Opinion
No. CV09-5010067S
April 8, 2010
MEMORANDUM OF DECISION RE MOTION TO STRIKE #101
FACTS
By service of the writ of summons and complaint, the plaintiffs, Elizabeth Ward and Mark Ward, commenced this action against the defendants, RAK Construction, LLC (RAK) and Robert A. Kordas, on August 28, 2009. In count one of the four-count complaint, the plaintiffs allege the following. The plaintiffs are owners of and reside at a residence in Milford, Connecticut. They entered into a contract with RAK for the renovation of that residence and other improvements. Pursuant to the agreement, the plaintiffs agreed to pay $203,000, and work commenced on or about June 1, 2008. According to the complaint, the agreement required RAK to complete the work within four months. RAK guaranteed that all work performed would be free from defects in workmanship and materials. The plaintiffs allege that the defendants breached this contract "by failing to complete construction timely and by failing to construct free from defects in workmanship and materials," and they list a number of such defects.
Specifically, the plaintiffs allege: "(a) The ducting was not built for the HVAC; (b) The upstairs bath had to be finished after the bottom floor was complete [such that] the construction crew had to break into the living room ceiling to finish the plumbing of the bathtub; (c) Inferior insulation was used which produced an offensive odor [such that it and the sheetrock had to be replaced; (d) The living room radiator had a drywall screw inserted into the pex tubing which caused a leak. The piping, floor joists, insulation and wood flooring (including refinishing the entire living room) had to be replaced, keeping the plaintiffs and their family out of the house for [three] days; (e) Banquet seating in the breakfast nook [was] not done; (f) Three radiators were broken by [the] plumbing subcontractor hired by the defendant; (g) Lawn damage from building materials; (h) The floorboards in the downstairs bathroom near the tub had to be replaced and refinished. The defendant told the plaintiffs that the bathroom would be complete upon move-in; (i) Master bath toilet was broken by flooring subcontractor hired by defendant; (j) No proper venting for the second floor rooms; [and] (k) Four floorboards in the dining room were patched with wood putty. The floorboard should have been replaced before the floors were finished."
The allegations of count one are incorporated into count two which alleges a violation of the Connecticut Unfair Trade Practices Act, General Statutes § 42-110a et seq. (CUTPA). In count two, the plaintiffs make the following additional allegations: "[RAK] ignored and refused to complete or correct construction items; [it] has ignored and refused to complete or correct defective work and materials in improvements and homes it has [built] for others after they have taken occupancy; [a]s a result of all of the forgoing conduct on the part of [RAK], it engaged in unfair and deceptive acts, omissions and/or practices in the conduct of its business and caused damages to the plaintiffs in violation of [CUTPA]."
The allegations of count one are also incorporated into count three, in which the plaintiff seeks to pierce the corporate veil. In count three, the plaintiffs make the following additional allegations: "Upon information and belief, [Kordas] owns 100% of the interest in [RAK]; [u]pon information and belief, [Kordas] is the sole member of [RAK]; [RAK] has never had, and does not now have, any genuine or separate existence, but has been used and exists for the sole purpose of permitting [Kordas] to transact business under a limited liability company guise; [RAK] is the alter ego of [Kordas] because there is such a unity of interest and ownership that the independence of [RAK] has in effect ceased or had never begun." For these reasons, the plaintiffs allege, Kordas is obligated to the plaintiffs for the damages incurred.
The allegations of count three are incorporated into count four, which also sounds in piercing the corporate veil. In count four, the plaintiffs make the following additional allegations: [RAK] has been completely dominated in policy and business practices by [Kordas]; [it] is a mere shell for [Kordas] and serves no legitimate purpose and has been used primarily as an intermediary to perpetrate fraud or to promote injustice; [Kordas] has used such control in contravention of the plaintiffs' legal rights; [b]y virtue of the foregoing, [Kordas] is obligated to the plaintiffs for damages incurred as aforementioned." In their prayer for relief, the plaintiffs seek money damages, punitive damages and attorneys fees and costs pursuant to CUTPA and such other relief as the court may deem appropriate in law or equity.
On November 19, 2009, the defendants filed a motion to strike count two of the complaint and the second and third prayers for relief on the ground that the allegations are insufficient to support an action in CUTPA, and strike counts three and four on the ground. that the allegations are insufficient to sustain a cause of action to pierce the corporate veil. On December 14, 2009, the plaintiffs filed a memorandum of law in opposition. The court heard oral argument on this matter at short calendar on February 1, 2010.
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). "[F]or the purpose of a motion to strike, the moving party admits all facts well pleaded." RK Constructors, Inc. v. Fusco Corp., 231 Conn. 381, 383 n. 2, 650 A.2d 153 (1994). Accordingly, "[i]f facts provable in the complaint would support a cause of action, the motion to strike must be denied." (Internal quotation marks omitted.) American Progressive Life Health Ins. Co. of New York v. Better Benefits, LLC, 292 Conn. 111, 120, 971 A.2d 17 (2009). On the other hand, "[a] motion to strike is properly granted if the complaint alleges mere conclusions of law that are unsupported by the facts alleged." (Internal quotation marks omitted.) Fort Trumbull Conservancy, LLC v. Alves, supra, 498. When ruling on a motion to strike, the court must "construe the complaint in the manner most favorable to sustaining its legal sufficiency." (Internal quotation marks omitted.) American Progressive Life Health Ins. Co. of New York v. Better Benefits, LLC, supra, 120.
I. CUTPA
The defendants argue that the complaint fails to allege any facts which, if proven, sustain a CUTPA claim. They take the position that beyond "boilerplate" language, the plaintiffs have not alleged that the defendants' actions were unlawful, offensive to an identifiable public policy, immoral, unethical, oppressive or unscrupulous nor do the allegations rise to the level of unreasonableness required under CUTPA. They maintain that because the plaintiffs have failed to plead any facts which would demonstrate that the defendants' acts were unfair, the plaintiffs cannot show that they suffered a substantial injury as a result of a CUTPA violation. Finally, the defendants argue that the plaintiffs have not alleged facts which, if proven, would establish that it was the unfair trade practice that was the proximate cause of any loss suffered by the plaintiffs. In response, the plaintiffs counter that the court must read the allegations broadly, that there is no special requirement of pleading CUTPA with any particularity over and above any other claim, and that the complaint alleges an action by the defendant constituting a violation of CUTPA. Thus, they maintain, count two should not be stricken.
CUTPA 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." General Statutes § 42-110b(a). "It is well settled that in determining whether a practice violates CUTPA [the Connecticut Supreme Court has] 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 business persons] . . . 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 lesser extent it meets all three . . . Ventres v. Goodspeed Airport, LLC, 275 Conn. 105, 155, 881 A.2d 937 (2005), cert. denied, 547 U.S. 1111, 126 S.Ct. 1913, 164 L.Ed.2d 664 (2006)." (Internal quotation marks omitted.) Builes v. Kashinevsky, Superior Court, judicial district of Fairfield, Docket No. CV 09 5022520 (September 15, 2009, Bellis, J.) ( 48 Conn. L. Rptr. 538, 539). "[I]n order to prevail in a CUTPA action, a plaintiff must establish both that the defendant has engaged in a prohibited act and that, as a result of this act, the plaintiff suffered an injury." (Internal quotation marks omitted.) Id.
The third criterion of the aforementioned cigarette rule is "whether [the practice] causes substantial injury to consumers." Id. "In discussing the third criterion, the federal trade commission has stated: The independent nature of the consumer injury criterion does not mean that every consumer injury is legally unfair, however. To justify a finding of unfairness the injury must satisfy three tests. It must be substantial; it must not be outweighed by any countervailing benefits to consumers or competition that the practice produces; and it must be an injury that consumers themselves could not reasonably have avoided." (Internal quotation marks omitted.) Williams Ford, Inc. v. Hartford Courant Co., 232 Conn. 559, 592, 657 A.2d 212 (1995).
The same facts that establish a breach of contract claim may be sufficient to establish a CUTPA violation; see Lester v. Resort Camplands International, Inc., 27 Conn.App. 59, 71, 605 A.2d 550 (1992); but not every contractual breach rises to the level of a CUTPA violation. See Hudson United Bank v. Cinnamon Ridge Corp., 81 Conn.App. 557, 571, 845 A.2d 417 (2004). "It has been held that a simple breach of contract does not offend traditional notions of fairness and thus no violation of CUTPA can be found. The weight of Superior Court decisions supports this position . . . The burdens on and risks inherent in contract formation would be intolerably increased and simple breach of contract claims would turn into windfalls in every case . . . A rule to the contrary — that a company violates CUTPA whenever it breaks an unprofitable deal — would convert every contract dispute into a CUTPA violation. We cannot assume that the Connecticut legislature, in enacting CUTPA, intended such an extraordinary alteration of the common law." (Citations omitted; internal quotation marks omitted.) Talbot v. Kirkup, Superior Court, judicial district of New London, Docket No. 551986 (September 20, 2000, Corradino, J.).
"There is a split of authority in Superior Court decisions regarding what is necessary to establish a CUTPA claim for breach of contract, the majority of courts holding that a simplebreach of contract, even if intentional, does not amount to a violation of CUTPA in the absence of substantial aggravating circumstances." Zelencich v. American Yacht Services, Superior Court, judicial district of Stamford-Norwalk at Stamford, Docket No. CV 02 0187145 (July 31, 2006, Jennings, J.). See also 12 R. Langer, J. Morgan D. Belt, Connecticut Unfair Trade Practices Act (2003) § 4.3, p. 196-97 ("A standard that almost all superior court decisions currently apply for a finding of unfairness is that the claimant must plead and prove `substantial aggravating circumstances attending the breach'"). "[Our] Supreme Court appears to have adopted this standard in Lydall v. Ruschemeyer, 282 Conn. 209, 247, 919 A.2d 421 (2007), citing a federal district court opinion standing for the same proposition." Webster Financial Corp. v. McDonald, Superior Court, judicial district of Waterbury, Docket No. CV 08 4016026 (January 28, 2009, Brunetti, J.). "In a sense, unfairness inheres in every breach of contract when one of the contracting parties is denied the advantage for which he contracted, but that is why remedial damages are awarded in contract claims. If such an award is to be trebled, the [state] legislature must have intended that substantial aggravating circumstances be present." (Internal quotation marks omitted.) Designs on Stone, Inc. v. John Brennan Construction Co., Superior Court, judicial district of Ansonia-Milford, Docket No. CV 97 059997 (April 9, 1998, Corradino, J.) ( 21 Conn. L. Rptr. 659, 661) (note that "the court in effect adopts the reasoning of [a North Carolina court] interpreting [that state's] unfair trade practices act").
"Courts have shown a willingness to strike CUTPA claims. where there are no further specific allegations as to why a breach of contract was unfair or deceptive. The substantive requirement of additional facts in addition to breach may be coupled with a procedural requirement that a CUTPA claim be pleaded with particularity or at least specificity as to what facts are alleged to satisfy the claim of unfairness or deception. Combining the two requirements, that there be a claim of more than simple breach and that the bases of that claim be pleaded with specificity, can be the basis of a court's granting a motion to strike claim based on a general allegation of breach of contract. This approach allows courts readily to dispose of claims in which the plaintiff makes only a general allegation of a CUTPA violation premised on a breach of contract. The difficulty lies in describing what conduct in addition to the breach is necessary to establish a CUTPA violation. A number of decisions have rejected the argument that a claim that a breach was `intentional' is an adequate allegation of an additional factor. A standard that almost all superior court decisions currently apply for a finding of unfairness is that the claimant must plead and prove `substantial aggravating circumstances attending the breach.'" 12 R. Langer, J. Morgan D. Belt, Connecticut Unfair Trade Practices Act (2003) § 4.3, p. 194-97.
"This court aligns itself with the majority view, and holds that to sufficiently plead a CUTPA claim arising out of a breach of contract, a claimant must show substantial aggravating circumstances . . . Where the plaintiff alleges sufficient aggravating circumstances, beyond a mere breach of contract that may bring the case within the cigarette rule, the CUTPA claim may withstand a motion [to strike]." (Citation omitted; internal quotation marks omitted.) O G Industries, Inc. v. Earth Technology, Inc., Superior Court, judicial district of Ansonia-Milford at Derby, Docket No. CV 08 5006408 (January 6, 2010, Bellis, J.).
Allegations of specific conduct that amounts to immoral, unethical, oppressive, or unscrupulous behavior can constitute a substantial aggravating factor. See, e.g., Jennings Smith Investigations v. Southern New England Telephone Co., Superior court, judicial district of Hartford, Docket No. CV 03 0827136 (September 13, 2004, Shapiro, J.) (finding that "oppressive" conduct constituting aggravating circumstance had been alleged where defendant over period of years agreed to correctly publish customer's telephone number and assured correction but instead knowingly published incorrect number repeatedly). In some circumstances, courts have held that plaintiffs who allege repeated or multiple breaches of a contract have alleged an aggravating circumstance sufficient to withstand a motion to strike. See, e.g., Greene v. Orsini, 50 Conn.Sup. 312, 315-16, 926 A.2d 708 (2007) (denying motion to strike CUTPA count when plaintiff alleged that defendants breached noncompetition agreement on several occasions despite plaintiffs repeated complaints and defindants' repeated assurances that it would cease competing); Ameripride Services, Inc. v. U.S. Food Service, Inc., Superior Court, judicial district of Hartford, Docket No. CV 04 0835453 (June 7, 2006, Tanzer, J.) (denying motion to strike CUTPA count when allegations that defendant repeatedly overcharged plaintiff for services defendant had agreed to perform may be characterized as aggravating circumstance).
In count two, the plaintiffs incorporate the entirety of their breach of contract claim, including allegations that, inter alia, "[t]he living room radiator had a drywall screw inserted into the pex tubing which caused a leak. The piping, floor joists, insulation and wood flooring (including refinishing the entire living room) had to be replaced, keeping the plaintiffs and their family out of the house for [three] days . . ." See note 1. The plaintiffs allege further that RAK "ignored and refused to complete or correct construction items . . . [and] has ignored and refused to complete or correct defective work and materials in improvements and homes it has built for others after they have taken occupancy." (Emphasis added.) The plaintiffs have alleged sufficient aggravating circumstances, beyond a mere breach of contract, that bring the case within the third criterion of the cigarette rule because they have alleged a pattern or practice that RAK "ignored and refused to complete or correct defective work and materials in improvements and homes it has built." Of course, the plaintiffs will have the burden a trial of establishing that their injury was substantial, that the alleged practice is not outweighed by any countervailing benefits to consumers or competition that the practice produces, and that they could not reasonably have avoided the injury themselves. On a motion to strike, it is the sufficiency of the allegations, not proof of those allegations, that is being challenged. Accordingly, the defendants' motion to strike count two is denied.
Practice Book § 10-39 "allows for a claim for relief to be stricken only if the relief sought could not be legally awarded." Pamela B. v. Ment, 244 Conn. 296, 325, 709 A.2d 1089 (1998). By their terms, the plaintiffs' second prayer for relief, "punitive damages pursuant to [CUTPA]," and third prayer for relief, "attorneys fees and costs pursuant to [CUTPA]," both correspond to the CUTPA count. Because I have denied the defendants' motion to strike the CUTPA count, the defendants' motion to strike the second and third prayers for relief is denied as well.
CT Page 8431
II. Piercing the Corporate Veil
The defendants argue that, typically, members of limited liability companies are not held personally liable on corporate contracts absent tortious conduct on behalf of the individual, and that the plaintiffs here have failed to allege any facts in support of piercing the corporate veil. The plaintiffs respond that the material allegations of the complaint satisfy the threshold legal test for piercing the corporate veil."A court's disregard of an entity's structure is commonly known as piercing the corporate veil." (Internal quotation marks omitted.) Litchfield Asset Management Corp. v. Howell, 70 Conn.App. 133, 148 n. 10, 799 A.2d 298, cert. denied, 261 Conn. 941, 806 A.2d 49 (2002). "In the usual veil piercing case, a court is asked to disregard a corporate entity so as to make available the personal assets of the owners to satisfy a liability of the entity." Id., 149. "A corporation is a separate legal entity, separate and apart from its stockholders . . . That principle also is applicable to limited liability companies and their members." (Citation omitted; internal quotation marks omitted.) Id., 147. "[T]he determination of whether to pierce the corporate veil of a stock corporation or to disregard the protections afforded a limited liability company requires the same analysis . . ." KLM Industries, Inc. v. Tylutki, 75 Conn.App. 27, 29 n. 2, 815 A.2d 688, cert. denied, 263 Conn. 916, 821 A.2d 770 (2003).
"The Connecticut Limited Liability Company Act, General Statutes §§ 34-100 to 34-242, inclusive, was adopted in 1993 . . . The allure of the limited liability company is its unique ability to bring together in a single business organization the best features of all other business forms — properly structured, its owners obtain both a corporate-styled liability shield and the pass-through tax benefits of a partnership." (Internal quotation marks omitted.) PB Real Estate, Inc. v. DEM II Properties, 50 Conn.App. 741, 742, 719 A.2d 73 (1998).
"This state recognizes two theories under which it will permit the protection of the corporate structure to be set aside, the instrumentality rule and the identity rule . . . The instrumentality rule requires . . . proof of three elements: (1) Control, not mere majority or complete stock control, but complete domination, not only of finances but of policy and business practice in respect to the transaction attacked so that the corporate entity as to this transaction had at the time no separate mind, will or existence of its own; (2) that such control must have been used by the defendant to commit fraud or wrong, to perpetrate the violation of a statutory or other positive legal duty, or a dishonest or unjust act in contravention of [the] plaintiff's legal rights; and (3) that the aforesaid control and breach of duty must proximately cause the injury or unjust loss complained of . . . The identity rule has been stated as follows: If [the] plaintiff can show that there was such a unity of interest and ownership that the independence of the corporations had in effect ceased or had never begun, an adherence to the fiction of separate identity would serve only to defeat justice and equity by permitting the economic entity to escape liability arising out of an operation conducted by one corporation for the benefit of the whole enterprise." (Citation omitted; internal quotation marks omitted.) Labbe v. Carusone, 115 Conn.App. 832, 838, 974 A.2d 738 (2009). "Although the `identity' or `alter-ego' doctrine has been primarily applied to reach beyond the veil to another corporation, it may also be employed to hold an individual liable." Klopp v. Thermal-Sash, Inc., 13 Conn.App. 87, 89 n. 3, 534 A.2d 907 (1987).
"Although Superior Court decisions differ as to what extent a complaint must allege the elements of the instrumentality rule or the identity rule, the decisions are consistent in holding that, at a minimum, the complaint must allege a sufficient factual basis for a court to pierce the corporate veil." Sekas v Enginuity PLM, LLC, Superior Court, judicial district of Ansonia-Milford at Derby, Docket No. CV 75002249 (June 6, 2007, Esposito, J.). For example, in Harris v. Kupersmith, Superior Court, judicial district of Stamford-Norwalk at Stamford, Docket No. CV 08 6000995 (August 31, 2009, Taggart, J.), the plaintiff alleged breach of a deferred compensation contract against two limited liability companies and an individual who was the sole member of those entities. The plaintiff claimed, inter alia, that the individual defendant used assets of the companies for his own personal use; that he employed the plaintiff to handle his private mail, bank accounts and other private matters; that he paid the plaintiff with corporate assets, that he bought a share in a private jet with corporate assets and then used this jet to provide transportation for his family and friends, and that the defendant personally decided not to pay the plaintiff the deferred compensation at issue in the complaint. In that case, the court found that the allegations were sufficient to show that the independence of the companies, if it ever existed, had ceased to exist, and denied the motion to strike. Id. See also Presti v. Sorbo, Superior Court, judicial district of Stamford-Norwalk at Stamford, Docket No. CV 96 0151172 (December 18, 1996, Ryan, J.) (denying motion to strike count sounding in piercing corporate veil when plaintiff alleged defendant individual acting as corporate president hired plaintiff, promised him payment, failed to pay him, decided to spend corporate assets to purchase car, all of which resulted in specified economic harm to plaintiff).
In contrast, courts routinely grant motions to strike counts sounding in piercing the corporate veil where legal conclusions rather than facts are alleged. See, e.g., Girouard v. R.I. Pools, Inc., Superior Court, judicial district of Stamford-Norwalk, Docket No. CV 07 5004474 (January 6, 2009, Adams, J.); Jannetty Racing Enterprises, Inc. v. Site Development Technologies, LLC, Superior Court, judicial district of Waterbury, Docket No. CV 05 4004820 (January 31, 2006, Brunetti, J.); Pompilli v. Pro-Line Painting, Superior Court, judicial district of New Haven, Docket No. CV 04 4001774 (May 13, 2005, Lopez, J.) ( CT Page 8433 39 Conn. L. Rptr. 347, 349-50); Sullivan v. Lake Compounce Theme Park, Inc., Superior Court, judicial district of Waterbury, Docket No. CV 02 0172497 (June 3, 2004, Alvord, J.), aff'd, 277 Conn. 113, 889 A.2d 810 (2006). Moreover, "[a] motion to strike can be granted on the ground that an allegation based `upon information and belief' is conclusory." Mashantucket Pequot Tribal Nation v. Tucker Co., Superior Court, judicial district of New London at Norwich, Docket No. 119750 (December 15, 2(I00, Martin, J). Accord Tomonto v. Progressive Northern Ins. Co., Superior Court, judicial district of Stamford-Norwalk at Stamford, Docket No. CV 04 4001543 (July 7, 2006, Lewis, J.T.R.) (noting narrow exception recognized by our Appellate Court in context of motion to dismiss for lack of subject matter jurisdiction).
In the present case, the plaintiffs separate their claims seeking to pierce the corporate veil into two counts. In count three, the plaintiffs appear to rely on the identity rule and in count four, the instrumentality rule. I will therefore analyze the rules separately, beginning with the identity rule.
In Girouard v. R.I. Pools, Inc., supra, Superior Court, Docket No. CV 07 5004474, the plaintiff alleged: "Iannone is the president and sole shareholder of R.I. Pools, Inc., that at all relevant times, Iannone was in complete domination of the finances, policy and business practices of R.I., and that [a]ll representations concerning the proposals and contract for the construction of the pool were made by and through Iannone." (Internal quotation marks omitted.) Id. The court held that this was insufficient to show a "`unity of interest and ownership' such that the line between corporate officer and corporation is so barely visible that piercing the corporate veil is justified; . . . [T]here are no specific facts alleged to demonstrate how Iannone disregarded corporate formalities or failed to maintain separate identities." Id.
In Sullivan v. Lake Compounce Theme Park, Inc., supra, Superior Court, Docket No. CV 02 0172497, the court noted: "[T]he plaintiff's legal ground for piercing the corporate veil — Kennywood's purported status as the alter-ego/instrumentality of Theme Park, Inc. — is dependent upon alleging underlying facts needed to prove the elements of either the instrumentality rule or the identity rule. Plaintiff's bald legal assertion in its complaint that Theme Park, Inc. was and is organized and operated by [Kennywood] with total dominion and control is unsupported by any factual allegations in the pleadings. Plaintiff also pleads that `[and] further Theme Park, Inc. was and is undercapitalized for the forseeable risks it would and does encounter.' However, while factually [pleaded], undercapitalization is not enough to satisfy the identity rule. The rule is utilized by the courts primarily to prevent injustice where corporations share officers, directors, shareholders, and overall ignore corporate formalities. Plaintiff alleges no facts as to these critical components of the identity rule." (Internal quotation marks omitted.) Id.
In Pompilli v. Pro-Line Painting, supra, 39 Conn. L. Rptr. 349, the plaintiff alleged, inter alia, "[a]s the alter ego of the corporate defendant, through commingling corporate funds with his own funds and failing to observe the formalities required by law of a limited liability company, [the sole member of the LLC] is liable to answer for the debts of the corporate defendant . . ." Id., 349. The court granted the motion to strike, finding that "no facts are alleged that there was a unity of interest and ownership that the independence of the corporation had in effect ceased or had never begun. The complaint only states that [the member] was commingling funds without setting forth the requisite control . . ." Id., 350. In the present case, in count three, the plaintiffs allege upon information and belief that "[Kordas] owns 100% of the interest in [RAK] . . . [and] [Kordas] is the sole member of [RAK]." The plaintiffs then allege the following seeking to pierce the corporate veil: "[RAK] has never had, and does not now have, any genuine or separate existence, but has been used and exists for the sole purpose of permitting [Kordas] to transact business under a limited liability company guise; [RAK] is the alter ego of [Kordas] because there is such a unity of interest and ownership that the independence of [RAK] has in effect ceased or had never begun."
That "[Kordas] owns 100% of the interest in [RAK] . . . [and] [Kordas] is the sole member of [RAK]," without more, is insufficient to demonstrate a unity of interest and ownership such that the independence of [RAK] had in effect ceased or had never begun. Such allegations, made upon information and belief, are conclusory. The remainder of the allegations constitute nothing more than a recital of some of the elements of the identity rule. No facts were alleged to support these legal conclusions. There are no specific facts alleged to demonstrate whether and how Kordas disregarded corporate formalities or failed to maintain separateidentities. There are no facts alleged in the complaint which would show that "adherence to the fiction of separate identity would serve only to defeat justice and equity." Accordingly, the motion to strike count three of the complaint is granted.
I will now address the instrumentality rule. "An allegation that the individual defendant is a high-ranking official within a company, or even its controlling or sole shareholder, is not sufficient to demonstrate the `complete domination' of the company required to satisfy the first element of the instrumentality test." (Internal quotation marks omitted.) CT Page 8435 Girouard v. R.I. Pools, Inc., supra, Superior Court, Docket No. CV 07 5004474 (finding insufficient allegation that individual was president and sole shareholder of corporate defendant). "In Fischer v. Bella-Vin Development, LLC, Superior Court, judicial district of Danbury, Docket No. 07 5003012 (October 10, 2008, Shaban, J.), the court considered allegations that [a]t all relevant times the defendant . . . was the controlling member of the [LLC] . . . and any act or omission by [the LLC] was done by the defendant . . . The court held that the first element of the instrumentality rule had not been satisfied because these allegations did not establish that the defendant's control reached the necessary level of complete domination." (Internal quotation marks omitted.) Id.
In Pompilli v. Pro-Line Painting, supra, Superior Court 39 Conn. L. Rptr. 349, the plaintiff alleged, inter alia: "[The member] has been conducting, managing, and controlling the affairs of the corporation since its incorporation, as though it were [his] own business and has used the corporation of the purpose of defrauding the plaintiff by accepting [a sum of money] from the plaintiff and, upon information and belief, not depositing said funds . . . [into] the corporate defendant's checking account thereby commingling the funds . . ." Id. 349. The courtfound that "[a] review of the allegations indicates that they allege legal conclusions rather than facts sufficient to support the piercing of the corporate veil under either theory. For example, there are no facts that demonstrate [the sole member of the LLC] actually exercised complete domination, not only in finances but of policy and business practice [with] respect to the transaction . . . Even if the allegations that [the member] commingled a single payment made to [the LLC] were true, this fact by itself is insufficient to pierce [the LLC's] corporate veil . . ." (Citations omitted; internal quotation marks omitted.) Id., 349-50.
In Jannetty Racing Enterprises, Inc. v. Site Development Technologies, LLC, supra, Superior Court, Docket No. CV 05 4004820, the plaintiff alleged: "(1) Bingham completely dominates the finances, policy, and business practice with respect to Site Development and the contract, and Site Development had no separate mind, will or existence of its own; (2) Bingham used his control over Site Development to commit fraud in contravention of the plaintiff's legal rights; (3) Bingham's control and breach of duty proximately caused the plaintiff unjust loss; and (4) such a unity of interest and ownership exists between Site Development and Bingham that the independence of Site Development is nonexistent, and the fiction of separate identity served only to defeat justice by permitting the defendant to escape liability arising out of an operation conducted by Site Development for the benefit of Bingham." Id. The court granted the motion to strike stating: "Aside from adding the names of the defendants, the plaintiff's allegations constitute nothing more than a recital of the elements of the instrumentality and identity rules. No facts are alleged to support these legal conclusions." Id.
In the present case, in count four, the plaintiffs incorporate the foregoing allegations and allege further that: "[RAK] has been completely dominated in policy and business practices by [Kordas]; [it] is a mere shell for [Kordas] and serves no legitimate purpose and has been used primarily as an intermediary to perpetrate fraud or to promote injustice; [Kordas] has used such control in contravention of the plaintiffs' legal rights; [b]y virtue of the foregoing, [Kordas] is obligated to the plaintiffs for damages incurred as aforementioned."
The plaintiffs argue in their brief that the facts alleged in their complaint also include the facts necessarily implied and fairly provable under these allegations, including the facts that Kordas "wholly dominated the finances, policies and business practices [of RAK]. He operated this business without observing any corporate formalities. He used it as a conduit to receive funds that were then diverted, at his sole discretion, to further his own business and personal purposes."
In Girouard v. R.I. . Pools, Inc., supra, Superior Court, Docket No. CV 07 5004474, the court refused to consider additional factual allegations raised in the plaintiff's memo. The plaintiff in that case had argued: "Iannone was, and upon information and belief still is, in complete control of R.I. Pools. He is the only one to sign contracts, he is the only individual who controls the finances and he is the project manager for his pool construction business. He signed the contract at issue." Id. The court noted: "While these assertions may substantiate the plaintiff's contention, the court must confine its analysis to the allegations actually set forth in the complaint. It is well established that a motion to strike must be considered within the confines of the pleadings and not external document . . . We are limited . . . 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 . . . Zirinsky v. Zirinsky, 87 Conn.App. 257, 268 n. 9, 865 A.2d 488, cert. denied, 273 Conn. 916, 871 A.2d 372 (2005)." (Internal quotation marks omitted.) Id.
Even if the plaintiffs in the present case had made these allegations in the complaint, it is unclear that bald assertions that Kordas, for example, "operated this business without observing any corporate formalities" would require a different result. See id.
Alleging that "[Kordas] owns 100% of the interest in [RAK] . . . [and] [Kordas] is the sole member of [RAK]" is insufficient to satisfy the first element of the instrumentality test because these allegations do not establish that Kordas' control reached the necessary level of complete domination. Moreover, the plaintiffs have failed to allege facts which show how Kordas' control and domination of RAK proximately caused the injuries or unjust losses complained of. The plaintiffs' remaining allegations constitute little more than a recital of some of the elements of the instrumentality rule. A motion to strike is properly granted if the complaint alleges mere conclusions of law that are unsupported by the facts alleged. Accordingly, the defendant's motion to strike count four is granted.
Conclusion
For the forgoing reasons, the defendants' motion to strike counts three and four is granted, and motion to strike as to count two and the second and third prayers for relief is denied.