Opinion
FSTCV186036155S
10-29-2018
James Socci v. Leo Socci, Jr.
UNPUBLISHED OPINION
Judge (with first initial, no space for Sullivan, Dorsey, and Walsh):Povodator, Kenneth B., J.T.R.
MEMORANDUM OF DECISION re MOTION TO DISMISS (#102.00)
POVADATOR, JTR
Factual/Procedural Background
This is the second of two related cases that in abbreviated form, are captioned Socci v. Socci . This case was commenced in 2018; the earlier case, more accurately/completely captioned as Leo Socci, Jr. v. James Socci (FSTCV176032566S), was commenced in 2017. Both proceedings involve the parties’ relationship in a business- an LLC- of which they were the sole owners, and directly or indirectly both actions arise from, or are based on, the conduct of the parties in the operation of that business. Of particular significance to the issue before the court, the plaintiff in this case, James Socci, filed a counterclaim in the earlier proceeding, and the specifications of wrongdoing in the counterclaim are facially near-identical to the specifications of wrongdoing in the complaint in this case (where he is the plaintiff, at least in nominal terms).
The defendant in this action has moved to dismiss this action, claiming that dismissal is appropriate under the prior pending action doctrine. Adopting an argument suggested by the above paragraph, the defendant contends that the parties are the same, and the issues are the same (comparing the allegations of the earlier counterclaim and the allegations in this complaint), and the underlying facts are essentially the same, such that the doctrine is claimed to be applicable.
In response, the plaintiff in this action claims that the parties are not the same because the plaintiff in this case is acting in a representative capacity, asserting a derivative action claim against the defendant, and as a result of that representative capacity, the parties are not the same. Further, because it is well-established that an individual can only assert personal claims, as opposed to claims of a corporate entity, the claims necessarily must be different.
Discussion
At the outset, the court must address the contention of the defendant that the issue implicates subject matter jurisdiction. "Subject matter jurisdiction involves the authority of the court to adjudicate the type of controversy presented by the action before it." Stefanoni v. Department of Economic and Community Development, 142 Conn.App. 300, 306 (2013) (internal quotation marks and citation, omitted). Once raised, the court must address and resolve a challenge to subject matter jurisdiction; Sousa v. Sousa, 157 Conn.App. 587, 599-600 (2015).
Although the court will address the merits of the claimed applicability of the prior pending action doctrine, the court rejects the characterization of doctrine as implicating subject matter jurisdiction.
First, we observe that "although a motion to dismiss is the proper vehicle to raise the issue of a prior pending action, the doctrine does not truly implicate subject matter jurisdiction." Gaudio v. Gaudio, supra, 23 Conn.App. at 294, 580 A.2d 1212; see also Halpern v. Board of Education, supra, 196 Conn. at 652 n. 4, 495 A.2d 264; In re Jessica M., 71 Conn.App. 417, 427, 802 A.2d 197 (2002) (declining to review claim raising prior pending action doctrine for first time on appeal, because subject matter jurisdiction not implicated). Bayer v. Showmotion, Inc., 292 Conn. 381, 403, 973 A.2d 1229, 1244 (2009).
Therefore, the court is not evaluating a matter that is subject to the rules applicable to subject matter jurisdictional challenges, but rather is evaluating a claim that is based on equitable and practical considerations- is there any purpose served by having seemingly duplicative proceedings pending simultaneously? In Bayer, notwithstanding the Supreme Court’s determination that the requirements for invocation of the prior pending action doctrine were applicable, the court also determined that it would not conclude that the trial court had committed reversible error in failing to apply the doctrine. ("Accordingly, we conclude that the trial court properly denied the defendant’s motion to dismiss under the circumstances presented in this case, notwithstanding our agreement with the defendant that its claims were virtually alike and adjudicated the same underlying rights of the parties." 292 Conn. 404.) Thus, satisfaction of the criteria for the doctrine does not require, in absolute terms, application of the doctrine, i.e. dismissal.
Bayer sets forth the general parameters of the doctrine:
The pendency of a prior suit of the same character, between the same parties, brought to obtain the same end or object, is, at common law, good cause for abatement. It is so, because there cannot be any reason or necessity for bringing the second, and, therefore, it must be oppressive and vexatious. This is a rule of justice and equity, generally applicable, and always, where the two suits are virtually alike, and in the same jurisdiction. (Internal quotation marks and citations, omitted.) 292 Conn. 395-96.
Bayer also discussed the level of similarity required for purposes of the prior pending action doctrine:
On the basis of this language, we conclude that the trial court must determine in the first instance whether the two actions are: (1) exactly alike, i.e., for the same matter, cause and thing, or seeking the same remedy, and in the same jurisdiction; (2) virtually alike, i.e., brought to adjudicate the same underlying rights of the parties, but perhaps seeking different remedies; or (3) insufficiently similar to warrant the doctrine’s application. 292 Conn. 397.
The plaintiff contends that the parties are different. The defendant relies upon the fact that the parties named in the summons for each case, and the parties named in the complaints and counterclaim are the same (James Socci and Leo Socci, Jr.). The plaintiff emphasizes that in this case, while James Socci is the human embodiment of the plaintiff, he is acting in a representative capacity rather than in a personal capacity, and with that distinction, the parties are not the same. That distinction was the basis for the outcome in Scarfo v. Snow, 168 Conn.App. 482, 146 A.3d 1006 (2016); and especially in light of footnote 10 at page 503- the plaintiff in his individual capacity lacked standing, but if he had sued as a representative of the corporate entity in a derivative action, he likely would have been able to pursue the claims he had unsuccessfully pursued in the actual litigation.
One of the "complications" in this case is that the corporate entity was not named as a party- in a derivative action, the entity on behalf of whom the plaintiff claims to be acting is often named as a defendant to ensure party status. Thus, for example, in a recent appeal involving a derivative action, Sojitz America Capital Corp. v. Kaufman, 141 Conn.App. 486, 61 A.3d 566 (2013), an examination of the trial court level file (Judicial District of Hartford, HHDCV116018649S) discloses that the corporate entity on whose behalf the plaintiff was pursuing the action was named as a defendant. Further emphasizing the representative status of the plaintiff, the caption on the complaint in Sojitz specifically referred to the plaintiff as acting "derivatively on behalf of" the corporate entity that also was named again, below in the caption, as an additional defendant, after the named defendant was identified. That is consistent with the observation in Scarfo, supra, 168 Conn.App. 501: "[In many of these actions, the] corporation is in an anomalous position of being both a defendant and a plaintiff in the same action." (Internal quotation marks and citation, omitted.)
Anecdotally, within the last week, the court conducted a status conference on two derivative actions involving a publicly-traded corporation, and the same approach was taken as in Sojitz- derivative status reflected in identification of the plaintiff and the corporate entity as a named defendant.
The issue before the court is not whether such identifications are necessary; the point is that it is common to have the distinct status of the party acting in a derivative capacity more clearly delineated, with the corporation often as a named defendant to further emphasize the derivative nature of the proceeding. Here, there is no "obvious" indicium of representative/derivative status, absent a careful examination of the allegations of the complaint. Thus, the contention of identity of parties by the defendant is understandable in the sense of persons named, but the issue is far more subtle- and less obvious- when functional party status is considered.
Focusing now on similarity of claims, the court acknowledges that in a nontechnical sense, the claims in both actions do appear similar, if not "virtually alike." The claims asserted by the plaintiff in this matter seem to mirror the claims he asserted in the counterclaim in the earlier proceeding. However, the court believes that such a facial examination leaves hidden the true nature of the relationship between the claims- a more subtle or nuanced review is required. It probably would be more accurate to say that the claims are complementary rather than duplicative.
It is well-established that an individual, as an individual, lacks standing to assert claims of injury to the corporate entity of which he/she may be a shareholder or member. See, Scarfo, supra ; see, more recently, Bongiorno v. Capone, 185 Conn.App. 176, 194-202 (2018). As reflected in these cases, however, it is often an issue as to whether the claimed injury is personal to the plaintiff, or is an injury to the corporate entity such that a derivative action, if not an action directly brought by the corporate entity, would be the proper approach.
The court notes that a motion to dismiss filed in the 2017 action was denied, but as in the cases cited above, the proper characterization of claims as personal or corporate may not always be easy to discern before or during trial. That suggests that complementarity may the proper perspective- if it is assumed and later proved that misconduct occurred, then to the extent that those claims may not properly be asserted by an individual as an individual who is a co-owner/shareholder, they can or should be asserted by way of derivative action.
The doctrine of prior pending action is grounded in, and justified by, the concept of judicial economy. In that sense, cases such as Bongiorno and Scarfo were exercises in inefficiency, as issues were adjudicated based on claims that individuals were the proper parties to advance claims of injury, each case ending with an appellate determination that those proceedings (or the relevant portion of the proceedings) had been a nullity. Here, however, if the cases are tried simultaneously, there will be no such inefficiency, given the complementarity of the claims. If James Socci lacks standing in the earlier case to assert his counterclaim against Leo Socci because the claims implicate harm to the corporate entity, then the derivative claims in this proceeding would be appropriate; but to the extent that the claims are personal, then it is the earlier counterclaim and not this action that would provide a jurisdictionally-appropriate forum in which to pursue the claims. Therefore, allowing both cases to proceed- presumably simultaneously- would avoid (or at least minimize) inefficiency rather than create inefficiency.
To be precise, in Scarfo, the trial court had ruled against the plaintiff on the merits; the appellate determination was that the plaintiff had lacked standing to pursue the action in the first instance, and remanded for dismissal. In Bongiorno, there had been a trial court finding
Conclusion
Bayer makes it clear that the doctrine is not to be applied mechanically, but with an eye on common sense and practical consequences. The status under which an individual is pursuing a claim can be essential if not determinative to the existence of standing, Thus, in Kortner v. Martise, 312 Conn. 1, 9-14, 91 A.3d 412 (2014), the court recognized that there might be an issue as to standing of a conservator to pursue an action on behalf of the conserved person, but once the conserved person had died and the conservator assumed a new role as administratrix, she had standing to (continue to) pursue a claim on behalf of the decedent.
The court concludes that the practical solution is to allow both cases to proceed such that whether the claims of James Socci are purely personal, or whether the claims actually are asserting rights of the corporate entity such that James Socci only can proceed through a derivative action- or whether perhaps his claims involve a bit of both- there will be a full and final resolution of all claims, with minimal additional transactional costs, if the cases are tried together.
The court recognizes that the plaintiff filed a motion to dismiss in the earlier proceeding (in his status as a defendant), which was denied, asserting that the claims of the plaintiff therein were not personal to the plaintiff. At argument on this motion, counsel for the plaintiff acknowledged that his counterclaim in the earlier proceeding might be flawed for that same reason. The merits of the claims in the earlier proceeding are not before this court at this time (nor is the jurisdiction of the court over that earlier proceeding); the claims are only relevant to the extent that they inform a decision on this motion to dismiss. Therefore, this is not a situation where "there cannot be any reason or necessity for bringing the second [action], and, therefore, it must be oppressive and vexatious"- there is a reason and a plausible claim of necessity for this second action such that it cannot be dismissed- metaphorically and/or technically- as "oppressive and vexatious." For all these reasons, the motion to dismiss is denied.