Opinion
No. X08 CV 10-6002996
January 6, 2011
MEMORANDUM OF DECISION MOTION TO STRIKE REVISED COMPLAINT #163
BACKGROUND
The present action was filed by the plaintiff, First Service Williams Connecticut, LLC (First Service) by writ, summons and complaint dated December 23, 2009 with return date of January 26, 2010. The named defendants are Cory Gubner (Gubner) and RHYS, LLC which is a business formed by the defendant Gubner. The plaintiff filed a ten-count revised complaint on August 6, 2010 and on December 16, 2010 the defendants filed a motion to strike the count one and count eight of the revised complaint. The plaintiff has filed a memorandum dated December 28, 2010 objecting to the motion to strike the revised complaint. The court heard argument on December 29, 2010 at which time count one was voluntarily withdrawn, by the plaintiff, as moot.
The defendant Cory Gubner was a principal in Chase Commercial Real Estate, LLC. In September 2002 Chase was acquired by Williams Real Estate of Connecticut, LLC (Williams CT). The defendant acquired a 50% ownership of Williams CT. The remaining 50% was owned by Williams Real Estate Co., Inc. (Williams NY). At the same time in 2002, the defendant entered into an employment contract with Williams Real Estate of Connecticut, LLC to remain in the position as President and Chief Executive Officer of this entity (Williams CT). In 2008, Williams NY began negotiations to sell Williams CT among other entities to the plaintiff, First Service. The defendant agreed to the sale. The defendant entered into a "Letter Agreement" for the sale of his interest. In October 2008, a 65% interest was sold to First Service. Williams Real Estate of Connecticut, LLC became the new entity of First Service Williams Connecticut, LLC. This was accomplished through a series of transactions and establishment of additional entities. The defendant, Gubner, agreed with First Service to continue in his capacity as President and CEO in the same manner and utilizing the same employment agreement he had with Williams CT. This employment agreement contained provisions including refraining from engaging in the real estate brokerage business in Fairfield County, Connecticut or Westchester County, New York in association with persons employed by the Williams Real Estate of Connecticut for a period of nine months following termination of employment, provisions of confidentiality and proprietary business concerns of First Service including the securing of client files, and the refraining from encouraging employees of First Service from providing information or leaving their employ. On August 25, 2009, the defendant gave written notice that he would not extend the employment contract beyond September 24, 2009. The day after he terminated his employment contract, the defendant began operating a commercial real estate office known as RHYS, LLC within 4 tenths of a mile from the First Service business offices. The defendant also had created and was operating a web site that included advertisement of a relationship with customers that were formerly with First Service.
The letter agreement included the eight parties the defendant sought to cite in which was denied by the court but it does not include First Service Williams.
The employment contract has a renewable one-year term ending on September 24 of each year. The defendant renewed his employment each year for 2003, 2004, 2005, 2006, 2007, and 2008.
The plaintiff brought this action pursuant to the employment agreement alleging that the defendant engaged in activities which violated this agreement by developing an office within the same area, utilizing the same clientele, encouraging employees of Williams CT to join his newly formed company of RHYS LLC, and removing confidential and proprietary business documents. The Revised Complaint contains ten counts each alleging various violations of the employment agreement.
DISCUSSION
The defendants now move to strike count eight of the revised complaint alleging a violation of Connecticut Unfair Trade Practices Act, Conn. Gen. Stat. Ann. § 42-110 et seq.("CUTPA") pursuant to Connecticut Practice Book § 10-39 et seq. Specifically, the defendants argue that count eight must be stricken as a matter of law insofar as the employer-employee relationship is not encompassed within the "trade or commerce" requirement under CUTPA. Conversely, the plaintiff argues that the defendants' motion should be denied because the plaintiffs' allegations lie outside the narrow confines of the employer-employee relationship and are sufficient to state a claim of violation of CUTPA in that defendants wrongfully deprived plaintiff of its confidential information, solicited employees to provide defendants with confidential and propriety information, solicited customers and employees in an effort to steal business from plaintiff, secretly orchestrated their activities in a way that they knew or should have known would inflict significant competitive injury on plaintiff, and engaged in an apparent scheme to reap the profitable employment and business relationships of plaintiff while avoiding the investment of time, money and resources that plaintiff has expended.
Practice Book § 10-39(a) provides that "Whenever any party wishes to contest (1) the legal sufficiency of the allegations of any complaint, counterclaim or cross claim, or of any one or more counts thereof, . . . that party may do so by filing a motion to strike the contested pleading or part thereof."
"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. In ruling on a motion to strike, the court is limited to the facts alleged in the complaint. The court must construe the facts in the complaint most favorably to the plaintiff . . . If facts provable in the complaint would support a cause of action, the motion to strike must be denied." (Citations omitted; internal quotation marks omitted.) Faulkner v. United Technologies Corp., 240 Conn. 576, 580, 693 A.2d 293 (1997). "A motion to strike is properly granted if the complaint alleges mere conclusions of law that are unsupported by the facts alleged." Novametrix Medical Systems, Inc. v. BOC Group, Inc., 224 Conn. 210, 215, 618 A.2d 25 (1992).
To establish a CUTPA violation, a "claimant's evidence must establish that the conduct at issue falls within one of three criteria. A court must decide whether the conduct (1) offends public policy, (2) is immoral, unethical, oppressive or unscrupulous or (3) causes substantial injury to consumers, competitors or other businessmen." Johnson Electric Co. v. Salce Contracting Associates, Inc., 72 Conn.App. 342, 356, 805 A.2d 864 (2002). The statute provides that "[n]o person shall engage in unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce." Section 42-110b(a) of the General Statutes. Trade and commerce is broadly defined as "the advertising, the sale or rent or lease, or the distribution of any services and any property, tangible or intangible, real, personal or mixed, and any other article, commodity, or thing of value in this state." General Statutes Section 42-110a(4). In addition, "[a]ny person who suffers any ascertainable loss of money or property, real or personal, as a result of the use or employment of a method, act or practice prohibited by section 42-110(b), may bring an action . . . to recover actual damages." Section 42-110g(a). The entire act is remedial in nature and must "be liberally construed in favor of those whom the legislature intended to benefit . . ." (Internal quotation marks omitted.) Concept Associates, Ltd. v. Board of Tax Review, 229 Conn. 618, 623, 642 A.2d 1186 (1994).
Our Supreme Court has stated that "purely intracorporate conflicts do not constitute CUTPA violations." Ostrowski v. Avery, 243 Conn. 355, 379, 702 A.2d 117 (1997). However while CUTPA does not apply to purely intracorporate conflicts, the Supreme Court has held that CUTPA does apply when defendant's actions go "well beyond governance of the corporation, and place him in direct competition with the interest of the corporation." Fink v. Golenbock, 238 Conn. 183, 213, 680 A.2d 1243. In Fink, the plaintiff and the defendant Golenbock were medical practitioners, each owning 50 percent of their professional corporation. The plaintiff brought a derivative shareholder action on behalf of the corporation against Golenbock for taking unfair and deceptive actions "to ensure that the plaintiff and the corporation would have no opportunity to engage in the practice of medicine . . ." Id., at 214, 680 A.2d 1243. The defendant, Golenbock, argued that CUTPA did not apply because the case only involved a dispute over the internal governance of the corporation. The court noted that the defendant took steps to ensure that the plaintiff would have no opportunity to engage in the practice of medicine in Bethel, informed clients that the corporation had changed and took over corporation's assets, equipment and employees to establish his new practice. Id., at 214. The court found that because the original corporation had neither been dissolved nor extinguished, the acts amounted to competitive moves designed to co-opt all of the corporation's operations. The court concluded that the case involved the provision of medical services within CUTPA's definition of trade or commerce and Golenbock's actions fell within the purview of CUTPA.
The defendants here rely on Quimby v. Kimberly Clark Corp., 28 Conn.App. 660, 613 A.2d 838 (1992), to support their motion to strike count eight of the revised complaint. In Quimby, the plaintiff employee contended that her employer, which was self-insured for the purposes of workers' compensation, had administered her claim of injury improperly. The plaintiff claimed as CUTPA violations "the defendant's failure to pay benefits in a timely manner, to investigate reasonably and promptly the plaintiff's claim . . ." Id., at 669-70, 613 A.2d 838. The misconduct alleged in Quimby revolved entirely around administrative failures and intracompany workers' compensation dispute. The Appellate Court held that "the actual employment relationship is not itself trade or commerce for the purpose of CUTPA." (Internal quotation marks omitted.) Id., at 670, 613 A.2d 838. The Appellate Court's decision in CT Page 2748 Quimby addressed only the applicability of CUTPA to acts occurring within the very limited confines of the employer-employee relationship and is therefore dissimilar to the allegations in the action presently before this court.
Unlike Quimby, the acts the plaintiff alleges falls outside the narrow confines of the employer-employee relationship.
Although the status or relationship of a defendant are relevant in determining whether his actions implicate trade or commerce the court is cognizant that it is not dispositive. The court must also consider the conduct of the defendants. Fink v. Golenbock, supra, 238 Conn. 183, 214, 608 A.2d 1243 (1996); Larsen Chelsey Realty Co. v. Larsen, 232 Conn. 480, 491, 656 A.2d 1009 (1995). 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., at 485-86. The court concluded that the fact pattern involved potentially a viable cause of action under CUTPA because Larsen's allegedly tortious conduct was outside the scope of his employment relationship. Id., at 493.
This court thus focuses on the conduct of the defendants alleged in the revised complaint to be in violation of CUTPA. The plaintiff here alleges that the defendants improperly established a rival entity, wrongfully deprived plaintiff of its confidential information, solicited confidential information, customers and employees in an effort to steal business from plaintiff, confidential information, customers and employees in an effort to steal business from plaintiff, secretly orchestrated their activities in a way that they knew or should have known would inflict significant competitive injury on plaintiff, and engaged in an apparent scheme to reap the profitable employment and business relationships of plaintiff while avoiding the investment of time, money and resources that plaintiff has expended. As in Larsen, there is an injured business person losing sales and clients to another by deceptive means. The court finds that the allegations of the revised complaint are similar to the kind of activity conducted outside of the employment relationship held to have violated CUTPA in Larsen Chelsey Realty Co. v. Larsen, supra, 232 Conn. 480, 656 A.2d 1009 and thus falls within the purview of CUTPA.
CONCLUSION
The motion to strike count eight of the plaintiff's revised complaint is denied.