Opinion
No. X06 CV 07 5011488 S
April 1, 2009
MEMORANDUM OF DECISION ON THE DEFENDANT'S MOTION TO STRIKE THE SECOND SUBSTITUTE COMPLAINT
STATEMENT OF THE CASE
The plaintiff in this action is the State of Connecticut, acting through the chief information officer of the department of information technology and the commissioner of public safety for the department of public safety. The defendant is Maximus, Inc., a Virginia corporation that is authorized to conduct business in Connecticut.
In the second substitute complaint, the plaintiff alleges that the State, through the department of information technology, entered into an agreement with the defendant to upgrade the Connecticut Online Law Enforcement Communications Teleprocessing System ("Collect System"). The Collect System is a law enforcement messaging and database system used by the department of public safety. The Collect System facilitates the exchange of state and national criminal justice information. Maximus identified Advanced Technology Systems Corporation ("ATS") as its subcontractor. The complaint alleges that the defendant breached the agreement by failing to supply the plaintiff with a Collect System that met the requirements of the agreement. The three-count complaint asserts claims for breach of contract, breach of implied warranty of fitness for a particular purpose and negligent misrepresentation. Pending before the court is the defendant's motion to strike the third count of the complaint alleging negligent misrepresentation.
In this third count, the plaintiff alleges that as part of its contract proposal, the defendant made various false representations to the State. These representations included the following: that the defendant had chosen the most experienced and best qualified personnel available at Maximus and ATS to work on the project; that ATS had the most advanced products in the public safety marketplace and provided unparalleled software development and customer services; that the ATS staff would have the skills and experience to understand the subject matter of the Collect System, and would devote the time necessary to perform the services needed to develop the Collect System; and that the defendant would have a quality assurance and quality control program. Second Substitute Complaint, ¶¶ 51-60. According to the complaint, the defendant's proposals containing these representations ultimately were incorporated into the final agreement that was executed by the parties. Second Substitute Complaint, ¶ 16.
The complaint further alleges that the defendant knew or had the duty of knowing that these representations were not true, that the State justifiably relied on these representations in executing the agreement, and that the State suffered pecuniary losses that were caused by this justifiable reliance. These losses include the amounts that the State paid to the defendant and to third parties under the agreement, the amounts it paid as part of the bonding used to finance the project, and the costs it incurred in maintaining the existing system without the beneficial use of the upgraded system. Second Substitute Complaint, ¶¶ 61-64.
In the motion to strike, the defendant argues that the third count of the plaintiff's complaint alleging negligent misrepresentation must be stricken under the economic loss doctrine. The court disagrees and denies the motion to strike.
DISCUSSION
"The purpose of a motion to strike is to contest . . . the legal sufficiency of the allegations of any complaint . . . to state a claim upon which relief can be granted." (Internal quotation marks omitted.) Fort Trumbull Conservancy, LLC v. Alves, 262 Conn. 480, 498, 815 A.2d 1188 (2003). In ruling on a motion to strike, the court examines the complaint "construed in favor of the [plaintiff], to determine whether the [plaintiff] stated a legally sufficient cause of action." (Internal quotation marks omitted.) Dodd v. Middlesex Mutual Assurance Co., 242 Conn. 375, 378, 698 A.2d 859 (1997). "It 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 . . . Indeed, pleadings must be construed broadly and realistically, rather than narrowly and technically." (Internal quotation marks omitted.) Violano v. Fernandez, 280 Conn. 310, 318, 907 A.2d 1188 (2006).
As previously stated, the defendant contends that the plaintiff's negligent misrepresentation claim must be stricken under the economic loss doctrine. The economic loss doctrine is a judicially created principle which prohibits recovery in tort when the claim arises from a contract and only seeks economic losses. See Santoro, Inc. v. A.H. Harris Sons, Inc., Superior Court, judicial district of Hartford, Docket No. CV 03 0828039 (September 23, 2004, Sheldon, J.) ( 38 Conn. L. Rptr. 4).
The defendant first argues that this court's construction of the economic loss rule should be guided by a ruling issued by Judge Hale in this case granting a previous motion to strike filed by the defendant. This ruling granted the defendant's motion to strike a negligence claim alleged by the plaintiff in an earlier complaint on the ground that it did not sufficiently plead any claims or duties distinct from the plaintiff's contract claims. See State v. Maximus, Inc., Superior Court, judicial district of Hartford, Docket No. CV 07 5015239 (June 4, 2008, Hale, J.). After this ruling, the plaintiff amended its complaint to allege negligent misrepresentation. According to the defendant, the plaintiff's negligent misrepresentation claim suffers from the same deficiency as its negligence claim. More specifically, the defendant insists that because the representations at issue were incorporated into the parties' agreements, the plaintiff's "only redress is for breach of contract and/or warranty." Maximus, Inc.'s Memorandum of Law in Support of Motion to Strike, p. 4. The defendant further explains this position as follows:
The case was subsequently transferred from the judicial district of Hartford to this court and assigned its present docket number.
This Court in this case has already found that the parties' duties owed to one another and their remedies for any breach of those duties are governed by contract law: "The court fails to see any duty imposed upon Maximus and/or ATS except the duty to complete the contract correctly. Failure to perform properly would result only in a violation of the contract. There was no other duty owed, any other organization or person aside from the duty to the contract." Memorandum of Decision, p. 6.
Maximus, Inc.'s Memorandum of Law in Support of Motion to Strike, p. 4.
The apparent thrust of the defendant's position is that when the gravamen of a plaintiff's claim is covered or governed by contact, tort claims are displaced and made unavailable. The court does not view Judge Hale's decision as being this broad. The defendant's position also appears much broader than the parameters of the economic loss doctrine. Furthermore, the position appears unsupported under Connecticut case law. Although the defendant is correct that "a mere breach of the contract would not afford a basis for a recovery in tort, but the necessary elements to establish negligence must be shown;" Dean v. Hershowitz, 119 Conn. 398, 409, 177 A. 262 (1935); there is no appellate authority supporting the proposition that common-law duties of care cannot emanate from contractual relationships, even when the contract is between commercial or sophisticated parties. Indeed, the most applicable appellate court cases are to the contrary. See, e.g., Williams Ford, Inc. v. Hartford Courant Co., 232 Conn. 559, 579, 657 A.2d 212 (1995) ("The [plaintiffs] were not barred from pursuing a negligence claim solely because they also might have had a breach of contract claim"); D'Ulisse-Cupo v. Board of Directors of Notre Dame High School, 202 Conn. 206, 218-19, 520 A.2d 217 (1987) ("If the plaintiff's complaint otherwise contains the necessary elements of negligent misrepresentation, it survives a motion to strike even though [other counts] grounded in promissory estoppel must fall"); Johnson v. Flammia, 169 Conn. 491, 496, 363 A.2d 1048 (1975) ("A party may be liable in negligence for the breach of a duty which arises out of a contractual relationship"); Sasso v. Ayotte, 155 Conn. 525, 529, 235 A.2d 636 (1967) (same).
The defendant's reliance on Gazo v. Stamford, 255 Conn. 245, 765 A.2d 505 (2001), to support its contention that negligence claims cannot emanate from contractual relations is misplaced. In Gazo, the plaintiff attempted to premise a third-party beneficiary contract claim on what was essentially a tort claim. The court rejected the plaintiff's contract claim because its essence sounded in tort, not contract. Id., 263-64. Consequently, Gazo did not involve a tort claim arising from contractual obligations.
The Supreme Court in Dean v. Hershowitz, supra, 119 Conn. 398, made the following comments on this topic:
We recently pointed out that negligence may be the outgrowth of precedent contractual relationship, but that it may also arise in situations where there is no thought of any such underlying relationship . . . In other words, the particular facts which bring two persons into a relationship to each other are not necessarily controlling, but the true test is, speaking generally, being in that relationship, are the circumstances such that one, in the performance of some act within the scope of that relationship, unless he uses proper care, is likely to do injury to the person, property or rights of the other . . . It is in this sense that negligence grows out of contracts as nuisance may grow out of negligence . . . Where there is a precedent relationship, all that is necessary to furnish a basis for an action of negligence is that there be present the elements necessary to establish such a cause of action, and if that is so, that that relationship is one of contract is not sound reason why the action should not lie.
(Citations omitted.) Id., 408-09.
To support its argument that the economic loss doctrine bars the plaintiff's negligent misrepresentation claim, the defendant primarily relies on the Supreme Court's decision in Flagg Energy Development Corp. v. General Motors Corp., 244 Conn. 126, 709 A.2d 1075 (1998). The plaintiffs in Flagg purchased engines manufactured by the defendant and brought suit alleging breach of contract, breach of warranties, tortious misrepresentations and violation of the Connecticut Unfair Trade Practices Act, General Statutes § 42-110(b) ("CUTPA"). In their misrepresentation claim, the plaintiffs alleged that the defendant "knew or should have known" that the representations and warranties made by the defendant as part of the sale were untrue. Flagg Energy Development Corp. v. General Motors Corp., supra, 244 Conn. 151-52 n. 41. The plaintiffs' CUTPA claim was premised on fraudulent inducement.
The defendant moved to strike the plaintiffs' tort and CUTPA claims arguing that the plaintiffs' recovery was limited to the remedies provided under the Uniform Commercial Code ("UCC") because the plaintiffs were only seeking the recovery of commercial losses. Id., 152. In response, the plaintiffs argued that the economic loss doctrine was inapplicable to actions based on fraud, and alternatively, that their tort and CUTPA claims were validated by the savings provisions of the UCC, General Statutes §§ 42a-1-103 and 42a-2-721. Id. After an extensive review of the applicable UCC provisions, the trial court rejected the plaintiffs' argument, concluding that the UCC provided an adequate remedy. On appeal, the plaintiffs argued that the trial court improperly applied the economic loss rule because the rule "does not apply to claims `for negligent misrepresentation of information provided for the guidance of others or to claims for unfair trade practices.'" Id., 153. The Supreme Court rejected the plaintiffs' contentions and affirmed the trial court's decision granting the motion to strike. "We agree with the holdings of cases in other jurisdictions that commercial losses arising out of the defective performance of contracts for the sale of goods cannot be combined with negligent misrepresentation." Id.
There is a split among Superior Court opinions about the scope of Flagg. Maximus relies on cases holding that Flagg applies the economic loss doctrine broadly to preclude tort claims seeking economic losses emanating from any contractual transactions involving commercial parties. The plaintiff relies on cases construing Flagg more narrowly and concluding that Flagg applies the economic loss doctrine to preclude tort claims seeking economic losses in cases involving the sale of goods governed by the provisions of the UCC. This court finds that the cases relied on by the plaintiff are more persuasive.
See, e.g., Morganti National, Inc. v. Greenwich Hospital Assn., Superior Court, complex litigation docket at Waterbury, Docket No. X06 CV 99 0160125 (September 27, 2008, McWeeney, J.); Greater New Haven Transit District v. Nafis Young Engineers, Inc., Superior Court, judicial district New Haven, Docket No. CV 02 0469107 (July 1, 2003, Arnold, J.) ( 35 Conn. L. Rptr. 100); Dobco, Inc. v. Williams Development Co., Superior Court, complex litigation docket at Tolland, Docket No. X07 CV 99 0072152 (May 12, 2002, Sferrazza, J.) ( 32 Conn. L. Rptr. 214); Worldwide Preservation Services, LLC. v. The IVth Shea, LLC, Superior Court, complex litigation docket at Stamford, Docket No. X05 CV 98 0167154 (February 1, 2001, Tierney, J.) ( 29 Conn. L. Rptr. 1).
See, e.g., Hoydic v. BE Juices, Inc., Superior Court, complex litigation docket at Stamford, Docket No. X08 CV 03 4010104 (February 27, 2008, Jennings, J.) ( 44 Conn. L. Rptr. 501); New Canaan v. Brooks Laboratories, Inc., Superior Court, judicial district of Stamford-Norwalk at Stamford, Docket No. CV 05 4006797 (November 7, 2007, Tobin, J.); Santoro, Inc. v. All. Harris Sons, Inc., supra, 38 Conn. L. Rptr. 4; Metcoff v. NCT Group, Inc., Superior Court, complex litigation docket at Waterbury, Docket No. X04 CV 04 0184701, (January 10, 2005, Alander, J.).
As just discussed, the precise issue presented in Flagg was whether the plaintiffs' recovery was limited to the remedies provided under the UCC. In answering this narrow question in the affirmative, the court did not address or expressly overrule its earlier decisions that did not involve the UCC, in which it held that negligence claims are not precluded solely because the claims seek economic losses arising from the parties' contractual relationship. Williams Ford, Inc. v. Hartford Courant Co., supra, 232 Conn. 579; D'Ulisse-Cupo v. Board of Directors of Notre Dame High School, supra, 202 Conn. 218-19. In Flagg, the court noted its agreement with two out of state cases applying the economic loss doctrine in situations that did not involve the UCC. See Duquesne Light Co. v. Westinghouse Electric Corp., 66 F.3d 604, 618 (3d Cir. 1995); Princess Cruises, Inc. v. General Electric Co., 950 F.Sup. 151, 155 (E.D.Va. 1996). The facts of Flagg, however, only involved the application of the UCC, and therefore, the issues presented in the case did not squarely call for the court to consider the application of the economic loss rule to a situation not involving the UCC. Consequently, in this particular context, the court's references to these out of state cases should be viewed as obiter dicta. The law is established that dictum does not represent binding authority. Remax Right Choice v. Aryeh, 100 Conn.App. 373, 378, 918 A.2d 976 (2007) ("It is well established that statements in prior cases that constitute dicta do not act as binding precedent"). Additionally, as a general rule, a trial court should proceed cautiously in concluding that dictum of a Supreme Court's decision overrules sub silento its prior, controlling precedent. Cf., WD Acquisition, LLC v. First Union National Bank, 262 Conn. 704, 714-15, 817 A.2d 91 (2003) (where lower court mistakenly relied on dictum of prior Supreme Court decision).
In Williams Ford, Inc. v. Hartford Courant Co., supra, 232 Conn. 579, the defendant argued that "where the controversy concerns purely economic losses allegedly caused by statements made during the course of a contractual relationship between businesses, it is contract law, rather than tort law, that should apply." Id. In rejecting this argument, the Supreme Court held that "a remedy on the contract is independent of a remedy for negligent misrepresentation. The [plaintiffs] were not barred from pursuing a negligence claim solely because they might also have had a breach of contract claim." Id.
" Flagg stands for the proposition that, where a claim for damages arises out of the commercial sale of goods governed by the Uniform Commercial Code and the losses are purely economic, a plaintiff's remedies are limited to those available under the Code. See Santoro v. A.H. Harris Sons, Inc., Superior Court, judicial district of Hartford at Hartford, Docket No. CV 03 0828039, (September 23, 2004, Sheldon, J.) ( 38 Conn. L. Rptr. 4, [6]) (`Under close examination, [ Flagg] cannot reasonably be read to create a general rule barring all tort claims based in whole or in part upon alleged breaches of contract or alleged breaches of warranties of fitness and/or merchantability. Instead, it can only be read to bar such claims in the particular circumstances there at issue, to wit: where both the plaintiff and the defendant are sophisticated commercial parties, and their dispute arises from the defendant's allegedly defective performance under a contract for the sale of goods.') Such a limited construction is necessary in light of the language of Williams Ford, Inc. v. Hartford Courant Co., supra, [ 232 Conn. 579], rejecting a broader doctrine. It is also consistent with holdings in other states. See, e.g., Neibarger v. Universal [Cooperatives, Inc.], [ 439 Mich. 512], 486 N.W.2d 612, 618 (Mich. 1992) (`[W]e hold that where a plaintiff seeks to recover for economic loss caused by a defective product purchased for commercial purposes, the exclusive remedy is provided by the UCC, including its statute of limitations.') and Trinity [Industries, Inc.] v. McKinnon Bridge Co., 77 S.W.3d 159, 171 (Tenn.Ct.App. 2001) (`In a contract for the sale of goods where the only damages alleged come under the heading of economic losses, the rights and obligations of the buyer and seller are governed exclusively by the contract.')." Metcoff v. NCT Group, Inc., Superior Court, complex litigation docket at Waterbury, Docket No. X04 CV 04 0184701 (January 10, 2005, Alander, J.).
"The rationale for such a rule has been cogently expressed by the Michigan Supreme Court. `The code represents a carefully considered approach to governing the economic relations between suppliers and consumers of goods. If a commercial purchaser were allowed to sue in tort to recover economic loss, the UCC provisions designed to govern such disputes, which allow limitation or elimination of warranties and consequential damages, require notice to the seller, and limit the time in which such a suit must be filed, could be entirely avoided.' Neibarger v. Universal Coops., [Inc.], [ 439 Mich. 512], 486 N.W.2d 612, 618 (Mich., 1992)." Metcoff v. NCT Group, Inc., Superior Court, complex litigation docket at Waterbury, Docket No. X04 CV 04 0184701 (January 10, 2005; Alander, J.). n. 6.
The plaintiff advances various reasons why the UCC, and, in turn, the economic loss rule do not apply in this case. The plaintiff first contends that the UCC does not apply to commercial sale transactions involving the State of Connecticut. The plaintiff cites no authority to support this position, but relies solely on an interpretation of the statutory language. See General Statutes § 1-2z.
General Statutes § 1-2z provides the following: "The meaning of a statute shall, in the first instance, be ascertained from the text of the statute itself and its relationship to other statutes. If, after examining such text and considering such relationship, the meaning of such text is plain and unambiguous and does not yield absurd or unworkable results, extratextual evidence of the meaning of the statute shall not be considered."
The Uniform Commercial Code-Sales, General Statutes §§ 42a-2-101 et seq., applies to contracts and agreements "relating to the present or future sale of goods." General Statutes § 42a-2-106(1). "Goods" are defined to include "all things, including specially manufactured goods, which are movable at the time of identification to the contract for sale . . ." General Statutes § 42a-2-105(1). Under General Statutes § 42a-2-103(1), a "buyer" is defined as "a person who buys or contracts to buy goods," and a seller is defined as "a person who sells or contracts to sell goods." Under the general definitions section of the UCC, the words "person" and "state" are defined specifically and separately. The plaintiff argues that because the UCC only applies to persons who buy or sell goods, and the UCC defines the terms "person" and "state" separately, the UCC does not apply to transactions involving state governments. Stated differently, according to the plaintiff because the term "state" is separately defined and its definition is not incorporated into the definition of "person," the UCC must be construed as excluding state agencies from its application.
General Statutes § 42a-1-201(27) defines a "person" as follows:
"Person" means an individual, corporation, business trust, estate, trust, partnership, limited liability company, association, joint venture, government, governmental subdivision, agency or instrumentality, public corporation or any other legal commercial entity.
General Statutes § 42a-1-201(38) defines a "state" as follows:
"State" means a state of the United States, the District of Columbia, Puerto Rico, the United States Virgin Islands or any territory or insular possession subject to the jurisdiction of the United States.
The plaintiff is correct that the word "state" is a specifically defined term under the UCC. However, the plaintiff does not address the fact that the UCC also defines the word "person" to include the "government" or a "governmental subdivision, agency or instrumentality." See footnote 8. The plaintiff cannot seriously contend that the department of information technology and the department of public safety are not "governmental agencies." The plaintiff expressly alleges that each of these entities is a state "agency" in the complaint.
In construing a statute such as the UCC, the court must endeavor to interpret all of its provisions in a manner that is consistent and that avoids rendering any particular provision meaningless or superfluous. To conclude that the definition of the term "person," as defined under General Statutes § 42a-1-201(27); excludes state agencies despite the definition's statement that a "governmental agency" is part of the definition of this term interjects ambiguity into the plain words of the statute and treats this language of the definition as though it is meaningless.
Furthermore, as previously noted, the plaintiff does not cite any authority to support its argument that the UCC does not apply to the state, and the most applicable case law located by the court rejects its position. In determining whether a state owned cement plant was entitled to assert sovereign immunity or was an "organization" governed by the provisions of South Dakota's version of the UCC, the Supreme Court of South Dakota expressed the following:
[T]he UCC provisions expressly apply to the state. In its general definitions, the UCC defines "organization" to include "government or governmental subdivision or agency." SDCL 57A-1-201(28) [see General Statutes § 42a-1-201(25)]. Because it is a governmental agency, the cement plant is an organization within the meaning of the UCC. As an organization, the cement plant is a "person" under SDCL 57A-1-201(30) [see General Statutes § 42a-1-201(27)], and, as a "person who sells or contracts to sell goods," it is a "seller" within the context of UCC-Sales. SDCL 57A-2-103(1)(d) [see General Statutes § 42a-2-102(1)]. See Northern Helex Company v. United States, 455 F.2d 546 (Ct.Cl. 1972), which applied UCC provisions to a sales contract between the federal government and a private company; and Shea-Kaiser-Lockheed-Healy v. Dept. of WP, Etc., 73 Cal.App.3d 679, 140 Cal.Rptr. 884 (1977), which held that a municipal water department was subject to the UCC in a sales transaction.
Arcon Construction Co. v. South Dakota Cement Plant, 349 N.W.2d 407, 410 (S.D. 1984).
The plaintiff next contends that the UCC does not apply to its misrepresentation claims because the transaction between the parties did not involve a sale of "goods" as defined under the UCC. According to the plaintiff, the contract was primarily a contract for services, and the production of materials under the contract incidental to these services. The court agrees.
As previously indicated, the UCC defines "goods" as "all things, including specially manufactured goods which are movable at the time of identification to the contract for sale . . ." General Statutes § 42a-2-105(1).
In Connecticut, the distinction between a services contract governed by the common law and a sales contract governed by the UCC has been addressed more extensively by our trial courts than our appellate courts. See Beckenstein v. Potter Carrier, 191 Conn. 150, 164, 464 A.2d 18 (1983); Incomm, Inc. v. Thermo-Spa, Inc., 41 Conn.Sup. 566, 569-70, 595 A.2d 954 [ 3 Conn. L. Rptr. 346] (1991); Gulash v. Stylarama, Inc., 33 Conn.Sup. 108, 111-13, 364 A.2d 1221 (1975); Page v. Hotchkiss, Superior Court, judicial district of Windham at Putnam, Docket No. CV 02 0067814 (December 2, 2003, Cosgrove, J.) ( 36 Conn. L. Rptr. 193); DSP Software Engineering, Inc. v. NCT Group, Inc., Superior Court, judicial district of Fairfield at Bridgeport, Docket No. CV 00 0370062 (August 10, 2000, Melville, J.). This topic was reviewed thoroughly by Judge Cosgrove in Page v. Hotchkiss, supra.
"A number of courts have addressed the question of whether `software' is a good or a service. These courts have come to differing conclusions depending upon the facts of each case. A significant factor for the courts was the degree of development and customization or programming that was required by the buyer. `At one end of the spectrum is a consumer who walks into the local electronics store, pulls a shrink-wrapped word processing program from the shelf, pays the cashier and goes home with it. Such a sale is very clearly one for a good. At the other end of the spectrum is a programmer that invents and develops new software [from scratch] for a particular customer. In that case, the contract is more like a services contract.' Smart Online, Inc. v. Opensite Technologies, Inc., Superior Court of North Carolina, Wake County, Business Court, Docket No. 01 CVS 09604, 2003 NCBC 5 (June 17, 2003) (51 U.C.C. Rep. Serv.2d 47). In the middle of the spectrum is the situation `[w]here programmers are selling preexisting software albeit with custom modifications or upgrades to adapt it to the user's needs or equipment.' Id. Where . . . the facts of a case place the issue in the middle of the spectrum, the courts have explicitly or implicitly relied upon a predominate element test. D. Toedt, The Law and Business of Computer Software (Release #12 10/2001) § 13.02, p. 13-3, and a primary factor in this analysis has been whether the programmer was `paid in a manner primarily reflecting [the] sale of goods . . .' Pearl Investments, [LLC] v. Standard I/O, Inc., 257 F.Sup.2d 326, 353 (D. Me. 2003).
"When applying the predominant element test `the question becomes whether the dominant factor or essence of the transaction is the sale of the materials or the services' . . . Incomm, Inc. v. Thermo-Spa, Inc., 41 Conn.Sup. 566, 570, 595 A.2d 954. `[I]t is clear that where the contract is basically one for the rendition of services, and the materials are only incidental to the main purpose of the agreement, the contract is not one for the sale of goods under the UCC.' . . . Martisek v. Showron, Superior Court, judicial district of Fairfield at Bridgeport, Docket No. CV 98 0354780 (July 9, 2003, Doherty, J.).
"`In determining whether a contract is one of sale [of goods] or to provide services, the court looks to the essence of the agreement to see whether service predominates over any sale aspect, such as supply of materials by the principal to the service entity . . . Whether a contract is one for the sale of goods, or for work and labor to be rendered may depend on whether the primary intent is merely to provide for the delivery of goods, or whether the essential consideration is work and labor to be performed at the employer's instance and for his use rather than for the producer's benefit . . . It is of no moment that the materials to be processed [were] transferred from the defendant's possession to the plaintiff's: where service predominates, and the transfer of personal property is only incidental to the transaction, it is a contract for work, labor and materials and not a sale.' . . . Id." Page v. Hotchkiss, supra, 36 Conn. L. Rptr. 195.
Because the question whether the parties' agreement was a sales contract or a services contract is being presented in the context of a motion to strike, the court must accept the truth of complaint's factual allegations and must view these allegations liberally in favor of the plaintiff. Based on this standard, the court agrees with the plaintiff that the predominant aspect of the parties' agreement was for labor and materials and not for the sale of goods.
According to the complaint, the Federal Bureau of Investigation maintained a National Crime Information Center ("NCIC") that stored criminal justice data for the entire United States and Canada. The NCIC was replaced in 1999 by the "NCIC 2000." This change in the NCIC required a change in the State's Collect System used by the department of public safety in order for this department to fully access and use NCIC 2000. The parties' agreement was premised, in part, on the defendant's response to a Request for Proposal ("RFP") issued by the department of information technology. The RFP "required that the [Collect System] be revised to meet NCIC 2000 encryption requirements. The RFP also required that the [Collect System] be revised to provide, at a minimum, all of the functionality and efficiency of the existing [Collect System] and also include additional new functions." Second Substitute Complaint, ¶ 10. As part of the parties' contract, the defendant agreed to: build the revised Collect System, provide certain products necessary for this purpose (a Pyramid XN2 web browser and a Pyramid XMR message switch), complete the work pursuant to a work schedule, and test the revised system to ensure that it complied with the requirements of the agreement. Second Substitute Complaint, ¶¶ 12, 16, 17, 18, 25. These allegations clearly establish that the parties' agreement was predominantly for labor and materials and not for the purchase of goods.
The defendant argues that the plaintiff cannot claim that the parties' agreement involved a contract for labor and materials because any such claim would be inconsistent with the second count of the complaint alleging a breach of the implied warranty of fitness. The defendant explains this position as follows. In an earlier filing, the defendant requested the plaintiff to revise the second count as initially pleaded because the count failed to identify the goods at issue. The defendant claimed that this specification was necessary in order for the plaintiff to make a claim for breach of implied warranty under the UCC. Without expressly conceding or addressing the defendant's legal position concerning the UCC, the plaintiff agreed to revise the complaint, and did revise the complaint, to indicate that the goods or materials supplied by the defendant were the Pyramid XN2 web browser and the Pyramid XMR message switch software programs. According to the defendant, this revision represents a concession on the part of the plaintiff that the implied warranty claim asserted in the second count is premised on the UCC. Based on this reasoning, the defendant insists that the plaintiff cannot now assert a claim for breach of warranty that is presumably governed by the UCC in the second count, and, at the same time, assert a claim for negligent misrepresentation that is not governed by the UCC in the third count. There are numerous, obvious flaws with the defendant's reasoning.
First, the second count claiming breach of implied warranty makes no reference to the UCC. There are cases recognizing or addressing the general rule that common-law contract claims for breach of implied warranty exist and may be asserted separately from the provisions of the UCC. See generally Cacace v. Morcaldi, 37 Conn.Sup. 735, 739-40, 435 A.2d 1035 (Appellate Session 1981) (discussing implied warranty claim of service contract as part of consideration of statute of limitations); Milau Associates, Inc. v. North Avenue Development Corp., 42 N.Y.2d 482, 488, 368 N.E.2d 1247, 398 N.Y.S.2d 882 (1977) (discussing circumstances in which cases have implied "warranty of fitness to transactions which in essence contemplated the rendition of services"); see also Uniform Commercial Code § 2-313, comment (4) (2003 Amendment) (warranty sections of this Article "[are] not designed in any way to disturb those lines of case law which have recognized that warranties need not be confined to [sales] contracts within the scope of this Article"). Consequently, as pleaded, both the second and third counts may be premised on common-law principles.
The operative claim of the second count reads as follows: "Because the MAXIMUS COLLECT System did not meet the requirements of the agreement and did not work, Maximus breached the implied warranty of fitness for a particular purpose." Second Substitute Complaint, Second Count, ¶ 51.
Moreover, although the defendant is correct that a contract cannot be governed by both the UCC and the common law of contracts; see Bead Chain Mfg. Co. v. Saxton Products, Inc., 183 Conn. 266, 270, 439 A.2d 314 (1981); this rule applies to the legal theory of any actual judgment or recovery and not to the legal sufficiency of separately pleaded causes of action. The law is well established that a plaintiff may, in good faith, plead in the alternative, even if separate counts assert inconsistent allegations or theories of recovery. See Practice Book § 10-25 ("The plaintiff may claim alternative relief, based upon an alternative construction of the cause of action"); see generally Dreir v. Upjohn Co., 196 Conn. 242, 245, 492 A.2d 164 (1985) ("Under our pleading practice, a plaintiff is permitted to advance alternative and even inconsistent theories of liability against one or more defendants in a single complaint"). Consequently, even if the defendant were correct and the second count is premised on the UCC and the third count is not, the rules of practice do not preclude such alternative pleading. The court, however, does not reach a definitive decision about the legal sufficiency or appropriate characterization of the second count. The motion to strike is directed to the third count, not the second count.
In summary, the court concludes that the economic loss rule as recognized by the Supreme Court in Flagg Energy Development Corp. v. General Motors Corp., supra, 244 Conn. 126, applies to cases involving the UCC. Because the allegations of the complaint indicate that the contract between the parties involved a services contract, and not a sales contract governed by the UCC, the economic loss doctrine is inapplicable. Consequently, the defendant's motion to strike must be denied.
CONCLUSION
Therefore, the defendant's motion to strike the third count of the plaintiff's second substitute complaint is denied.
So ordered this 1st day of April 2009.