Opinion
No. CV 075008131
December 30, 2009
MEMORANDUM OF DECISION RE MOTION TO STRIKE
The defendant/counterclaim plaintiff, Prime One/Prime Direc, Inc. (Prime One) filed an amended motion to strike the set off and special defense filed by the plaintiff/counterclaim defendant, SNET Information Services (SNET) arguing that the setoff is improperly asserted and the special defense is insufficient. The plaintiff/counterclaim defendant filed an objection to which the defendant/counterclaim plaintiff filed a brief in reply. The matter was heard at short calendar on October 13, 2009. For reasons more fully set forth herein, this court grants the motion to strike.
The defendant/counterclaim plaintiff filed its original motion to strike on August 26, 2009, to which the plaintiff/counterclaim defendant filed an objection on October 1, 2009. Then, on October 9, 2009, the defendant/counterclaim plaintiff filed amended motions to strike (#190 and 191) to which the plaintiff did not object. Therefore, the amended motion to strike (#191) is the operative pleading.
On February 8, 2007, SNET brought this action against Prime One. To collect an alleged debt in the amount of $271,066.87 for telephone directory advertising services provided on or about and after July 20, 2005. The defendant/counterclaim plaintiff filed seven amended counterclaims on November 20, 2008. On March 30, 2009, the court, Robinson, J., granted the SNET's motion to strike Prime One's seventh amended counterclaim, along with the corresponding prayer for relief. The remaining counterclaims sound in negligence; unjust enrichment; errors, omissions and/or breaches of duty; bad faith; misrepresentation; and CUTPA violation. SNET filed an answer and special defense to the remaining six amended counterclaims on April 30, 2009, in which it asserted 1) its entitlement to a setoff of at least $271,066.87 in the event that it bears any liability and 2) a special defense that limitation of liability provisions in past advertising contracts between it and the defendant should limit any liability it now bears.
SETOFF
SNET's setoff states in its entirety: "To the extent that [the plaintiff] has any liability, which [the plaintiff] denies, [the plaintiff] is entitled to a setoff of at least $271,066.87 for advertising charges owed to [the plaintiff] by the defendant/counterclaim plaintiff." Prime One moves to strike the setoff on the ground that it is improper to assert a claim for a set off to the tort claims. Specifically, Prime One contends that SNET's $271,066.87 contract debt cannot be set off against the damages sought pursuant to the six tort-based amended counterclaims because there is no mutuality between the former amount and the latter one. SNET responds that the setoff is proper with respect to the second counterclaim of unjust enrichment because there is precedent that recognizes such a claim in relation to such a cause of action and the third and fourth counterclaims of "breach of duty" and "bad faith" because they properly sound in contract, not tort.
Practice Book § 10-54 provides: "In any case in which the defendant has either in law or in equity or in both a counterclaim, or right of setoff, against the plaintiff's demand, the defendant may have the benefit of any such setoff or counterclaim by pleading the same as such in the answer, and demanding judgment accordingly; and the same shall be pleaded and replied to according to the rules governing complaints and answers." "It is the defendant's burden to demonstrate its right of setoff by affirmatively and adequately alleging such a claim in the pleadings." Petti v. Balance Rock Associates, 12 Conn.App. 353, 362, 530 A.2d 1083 (1987).
"In Connecticut, a setoff may be legal or equitable in nature." (Internal quotation marks omitted.) Croall v. Kohler, 106 Conn.App. 788, 791, 943 A.2d 1112 (2008). "Legal setoff is governed by General Statutes § 52-139 et seq. and involves mutual debts between the parties in any action: (1) to recover on a debt pursuant to § 52-139; (2) by an assignee of a nonnegotiable chose in action . . . (3) for trespass to real or personal property or other tort committed without force pursuant to General Statutes § 52-141; or (4) involving joint debtors." (Citations omitted; internal quotation marks omitted.) OCI Mortgage Corp. v. Marchese, 255 Conn. 448, 463, 774 A.2d 940 (2001). The only category under which the present action falls is (1). Specifically, § 52-141(a) provides in relevant part: "In a civil action . . . for a tort, unaccompanied by force, resulting in consequential injury, a defendant may set off against any judgment rendered against him any debt which he holds, jointly or severally, against the plaintiff."
Section 52-139 provides in relevant part: "In any action brought for the recovery of a debt, if there are mutual debts between the plaintiff . . . and the defendant . . . one debt may be set off against the other."
"Setoff is the right to cancel or offset mutual debts or cross demands . . . The concept of setoff allows [parties] that owe each other money to apply their mutual debts against each other, thus avoiding the absurdity of making A pay B when B in fact owes A." (Internal quotation marks omitted.) Mariculture Products Ltd. v. Certain Underwriters at Lloyd's of London, 84 Conn.App. 688, 703, 854 A.2d 1100, cert. denied, 272 Conn. 905, 863 A.2d 698 (2004). "A debt is defined as an `unconditional and legally enforceable obligation for the payment of money.' Ballantine's Law Dictionary (3d Ed.)." Id. "`Mutual debts . . . are cross debts in the same capacity and right and of the same kind and quality.'" (Internal quotation marks omitted.) Mariculture Products Ltd. v. Certain Underwriters at Lloyd's of London, supra, 704. "[T]hey must exist between the parties in their own right, and be of the same kind and quality, clearly ascertained and liquidated." General Consolidated, Ltd. v. Rudnick Sons, Inc., 4 Conn. Cir.Ct. 581, 586, 237 A.2d 386 (1967).
"The right of setoff, whether legal or equitable, has always been confined to rights of action arising from contract." Downing v. Wilcox, 84 Conn. 437, 441, 80 A. 288 (1911). "In an action ex contractu . . . it is not permissible to file a counterclaim sounding in tort unless the subject-matter of the counterclaim is so connected with the matter in controversy under the original complaint that its consideration is necessary for a full determination of the rights of the parties." (Emphasis in original; internal quotation marks omitted.) Springfield-DeWitt Gardens v. Wood, 143 Conn. 708, 713, 125 A.2d 488 (1956). The Supreme Court has also held that a party may not set off a contract debt against damages sought in a tort-based cause of action. See Lovell v. Hammond Co., 66 Conn. 500, 508, 34 A. 511 (1895) (plaintiff's substitution of cause of action sounding in tort for one sounding in contract "made it proper to grant the motion to strike out the [defendant's] plea of setoff" based on goods that buyer, for whom plaintiff acted as bankruptcy trustee, had purchased from defendant seller because statutory right of setoff only exists "in actions brought for a recovery of a debt, and when there are mutual debts between the parties").
The $271,066.87 contract debt and the damages sought pursuant to the amended counterclaims in the present case are not "mutual debts" because the latter sum is not "an unconditional and legally enforceable obligation for the payment of money." For this reason, the court is not persuaded by the plaintiff's argument that it may set off the contract debt against the damages sought pursuant to the second amended counterclaim sounding in unjust enrichment.
The case to which the plaintiff cites in support of the argument, Spec Air Systems v. Allied Rawal, Inc., Superior Court, judicial district of New Haven, Docket No. CV 91 0325696 (November 17, 1994, Booth, J.) [ 13 Conn. L. Rptr. 78], involved an unjust enrichment claim based upon a sale of goods in which the damages sought were equal to the cost of the goods. The defendant in the present case alleges in the second amended counterclaim that the plaintiff's improper conduct was not pursuant to an agreement or an understanding between the parties. The defendant also alleges that the plaintiff will be unjustly enriched in the amount of unspecified "benefits" that it has received or will receive because of its improper conduct.
Further, "[i]t is the nature of the relief sought, that determines the character of the action, not simply how it is characterized by the parties." (Internal quotation marks omitted.) Stearns Wheeler v. Kowalsky Bros., 289 Conn. 1, 6, 955 A.2d 538 (2008). The amended counterclaims are based on tortious conduct and not on the performance of contractual obligations. Therefore, SNET has not pleaded sufficient facts to demonstrate that the contract debt and the counterclaim damages are "mutual debts" in accordance with previously formed business-based agreements or understandings. Therefore, the court grants the defendant/counterclaim plaintiff's motion to strike the plaintiff's setoff.
SPECIAL DEFENSE
In its answer and special defense, the plaintiff/counterclaim defendant claims, "To the extent that the [plaintiff] has any liability, which [the plaintiff] denies, the defendant/counterclaim plaintiff is limited by the respective limitation of liability provisions in the advertising contracts between [the plaintiff] and the defendant/counterclaim plaintiff." The defendant/counterclaim plaintiff first seeks to strike the special defense on the ground that it is a legal conclusion lacking sufficient factual support regarding the contracts and/or the provisions upon which the plaintiff relies. Prime One also seeks to strike the special defense on the ground that a party that engages in intentional and/or bad faith behavior, of which it accuses SNET in its fourth, fifth and sixth amended counterclaims, cannot avail itself of a contractual clause that limits liability. SNET responds that the special defense is not a legal conclusion because it "sufficiently apprises the court and opposing counsel of the issues to be tried" and that the special defense is not an attempt to limit its liability for intentional and/or bad faith behavior.
Practice Book § 10-50 provides in relevant part: "Facts which are consistent with such statements but show, notwithstanding, that the plaintiff has no cause of action, must be specially alleged. Thus, accord and satisfaction, arbitration and award, coverture, duress, fraud, illegality not apparent on the face of the pleadings, infancy, that the defendant was non compos mentis, payment (even though nonpayment is alleged by the plaintiff), release, the statute of limitations and res judicata must be specially pleaded." "The fundamental purpose of a special defense, like other pleadings, is to apprise the court and opposing counsel of the issues to be tried, so that basic issues are not concealed until the trial is underway." Bennett v. Automobile Ins. Co. of Hartford, 230 Conn. 795, 802, 646 A.2d 806 (1994).
"A limitation of liability, whether contractual or statutory, is, in substance and effect, a partial release of liability and, as such, is properly the subject of a special defense." New England Savings Bank v. FTN Properties Ltd. Partnership, 32 Conn.App. 143, 146, 628 A.2d 30 (1993). "When applied to contracts to which the parties are sophisticated business entities, the law, reflecting the economic realities, will recognize an agreement to relieve one party from the consequences of his negligence on the strength of a broadly worded clause framed in less precise language than would normally be required, though even then it must evince the unmistakable intent of the parties." (Internal quotation marks omitted.) BD Associates, Inc. v. Russell, 73 Conn.App. 66, 73, 807 A.2d 1001 (2002).
In the present case, the only fact that SNET has pleaded with respect to the special defense pertains to the existence of advertising contracts between the plaintiff and the defendant with provisions that limit any liability which the former party may now bear to the latter party. This is insufficient under Practice Book § 10-2: "Acts and contracts may be stated according to their legal effect, but in so doing the pleading should be such as fairly to apprise the adverse party of the state of facts which it is intended to prove." While the rule does not require a party to "provide detailed factual allegations," it does require that a party "plead something more than conclusory allegations that invite speculation . . ." See Bridgeport Harbour Place I, L.L.C. v. Ganim, 111 Conn.App. 197, 209-10, 958 A.2d 210 (2008), cert. granted, 290 Conn. 906, 962 A.2d 793 (2009) (Appellate Court upheld trial court's grant of motion to strike one-count complaint sounding in antitrust on basis of rule where plaintiff alleged but did not plead sufficient facts to show that defendant's conduct adversely affected competition in relevant market).
The plaintiff's allegation in the present case that there are contracts with provisions limiting liability is conclusory. "Although the court is required to read the pleadings broadly and in the light most favorable to sustaining the legal sufficiency of the claim, it cannot read additional allegations into the pleading, particularly when [an absent] allegation . . . is directly relevant to the . . . purported claim." Pike v. Bugbee, 115 Conn.App. 820, 828 n. 5, 974 A.2d 743, cert. granted, 293 Conn. 923, 980 A.2d 912 (2009) (upholding trial court's grant of motion to strike negligence count against parents of defendant based on vicarious liability when plaintiff did not plead facts regarding defendant's age). Specific contractual language is directly relevant and required in the present case.
The Special Defense also fails to meet the requirement that the plaintiff provide "a plain and concise statement of the material facts upon which [it relies]" such that the defendant has "information as to what actions or lack thereof [the plaintiff relies] on." Therefore, the court grants the defendant/counterclaim plaintiff's motion to strike the plaintiff/counterclaim defendant's special defense.
Because of the foregoing analysis, the court need not reach the defendant's ground that the plaintiff cannot limit liability via contract for intentional and/or bad faith behavior.