Summary
striking claim brought under section 31-72 that only stated violation of section 31-73
Summary of this case from Quiello v. Reward Network Establishment ServicesOpinion
No. CV 03-0089577
August 16, 2005
MEMORANDUM OF DECISION
This matter came before the court on May 9, 2005 on a motion to strike counts four, five and seven of the plaintiff's complaint filed by defendants Lucia Winter and Steven Winter. For the reasons stated below, the motion to strike is granted.
FACTS
On February 3, 2003, the plaintiff, Denise M. Dougherty, filed a seven-count complaint against the defendants, Brian T. Dougherty, Lucia Winter and Steven Winter. This case arises out of the alleged misuse of corporate funds by the defendants. The plaintiff, an employee and shareholder in L.M.C. Imports, Inc., alleges that the defendants, also shareholders in L.M.C. Imports, Inc., breached their fiduciary duty and their obligation of good faith and fair dealing by engaging in self-dealing, using corporate funds to purchase services and equipment for personal use, using corporate funds to pay unwarranted fees and expenses and making undisclosed and improper adjustments to corporate records to reduce the plaintiff's interest in the corporation and increase their own.
On April 21, 2003, defendants Lucia Winter and Steven Winter filed a motion to strike counts four, five and seven of the plaintiff's complaint. Count four, against defendants Brian Dougherty and Steven Winter, is brought pursuant to General Statutes § 31-73 and seeks to recover wages and fringe benefits that were allegedly misused under General Statutes § 31-72. Count five, directed at all three named defendants, is brought pursuant to the General Statutes § 42-110a et seq., known as the Connecticut Unfair Trade Practices Act (CUTPA). Count seven seeks foreclosure of a judgment lien and monetary damages against defendants Brian Dougherty and Steven Winter, alleging that they entered into a real estate agreement that was in violation of the separation agreement and divorce judgment between the plaintiff and defendant Brian CT Page 11968-ai Dougherty. On May 29, 2003, the plaintiff filed a memorandum in opposition to defendants Lucia Winter and Steven Winter's motion to strike.
DISCUSSION
"The purpose of a motion to strike is to contest . . . the legal sufficiency of the allegations of any complaint . . . to state a claim upon which relief can be granted." (Internal quotation marks omitted.) Fort Trumbull Conservancy, LLC v. Alves, 262 Conn. 480, 498, 815 A.2d 1188 (2003). The role of the trial court in ruling on a motion to strike is "to examine the [complaint], construed in favor of the [plaintiff], to determine whether the [pleading party has] stated a legally sufficient cause of action." (Internal quotation marks omitted.) Dodd v. Middlesex Mutual Assurance Co., 242 Conn. 375, 378, 698 A.2d 859 (1997). "For the purpose of ruling upon a motion to strike, the facts alleged in the complaint, though not the legal conclusions it may contain, are deemed to be admitted." (Internal quotation marks omitted.) Murillo v. Seymour Ambulance Assn., Inc., 264 Conn. 474, 476, 822 A.2d 1202 (2003).
Count Four
Lucia Winter and Steven Winter (hereinafter "the defendants") move to strike count four of the plaintiff's complaint on the ground that the plaintiff did not plead sufficient facts to bring the matter within the purview of General Statutes § 31-73 regarding the refund of wages. Specifically, the defendants contend that the plaintiff has not alleged facts that support a claim that there was a refund of wages nor has she alleged that any such refund was a condition to obtaining or continuing employment. The defendants also state that, even if the plaintiff does allege sufficient facts to bring this matter within the purview of the statute, the statute is penal and therefore does not support a civil cause of action.
The plaintiff responds that count four was brought to recover wages and fringe benefits pursuant to General Statutes § 31-72, as stated in her prayer for relief. She contends that General Statutes §§ 31-58 through 31-76m govern the payment of wages and represent a clear public policy of protecting wages. The plaintiff argues that claims brought under § 31-72 do give rise to a civil cause of action.
The plaintiff alleges the following facts in count four of her complaint. She was a full-time employee of L.M.C. Imports, Inc. and that by agreement she was paid wages and other benefits. As part of her employment, the company paid for the lease and maintenance of the CT Page 11968-aj plaintiff's personal vehicle, which she used for the company's benefit. The defendants reduced the plaintiff's loan account, an account she held as a shareholder in the company, by $18,022.88 without disclosing their actions to the plaintiff. By reducing the plaintiff's loan account, the defendants violated § 31-73 by exacting from the plaintiff a refund of wages and by exacting from the plaintiff a debt allegedly owed to the company as a refund of wages paid to a third party.
General Statutes § 31-73 states in relevant part: "(a) When used in this section, `refund of wages' means: (1) The return by an employee to his employer or to any agent of his employer of any sum of money actually paid or owed to the employee in return for services performed or (2) payment by the employer or his agent to an employee of wages at a rate less than that agreed to by the employee or by any authorized person or organization legally acting on his behalf. (b) No employer . . . shall, directly or indirectly, demand, request, receive or exact any refund of wages, fee, sum of money or contribution from any person, or deduct any part of the wages agreed to be paid, upon the representation or the understanding that such refund of wages, fee, sum of money, contribution or deduction is necessary to secure employment or continue in employment . . . A payment to any person of a smaller amount of wages than the wage set forth in any written wage agreement or the repayment of any part of any wages received, if such repayment is not made in the payment of a debt evidenced by an instrument in writing, shall be prima facie evidence of a violation of this section . . . (d) Any person who violates any provision of this section shall be fined not more than one hundred dollars or imprisoned not more than thirty days for the first offense, and, for each subsequent offense, shall be fined not more than five hundred dollars or imprisoned not more than six months or both."
The plaintiff does not allege in count four that any refund of wages was necessary to secure her employment or continue in her employment. She merely alleges that the reduction of her loan account, held by the plaintiff in her capacity as a shareholder in the company, constituted a refund of the wages paid to her as an employee of the company and is a violation of § 31-73. No other facts are pleaded to support this allegation.
The plaintiff contends that count four is brought pursuant to General Statutes § 31-72, as stated in her prayer for relief. General Statutes § 31-72 states in relevant part: "When any employer fails to pay an employee wages in accordance with the provisions and sections of 31-71a to 31-71i, inclusive, or fails to compensate an employee in accordance with section 31-76k . . . such employee . . . may recover, in a civil action, twice the full amount of such wages, with costs and such CT Page 11968-ak reasonable attorneys fees as may be allowed by the court, and any agreement between him and his employer for payment of wages other than as specified in said sections shall be no defense to such action . . ." While the plaintiff seeks damages pursuant to § 31-72, she has not alleged that the defendants violated the provisions of §§ 31-71a through 31-71i or § 31-76k, the statutes that give rise to the relief granted under § 31-72. Count four of the complaint alleges only a violation of § 31-73. As she has not pleaded any facts stating that her employment was conditioned on or pursuant to a refund of wages, the motion to strike count four is granted.
Count Five
The defendants state that the plaintiff's allegations arise out of her relationship with her corporate employer, acting through the individual defendants, as a shareholder and employee. They argue that the employment relationship does not constitute a trade or commerce for the purposes of CUTPA which prohibits a person from engaging in unfair methods of competition in the conduct of trade or business. The defendants also contend that the plaintiff has stated a single failure on the part of the defendants and that in order to maintain a claim under CUTPA, she must allege that the defendants committed deceitful acts with such frequency as to indicate a general business practice.
The plaintiff responds that a CUTPA claim arises when the rights of a minority interest owner of a business have been abused by the owners holding a majority interest. The plaintiff also contends that the defendants' conduct goes outside the confines of the employer-employee relationship and that her status as a former employee is not controlling. Finally, the plaintiff argues that she has alleged more than a single act on the part of the defendants. She states that she alleged a series of acts by the defendants by which the defendants attempted to conceal their actions and breach their fiduciary duty.
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." To successfully state a claim under CUTPA, "the plaintiff must allege that the actions of the defendant were performed in the conduct of `trade or commerce' . . . [A]n employment relationship does not constitute trade or commerce for the purposes of CUTPA." (Citations omitted; internal quotation marks omitted.) Muniz v. Kravis, 59 Conn.App. 704, 711, 757 A.2d 1207 (2003). In addition, the Supreme Court has stated that "purely intracorporate conflicts do not constitute CUTPA violations . . ." Ostrowski v. Avery, 243 Conn. 355, 379, 703 A.2d 117 (1997). CT Page 11968-al
While CUTPA does not apply to purely intracorporate conflicts, the Supreme Court has stated that CUTPA does apply when the defendant's actions go "well beyond governance of the corporation, and [place] him in direct competition with the interests of the corporation." Fink v. Golenbock, 238 Conn. 183, 213, 680 A.2d 1243 (1996). In Fink, the defendant informed clients that the original corporation had changed and that they should take their business to the new corporation created by the defendant, using the original corporation's employees, assets and equipment. The court held that because the original corporation had never been dissolved, the actions of the defendant amounted to competitive moves designed to co-opt the original corporation's business and operations. Id., 214.
The plaintiff also cites Larsen Chesley Realty Co. v. Larsen, 232 Conn. 480, 656 A.2d 1009 (1995) to support the proposition that her CUTPA claim can be maintained. In Larsen, the defendant, the president of the plaintiff corporation, accepted employment with a competing firm and sent notices to clients and business contacts falsely stating that the plaintiff corporation was being taken over by the competing firm and all future business should be directed to that firm. Id., 485-86. In Spector v. Konover, 57 Conn.App. 121, 747 A.2d 39, cert. denied, 254 Conn. 913, 759 A.2d 507 (2000), the defendants diverted partnership funds to finance their other entities, putting them in direct competition with the interests of the partnership. Id., 133-34.
In the present case, the plaintiff alleges that the defendants breached their fiduciary duty and their obligation of good faith and fair dealing by engaging in self-dealing, using corporate funds to purchase services and equipment for personal use, using corporate funds to pay unwarranted fees and expenses and making undisclosed and improper adjustments to corporate records. She has not alleged that the defendants' actions put them in direct competition with the corporation. The allegations amount to a dispute over the plaintiff's employment and the internal governance of the corporation. As such, the plaintiff's CUTPA claim is legally insufficient.
Count Seven
The defendants argue that the facts alleged in count seven do not constitute any recognized cause of action in Connecticut and that their motion to strike should therefore be granted. They contend that the plaintiff did not allege that the separation agreement was breached and that there is no cause of action in Connecticut for tortious interference with financial expectancy under a separation agreement or divorce CT Page 11968-am decree. Also, the defendants state that there is no cause of action for civil conspiracy in Connecticut.
In reply, the plaintiff contends that tortious interference with business relations is a recognized cause of action in Connecticut. She states that she has alleged sufficient facts to support a cause of action against defendant Steven Winter for tortious interference with her financial expectancy arising from the real estate agreement between Brian Dougherty and Steven Winter in which Steven Winter paid below market value in an attempt to diminish the plaintiff's property settlement. The plaintiff admits that, technically, Connecticut does not recognize a cause of action for civil conspiracy, but she argues that her action is for damages caused by acts committed pursuant to a formed conspiracy rather than by the conspiracy itself.
"A claim for tortious interference with contractual relations requires the plaintiff to establish (1) the existence of a contractual or beneficial relationship, (2) the defendants' knowledge of that relationship, (3) the defendants' intent to interfere with the relationship, (4) the interference was tortious, and (5) a loss suffered by the plaintiff that was caused by the defendants' tortious conduct." (Internal quotation marks omitted.) Appleton v. Board of Education, 254 Conn. 205, 212-13, 757 A.2d 1059 (2000). Connecticut courts have "long recognized a cause of action for tortious interference with contract rights or other business relations . . . [The Supreme Court has held, however, that] not every act that disturbs a contract or business expectancy is actionable . . . [F]or a plaintiff to successfully prosecute such an action it must prove that the defendant's conduct was in fact tortious. This element may be satisfied by proof that the defendant was guilty of fraud, misrepresentation, intimidation or molestation . . . or that the defendant acted maliciously . . . [A]n action for intentional interference with business relations . . . requires the plaintiff to plead and prove at least some improper motive or means . . . The plaintiff in a tortious interference claim must demonstrate malice on the part of the defendant, not in the sense of ill will, but intentional interference without justification . . . In other words, the [plaintiff] bears the burden of alleging and proving lack of justification on the part of the actor." (Citations omitted; internal quotation marks omitted.) Daley v. Aetna Life Casualty Co., 249 Conn. 766, 805-06, 734 A.2d 112 (1999).
In the present case, the plaintiff alleges that pursuant to the separation agreement, which was incorporated into the divorce decree, Brian Dougherty was to sell his interest in a piece of property, pay all debts associated with that property and divide the remaining profit with CT Page 11968-an the plaintiff. She states that Brian Dougherty conveyed the property to Steven Winter, who had actual or constructive notice of the obligations of Brian Dougherty under the separation agreement and divorce judgment, that the conveyance was not an arms length transaction, was for less than fair market value and was in breach of the separation agreement and divorce judgment. She states that Steven Winter tortiously interfered with her financial expectancy by purchasing the property from Brian Dougherty. Finally, the plaintiff alleges that by entering into the agreement to purchase the property, Brian Dougherty and Steven Winter engaged in a civil conspiracy to dilute and diminish the property settlement she was entitled to under the separation agreement and divorce judgment.
"Stated simply, to substantiate a claim of tortious interference with a business expectancy, there must be evidence that the interference resulted from the defendant's commission of a tort. [A] claim is made out [only] when interference resulting in injury to another is wrongful by some measure beyond the fact of the interference itself . . . [Not e]very act of interference is tortious." (Internal quotation marks omitted.) Downes-Patterson Corp. v. First National Supermarkets, Inc., 64 Conn.App. 417, 429, 780 A.2d 967 (2001). The plaintiff does not specifically allege any wrongful action other than the interference itself. Her only claim is that solely by entering into an agreement to purchase the subject property, Steven Winter tortiously interfered with her financial expectancy and, together with Brian Dougherty, entered into a civil conspiracy. Therefore, the plaintiff's claim for tortious interference with her financial expectancy is legally insufficient and the motion to strike count seven is granted.
In Connecticut, "[t]here is no independent claim of civil conspiracy. Rather, [t]he action is for damages caused by acts committed CT Page 11968-ao pursuant to a formed conspiracy rather than by the conspiracy itself . . . Thus, to state a cause of action, a claim of civil conspiracy must be joined with an allegation of a substantive tort." (Internal quotation marks omitted.) Larobina v. McDonald, 274 Conn. 394, 408, 876 A.2d 522 (2005). In count seven, the plaintiff alleged both tortious interference with a financial expectancy and civil conspiracy. The only underlying cause of action for the claim of civil conspiracy was the claim of tortious interference. Therefore, the granting of the motion to strike the claim of tortious interference with the plaintiff's financial expectancy is fatal to her claim of civil conspiracy.
CONCLUSION
The motion to strike count four is granted. The plaintiff failed to allege that a refund of wages was necessary to secure or continue her employment and did not allege any violations that would state a claim for damages pursuant to General Statutes § 31-72. The motion to strike count five is granted. Employment relationships and disputes over intracorporate governance do not give rise to a claim under CUTPA. Finally, the motion to strike count seven is granted as the plaintiff alleged only that the act of interference itself was the basis of her claim for tortious interference with her financial expectancy.
BRUNETTI, J.