Opinion
No. CV 06-5003255 S
April 9, 2010
MEMORANDUM OF DECISION
On June 14, 2006, the plaintiff, Arnold Suresky, filed a five-count complaint based on an investment transaction involving the defendants, Joseph Sweedler, William Sweedler, Andrew Tarshis, Windsong Allegiance Group, LLC (WAG), Allegiance Apparel Group, LLC (AAG) and Joe Boxer Canada, LP (JBC). The plaintiff filed an amended complaint on December 6, 2006, alleging in counts one and two, fraud in the inducement and a breach of fiduciary duty respectively as to J. Sweedler, W. Sweedler and Tarshis; in counts three and four, unjust enrichment and a breach of contract respectively as to all defendants; and in count five, conversion respectively as to J. Sweedler and W. Sweedler. Subsequently, on September 20, 2007, the court granted the defendants' motion to strike, as to count five of the complaint, the conversion claim.
WAG, AAG and JBC will be collectively referred to as "the companies."
The plaintiff alleges the following facts in the amended complaint. During the period from 2001 to 2004, the plaintiff invested an aggregate of $2.5 million in the companies. J. Sweedler and W. Sweedler were majority interest holders and controlled and managed the companies. Tarshis, an attorney, served as the senior vice president and general counsel of the companies and also provided legal advice to J. Sweedler and W. Sweedler. In 2001, WAG acquired ownership of Joe Boxer Company, LLC, Joe Boxer Licensing, LLC, and Joe Boxer Canada Holding Company. In 2002, WAG, through the Joe Boxer Group, entered into a licensing agreement granting K-Mart stores the exclusive rights to sell Joe Boxer brand apparel. From 2001 until June 2005, the only sums of money that the plaintiff received were in the form of member distributions, salary for a limited time, principal and agreed upon interest in repayment of additional loans that the plaintiff had made to the companies.
Joe Boxer Company, LLC, Joe Boxer Licensing, LLC, and Joe Boxer Canada Holding will be collectively referred to as the "Joe Boxer Group."
At various times from 2001 to 2006, the plaintiff complained that his membership payments were below the amount which had been promised to him at the time of his initial investment. In response to those complaints, J. Sweedler became "increasingly belligerent and demeaning towards the plaintiff," refusing to provide access to any of the companies' books, records, financial statements or other company material. In 2005, J. Sweedler and W. Sweedler began negotiating with Iconix Brand Group, Inc. for the acquisition of the rights and assets of the Joe Boxer Group, including the trademarks and trade names. The negotiations culminated in an asset purchase transaction, the Iconix Acquisition, pursuant to which "Iconix acquired such rights and assets in consideration for its, in pertinent part, (a) paying to Windsong Allegiance . . . the sum of $40 million, (b) transferring to Windsong Allegiance . . . 4,350,000 shares of Iconix stock, and (c) assuming certain liabilities of the Joe Boxer Group."
During the negotiations and prior to closing of the Iconix Acquisition, J. Sweedler, W. Sweedler and Tarshis, "acting in concert with one another, created the false impression to plaintiff that plaintiff's written consent to the transaction was needed on an emergency basis."
To induce him to consent to the acquisition of Iconix, the plaintiff alleges that J. Sweedler, W. Sweedler and Tarshis, individually and on behalf of the companies, made the following representations to the plaintiff: (a) AAG and JBC "had assets of negligible value"; (b) WAG's "only viable asset was the rights to the Joe Boxer [G]roup of trade names and trademarks, and all related contracts"; (c) "[the] [p]laintiff's capital accounts in each of the [c]ompanies had been depleted"; (d) "the closing of the Iconix Acquisition, and the payment to [the] plaintiff of his fair share of the proceeds thereof, would have the effect of plaintiff's redeeming his membership interests in Windsong Allegiance for the fair and reasonable value thereof"; (e) "[f]ollowing the closing of the Iconix Acquisition, [the] plaintiff would receive a lump sum payment of cash and a certain amount of Iconix stock, which would have an aggregate value equivalent to 10% of the proceeds of the Iconix Acquisition — which value would be the functional equivalent of the fair and reasonable value of plaintiff's membership interest in Windsong Allegiance"; and (f) J. Sweedler, W. Sweedler and Tarshis had, since plaintiff joined the companies, "kept the corporate and financial books and records of the companies in accordance with generally accepted accounting principles, and consistent with their responsibilities to [the] plaintiff."
The plaintiff further alleges that he was not invited to attend the formal closing and, instead, on or around July 22, 2005, was called into the companies' offices to meet with Tarshis, "to execute what he was told were necessary `closing documents.'" The plaintiff was told by Tarshis that "there were many pages of many documents, all of which were innocuous in nature but necessary for [the] plaintiff to receive the amount to which he was entitled as a result of the transaction and, by extension, the fair and reasonable value of his membership interests in the [c]ompanies." The plaintiff, at the request of Tarshis, only looked at the signature pages of the documents to which he was asked to sign. Upon signing each document, Tarshis quickly removed each document before placing the next document to sign in front of the plaintiff. The last document the plaintiff was asked to sign was a two-page letter, dated July 15, 2005, entitled the "Redemption Letter." The document purported to include the plaintiff's interest in WAG and AAG, amounting to $1,402,357 and 412,250 shares of restricted Iconix stock "in full satisfaction of [the plaintiff's] entire membership interests" in WAG and AAG. Only after signing the second page was the plaintiff permitted, by Tarshis, to see the first page of the Redemption Letter containing all of the substantive provisions of the transaction. The second page of the Redemption Letter was the only page, among all of the closing documents, that described the amount of money and stock that would be paid out to the plaintiff in the Iconix Acquisition. When the plaintiff saw the Redemption Letter, he objected that it was "significantly less than the [ten percent] share that he had expected and been promised out of the proceeds of the Iconix Acquisition." Upon making his objections, Tarshis referred the plaintiff to J. Sweedler, who asked the plaintiff whether he believed he had signed the Redemption Letter "under duress." The plaintiff responded that he believed he had been coerced into signing the documents under false pretenses, to which J. Sweedler responded, "get a lawyer."
The plaintiff also alleges that following the Iconix Acquisition, J. Sweedler and W. Sweedler received cash distributions from the companies and Iconix stock with an aggregate value that was disproportionately large compared to the combined Sweedlers' ownership interest in the companies, at the plaintiff's expense. Additionally, W. Sweedler gained a position at Iconix as Executive Vice President, while Tarshis was given the position at Iconix of Senior Vice President for Business Affairs, Associate Counsel and General Counsel of what became the Iconix Joe Boxer division.
The plaintiff seeks to have the Redemption Letter deemed null and void to the extent that it purports to constitute a full satisfaction of the plaintiff's interest in the companies or a waiver of the plaintiff's claim for a full accounting of all financial records and dealings of the companies, an accounting of all financial records and dealings of each of the companies from 2001 to the present, actual and consequential damages, interest according to law, and costs and expenses entitled to by statute or court rule.
The defendants filed a motion for summary judgment, on November 25, 2009, on the ground that there are no genuine issues of material fact and they are entitled to judgment as a matter of law. The defendants submitted a memorandum of law in support of the motion along with various documents and exhibits and, on January 6, 2010, filed a reply memorandum in further support of their motion. On January 7, 2010, the plaintiff filed a memorandum of law in opposition arguing that issues of fact remain as to each count of the complaint and submitted a sixty-nine-page affidavit and various other documents.
In an order, dated December 14, 2009, the court, Gilardi J, granted the defendants' motion for permission to bring the current motion before the court.
Originally, the memorandum of law in support of the motion, along with the exhibits, was filed on November 25, 2009, and refiled on January 20, 2010.
"Practice Book § 17-49 provides that summary judgment shall be rendered forthwith if the pleadings, affidavits and any other proof submitted show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." (Internal quotation marks removed.) Provencher v. Enfield, 284 Conn. 772, 790-91, 936 A.2d 625 (2007). "In seeking summary judgment, it is the movant who has the burden of showing the nonexistence of any issue of fact . . . To satisfy his burden the movant must make a showing that it is quite clear what the truth is, and that excludes any real doubt as to the existence of any genuine issue of material fact . . . Once the moving party has met its burden, however, the opposing party must present evidence that demonstrates the existence of some disputed factual issue . . . Mere assertions of fact . . . are insufficient to establish the existence of a material fact and, therefore, cannot refute evidence properly presented to the court under Practice Book § [17-45]." (Internal quotation marks omitted.) Zielinski v. Kotsoris, 279 Conn. 312, 318-19, 901 A.2d 1207 (2006).
In support of their motion, the defendants submitted several exhibits, including: an affidavit from Tarshis, a certificate of amendment of WAG, an affidavit from W. Sweedler, the WAG Operating Agreement, the AAG Operating Agreement, the JBC Agreement, a "Membership Register," a letter from W. Sweedler to the plaintiff, a wire transfer agreement made between the parties and facsimile pages, a membership percentage agreement, the Redemption Letter signed by both W. Sweedler and the plaintiff, excerpts from the plaintiff's deposition, the defendants' responses to the interrogatories and a deposition of Stanley Morin, the plaintiff's accountant. The plaintiff, in opposition to the motion, has submitted a personal affidavit, portions of the Iconix Asset Purchase Agreement, a breakdown of the plaintiff's payout under the Iconix Asset Purchase Agreement and the WAG payroll logs from 2002 to 2005.
"As the party moving for summary judgment, the [movant] is required to support its motion with supporting documentation, including affidavits." Heyman Associates No. 1 v. Ins. Co. of Pennsylvania, 231 Conn. 756, 796, CT Page 8924 653 A.2d 122 (1995). Likewise, "[t]he existence of the genuine issue of material fact must be demonstrated by counteraffidavits and concrete evidence." (Internal quotation marks omitted.) Little v. Yale University, 92 Conn.App. 232, 235, 884 A.2d 427 (2005), cert. denied, 276 Conn. 936, 891 A.2d 1 (2006). "[B]efore a document may be considered by the court in support of a motion for summary judgment, `there must be a preliminary showing of [the document's] genuineness, i.e., that the proffered item of evidence is what its proponent claims it to be. The requirement of authentication applies to all types of evidence, including writings . . .' Conn. Code Evid. § 9-1(a), commentary. Documents in support of or in opposition to a motion for summary judgment may be authenticated in a variety of ways, including, but not limited to, a certified copy of a document or the addition of an affidavit by a person with personal knowledge that the offered evidence is a true and accurate representation of what its proponent claims it to be." New Haven v. Pantani, 89 Conn.App. 675, 679, 874 A.2d 849 (2005).
As to the admissibility of the defendants' documents, both the affidavit of Tarshis and of W. Sweedler includes facts within their personal knowledge. Tarshis attests to the authenticity of the certificate of amendment of WAG and Sweedler to the authenticity of the WAG, AAG and JBC Agreements, the "Membership Register," a letter from W. Sweedler to the plaintiff, a wire transfer agreement made between the parties, a membership percentage agreement and the Redemption Letter signed by both W. Sweedler and the plaintiff. Thus, this evidence is properly admissible. Additionally, the excerpts of deposition testimony of the plaintiff and Morin are also properly admissible as having been certified. The defendants' responses to the interrogatories are admissible as part of the file in this case. Furthermore, the plaintiff, in his affidavit, testifies to the authenticity of portions of the Iconix Asset Purchase Agreement, a breakdown of the plaintiff's payout under the Iconix Asset Purchase Agreement and the WAG payroll logs from 2002 to 2005. Finally, none of the parties have objected to the admissibility of this evidence.
The defendants argue that (1) the plaintiff's breach of contract claim, based on an oral promise, is an unenforceable modification of the parties' written contracts and, therefore, not binding on the defendants; (2) there is no factual evidence of fraudulent inducement; (3) the defendants owed no fiduciary duty to the plaintiff because the WAG Agreement, the key contract governing the relationship among the parties, waived any such duty between members; (4) the plaintiff cannot recover for unjust enrichment because the plaintiff obtained the benefits under the written contract; and (5) the plaintiff is barred from seeking rescission of the Redemption Letter because the plaintiff has not and cannot restore the defendants to their former condition before his acceptance of the benefits of the Redemption Letter.
In response, the plaintiff counters that (1) the evidence supports the plaintiff's justifiable reliance upon the fraudulent representations made by the defendants; (2) J. Sweedler, W. Sweedler, and Tarshis breached their fiduciary duty as principals and officers in WAG and AAG; (3) the defendants were unjustly enriched depriving the plaintiff of his membership interests in the companies; and (4) his breach of contract claim is not based on a modification of the operating agreements but instead is a claim that the defendants breached a "stand-alone agreement" to pay ten percent of the proceeds of the Iconix transaction as consideration for the plaintiff's membership interest in the companies.
As a threshold matter, the defendants mention in their memorandum in support of the motion for summary judgment that, as to the WAG and JBC operating agreements, a choice of law provision in each states that the governing law of the agreement is that of Delaware. They further mention that, as to the AAG agreement, the governing law is that of Connecticut. The defendants also note that the law of Connecticut is in accord with that of Delaware as to the formation of an agreement, any claim of fraud, the rights and obligations of limited liability companies, a claim for unjust enrichment and the rescission of a contract. The plaintiff responds that "none of the issues raised in the motion has anything to do with governance or construction of any of these three operating agreements. Instead, each of the causes of action . . . has only to do with the events surrounding the Iconix transaction."
Under Practice Book § 10-3(b): "A party to an action who intends to raise an issue concerning the law of any jurisdiction or governmental unit thereof outside this state shall give notice in his or her pleadings or other reasonable written notice." When the present case commenced on June 14, 2006, there was no notice in the pleadings or other written notice, prior to the current motion before the court, arguing that Delaware law applies. Therefore, the issue of whether Delaware law should apply is moot, as Connecticut law has been applied during the entirety of the present case. Moreover, the defendants acknowledge that the laws of Delaware and Connecticut are in accord with each other.
"Under modern conflicts-of-law theory, where there is a `false conflict' such that the laws of both states relevant to the set of facts are the same, or would produce the same decision in the lawsuit, there is no real conflict between them . . . In such a case, the case ought to be decided under the law that is common to both states . . . It is only after a determination is made that there is indeed an actual conflict between the laws of the particular jurisdictions that the interests of the respective jurisdictions are analyzed." (Citations omitted; internal quotation marks omitted.) Haymond v. Statewide Grievance Committee, 45 Conn.Sup. 481, 488-89, 723 A.2d 821 [ 21 Conn. L. Rptr. 123] (1997), aff'd, 247 Conn. 436, 723 A.2d 808 (1999). Accordingly, the court need not address the issue of choice of law, as Connecticut law is applicable.
In count four, a breach of contract claim, the plaintiff alleges that the defendants breached their promise in failing to pay him ten percent of the proceeds of the Iconix Acquisition amounting to in excess of $15 million and, as a result, they breached their promise to him. The defendants argue that the plaintiff's interests in the companies were governed by written contracts and, therefore, could only be modified in writing and not by an oral promise. The defendants point out that, after months of negotiations regarding a buy-out of the plaintiff's interests in the companies, a written and valid Redemption Letter was agreed upon which subsequently bars the plaintiff "from proffering any alleged oral statements made during the extensive negotiations to vary or otherwise modify the plain language of the Redemption Letter." Without providing this court with any legal authority, the plaintiff argues that the "contract" was not a modification of any of the operating agreements but a "stand-alone agreement" that is "not precluded by provisions in any of the operating agreements allowing amendment only in writing." Since the plaintiff received an amount less than ten percent of the proceeds in breach of the promises made to him, he argues that he is entitled to the "difference between what he received and what he was promised."
"The existence of a contract is, at least initially, a question of fact . . ." (Citation omitted.) Simmons v. Simmons, 244 Conn. 158, 187, 708 A.2d 949 (1998). "[T]he parties to a written contract of the character of the one under review are as free to alter it after it has been made as they were to make it, and all attempts on their part by its terms to tie up their freedom of dealing with each other will be futile . . . In [a previous case] it was held that where parties enter into a parol agreement to modify a written contract, the fact that the contract contained a provision that no change should be made in it except in writing would not destroy the effect of the oral agreement, if the circumstances were such that the promisee would fairly understand that the stipulation requiring a writing had been waived. Such a waiver would ordinarily arise out of a parol modification entered into by the parties, and hence the general rule is stated to be that, despite a provision in the contract that it may not be changed except in writing a parol agreement modifying its terms will be given effect." (Citation omitted; emphasis added; internal quotation marks omitted.) Blakeslee v. Water Commissioners, 121 Conn. 163, 182-83, 183 A. 887 (1936). "It is well settled that a written contract may be modified by parol if the parties so intended . . . The mutual promises of the parties furnish the consideration for the modification of the contract . . . The contract, as thus modified, [becomes] the real contract between the parties." (Citations omitted.) Baena Bros., Inc. v. Welge, 3 Conn. Cir.Ct. 67, 69, 207 A.2d 749 (1964). "Whether a contract or a subsequent modification exists is a question of fact for the court to determine." (Internal quotation marks omitted.) Saye v. Howe, 92 Conn.App. 638, 643, 886 A.2d 1239 (2005).
In the present case, Section 11.2 of the WAG Agreement states in relevant part: "No waiver of, and no amendment, modification or supplement to, this Agreement will be valid, binding or enforceable unless such waiver, amendment, modification or supplement has been (i) authorized and approved by the Board of Managers and consented to by Members owning at least a majority of the Member Shares, and (ii) executed and delivered by the Board of Managers (or its designee) on behalf of the Company." Additionally, the AAG and JBC agreements in sections 24 and 7 respectively, also contain clauses prohibiting modification, although the plaintiff's signature is only affixed to the WAG Agreement.
The defendants contend that "[t]he WAG agreement is the key agreement here because it granted [the] [p]laintiff the opportunity to invest in the Joe Boxer brand that [is] the subject of the Iconix Acquisition."
There is some issue as to which of the companies' operating agreements applies to the plaintiff based on the documents provided to the court. The plaintiff has an interest in each of the companies, but how each agreement applies to the plaintiff is a genuine issue of material fact.
Regarding the plaintiff's claim that the defendants breached an oral contract, there exists an issue of fact as to whether during the negotiations a separate oral contract was formed or it was a modification of the operating agreements. The defendants fail to provide any evidence on how the alleged oral contract modifies any of the provisions in the operating agreements. Even if the oral contract was deemed a modification of the operating agreement, it could be binding as long as that was the intention of the parties. Since the defendants have not shown the absence of a material fact as to the intent of the parties, the motion for summary judgment as to count four is denied.
In count one, the plaintiff alleges that J. Sweedler, W. Sweedler and Tarshis made representations that they knew were false while engaging in fraudulent conduct including: using assets of the companies for personal reasons, commingling the companies' funds with other business entities and failing to keep the companies' books and records in an accurate manner. The defendants argue that the plaintiff has neither provided evidence that any of the purported "six misrepresentations" were made nor that he was fraudulently induced to act upon them. Further, even if the misrepresentations were made, which the defendants do not concede, they contend that the plaintiff has failed to prove justifiable reliance, a critical element of such a claim. The defendants also maintain that the plaintiff, as a "sophisticated investor," did not rely on any of the purported representations in executing the Redemption Letter. In response, the plaintiff argues that multiple misrepresentations were made by the defendants on which he reasonably relied in "consenting to and participating in the Iconix transaction."
These statements have been set forth completely under the "Facts" section on pages 3-4.
"Fraud and misrepresentation cannot be easily defined because they can be accomplished in so many different ways. They present, however, issues of fact . . . The trier of facts is the judge of the credibility of the testimony and of the weight to be accorded it." (Citation omitted; internal quotation marks omitted.) Maturo v. Gerard, 196 Conn. 584, 587-88, 494 A.2d 1199 (1985). "Fraud vitiates all contracts, written or otherwise; no rule of law, including the parol evidence rule, deprives a trial court of the power to allow oral testimony to prove fraud." Harold Cohn Co. v. Harco International, LLC, 72 Conn.App. 43, 49, 804 A.2d 218, cert. denied, 262 Conn. 903, 810 A.2d 269 (2002). "The essential elements of a cause of action in fraud are: (1) a false representation was made as a statement of fact; (2) it was untrue and known to be untrue by the party making it; (3) it was made to induce the other party to act upon it; and (4) the other party did so act upon that false representation to his injury . . . All of these ingredients must be found to exist; and the absence of any one of them is fatal to a recovery . . . Additionally, [t]he party asserting such a cause of action must prove the existence of the first three of [the] elements by a standard higher than the usual fair preponderance of the evidence, which higher standard we have described as clear and satisfactory or clear, precise and unequivocal." (Citations omitted; internal quotation marks omitted.) Citino v. Redevelopment Agency, 51 Conn.App. 262, 275-76, 721 A.2d 1197 (1998), overruled on other grounds by Kaczynski v. Kaczynski, 294 Conn. 121, 981 A.2d 1068 (2009).
"Section 537 of Restatement (Second) Torts says that: The recipient of a fraudulent misrepresentation can recover against its maker for pecuniary loss resulting from it, but only if (a) if he . . . relies on the misrepresentation in acting or refraining from action, and (b) his . . . reliance is justifiable." Benvenuti Oil Co., Inc. v. Foss Consultants, Inc., Superior Court, judicial district of New London, Docket No. CV 01 559862 (August 1, 2003, Corradino, J.).
The factual differences in the affidavits demonstrate that an issue of fact exists as to whether the defendants made fraudulent statements. Tarshis testified in his affidavit that in the "course of his interactions with the Plaintiff, I did not make any representations in order to induce him to consent to the Iconix Acquisition or sign the Redemption Letter." In response, the plaintiff in his affidavit attests that multiple misrepresentations were made to him and that he "would have never signed off on the Iconix transaction documents . . . but for [his] reliance on [the defendant's false] representations."
Also, at issue is whether the plaintiff's reliance would be reasonable based on any consultation with financial advisors in agreeing to the Redemption Letter. The plaintiff testified that his "personal accountant, Stanley Morin, made a number of attempts to reconcile [payments made to the plaintiff] with my outstanding loans and membership or partnership interests." And that "[i]n or about November 2004, as a result of my growing concern over my investment . . . I spoke with an accountant friend of mine" after the plaintiff had become "more vocal about seeking an explanation of the WAG and AAG finances." He also testified that his reliance was reasonable "inasmuch as [Joseph] Sweedler had, back in November 2004, offered a short-term `resolution' of the accounting issues that Mr. Morin and I had been raising by promising to begin making quarterly distribution payments to me. Based on that promise, I had held off on making further inquiries on the accounting, and I felt further assured that such inquires were necessary based on the above-referenced representations made to me by [Joseph] Sweedler, William Sweedler and Andrew Tarshis." Neither Tarshis or W. Sweedler testify in their affidavits as to the extent of the plaintiff's consultation with financial experts, rather the defendants argue that the plaintiff's reliance was unreasonable based on these consultations and the plaintiff's own background. The plaintiff's affidavit, however, creates an issue of fact as to the extent of his consultation with financial experts prior to signing the Redemption Letter. There is also an issue of fact as to whether the plaintiff was a "sophisticated investor," making reliance on any fraud justifiable. As a result, the question of whether the plaintiff justifiably relied on promises of the defendants when the plaintiff signed the Redemption Letter and agreed to the Iconix Acquisition remains at issue. Since issues of fact exist, the motion for summary judgment as to count one is denied.
Count two of the operative complaint, breach of fiduciary duties, alleges that J. Sweedler, W. Sweedler and Tarshis, as principals and/or officers, owed a fiduciary duty of care to the plaintiff. The defendants argue that the WAG Agreement exempts a manager from any fiduciary duty to one another. Specifically, the defendants argue that section 5.6 of the WAG Agreement waives any fiduciary duty owed to the plaintiff. The plaintiff counters that section 5.6 only provides that no "`Manager' or `Shareholder Related Person' shall have duties to WAG or to any other Manager or Shareholder Related company `[e]xcept as otherwise required by the Act or other applicable laws.' Nothing precludes the application of Connecticut law (clearly, an `other applicable law') where, as here, all of the parties' dealings with one another occurred exclusively within this State. Moreover, defendants point to the WAG Operating Agreement as thought it were the exclusive document governing the parties' conduct toward one another, thus ignoring the AAG Operating Agreement, paragraph 25 of which explicitly makes Connecticut law determinative of the rights and liabilities of the parties."
Inasmuch as count two specifically refers to "the companies," the allegations include a breach of the defendants' fiduciary duty in all three of the companies.
The defendants' membership and/or role as principals or officers in AAG and JBC is also at issue. The roles of J. Sweedler, W. Sweedler and Tarshis, in each separate company is not clear, nor is the plaintiff's role as a member in each of the companies.
Under Connecticut law, "[a] fiduciary or confidential relationship is characterized by a unique degree of trust and confidence between the parties, one of whom has superior knowledge, skill or expertise and is under a duty to represent the interests of the other." (Internal quotation marks omitted.) Cadle Co. v. D'Addario, 268 Conn. 441, 455, 844 A.2d 836 (2004). See also Konover Development Corp. v. Zeller, 228 Conn. 206, 219, 635 A.2d 798 (1994) (discussing the Connecticut Uniform Partnership Act and fiduciary duties owed between partners). A fiduciary relationship exists where the fiduciary is either in a "dominant position, thereby creating a relationship of dependency, or [is] under a specific duty to act for the benefit of another." Hi-Ho Tower, Inc. v. Com-Tronics, Inc., 255 Conn. 20, 38, 761 A.2d 1268 (2000). "The law will imply [fiduciary responsibilities] only where one party to a relationship is unable to fully protect its interests [or where one party has a high degree of control over the property or subject matter of another] and the unprotected party has placed its trust and confidence in the other." (Internal quotation marks omitted.) Id., 41. "The existence of a fiduciary duty is largely a factual determination and the extent of the duty and the resulting obligations may vary according to the nature of the relationship: the obligations do not arise as a result of labeling, but rather by analysis of each case." Hoffnagle v. Henderson, Superior Court, judicial district of Hartford, Docket No. CV 02 0813972 (April 17, 2003, Beach, J.). See also Konover Development Corp. v. Zeller, supra, 228 Conn. 222-23. "An officer and director occupies a fiduciary relationship to the corporation and its stockholders . . . He occupies a position of the highest trust and therefore he is bound to use the utmost good faith and fair dealing in all his relationships with the corporation." (Citation omitted.) Katz Corp. v. T.H. Canty Co., 168 Conn. 201, 207, 362 A.2d 975 (1975).
First, the motion for summary judgment as to count two raises the question of whether the defendants' arguments fully address the entire count in the complaint. The defendants focus solely on the WAG Agreement and whether, as members of that company, the WAG Agreement waived the named defendants' fiduciary duties. The argument fails to address whether there is a fiduciary duty owed to the plaintiff based on the named defendants' roles at AAG and JBC.
The defendants' membership and/or role as principals or officers in AAG and JBC is also at issue. The allegations go to the fiduciary duty owed as principals or officers in all three of the companies. The role of J. Sweedler, W. Sweedler and Tarshis, however, in each separate company is not clear; nor is the plaintiff's role as a member in each of the companies. Count two of the operative complaint states: "As principals and/or officers of the Companies, the Sweedlers, and Tarshis owed an elevated, fiduciary duty of care to act in plaintiff's best interests." The plaintiff, in those pleadings, defined the companies as Windsong Allegiance Group, LLC, Allegiance Apparel Group, LLP and Joe Boxer Canada, LLC.
Our Appellate Court addressed a similar issue in a case where the defendant moved for summary judgment, but addressed only one claim in a particular count of the pleadings. Rockwell v. Quintner, 96 Conn.App. 221, 229, 899 A.2d 738, cert. denied, 280 Conn. 917, 908 A.2d 538 (2006). Judge Rogers, now Chief Justice, in that case stated: "An important exception exists . . . to the general rules that a party opposing summary judgment must provide evidentiary support for its opposition, and that exception has been articulated in our jurisprudence with less frequency than has the general rule. On a motion by [the] defendant for summary judgment the burden is on [the] defendant to negate each claim as framed by the complaint . . ." (Internal quotation marks omitted.) Id., 229. In Rockwell, the court held that "[b]ecause the defendant's affidavit did not eliminate all factual issues raised by the allegations of the complaint, the burden of proof never shifted to the plaintiff." Id., 233. See also Daconto v. Trumbull Housing Authority, Superior Court, judicial district of Ansonia-Milford at Derby, Docket No. CV 03 4007847 (January 31, 2008, Ripley, J.) (denying the defendant's motion for summary judgment on a claim where the memorandum of law only addressed a gender discrimination claim and did not address the additional claim of retaliation in the same count).
As in the appellate case, the defendants here do not eliminate all factual issues raised by the allegations in count two of the complaint, mainly their fiduciary duty to the plaintiff based on their roles with AAG and JBC. The AAG Agreement and JBC Agreement, unlike the WAG Agreement, do not include a waiver of the members' fiduciary duties to one another. The evidence submitted by the defendants does not conclusively establish the role each had with each of the companies and, therefore, has not demonstrated a fiduciary duty that each defendant has to the plaintiff. Separately, there is an issue as to whether Tarshis, as an attorney for the companies for the Iconix Acquisition, owed the plaintiff a fiduciary duty, based on his role in the Iconix Acquisition and his role as counsel for the companies to which the plaintiff was a member and a minority shareholder. As a result, there remain issues of fact and the motion for summary judgment as to count two of the complaint is denied.
W. Sweedler, according to his affidavit, operated as Chief Executive Officer of the companies. Tarshis, in his affidavit, states that he was the Senior Vice President and Counsel for the companies from May 2001 until July 2005. It is unclear the exact role J. Sweedler maintained in the companies, but it is alleged that J. Sweedler and W. Sweedler, who are father and son, were majority interest holders and in control of management of the companies.
Tarshis was not a member of any of the companies and, therefore, the waiver of fiduciary duties in the WAG Agreement would not be applicable to him. Thus, even if the court was to find that all fiduciary duties between members were waived under the WAG Agreement, the part of the count as to Tarshis would remain.
In count three, unjust enrichment, the plaintiff alleges that, due to the defendants' conduct, he was unjustly and unfairly deprived of the fair and reasonable value of his membership interests in the companies. In support of their motion for summary judgment, the defendants argue that the plaintiff cannot recover for unjust enrichment because they have fulfilled their obligations under the Redemption Letter and the plaintiff has obtained the benefits under any and all express contracts. Specifically, the defendants argue that because the plaintiff received the benefits of the Redemption Letter there can be no claim for unjust enrichment. The plaintiff responds that each of the individual defendants benefited financially by his having been wrongfully deprived of full participation in the Iconix Acquisition.
"Unjust enrichment is a legal doctrine to be applied when no remedy is available pursuant to a contract." (Internal quotation marks omitted.) Russell v. Russell, 91 Conn.App. 619, 637, 882 A.2d 98, cert. denied, 276 Conn. 924, 888 A.2d 92 (2005). "Determining whether the equitable doctrines of quantum meruit and unjust enrichment are applicable in any case requires a factual examination of the particular circumstances and conduct of the parties . . . The amount of damages available under either doctrine, if any, is a question for the trier of fact." (Citations omitted.) David M. Somers Associates, P.C. v. Busch, 283 Conn. 396, 407, 927 A.2d 832 (2007). "Parties routinely plead alternative counts alleging breach of contract and unjust enrichment, although in doing so, they are entitled only to a single measure of damages arising out of these alternative claims . . . Under this typical belt and suspenders approach, the equitable claim is brought in an alternative count to ensure that the plaintiff receives some recovery in the event that the contract claim fails." (Citations omitted.) Stein v. Horton, 99 Conn.App. 477, 485, 914 A.2d 606 (2007). "Connecticut courts consistently have upheld and endorsed the principle that a litigant may recover just damages for the same loss only once." (Internal quotation marks omitted.) Mahon v. B.V. Unitron Mfg., Inc., 284 Conn. 645, 663, 935 A.2d 1004 (2007).
Since the courts allow parties to plead in the alternative, the plaintiff may plead breach of an express contract and unjust enrichment. Accordingly, the defendants' motion for summary judgment as to count three is denied.
Lastly, the defendants argue that the plaintiff cannot seek the remedy of rescission of the contract because the plaintiff has not restored the defendants to the condition they were in before the Redemption Letter. The defendants argue that, because the plaintiff has asked the court to deem the Redemption Letter null and void, the plaintiff would have to return the money that he received as a result of the Iconix transaction. The plaintiff has not provided this court with any arguments as to why rescission is an appropriate remedy under the circumstances of this case.
"A defrauded party has the option of seeking rescission or enforcement of the contract and damages. Fraud in the inducement of a contract ordinarily renders the contract merely voidable at the option of the defrauded party, who also has the choice of affirming the contract and suing for damages . . . If he pursues the latter alternative, the contract remains in force." (Internal quotation marks omitted.) Harold Cohn Co. v. Harco International, LLC, supra, 72 Conn.App. 49-50. "If the plaintiff rescinds the contract and seeks restitution, then both the plaintiff and the defendant ordinarily must restore to each other what each had received in the transaction . . . On the other hand, if the plaintiff affirms the contract, he or she may sue for damages while retaining any consideration that he or she had received in the transaction." (Citations omitted.) Leisure Resort Technology, Inc. v. Trading Cove Associates, 277 Conn. 21, 32, 889 A.2d 785 (2006).
In the present case, the plaintiff is seeking the latter option, while also asking the court for a declaration as to the Redemption Letter. The plaintiff seeks a declaration that the Redemption Letter is null and void to the extent that it purports to amount to full payment for his membership interest. Such a declaration is not the same as a rescission. A rescission of the Redemption Letter would be a seemingly impossible task, as the plaintiff has cashed in his stock and the Iconix Acquisition has been completed. Instead, the plaintiff seeks both damages and a declaration. Therefore, the plaintiff is able to retain the consideration, for partial payment of his membership interest, while seeking damages for the remaining membership interest that he claims was not paid.
For the foregoing reasons, the court denies the defendants' motion for summary judgment as to all counts.