Opinion
FSTCV116010748
04-26-2016
Frank H. Peluso et al. v. Robert W.Vanech
UNPUBLISHED OPINION
MEMORANDUM OF DECISION RE DEFENDANT'S MOTIONS FOR SPECIAL FINDING PURSUANT TO C.G.S. § 52-226a (#175) AND FOR SANCTIONS (#176)
Hon. Charles T. Lee, J.
Defendant Robert Vanech makes this motion for a special finding pursuant to Gen. Stat. § 52-226a alleging that this action was brought without good faith and without merit. Defendant also has filed a motion for sanctions seeking an award of attorneys fees based on plaintiff's alleged bad faith litigation conduct. As more fully set forth below, the court declines to make the special finding that " the action . . . was without merit and not brought or asserted in good faith." However, the court also finds that, in one instance, plaintiff and its counsel acted in bad faith and without merit sufficient to justify an award of attorneys fees to defendant.
BACKGROUND
The underlying action was commenced by plaintiffs Frank and Diana Peluso against their former son-in-law, Robert Vanech, on or about July 23, 2011. The Amended Complaint, dated September 15, 2011, alleges four tort counts against defendant arising out of his conduct towards plaintiffs while married to their daughter Nicole and during their divorce, and two counts seeking money damages for legal services allegedly rendered by Mr. Peluso to Mr. Vanech in connection with a company called Eureka Broadband Corporation in California. The tort counts are styled negligent infliction of emotional distress, intentional infliction of distress, reckless infliction of emotional distress and infliction of physical illness. The contract counts are styled breach of contract and unjust enrichment.
The case was tried before the court over five days in January, February and April 2015. The court rendered a memorandum of decision dated July 30, 2015, finding against plaintiff on all counts. In summary, the court found that, with respect to the negligent infliction of emotional distress count that " a family divorce is inherently distressing and related activities here do 'not create an unreasonable risk of causing the plaintiff(s) emotional distress.'" (Citation omitted). With respect to Count II, alleging intentional infliction of emotional distress, the court found that the proof of conduct by Mr. Vanech did not establish sufficiently outrageous behavior. With respect to Counts III and IV, the court discussed applicable law and determined that Connecticut jurisprudence has not recognized the torts of reckless infliction of emotional distress or infliction of physical illness, and also found that plaintiff failed to establish causation by defendant of plaintiffs' alleged maladies.
As to the breach of contract count, the court held (at 17),
Count V of the complaint alleges that " the Plaintiff provided legal services to defendant for a merger, sale and/or acquisition of a west coast company, " which defendant requested and now has breached the contract by failing to pay the fair market value of forty-five thousand dollars. However, plaintiffs have adduced no proof of any agreement between Mr. Vanech and Mr. Peluso for the provision of legal services to Eureka Broadband in 1999 or at any other time. They have shown that Mr. Fiore provided services, pursuant to agreements with Eureka Broadband, but they did not involve legal services, Mr. Fiore has received the compensation for which he bargained, and Mr. Peluso has admitted that those services were outside the scope of his partnership agreement with Mr. Fiore. Because plaintiffs have not proven their case in chief, the court does not reach defendant's special defenses, including the statute of limitations.
With respect to Count VI, alleging unjust enrichment, the court stated (at 18), " Because plaintiffs were not entitled to any payment for their purported legal services to Eureka Broadband, defendant's failure to pay for them is not unjust, nor have plaintiffs demonstrated that defendant benefitted from any alleged legal services by plaintiffs." Accordingly, the court directed entry of judgment in favor of defendant.
On August 13, 2015, defendant filed the present motion (#175) for order of special finding that the lawsuit was without merit and was not brought or asserted in good faith, pursuant to Gen. Stat. § 52-226a and P.B. § 17-7. Concurrently, defendant filed a motion (#176) for sanctions for bad faith litigation practices against the plaintiffs and their counsel, the Law Office of Frank N. Peluso, P.C. (the " Peluso firm") and Leon P. Cameron, Esq., an associate with the Peluso firm during some of the pendency of the litigation and during the trial. The motion for sanctions listed twenty-six instances of claimed bad faith litigation practices, and was accompanied by an affidavit of attorneys fees. On September 15, 2015, plaintiffs and respondents filed their objections (#s 182, 183, 184 and 185) to the motions for a special finding and sanctions. On November 2, 2015, plaintiff filed a responding affidavit (#189). The motions were heard at short calendar on March 8, 2015. Defendant submitted a supplement (#191) to the affidavit of attorneys fees on March 8, 2016, and supporting exhibits (#192) on March 15, 2016.
At oral argument, the court indicated that it would deny the special finding as to the tort counts, as more fully discussed below, but would consider making the finding as to the contract count and also would consider an award of sanctions with respect to (1) plaintiffs' effort to disqualify defendant's counsel, and (2) a last minute request for continuance of the trial on December 12, 2014 and subsequent related behavior by plaintiffs.
DISCUSSON
Gen. Stat. Section § 52-226a (Special finding that action or defense without merit and not in good faith) provides in pertinent part, " In any civil action tried to a jury, after the return of a verdict and before judgment has been rendered thereon, or in any civil action tried to the court, . . . the prevailing party may file a written motion requesting the court to make a special finding to be incorporated in the judgment or made a part of the record, as the case may be, that the action or a defense to the action was without merit and not brought or asserted in good faith. Any such finding shall be admissible in any subsequent action brought to section 52-568 [Damages for groundless or vexatious suit or defense)."
As the Appellate Court has said in Beverly v. State of Connecticut, 44 Conn.App. 641, 648-49, 691 A.2d 1093 (1997), " We have declined to uphold awards under the bad-faith exception absent both clear evidence that the challenged actions are entirely without color and [are taken] for reasons of harassment or delay or for other improper purposes.
In the case of Fattibene v. Kealey, 18 Conn.App. 344, 361, 558 A.2d 677 (1989), the Appellate Court stated, " Whether a claim is colorable, for purposes of the bad faith exception, is a matter of whether a reasonable attorney could have concluded that facts supporting the claim might be established, not whether such facts had been established. To determine whether the bad faith exception applies, the Court must assess whether there has been substantive bad faith as exhibited, for example, by a party's use of oppressive tactics or its willful violation of court orders; the appropriate focus for the court is the conduct of the party in instigating or maintaining the litigation . . ."
Many cases repeat the formulation set forth in Beverly and Fattabene . In Rogan v Rungee, Superior Court, judicial district of New Britain, Docket No. CV 08 5008476, (May 7, 2012), the court stated, " A special finding under General Statutes § 52-226a can be made only when two elements have been shown: (1) 'the action was without merit' and (2) 'the action . . . was not brought or asserted in good faith.' Both must be found in order for 'the court to make a special finding.' Trial courts have upheld the denial of a motion for special finding in which the plaintiff's action was determined to be commenced without merit but the court had insufficient evidence to make a finding that it was not brought or asserted in good faith." Shea v. Chase Manhattan Bank, Superior Court, judicial district of Stamford-Norwalk at Stamford, Docket No. CV 96 0149647, (June 15, 2000, Tierney, J.) . . . Here, the court lacks sufficient evidence to make a finding that this action was not brought in good faith."
In the case of Purcell v. Vogt, Superior Court, judicial district of Stamford/Norwalk, Docket No. CV 00-1750088, (April 30, 2003), the court, in construing § 52-226a said, " Despite plaintiff's repetitive and often vituperative statements that Vogt and his attorney, inter alia had a baseless defense and counterclaim, committed perjury, tried to deceive the court, and carried out a cover-up, the court makes no such finding. The case was a difficult one, for all concerned, and neither side showed its finest colors. The jury has spoken in favor of the plaintiff however, there is no basis for a 52-226a finding."
In the case of Acker v Farrah, Superior Court, judicial district of Fairfield, Docket No. CV 93 0704603 S, (July 30, 1998), the court did make the special finding, and said, " There was not a scintilla of evidence that the plaintiffs breached a duty of good faith and fair dealing, imposed a usurious and unconscionable or inequitable note on the defendants, as alleged in their special defenses. Likewise, the counterclaims are totally without merit. It is crystal clear to this court that no reasonable attorney or defendant could have concluded that facts could be established supporting their claims." Accordingly, the court found that the action was without merit and not brought or asserted in good faith.
In the case of Caciopoli v. Neri Brothers Construction, Superior Court, judicial district of Middlesex, Docket No. CV 92 0067375, (March 17, 1998), the court held that it could not " find that the defendant violated § 52-226a merely because the defendant did not thoroughly investigate various aspects of its claim, or because various aspects of its claim were weak. If it could, then violations of § 52-226a would occur routinely."
In Spellane v. Zelitch, Superior Court, judicial district of New Haven, Docket No. CV 90-0296440 (July 25, 1994) , the court held, " It is quite plain that the lawsuit now before this court was initially brought without any appreciation of the applicable law and the limitation of Section 31-293(a) of the General Statutes, and the plaintiff pursued the case in a histrionic manner and for purposes of harassing, burdening and stigmatizing an adversary on the basis of resentments going beyond the particular shoving incident ostensibly at issue . . . The plaintiff's motivation in bringing suit is not, however, the issue as to the imposition of sanctions. She produced testimony that, though it was not very likely to be believed, would have established a claim if it had been believed, thereby rendering her claim " colorable" within the definition supplied in Fattibene . Since her claim was 'colorable' within that low standard, this court will not apply the sanction of entering the finding requested by the defendant, who remains free to pursue his claim of vexatious litigation."
Our Supreme Court in Maris v. McGrath, 269 Conn. 834, 850 A.2d 133 (2004) stated, " the so-called 'American Rule' for the award of attorneys fees to the prevailing party bars such an award 'except as provided by statute or in certain defined exceptional circumstances . . .'" (Citation omitted.) Id. at 835. The court described one such exceptional circumstance, " It is generally accepted that the court has the inherent authority to assess attorneys fees when the losing party has acted in bad faith, vexatiously, wantonly or for oppressive reasons. [Citations omitted.] This bad faith exception applies, not only to the filing of an action, but also in the conduct of the litigation." Id., at 844-45.
Our Supreme Court reaffirmed the court's inherent power to regulate litigation conduct in its recent decision in Miller v. Appellate Court, 320 Conn. 759, Id. at *6 (April 5, 2016) saying, " It is beyond dispute that courts '[have] the authority to regulate the conduct of attorneys and [have] a duty to enforce the standards of conduct regarding attorneys.' Bergeron v. Mackler, 225 Conn. 391, 397, 623 A.2d 489 (1993); see also Gionfrido v. Wharf Realty, Inc., 193 Conn. 28, 33, 474 A.2d 787 (1984) ('[i]t is an inherent power of the court to discipline members of the bar, and to provide for the imposition of reasonable sanctions to compel the observance of its rules' [internal quotation marks omitted]). 'There are three possible sources for the authority of courts to sanction counsel and pro se parties. These are inherent power, statutory power, and the power conferred by published rules of the court. The power of a court to manage its dockets and cases by the imposition of sanctions to prevent undue delays in the disposition of pending cases is of ancient origin, having its roots in judgments . . . entered at common law . . . and dismissals . . . That power may be expressly recognized by rule or statute but it exists independently of either and arises because of the control that must necessarily be vested in courts in order for them to be able to manage their own affairs so as to achieve an orderly and expeditious disposition of cases.' (Internal quotation marks omitted.) Srager v. Koenig, 42 Conn.App. 617, 620, 681 A.2d 323, cert. denied, 239 Conn. 935, 936, 684 A.2d 709 (1996); see also Briggs v. McWeeny, 260 Conn. 296, 335, 796 A.2d 516 (2002) ('[a] court is free to determine in each case, as may seem best in light of the entire record before it, whether a sanction is appropriate and, if so, what the sanction should be' [emphasis omitted; internal quotation marks omitted])."
From the authorities cited above, it is apparent that a special finding under Gen. Stat. 52-226a can be made only when the court finds " clear evidence" of both lack of merit and lack of good faith. If the court finds the claim to be colorable, the motive in asserting it is irrelevant. Conversely, even if the claim lacks merit, the finding should not be made if the claim was made in good faith. Separately, even without the Section 52-226a finding, sanctions can be awarded for bad faith litigation conduct, in the exercise of the court's inherent power to regulate proceedings before it.
ANALYSIS
A. The Special Finding under Gen. Stat. § 52-226a
As mentioned above, the court ruled from the bench that the tort claims were not subject to the special finding under Section 52-226a. The court stated: " I have reviewed the complaint and my ruling and I find that the tort claims were colorable. The negligent infliction of emotional distress was one that required an analysis of the facts. And while I found against the plaintiff, I did not think it was taken in bad faith or pled in [bad] faith. Similarly, the intentional infliction also was a judgment call by the Court. The reckless infliction required quite an extensive or fairly extensive legal analysis of whether [it] would be recognized by the courts of Connecticut. I found it would not. The count relating to physical harm does not at this time exist under Connecticut jurisprudence, but might be subject to an extension of the law." Transcript of March 8, 2016 Hearing, at 6-7. Accordingly, the court found and finds that the defendant failed to meet its burden in showing that the tort counts were without merit and not brought in good faith.
The court found the contract count (and related unjust enrichment count) more troubling, and the parties engaged in fairly extensive colloquy on the subject. Count V of the amended complaint, dated September 15, 2011, alleges in pertinent part:
10. The Plaintiff provided legal services to defendant for a merger, sale and/or acquisition of a west coast company.
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13. The fair market value of the services was $45,000 dollars, plus interest at the legal rate.
14. Plaintiff demanded full payment from the Defendant, but the Defendant has neglected or refused to pay said amount in bad faith.
As cited above, in its memorandum of decision, the court found that plaintiffs had presented no proof at trial of any agreement between Mr. Peluso and Mr. Vanech for the provision of legal services in connection with a merger, sale or acquisition of a west coast company. There was proof, however, that Mr. Fiore, an accountant and business associate of Mr. Peluso, provided business advice and services to Eureka Broadband, Mr. Vanech's California company, and Mr Peluso provided controverted testimony that he had rendered legal advice in connection with Mr. Vanech's employment contract with the company. Further, the invoices from Mr. Fiore specifying what service he had provided to Eureka Broadband were not generated until two years after the filing of the complaint. The complaint, filed in 2011, addressed matters occurring over ten years earlier, at or close to a time when Mr. Peluso was providing legal advice to his then-son in law, Mr. Vanech. As a result, although inaccurate, the court cannot conclude that the allegations of the contract and unjust enrichment counts were entirely without color, however pale. Mr. Peluso's motives in bringing the suit are therefore irrelevant. Accordingly, the court refuses to make the special finding of lack of merit and bad faith required under Gen. Stat. § 52-226a.
B. Sanctions for Bad Faith Litigation Conduct
At the hearing, the court reviewed and discussed defendant's twenty-six assertions of bad faith litigation conduct and rejected all but two as insufficiently egregious to justify sanctions in derogation of the American Rule as to the parties' responsibility for their own legal costs.
The first assertion claiming bad faith litigation conduct was set forth in Paragraphs 11 and 12 of defendant's motion for sanctions (at 12), as follows:
11. By repeatedly attempting to deprive Defendant of representation by counsel (See ¶ 12, infra); 12. By harassment of Defendant's counsel including, inter alia, filing a baseless motion to disqualify Defendant's counsel (Doc. No. 128.00, filed June 30, 2014, which was dismissed by the court on 9/15/2014), filing a frivolous grievance complaint against Defendant's counsel (SGC No. 14-097, which was dismissed by the Statewide Bar Counsel for insufficient allegations on July 11, 2014). and filing a law suit against Defendant's counsel (FST CV 14-6022741 S, which was dismissed on November 10, 2014, J. Heller), and thereafter appealing the dismissal (AC 37399), which appeal is currently pending; as
Important context to these events was provided at the March 8, 2016 hearing. The disqualification motion was essentially a mirror image of a motion filed by defendant a few days earlier against plaintiff's lawyer, both raising the possibility that the other attorney would be a necessary witness in possible proceedings relating to plaintiff's retention of defendant's client files and escrow account, a matter not at issue in the present case. As a result, the court finds that the disqualification motion was not sanctionable in its specific context initiated by defendant. As to the grievance complaint and law suit (for defamation), the court finds these matters to be extraneous to the present case and not properly the subject of sanctions here.
The second assertion of bad faith litigation of particular concern is mentioned in Paragraph 17 of defendant's motion for sanctions (at 13):
17. By repeated eleventh hour bad faith motions to continue the trial date (Doc. No. 156.00, dated 12/12/14 (5 days before trial), and Doc. No. 160.00, dated 12/16/14, one day before the trial was scheduled to commence (the nonresident defendant had already traveled from his home in California to appear at trial); all of which was to the detriment and expense of the non-resident defendant;
Further facts developed without contradiction at the hearing show that the trial in this matter was scheduled to commence on Wednesday, December 17, 2014. Transcript at 18-22. On Friday, December 12, 2014, plaintiff moved for a continuance, claiming Mr. Fiore was unavailable on the 17th. Defendant's counsel went to court on the 12th to argue against the continuance. The continuance was denied, and counsel was directed to take Mr. Fiore's deposition on Tuesday, December 16th in preparation for the trial on the 17th. Mr. Vanech traveled from California to Connecticut in reliance on the schedule. However, on December 16th, Attorney Cameron cancelled Mr. Fiore's deposition, so advising defendant's counselor about ninety minutes before the deposition was scheduled to begin. Later on the 16th, Attorney Cameron filed another motion for a continuance, claiming to be ill with the flu. On the morning of the 17th, neither Attorney Cameron nor Attorney Peluso appeared in court, although defendant's attorney did appear. Later that day, Attorney Cameron was reached by telephone and advised the court that he had not consulted a doctor. The trial was continued until January 21, 2015. Id.
The court finds plaintiff's conduct following the denial of its December 12th motion for a trial continuance to have been in bad faith and an obvious subterfuge to avoid trial on the 17th. The stratagem caused defendant unnecessary legal fees. Accordingly, the court awards defendant sanctions against plaintiff Frank Peluso and his law firm in the amount of legal expenses Mr. Vanech incurred from December 12th through December 17, 2014. The court does not impose these sanctions on Attorney Cameron because the court finds that he, as an attorney recently admitted to practice, would not have had authority to seek a continuance of a trial against his principal, and the inference is strong that he was acting at the direction of Mr. Peluso. Defendant's counsel is directed to submit evidence of such costs at a further proceeding.
CONCLUSION
For the reasons set forth above, the court denies defendant's motion for a special finding pursuant to Gen. Stat. § 52-226a. The court grants defendant's motion for sanctions as provided above in an amount to be determined at a subsequent proceeding.