Opinion
X04HHDCV156066060S
12-12-2016
Robert C. Johnson, II et al. v. Bank of America, N.A., Trustee et al
UNPUBLISHED OPINION
MEMORANDUM OF DECISION RE KELLEY DRYE DEFENDANTS' MOTION TO STRIKE (#146)
David M. Sheridan, J.
The defendants Kelley Drye & Warren, LLP (" Kelley Drye"), James Nealon, James Moriarty, and M. Ridgway Barker have moved to strike all of the plaintiffs' claims brought against them. For the reasons set forth below, the motion is granted as to certain counts, and denied as to others.
I. PLAINTIFFS' ALLEGATIONS
The operative complaint is dated January 22, 2016 and is brought in nine counts as against five defendants. Common to all counts are paragraphs 1 through 202. Paragraphs 1 through 26 identify the various parties to the litigation. Paragraphs 27 through 202 allege a chronology of events stretching from 1956 to 2014. For purposes of the present motion, the following facts as alleged in the plaintiffs' complaint are accepted as true.
In 1956, R.C. Johnson and Charles Gibbs organized " a partnership in corporate form . . . named Gibbs Wire & Steel Company, Inc. (" GWS")." (Complaint, ¶ 32.) R.C. Johnson provided $40,000 of the company's starting capital of $50,000 and Charles Gibbs provided the remaining $10,000.
GWS was organized with two classes of stock: Voting Common Stock and Class B Nonvoting Stock. Charles Gibbs owned 51% of the GWS Voting Stock, representing a controlling interest in the company, while R.C. Johnson owned only 44% of GWS Voting Stock. The plaintiffs allege that, in recognition of, and as protection for, R.C. Johnson having provided 80% of GWS's initial capital, the Certificate of Incorporation and Bylaws contained certain provisions regarding liquidation of stock, including a requirement that " The Voting Common and the Class B Nonvoting Stock shall have the same price per share." (Complaint, ¶ 37.)
GWS became successful and profitable and R.C. Johnson's son, plaintiff Bob Johnson joined the company as a salesman in 1962. From 1962 to his death in 1970, R.C. Johnson systematically transferred his GWS shares to his wife and his son. After R.C. Johnson's death, his remaining shares of GWS Voting Common Stock and Class B Nonvoting Stock were transferred to his wife, Susan Mary Johnson, and their son, Bob Johnson. Some of the Class B Nonvoting Stock was subsequently transferred to a Trust, the Susan Mary Johnson Revocable Trust. At some point, all of the GWS Voting Shares were transferred to another Trust, the Robert B. Johnson Revocable Trust. R.C. Johnson's son, plaintiff Bob Johnson, and his grandson, plaintiff Robert C. Johnson, II (" Rob Johnson") were the Trustees of the Robert B. Johnson Revocable Trust.
From 1970 onward, GWS continued in business and provided employment for many of the descendants of its founders. Throughout the 1990s, GWS apparently experienced robust growth in business. Amidst this success, the GWS boardroom became a battleground between warring factions allied with the Johnson or Gibbs families. The period was marked by disagreements and struggles over various issues related to the business of GWS. The Gibbs family members involved in the GWS business used their position as majority shareholders to make members of the Johnson family unwelcome.
This ongoing discord led members of the Johnson family to explore the possibility of cutting ties with GWS by offering all of their GWS stock to the company for repurchase. In 2007, the Johnson family retained attorney Michael McKenna to negotiate a sale of all Johnson family's GWS shares to the company at book value. GWS rejected the Johnson Family's offer to sell all of its GWS stock (voting and nonvoting), and instead responded that it would repurchase only the Johnson family's GWS Voting Stock. The Johnson family refused to go through with the sale and GWS warned that it would take action to force the Johnson family to sell their GWS Voting Stock back to GWS.
In March of 2008, GWS commenced an action in Superior Court against the trustees of The Robert B. Johnson Revocable Trust, which held title to the Johnson family's GWS Voting Stock. The lawsuit sought to enforce an agreement by the trustees of The Robert B. Johnson Revocable Trust to sell the GWS Voting Stock back to GWS. The Johnson family retained Kelley Drye to represent them in the litigation. The terms of the engagement were memorialized in a March 11, 2008 engagement letter with attached " Standard Terms and Conditions of Engagement." Once retained, Kelley Drye appeared in the GWS lawsuit on behalf of the Johnson family defendants and removed the action to federal district court, where a motion to dismiss was filed. The District Court denied the motion to dismiss.
In April 2009, in reliance upon the advice of Kelley Drye attorney James Nealon, the Johnson family agreed to enter into a stipulated judgment to resolve the federal lawsuit. Pursuant to the stipulated judgment, the Johnson family Voting Stock was sold to GWS for $62 per share. As a result of the stipulated judgment, the plaintiffs allege that they were left " totally powerless to have any 'say' in GWS matters" and were " deprived of their last bastion of hope to provide leverage to obtain a proper price for the sale of their GWS Class B nonvoting shares." (Complaint, ¶ 127.)
In August of 2009, Kelley Drye, on behalf of the Johnson Family shareholders, commenced a shareholder oppression action pursuant to General Statutes § 33-898 against GWS in Connecticut Superior Court. While that lawsuit was pending, Kelley Drye was retained by Bank of America in connection with two class actions brought against the Bank in the federal court in New Jersey. At the time, Bank of America was also the Trustee of the Susan Mary Johnson Revocable Trust, which held 27, 533 shares of GWS Class B Common Stock in trust, and was negotiating with GWS to sell to GWS the Class B Non-Voting Stock that it was holding. Kelley Drye did not disclose its representation of Bank of America to the plaintiffs.
In March of 2011, Bank of America, as trustee, sold the Class B Non-Voting Stock held by the Trust to GWS for $34.52 per share. During the course of their representation of the plaintiffs in the shareholder oppression lawsuit, the Kelley Drye lawyers had " maintained and provided expert opinion . . . that the GWS Class B common stock per share value was substantially greater than the $34.52 share offered by GWS."
Sometime around June of 2012, as part of negotiations to settle the shareholder oppression lawsuit, GWS offered to purchase all of the Johnson family's shares of Class B Common Stock for $40 per share. A settlement agreement was worked out whereby the members of the Johnson family agreed to sell all of their outstanding shares of Class B Common Stock to GWS at approximately $40 per share, with approximately one-quarter of the sale price to be paid at the closing, and the balance subject to promissory notes to be paid over twelve years, with the debt subordinated to other GWS debt. The sale transaction contemplated under the Agreement concluded in late December 2012. Kelley Drye's legal fees of approximately $1,150,000 were paid from the cash portion of the settlement proceeds paid at the December 2012 closing.
In November of 2015, the plaintiffs commenced this action against Bank of America, the Kelley Drye law firm and three of Kelley Drye's lawyers, James Nealon, James Moriarty, and M. Ridgway Barker. With regard to Kelley Drye and its lawyers, the plaintiffs allege generally that those defendants' legal representation was deficient or inadequate, was marked by misrepresentations, threats and coercion, and was improper due to an alleged conflict of interest arising from Kelley Drye's concurrent representation of Bank of America. The plaintiffs allege that the defendants' wrongful conduct caused them monetary losses, in that they were forced to settle the shareholder oppression lawsuit by accepting a substantially diminished redemption value for their GWS stock of $40 per share.
On April 11, 2016, Kelley Drye and attorneys Nealon, Moriarty, and Barker filed their motion to strike all of the counts brought against them. The plaintiffs filed their memorandum in opposition on June 10, 2016, and the parties were heard at argument on June 21, 2016.
The court expresses its gratitude for the parties' willingness to waive the 120-day requirement of Practice Book Section 11-19.
II. STANDARD OF REVIEW
" A motion to strike challenges the legal sufficiency of a pleading, and, consequently, requires no factual findings by the trial court." (Internal quotation marks omitted.) Fidelity Bank v. Krenisky, 72 Conn.App. 700, 720, 807 A.2d 968, cert. denied, 262 Conn. 915, 811 A.2d 1291 (2002). " For the purpose of ruling upon a motion to strike, the facts alleged in a complaint, though not the legal conclusions it may contain, are deemed to be admitted." (Internal quotation marks omitted.) Bridgeport Harbour Place I, LLC v. Ganim, 111 Conn.App. 197, 203, 958 A.2d 210 (2008), aff'd, 303 Conn. 205, 32 A.3d 296 (2011).
" Under modern rules of pleading . . . pleadings should be read broadly and realistically, rather than narrowly and technically . . . That does not mean, however, that the trial court is obligated to read into pleadings factual allegations that simply are not there or to substitute a cognizable legal theory that the facts, as pleaded, might conceivably support for the noncognizable theory that was actually pleaded." (Citation omitted; internal quotation marks omitted.) Pane v. Danbury, 267 Conn. 669, 677, 841 A.2d 684 (2004). " [T]he burden [is] upon the pleaders to make such averments that the material facts should appear with reasonable certainty . . . essential allegations may not be supplied by conjecture or remote implication." (Citation omitted; internal quotation marks omitted.) Cahill v. Board of Education, 198 Conn. 229, 236, 502 A.2d 410 (1985).
III. ANALYSIS
A. Second Count (Breach of Fiduciary Duty)
The Second Count, alleging breaches of fiduciary duty, relies upon a wide array of factual allegations. These allegations fall into four basic categories:
(1) allegations regarding failures to disclose, failures to properly advise, representations and misrepresentations made by Kelley Drye and its lawyers during the course of the legal representation;
(2) allegations that the Kelley Drye had a conflict of interest in representing the plaintiffs in their lawsuit challenging the valuation of GWS stock at the same time that it was representing Bank of America, a holder of a large block of similar GWS stock that was negotiating for the sale of that stock on terms that would adversely affect the plaintiffs' claim;
(3) allegations that Kelley Drye and its lawyers " coerced" the plaintiffs to agree to the settlement of the shareholder oppression lawsuit in order to avoid certain consequences of the conflict of interest created by the simultaneous representation of Bank of America; and
(4) allegations that Kelley Drye breached its fiduciary duties by making the best interests of the plaintiff's secondary to Kelley Drye's business and financial interests in various ways, including having the firm's fees paid from the proceeds of the 2012 settlement.
See Second Count, ¶ ¶ 206(k) through 206(v).
See Second Count, ¶ ¶ 206(b) through (i), 206(y), 206(aa), 206(bb).
See Second Count, ¶ ¶ 206(y), 206(z), 206(aa), 206(bb).
See Second Count, ¶ ¶ 206(j), 206(w), 206(cc).
The defendants argue that the breach of fiduciary duty claim in the Second Count is insufficient as a matter of law for several reasons. First, the defendants assert that the plaintiffs' allegations of fact may support a claim for professional negligence, but they do not establish a breach of fiduciary duty. Second, they contend that the plaintiff's allegations of fact do not, as a matter of law, support their claim that Kelley Drye's representation of the Johnsons was subject to a conflict of interest, much less any kind of " actionable" conflict of interest. Third, the defendants argue that the plaintiffs have failed to allege facts that would show that Kelley Drye's compensation for its legal services was unjustified, excessive, or in violation of the Retainer Agreement, or that Kelley Drye's conduct in securing payment for its services was dishonest, fraudulent or immoral.
The essential elements to pleading a cause of action for breach of fiduciary duty under Connecticut law are:
1) That a fiduciary relationship existed which gave rise to: (a) a duty of loyalty on the part of the defendant to the plaintiff, (b) an obligation on the part of the defendant to act in the best interests of the plaintiff, and (c) an obligation on the part of the defendant to act in good faith in any manner relating to the plaintiff. (2) That the defendant advanced his or her own interests to the detriment of the plaintiff;
(3) That the plaintiff has sustained damages; and
(4) That the damages were proximately caused by the fiduciary's breach of his or her fiduciary duty.Banning v. Right Choice Real Estate, LLC, No. CV106003818S, 2011 WL 1033223 (Conn.Super.Ct. Feb. 22, 2011).
It is, of course, undisputed that attorneys owe fiduciary duties to their clients, including the duties of undivided loyalty and honesty. But " [p]rofessional negligence alone . . . does not give rise automatically to a claim for breach of fiduciary duty. Although an attorney-client relationship imposes a fiduciary duty on the attorney . . . not every instance of professional negligence results in a breach of that fiduciary duty . . . Professional negligence implicates a duty of care, while breach of fiduciary duty implicates a duty of loyalty and honesty." (Citations omitted; internal quotation marks omitted.) Beverly Hills Concepts, Inc. v. Schatz & Schatz, Ribicoff & Kotkin, 247 Conn. 48, 56-57, 717 A.2d 724 (1998).
" Absent claims of fraud, self-dealing, or a conflict of interest on the part of the defendant law firm, [allegations of substandard legal representation] simply do not suffice to also encompass a claimed breach of fiduciary duty." Orthopaedic Specialty Group, P.C. v. Day Pitney, LLP, No. X05CV106007313S, 2011 WL 4716325 (Conn.Super.Ct. Sept. 13, 2011). Plaintiffs asserting claims for breach of fiduciary duty against an attorney are required to allege something beyond simple negligence or legal malpractice--the cases have generally referred to allegations reflecting some form of dishonest, disloyal, fraudulent or immoral behavior.
The allegations that Kelley Drye consciously ignored a potential conflict of interest and then " coerced" the plaintiffs to agree to the settlement of the shareholder oppression lawsuit in order to further conceal the conflict or avoid other consequences of the disclosure of the conflict of interest sufficiently allege a claim for breach of fiduciary duty as that cause of action has been defined in the relevant case law referenced above. The conduct as described, does not involve the exercise of legal skill and professional judgment or the formulation and execution of legal strategy. In the context of any fiduciary relationship, " coercion" by the person acting as the fiduciary in furtherance of an improper self-interest clearly implicates concepts of loyalty, honesty and morality.
The same cannot be said of the factual allegations in subparagraphs 206(k) thorough 206(v) of the Second Count. The acts, omissions, and " failures" pled in those paragraphs are only associated with the defendants' competence as attorneys and are insufficient to implicate duties of loyalty or honesty so as to sustain a claim for breach of fiduciary duty.
However, as a general rule, isolated paragraphs within a count or within a complaint are not properly subject to a motion to strike. " [O]nly an entire count of a counterclaim or an entire special defense can be subject to a motion to strike, unless the individual paragraph embodies an entire cause of action or defense." Weingarden v. Milford Anesthesia Associates, P.C., No. NNHCV116016353S, 2013 WL 3119578, at *11 (Conn.Super.Ct. May 30, 2013). Subparagraphs 206(k) thorough 206(v) of the Second Count allege facts that are not legally sufficient to support a cause of action for breach of a fiduciary duty, but they do not embody an entire cause of action. Putting aside those allegations, other allegations of fact in the Second Count would support a cause of action for breach of a fiduciary duty, and thus the Count as a whole survives the motion to strike.
The motion to strike the Second Count is denied.
B. Third Count (Legal Malpractice)
The Third Count is based in professional negligence and alleges specific acts or omissions in connection with Kelley Drye's representation of the plaintiffs that constituted a failure to exercise that degree of knowledge, care, skill, and diligence ordinarily exercised by prudent and competent civil litigation lawyers in Connecticut in similar cases. The defendants' acts or omissions are specifically alleged to be " a direct and proximate cause of the Plaintiffs having suffered substantial damages." (Complaint, Third Count, ¶ 219.)
Generally, a plaintiff alleging legal malpractice must prove all of the following elements: " (1) the existence of an attorney-client relationship; (2) the attorney's wrongful act or omission; (3) causation; and (4) damages." Grimm v. Fox, 303 Conn. 322, 329, 33 A.3d 205 (2012).
The defendants argue that the Third Count fails to state a claim for which relief may be granted because the plaintiffs " fail to allege an essential element of a claim for professional negligence: that is, a causal connection between any conduct of Defendants and the purported 'damages' Plaintiffs claim to have suffered." (Defendants' April 11, 2016 Motion to Strike [#146], p. 2.) The court disagrees. At the outset, as referenced above, the plaintiffs have explicitly alleged a " direct and proximate" causal connection between their damages and the conduct described in the 200-plus paragraphs of factual allegations. (Complaint, Third Count, ¶ 219.) The court also rejects the notion that the allegation is " conclusory" because there is no explanation of " how any such breach was, or could have been, the cause of the " damages" Plaintiffs say they suffered." (Defendants' April 11, 2016 Memorandum in Support of Motion to Strike [#147], p. 21.) A fair reading of the complaint leads to an evident connection between a financial loss and a client being " coerced" or misled into entering a settlement which sets the redemption price for the GWS stock at an unrealistically low value.
It is true that motion to strike " does not admit legal conclusions ." (Emphasis added.) Faulkner v. United Technologies Corp., 240 Conn. 576, 588, 693 A.2d 293 (1997). For this reason, a motion to strike is properly granted " if the complaint alleges mere conclusions of law that are unsupported by the facts alleged." (Emphasis added). Santorso v. Bristol Hospital, 308 Conn. 338, 349, 63 A.3d 940 (2013).
However, causation is not a legal issue; it is generally a factual issue to be determined by the trier of fact. It only becomes a legal issue in exceptional circumstances. McDermott v. State, 316 Conn. 601, 616, 113 A.3d 419 (2015). In order to prove causation with respect to their allegations of legal malpractice, the plaintiffs will be required to present expert testimony. See, Bozelko v. Papastavros, 323 Conn. 275, 283, 147 A.3d 1023 (2016) (expert testimony also is a general requirement for establishing the element of causation in legal malpractice cases). But, at this stage of the proceedings it is sufficient to allege causation as a material fact upon which the plaintiffs rely; it is not necessary to plead the evidence by which that fact will be proven. See Practice Book § 10-1.
The motion to strike is denied as to the Third Count.
C. Fourth Count (Breach of Contract)
In the Fourth Count, the plaintiffs assert a claim of breach of contract for legal services. Paragraphs 101 to 103 allege that the parties entered into a written retainer agreement with respect to the representation. Specifically, the agreement (which is attached as an exhibit to the complaint) contained the following terms:
Because the possibility exists that another client may engage us in a matter adverse to the family, you and your family members signing below agree that we may presently or in the future undertake to represent existing or new clients in matters adverse to the family, unless such representation would be substantially related to the subject matter of our representation of the family. We shall also be disqualified from representing any client in any matter where any confidential information of the family made available to us in connection with the matters mentioned above becomes material or relevant to such matter or where use of such information would be adverse to the interests of the family.
We will endeavor to serve the family effectively and strive to represent its interests vigorously and efficiently . . .
Paragraph 207 of the Fourth Count alleged that " [Kelley Drye] expressly promised to withdraw its representation of Plaintiffs in the event of a conflict of interest." Paragraphs 208 and 209 allege, generally, that once the alleged Bank of America conflict arose, Kelley Drye continued to represent the plaintiffs, in breach of its obligations under the contract.
The defendants argue that the plaintiffs have failed to allege a legally sufficient claim for breach of contract for legal services because: (1) the " express promise" which is alleged allegations is inconsistent with the unambiguous language of the retainer agreement, which does not include any kind of contractual promise that required Kelley Drye to withdraw from the representation of the plaintiffs; and (2) allegations that an attorney " breached a promise to represent the client with the necessary diligence and dedication fall, as a matter of law, into the category of legal malpractice, and are not sufficient to state a claim for breach of contract. The court agrees.
The plaintiff must plead facts, not sounding in negligence, which, if read broadly, disclose a breach of a contractual duty owed to him by the defendants. Rosato v. Mascardo, 82 Conn.App. 396, 411, 844 A.2d 893 (2004). A legally sufficient claim for breach of contract to provide legal services must specifically allege that the attorney expressly promised to deliver a specific result, or expressly promised that under certain specified conditions, certain specific actions would be performed. There must be evidence of that those promises were part of an agreement between the attorney and his client. " [A] bald assertion that the defendant has a contractual obligation, without more, is insufficient to survive a motion to strike." (Internal quotation marks omitted.) Commissioner of Labor v. C.J.M. Services, Inc., 268 Conn. 283, 293, 842 A.2d 1124 (2004).
In the present case, the supporting facts alleged by 'the plaintiffs--especially the written retainer agreement--do not evidence that any express promise was made by Kelley Drye to " withdraw its representation of Plaintiffs in the event of a conflict of interest."
A motion to strike may be decided based on a comparison of incorporated contractual terms to the factual allegations of a complaint. See, e.g., Donar v. King Assocs., 67 Conn.App. 346, 349, 786 A.2d 1256 (2001). While it is true that the language of the agreement incorporated in the complaint does bear some relation to Kelley Drye's ability to represent new or existing or clients with interests potentially adverse to those of the plaintiffs, those terms cannot be read to embody an affirmative contractual obligation to withdraw from representation of the plaintiffs in the event of a conflict of interest.
Paragraph 210 of the Fourth Count, which alleges that " in the Retainer Agreement, [Kelley Drye], through the Defendant, Barker, represented that [Kelley Drye] will endeavor to serve the (Johnson) family 'effectively and strive to represent its interests vigorously and efficiently'" clearly will not support a claim for breach of contract against an attorney. " A claim that a defendant promised to work diligently or in accordance with professional standards is not made a contract claim simply because it is couched in the contract language of promise and breach." Caffery v. Stillman, 79 Conn.App. 192, 197, 829 A.2d 881 (2003).
Therefore, the motion to strike is granted as to the Fourth Count.
D. Fifth Count (Implied Covenant of Good Faith and Fair Dealing)
The Fifth Count asserts a claim, against Kelley Drye only, for breach of the implied covenant of good faith and fair dealing.
An action for breach of the covenant of good faith and fair dealing requires proof of three essential elements: " (1) that the plaintiff and the defendant were parties to a contract under which the plaintiff reasonably expected to receive certain benefits; (2) that the defendant engaged in conduct that injured the plaintiff's right to receive benefits it reasonably expected to receive under the contract; and (3) that when committing the acts by which it injured the plaintiff's right to receive under the contract, the defendant was acting in bad faith." First Serv. Williams Connecticut, LLC v. Gubner, No. FST106002996S, 2011 WL 4953439, at *3 (Conn.Super.Ct. Sept. 27, 2011).
In the present case, as discussed in connection with the Fourth Count based on breach of contract, the plaintiffs have not alleged facts sufficient to show that they could have " reasonably expected to receive certain benefits from the promises and representations in the Retainer Agreement, such as . . . [Kelley Drye's] withdrawal from representing Plaintiffs in the event [Kelley Drye's] representation would be compromised by [Kelley Drye's] representation of other clients." (Complaint, Fifth Count ¶ 213.)
The motion to strike is granted as to the Fifth Count.
E. Eighth Count (CUTPA)
In the Eighth Count, the plaintiffs allege that the conduct of Kelley Drye and its lawyers in connection with the representation of the plaintiffs constitutes a violation of the Connecticut Unfair Trade Practice Act, Conn. Gen. Stat. § 42-110a et seq. (" CUTPA"). The defendants argue that the CUTPA claim is legally insufficient because CUTPA claim may be asserted against attorneys only in narrow circumstances concerning the entrepreneurial aspects of attorney representation of clients, and none of the conduct alleged in the Eighth Count falls within that narrow exception.
Our Supreme Court has stated that, in general, " CUTPA applies to attorneys." Heslin v. Connecticut Law Clinic of Trantolo & Trantolo, 190 Conn. 510, 520, 461 A.2d 938 (1983). " [A]lthough all lawyers are subject to CUTPA, most of the practice of law is not." Suffield Development Associates Ltd. Partnership v. National Loan Investors, L.P., 260 Conn. 766, 782, 802 A.2d 44 (2002). " Professional negligence, or malpractice, does not fall under CUTPA." Anderson v. Schoenhorn, 89 Conn.App. 666, 674, 874 A.2d 798 (2005). " CUTPA covers only the entrepreneurial or commercial aspects of the profession of law." Haynes v. Yale-New Haven Hospital, 243 Conn. 17, 35, 699 A.2d 964 (1997).
Accordingly, " the most significant question in considering a CUTPA claim against an attorney is whether the allegedly improper conduct is part of the attorney's professional representation of a client or is part of the entrepreneurial aspect of practicing law." Suffield Development Associates Limited Partnership v. National Loan Investors, supra, 260 Conn. 781. " The entrepreneurial exception is just that, a specific exception from CUTPA immunity for a well-defined set of activities--advertising and bill collection, for example." (Internal quotation marks omitted.) Id.; see also, Haynes v. Yale-New Haven Hospital, 243 Conn. 17, 34-38, 699 A.2d 964 (1997) (establishing solicitation of business and billing as entrepreneurial, but claims involving competency and strategy as part of professional representation).
In the present case, Paragraph 218(f) of the Eight Count alleges in pertinent part as follows:
218. The aforesaid conduct of [Kelley Drye] and one or more of the Individual Defendants in obtaining and retaining Plaintiffs as [Kelley Drye] clients and procuring fees, including:
(f) unauthorized appropriation of over $1,150,000 from the cash portion of the settlement (constituting close to 1/3 of the cash portion paid at the closing) in addition to substantial fees already paid occurred in the conduct of trade or commerce within the State of Connecticut as defined in the Connecticut Unfair Trade Practices Act, C.G.S. § 42-110a et seq. (" CUTPA").
The plaintiffs' allegations of " unauthorized appropriation" of funds in connection with procuring payment of fees--when taken as true and when read " broadly and realistically" as it must be in the context of a motion to strike--sufficiently implicates the entrepreneurial exception to the general prohibition against CUTPA claims against attorneys.
The motion to strike the Eighth Count is denied.
F. Ninth Count (CUSA)
In the Ninth Count, the plaintiffs assert a claim against Kelley Drye and Attorney Nealon for violation of the Connecticut Uniform Securities Act, General Statutes § 36b-2 et seq. (" CUSA"). Section 36b-29(a)(2) of CUSA creates liability for anyone who offers, sells or materially assists any person who offers or sells a security in violation of securities law. The defendants argue that the claim in the Ninth Count is legally insufficient because the conduct alleged does not fall within the scope of CUSA. Specifically, the defendants argue that CUSA expressly exempts from its scope attorneys whose investment advice is solely incidental to their legal representation of a client. See General Statutes § 36b-3(11)(C).
The plaintiffs contend that they have alleged facts that would establish that Attorney Nealon's advice to the plaintiffs as to the valuation and sale of GWS shares of stock was not " solely incidental" to his professional representation, but in fact was " for self-serving purposes, to obtain $1.15 million in 'fees.'" (Plaintiffs' June 10, 2016 Memorandum in Opposition to Motion to Strike [#170], p. 31.)
The court agrees with the defendants. The defendants Kelley Drye and Attorney Nealon, with respect to the acts and omissions alleged in the Ninth Count of the complaint, were attorneys engaged in the professional representation of a client, and were not " investment advisors" within the meaning of CUSA and therefore are not subject to liability under that Act.
The Motion to Strike is granted as to the Ninth Count.
IV. CONCLUSION
For the reasons stated, the motion to strike is granted as to the Fourth, Fifth and Ninth Counts, and denied as to all other counts.