Opinion
No. CV 06-5002921
September 29, 2006
MEMORANDUM OF DECISION RE MOTION TO STRIKE ( #101)
Before the court is the defendants' motion to strike counts six and seven of the plaintiff's complaint on the ground that each count fails to allege sufficient facts to state a claim for breach of fiduciary duty and a violation of the Connecticut Unfair Trade Practices Act, respectively.
The plaintiff, William Wadsworth, filed an eight-count complaint against the defendants, David Sessions and the Casle Corporation (Casle) in which he alleges that he is and has been an employee of Casle since 1987 and that Sessions is the owner and president of Casle as well as "the managing member or general partner in the LLC's or other entities which [were] formed . . . by Casle . . ." Casle is engaged in the development, design and construction of commercial and governmental real estate. This action arises out of the defendants' failure to transfer an ownership interest in Casle to the plaintiff after allegedly promising to do so.
All of the counts in the complaint are against both of the defendants except count six, which is only against Sessions. In count six, the plaintiff alleges a breach of fiduciary duty against Sessions. In count seven, the plaintiff alleges Sessions and Casle violated the Connecticut Unfair Trade Practices Act (CUTPA), Conn. Gen. Stat. § 42-110b, et. seq. As to count six, breach of fiduciary duty, Sessions claims that "there is no such recognized cause of action in the employer/employee relationship"; and as to count seven, violation of CUTPA, the defendants claim that it is inapplicable to employer/employee relationships, intra-corporate conflicts, or internal affairs of a partnership; that it is inapplicable to a violation that does not arise out of trade or commerce and that the allegations in the complaint do not satisfy the requirements of the "cigarette rule."
"It is axiomatic that a party cannot breach a fiduciary duty to another party unless a fiduciary relationship exists between them. [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 . . ." (Citation omitted; internal quotation marks omitted.) Sherwood v. Danbury Hospital, 278 Conn. 163, 195, 896 A.2d 777 (2006).
"An attorney-client relationship imposes a fiduciary duty on the attorney." (Internal quotation marks omitted.) Updike, Kelly Spellacy, P.C v. Beckett, 269 Conn. 613, 648 n. 28, 850 A.2d 145 (2004). "[P]artners are bound in a fiduciary relationship and act as trustees toward each other and toward the partnership." (Internal quotation marks omitted.) Oakhill Associates v. D'Amato, 228 Conn. 723, 727, 638 A.2d 31 (1994). See also Citibank (South Dakota), N.A. v. Gifesman, 63 Conn.App. 188, 197, 773 A.2d 993 (2001) (in a partnership, a fiduciary duty is automatic).
In count six, the plaintiff alleges that Sessions was a lawyer, who provided him with occasional legal advice on various matters, specifically in 1994, when Sessions stated he would make the plaintiff his business partner. The plaintiff also alleges therein that in the winter of 2001, Sessions announced in the company's newsletter that the plaintiff was a partner of Casle, referred to him as a partner at meetings with clients, then in July 2002, Sessions explained to him the "parameters of the partnership," agreed to give the plaintiff a 3 percent interest in Casle, and in July 2003, again repeated that the plaintiff had this 30 percent interest. The plaintiff subsequently asserts that, as a result of these factual allegations, he and Sessions entered into a fiduciary relationship, which imposed on Sessions specific fiduciary duties and that Sessions breached their fiduciary relationship. The plaintiff's allegations are sufficient to support a claim of a fiduciary relationship between him and Sessions in which Sessions occupied a "superior position" and that within the partnership, he possessed "superior knowledge."
The motion to strike count six is denied.
As to count seven, the defendants argue that the plaintiff fails to allege sufficiently a violation of CUTPA because CUTPA's "trade or commerce" requirement does not apply to disputes arising from employment relationships, internal business affairs of a partnership or purely intra-corporate conflicts and because the plaintiff fails to allege facts sufficient to meet the requirements set forth in the "cigarette rule."
"CUTPA applies to a broad spectrum of commercial activity . . . The act states 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.' Conn. Gen. Stat. § 42-110b(a)." (Citation omitted; internal quotation marks omitted.) Ostrowski v. Avery, 243 Conn. 355, 378-79, 703 A.2d 117 (1997). "To state a claim under CUTPA, the plaintiff must allege that the actions of the defendant were performed in the conduct of `trade or commerce' . . . [A]n employment relationship does not constitute trade or commerce for the purposes of CUTPA." (Citations omitted; internal quotation marks omitted.) Muniz v. Kravis, 59 Conn.App. 704, 711, 757 A.2d 1207 (2003).
In addition, the Connecticut Supreme Court has stated that "purely intra corporate conflicts do not constitute CUTPA violations . . . Ostrowski v. Avery [ supra, 243 Conn. 379]. It has distinguished, however, such internal corporate actions that also have the effect of `usurp[ing] the business and clientele of one corporation in favor of another . . .' Id., quoting Fink v. Golenbock, 238 Conn. 183, 212, 680 A.2d 1243 (1996).
The plaintiff incorporates his allegations from count six that Sessions improperly withheld an ownership interest from him while also providing him with legal advice in the context of a partnership relationship. He further contends in count seven that the defendants are engaged in the construction business and that the defendants' "conduct has been unfair and has tended to deceive" him, all of which amount to a violation of CUTPA. To state a cause of action for a CUTPA violation, the plaintiff must allege that the issue was more than a private conflict between parties within the same business. See Russell v. Russell, supra, 91 Conn.App. 648. The plaintiff, however, fails to allege anything beyond a "purely intra corporate" conflict. He merely alleges that the defendants' failure to transfer an ownership interest in Casle to him was "unfair and has tended to deceive" the plaintiff.
A partnership does not change the nature of the dispute. The court still must examine whether the conflict is private in nature. Russell v. Russell, supra, 91 Conn.App. 647, citing Chester v. Schatz Schatz, Ribicoff Kotkin, Superior Court, judicial district of Hartford-New Britain at Hartford, Docket No. CV 91-0447376 (June 3, 1991, O'Neill, J.) ( 7 C.S.C.R. 721) ( 6 Conn. L. Rptr. 526) (internal strife of partnership held outside scope of CUTPA). Finally, the plaintiff fails to allege facts sufficient to support a CUTPA claim in the context of an employment relationship. In United Components, Inc. v. Wdowiak, 239 Conn. 259, 264-65, 684 A.2d 693 (1996), the court upheld a trial court decision granting a motion to strike on the ground that the employment relationship "did not rise to the level of trade or commerce cognizable under CUTPA." The plaintiff's CUTPA claim is insufficient as it pertains to the employment relationship between the plaintiff and the defendants.
The motion to strike count seven of the complaint is granted.
CONCLUSION
Motion to strike count six is denied.
Motion to strike count seven is granted.