Opinion
No. CV 01-0805554 S
June 20, 2001
MEMORANDUM OF DECISION
The present action arose following the defendants' alleged nonpayment for work that the plaintiff performed on a sub-subcontract. The plaintiff is Wolverine Fire Protection Co., Inc., d/b/a Smith Automatic Sprinkler. The defendants are Tougher Industries, Inc. (Tougher), and Employers Insurance of Wausau, A Mutual Company (Wausau).
The plaintiff alleges the following facts. Tougher was awarded a public contract by the department of public works on April 29, 1999, to act as a general contractor for construction and/or renovation to the Learning Corridor, a public building in Hartford, Connecticut. It is undisputed that the total contract exceeded $50,000. Pursuant to General Statutes § 49-41, Wausau, as surety, and Tougher, as principal, executed a labor and material payment bond, in favor of Gilbane Building Company, the obligee, in the amount of $10,440,000 to secure Tougher's obligation to pay all claimants for labor and materials used or reasonably required for use in completing its public contract. Prior to June 9, 1999, Tougher entered into a subcontract with Accurate Automatic Fire Protection, Inc. (Accurate), for the installation of a complete fire protection system in the Learning Corridor. Accurate subcontracted with the plaintiff for "engineering [services including] stamped drawings [and] fabrication of piping and materials" for the Learning Corridor project. (Complaint, ¶ 4.) The plaintiff was to be paid the contract price of $224,000 in periodic installment payments while performing the sub-subcontract.
General Statutes § 49-41 provides: "(a) Each contract exceeding fifty thousand dollars in amount for the construction, alteration or repair of any public building or public work of the state or of any subdivision thereof shall include, a provision that the person to perform the contract shall furnish to the state or the subdivision on or before the award date, a bond in the amount of the contract which shall be binding upon the award of the contract to that person, with a surety or sureties satisfactory to the officer awarding the contract, for the protection of persons supplying labor or materials in the prosecution of the work provided for in the contract for the use of each such person, provided no such bond shall be required to be furnished (1) in relation to any general bid in which the total estimated cost of labor and materials under the contract with respect to which such general bid is submitted is less than fifty thousand dollars, (2) in relation to any sub-bid in which the total estimated cost of labor and materials under the contract with respect to which such sub-bid is submitted is less than fifty thousand dollars, or (3) in relation to any general bid or sub-bid submitted by a consultant, as defined in section 4b-55. Any such bond furnished shall have as principal the name of the person awarded the contract.
"(b) Nothing in this section or sections 49-41a to 49-43, inclusive, shall be construed to limit the authority of any contracting officer to require a performance bond or other security in addition to the bond herein referred to, except that no such officer shall require a performance bond in relation to any general bid in which the total estimated cost of labor and materials under the contract with respect to which such general bid is submitted is less than twenty-five thousand dollars or in relation to any sub-bid in which the total estimated cost of labor and materials under the contract with respect to which such sub-bid is submitted is less than fifty thousand dollars."
The plaintiff commenced performance on the sub-subcontract in June 1999. The plaintiff received several progress payments in the form of checks from Tougher to Accurate and the plaintiff jointly. On April 18, 2000, the plaintiff completed its work on the sub-subcontract. The plaintiff alleges that it substantially performed all the terms and conditions on its part and submitted timely invoices.
The plaintiff alleges that Tougher failed to perform under the terms of the bond by failing to pay promptly for labor and material used or required for use in the performance of the contract. The plaintiff alleges it is owed $77,094 under the terms of the subsubcontract. Pursuant to General Statutes § 49-42, the plaintiff notified Tougher and Wausau of the amount due and owing on July 17, 2000. On September 25, 2000, Wausau denied liability as surety on the bond. On October 11, 2000, the plaintiff served a notice of claim by Federal Express and certified mail, return receipt requested on Wausau and Tougher demanding that Wausau make payment under the bond. Despite the plaintiff's notice of nonpayment, it has not been paid.
General Statutes § 49-42 provides: "(a) Any person who performed work or supplied materials for which a requisition was submitted to, or for which an estimate was prepared by, the awarding authority and who does not receive full payment for such work or materials within sixty days of the applicable payment date provided for in subsection (a) of section 49-41a, or any person who supplied materials or performed subcontracting work not included on a requisition or estimate who has not received full payment for such materials or work within sixty days after the date such materials were supplied or such work was performed, may enforce his right to payment under the bond by serving a notice of claim on the surety that issued the bond and a copy of such notice to the contractor named as principal in the bond within one hundred eighty days of the applicable payment date provided for in subsection (a) of section 49-41a, or, in the case of a person supplying materials or performing subcontracting work not included on a requisition or estimate, within one hundred eighty days after the date such materials were supplied or such work was performed. The notice of claim shall state with substantial accuracy the amount claimed and the name of the party for whom the work was performed or to whom the materials were supplied, and shall provide a detailed description of the bonded project for which the work or materials were provided. If the content of a notice prepared in accordance with subsection (b) of section 49-41a complies with the requirements of this section, a copy of such notice, served within one hundred eighty days of the payment date provided for in subsection (a) of section 49-41a upon the surety that issued the bond and upon the contractor named as principal in the bond, shall satisfy the notice requirements of this section. Within ninety days after service of the notice of claim, the surety shall make payment under the bond and satisfy the claim, or any portion of the claim which is not subject to a good faith dispute, and shall serve a notice on the claimant denying liability for any unpaid portion of the claim. The notices required under this section shall be served by registered or certified mail, postage prepaid in envelopes addressed to any office at which the surety, principal or claimant conducts his business, or in any manner in which civil process may be served. If the surety denies liability on the claim, or any portion thereof, the claimant may bring action upon the payment bond in the Superior Court for such sums and prosecute the action to final execution and judgment. An action to recover on a payment bond under this section shall be privileged with respect to assignment for trial. The court shall not consolidate for trial any action brought under this section with any other action brought on the same bond unless the court finds that a substantial portion of the evidence to be adduced, other than the fact that the claims sought to be consolidated arise under the same general contract, is common to such actions and that consolidation will not result in excessive delays to any claimant whose action was instituted at a time significantly prior to the motion to consolidate. In any such proceeding, the court judgment shall award the prevailing party the costs for bringing such proceeding and allow interest at the rate of interest specified in the labor or materials contract under which the claim arises or, if no such interest rate is specified, at the rate of interest as provided in section 37-3a upon the amount recovered, computed from the date of service of the notice of claim, provided, for any portion of the claim which the court finds was due and payable after the date of service of the notice of claim, such interest shall be computed from the date such portion became due and payable. The court judgment may award reasonable attorneys fees to either party if upon reviewing the entire record, it appears that either the original claim, the surety's denial of liability, or the defense interposed to the claim is without substantial basis in fact or law. Any person having direct contractual relationship with a subcontractor but no contractual relationship express or implied with the contractor furnishing the payment bond shall have a right of action upon the payment bond upon giving written notice of claim as provided in this section.
"(b) Every suit instituted under this section shall be brought in the name of the person suing, in the superior court for the judicial district where the contract was to be performed, irrespective of the amount in controversy in the suit, but no such suit may be commenced after the expiration of one year after the applicable payment date provided for in subsection (a) of section 49-41a, or, in the case of a person supplying materials or performing subcontracting work not included on a requisition or estimate, no such suit may be commenced after the expiration of one year after the date such materials were supplied or such work was performed.
"(c) The word "material' as used in sections 49-33 to 49-43, inclusive, shall include construction equipment and machinery that is rented or leased for use (1) in the prosecution of work provided for in the contract within the meaning of sections 49-33 to 49-43, inclusive, or (2) in the construction, raising, removal of any building or improvement of any lot or in the site development or subdivision of any plot of land within the meaning of sections 49-33 to 49-39, inclusive."
The plaintiff seeks payments and damages from Tougher, alleging that Tougher is liable on the following theories: the obligation on the bond pursuant to § 49-42 (count one); quantum meruit (count two); breach of implied covenant of good faith and fair dealing (count three); and breach of the Connecticut Unfair Trade Practices Act (CUTPA), General Statutes § 42-110b(a) et seq., (counts five). Similarly, the plaintiff alleges that the actions of Wausau constitute a violation of its surety obligation on the bond pursuant to § 49-42 (count one). The plaintiff also brings this action against Wausau for damages in quantum meruit (count two) and breach of the implied covenant of good faith and fair dealing (count four) and (CUTPA) (Count six). On April 5, 2001, Tougher and Wausau filed a motion to strike counts three, four, five and six of the plaintiff's complaint. The plaintiff filed an objection on April 18, 2001.
General Statutes § 42-110b(a) provides: "No person shall engage in unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce."
DISCUSSION
"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). "Thus, [i]f facts provable in the complaint would support a cause of action, the motion to strike must be denied. . . . [W]hat is necessarily implied [in an allegation] need not be expressly alleged. . . . 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." (Citations omitted; internal quotation marks omitted.) Gazo v. Stamford, 255 Conn. 245, 260, 765 A.2d 505 (2001).
A Counts Three and Four Breach of Implied Covenant of Good Faith and Fair Dealing 1
Tougher and Wausau argue that counts three and four should be stricken because § 49-42 provides the plaintiff's exclusive remedy. The plaintiff argues that § 49-42 is not its exclusive remedy and that it has properly alleged all of the counts in its complaint.
"General Statutes (Rev. to 1983) §§ 49-41 through 49-43, which provide for the furnishing of bonds guaranteeing payment (payment bonds) on public works construction projects, were enacted to protect workers and materials suppliers on public works projects who cannot avail themselves of otherwise available remedies such as mechanic's liens." (Internal quotation marks omitted.) Blakeslee Arpaia Chapman, Inc. v. El Constructors, Inc., 239 Conn. 708, 714, 687 A.2d 506 (1997). "This legislation, known as the Little Miller Act (act), was patterned after the federal legislation popularly known as the Miller Act; 40 U.S.C. § 270a through 270d; and, therefore, [courts] have regularly consulted federal precedents to determine the proper scope of our statute. . . . The federal precedents, like our own, counsel liberal construction of statutory requirements other than those relating to specific time constraints. . . . As the United States Supreme Court has stated, the federal Miller Act is highly remedial in nature . . . [and] entitled to a liberal construction and application in order properly to effectuate the [legislative] intent and to protect those whose labor and materials go into public projects." (Citations omitted; internal quotation marks omitted.) Blakeslee Arpaia Chapman, Inc. v. El Constructors, Inc., supra, 239 Conn. 716.
"Section 49-42 does not contain an exclusivity provision, and no Connecticut [Appellate] cases were found that expressly addressed the issue of whether [§] 49-42 provides an exclusive remedy. However, there have been cases in Connecticut in which violations of [§] 49-42 and (CUTPA), [the Connecticut Unfair Insurance Practices Act (CUIPA), § 38a-815] and CUTPA have been alleged in a single complaint."Blakeslee Arpaia Chapman, Inc. v. United States Fidelity Guaranty Co., Superior Court, judicial district of New London at New London, Docket No. 520348 (March 4, 1994, Hurley, J.); see, e.g., Okee Industries, Inc. v. National Grange Mutual Ins. Co., 225 Conn. 367, 623 A.2d 483 (1993) (complaint alleged violations of § 49-42, CUIPA and CUTPA); Saturn Construction Co. v. Premier Roofing Co., 238 Conn. 293, 296, 680 A.2d 1274 (1996) (complaint alleged violations of § 49-41 a and CUTPA). Furthermore, the Connecticut Supreme Court has explicitly stated: "In the absence of . . . explicit language, we adhere to our long-standing rule that [n]o statute is to be construed as altering the common law, farther than its words import [and a statute] is not to be construed as making any innovation upon the common law which it does not fairly express." (Internal quotation marks omitted.) Rumbin v. Utica Mutual Ins. Co., 254 Conn. 259, 266, 757 A.2d 526 (2000).
General Statutes § 38a-815 provides in part: "No person shall engage in this state in any trade practice which is defined in section 38a-816 as, or determined pursuant to sections 38a-817 and 38a-818 to be, an unfair method of competition or an unfair or deceptive act or practice in the business of insurance, nor shall any domestic insurance company engage outside of this state in any act or practice defined in subsections (1) to (12), inclusive, of section 38a-816."
The United States Courts of Appeals for the Second, Fifth, Ninth and Tenth Circuits have considered the issue of whether the federal Miller Act provides a plaintiff with an exclusive remedy, and these Courts of Appeals have concluded that it does not. See United States v. Reid Gary Strickland Co., 161 F.3d 915, 919 (5th Cir. 1998); Wright v. United States Postal Service, 29 F.3d 1426, 1431 (9th Cir. 1994); K-W Industries v. National Surety Corp., 855 F.2d 640, 643 (9th Cir. 1988); Active Fire Sprinkler Corp. v. United States Postal Service, 811 F.2d 747, 754 (2nd Cir. 1987); United States v. Ins. Co. of North America, 695 F.2d 455, 458 (10th Cir. 1982).
The issue of whether § 49-42 is a plaintiff's exclusive remedy has been addressed in several Connecticut Superior Court decisions. Blakeslee Arpaia Chapman, Inc. v. United States Fidelity Guaranty Co., supra, Superior Court, Docket No. 520348, involved facts very similar to the present action. In Blakeslee Arpaia Chapman, Inc. v. United States Fidelity Guaranty Co., the plaintiff alleged that the defendant's failure to pay the plaintiff on its subcontract balance constituted a breach of § 49-42, a violation of CUIPA, a violation of CUTPA; and a breach of the covenant of good faith and fair dealing. Looking to precedent from the federal courts construing the Miller Act, the court concluded that "[§] 49-42 is not plaintiff's exclusive remedy against a general contractor's surety." Id. In Premier Roofing Co. v. Ins. Co. of North America, Superior Court, judicial district of Danbury, Docket No. 312438 (March 3, 1995, Leheny, J.) ( 13 Conn.L.Rptr. 544, 547), the court emphasized the remedial purpose of § 49-42 and permitted a CUTPA claim along with a claim under § 49-42. See also Production Equipment Co. v. Blakeslee Arpaia Chapman, Inc., Superior Court, judicial district of New Haven at Meriden, Docket No. 247485 (January 3, 1996, Silbert, J.) ( 15 Conn.L.Rptr. 558) (allowing CUTPA claim in addition to claim pursuant to § 49-42).
It is the opinion of this court that § 49-42 is not the plaintiff's exclusive remedy. The cases relied on by the defendants are distinguishable from the present action because they deal with a statutory remedy and the breach of the implied covenant of good faith and fair dealing in the context of employment law. See Contois v. Carmen Anthony Restaurant Group, L.L.C., Superior Court, judicial district of Waterbury, Docket No. 160287 (February 2, 2001, Doherty, J.) (plaintiff alleges violation of General Statutes § 31-290a and a claim for breach of the covenant of good faith and fair dealing); Rothberg v. United Illuminating Co., Superior Court, judicial district of New Haven, Docket No. 391576 (February 5, 1997, Silbert, J.) ( 18 Conn.L.Rptr. 690) (plaintiff alleges violation of General Statutes § 46a-60(4), § 31-51m(d) and a claim for breach of the covenant of good faith and fair dealing).
2
Tougher and Wausau argue in the alternative that counts three and four should be stricken because the plaintiff does not allege the type of aggravating circumstances necessary to support a claim of breach of the covenant of good faith and fair dealing arising from an alleged breach of contract. Specifically, Tougher and Wausau argue that the plaintiff relies merely on the non-payment of its alleged bills the basis for its breach of the duty of good faith and fair dealing and fails to offer evidence of egregious conduct by the defendant. The plaintiff argues that the third and fourth counts of its complaint sufficiently allege violations of the covenant of good faith and fair dealing.
"Every contract carries an implied covenant of good faith and fair dealing requiring that neither party do anything that will injure the right of the other to receive the benefits of the agreement." Habetz v. Condon, 224 Conn. 231, 238, 618 A.2d 501 (1992). "Bad faith in general implies both actual or constructive fraud, or a design to mislead or deceive another, or a neglect or refusal to fulfill some duty or some contractual obligation, not prompted by an honest mistake as to one's rights or duties, but by some interested or sinister motive. . . . Bad faith means more than mere negligence; it involves a dishonest purpose." (Citation omitted, internal quotation marks omitted.) Id., 237.
A mere conclusory allegation of bad faith "unsupported by any factual allegations, is insufficient to sustain a claim of bad faith." Waugh v. Nationwide Mutual Ins. Co., Superior Court, judicial district of New Haven at Meriden, Docket No. 244326 (January 5, 1996, Silbert, J.); see also Puglio v. National Grange Mutual Ins. Co., Superior Court, judicial district of Fairfield at Bridgeport, Docket No. 303610 (October 12, 1993, Maiocco, J.). "Thus, a claim for breach of the implied covenant of good faith and fair dealing is not legally sufficient unless a dishonest purpose or sinister motive is alleged." Pine Creek Partners v. Seaman, Superior Court, judicial district of Fairfield at Bridgeport, Docket No. 364880 (December 20, 2000, Skolnick J.); see also Cornerstone Bank v. Oak Street Center, Inc., Superior Court, judicial district of Stamford-Norwalk at Stamford, Docket No. 169832 (January 8, 2001, Hickey, J.); Siebe Environmental v. Johnson-Goodyear, Inc., Superior Court, judicial district of Hartford, Docket No. 585061 (October 6, 2000, Hale, J.); Amity Regional School v. The Atlas Construction Co., Superior Court, judicial district of Waterbury, Docket No. 153388 (August 15, 2000, McWeeny, J.).
The plaintiff has alleged that both of the defendants wrongfully withheld monies from the plaintiff; (Complaint, ¶ 16); and violated the little Miller Act; (Complaint, ¶¶ 11-17); that Tougher compelled the plaintiff to initiate litigation; (Complaint, ¶ 27); and that Wausau failed to conduct a good faith investigation in connection with the plaintiff's claim under the bond, thereby causing the plaintiff to initiate litigation. (Complaint, ¶¶ 31-32.) Wausau argues that the plaintiff was paid for its materials when it was a subcontractor. (Complaint, Exhibit D.) Wausau further argues that Accurate was terminated and another contractor finished the work that Accurate failed to complete on its subcontract. (Complaint, Exhibit D.)
It is the opinion of the court that the plaintiff has merely concluded that the defendants acted in bad faith and has not alleged sufficient facts to support a claim of breach of the implied covenant of good faith and fair dealing. See Waugh v. Nationwide Mutual Ins. Co., supra, Superior Court, Docket No. 244326. Because the plaintiff has failed to allege that the defendants acted with an improper motive or purpose, the defendants' motion to strike counts three and four of the plaintiff's complaint is granted.
B Counts Five and Six CUTPA
Tougher and Wausau argue that counts five and six should be stricken because the plaintiff has pleaded a simple breach of contract but has not pleaded facts sufficient to support a finding of bad faith, as required to prevail on a CUTPA claim. The plaintiff argues that statutory violations may provide a foundation for a CUTPA claim, especially where the statute allegedly violated was implemented to address public policy concerns.
"It is well settled that in determining whether [an act or] practice violates CUTPA we have adopted the criteria set out in the cigarette rule by the federal trade commission for determining when [an act or] 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 — whether, 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 businessmen]." (Internal quotation marks omitted.) Saturn Construction Co. v. Premier Roofing Co., supra, 238 Conn. 310. "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. . . . Thus a violation of CUTPA may be established by showing either an actual deceptive practice . . . or a practice amounting to a violation of public policy." (Internal quotation marks omitted.) Id., 311.
"The Connecticut supreme court has determined that statutory violations, other than violations of CUIPA, may give rise to a CUTPA cause of action." Blakeslee Arpaia Chapman, Inc. v. United States Fidelity Guaranty Co., supra, Superior Court, Docket No. 520348. "In enacting CUTPA, the legislature intended to create an expansive act. . . . To that end, the legislature expressly provided that `[i]t is the intention of the legislature that this chapter be remedial and be so construed.'" (Citation omitted.) Web Press Services Corp. v. New London Motors, Inc., 203 Conn. 342, 354, 525 A.2d 57 (1987).
In Blakeslee Arpaia Chapman, Inc. v. United States Fidelity Guaranty Co., supra, Superior Court, Docket No. 520348, the court addressed the issue of whether a CUTPA action is maintainable with a § 49-42 claim. The court concluded that "[i]n view of the remedial aspects contained in both [§] 49-42 and CUTPA, and in light of the liberal construction afforded these statutes, the court finds that the plaintiff's CUTPA claim is maintainable." Id. See also Production Equipment Co. v. Blakeslee Arpaia Chapman, Inc., supra, 15 Conn.L.Rptr. 558 (allowing CUTPA claim in addition to claim under § 49-42);Premier Roofing Co. v. Ins. Co. of North America, supra, 13 Conn.L.Rptr. 547 (allowing CUTPA claim in addition to claim under § 49-42).
In light of the liberal construction afforded the CUTPA statute, the court finds that a violation of [§] 49-42 may give rise to a CUTPA claim. The court denies the defendants' motion to strike counts five and six of the plaintiff's complaint.
Counts five and six of the plaintiff's complaint both allege violations of CUTPA against Tougher. Count six alleges that "Tougher acted in bad faith in failing to make prompt payment, in refusing to make payment after demand and in instructing Wausau to not make payment under the bond in violation of Connecticut General Statutes § 49-42"; (Complaint, ¶ 40.); while count five alleges that "Tougher acted in bad faith in failing to make prompt payment, in refusing to make payment after demand and in instructing Wausau not to make payment under the bond." (Complaint, ¶ 35.) It is submitted that while count six mentions § 49-42, count five still may be maintained because it is "within at least the penumbra of some common law, statutory, or other established concept of unfairness." Saturn Construction Co., Inc. v. Premier Roofing Co., Inc., supra, 238 Conn. 310. Because count five implicates § 49-42, it is submitted that the same analysis applies to both counts and the court should deny the defendants' motion to strike counts five and six of the plaintiff's complaint.
CONCLUSION
For the foregoing reasons, the defendants' motion to strike counts three and four of the plaintiff's complaint are granted and the defendants' motion to strike counts five and six of the plaintiff's complaint are denied.
HALE, JTR