Opinion
No. FST CV 05 4006797S
November 7, 2007
MEMORANDUM OF DECISION
The above-entitled action was filed by the Town of New Canaan ("New Canaan") against defendant, Brooks Laboratories, Inc. ("Brooks"), alleging that Brooks performed an asbestos assessment of New Canaan High School in a negligent and incomplete manner resulting in financial harm to New Canaan. The original complaint asserted claims of breach of contract and negligence against Brooks.
Brooks filed a timely apportionment complaint against apportionment defendants pursuant to General Statutes § 52-102b. Those apportionment defendants were Kaestle Boos Associates, Inc. ("Kaestle"), OG Industries, Inc. ("OG"), Ashforth Properties, Inc. d/b/a A.P. Construction, Inc. ("Ashforth"), OG Industries, Inc./A.P. Construction, Inc. Joint Venture (the "Joint Venture') and Chem Scope, Inc. ("Chem Scope").
Each of the apportionment defendants filed motions to dismiss the apportionment complaint on the ground that the General Statutes §§ 52-102b and 52-572h did not apply to claims seeking damages for economic loss. On August 18, 2006 the court (Lewis, J.T.R.) [41 Conn. L. Rptr. 861], granted the motions to dismiss. While the motions to dismiss were pending, New Canaan asserted claims against the apportionment defendants. On August 7, 2006, the court (Tobin, J.) [41 Conn. L. Rptr. 794], denied Kaestle's motion to strike New Canaan's claim against it finding that the claim was properly asserted under General Statutes § 52-102b(d). Thereafter, following rulings on various requests to revise, New Canaan filed a revised amended complaint dated August 14, 2007 (#160) setting forth claims against the defendants in twelve counts.
Presently at issue are a motion to strike the eighth and the tenth counts of New Canaan's revised amended complaint dated August 29, 2007 filed by defendants OG and the Joint Venture (#161) and a motion to strike the twelfth count of the same complaint dated September 13, 2007 filed by defendant Ashforth (#163). In the eighth count New Canaan claims that the Joint Venture was negligent and failed to exercise reasonable care in the performance of its duties under a construction management contract between New Canaan and the Joint Venture. In the tenth and twelfth count New Canaan claims that OG and Ashforth, respectively, as general partners of the Joint Venture, are liable to New Canaan for the economic losses it suffered as a result of the Joint Venture's negligence as alleged in the eighth count.
The defendants' motions to strike asserts that the claim set forth in the eighth, tenth and twelfth counts are either barred by the economic loss doctrine or are not permitted under the apportionment statutes, General Statutes §§ 52-102b and 52-572h. "Practice Book § 10-39(a) provides in relevant part: Whenever any party wishes to contest . . . the legal sufficiency of the allegations of any complaint, counterclaim or cross claim, or of any one or more counts thereof, to state a claim upon which relief can be granted . . . that party may do so by filing a motion to strike the contested pleading or part thereof." (Internal quotation marks omitted.) Sullivan v. Lake Compounce Theme Park, Inc., 277 Conn. 113, 116 n. 3, 889 A.3d 810 (2006). "[A] counterclaim is a cause of action existing in favor of the defendant against the plaintiff and on which the defendant might have secured affirmative relief had he sued the plaintiff in a separate action . . . A motion to strike tests the legal sufficiency of a cause of action and may properly be used to challenge the sufficiency of a counterclaim." (Citations omitted; internal quotation marks omitted.) Fairfield Lease Corp. v. Romano's Auto Service, 4 Conn.App. 496, 496, 495 A.2d 286 (1985).
"It is fundamental that in determining the sufficiency of a [pleading] challenged by a [party's] motion to strike, all well-pleaded facts and those facts necessarily implied from the allegations are taken as admitted." (Internal quotation marks omitted.) Gazo v. Stamford, 255 Conn. 245, 260, 765 A.2d 505 (2001). "The allegations of the pleading involved are entitled to the same favorable construction a trier would be required to give in admitting evidence under them and if the facts provable under its allegations would support a defense or a cause of action, the motion to strike must fail." (Internal quotation marks omitted.) Clohessy v. Bachelor, 237 Conn. 31, 33 n. 4, 675 A.2d 852 (1996).
ECONOMIC LOSS DOCTRINE
In support of the motion to strike defendant, Ashforth, adopted the arguments set forth in a brief filed by OG and the Joint Venture in support of their motion to strike (#161.01). That brief asserts that Connecticut has adopted the economic loss doctrine and that the losses claimed by New Canaan are not recoverable under that doctrine. The economic loss doctrine "is a judicially created principle which prohibits recovery in tort where the basis for that tort claim arises from violation of a contract and damages are limited to purely economic losses as opposed to personal injury or property damage." Dobco, Inc. v. Williams Development Co., Superior Court, complex litigation docket at Tolland, Docket No. X07 CV 99 0072152 (May 17, 2002, Sferrazza, J.) [32 Conn. L. Rptr. 214]. The defendants assert that the doctrine was adopted by the Supreme Court in Flagg Energy Development Corp. v. General Motors Corp., 244 Conn. 126 (1998).
In Flagg, supra, the Supreme Court upheld the trial court's granting of a motion to strike a negligent misrepresentation count, stating that a claim for breach of contract could not be combined with negligent misrepresentation where only commercial losses were sustained. The court stated that it "agree[d] with the holding of cases in other jurisdictions that commercial losses arising out of the defective performance of contracts for the sale of goods cannot be combined with negligent misrepresentation." Id., 153. In its opinion the Supreme Court did not refer to the three-year-old decision in Williams Ford, Inc. v. Hartford Courant Co., 232 Conn. 559, 579 (1995), expressly rejecting adoption of the economic loss doctrine. In rejecting the claim that only contract law should apply to purely economic losses allegedly caused by actions taken during the course of a contractual relationship, the court in Williams Ford stated that, "[i]f the plaintiff's complaint otherwise contains the necessary elements of negligent misrepresentation, it survives a motion to strike even [if] the . . . counts grounded in [contractual common law] must fall." (Internal quotation marks omitted.) Id.
Since the decision in Flagg, supra, no appellate authority has addressed whether the economic loss doctrine is recognized in Connecticut and, if so, whether the doctrine should be extended beyond cases involving the sale of goods. As a result, "a split has emerged among the [judges of the] superior [court] as to whether the ruling in Flagg bars tort claims for economic loss in non-product liability cases." Smith Craft Real Estate Corp. v. Handex of Connecticut, Inc., Superior Court, judicial district of Ansonia-Milford, Docket No. CV 03 0082188 (June 25, 2004, Ronan, J.) 37 Conn. L. Rptr. 272).
"Several superior [court decisions] have found that the holding in Flagg amounts to a recognition of the doctrine and warrants an extension of the doctrine well beyond products liability cases." (Internal quotation marks omitted.) Diversified Technology Consultants, Inc. v. Sentinel Equities Corp., Superior Court, judicial district of New Haven, Docket No. CV 05 4012681 (August 11, 2006, Silbert, J.) (41 Conn. L. Rptr. 813). However, "[t]here is also a line of cases that refuses to adopt the economic loss doctrine or adopts the doctrine in limited circumstances." (Internal quotation marks omitted.) Id.
Although it might seem that the Flagg case directly contradicts the earlier decision in Williams Ford, a majority of Superior Court judges have tried to resolve any tension between the two cases, and preserve both holdings, by distinguishing the circumstances, and the law applied, in each case. In the Williams Ford case, the court determined that under the applicable common-law rules for both contracts and negligence "the [plaintiffs] were not barred from pursuing a negligence claim solely because they also might have had a breach of contract claim." 232 Conn. at 579. In Flagg, supra, the court specifically considered the statutory implications of the Uniform Commercial Code (UCC) because the claimed losses flowed from an agreement for the sale of goods covered by the UCC. Based on these circumstances, many other opinions have found that "the [ Flagg court's] affirmance of the trial court's granting of the defendant's motion to strike the plaintiffs' misrepresentation claim was not expressly premised on the economic loss doctrine but rather on the fact that such a claim was incompatible with and thus displaced by the provisions of the UCC." (Internal quotation marks omitted.) Diversified Technology Consultants, Inc. v. Sentinel Equities Corp., supra, 41 Conn. L. Rptr. 813.
In considering the issue some courts have apparently followed the "established rule of law that a later decision overrules prior decisions which conflict with it, whether such prior decisions are mentioned and commented upon or not." (Internal quotation marks omitted.) State v. Dukes, 209 Conn. 98, 110 (1989). On the other hand, some courts have acknowledged that there is "an obligation to harmonize . . . case law so as to bring about consistent common law development." Smith v. Bridgeport Futures Initiative, Inc., Superior Court, Judicial District of Fairfield, Docket No. CV 326697 (August 16, 1996, Levin, J.) (17 Conn. L. Rptr. 412).
Based on this obligation, a majority of judges of the Superior Court have tried to harmonize these two Supreme Court cases by narrowly interpreting the Flagg decision to preserve the Supreme Court's earlier holding in Williams Ford. These judges reason that "[u]pon close examination, [the decision in Flagg] cannot be reasonably read to create a general rule barring all tort claims based in whole or in part upon alleged breaches of contract . . . Instead, it can only be read to bar such claims in the particular circumstances there at issue, to wit: where both the plaintiff and the defendant are sophisticated commercial parties, and their dispute arises from the defendant's allegedly defective performance under a contract for the sale of goods." (Emphasis in the original; internal quotation marks omitted.) Paliwoda v. Mathews, Superior Court, judicial district of Fairfield, Docket No. CV 02 0398249 (October 16, 2006, Gilardi, J.). By finding that "the Supreme Court's decision in Flagg is limited to situations involving contracts for the sale of goods, it neither overrules nor conflicts with the Supreme Court's decision in Williams Ford." (Internal quotation marks omitted.) Paliwoda v. Mathews, supra, Superior Court, Docket No. CV 02 0398249.
Although a minority of Superior Court cases have tried to expand the scope of the economic loss doctrine beyond the scope of Flagg, such extensions have chiefly occurred in situations where a court has found there to be some significant similarity to the facts in the Flagg case. For example, in Worldwide Preservation Services, LLC v. The IVth Shea, LLC, Superior Court, complex litigation docket at Stamford-Norwalk at Stamford, Docket No. X05 CV 98 0167154 (February 1, 2001, Tierney, J.) (29 Conn. L. Rptr. 1), Judge Tierney noted that, although the claims by Worldwide arose out of a building construction contract and not a sale of goods contract, "it has common features with the facts of Flagg." The court reasoned that the situation in Worldwide Preservation was similar to the Flagg case because both cases involve "the manufacturing off-site of large components to be later construed as part of a larger building." Id. An expansion of the economic loss doctrine has also been found to be more compelling in cases where "[t]he parties are sophisticated corporations familiar with the type of [goods or] services rendered, and the consequences . . . likely to result form a failure to perform the contract as promised." Worldwide Preservation Services, LLC v. The IVth Shea, LLC, supra, 29 Conn. L. Rptr. 1; see also Morganti National, Inc. v. Greenwich Hospital Ass'n., Superior Court, complex litigation docket at Waterbury, Docket No. X06 CV 99 0167154 (September 27, 2001, McWeeny, J.) (the court found both parties were sophisticated corporations who entered into a major contract, which specifically, in detail, addressed risks of loss and limitations on damage claims).
The court finds that Connecticut has not adopted the economic loss doctrine with respect to claims similar to those asserted by New Canaan against defendants, OG, Ashforth, and the Joint Venture. Accordingly, the motions to strike cannot be granted on that ground.
APPORTIONMENT CONSIDERATIONS
The defendants also assert that the claims set forth in New Canaan's eighth, tenth and twelfth counts are not permitted under the apportionment statutes, General Statutes §§ 52-102b and 52-572h. Once again defendant Ashforth adopts the arguments of the OG/Joint Venture brief. In that brief, it is claimed that allowing New Canaan to assert claims against the apportionment defendants would be tantamount to overruling the decision of the court (Lewis, J.T.R.) [41 Conn. L. Rptr. 861] dated August 18, 2006, dismissing defendant Brooks's apportionment complaints. The brief claims that the court should consider that ruling to be the "law of the case" and grant the motions to strike. In his decision Judge Lewis found that "General Statutes § 52-572h applies only in those cases where the underlying complaint alleges negligence that results in damages to property and since both the underlying complaint and apportionment complaints seek to recover losses that are purely commercial in nature, the apportionment defendant's motions to dismiss the apportionment complaint is granted." The defendants' brief asserts that it is inconceivable that the legislature intended to have commercial losses recoverable in negligence actions yet prohibit apportionment for the same commercial loss caused by negligence. However, the defendants' brief does not refer to any case law or legislative history to support the contention that the legislative consideration of the "economic loss doctrine" played any part in the adoption of our apportionment statute.
Our apportionment statute General Statutes § 52-102b was enacted in 1995. Subsection (a) of that statute provides that any apportionment writ, summons and complaint "shall be served within one hundred twenty days of the return date." That subsection further provides that a party cited in as an apportionment defendant "shall be a party for all purposes." Subsection (d) states that a "plaintiff may, within sixty days of the return date of the apportionment complaint . . . assert any claim against the apportionment defendant arising out of the transaction or occurrence that is the subject matter of the original complaint."
The Supreme Court has held that, in most cases, the one-hundred-twenty-day requirement of General Statutes § 52-102b(a) implicates the personal jurisdiction of the court and not subject matter jurisdiction. In Lostritto v. Community Action Agency of New Haven, Inc., 269 Conn. 10 (2004), the court was required to determine whether the one-hundred-twenty-day time limitation set forth in General Statutes § 52-102b(a) was mandatory or directory. The court found that the legislature's use of the word "shall" in the statute suggested the intent to make service within the time provided mandatory. Id. at 20. The court also noted that General Statutes § 52-102b(f) provides that the provisions of the statute "shall be the exclusive means by which a defendant may cause a party to brought in as an apportionment defendant. . ." Id. at 21. The court went on to review the legislative intent in enacting Tort Reforms I and II and the fact that General Statutes § 52-102b was enacted to provide a practical means to accomplish the apportionment objectives of Tort Reform II as set forth in General Statutes § 52-572h. Id. at 23-25. The court then found that the one-hundred-twenty-day time limitation was designed to accomplish a substantive purpose rather than a procedural one and that therefore the time limitation was mandatory. Id. at 25. The court determined that the failure to comply with the statute implicated the court's personal jurisdiction over the apportionment defendant and not the court's subject matter jurisdiction. Id. at 33. Ultimately the court found that the mandatory time limits of General Statutes § 52-102b(a) "must be complied with absent an equitable reason for excusing compliance, including waiver or consent by the parties." Id. at 35-36.
In Carpenter v. Law Offices of Dressler and Assoc., LLC, 85 Conn.App. 655 (2004), the Appellate Court considered the jurisdictional implications which arose when a client sued her former attorney for malpractice and the defendant attorney served an apportionment complaint on three attorneys who had succeeded him in representing the plaintiff. The plaintiff amended her complaint to assert direct claims against the apportionment defendant within sixty days of the apportionment defendants' appearance as required by General Statutes § 52-102b(d). The trial court granted the apportionment defendants' motion to strike the apportionment complaint finding that the plaintiff's claim was not one resulting in personal injury, wrongful death or property damage and thus not subject to apportionment. Thereafter the trial court granted the apportionment defendants' motion to dismiss the plaintiff's claims against them. The Appellate Court found that under Lostritto, supra, the trial court improperly found that it did not have subject matter jurisdiction. The court further found that the court did have subject matter jurisdiction over the plaintiff's direct claims against the apportionment defendants and that any lack of personal jurisdiction was waived when the apportionment defendants failed to raise that issue within thirty days of their appearance.
On August 7, 2006, prior to the court's dismissal of Brooks's apportionment complaint, the court (Tobin, J.) [41 Conn. L. Rptr. 794] overruled an objection of one of the apportionment defendants to New Canaan's motion to amend its complaint to assert direct claims against the apportionment defendants. In that decision the court considered the Appellate Court decision in Carpenter, supra, as controlling. Surprisingly, in their brief the defendants do not discuss either Carpenter or the August 6, 2006 decision of the court.
The August 18, 2006 decision of the court (Lewis, J.T.R.) [41 Conn. L. Rptr. 861] did not consider the claims of New Canaan against the apportionment defendants, only the claims of Brooks as apportionment plaintiff against the same defendants. To the extent that the "law of the case" doctrine applies, the court finds that it was the August 6, 2006 decision which addressed substantially the same issue as the defendants seek to re-litigate in their motions to strike.
In its brief in opposition to the motions to strike, New Canaan claims that its assertion of direct claims against the parties cited in as apportionment defendants was authorized by Practice Book § 10-60 (permitting amendments to pleadings) rather than the under the authority of General Statutes § 52-102b(d) permitting plaintiffs to assert claims against parties cited in as apportionment defendants). This may be a distinction without a difference. If the defendants had not been cited in under the apportionment statute New Canaan would have been able to cite them in as additional defendants under Practice Book § 10-60 and General Statutes § 52-102. However, since General Statutes § 52-102b(a) provided that an apportionment defendant "shall be a party for all purposes. . .," New Canaan was able to assert causes of action against these defendants by simply amending its complaint to include the appropriate allegations concerning the defendants' conduct.
Considering the claims of the defendants in light of the Appellate Court holding in Carpenter, supra, the court finds the motions to strike the eighth, tenth and twelfth counts of New Canaan's revised amended complaint on the basis of the apportionment statute are without merit.
Since neither ground asserted by the defendants in their motions to strike affords a basis to grant the motions, the motions to strike are denied.