Opinion
No. CV07-5003345S
November 7, 2007
MEMORANDUM OF DECISION RE MOTION TO STRIKE (#105)
FACTS
On March 12, 2007, the plaintiffs, Alfred Mauriello and Robin Mauriello, filed a three-count amended complaint, against the defendants, ACJC, LLC, Michael A. Carozza, and Querino Maia, arising out of the defendants' alleged misrepresentations in the course of representing the plaintiffs in the purchase of a new home and the associated sale of the plaintiffs' home. Counts one, two, and three of the amended complaint allege, respectively, professional negligence, breach of fiduciary duty, and a CUTPA violation on the part of the defendants when they failed to inform the plaintiffs of difficulties with a prospective purchaser of the plaintiffs' home and subsequently misrepresented the status of the home sale.
The plaintiffs allege the following facts. The plaintiffs, who had been residing in Naugatuck, Connecticut, contracted with defendants to act as their real estate agents for the purchase of a new residence. The plaintiffs subsequently entered into a contract to purchase a new home in Oxford, Connecticut, contingent on the sale of the Naugatuck house; the defendants were retained to sell the Naugatuck house. The plaintiffs then entered into a contract with potential purchasers of the Naugatuck house, who paid an initial deposit of $1,000. That initial payment was to be followed by an additional deposit of $4,000; both deposits were to be paid to the defendants for deposit in defendants' trustee account. The plaintiffs proceeded with the purchase of the Oxford house based on the assurances of the defendants that the sale of the Naugatuck house was secure. The sale of the Naugatuck house was not secure as the initial $1,000 check had been returned by the bank, the subsequent $4,000 deposit was never made, and the potential purchasers' mortgage company was unable to locate or communicate with said purchasers; moreover, the defendants knew of these problems and actively misrepresented the status of the transaction.
On May 16, 2007, the defendants filed a motion to strike seeking to strike the third count of the amended complaint. The defendants submitted a memorandum of law in support of the motion. On June 29, 2007, the plaintiffs filed a memorandum of law in opposition pursuant to Practice Book § 10-42.
DISCUSSION
"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.) Batte-Holmgren v. Commissioner of Public Health, 281 Conn. 277, 294, 914 A.2d 996 (2007). "[F]or the purpose of a motion to strike, the moving party admits all facts well pleaded." RK Constructors, Inc. v. Fusco Corp., 231 Conn. 381, 383 n. 2, 650 A.2d 153 (1994); see also Ferryman v. Groton, 212 Conn. 138, 142, 561 A.2d 432 (1989). "The court must construe the facts in the complaint most favorably to the plaintiff." (Internal quotation marks omitted.) Sullivan v. Lake Compounce Theme Park, Inc., 277 Conn. 113, 117, 889 A.2d 810 (2006). "Thus, [i]f facts provable in the complaint would support a cause of action, the motion to strike must be denied . . . Moreover . . . [w]hat is necessarily implied [in an allegation] need not be expressly alleged." (Internal quotation marks omitted.) Violano v. Fernandez, 280 Conn. 310, 318, 907 A.2d 1188 (2006).
The defendants move to strike the third count, the CUTPA claim, on the ground that the alleged conduct does not amount to unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce and does not give rise to a claim of a violation of CUTPA. In support of their motion, the defendants argue that the plaintiffs' third count should be stricken because it fails to meet the "cigarette rule" standard for CUTPA claims by failing to meet the third prong of the standard, which requires substantial injury to consumers. The plaintiffs argue in opposition that the allegations in the complaint are on their face sufficient to meet all three prongs of the "cigarette rule" standard.
The Connecticut Supreme Court has stated that "[i]t is well settled that in determining whether a practice violates CUTPA [this court has] adopted the criteria set out in the cigarette rule by the [F]ederal [T]rade [C]ommission for determining when a practice is unfair: (1) [W]hether the practice, without necessarily having been previously considered unlawful, offends public policy as it has been established by statutes, the common law, or otherwise — in other words, it is within at least the penumbra of some common law, statutory, or other established concept of unfairness; (2) whether it is immoral, unethical, oppressive, or unscrupulous; (3) whether it causes substantial injury to consumers, [competitors or other business persons]. . ." (Internal quotation marks omitted.) Edmands v. CUNO, Inc., 277 Conn. 425, 451 n. 16, 892 A.2d 938 (2006). The court has further stated that "[a]ll three criteria do not need to be satisfied to support a finding of unfairness. A practice may be unfair because of the degree to which it meets one of the criteria or because to a lesser extent it meets all three." (Internal quotation marks omitted.) Id.
The cigarette rule, "however, refers only to practices that are not `deceptive.'" CNF Constructors v. Culligan Water Conditioning Co., Superior Court, judicial district of New Haven at Meriden, Docket No. CV 92 0242302 (September 9, 1993, Blue, J.) ( 8 C.S.C.R. 1057). "[A] violation of CUTPA may be established by showing . . . an actual deceptive practice . . . (Internal quotation marks omitted.) De La Concha of Hartford, Inc. v. Aetna Life Ins. Co., 269 Conn. 424, 434, 849 A.2d 382 (2004). "A `deceptive' practice is a CUTPA violation by definition. Moreover, one of the primary categories of practices which the FTC has prohibited as unfair is the withholding of material information." (Citations omitted.) CNF Constructors v. Culligan Water Conditioning Co., supra.
In the present case, the plaintiffs allege that prior to the closing on the purchase of their new home in Oxford, the defendants became aware that the purchase of the plaintiffs' Naugatuck home would not be able to proceed as contracted due to the prospective buyer's failure to pay the required deposits or satisfy his mortgage contingency clause; however, the defendants failed to advise the plaintiffs of such and instead advised the plaintiffs that the sale of the home was secure. The plaintiffs assert that the defendants made misrepresentations and omissions in regard to the sale of their Naugatuck home in order to ensure that they received commission on the plaintiffs' purchase of the Oxford home. The plaintiffs contend that this conduct was "deceptive, misleading, immoral and unscrupulous" and caused them to sustain damages, in violation of CUTPA. Construing the facts in the light most favorable to the plaintiff, the allegation that the defendants actively misrepresented the status of the sale of the plaintiffs' Naugatuck house is sufficient to sustain the CUTPA claim.
In the alternative, the defendants argue that the CUTPA claim must fail because the facts alleged constitute malpractice rather than a proper CUTPA claim, and the entrepreneurial exception to CUTPA should be properly extended to cover real estate malpractice. The plaintiffs counter by arguing that the third count does not allege professional malpractice or negligence and therefore this exception does not apply.
The defendants appear to equate the "entrepreneurial exception" with the professional negligence limitation on CUTPA claims. To the contrary, the "entrepreneurial exception" is only applicable to a situation where the particular professional's conduct would be immune from CUTPA liability but for the fact that it occurred in the entrepreneurial aspects of the business. See Suffield Development Associates Ltd. Partnership v. National Loan Investors, L.P., 260 Conn. 766, 802 A.2d 44 (2002) ("[t]he entrepreneurial exception is just that, a specific exception from CUTPA immunity for a well-defined set of activities"). The defendant's argument is essentially that the plaintiff's claim in count three sounds in professional negligence, not violation of CUTPA, and the court will address it as such.
The distinction between CUTPA and professional negligence, at least in the medical context, was originally laid out by the Connecticut Supreme Court in Haynes v. Yale-New Haven Hospital, 243 Conn. 18, 699 A.2d 964 (1997): "[T]he touchstone for a legally sufficient CUTPA claim against a health care provider is an allegation that an entrepreneurial or business aspect of the provision of services is implicated, aside from medical competence or aside from medical malpractice based on the adequacy of staffing, training, equipment or support personnel. Medical malpractice claims recast as CUTPA claims cannot form the basis for a CUTPA violation. To hold otherwise would transform every claim for medical malpractice into a CUTPA claim." Id., 38. The Connecticut Supreme Court reaffirmed the entrepreneurial exception applied to the legal profession in Beverly Hills Concepts, Inc. v. Schatz Schatz, Ribicoff Kotkin, 247 Conn. 48, 717 A.2d 724 (1998): "We have stated . . . that only the entrepreneurial aspects of the practice of law are covered by CUTPA. Accordingly, as in the health care context, we conclude that professional negligence — that is, malpractice — does not fall under CUTPA." (Citations omitted; quotation marks omitted.) Id., 79.
The question of how far the professional negligence exclusion extends has created a split in the Superior Courts. "A number of courts have held that the CUTPA exclusion extends beyond the medical and legal fields to exempt other types of professional malpractice." Salzano v. Goulet, Superior Court, Judicial District of New Haven at Meriden, Docket No CV 04 0287567 (April 18, 2005, Wiese, J.) ( 39 Conn. L. Rptr. 166). Conversely, "[o]ther Superior Courts have reasoned that a CUTPA count based on negligence in professions other than law or medicine should survive a motion to strike because the appellate courts have not expressly extended the professional negligence exception." Id.
See Krassner v. CPM Ins. Services, Superior Court, judicial district of New Haven, Docket No. CV 01 0456362 (August 8, 2002, Booth, J.) ( 35 Conn. L. Rptr. 701) (insurance); Worldwide Preservation Services, LLC v. IVth Shea, LLC, Superior Court, complex litigation docket at Stamford, Docket No. XO5 CV 98 0167154 (February 1, 2001, Tierney, J.) ( 29 Conn. L. Rptr. 7) (engineers); Amity Regional School District #5 v. Atlas Construction Co., Superior Court, complex litigation docket at Waterbury, Docket No. X06 CV 99 153388 (July 26, 2000, McWeeny, J.) ( 27 Conn. L. Rptr. 605) (architecture); Day v. Yale University School of Drama, Superior Court, judicial district of New Haven, Docket No. CV 97 400876 (March 7, 2000, Licari, J.) ( 26 Conn. L. Rptr. 624) (education); Ann Fields of South Windsor, Inc. v. Prestileo, Superior Court, judicial district of Hartford, Docket No. CV 97 569685 (August 25, 1999, Bishop, J.) (insurance agents); Shareamerica, Inc. v. Ernst Young, Superior Court, judicial district of Waterbury, Docket No. CV 93 150132 (July 2, 1999, Sheldon, J.) (accounting); Anderson v. Yale University, Superior Court, judicial district of New Haven, Docket No. CV 97 399373 (July 1, 1998, Hartmere, J.) ( 22 Conn. L. Rptr. 341) (journalism).
See Vuoso Enterprises, Inc. v. Dept. of Consumer Protection, Superior Court, judicial district of New Haven at Meriden, Docket No. CV 99 267844 (March 13, 2001, Robinson-Thomas, J.) (auto mechanic); Pollock v. Panjabi, 47 Conn.Sup. 179, 781 A.2d 518 (2000) (expert witness); Hopper v. Hemphill, Superior Court, judicial district of Stamford-Norwalk at Stamford, Docket No. 99 171709 (May 10, 2000, Hickey, J.) ( 27 Conn. L. Rptr. 181) (architecture); Darien Asphalt Paving, Inc. v. Newtown, Superior Court, judicial district of New Britain, Docket No. CV 98 488078 (December 7, 1998, Nadeau, J.) ( 23 Conn. L. Rptr. 495) (architecture).
Neither the Superior Court nor the appellate courts of Connecticut have extended the professional negligence limitation on CUTPA liability to real estate agents, and the Superior Court has routinely upheld CUTPA claims against real estate agents for misrepresentations involved in the sale of property. For example, in Kane v. Neveleff, Superior Court, judicial district of New Haven, Docket No. CV 00 0439308 (July 11, 2002, Arnold, J.), although the professional negligence exception was not raised by the parties, the court found that CUTPA did apply to real estate agents in cases where misrepresentation of material facts have been alleged. In Kane, the plaintiffs claimed "damages arising out of non-disclosure and misrepresentations made by the defendants regarding the defective condition of [the] basement, the septic system and the grading and the drainage of the premises." Id. The court found that "[t]he type of activity presented by the complaint and the type of harm alleged by the plaintiffs as a consequence of such activity is the type of harm which CUTPA and the statutes and regulations regarding real estate agents and brokers were intended to remedy as a matter of public policy. CUTPA is remedial in nature and it is to be applied liberally." Id.
See also Williams v. Feely, Superior Court, judicial district of New London at New London, Docket No. CV 05 5000295 (October 2, 2006, Hurley, J.T.R.) ( 42 Conn. L. Rptr. 168); Schur v. David Ogilvy and Associates, Inc., Superior Court, judicial district of Stamford, Docket No. CV 99 0175461 (April 27, 2000, D'Andrea, J.) [ 27 Conn. L. Rptr. 103]; Correll v. Edgecomb, Superior Court, judicial district of New London, Docket No. CV 526915 (December 13, 1994, Hurley, J.).
The application of CUTPA to real estate agents involved in misrepresentation has also been endorsed at the appellate level. In Tanpiengco v. Tasto, 72 Conn.App. 817, 806 A.2d 1080, the Appellate Court upheld a judgment rendered on a CUTPA claim against the defendant real estate agents who had misrepresented the nature of neighboring property.
Given the consistent endorsement of the application of CUTPA to real estate agents involved in material misrepresentation by the courts, the court in the present case will not extend the professional negligence exception to CUTPA to cover real estate agents. Accordingly, the defendants' motion to strike count three of the amended complaint is denied.