. Expert testimony would have been useful in that regard. The plaintiffs cite to the decision in Dur-A-Flex, Inc. v. Laticrete International, Inc., Superior Court, judicial district of Waterbury, Docket No. CV 06 5014930, 2010 WL 2574146 *2 (May 27, 2010, Eveleigh, J.), in which the court found that it would be unreasonable to prohibit future use, and awarded a royalty of $10,000 per month for five years. However, the jury had awarded plaintiff $43.7 million under the CUTSA count, and the parties had stipulated that a royalty of $10,000 over five years would be a reasonable amount. As a result, the instant case is clearly distinguishable from the situation in Dur-A-Flex, both as to the size of the monetary award, i.e., $43.7 million versus zero, and in light of the parties’ stipulation as to amount and duration of the royalty. Accordingly, in light of the foregoing, the court denies the request for royalties on the basis of a failure of pleading and an absence of proof.
Conclusion
In summary, the court denies any award of compensatory damages to the plaintiffs under CUTPA because they would be duplicative of the damages already awarded by the jury. However, the court will hold an evidentiary hearing with respect to punitive damages, attorneys fees and costs under CUTPA. The court denies the request for an injunction or award of royalties under count four of the complaint. The parties will receive notice of a scheduling conference in the near future.