Opinion
No. X03-HHD-CV-09-6013738-S
May 26, 2011
MEMORANDUM OF DECISION ON MOTION TO STRIKE/MOTION FOR SUMMARY JUDGMENT (No. 155)
This action arises from an alleged breach of a construction contract between the plaintiff, Petra Construction Corp., and the defendant, Sacred Heart University ("SHU"), for the construction of a chapel on the defendant's Fairfield, Connecticut campus.
The sixth count of the complaint dated November 15, 2010 alleges violation of the Connecticut Unfair Trade Practices Act (CUTPA), General Statutes § 42-110a et seq., and incorporates claims for breach of contract, breach of the implied warranty of good faith and fair dealing, and breach of General Statutes §§ 42-158j and 42-158k. The defendant moves to strike the sixth count of the complaint and corresponding prayer for relief on the ground that: (1) the defendant's primary trade or commerce is education, not contracting for construction services, and (2) the present matter is merely a breach of contract action, unsupported by allegations of aggravating factors sufficient to bring the plaintiff's claim within the ambit of CUTPA. Alternatively, the defendant moves for partial summary judgment as to the sixth count of the complaint on the ground that there is no genuine issue of material fact that the defendant is a private university, engaged in a primary trade or commerce of education. The plaintiff objected to the motion to strike on February 3, 2011. The defendant filed a reply brief on March 7, 2011, and the court heard oral argument on March 21, 2011.
I. The Motion to Strike
"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." (Citations omitted; internal quotation marks omitted.) Russell v. Russell, 91 Conn.App. 619, 646, cert. denied, 276 Conn. 924 (2005). "Whether the defendant is subject to CUTPA is a question of law, not fact." (Internal quotation marks omitted.) Muniz v. Kravis, 59 Conn.App. 704, 712, 757 A.2d 1207 (2000), quoting Connelly v. Housing Authority, 213 Conn. 354, 364-65, (1990). "[A] CUTPA violation may not be alleged for activities that are incidental to an entity's primary trade or commerce." McCann Real Equities Series XXII, LLC v. David McDermott Chevrolet, Inc., 93 Conn.App. 486, 523, cert. denied, 277 Conn. 928 (2006); see also Cornerstone Realty, Inc. v. Dresser Rand Co., 993 F.Sup. 107, 113 (D.Conn. 1998) ("a CUTPA violation may not arise out of conduct that is merely incidental to the performance of one's trade or commerce").
The defendant argues that McCann Real Equities Series XXII, LLC v. David McDermott Chevrolet, Inc., supra, 93 Conn.App. 486, establishes a bright line rule and that consumption of construction services, to the extent it can be deemed a trade, is clearly incidental to the defendant's primary trade or commerce of education. The defendant further argues that the plaintiff has failed to allege specifically that engaging construction services is the defendant's primary trade or commerce.
In response, the plaintiff contends that an entity's primary trade or commerce under CUTPA includes commercial transactions that it engages in on a regular basis. The plaintiff argues that the defendant's primary trade or commerce is not limited to the provision of educational services to students, but rather encompasses the defendant's activities that it "engages in on a regular basis to carry out its primary trade or commerce," such as the procurement of construction services. Furthermore, the plaintiff argues that it has clearly alleged that the consumption of construction services falls within the defendant's primary trade or commerce.
In McCann, the plaintiff alleged CUTPA violations based on the sale of real property by the defendant automobile dealer. The McCann court determined that the purchase and sale of real property was incidental to the defendant's primary business of automotive sales, and held that the plaintiff could not base its CUTPA claim on conduct incidental to the defendant's primary trade or commerce. Thus, the court upheld a directed verdict in favor of the defendant on the CUTPA claim.
The Appellate Court revisited the issue of what constitutes a business's primary trade or commerce in Sovereign Bank v. Licata, 116 Conn.App. 483, cert. granted on other grounds, 293 Conn. 935 (2009). In that case, the original plaintiff had instituted a mortgage foreclosure action against the defendant and the underlying mortgage was subsequently transferred to the substitute plaintiff, Seven Oaks Partners, LP (Seven Oaks). The defendant and Seven Oaks entered into a forbearance agreement and, when the defendant failed to perform under the agreement, Seven Oaks proceeded with the foreclosure action. The defendant filed counterclaims against Seven Oaks, including a CUTPA claim. The Appellate Court determined that Seven Oaks had "been engaged in the business of real estate acquisition, including the purchase, sale and renovation of real property." Sovereign Bank v. Licata, supra, 116 Conn.App. 494.
In concluding that Seven Oaks was not subject to CUTPA, the court found that "[t]he subject transaction involved the Seven Oaks' acquisition of the defendant's mortgage loan and note . . . the forbearance agreement . . . and conduct between the parties during the period of forbearance." Id. The court determined that "[t]here was no evidence presented at trial that Seven Oaks ever had, prior to the transaction or thereafter, engaged in the mortgage business, nor did the defendant allege as much. The defendant's allegations solely related to an ancillary transaction that was incidental to the Seven Oaks' primary real estate business and thus fell outside the CUTPA penumbra." (Emphasis added.) Id.
Here, the plaintiff alleges that "SHU's primary trade or business is that of a large university, including the construction, renovation, and maintenance of its extensive built environment and execution of its Master Plan, which includes updating, expanding, and adding to the buildings on its campus." (Second Rev. Compl., ¶ 36.) Construing the complaint broadly, the plaintiff alleges that the defendant has engaged in a series of construction transactions prior to the subject transaction or thereafter. Specifically, the plaintiff alleges that "SHU has implemented multiple construction projects to undertake the construction of new buildings or substantial renovations to existing buildings." (Second Rev. Compl., ¶ 38.) Accordingly, the plaintiff has sufficiently alleged that the subject conduct falls within the defendant's primary trade or commerce.
"It is well established that a motion to strike must be considered within the confines of the pleadings and not external documents . . . We are limited . . . to a consideration of the facts alleged in the complaint." (Internal quotation marks omitted.) Zirinsky v. Zirinsky, 87 Conn.App. 257, 268 n. 9, 865 A.2d 488, cert. denied, 273 Conn. 916, 871 A.2d 372 (2005). Although the defendant argues that its articles of organization clearly establish that its business purpose is the provision of higher education, this argument cannot be considered by the court as support for the motion to strike.
The defendant does not contest that its primary business is that of a large university. Rather, the defendant argues that it "is a consumer of construction services, not engaged in the primary trade of construction." "Trade" or "commerce" is defined under CUTPA as "the advertising, the sale or rent or lease, the offering for 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 § 42-110(a)(4). There is a split of authority among trial courts as to whether a seller of goods or services may assert a CUTPA claim against a purchaser or consumer of those goods and services. See R. Langer, J. Morgan D. Belt, 12 Connecticut Practice Series: Unfair Trade Practices (2010) § 3.1, n. 8 (collecting cases).
"Reading the allegations of the Second Amended Complaint, including the facts necessarily implied by and fairly provable under them, it cannot be disputed that SHU's primary trade is that of an institution of higher learning." (Def.'s Memorandum in Support of Motion to Strike, p. 7.)
The plaintiff contends that our appellate courts, although not directly addressing the issue, have affirmed judgments under CUTPA in favor of sellers of goods or services against consumers of those goods and services. (Pl.'s Memo, p. 19); see D. Belt, "Unresolved Issues Under the Unfair Trade Practices Act," 82 Conn. B.J. 389, 409 n. 117 (2008), citing Johnson Electric Company, Inc. v. Salce Contracting Associates, Inc., 72 Conn.App. 342, cert. denied, 262 Conn. 922 (2002); Saturn Construction Company, Inc. v. Premier Roofing Company, Inc., 238 Conn. 293, 310 (1996); Francolino v. Klatt, 26 Conn.App. 203, 209-10 (1991).
"CUTPA, by its own terms, applies to a broad spectrum of commercial activity." Larsen Chelsey Realty Co. v. Larsen, 232 Conn. 480, 492 (1995). "CUTPA is not limited to conduct involving consumer injury . . . [A] competitor or other business person can maintain a CUTPA cause of action without showing consumer injury." McLaughlin Ford, Inc. v. Ford Motor Co., 192 Conn. 558, 566-67 (1984). CUTPA's "coverage is broad and its purpose remedial." Id., 566. This court therefore agrees with those courts which have held that a seller of goods or services like the plaintiff here may assert a CUTPA claim against a purchaser or consumer of those goods and services. A university's primary trade or commerce is not necessarily limited to the provision of education. See Osberg v. Yale University, Superior Court, judicial district of New Haven, Docket No. CV 08 5021879 (February 11, 2009, Holden, J.) (denying motion to strike where "[ e]ven if it is assumed that the defendant's only primary business is the provision of education . . . [the plaintiff's] allegations sufficiently state that the defendant's conduct in locking her out of her apartment and studio arose from a transaction that was not merely incidental to the defendant's primary trade of providing an educational program." [Emphasis added.]). In addition to education, a university offers social and cultural enrichment, residential life, recreation, and, in many cases, opportunities for religious worship, to its students and its surrounding community. These things are not incidental to, but are in fact important components of a university education. Their added economic value is captured in the cost of tuition and fees. Most if not all of these things are provided in buildings which need to be constructed or renovated. If the plaintiff can prove its allegation that the defendant's consumption of construction services is an essential element of its regular business as a university, then the plaintiff will sufficiently prove that the defendant's conduct was not incidental to its primary trade or commerce. See Coppola Construction Co., Inc. v. Hoffman Enterprises Ltd. Partnership, Superior Court, judicial district of Hartford, Docket No. CV 09 5034505 (November 2, 2010, Sheldon, J.) (motion to strike CUTPA count denied where plaintiff alleged purchasing defendant engaged in trade or commerce of real estate development).
"[N]ot every contractual breach rises to the level of a CUTPA violation." (Internal quotation marks omitted.) Naples v. Keystone Building Development Corp., 295 Conn. 214, 228, 990 A.2d 326 (2010). "A simple breach of contract does not offend traditional notions of fairness and, standing alone, does not offend public policy so as to invoke CUTPA." Greene v. Orsini, 50 Conn.Sup. 312, 315, 926 A.2d 708 (2007). "Although the same facts that establish a breach of contract claim may be sufficient to establish a CUTPA violation . . . [a] breach of contract claim can make out a legally sufficient CUTPA claim [only] as long as there are substantial aggravating circumstances." Hoydic v. B E Juices, Inc., Superior Court, complex litigation docket at Stamford, Docket No. X08 CV 03 4010104 (February 7, 2008, Jennings, J.).
"When the superior courts have permitted a CUTPA cause of action based on a breach of contract, there generally has been some type of fraudulent behavior accompanying the breach or aggravating circumstances. See CNF Constructors, Inc. 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 CSCR 1057, 1058) (permitting the plaintiff to pursue a CUTPA cause of action based on breach of contract because the misrepresentations `induced the contract')." Belveron Partners Fund I, LP v. Augustus Manor Associations Ltd. Partnership, Superior Court, complex litigation docket at Hartford, Docket No. X04 CV 09 5032917 (March 31, 2010, Shapiro, J.).
The defendant, relying on Williams Ford, Inc. v. Hartford Courant Co., 232 Conn. 559, 657 A.2d 212 (1995), argues that a violation of prong one of the cigarette rule, standing alone, is insufficient to establish a CUTPA violation. Thus, the defendant contends that a violation of § 42-158j is insufficient to support the plaintiff's CUTPA claim. The defendant contends that the plaintiff's remaining allegations amount to nothing more than a simple breach of contract action, unaccompanied by aggravating circumstances. The defendant's reliance on Williams Ford is misplaced. In that case the court stated that "the first prong, standing alone, is insufficient to support a CUTPA violation, at least when the underlying claim is grounded solely in negligence." (Emphasis added.) Williams Ford, Inc. v. Hartford Courant Co., supra, 232 Conn. 593. This plaintiff's CUTPA claim incorporates claims for breach of contract, breach of the implied covenant of good faith and fair dealing, and breach of statutory prompt payment provisions; there are no allegations of negligence.
Here, the plaintiff alleges that the defendant violated sections 42-158j and 42-158k. Section 42-158j has previously been determined to evince an established public policy concern over prompt payment of contracts and a CUTPA claim premised on a violation of the public policy embodied by § 42-158j has survived a motion to strike. LV Construction Co., LLC v. Pro Con Inc., Superior Court, judicial district of New Haven, Docket No. CV 03 0479368 (June 24, 2004, Licari, J.) [ 37 Conn. L. Rptr. 311] (motion to strike CUTPA claim denied where plaintiff alleged failure to pay on three separate occasions, invoking public policy subsequently recognized by § 42-158j).
Moreover, courts have held that alleged violations of the substantially similar prompt pay provision of General Statutes § 49-41a et seq. provide a basis for a CUTPA claim. See, e.g., Silktown Roofing v. Haynes Construction, Superior Court, judicial district of Middlesex, Docket No. CV 05 4004864 (August 3, 2006, Dubay, J.) [ 41 Conn. L. Rptr. 770] (allegations that defendant refused to honor repeated requests for payment under contract with plaintiff sufficient to allege CUTPA violation under public policy prong of cigarette rule for violation of General Statutes § 49-41a.).
In addition to alleged statutory violations, the plaintiff alleges fraudulent representations with regard to the underlying contract between the parties. Specifically, the complaint incorporates claims for breach of the implied covenant of good faith and fair dealing, and alleges that the defendant represented to the plaintiff that it agreed to, and would pay for, extra work pursuant to certain construction change directives issued during the construction project, when it did not intend to pay the plaintiff for such work. (Second Rev. Compl., ¶ 27.)
Viewing the complaint in a light most favorable to sustaining its legal sufficiency, the plaintiff has alleged aggravating factors sufficient to support its CUTPA claim. The CUTPA count alleges violation of §§ 42-158j and 42-158k, and, therefore, sufficiently alleges a violation of established public policy. Furthermore, the complaint alleges unethical and fraudulent conduct with regard to the underlying contract and subsequent construction change directives. Cf. Southern New England Telephone Co. v. Global Naps, Inc., 482 F.Sup.2d 216 (D.Conn. 2007), aff'd 390 Fed. Appx. 44 (2d Cir. 2010) (rejecting defendant's argument on summary judgment that "breach of an obligation to pay money, whether under a tariff or a normal contract, is not enough to establish an unfair trade practice.").
"To establish an action for promissory fraud, the plaintiff must prove that a false representation was made as a statement of fact, the statement was untrue and known to be untrue by the party making it, the statement was made to induce the other party to act on it and the other party did so act upon that false representation to his injury. Capp Industries, Inc. v. Schoenberg, 104 Conn.App. 101, 116, 932 A.2d 453 (2007)." Klein v. Bratt, Superior Court, judicial district of Stamford-Norwalk, Docket No. CV 05 5000502 (November 25, 2009, Tierney, J.T.R.).
The motion to strike the Sixth Count is therefore denied.
II. The Motion for Summary Judgment
The defendant moves, in the alternative, for summary judgment on the sixth count, arguing that there is no genuine issue of material fact that the defendant's primary trade or business is education. The defendant further submits that the consumption of construction services is incidental to its primary trade or commerce and that it is thus entitled to judgment as a matter of law. The defendant supports its argument with the following evidentiary submissions: (1) an affidavit of David L. Coppola, vice president of strategic planning and administration for the defendant, and (2) a copy of the defendant's certificate of incorporation.
The plaintiff argues that there is a genuine factual dispute as to whether the chapel construction project fell within the defendant's primary trade or commerce. In support of its argument, the plaintiff submits: (1) an affidavit of Brian P. Rice, an attorney for the plaintiff, (2) a notice of deposition, (3) a certificate of substantial completion, and (4) copies of various pages taken from the defendant's website.
In moving for summary judgment, the defendant refers to statements of corporate purpose contained in an affidavit of its president, Coppolla. The Coppola affidavit avers that "the University is not in the business of construction; rather, Sacred Heart University has only been a consumer of construction services." "[A]ffidavits containing self-serving allegations need not be viewed as persuasive by the court . . . Additionally, [t]he Superior Courts have consistently discounted self-serving affidavits as insufficient to support a motion for summary judgment . . ." (Citations omitted; internal quotation marks omitted.) Paranto v. Piotrkowski, Superior Court, judicial district of New Haven, Docket No. CV 07 5013627 (September 22, 2010, Zoarski, J.T.R.) The Coppola affidavit is insufficient to establish that the conduct in question falls outside of the defendant's primary trade or commerce.
In further support of its argument, the defendant attaches a copy of its certificate of incorporation. The certificate provides: "The purpose of said corporation shall be to establish, organize, maintain and conduct a university including colleges and graduate schools and to engage in acts exclusively for charitable, scientific and educational purposes within the meaning of Section 501(c)(3) of the Internal Revenue Code of 1954 as amended and the regulations thereunder. In carrying out such purposes, the corporation may engage in any lawful act or activity which is permitted by the Nonstock Corporation Act of the State of Connecticut, subject to the provisions contained in this Certificate of Incorporation." The defendant argues that its statement of corporate purpose clearly establishes that its primary trade or commerce is the provision of educational services and, thus, that it is entitled to summary judgment as there is no genuine issue of fact that its conduct related to the construction contract was incidental to its primary business purpose.
In Landmark Investment Group, LLC v. Chung Family Realty Partnership, LLC, 125 Conn.App. 678, 10 A.3d 61 (2010), the defendant, a realty holding company, appealed a decision of the trial court applying CUTPA to a single real estate transaction. There, the defendant argued that its owner was a lifelong restaurateur, who was unfamiliar with the complexities of real estate development, and that the subject transaction, involving the sale of the defendant's sole asset, was consummated in desperation, after the defendant's business had ceased. Thus, the defendant argued that the transaction was incidental to its business.
Finding "no support in McCann Real Equities Series XXII, LLC . . . for the proposition that the sale of assets of an unprofitable business is incidental to that business"; Landmark Investment Group, LLC v. Chung Family Realty Partnership, LLC, supra, 125 Conn.App. 700; the Appellate Court rejected the defendant's argument. In affirming the trial court's CUTPA determination, the Appellate Court noted that "[t]he defendant's articles of organization state that its purposes are `to acquire, manage, lease, and develop real property and related assets,' and it attempted to develop the [subject] property." Id. The court further determined that the articles of organization, together with the fact that the defendant to the action was the real estate company, not its individual owner, "amply support the [trial] court's finding that real estate development was the defendant's main commercial endeavor." Id., 700-01.
The court's holding in Landmark does not indicate that a statement of corporate purpose conclusively establishes an entity's primary line of business. Were a court to consider such evidence dispositive, untenable outcomes could clearly result. The fact that an entity may incorporate for any lawful purpose; General Statutes § 33-363(b); supports the position that a corporation may have more than one line of business that falls within its primary trade or commerce under CUTPA.
Although the defendant provides evidence that its primary trade or commerce as a university is the provision of educational services, the plaintiff has proffered evidence in opposition that the consumption of construction services was within the defendant's primary trade or commerce. The Coppola affidavit states that the defendant was engaged in multiple building projects. (Def.'s Ex. C.) In addition, the defendant admits in its reply memorandum that it has contracted with the plaintiff for at least two building projects. (Def.'s Reply, p. 7.) The certificate of substantial completion attached to the plaintiff's objection lists the defendant as both the owner and contractor for the chapel construction project. (Pl.'s Ex. 2.) Furthermore, the web pages provided by the plaintiff and authenticated by the Rice affidavit provide support for the allegations that the defendant engaged in an ongoing construction project involving both new buildings and renovations throughout its campus, pursuant to a master building plan and in service of its academic mission. (Pl.'s Ex. 3-5.) Finally, the defendant's articles of incorporation state that its purpose is to, in part, "establish" and "maintain" a university. There is clearly an issue of material fact as to whether the establishment and maintenance of a Catholic university, includes the ongoing consumption of contracting services for the purpose of constructing, rehabilitating and maintaining a chapel and other campus buildings.
The motion for summary judgment is therefore also denied.