Opinion
No. X04-CV-01-0124519S, X04CV020125238S
October 20, 2003
MEMORANDUM OF DECISION
In these consolidated cases, the president of an accounting firm filed an action for damages and injunctive relief against its former employee, Donald L. Charlton, who now operates a competing accounting practice. Brodeur Company, CPAs, P.C. alleges usurpation of corporate opportunities, breach of fiduciary duty, violation of the Connecticut Trade Secrets Act, tortious interference with business relationships and violations of the Connecticut Unfair Trade Practices Act arising out of Charlton's pre- and post-termination of employment activities. An independent action brought by the defendant Donald L. Charlton against the accounting firm claims damages for the breach of his employment contract due to the firm's failure to pay appropriate sums for his agreed-upon compensation, for misrepresentation regarding his compensation and for conversion of these sums. Each party has denied the material allegations of the other's claims and asserted a number of equitable special defenses, such as accord and satisfaction, estoppel and the like against the claims of the other. For the reasons set forth in detail below, the court finds the issues for the defendant Donald L. Charlton on all counts of the Brodeur Company complaint and finds for Mr. Charlton on his breach of contract claim against his former employer in the amount of $31,701.73 together with statutory interest of $7,970.39. No punitive damages in the form of attorneys fees are awarded.
I. FACTS
Unusual for most professional employment relationships of this kind, the firm and its employee of almost ten years standing had never entered into a written covenant not to compete. As is often the case with smaller businesses, the employment relationship between Charlton and Brodeur exhibited a degree of informality as to the precise details of the employment. Many of the contested issues between the parties thus turn not upon the law, but upon resolution of the conflicting testimony, informed by the burdens of proof and persuasion as well as the credibility of the witnesses. As noted in Hoffnagle v. Henderson, 2003 Ct. Sup. 5967, Superior Court, judicial district of Hartford at Hartford, Docket No. CV02-0813972 S (April 17, 2003, Beach, J.), such informality leads to "some murkiness in the precise workings of the transactions and the understandings of the parties." Further, there was a persistent pattern of change and re-negotiation in the exact financial terms of employment. Such lack of precision, misunderstanding, as well as differing and evolving expectations on the part of the principals have now unfortunately culminated in this acrimonious, ruinously expensive and bitter litigation. The very closeness of their previously professional relationship has made its end extremely difficult for both parties.
II. BRODEUR COMPANY, CPAs, P.C. CLAIMS A. Claims arising from Mr. Charlton's Pre-Termination Conduct 1) Counts One and Two: Usurpation of Corporate Opportunity, Breach of Fiduciary DutyIn determining whether a cause of action for usurpation of a corporate opportunity exists, the central inquiry is whether the corporate opportunity is within the corporation's business purpose. The factors to analyze whether the business opportunity was one in which the corporation had an interest are:
(1) whether the business opportunity was one in which the complaining corporation had an interest or an expectancy growing out of an existing contractual right; (2) whether there was a close relationship between the opportunity and the corporation's business purposes and current activities; and (3) whether the business areas contemplated by the opportunity were readily adaptable to the corporation's existing business, in light of its fundamental knowledge, practical experience, facilities, equipment, and personnel.
Ostrowski v. Avery, 243 Conn. 355, 366, 703 A.2d 117 (1997). And once a plaintiff has proven the existence of a corporate fiduciary relationship and a corporate opportunity, the defendant bears the burden of proving, by clear and convincing evidence, that the defendant has not usurped a corporate opportunity. See Katz Corp. v. T.H. Canty Co., 168 Conn. 201, 207, 362 A.2d 975 (1975).
Closely related to these claims are the claims for breach of fiduciary duty, articulated in Count Two. As the Supreme Court noted in Beverly Hills Concepts, Inc. v. Schatz Schatz, Ribicoff Kotkin, 247 Conn. 48, 57, 717 A.2d 724 (1998), a fiduciary duty springs not from a simple duty of care, but from a duty of loyalty to the party claiming the fiduciary relationship. A party claiming a fiduciary relationship must plead and prove that the party it characterizes as a fiduciary had a duty to represent his or her interests. Konover Development Corp. v. Zeller, 228 Conn. 206, 218, 635 A.2d 798 (1994). "[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." (Internal quotation marks omitted.) Beverly Hills Concepts, Inc. v. Schatz Schatz, Ribicoff Kotkin, supra, 247 Conn. 48, at 56. It is undisputed that there existed a fiduciary relationship between the Brodeur firm and Mr. Charlton, who was a highly valued employee.
a) Outside Work
Central to the resolution of the claims in Count One and Two is the ability of a Brodeur firm employee to have certain clients outside the firm. For many years, Donald C. Brodeur, Jr. has worked as a certified public accountant in the accounting firm of Brodeur Company, CPAs, P.C., a firm with offices located in Old Saybrook and in Waterford, Connecticut. In 1995, he became the firm's president and controlling seventy percent owner shareholder. His brother Stefan owns the remaining thirty percent interest in the firm, which was started by their father years ago. In March 1991, his father, Donald Brodeur, who was then the president, hired Donald L. Charlton as a certified public accountant with the title "tax manager." Some of the terms of Mr. Charlton's employment were reduced to writing in a letter sent by the senior Mr. Brodeur to Mr. Charlton and are the terms on which he began his employment over ten years ago. The letter established Mr. Charlton's beginning salary and promised periodic reviews in the future. During the negotiations, he was told that there was the possibility of a partnership if the relationship went well.
Charlton Exhibit 4.
From the uncontroverted testimony, the court finds that in his employment interviews in March 1991, Mr. Charlton disclosed that he had certain personal tax clients he wanted to retain. These were existing clients for whom he prepared individual 1040 tax returns, generally the kind of business the Brodeur firm was not interested in unless it was for clients who had other additional, more sophisticated tax preparation needs. He was not asked to bring these clients into the firm and continued to retain these clients outside the firm and bill them separately until the time of his termination as an employee in February 2001. The court concludes that an express part of his employment agreement, formed at the time he was hired, permitted him to personally work for previously existing clients outside the firm.
The first few years of his employment passed without significant incident, although Mr. Charlton's work with the firm was never reviewed at the intervals stated in the letter and no significant salary increases were forthcoming. To the extent that details of the terms and conditions of employment were not set forth in the hiring letter, there was a generic firm handbook which spoke of the general policies for vacation, compensation time, and the regular hours of employment which were greater during tax season than otherwise. There were no sections in any employee manual during the years of Mr. Charlton's employment concerning outside employment or the use of firm software to prepare tax returns personally for non-firm clients.
Charlton Exhibit 1 is a copy of the 1992 handbook, consisting of 4 pages. Charlton Exhibit 2 is the 1994 handbook, consisting of 7 pages, one of which is the yearly calendar. Both exemplars are generic and very basic employee manuals. No others were introduced by either party until the 2001 extensively detailed book.
Despite Mr. Brodeur's insistence in his testimony that both rules concerning outside employment and use of software were very important to the firm, even the updated and significantly more detailed 83-page handbook presented to all employees on February 8, 2001 failed to mention either rule. (Brodeur Exhibit 2.) From this, the court concludes that these "rules" were not as important a part of the general implied employment agreement as the firm now realizes they should have been. Had they occupied such a place of paramount importance, surely they would have been specifically stated in detail in writing in the extensively revised manual in 2001.
Neither of the Brodeurs ever communicated to Mr. Charlton or other firm employees that they were prohibited from performing accounting work for personal clients outside of the firm. In addition, despite much testimony that the firm policy to the contrary was clear and that it "goes without saying," the court finds that there was a pattern of conduct by other employees at the firm to perform certain accounting services outside the firm. Such services were either never billed or were paid directly by the client to the employee outside of the firm's regular business.
Mr. Brodeur himself did accounting work for other companies in which he had an ownership interest. His testimony makes it clear that he himself did not distinguish between his duty to the firm and his obligations to these other entities. He considered his personal outside work justified, in those instances where he was personally involved. The court also finds that the employees were well aware of his conduct.
To support his belief that such work was not permitted, Mr. Brodeur testified that no employee ever came to ask him permission to do outside work. The court finds that this was so in large measure because Mr. Brodeur himself had not clearly established nor communicated the exact terms and conditions of their employment to his employees. By permitting outside work in some instances, doing it himself and requesting one of his employees to perform such work in another business owned by him, Mr. Brodeur apparently never understood that implied working habits and conditions are set in any small business in large measure by the personal example of the owners. Such permissive conduct and failure to establish uniform rules all contributed to the lack of clarity in the terms and conditions of Mr. Charlton's employment.
Whether he personally subsequently billed through the firm or whether the other company had no funds to pay and so the work was done without recompense do not impact the example being set that outside work was sometimes acceptable.
The court finds, from this long-standing pattern of conduct, that employees of the Brodeur firm were permitted to perform outside accounting work and bill for it personally under certain circumstances. This pattern of conduct, the court concludes, forms a part of the general implied employment agreement that the firm established with its at-will employees and was part of its contract with Mr. Charlton. Generally, the permitted work can be categorized as that type of accounting work it was apparent would not have come to the firm or which was the type of work the firm did not want. Such tacit permission by personal example and acquiescence concerning accounting work performed outside the firm by firm employees continued until after the commencement of these lawsuits, after which employees who were then at the firm were specifically prohibited from doing such work.
"A contract is an agreement between parties whereby one of them acquires a right to an act by the other; and the other assumes an obligation to perform that act . . . Contracts may be express or implied. These terms however do not denote different kinds of contracts, but have reference to the evidence by which the agreement between the parties is shown. If the agreement is shown by the direct words of the parties, spoken or written, the contract is said to be an express one. But if such agreement can only be shown by the acts and conduct of the parties, interpreted in the light of the subject matter and of the surrounding circumstances, then the contract is an implied one." Shelly v. Bristol Savings Bank, 63 Conn. 83, 87, 26 A. 474 (1893); see also Boland v. Catalano, 202 Conn. 333, 337, 521 A.2d 142 (1987).
The court heard testimony from two such employees whose understanding of the "rules" was as non-existent as Mr. Charlton's. Other employees were told to stop such work after these lawsuits were commenced, but no others have been sued for return of any fees so earned.
b) The L. Claims
Since there is no need for the court to disclose the exact names of these individuals, for privacy reasons, they will be referred to by their initials only.
There are three separate groups of clients for whom Mr. Charlton performed work, which form the basis of the claims of usurpation of corporate opportunities and breach of fiduciary duty. The first of these concerned former firm tax customers named L. and their related corporate and partnership entities. Due to the individuals' slow payment of the bills for their individual 1040 returns as well as the unprofitable nature of this fixed price work, Mr. Brodeur declined to have them as repeat firm clients. The work requested was to review tax returns in connection with a refinancing of certain loans. The L.s were working with an attorney, Nicholas Gorra, who leased space from the Brodeur firm in the Old Saybrook office and who shared with them a conference room. It was through Attorney Gorra that Mr. L first approached Donald Charlton to speak with Mr. Brodeur about their again being firm clients. Mr. Charlton relayed this request to Mr. Brodeur about the L.s on at least three if not four separate occasions. Each time the request was denied.
Having concluded that the L.s were not firm clients, Mr. Charlton did their work on the side after normal firm hours and billed them separately. He admitted he used firm software to prepare their returns, not being aware of any firm policy to the contrary. He also did not request permission to do this work outside of the firm, since Mr. Brodeur had repeatedly rejected the L.s as clients. In addition, given his specific agreement with Mr. Brodeur's father, it was reasonable for him to conclude that he could perform on his own account accounting work, which the firm had rejected. The court has found that the business, by its conduct, impliedly permitted such outside work.
After he began a review of the L. returns, Mr. Charlton realized that amending a prior year's return would be financially beneficial to the L.s and he did so. In addition, as he began to do their tax work, the scope of his engagement with them expanded to other related entities. In connection with the engagement concerning the refinancing, Mr. Charlton received the sum of $6,000. All in all, from the end of 1998 to 1999, he billed and received an additional total of $24,000 for L. family tax returns and other entity related work.
While the court received voluminous exhibits and much duplicative testimony during this nine-day court trial, much of the material was disorganized and not presented in a manner best calculated to support the arguments of the parties. The totals are taken from Brodeur Exhibit 2. There were additional billings in 1999, but not of this magnitude.
Mr. Brodeur admits that he turned down the work when it was offered to the firm. He testified that there were "no circumstances" under which he would have accepted the L. work as firm business. Nonetheless, he claims that by accepting it, Charlton was usurping a corporate opportunity and competing with the firm He is angry about the amounts received and the scope of the engagements, as he believes that the firm was well qualified to perform this work. He specifically criticized Charlton's ability to prepare financial statements for the real estate related partnerships, the very work he had turned down. In addition, he was particularly offended by the fact that a prior year's return, prepared by a firm other than Brodeur and Co., was amended by Mr. Charlton, thereby saving the client substantial money.
After Mr. Brodeur learned of Mr. Charlton's outside work, the parties had a difficult meeting in which tempers flared and which caused Mr. Brodeur to consider terminating Mr. Charlton. During the course of the meeting, Mr. Brodeur disclosed to Mr. Charlton that he had never been on a partnership track with the firm. Recollections of the meeting and its outcome differ, although Mr. Charlton memorialized his recollection of the contents of the meeting shortly thereafter, which recollections the court credits. Mr. Brodeur was also upset at the time about Charlton's personal use of firm software, a tax preparation program called Pro FX, even though Charlton had been given permission to have the program installed on his home computer and to use it there.
Brodeur Exhibits 19 and 20, Charlton memos dated 9/29/99, which set forth Mr. Charlton's responses to the Brodeur firm's accusations. While the testimony reflects that Mr. Brodeur also took contemporaneous notes during every meeting, none were apparently retained and with only two exceptions, none were presented at trial.
Subsequent to their meeting, the parties reached a resolution of their differences about the L. accounts in the fall of 1999. Mr. Charlton agreed not to use firm software for personal client tax preparation work. Mr. Charlton stated that "Any new client that can be served by the firm will and has been served by the firm." Indeed, the evidence demonstrates that from 1998 to 2000, Mr. Charlton brought between 40 to 50 new clients into the firm for accounting or estate planning work. In addition, Mr. Brodeur did not demand that sums that Charlton had personally received for the L. accounting work be repaid to the firm.
Quote from Brodeur Exhibit 20.
Mr. Brodeur continues to be exercised about the total fee Charlton received and the facts that all of the engagements were not disclosed to him fully in September 1999. Since such additional work would not have become firm work unless the firm accepted that initial work, the scope of the ultimate engagements is not legally relevant to the inquiry.
While Mr. Brodeur points to these memos as the beginning of Mr. Charlton's efforts to cover up his deceitful self-dealing with firm clients and his direct competition with the firm, breaching Charlton's fiduciary duty to the firm, such a claim is inconsistent with Mr. Broduer's testimony that he would not have accepted the Ls as clients under any circumstances. Whatever legal claims the Brodeur firm may have had against Mr. Charlton in connection with the L. matters were resolved between the parties almost four years ago, when the parties put this matter behind them, reached an accord and satisfaction and continued their professional and employment relationships.
Would Mr. Charlton's conduct, if the parties had not reached an accord and satisfaction, have usurped a corporate opportunity and or breached his fiduciary duty of loyalty to his employer? In reaching a conclusion about such a breach and whether a corporate opportunity was usurped, the Restatement Second of Agency (1958) in § 389 states, " [u]nless otherwise agreed, an agent is subject to a duty not to deal with his principal as an adverse party in a transaction connected with his agency without the principal's knowledge." (Emphasis added.) See also Restatement Second of Agency (1955) § 390: "[an] agent who, to the knowledge of the principal, acts on his own account in a transaction in which he is employed, has a duty to deal fairly with the principal and to disclose to him all facts which the agent knows or should have known would reasonably affect the principal's judgment, unless the principal has manifested that he knows such facts or that he does not care to know them."
The court finds that the L. work was not a corporate opportunity, the corporation having repeatedly turned down the work. The court specifically finds that Mr. Charlton disclosed such information as was known to him at the time the work was offered to him to the Brodeur firm, which through the actions of Donald Brodeur specifically declined to consider it. The fact that the work expanded after its rejection by the firm is immaterial to this finding. The court further concludes that Mr. Charlton also did not breach his fiduciary duty to the firm. This is so because the court concludes that the plaintiff did not meet its burden of persuasion to show that the L work was within the scope of the firm work or undertaking, i.e., it was not a corporate opportunity.
Such a conclusion is also reached if 5.05 of the America Law Institute Principles of Corporate Governance are considered for that section also required that the executive must first offer the corporate opportunity to the corporation. See Ostrowski v. Avery, 243 Conn. 355, at 372.
Whether or not Mr. Charlton breached his fiduciary duty to the firm by performing the L. work would present a closer question if it was not clear that there was tacit permission to perform such outside work. In this instance, the court finds that it was proven without question that the L tax work was not the type of work the plaintiff corporation desired and therefore was the type of work which could permissibly be performed without concern by an employee on his own account.
c) The Gorra claims
In 1998, after some discussion, the firm decided to expand its estate planning business and Mr. Charlton and Attorney Gorra held seminars to generate new business in this practice area. As mentioned, Attorney Nicholas Gorra leased office space in the building in Old Saybrook where the Old Saybrook offices of Brodeur Co. were housed. The firm invested some sums in advertising and other expenses for the development of this new business. As a result of these efforts, Mr. Charlton brought new estate planning clients into the firm and the accounting work done for them was billed in the firm. In 1999, certain sums were paid by Attorney Gorra to Mr. Charlton for what Mr. Charlton described as his review, after normal business hours, of the estate planning documents drafted by Mr. Gorra. Mr. Charlton candidly testified that he was concerned about this aspect of Mr. Gorra's work and wanted to be certain that the joint clients were well served by their association. He testified that he did not bill for the work nor did he expect to be paid. He testified that the sums he received from time to time were gifts or gratuities for this joint work, which was not normal work for the firm. The total amount paid by Attorney Gorra to Mr. Charlton from 1998-2000 was approximately $3,600.
Brodeur Exhibit 5.
The only testimony contradicting these claims is the deposition testimony of Mr. Gorra, which the court concludes is self-serving and which the court does not credit. While Mr. Gorra claims he told Mr. Charlton to do the right thing with these funds, his conduct reveals his words for what they are and speaks far louder and more persuasively to the court. That conduct is revealed by the checks Mr. Gorra personally wrote out on his business account for this work. Contrary to his testimony about how he expected Mr. Charlton to handle the funds, Mr. Gorra did not make these checks payable to Brodeur Company, CPAs, P.C., but payable to Mr. Charlton personally. The court concludes that the work Mr. Charlton performed for Attorney Gorra was a task not normally performed by accountants, was neither firm work nor a corporate opportunity.
The second portion of the Gorra claim relates to Mr. Gorra's personal tax returns, which were prepared by Mr. Charlton. Mr. Charlton testified that Mr. Gorra specifically told him that he did not want the firm to do the work because he did not want employees of the firm to know his financial stats and income. Mr. Gorra did not admit this in his deposition, but did state that he would have gone to another firm for his tax returns. Collateral support for the court's conclusion that this was not work that would have been performed by the firm is provided by the manner in which Attorney Gorra's payroll returns were processed. Initially, these returns had been prepared by the Brodeur firm. Mr. Brodeur testified that this was generally not the sort of work the firm wanted to have. And thereafter the payroll returns were prepared by another accountant of the Brodeur firm, Michael Michaud, who prepared these on his own account outside the firm. Mr. Michaud's conduct with respect to this outside business reflects both Mr. Charlton's understanding of the firm policy and supports the conclusion that Mr. Gorra did not want the firm to continue to have access to his confidential financial information. Again, as with the L. claims, even though the Gorra work was not disclosed to the plaintiff, the court finds that the tax preparation work would not have come to the corporation. In addition, neither the individual 1040 tax preparation work nor the consulting work was within the company's avowed business purpose.
d) The NL Claims
The actual full name of this estate planning client is not relevant to this decision and the court will use this abbreviation for the sake of privacy.
In 2000, Ms. NL was referred to Mr. Charlton. She was interested in some estate planning advice and had had a bad experience with a major accounting firm which could not answer her questions and which handed her from a senior accountant to junior employees who were of no help to her. She met with Mr. Charlton and Attorney Gorra after regular business hours in the joint conference room in the Brodeur building in 2000. She testified that she was impressed by Mr. Charlton's level of knowledge and his ability to answer the questions that she had. She stated that there was no chance that she would have retained the Brodeur firm because she was not looking to retain another accounting firm. In November and December 2000, Mr. Charlton then received a retainer of $10,000 from her for future estate planning work and other checks in the amount of $9,653.
Despite Brodeur's claim that she was referred to the firm, the court finds that there is no evidence to support Mr. Brodeur's supposition that this was so. This is an instance where the Brodeur firm bears the burden of proof and it has not been met.
Mr. Charlton's resume reflects his considerable training and experience in the estate planning area.
This retainer was the subject of much testimony and raised Mr. Brodeur's considerable ire. Regardless of who may have been entitled to deposit it into a client's funds account, until earned, it belonged neither to Mr. Charlton or Mr. Brodeur's firm. In the end, it was appropriately returned to Ms. NL.
Ms. Charlton testified, and it remains uncontradicted, that the payment of these sums was for work that had not yet been performed and was year-end-tax planning for Ms. NL to provide her with a badly-needed deduction for the tax year 2000. Before the start of the tax season in 2001, Mr. Charlton had only completed a preliminary review of certain NL documents and tax returns. The total amount of work he performed for Ms. NL before he left the firm in February 2001 was $868.78, which testimony and evidence the court credits. If the plaintiff were successful in its claims against Mr. Charlton on this point, the total damages it could recover, the court concludes, would only be in the amount of $868.78.
Brodeur Company, CPAs, P.C., however, sees Mr. Charlton's conduct as a piece of the claimed self-dealing by Mr. Charlton at the expense of the firm and his continued breach of his fiduciary duty to the firm. It points to a handwritten memo of November 2000, which Mr. Charlton wrote to himself about this engagement and the future work he was going to do. While Mr. Brodeur, with the jaundiced view created by hindsight, perceives Mr. Chartlon's stated plan to bring Ms. NL into the firm "at the appropriate time" as part of Mr. Charlton's continued "cover-up of his conduct" and part of his "continued pattern of deceptive conduct" in his efforts to steal existing clients, in light of Ms. NL's own testimony, the court does not agree and credits the sincerity of this comment. The court does not conclude that this memo supports the inference Brodeur wishes the court to draw that Charlton had no intention of ever approaching Mr. Brodeur with this client as a firm opportunity.
Brodeur Exhibit 8.
Brodeur Exhibit 8 lists various valid professional reasons why Mr. Charlton believed this client should not have been brought into the firm at that time.
As is the case with other issues raised in the Brodeur suit, the unsupported contradictory negative inferences Mr. Brodeur unreasonably draws from past events cause him to make excessive firm claims against Mr. Charlton. The firm claims, on the one hand, that whether or not the NL estate-planning work had been done by the time Mr. Charlton left the firm is irrelevant to the consideration of these issues. It argues that all the fees earned then and in the future by Mr. Charlton from Ms. NL, as well as the retainer of $10,000 and the prepaid fees should be repaid to the firm. And this claim is seriously advanced, despite the fact that, on the other hand, Mr. Brodeur admits that when Mr. Charlton left, Mr. Charlton was free to perform accounting work for any firm client who then left the firm to engage him. Mr. Brodeur also admits that the firm would not thereafter be entitled to any fees for the new work performed even though it maintains that the NL account was one which the Brodeur firm could have handled, had the client remained.
Such simultaneous mutually contradictory claims appear premised on Mr. Brodeur's unstated assumption that Mr. Charlton should not be permitted to compete directly with the firm because "it is unfair." He and the firm have acted throughout this lawsuit as though Mr. Charlton was subject to a covenant not to compete, which admittedly he was not. Without such a covenant, whether or not the work was performed while Mr. Charlton was an employee of the firm is highly relevant to the possible damages that can permissibly be claimed. There is simply no reasonable legal basis under which the firm could claim future fees for the work Mr. Charlton performed for Ms. NL after he left the Brodeur firm, yet it continues to passionately argue for such damages. Nor would equity consider it appropriate to require a disgorgement of all amounts paid to him in the three years prior to this conduct.
Mr. Brodeur's direct testimony at trial.
Much trial time was spent on these facts without Mr. Brodeur understanding that his personal anger at the loss of such potential income continues to cloud his understanding of his permissible firm claims.
At closing argument, this claim appears to have been seriously advanced by the plaintiff, which provided no credible evidence at trial of the reduction in the amount of its income in the year after Mr. Charlton's departure on which to base a claim of damages.
Such claims and arguments also obscure the basic issue as to whether in this instance Mr. Charlton breached his fiduciary duty to the firm by not disclosing the NL work to the firm and, if nothing else, channeling the fees through the firm, since Ms. NL was adamant about not wanting to hire the firm. Having previously found that Mr. Charlton had an implied employment agreement with the firm, which permitted outside employment under certain circumstances, the court concludes that it was not unreasonable for him to suppose he could perform the NL work in this fashion.
The court further notes that at the earlier conclusion of the L. disagreement, Mr. Charlton indicated in a letter to Mr. Brodeur that "all work that could be done by the firm would be brought into the firm." Ms. Brodeur in 1999 did not respond to this statement and the court concludes, again by acquiescence, this formulation became part of the implied employment contract between Mr. Charlton and the Brodeur firm. Had Mr. Brodeur wanted clarity about this important topic at that time when it was in serious contention, it would not have been difficult to obtain. But no response was forthcoming, and if anything, the general "murkiness" in the parties' dealings with each other increased. Such lack of clarity and its consequences are now apparent and the court will not charge Mr. Charlton with them. The court is persuaded by Ms. NL's own statement of her position about whether or not she would have retained the firm for her work at that time. This was not a corporate opportunity nor did the undertaking represent a breach of Mr. Charlton's fiduciary duty to the firm. Under the terms of the implied employment agreement, Mr. Charlton was permitted to perform such work outside the firm.
Exhibit 20.
B. Claims Arising from Mr. Charlton's Conduct During and Post-termination 1) Solicitation of Clients
There are additional factual claims the Brodeur firm makes in Counts One and Two which concern Mr. Charlton's conduct during negotiations surrounding his termination of employment and after his termination and departure from the firm. One of these is that Mr. Charlton "solicited" certain clients to come with him when he opened his independent firm. The firm infers that there was improper solicitation because Mr. Charlton spoke to certain clients in the period of February 17, 2001 to February 24, 2001 when they came to the firm to pick up their 2000 1040 returns for filing. The only direct evidence on this point comes from Mr. Charlton. He testified that he spoke to certain individuals whose tax work he did when they came to pick up their returns. He informed them that he was leaving the firm. He stated that he did not request their business for his new firm, but that these clients themselves stated they wanted their business to remain in Mr. Charlton's hands. To simply inform existing clients that he was leaving, the court finds, was not an act of solicitation. Without any further evidence, the firm has not met its burden of proof on this issue.
There is no evidence of any solicitation of any client to join Charlton's new practice predating the week beginning on February 18, 2001.
In addition, the firm points to two email communications, which Mr. Charlton sent, both to firm clients Mr. Charlton had brought to the firm. The email to Mr. Chapman is dated 2/20 and specifically requests his business and that of other family members who were then firm clients. This email is the only evidence of any direct solicitation proven by the Brodeur firm in its entire case. Despite its anger and frustration that certain clients, who it perceived as belonging exclusively to the firm, left to become clients of Mr. Charlton, the fact remains that it had not protected itself from such direct competition. There was no covenant not to compete. As the court noted in Town and Country House and Homes v. Evans, 150 Conn. 314, 317-19, 189 A.2d 390 (1963), in the absence of a covenant not to compete, an employee is entitled to solicit his former customers immediately upon terminating employment if the names of the customers do not constitute trade secrets. So the court must of necessity determine the exact date Mr. Charlton's employment ended to determine if his conduct in this one instance was improper.
Brodeur Exhibits 27 and 28.
Whether or not the customer names were trade secrets will be reviewed later on in this opinion.
2) Date of Termination as an At-Will Employee
The Brodeur firm claims that the date of termination of employment was February 24, 2001, the last date Mr. Charlton was paid as an employee. Again, it bears the burden of proof and persuasion on this issue. The one proven act of solicitation occurred before that date. Mr. Charlton believes that the date of termination was February 17, 2001, when Mr. Charlton and Mr. Brodeur determined that Mr. Charlton would no longer be an employee of the firm and would be paid during the next week as an employee until all the details of their hoped-for independent contractor agreement were worked out. For a resolution of this question, further background facts must be reviewed.
The court finds that on Saturday, February 17, 2001 the parties had a lengthy meeting to discuss the terms and conditions of Mr. Charlton's continued employment, if any. There were many earlier events, which have relevance to this meeting. After Mr. Charlton learned in the September 1999 meeting concerning the L. clients that he was not on a partnership track with the firm, he had begun aggressively to review his compensation. He negotiated with the firm regarding various types of bonuses for the new clients and/or new work he brought into the firm. Such subsequent agreements as were reached required lengthy negotiations between the parties for the years in question. In the latter part of 2000, Mr. Charlton began to make plans to request additional sums above and beyond those he had earlier requested. On January 12, 2001, he gave Mr. Brodeur a four-page memorandum detailing his requests. There was no immediate response.
Brodeur Exhibit 23.
On February 8, 2001, Mr. Brodeur presented to all his employees a new extensive employee handbook, which made substantial changes in the conditions of their at-will employment. It contained requirements for the employee's physical presence at the firm's offices and detailed limited times for lunch and breaks, which were offensive to Mr. Charlton. The new rules were extremely restrictive and indeed would have been perceived as offensive by any professional employee accustomed to exercising some discretion and who engaged in firm business development efforts. Mr. Charlton refused to sign the confidentiality agreement and the acceptance form for the handbook. He communicated his unwillingness to be bound by these rules to Mr. Brodeur at a subsequent meeting, prior to February 17, 2001.
The issue of arrival and departure times and time spent in the office by Mr. Charlton had been a source of conflict between Mr. Charlton and Mr. Brodeur for at least two years and is referenced in memos that were exchanged in 1999.
Shortly after Mr. Charlton had received the new handbook, he made a proposal to Mr. Brodeur containing three options: for his continued employment under terms which did not bind him to these new restrictions and setting forth his requested compensation rates, for hourly compensation and as an independent contractor. His memo reflects that he and Mr. Brodeur had reached an impasse, most specifically about the new rules of employment. The day after he made his new written proposal to Mr. Charlton was Saturday, February 17, 2001 and the parties met for most of the day to see what agreement, if any, they could reach. They agreed on that day that Mr. Charlton would no longer continue as an employee of the firm bound by the new rules.
Charlton Exhibit 32, memo dated 2/16/01.
His contemporaneous emails to Mr. Chapman and Mr. Tortia reflect his understanding that he was self-employed as of February 17, 2001. The court concludes from the evidence that Mr. Charlton believed he had resigned as an employee effective on that day. The court credits his understanding that he would continue to be paid as if he were an employee for the following week until the details of the independent contractor arrangement could be worked out.
Mr. Brodeur claims Mr. Charlton continued as an employee until February 24. A detailed review of the contemporaneous letters and memos concerning their negotiations does not support his conclusions. On February 22, 2001, Mr. Brodeur delivered a memo to Mr. Charlton, which contains, as did much of his testimony, imprecise and mutually contradictory statements in the first paragraph of his letter. He references the meeting of February 17, and then states: "At the conclusion of this meeting, it was mutually agreed that the only acceptable way we could continue our relationship would be for you to practice on your own as an independent contractor." The court finds that on that date it was mutually agreed that Mr. Charlton would have his own practice and he communicated to Mr. Brodeur his decision to start his own firm. In the second page of his letter, Mr. Brodeur makes a second point, which also lends support to the court's finding: ". . . we need to address the issue of whether you claim the right to retain any of the firm's client base as your own . . . I need to know which clients you propose would follow you . . . I must insist that we discuss the content of the communications, before you contact any of the firm's existing clients." From the free flowing negotiations, it is apparent that even Mr. Brodeur was not treating Mr. Charlton as a firm employee during the week of February 18, 2001.
Based on its review of the negotiations of the parties, the court finds that Mr. Charlton was an at-will employee of the Brodeur firm from March 1991 to the time of the negotiations concerning the new firm handbook on February 8, 2001. "[I]t is a general proposition that contracts of permanent employment, or for an indefinite term, are terminable at will." (Internal quotation marks omitted.) Burnham v. Karl Gelb, P.C., 252 Conn. 153, 158-59, 745 A.2d 178 (2000). "In Connecticut, an employer and employee have an at-will employment relationship in the absence of a contract to the contrary. Employment at will grants both parties the right to terminate the relationship for any reason, or no reason, at any time without fear of legal liability." (Internal quotation marks omitted.) Thibodeau v. Design Group One Architects, LLC, 260 Conn. 691, 697-98, 802 A.2d 731 (2002).
Mr. Charlton, as was his right, rejected the new terms and conditions of employment and proposed others. He refused to be bound by rules upon which Mr. Brodeur and the firm insisted. While he had not officially resigned, there was no agreement concerning his employment terms. Less than ten days later, on February 17, 2001, the parties agreed that their continued relationship could only be that of a firm employing an independent contractor. The court finds that these negotiations consisted of various offers by Mr. Charlton concerning his continued employment, one of which, that of independent contractor status, was accepted by Mr. Brodeur. "The existence of a contract is a question of fact to be determined by the trier on the basis of all the evidence . . . To form a valid and binding contract in Connecticut, there must be a mutual understanding of the terms that are definite and certain between the parties . . . To constitute an offer and acceptance sufficient to create an enforceable contract, each must be found to have been based on an identical understanding by the parties." (Internal quotation marks omitted.) Lussier v. Spinnato, 69 Conn. App. 136, 140, 794 A.2d 1008 (2002). On the date of Mr. Brodeur's acceptance, February 17, 2001, a new contract came into existence.
One logical and legal consequence of this new contract is that either when Mr. Charlton rejected the terms of the employee handbook or at the moment the new agreement was reached, Mr. Charlton's earlier at-will employment was terminated. All that remained was to work out the details of the independent contractor relationship. How he was to be paid for the next week cannot change the legal effect of the parties' agreement. Mr. Brodeur's letter, reviewed above, taken at face value, also demonstrates that Mr. Charlton's resignation was effective as of February 17, 2001. As the Brodeur firm bears the burden of proof and persuasion on this issue, the court concludes that burden has not been met. The court finds, therefore, that on the date of the solicitation via email to Mr. Chapman, Mr. Charlton reasonably understood his relationship to have ended. He was no longer an employee of the firm. Given his new status, it was permissible for him to solicit Brodeur firm clients.
2) Firm Files, Both Physical and Electronic, Use of Software
The firm further claims in Counts One and Two that Mr. Charlton removed from the Brodeur firm physical and electronic files without authorization. It claims that he used firm software without authorization. No evidence was presented concerning any physical files he removed without authorization. Despite the fact that an independent computer expert tested Mr. Charlton's computer and testified in court, he was not asked to look for any firm files and could not find any inappropriate software on Mr. Charlton's computer. Mr. Charlton testified that after he left the firm employ and while still working as an independent contractor, he gave Mr. Brodeur some 40 to 50 computer disks with old information stored on them. He retained those disks of clients he understood were coming with him.
The only credible evidence on this point concerns a file Mr. Brodeur refused to release, despite a former client's request that it be released to Mr. Charlton, conduct which is prohibited by the ethics code for certified public accountants.
The expert testimony only negatively contributed to the Brodeur firm claim and affirmatively to Mr. Charlton's defense.
While there was much testimony from Mr. Brodeur about Mr. Charlton's failure to list all the clients he expected to leave with him, since Mr. Charlton's employment was terminated on 2/17/01 and there was no covenant not to compete, any Brodeur firm client was thereafter free to follow Mr. Charlton.
Much trial time was consumed over two clients named Boos and Osbourn, who in late 2001 received a printed tax organizer form from Mr. Charlton with the Brodeur firm return address on it and showing a notation of "OLDSAYB" on the pages. Mr. Charlton admits he used stored data from the Brodeur firm to create these organizers. He testified that at the time of the termination he had brought his own version of the PRO FX tax preparation software, which permitted him to use the stored information. He maintains that he had permission to take this material and there has been no proof to the contrary. Again, the burden of proof and persuasion on this issue lies with the Brodeur firm and it has not been met.
Interwoven with the factual claims reviewed to this point is the allegation in Counts One and Two that Mr. Charlton's conduct interfered with the firm's business relationships. Based on all of the findings of fact and conclusions of law above stated, the court finds that the conduct in question did not in fact interfere with existing relationships at the time Mr. Charlton was a firm employee.
C) Count Four: Violation of the Connecticut Uniform Trade Secrets Act
The same facts alleged in Counts One and Two are re-alleged in Count Four as violations of the Connecticut Uniform Trade Secrets Act, General Statutes § 35-50 et seq., based on the facts set forth in details in Counts One and Two. The Connecticut Uniform Trade Secrets Act provides, in pertinent part, that misappropriation means the "disclosure or use of a trade secret of another without express or implied consent by a person who . . . at the time of disclosure or use, knew or had reason to know that his knowledge of the trade secret was acquired under circumstances giving rise to a duty to maintain its secrecy or limit its use . . ." General Statutes § 35-51(b)(2)(B)(ii).
Count Three was previously stricken by the court, as it purported to allege a cause of action for misappropriation of trade secrets under the common law and relied upon the same facts.
A trade secret is defined as "information, including a formula, pattern, compilation, program, device, method, technique, process, drawing, cost data or customer list that: (1) Derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use, and (2) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy." General Statutes § 35-51(d).
First, the Brodeur firm has failed to offer any evidence that the client identifying information stored in its computers and on the disks Mr. Charlton retained was in any way proprietary in nature and was a "trade secret," as that term is defined in the Act. It has failed to establish that Mr. Charlton removed any such files without permission. It has also failed to demonstrate that the names of its clients constituted a "trade secret" as that term is defined by the Act. Most notably, Mr. Brodeur, on behalf of the firm, could identify no damages at all from the claimed violations. General Statutes Section § 35-53 lists the damages recoverable and notes that a "complainant may recover damages for the actual loss caused by misappropriation," as well as for unjust enrichment. Punitive damages are recoverable if there was willful or malicious misappropriation.
A fundamental cornerstone of this statute, the court concludes, and much of our system of justice is that there must be some measurable damages before a litigant is entitled to any recovery. Having admitted at trial that there were no identifiable damages, the Brodeur firm has admitted that it does not have a colorable claim under this statute. The court dismisses Count Four of the complaint for the plaintiff firm's failure to make out a prima facie case of violation of the Connecticut Uniform Trade Secrets Act.
D) Count Five: Tortious Interference with Business Relationships
The Brodeur firm re-alleges all the facts discussed in Count Five, claiming damages for tortious interference with business relationships. "[I]n order to recover for a claim of tortious interference with business expectancies, the claimant must plead and prove that: (1) a business relationship existed between the plaintiff and another party; (2) the defendant intentionally interfered with the business relationship while knowing of the relationship; and (3) as a result of the interference, the plaintiff suffered actual loss." Hi-Ho Tower, Inc. v. Com-Tronics, Inc., 255 Conn. 20, 32-33, 761 A.2d 1268 (2000); see generally, Elliot v. Staron, 46 Conn. Sup. 38, 59-60, 735 A.2d 902 (1997). This tort requires proof of "misrepresentation, intimidation or molestation . . . or that the defendant acted maliciously." (Citations omitted; internal quotation marks omitted.) Sportsmen's Boating Corp. v. Hensley, 192 Conn. 747, 754, 474 A.2d 780 (1984).
Reviewing the evidence with these principles in mind the court finds that the Brodeur firm has not met its burden of proof that Mr. Charlton tortiously interfered with the plaintiff's contractual relations. Specifically, the court finds no evidence that Mr. Charlton committed any act that may be characterized as false, intimidating, or malicious. The court has concluded that his actions, given his employment conditions, were appropriate. The court therefore finds for the defendant on Count Five.
E) Counts Seven and Eight
Count Seven states a cause of action pursuant to the Unfair Trade Practices Act, Connecticut General Statutes 42a-110 et seq., based on the course of conduct alleged in the previous counts. Such claims under the Unfair Trade Practices Act are derivative in nature, that is, the conduct on which the claims are based must have been proven. Since none of the earlier causes of action have been proven, the court finds that the plaintiff failed to prove its claims of unfair or deceptive trade practices pursuant to the Act. The last or Eighth Count requests injunctive relief and fails for the reasons above stated and because no irreparable harm has been shown.
ORDERS
The court dismisses Count Four for the plaintiff's failure to make out a prima facie case. Judgment may enter for the defendant Donald L. Charlton on all remaining counts of the complaint of Brodeur Company, CPAs, P.C.
III. CLAIMS OF DONALD L. CHARLTON A. Count One: Breach of Contract
In the consolidated case brought by Mr. Charlton against his former employer, Count One claims damages for breach of contract for the firm's failure to pay him his agreed-upon compensation, Count Two claims damages for misrepresentation regarding his compensation and Count Three is for conversion for the amounts due him to the firm's own use. The Brodeur firm has denied the material allegations of all of the counts and alleged a number of special defenses.
Mr. Charlton's annual compensation until 1997 was for a fixed sum together with comp. time as outlined in the firm handbook. After that time, the parties entered into a different arrangement because Mr. Charlton discovered, while sitting in on the interview of a new employee that the firm paid a 10% bonus for new work any of the accountants brought into the firm. After learning, during the confrontation over the L. accounts that he was not on a partnership track with the firm, he requested and was given new business and other bonuses by the firm. When it came time to agree upon the amount of any additional compensation for the 2000 employment year in the early months of 2001, no agreement was reached because of the mounting animosity between the parties over the evolving end of their professional relationship. No bonus of any kind was paid for the year 2000 in 2001 nor were any bonuses paid for the 2001 work before February 17, 2001.
A resolution of these claims first requires a determination of the details of the employment agreement as it existed at the applicable times and a resolution of the factual disputes concerning the agreement. As previously noted, "The existence of a contract is a question of fact to be determined by the trier on the basis of all the evidence . . . To form a valid and binding contract in Connecticut, there must be a mutual understanding of the terms that are definite and certain between the parties . . . To constitute an offer and acceptance sufficient to create an enforceable contract, each must be found to have been based on an identical understanding by the parties." (Internal quotation marks omitted.) Lussier v. Spinnato, 69 Conn. App. 136 at 140.
The court finds from the evidence that in 1999, Mr. Charlton proposed a compensation package and formula he set forth in a memo to Mr. Brodeur dated January 14, 1999. The agreement called for a base salary, which included an annual $5,000 car allowance, if certain minimum billable hours were met. In addition, there was a 10% bonus for non-recurring new client business. Mr. Charlton also proposed 10% of the fees generated from the business of new recurring clients for a period of 3 years and 10% of a new engagement for an existing client, if it was work only Mr. Charlton could perform, i.e. certain estate planning work. Last, there was an incentive bonus of 20% for billable time in excess of 75% of the normal billable time. This communication was not responded to and Mr. Brodeur now believes it was rejected, which belief the court cannot credit.
Charlton Exhibit 10.
Chronologically, the next documentation of the compensation details is set forth in Charlton Exhibit 15, a memo from Mr. Charlton to Mr. Brodeur dated 11/11/99 which bears certain handwritten notations that signify, according to Mr. Charlton's testimony, agreement by Mr. Brodeur to these terms in a subsequent meeting. The court credits this testimony not only based on its assessment of the relative credibility and detailed recollections of the parties, but also on the basis of the subsequent events, which included payment of bonuses to Mr. Charlton in calendar year 2000 for 1999, based on this schedule. Specifically, as it relates to the disputed claims, the comp. time was to be paid quarterly, a new business bonus of 10% for non-recurring projects with a minimum of $1,000 was to be paid, and lesser percentages thereafter, an incentive bonus of 20% for billable time in excess of 75% of the standard time basis. The court finds that there was a meeting of the minds as to the details of the compensation agreement for the 2000 calendar year.
See also Exhibit 16, summary notes for the 1999 negotiation over the course of the year.
In 2001, Mr. Charlton made additional proposals to Mr. Brodeur, but the court concludes that no meeting of the minds was reached concerning the proposed additional compensation package under discussion. It would not be reasonable to suppose that the parties had no understanding regarding the payment of bonuses, since the court sees Mr. Charlton's new proposals as only that; proposals which were never accepted. Indeed, Mr. Brodeur did not deny that the earlier compensation arrangement was in place, but only disputed that any amounts were due under it. The court therefore finds that the agreement from the previous year remained in effect, with the exception of the hourly rate for billings, on which some of the figures are based. That base hourly amount by agreement, as indicated by the firm bookkeeper, had been increased in late 2000.
The court finds from the evidence that Mr. Charlton has proven the following amounts were due him pursuant to his employment contract's compensation package as detailed above:
1. 2000 comp. time unpaid $ 1,430.62
2. 2001 comp time unpaid 2,570.13
3. new car allowance for 2001 763.90
The court finds that the car allowance was part of Mr. Charlton's yearly income, and not part of the bonus system agreed to between the parties.
4. new business bonus for 2001 7,054.39
Since Mr. Charlton has the burden of proof to show that amounts were not only billed, but also collected, the court cannot permit recovery of the reconstructed amounts as the amounts collected remain unknown. To award them would be to permit speculation on this point.
5. Incentive bonus for 2000 18,428.44
6. Incentive bonus for 2001 1,454.25
In view of the agreement to pay such bonuses quarterly, even though the amounts are based on a projected yearly total of billable hours, the court finds that the quarterly bonus can and was properly calculated in detail and can be prorated in accordance with the agreed-upon formula. See Charlton Exhibit 60.
Total $31,701.73
The Brodeur Firm Special Defenses
To counter these claims and in part to support its claim in its case in chief that Mr. Charlton intended to defraud the firm, the Brodeur firm presented testimony about certain billing accounts created by Mr. Charlton. The accounts were for the purpose of more equitably spreading certain estate planning development costs, such as tax analysis templates, proportionally across the bills for the clients for whom such tools were then employed. At the time of his departure, the firm maintained that there were approximately 400 hours in unbilled time in these accounts and that Mr. Charlton should repay the firm these amounts before any sums would become due him for his compensation.
The court finds that the firm made no reasonable effort to bill these amounts to clients for whom a portion of the time would have been proper. And the court therefore finds that they took no steps to mitigate their claimed damages. Second, the hourly total was not only for Mr. Charlton's work, but work of others who were under his direction. Further, based on the testimony of the bookkeeper and Mr. Charlton, the court finds there was no firm policy that such sums would be deducted from an individual employee's account if not collected in any one year.
In addition to this testimony, the Brodeur firm special defenses raise many of the same issues litigated in the Brodeur case in chief. There are four special defenses, all of which allege that Mr. Charlton owed a duty of loyalty to the firm, which is unquestioned. The First Special Defense alleges all payments were made to Mr. Charlton, which the court has found not to have been established, as set forth in detail above. The Second Special Defense alleges that Mr. Brodeur resigned on February 24, 2002 and is not entitled to any compensation. Based on the court's findings this special defense has also failed.
The remaining two special defenses raise equitable reasons why Mr. Charlton should receive no compensation. The Third Special Defense refers to the doctrine of equitable estoppel and the Fourth Special Defense to the defense of unclean hands. The elements of the doctrine of equitable estoppel are discussed by our Appellate Court in Sablosky v. Sablosky, 72 Conn. App. 408, 805 A.2d 745 (2002). Equitable estoppel is predicated on two essential elements: (1) the plaintiff must do or say something that is intended or calculated to induce the defendant to believe in the existence of certain facts and to act upon that belief, and (2) the defendant, in reliance on those facts, must actually change his position, thereby incurring some injury. Since the court has found that Mr. Charlton did not breach his duty of loyalty to the firm, the firm did not and could not have changed its position in reliance on his conduct. Last, it failed to demonstrate that it suffered any injury. The court finds that this special defense has not been proven.
The Fourth Special Defense raises the claim of unclean hands. "It is a fundamental principle of equity jurisprudence that for a complainant to show that he is entitled to the benefit of equity he must establish that he comes into court with clean hands . . . The clean hands doctrine is applied not for the protection of the parties but for the protection of the court . . . It is applied not by way of punishment but on considerations that make for the advancement of right and justice . . . The doctrine of unclean hands expresses the principle that where a plaintiff seeks equitable relief, he must show that his conduct has been fair, equitable and honest as to the particular controversy in issue . . . Unless the plaintiff's conduct is of such a character as to be condemned and pronounced wrongful by honest and fair-minded people, the doctrine of unclean hands does not apply." (Citation omitted; internal quotation marks omitted.) Thompson v. Orcutt, 257 Conn. 301, 310, 777 A.2d 670 (2001). "The party seeking to invoke the clean hands doctrine to bar equitable relief must show that his opponent engaged in wilful misconduct with regard to the matter in litigation." Polverari v. Peatt, 29 Conn. App. 191, 202, 614 A.2d 484, cert. denied, 224 Conn. 913, 617 A.2d 166 (1992). The court finds that this doctrine is of no assistance to the Brodeur firm as Mr. Charlton's conduct was not found to be deceitful or wilful, nor was it of such a nature as to be generally condemned.
The court therefore finds that none of the special defenses is proven. The court awards Mr. Charlton the sum of $31,701.73 for past due compensation pursuant to his implied employment contract and compensation agreement. In addition, he is entitled to damages for the detention of money wrongfully withheld after it becomes payable at the statutory interest rate of 10% per year pursuant to Connecticut General Statutes § 37-3a. The court concludes that the sums were wrongfully withheld. The exact interest calculation depends on the date the sums became due and the amounts above listed became due on various dates. The court has reviewed the interest calculations made by Mr. Charlton as set forth in exhibit 61 and adopts those calculations as its own. The total interest due through July 31, 2003 is $7,970.39, which the court hereby awards. The per diem rate on this total interest is $10.86 per day until the sum is paid in full.
B. Counts Two and Three: Misrepresentation and Conversion
Count Two of Mr. Charlton's complaint seek damages for misrepresentation regarding the compensation to be paid, on which Mr. Charlton relied to his detriment in remaining with the firm. Count Three seeks damages for conversion of funds which were the property of Mr. Charlton, the compensation not timely paid. These two counts allege tortious causes of action, but the fundamental nature of the claims is based upon the breach of the compensation contract between the parties, for which the court has determined Mr. Charlton is entitled to recovery.
The court finds, from its review of the evidence and the free flowing negotiations between the parties in 1999, 2000 and 2001, that at most negligent misrepresentation was proven by Mr. Charlton. As to negligent misrepresentation, "[t]he governing principles are set forth in . . . § 552 of the Restatement Second of Torts (1979): One who, in the course of his business, profession or employment . . . supplies false information for the guidance of others in their business transactions, is subject to liability for pecuniary loss caused to them by their justifiable reliance upon the information, if he fails to exercise reasonable care or competence in obtaining or communicating the information . . . that the representations contained false information." (Citations omitted; internal quotation marks omitted.) Citino v. Redevelopment Agency, 51 Conn. App. 262, 273-74, 721 A.2d 1197 (1998). "There must be a justifiable reliance on the misrepresentation for a plaintiff to recover damages." Id., 275. And as to conversion, "[c]onversion occurs when one, without authorization, assumes and exercises ownership over property belonging to another, to the exclusion of the owner's rights." Wellington Systems, Inc. v. Redding Group, Inc., 49 Conn. App. 152, 169, 714 A.2d 21, cert. denied, 247 Conn. 905, 720 A.2d 516 (1998).
The fundamental difficulty with Mr. Charlton's claims on these counts is that the only evidence of damages was the evidence presented for the breach of contract claim. Those damages have already been awarded, to the extent found. There was no evidence of any additional damages. A fundamental rule of our jurisprudence is that no plaintiff is entitled to double recovery upon proof of the same underlying facts. "It is a time-honored rule that an injured party is entitled to a full recovery only once for the harm suffered." Buell v. American Universal Ins. Co., 224 Conn. 766, 775, 621 A.2d 262 (1993). "[A] litigant may recover just damages for the same loss only once. The social policy behind this concept is that it is a waste of society's economic resources to do more than compensate an injured party for a loss and, therefore, that the judicial machinery should not be engaged in shifting a loss in order to create such an economic waste." (Emphasis omitted.) Haynes v. Yale-New Haven Hospital, 243 Conn. 17, 23-24, 699 A.2d 964 (1997). Counts Two and Three present alternate legal theories for recovery of damages. As additional damages have not been proven, none are awarded.
Mr. Charlton also seeks punitive damages in the form of attorneys fees. "Punitive damages [and attorneys fees] are not ordinarily recoverable for breach of contract . . . This is so because . . . punitive or exemplary damages are assessed by way of punishment, and the motivating basis does not usually arise as a result of the ordinary private contractual relationship." (Citation omitted; internal quotation marks omitted.) Barry v. Posi-Seal International, Inc., 40 Conn. App. 577, 584, 672 A.2d 514, cert. denied, 237 Conn. 917, 676 A.2d 1373 (1996). Such damages are warranted where wanton or willful misconduct has been proven. Markey v. Santangelo, 195 Conn. 76, 77 (1985). There was no proof of such conduct and the court makes no punitive damages award.
C. ORDERS
Judgment may enter on Count One for breach of contract for Donald L. Charlton in the amount of $31,701.73. The court awards interest at 10% per annum though July 31, 2003 of $7,970.39, and per diem interest of $10.86 until the judgment shall have been paid in full. Statutory costs are also awarded.
Judgment may enter on Counts Two and Three for Brodeur Co., CPAs, P.C.
BY THE COURT
BARBARA M. QUINN, Judge