Opinion
No. X07 CV 08 5023851
August 25, 2009
MEMORANDUM OF DECISION
I
In December 2004, the named plaintiff, Judith Tumosa, utilizing the services of the defendants, Jeffrey Curtis and Hartford Business Brokers, LLC (HBB), sold her dog grooming business. After selling two commercial properties to raise additional capital, with the assistance of the defendants, the plaintiff looked for a new investment opportunity over the next year. On or about November 4, 2005, the plaintiff, along with her husband, David Tumosa, who is the co-plaintiff, purchased the stock of a physical therapy business known as Central Physical Therapy, Inc., for $2,397,000 from the third party defendants, Leon Sasonov and Marina Sasonov.
In the original complaint, the plaintiffs identified HBB as Hartford Business Brokers, Inc. HBB is identified as a limited liability company in their amended complaint, dated May 14, 2009. Additionally, the plaintiffs filed a motion to correct this misnomer which was granted by this court on June 10, 2009.
On September 5, 2006, the plaintiffs filed suit against the Sasonovs, in Tumosa v. Sasonov, Superior Court, complex litigation docket at Hartford, Docket No, X07 CV 06 5008204, alleging, among other things, fraud, fraudulent misrepresentation and negligent misrepresentation in their dealings concerning the value of the business. On October 17, 2008, the plaintiffs filed the instant suit against Curtis and HBB alleging breach of fiduciary duty, negligence, negligent infliction of emotional distress and violation of the Connecticut Unfair Trade Practices Act, General Statutes (CUTPA) (§ 42-110a, et seq.).
The motion to consolidate that suit with the present action was granted on April 21, 2009.
On May 13, 2009, Curtis moved to strike all counts of the complaint against him and HHB moved to strike the first, third and fourth counts against it. Curtis argues that he is shielded from liability on all counts pursuant to General Statutes § 34-133(a). Both Curtis and HBB maintain that the plaintiffs have failed to plead sufficient facts to support the first, third and fourth counts against them. The plaintiffs filed a memorandum in opposition to the motion on June 1, 2009 and the court heard oral argument on June 23, 2009. The parties thereafter filed supplemental memoranda on July 6, 2009.
Initially, HBB sought to strike the complaint against it on the grounds that it was improperly named. As noted above, the plaintiffs amended their complaint on May 14, 2009 and were granted permission to correct the misnomer on June 10, 2009 changing Hartford Business Brokers, Inc., to Hartford Business Brokers, LLC. See footnote 1. The defendants refiled substantially the same motion to strike, deleting that ground, on June 1, 2009.
Section 34-133 provides: "(a) Except as provided in subsection (b) of this section, a person who is a member or manager of a limited liability company is not liable, solely by reason of being a member or manager, under a judgment, decree or order of a court, or in any other manner, for a debt, obligation or liability of the limited liability company, whether arising in contract, tort or otherwise or for the acts or omissions of any other member, manager, agent or employee of the limited liability company. "(b) Nothing contained in sections 34-100 to 34-242, inclusive, shall be interpreted to abolish, repeal, modify, restrict or limit the law in effect on October 1, 1993, in this state applicable to the professional relationship and liabilities between the person furnishing the professional services and the person receiving such professional service and to the standards for professional conduct; provided any member, manager, agent or employee of a limited liability company rendering professional services formed under sections 34-100 to 34-242, inclusive, shall be personally liable and accountable only for negligent or wrongful acts or misconduct committed by him, or by any person under his direct supervision and control, while rendering professional services on behalf of the limited liability company to the person for whom such professional services were being rendered; and provided further the personal liability of members of a limited liability company rendering professional services formed under sections 34-100 to 34-242, inclusive, in their capacity as members of such limited liability company, shall be no greater in any aspect than that of a shareholder who is an employee of a corporation formed under chapter 601. A limited liability company rendering professional services shall be liable up to the full value of its property for any negligent or wrongful acts or misconduct committed by any of its members, managers, agents or employees while they are engaged on behalf of the limited liability company in the rendering of professional services."
On June 8, 2009, the plaintiffs adopted their memorandum in opposition to the motion to strike, dated May 28, 2009, acknowledging the deletion of the misnomer issue. See footnote 3.
CT Page 14442
II
"The purpose of a motion to strike is to contest . . . the legal sufficiency of the allegations of any complaints . . . to state a claim upon which relief can be granted." (Internal quotation marks omitted.) Peter-Michael, Inc. v. Sea Shell Associates, 244 Conn. 269, 270, 709 A.2d 558 (1998). "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." (Internal quotation marks omitted.) Violano v. Fernandez, 280 Conn. 310, 318, 907 A.2d 1188 (2006). "The court must construe the facts in the complaint most favorably to the plaintiff." (Internal quotation marks omitted.) Faulkner v. United Technologies Corp., 240 Conn. 576, 580, 693 A.2d 293 (1997). "[I]f facts provable in the complaint would support a cause of action, the motion to strike must be denied . . . Thus, we assume the truth of both the specific factual allegations and any facts fairly provable thereunder. In doing so, moreover, we read the allegations broadly . . . rather than narrowly." (Internal quotation marks omitted.) Sylvan R. Shemitz Designs, Inc. v. Newark Corp., 291 Conn. 224, 231, 967 A.2d 1188 (2009).III A.
Curtis first argues that he is shielded from liability against all of the plaintiffs' claims pursuant to § 34-133(a). That section, in relevant part, provides that "a person who is a member or manager of a limited liability company is not liable, solely by reason of being a member or manager . . . for a . . . liability of the limited liability company, whether arising in contract, tort or otherwise or for the acts or omissions of any other member, manager, agent or employee of the limited liability company." (Emphasis added.) While Curtis acknowledges that section (b) allows for personal liability of a member, he argues that the exception is limited to those engaged in professional services as defined by General Statutes § 34-101(23). As § 34-101(23) does not include business agents, Curtis argues that the counts against him must be stricken because he is shielded from liability under § 34-133(a).
Section 34-101(23) provides: "`Professional service' means any type of service to the public that requires that members of a profession rendering such service obtain a license or other legal authorization as a condition precedent to the rendition thereof, limited to the professional services rendered by dentists, naturopaths, chiropractors, physicians and surgeons, doctors of dentistry, physical therapists, occupational therapists, podiatrists, optometrists, nurses, nurse-midwives, veterinarians, pharmacists, architects, professional engineers, or jointly by architects and professional engineers, landscape architects, real estate brokers, insurance producers, certified public accountants and public accountants, land surveyors, psychologists, attorneys-at-law, licensed marital and family therapists, licensed professional counselors, licensed or certified alcohol and drug counselors and licensed clinical social workers."
This court disagrees. "It is black letter law that an officer of a corporation who commits a tort is personally liable to the victim regardless of whether the corporation itself is liable." Kilduff v. Adams, Inc., 219 Conn. 314, 331-32, 593 A.2d 478 (1991). "It is well established that an officer of a corporation does not incur personal liability for its torts merely because of his official position. Where, however, an agent or officer commits or participates in the commission of a tort, whether or not he acts on behalf of his principal or corporation, he is liable to third persons injured thereby . . . Thus, a director or officer who commits the tort or who directs the tortious act done, or participates or operates therein, is liable to third persons injured thereby, even though liability may also attach to the corporation for the tort." (Citations omitted; internal quotation marks omitted.) Ventres v. Goodspeed Airport, LLC, 275 Conn. 105, 141-42, 881 A.2d 937 (2005), cert. denied, 547 U.S. 1111, 126 S.Ct. 1913, 164 L.Ed. 2d 664 (2006).
This principle applies equally to limited liability companies. Indeed, our Supreme Court has stated that General Statutes § 34-134, which is similar to § 34-133(a), "evinces no legislative intent to eliminate the right to impose liability on a member or manager of a limited liability company who has engaged in or participated in the commission of tortious conduct. Rather, the statute merely codifies the well established principle that an officer of a corporation does not incur personal liability for its torts merely because of his official position." (Emphasis in original; internal quotation marks omitted.) Id., 145.
The opposite is also true — a sole member of a limited liability company has standing to sue along with the limited liability company where a defendant has allegedly slandered both the limited liability company and the individual. See Ma'Ayergi Associates, LLC v. Pro Search, Inc., 115 Conn.App. 662, 974 A.2d 724 (July 14, 2009).
Section 34-134, in relevant part, provides: "A member or manager of a limited liability company is not a proper party to a proceeding by or against a limited liability company solely by reason of being a member or manager of the limited liability company . . ."
In the present case, the plaintiffs do not allege that Curtis is merely a managing member and an agent and representative of HBB. The amended complaint contains multiple allegations of Curtis' direct participation in the alleged tortious conduct. For example, the plaintiffs allege that Curtis told Judith Tumosa that the business' financial performance was strong, Curtis told Judith Tumosa that she did not need an attorney until closing and Curtis told Judith Tumosa that the plaintiffs could not have or would not be allowed to have an accountant look though the business' billing records. Because the plaintiffs allege that Curtis participated in the tortious activities, he may be liable to the plaintiffs regardless of whether he committed torts in his individual capacity or on behalf of the limited liability company. See id., 142-43 (concluding that trial court properly determined that defendant was personally liable for tortious conduct irrespective of whether defendant was acting in individual capacity or on behalf of corporation). As a result, this court cannot find that Curtis is shielded from liability for all of the plaintiffs' claims pursuant to § 34-133(a), but must next examine the complaint to determine whether the allegations are sufficient to withstand this motion to strike.
B.
The first count alleges breach of fiduciary duty and the defendants argue that the plaintiffs have failed to plead sufficient facts to support the existence of a fiduciary relationship and to show causation, assuming arguendo that a duty existed and was breached. "[A] fiduciary or confidential relationship is characterized by a unique degree of trust and confidence between the parties, one of whom has superior knowledge, skill or expertise and is under a duty to represent the interests of the other . . . The superior position of the fiduciary or dominant party affords him great opportunity for abuse of the confidence reposed in him . . . We have not, however, defined that relationship in precise detail and in such a manner as to exclude new situations, choosing instead to leave the bars down for situations in which there is a justifiable trust confided on one side and a resulting superiority and influence on the other . . . [U]nder our case law, the fiduciary relationship is not singular. The relationship between sophisticated partners in a business venture may differ from the relationship involving lay people who are wholly dependent upon the expertise of a fiduciary. Fiduciaries appear in a variety of forms, including agents, partners, lawyers, directors, trustees, executors, receivers, bailees and guardians. [E]quity has carefully refrained from defining a fiduciary relationship in precise detail and in such a manner as to exclude new situations." (Citations omitted; internal quotation marks omitted.) Falls Church Group, Ltd. v. Tyler, Cooper Alcorn, LLP, 281 Conn. 84, 108-09, 912 A.2d 1019 (2007).
In the present case, the court reads the allegations of the plaintiffs' amended complaint broadly; see Sylvan R. Shemitz Designs, Inc. v. Newark Corp., supra, 291 Conn. 231; and construes the facts in the complaint most favorably to the plaintiffs. See Faulkner v. United Technologies Corp., supra, 240 Conn. 580. Specifically, the court construes the amended complaint to allege that the plaintiffs relied on the advice of the defendants in finding a suitable investment opportunity after having worked with the defendants to sell an existing business. Additionally, Curtis allegedly advised Judith Tumosa that she did not need to be a licensed physical therapist or have prior experience in the field; that, as stated above, the business was strong; that no lawyer was needed until the closing; and that an accountant would not be able to review the financial records. Furthermore, the plaintiffs allege that Curtis prepared a due diligence check list as well as a list of tasks to be done before closing for the plaintiffs that did not include checking the compliance of the business or its billing practices with Medicare statutes, regulations and rules. Consequently, the plaintiffs allege that "[a]s a result of the actions and undertakings of Curtis and HBB in assuming the role of a financial and business advisor to the [plaintiffs], Curtis and HBB owed fiduciary duties to the [plaintiffs] to exercise due and proper care with respect to any such advice given." Therefore, the court finds that the plaintiffs sufficiently allege the existence of a relationship of trust and confidence with both of the defendants who had superior knowledge or expertise and a duty to represent the interests of the plaintiffs.
The plaintiffs allege that Medicare accounted for approximately 40 percent of the revenues of the business, but that the Sasonovs engaged in fraudulent and abusive Medicare billing thereby inflating overall revenues of the business.
The defendants also argue that the first count should fail because any alleged breach of duty did not cause the plaintiffs' damages. In support of this argument, the defendants argue facts not alleged in the amended complaint and are not proper for consideration. "We are limited, however, to a consideration of the facts alleged in the complaint. A speaking motion to strike (one imparting facts outside the pleadings) will not be granted." Doe v. Marselle, 38 Conn.App. 360, 364, 660 A.2d 871 (1995), rev'd on other grounds, 236 Conn. 845, 675 A.2d 835 (1996). Thus, the defendants' motion to strike the first count is denied.
C.
The defendants next seek to strike the third count, negligent infliction of emotional distress, on the grounds that the plaintiffs only allege conclusions of law and not sufficient facts. The essential elements of a negligent infliction count are that "the defendant's conduct created an unreasonable risk of causing the plaintiff emotional distress, the plaintiff's distress was foreseeable, the emotional distress was severe enough that it might result in illness or bodily harm, and, finally, that the defendant's conduct was the cause of the plaintiffs distress." (Citation omitted.) Olson v. Bristol-Burlington Health District, 87 Conn.App. 1, 5, 863 A.2d 748, cert. granted, 273 Conn. 914, 870 A.2d 1083 (2005). The defendants argue that the plaintiffs merely incorporate the allegations of the negligence cause of action with the conclusion that the plaintiffs suffered "mental anguish and emotional distress."
Nevertheless, a review of the complaint as it pertains to the third count reveals that the plaintiffs sufficiently allege that the defendants' actions, as mentioned above, in advising the plaintiffs to purchase this particular business, including the due diligence advice, created an unreasonable risk of causing the plaintiffs' emotional distress. The plaintiffs allege that they secured the monies to purchase the business, paid $1 million in cash, signed a note for $1,397,000 personally guaranteeing the lease, found the business to be substantially overvalued, had two properties foreclosed upon, including their home, and subsequently experienced emotional distress. It may be fairly construed from a broad reading of the complaint that this occurred because the defendants failed to advise them properly on the investigation of the true value and nature of Central. Therefore, the court finds that the plaintiffs have provided a sufficient factual basis as to the cause of the alleged foreseeable emotional distress and the motion to strike the third count is denied.
D.
Similarly, the defendants argue that the plaintiffs have failed to plead a CUTPA violation sufficiently; they maintain that the complaint is "entirely devoid of any factual allegations." The requirements in determining whether a practice violate CUTPA are well known. "[General Statutes §] 42-110b(a) provides that [n]o person shall engage in unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce. It is well settled that in determining whether a practice violates CUTPA we have adopted the criteria set out in the cigarette rule by the federal trade commission for determining when a practice is unfair: (1) [W]hether the practice, without necessarily having been previously considered unlawful, offends public policy as it has been established by statutes, the common law, or otherwise — in other words, it is within at least the penumbra of some common law, statutory, or other established concept of unfairness; (2) whether it is immoral, unethical, oppressive, or unscrupulous; (3) whether it causes substantial injury to consumers, [competitors or other businesspersons] . . . All three criteria do not need to be satisfied to support a finding of unfairness. A practice may be unfair because of the degree to which it meets one of the criteria or because to a lesser extent it meets all three." (Internal quotation marks omitted.) Ventres v. Goodspeed Airport, LLC, supra, 275 Conn. 154-55. "CUTPA, by its own terms, applies to a broad spectrum of commercial activity," (Internal quotation marks omitted.) Eder Brothers, Inc. v. Wine Merchants of Connecticut, Inc., 275 Conn. 363, 380, 880 A.2d 138 (2005).
Based upon the same allegations as stated above, this court does not agree with the defendants. "[A] breach of fiduciary duty in any relation covered by CUTPA is likely to be deceptive or unfair." (Internal quotation marks omitted.) Giordano v. Bittner, Superior Court, judicial district of Hartford, Docket No. CV 0577552 (July 2, 1998, Teller, J.) (quoting 1 R. Langer, J. Morgan D. Belt, Connecticut Unfair Trade Practices Act (1994) § 4.13, p. 163). In the present case, the plaintiffs have alleged the essential requirements of a breach of fiduciary duty and such a breach could meet any of the three criteria of the cigarette rule. See Priceline.Com, Inc. v. Mayes, Superior Court, complex litigation docket at Stamford, Docket No. X08 CV 03 0196820 (March 16, 2005, Adams, J.) (39 Conn. L. Rptr. 9, 12) (finding that complaint's allegations of breach of fiduciary duty "sufficient to establish deceitful and unscrupulous conduct"); see also Ostrowski v. Avery, CT Page 14447 243 Conn. 355, 378, 703 A.2d 117 (1997) ("[i]f the retrial results in findings of violations of fiduciary duty, the question remains whether such misconduct constitutes an unfair and deceptive trade practice within the meaning of CUTPA").
IV
Accordingly, the defendants' motion to strike is denied.