Opinion
HHDCV186101163S
04-05-2019
Scott David Thomas v. Robert Lavallee et al.
UNPUBLISHED OPINION
Judge (with first initial, no space for Sullivan, Dorsey, and Walsh): Shapiro, Robert B., J.T.R.
MEMORANDUM OF DECISION
ROBERT B. SHAPIRO JUDGE TRIAL REFEREE
This matter is before the court concerning the defendant Robert LaVallee’s (defendant) motion to dismiss for lack of personal jurisdiction (#103). The court heard oral argument concerning the motion on February 11, 2019. For the reasons stated below, the motion to dismiss is denied.
I
Background
In this action, the plaintiff, Scott Thomas, is attempting to recover on a judgment from a previous action against the plaintiff’s former employer, a corporation formerly owned by the defendant. In a complaint filed on October 2, 2018, the plaintiff (1) alleges a violation of the Uniform Fraudulent Transfer Act, and (2) seeks to pierce the corporate veil. In his complaint, the plaintiff alleges the following facts.
The plaintiff’s complaint also contains counts against three separate business entities as defendants. None of those entities joined in this defendant’s motion to dismiss and therefore those counts are not addressed herein.
The plaintiff was previously employed by LaVallee Overhead Door, Inc. (the Company), a corporation of which the defendant owned fifty-one percent and his then-wife owned forty-nine percent. On or about January 2, 2015, the plaintiff initiated an administrative action against the Company with the Connecticut Commission on Human Rights and Opportunities (CHRO) for employment discrimination, hostile work environment, sexual harassment, and retaliation.
Following the CHRO proceeding and having exhausted administrative remedies, the plaintiff filed the underlying action, Thomas v. LaVallee Overhead Doors, Inc., Superior Court, judicial district of Hartford, Docket No. CV-15-6061091-S. On May 22, 2017, the plaintiff secured a judgment in the amount of $279, 502.60. In or about March 2018, by execution, the plaintiff later seized $32, 942.57 held in a bank account in the name of the Company. On September 28, 2018, the plaintiff commenced the present action. See return of service (#100.32).
In the first count of the complaint, the plaintiff alleges the defendant violated the Connecticut Uniform Fraudulent Transfer Act in two ways. First, the defendant transferred ownership of the Company to a third party on January 16, 2015, during the CHRO proceedings, and allegedly without receiving reasonable value in return. Second, the defendant, on or about April 16, 2015, changed the name of the Company. The plaintiff argues the defendant took these actions in response to the plaintiff’s CHRO action and in a deliberate attempt to shield the Company’s assets from liability.
In the second count, the plaintiff contends the court should pierce the corporate veil and hold the defendant personally liable for the outstanding judgment. In support, the plaintiff alleges the defendant maintained complete control and dominion over the Company during the transfer, and over the Company’s finances, policies, and business practices. The Company, therefore, had no separate mind, will, or existence apart from the defendant.
On November 21, 2018, the defendant filed a motion to dismiss for lack of personal jurisdiction. In support of his motion, the defendant also submitted a memorandum of law, an affidavit, two contracts involving the Company, and a dissolution of marriage agreement. Specifically, the defendant argues the plaintiff cannot establish personal jurisdiction under Connecticut’s long-arm statute and the due process requirements of the United States Constitution. Additionally, the defendant argues that any basis for jurisdiction over him in his personal capacity would require the court to pierce the corporate veil, but asserts that the plaintiff lacks a basis for piercing.
On November 29, 2018, the plaintiff filed an objection to the defendant’s motion to dismiss. On February 7, 2019, the defendant filed a reply brief.
Practice Book § 11-10(b) requires a party to file reply memorandum, if at all, "within fourteen days of the filing of the responsive memorandum." The plaintiff agreed to waive this requirement and allow the defendant’s late reply memorandum.
II
Discussion
"When a motion to dismiss for lack of personal jurisdiction raises a factual question which is not determinable from the face of the record, the burden of proof is on the plaintiff to present evidence which will establish jurisdiction." Standard Tallow Corp. v. Jowdy, 190 Conn. 48, 54, 459 A.2d 503 (1983).
It is undisputed that the defendant is a nonresident of Connecticut. "If the defendant challenging the court’s personal jurisdiction is a foreign corporation or a nonresident individual, it is the plaintiff’s burden to prove the court’s jurisdiction." Cogswell v. American Transit Ins. Co., 282 Conn. 505, 515, 923 A.2d 638 (2007). A two-part inquiry is required. "The trial court must first decide whether the applicable state long-arm statute authorizes the assertion of jurisdiction over the defendant. If the statutory requirements are met, its second obligation is then to decide whether the exercise of jurisdiction over the defendant would violate constitutional principles of due process." (Internal quotation marks omitted.) Knipple v. Viking Communications, Ltd., 236 Conn. 602, 606, 674 A.2d 426 (1996).
A
Long-Arm Statute
As to the first part of the inquiry, Connecticut’s long-arm statute is codified in General Statutes § 52-59b(a), which provides in relevant part: "[for] any cause of action arising from any of the acts enumerated in this section, a court may exercise personal jurisdiction over any nonresident individual ... who in person or through an agent: (1) Transacts any business within the state; (2) commits a tortious act within the state ... (3) commits a tortious act outside the state causing injury to person or property within the state ... if such person or agent (A) regularly does or solicits business, or engages in any other persistent course of conduct, or derives substantial revenue from goods used or consumed or services rendered in the state, or (B) expects or should reasonably expect the act to have consequences in the state derives substantial revenue from interstate or international commerce; (4) owns, uses, or possesses any real property situated within the state; or (5) uses a computer ... or a computer network ... located within the state."
As grounds for his motion to dismiss as to the long-arm statute, the defendant contends all the alleged actions were committed, if at all, by the Company; and the defendant merely served as the Company’s president and as a shareholder, and, therefore, personal jurisdiction cannot be extended to him. Additionally, the defendant attests that he has resided in Florida for nearly three years, and at the time the present action was instituted, he was not a resident of Connecticut. The defendant also attests not to have transacted business in this state within the meaning of the long-arm statute. And finally, even though the defendant admits to owning property in this state, he argues the present causes of action do not arise out of that ownership.
The plaintiff provides three reasons why the long-arm statute should provide for jurisdiction over the defendant. First, the plaintiff contends that the defendant "transacts business" in Connecticut within the meaning of the long-arm statute. Specifically, the plaintiff alleges the defendant: (1) is member of a domestic limited liability company; (2) is an assignee of certain rights to collect unpaid accounts receivable owed to the Company following its sale; and (3) on two prior occasions, made use of the Connecticut courts to litigate issues related to these roles, and in one action, initiated in October 2017, the defendant pleaded to be a Connecticut resident.
"In determining whether the [plaintiff’s] cause of action arose from the [defendant’s] transaction of business within this state we do not resort to a rigid formula. Rather, we balance considerations of public policy, common sense, and the chronology and geography of the relevant factors." (Internal quotation marks omitted.) Ryan v. Cerullo, 282 Conn. 109, 122, 918 A.2d 867 (2007). As an initial matter, for the long-arm statute to be applicable, the cause of action must arise out of an enumerated activity. See General Statutes § 52-59b(a). The plaintiff has failed to offer any evidence proving the present causes of action, namely fraudulent corporate transfer and an attempt to pierce the corporate veil, are in any way related to the defendant’s membership in a domestic LLC or role as assignee of outstanding debts.
Further, no examples in Connecticut case law were located allowing prior litigation in this State’s courts to be a basis for exercising personal jurisdiction in a later action. An instructive example is Inv. Assocs. v. Lancia, Superior Court, judicial district of New Haven, Docket No. CV-07-4028746-S (May 5, 2008, Robinson, J.), where the court dismissed a plaintiff’s attempt to rely on a prior litigation between the two parties to secure personal jurisdiction over a foreign defendant to collect on the unpaid judgment from that prior litigation . If prior and related litigation cannot be used to establish personal jurisdiction over a foreign defendant, it should follow that unrelated prior litigation cannot succeed either.
The plaintiff’s second ground for long-arm jurisdiction is that the defendant owns property in South Windsor, Connecticut and the Company operated out of this address during the plaintiff’s employment. Again, for the long-arm statute to be applicable, the cause of action must arise out of an enumerated activity, in this case the ownership, use, or possession of real property. See General Statutes § 52-59b(a). Specifically, the property prong of the long-arm statute is invoked for causes of action directly related to the property. See, for example, Zartolas v. Nisenfeld, 184 Conn. 471, 440 A.2d 179 (1981), an action to recover against nonresident grantors for breach of warranties within a warranty deed, where the court stated, "By owning land in Connecticut the defendants invoked the benefits and protection of Connecticut’s laws of real property ..." Id., 475. The defendant’s ownership of real property in Connecticut, without more, does not provide a basis for personal jurisdiction.
Third, and finally, the plaintiff relies on his allegation that the defendant committed torts in Connecticut and is therefore subject to personal jurisdiction. It is undisputed the alleged torts arise out of the defendant’s ownership and control of the Company. On this issue, the parties debate the application of the so-called fiduciary shield doctrine, which remains unsettled law in Connecticut.
"[T]he fiduciary shield doctrine is based upon the notion that it is unfair to subject a corporate employee personally to suit in a foreign jurisdiction when his only contacts with that jurisdiction have been undertaken on behalf of his corporate employer." (Internal quotation marks omitted.) Under Par Associated, LLC v. Wash. Depot A., Inc., 47 Conn.Supp. 319, 326, 793 A.2d 300 (2001) . "[A] number of Superior Court cases have held that exercise of jurisdiction over a nonresident is improper if based on acts undertaken as an agent of another entity ... The trend, however, is to the contrary." (Citations omitted; internal quotation marks omitted.) Dime Bank v. Merrill Lynch, Pierce, Fenner & Smith, Inc., Superior Court, judicial district of Stamford, Complex Litigation Docket, Docket No. X05-CV-09-4017091-S (January 15, 2010, Blawie, J.).
Under Par Associated, LLC v. Wash. Depot A., Inc., 47 Conn.Supp. 319, 793 A.2d 300 (2001) appears to be the guiding case on the fiduciary shield doctrine in Connecticut. In it, the court, Blue, J., conducted a thorough analysis of the New York long-arm statute on which Connecticut’s was based, relying in particular on Kreutter v. McFadden Oil Corp., 71 N.Y.2d 460, 522 N.E.2d 40, 527 N.Y.S.2d 195 (1988) in which New York’s highest court rejected the fiduciary shield doctrine. Under Par Associated, LLC v. Wash. Depot A., Inc., supra, 47 Conn.Supp. 325-28. The Kreutter court determined the doctrine finds no support in the statute’s language or legislative history, is not necessary as a matter of fairness, and is undesirable as matter of public policy. Id., 326. Finding these reasons "especially pertinent," the court, Blue, J., determined "the fiduciary shield doctrine finds no place in the text or underlying policy of § 52-59b." (Internal quotation marks omitted.) Id., 327.
In Connecticut, "[t]he fact that [a defendant] was acting on behalf of [a company] when he committed the alleged tort does not shield him from liability on an individual basis, and, thus, is not a basis for claiming lack of personal jurisdiction." American Protective Services v. Brady, Superior Court, judicial district of New Haven, Docket No. CV-00-0436227 (December 7, 2001, Jones, J.) . "[I]nstead of the fiduciary shield doctrine, the Superior Court utilizes the constitutional due process analysis to determine if the corporate officer’s actions constitute such minimum contacts with the forum that the court can assert personal jurisdiction over the defendant." Fischer v. Ulysses Partners, LLC, Superior Court, judicial district of Stamford, Docket CV-15-6024901-S (February 11, 2016, Lee, J.) .
In situations involving allegations of fraudulent tortious conduct, the plaintiff’s complaint must contain sufficient and factually specific allegations implicating the defendant as playing "an integral role" in the alleged scheme. Dime Bank v. Merrill Lynch, Pierce, Fenner & Smith, Inc., supra, Superior Court, Docket No. X05-CV-09-4017091-S. See also, Ferrara v. Munro, Superior Court, judicial district of Middletown, Docket No. CV-14-6011790-S (November 20, 2014, Aurigemma, J.) (nonresident defendant must be the "primary actor" in the matter giving rise to the plaintiff’s claims). Importantly however, vague allegations of participation, knowledge, or direction, without providing specific actions taken by the defendant do not provide a sufficient basis for personal jurisdiction. Ferrara v. Munro, supra, Superior Court, Docket No. CV-14-6011790-S.
While there are examples where no personal jurisdiction over a nonresident corporate officer was found, see, e.g.,
In the present case, the complaint alleges that the defendant violated the Connecticut Uniform Fraudulent Transfer Act in two ways: (1) by transferring ownership of the Company to a third party without receiving reasonable value in return; and (2) by later changing the name of the Company. The plaintiff alleges the defendant took these actions in response to the plaintiff’s CHRO action and in a deliberate attempt to shield the Company from liability. These allegations are sufficient to confer personal jurisdiction under § 52-59b(a)(2).
II
Due Process
"The due process test for personal jurisdiction has two related components: the minimum contacts inquiry and the reasonableness inquiry. The court must first determine whether the defendant has sufficient contacts with the forum state to justify the exercise of personal jurisdiction ... For the purposes of this initial inquiry, a distinction is made between specific and general jurisdiction." (Internal quotation marks omitted.) Panganiban v. Panganiban, 54 Conn.App. 634, 639, 736 A.2d 190, cert. denied. 251 Conn. 920, 742 A.2d 359 (1999). Specific jurisdiction requires "the suit must arise out of or relate to the defendant’s contacts with the forum ... In other words, there must be an affiliation between the forum and the underlying controversy, principally, an activity or occurrence that takes place in the forum State and is therefore subject to the State’s regulation ... [S]pecific jurisdiction is confined to adjudication of issues deriving from, or connected with, the very controversy that establishes jurisdiction." (Citations omitted; emphasis in original; internal quotation marks omitted.) Bristol-Myers Squibb Co. v. Superior Court of California, 137 S.Ct. 1772, 1780, 198 L.Ed.2d 395 (2017). This analysis is not concerned with the quantity but the quality of the activity or occurrence. See International Shoe Co. v. Washington, 326 U.S. 310, 319, 66 S.Ct. 154, 90 L.Ed. 95 (1945).
In determining the reasonableness component and whether the exercise of jurisdiction would offend traditional notions of fair play and substantial justice, "the defendant’s conduct and connection with the forum State [must be] such that he should reasonably anticipate being haled into court there." (Internal quotation marks omitted.) United States Trust Co. v. Hobart, 197 Conn. 34, 41, 495 A.2d 1034 (1985).
Here, the defendant continues to own real property in Connecticut, use Connecticut courts, and retain membership in a domestic company. The circumstances here arise out of the defendant’s role as the former president and shareholder of the Company. He should reasonably anticipate being haled into court in Connecticut for allegations related thereto. In light of the facts and circumstances of the present case, the court’s jurisdiction over the nonresident defendant is consistent with due process and does not offend traditional notions of fair play and substantial justice.
By this ruling, this court is not deciding whether the defendant actually committed the acts alleged by the plaintiff. That determination will be made by the trier of fact. This decision pertains only to personal jurisdiction.
CONCLUSION
For the forgoing reasons, the motion to dismiss is denied.
Isola v. RLJ Elec. Corp., Superior Court, judicial district of Stamford, Docket No. CV-13-16018537-S (March 28, 2014, Truglia, J.) 834 (holding no jurisdiction over defendant nonresident officers where they lack minimum contacts and the causes of action derive from breach of contract claims against defendant foreign corporation), in cases involving allegations of fraudulent tortious conduct, the court has consistently found it could exercise personal jurisdiction. See, e.g., Fischer v. Ulyssess Partners, supra, Superior Court, Docket. No. CV-15-6024901S; Dime Bank v. Merrill Lynch, Pierce, Fenner & Smith, Inc., supra, Superior Court, Docket No. X05-CV-09-4017091-S; Haynes Constr. Co. v. FAMM Steel, Inc., Superior Court, judicial district of Milford, Docket No. CV-04-0085304-S (April 27, 2005, Moran, J.) 195; American Protective Services v. Brady, supra, Superior Court, Docket No. CV-00-0436227.