Opinion
Nos. X01-CV-02-0183111-S, X01-CV-04-0185228-S
February 10, 2006
MEMORANDUM OF DECISION RE 1) PLAINTIFFS' MOTION FOR SUMMARY JUDGMENT ON NINTH COUNTERCLAIM (#164) 2) DEFENDANT'S MOTION FOR SUMMARY JUDGMENT (#170)
Procedural and Factual Background re Plaintiffs' Motion for Summary Judgment on Kennett's Ninth Counterclaim (#164)
This is a multi-count complaint brought by the decedent's former employer and colleagues against the decedent whose wife Carol has now been substituted as the party defendant. The defendant filed "Second Revised Counterclaims" to the governing complaint. The plaintiffs' summary judgment motion is here addressed only as to the Ninth Counterclaim asserted by Kennett under filing date of March 8, 2005. That Ninth Counterclaim asserts a breach of contract claim with regard to payment of life insurances proceeds. It is directed to the defendant Carlyle as the former employer of the decedent and to Michael Gamache who served, as did the decedent, as a Class A Member of the employer-company. The "contract" is identified as the Buy-Sell Agreement ("Agreement") dated April 26, 1996 (Ex. G); it was executed by the defendant. Id., at Bates #05100. The alleged breach is the plaintiffs' failure to pay to the decedent's widow the sum of two million dollars ($2,000,000.00) upon her husband's death, that sum being the total amount of the face value of two life insurance policies on which the decedent was the named insured.
The pleadings have undergone multiple revisions. The court's file shows no response to the "Second Revised Counterclaims." It is therefore, in view of the trial date, appropriate to plead to the same and for both parties to ensure they have filed their last revisions and that proper responses are filed such that plaintiffs may file a current Certificate of Closed Pleadings.
The plaintiffs have moved for summary judgment "on the Estate's Ninth Counterclaim" and assert there is no genuine issue of material fact regarding the assignment to People's Bank of $750,000 of the insurance procured on Kennett's life under a policy issued by Minnesota Life Insurance Company under Policy No. 2-071-231V; it had a face value of one million dollars ($1,000,000.00). There was a second life insurance policy on the decedent, this policy having been issued by Banner Life Insurance Company, bearing Policy No. 17B183346, and also with a face value of one million dollars ($1,000,000.00). Plaintiffs' position is that the maximum amount due the widow under these policies is 1.25 million ($2,000,000 minus the $750,000 assigned to People's Bank under the Minnesota policy).
Both parties have filed memoranda with extensive attachments. Both have waived oral argument, thus consenting to adjudication on the papers.
Applicable Law
Connecticut Practice Book § 17-49 provides that summary judgment may be rendered only 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. See Connecticut Bank Trust Co. v. Carriage Lane Assoc., 219 Conn. 772, 780-81 (1991). "To satisfy [its] 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." Fogarty v. Rashaw, 193 Conn. 442, 445 (1984).
"[S]ummary disposition . . . should be on evidence which a jury would not be at liberty to disbelieve and which would require a directed verdict for the moving party." Id. at 752. "The burden of proof is on the moving party and the standards of summary judgment are strictly and forcefully applied." Id. (Emphasis added.) Summary judgment should not foreclose credibility challenges or the proof of facts by circumstantial evidence, making summary judgment "particularly inappropriate where the inferences which the parties seek to have drawn deal with questions of motive, intent and subjective feelings and reactions." See Suarez v. Dickmont Plastics Corp., 229 Conn. 99, 111 (1994).
To successfully oppose a motion for summary judgment, the nonmovant must cite specific facts . . . which contradict those stated in the movant's affidavits and documents. Jones v. H.N.S. Management Co., 92 Conn.App. 223, 229 (2005). "Expressions of the nonmovant's feelings and beliefs regarding the facts in issue are not sufficient." Id. A conclusory assertion does not constitute evidence sufficient to defeat the motion. Hoskins v. Titan Value Equities Group, Inc., 252 Conn. 789, 793-94 (2000). When there are no contradictory affidavits, the court properly decides the motion by looking only to the sufficiency of the movant's affidavits and other proof. Little v. Yale Univ., 92 Conn.App. 232, 235 (2005). The nonmovant's failure to file appropriate supporting documentation is not fatal to that party's objection if the moving party cannot demonstrate the absence of a genuine issue of material fact. Carraquillo v. Carlson, 90 Conn.App. 705, 709-10 (2005). (Emphasis added.)
Adjudication — Plaintiff's Motion for Summary Judgment as to Ninth Counterclaim
Additional facts are necessary for adjudication. In 1997, Carlyle sought and obtained a financing commitment from People's Bank ("People's"). People's required, inter alia, that Carlyle assign to it key man life insurance on Kennett and Gamache to the extent of $750,000 each and, further, that both Kennett and Gamache execute a personal guaranty on a joint and several basis limited to $400,000 each. Kennett initialed the "Guarantors" provision of the commitment letter acknowledging his agreement to the same. Ex. A, Bates #PE00438. He also executed a "Limited Continuing Guaranty Agreement" acknowledging the loans and his personal commitment as Guarantor. Ex. C. Under Paragraph 1 of the Guaranty Agreement, Kennett "absolutely, unconditionally and irrevocably guaranteed to [People's] Bank full and punctual payment and performance of any and all loans . . . indebtedness, liabilities, obligations, covenants or duties of [the Company] to Bank of any kind or nature, arising under the Loan Agreement or any other documents executed in connection therewith . . . whether created directly by Bank or acquired by assignment . . ." Paragraph 3 provided the Guaranty was "a primary and original obligation of Guarantor and is an absolute, unconditional, continuing and irrevocable guaranty of payment and performance . . ." Paragraph 8 provided the Guarantor delivered the Guaranty "based solely upon Guarantor's independent investigation and understanding of the transaction of which this Guaranty is a part . . ." Under Paragraph 17, the Guaranty was made binding upon the Guarantor's "heirs, executors . . ." and stated it "shall inure to the benefit of and be enforceable by Bank and its successors, transferees, and assigns . . ." Under Paragraph 23, the provisions of the Guaranty were extended and made applicable to all "renewals, amendments, extensions and modifications of the Obligations". . . and that "All references to the Obligations and such documents, agreements or instruments shall be deemed to include any renewal, extension, amendment or modification thereof . . ."
Thereafter, in October of 1998, Carlyle obtained financing from People's for two (2) additional loans and required that "all terms of the existing Loan Agreement and related documents between Bank and [the Company] shall remain the same and in full force and effect." Ex. 5. It restated the requirement Carlyle assign key man life insurance on Gamache and Kennett in the amount of $750,000 each and a personal guaranty from each of them "on a joint and several basis" without any stated maximum limit. Kennett's agreement to these terms is established by his countersigning of the 10/13/98 commitment letter from People's. Ex. D. At the closing, Kennett signed the Guaranty Certificate for these additional loans (Ex. E) and executed an "Unlimited Continuing Guaranty Agreement and Confirmation of Limited Guaranty Agreement." Ex. F. The terms of Ex. F replicate the provisions of the first executed Guaranty Agreement as just above quoted.
On April 28, 2000, Carlyle purchased the second life insurance policy on the decedent's life from Banner. That policy and the policy previously obtained from Minnesota Mutual remained in effect until Kennett's death on April 2, 2004. Carlyle then made claim under the Banner policy and received $1,000,000; People's made claim under the Minnesota Mutual policy and received $993,776.99. Ex. 7 to Opposing Memorandum. It remitted $250,000 of that sum to Carlyle. Thus, Carlyle had, as of June 2004, received approximately $1,250,000 from the two key man life insurance policies it maintained on the decedent.
The plaintiffs state People's was paid the sum of $750,000 as was earlier assigned and "remitted $250,000" to Carlyle. The question of fact as to whether the amount received by Carlyle was in fact $250,000 or $243,776.99 is not a material question of fact and not pertinent to resolution of this motion.
The Buy-Sell Agreement which is the subject of the Ninth Counterclaim was executed by all Class A members of Carlyle — to include Kennett — on April 26, 1996. Ex. G. It included provisions for a mandatory purchase by Carlyle of Kennett's interest in the company upon his death. It provided for key man coverage purchased by companies for their protection in the event of the death or disability of a valued employee. Kennett knew the policies were for that purpose and were purchased with regard to the Buy-Sell Agreement. Section 2.1 of the Agreement provides for such. The defendant/counterclaim plaintiff urges § 2.1(e) requires payment of the face value of both policies ($2,000,000). In pertinent part, it provides "The Company shall pay the proceeds of any Policy to . . . the estate of the deceased member within thirty (30) days of the later to occur of (1) the determination of the Death/Disability Purchase Price, or (ii) the receipt of the insurance proceeds of any and all Policies maintained by the Company on . . . the deceased Member."
If purchased by a partnership (which Carlyle is not alleged to have been), the purpose of such coverage is to provide funds with which to buy out the interest of a partner upon death or disability. Black's Law Dictionary, Fifth Edition (1979), p. 781.
See e.g., the application he completed and submitted to Banner — specifically, his response to #2 on p. 1 of the application. Opposing Memorandum, Ex. 3.
The plaintiffs argue "proceeds" (with regard to the Minnesota policy) must mean that sum remaining after the deduction of the $750,000 assigned and paid to People's. The defendant/plaintiff on the counterclaim asserts that, under § 2.1(e)(ii) of the Buy-Sell Agreement, "proceeds" means the total of all monies under that policy (as well as the Banner policy) maintained by Carlyle on the decedent's life. Though neither party here specifically asserts an ambiguity in the contract, that claim is inherent in their positions and the court must necessarily address the principles governing contract interpretation.
Contract interpretation involves determining the intent of the parties by "construing the whole contract and all relevant provisions together . . ." Colby v. Burnham, 31 Conn.App. 707, 714 (1993). "Where the language of the contract is clear and unambiguous, the contract is to be given effect according to its terms." Tallmadge Brothers, Inc. v. Iroquois Gas Transition Systems, 252 Conn. 479, 498 (2000). "[E]very provision must be given effect if it is possible to do so." United Illuminating Co. v. Wisvest-Connecticut, LLC, 259 Conn. 665, 671 (2002). Parties "ordinarily do not insert meaningless provisions in their agreements." Connecticut Co. v. Division 425, 147 Conn. 608, 617 (1960). If the language of the contract is susceptible to more than one reasonable interpretation, the contract is ambiguous. United Illuminating, supra, at 671. "The court will not torture words to impart ambiguity where ordinary meaning leaves no room for ambiguity . . . Moreover, the mere fact that the parties advance different interpretations of the language in question does not necessitate a conclusion that the language is ambiguous." Id., at 670. "In contrast, a contract is ambiguous if the intent of the parties is not clear and certain from the language of the contract itself. [A]ny ambiguity in a contract must emanate from the language used by the parties . . . The contract must be viewed in its entirety, with each provision read in light of the other provisions . . . In addition, where there are multiple writings regarding the same transaction, the writings should be considered together in construing the contract . . ." Id., at 670-71. The court's determination whether a contract is ambiguous is a question of law. Detels v. Detels, 79 Conn.App. 467, 472 (2003).
The court agrees with the plaintiff on the counterclaim that the Buy-Sell Agreement is an integrated contract. It contains a merger clause (Ex. G, § 3.3) which typically indicates the intent to form an integrated contract (See Lux v. Environmental Warranty, Inc., 59 Conn.App. 26, 33 fn. 8 [2000]). The court also agrees that, when a contract is integrated, the parol evidence rule is applicable and extrinsic evidence is not permitted to vary or contradict written terms. Benvenuti Oil Co. v. Foss Consultants, Inc., 64 Conn.App. 723, 727 (2001). That, however, doesn't support the counterclaim-plaintiff's interpretation of "proceeds."
That being so, the widow cannot testify to her husband allegedly telling her that, when he died, she "would get two million dollars."
The counterclaim-plaintiff does not raise any question of fact in her memorandum. She doesn't dispute — by affidavit or otherwise — Carlyle's intent with regard to the purchase of the subject life insurance policy. She doesn't dispute the decedent's execution of the various agreements (as here earlier referenced) which clearly provide for the assignment of $750,000 of the face amount of the Minnesota policy to People's. She doesn't dispute her late husband's acknowledgment that the reason for the policy was to provide "key man" coverage in connection with the Buy-Sell Agreement. See Ex. 3 of Opposing Memorandum, Personal Information Statement signed by the decedent, Response to Question 2. There is no dispute that the decedent knew Carlyle — not he — was the "owner" of the policy. See Id., "Part I" of Application, Response to #3. There is no dispute Kennett knew Carlyle was the "primary beneficiary" of the policy. Id., Response to #4. There is no dispute the decedent executed multiple Guaranty Agreements "in favor of and for the benefit of People's Bank." See e.g. Exs. C, D and E of movant's memorandum. To accept the counterclaim-plaintiff's interpretation of "proceeds" is to ignore the language in all of the documents Kennett executed as acknowledgment of his intent not only that $750,000 of the face value of the Minnesota policy be paid to People's (and thus the assignment) but also that such be binding upon his heirs — to include Mrs. Kennett. The surrounding circumstances regarding these documents are not in dispute; thus, their construction and legal effect is a question of law. See Bria v. St Joseph's Hosp., 153 Conn. 626, 632 (1966). As a matter of law, "proceeds" as used in the Buy-Sell Agreement, must be construed to mean those funds Carlyle received from the two (2) policies in place on Kennett's life. There is no other "reasonable" construction. The maximum with regard to those policies is the total of $250,000 under the Minnesota policy and $1,000,000 under the Banner policy — $1.25 million as the plaintiffs urge. That interpretation is required to give meaning not only to the Agreement but also to all other documents executed in relation to the securing of the loans Kennett, his colleague Gamache, and his employer solicited and received to permit the continued operation and/or expansion of the company in which Kennett had an ownership interest. That the assignment of the policy served as a collateral security for the loans does not alter that conclusion. The counterclaim-plaintiff's argument is not bolstered by its claim (without any evidentiary support) there was "no reduction of the Carlyle indebtedness by $750,000 at the time of the assignment" (Opposing memorandum, at 9) nor is its claim the assignment was not valid because "there is no indication that People's Bank, on obtaining the assignment of life insurance, surrendered the right to full payment of the debt or reduced the Carlyle indebtedness by $750,000." Id. No reduction of the loan by $750,000 could be made until the policy spoke — on Kennett's death or disability. It is not enough to defeat a motion for summary judgment simply to "raise" a tortured argument without evidence thereof. Contrary to the counterclaim-plaintiff's assertion the amount to be received from the policy was not "uncertain." See Ex. B to movant's memorandum which clearly provides People's was assigned $750,000 of the $1,000,000 policy value of Policy No. 20712131V issued by Minnesota on Kennett's life. The nonmovant offers no evidence in contradiction of the same. Nor is the court persuaded by the apparent argument the assignment was somehow contingent on a non-perfected collateral security; it is to communicate a mere expression of belief unsupported by any facts and, as such, will not defeat a summary judgment motion. The argument the assignments do not extinguish Mrs. Kennett's rights as a "beneficiary" belie the nonmovant's understanding of the purpose of key man insurance. She was never intended to be the "beneficiary" of the face value of that policy, a fact her decedent acknowledged over and over again. Key man policies were not at issue in Connelly v. Wells, 142 Conn. 529 (1955), cited by the widow. Mrs. Kennett was never the named beneficiary of the Minnesota policy as the decedent's wife was in Connelly. However, Connelly (as the plaintiffs assert in their Reply — but fail fully to develop) is instructive in acknowledging that, where a policy is assigned to a bank (as here), the beneficiary's right to the proceeds is " impaired only so far as necessary to carry out the promise of the insured to repay the loan. Subject only to that limited impairment, the beneficiary remained the owner of the right to receive the proceeds upon the death of the insured." (Emphasis added.) Id., at 535. Carlyle was the beneficiary of the Minnesota policy. The right to receive the proceeds of the policy on Kennett's life was impaired only so far as necessary to carry out the intent to pay $750,000 of its face value to People's pursuant to Kennett's Guaranty Agreement and subsequent assignment.
To the extent there is a question of' fact regarding the percentage of Kennett's ownership interest, Kennett, on 11/11/99, states unambiguously it is "42.5%." Id., at 4(h). Resolution of that issue is not necessary for the court's adjudication of the meaning of "proceeds."
That the $750,000, upon Kennett's death, was sent directly to People's is explained by the assignment People's required and Kennett executed. It does not alter the fact that Carlyle benefited from the same by way of reduction of its loan.
The summary judgment motion addresses only the Ninth Counterclaim which asserts that the plaintiffs' failure to pay $2,000,000 under the two (2) policies constitutes a breach of the Buy-Sell Agreement. The court addresses only that claim in concluding there is no genuine issue of material fact with regard to the claim under the Ninth Counterclaim based upon the life insurance policies. The plaintiffs' motion for summary judgment as to that counterclaim is granted as a matter of law.
The court neither addresses nor resolves any of the collateral issues the parties have raised — i.e., the method of determining the purchase price of the decedent's membership interest in Carlyle (See § 2.1[a] of the Buy-Sell Agreement.) or the counterclaim-plaintiff's need to obtain an independent appraisal — as not raised by the instant motion or determinative of the same. The court decides only the interpretation of "proceeds" as necessary to adjudication regarding the Ninth Counterclaim.
Adjudication — Defendant's Motion for Summary Judgment
The defendant/counterclaim plaintiff has filed a motion for summary judgment on Counts One (1) through Eleven (11) and Count Fourteen (14) of the Second Revised Complaint of November 7, 2003, and on its own Ninth Counterclaim of the Second Revised Counterclaims of March 4, 2005, together with extensive attachments. The plaintiffs/defendants on the counterclaims. have objected. Both sides have filed memoranda of law and both have waived oral argument, consenting to the court's adjudication on the papers.
The moving party has also filed a Reply to the nonmovant's objection.
The plaintiffs have asserted "Global Objections" as to all counts. Specifically, they argue this court should summarily deny the motion because, inter alia, the defendant's supporting affidavits and 32 "drop-filed" attachments were not "authenticated" (accompanied by affidavits based on personal knowledge or certified to opposing counsel) under City of New Haven v. Pantani, 89 Conn.App. 675, 679 (2005). See also P.B. §§ 17-45 and 17-46. As to the appropriateness of the affidavits provided in support of the motion, the court is in a position to determine whether they should be considered. Further, the burden is on the moving party and, since that is so, the court must view the evidence proffered in the light most favorable to the nonmovant who is given the benefit of all inferences that can be drawn. Catz v. Rubenstein, 201 Conn. 39, 49 (1986). Thus, no purpose is to be served in the court's not now considering evidence offered during what, in view of the total number of claims by both parties, may be a lengthy trial if in fact the defendant raises at trial the same claims on a motion for directed verdict. Clearly there is utility in avoiding the expense of protracted litigation where the factual issues raised are relatively simple or where the outcome of the litigation is relatively clear.
The court also rejects the argument advanced by plaintiffs that the defendant's motion should be denied in its entirety because essentially the defendant claims the asserted counts are legally insufficient and that Kennett should therefore have filed a Motion to Strike. The use of a motion for summary judgment to challenge the legal sufficiency of a complaint is appropriate when the complaint fails to set forth a cause of action and the defendant can establish the defect cannot be cured by repleading. Larobina v. McDonald, 274 Conn. 394, 401 (2005). (Citation omitted.)
The motion for summary judgment on the Ninth Counterclaim is denied. The counterclaim plaintiff has here raised exactly the same argument as above adjudicated and no reason presents for the court to address it again. As a matter of law, all that is owed Mrs. Kennett on the Minnesota policy is the "proceeds" of that policy — the amount remaining after the $750,000 Kennett agreed be assigned to People's.
It is pertinent the term "proceeds" was employed when, had it been intended the decedent receive all of the coverage procured, the parties could have referenced "the face value" of the policy or, simply, the "coverage."
Regarding Kennett's claim for summary judgment on the plaintiffs' affirmative claims, the plaintiffs again assert a "global" argument the court should deny the motion because it is either: (a) an attack on disputed factual issues regarding the extent, type, and cause of damages sustained, or (b) it seeks summary judgment on only a portion of a count in a complaint or a fragment of a claim. As to the latter, Home Ins. Co. v. Htfd. Underwriters Ins. Co., 2005 WL 1088247, Docket No. X04-CV-03-0103487-S, judicial district of Middlesex (April 6, 2005) (Quinn, J.) ( 39 Conn. L. Rptr. 60), is not instructive because there the movant sought partial summary judgment on one (1) claimed breach in a paragraph of the complaint asserting at least as many as eleven (11) breaches. Here there is no such partial claim. As to (a) above, the plaintiffs seize upon the defendant's assertion that, even if some damages are recoverable, some of those claimed are excessive. The plaintiffs' focus on that statement ignores that the defendant has asserted the types of damages alleged "are not recoverable damages under the counts pled and/or were not caused by the defendant." Memorandum, at 20. Defendant urges the widow's motion be granted because the plaintiffs cannot establish the amount of the damages claimed with sufficient certainty and/or cannot establish the damages claimed were caused by the decedent's conduct. Reply, at pp. 3-4.
Summary judgment was sought only as to "subsection (k) of paragraph 30 of plaintiff's complaint." Id., at *1.
Assuming for the purpose of adjudicating this motion that allegations directed to Kennett's conduct raise factual disputes to be decided by a jury, that alone is not dispositive of this motion since, if the court concludes as a matter of law that the damages claimed are too speculative to permit recovery and/or that causation cannot be established, summary judgment is appropriate.
"Damages are recoverable only to the extent that the evidence affords a sufficient basis for estimating their amount in money with reasonable certainty." (Internal quotation marks omitted.) 24 Leggett Street Ltd. Partnership v. Beacon Industries, Inc., 239 Conn. 284, 308-09 (1996). Thus, "[t]he court must have evidence by which it can calculate the damages, which is not merely subjective or speculative, but which allows for some objective ascertainment of the amount." Bronson Townsend Co. v. Battistoni, 167 Conn. 321, 326-27 (1974). When damages are claimed, they are an essential element of proof and must be proved with reasonable certainty. Coughlin v. Anderson, 270 Conn. 487, 512 (2004). They cannot be based on contingency or conjecture ( Leisure Resort Technology, Inc. v. Trading Cove Associates, 277 Conn. 21, 35), and summary judgment is appropriately granted where there is insufficient evidence of damages. Id. Damages cannot remain uncertain or speculative. Fox v. Mason, 189 Conn. 484, 488 (1993).
Summary judgment may be granted on the failure to establish causation. Abrahams v. Young Rubicam, Inc., 240 Conn. 300, 307 (1997). Proximate cause is an actual cause that is a substantial factor in the resulting harm. Stewart v. Federated Department Stores, 234 Conn. 597, 606 (1995). Although the issue of causation generally is a question of fact, it become one of law when the mind of a fair and reasonable person could reach only one conclusion. Debreuil v. Witt, 80 Conn.App. 410, 429 (2003). Under those circumstances, it is appropriate to render summary judgment. In Vaillancourt v. Latifi, 81 Conn.App. 541 (2004), the plaintiff sought damages for injuries he allegedly sustained when colliding with the defendant while playing softball organized by the codefendant YMCA. It was the plaintiff's claim the YMCA negligently failed to train its umpires to protect players from attacks by other competitors. The trial court rendered summary judgment on the ground there was before it no evidence as to the scope of the YMCA's duty. The Appellate Court affirmed on the basis no acts or omissions alleged as against the YMCA were the legal cause of the plaintiff's injuries. Id., at 550. It further noted, "We cannot speculate here about what might have happened if the umpire had informed Latifi of the slide rule." Id. The plaintiffs' claims for damages in the instant case require speculation and are not reasonably certain in their calculation to permit recovery nor do they, as a matter of law, establish legal cause.
The court adopts the following grouping of the plaintiffs' claims based on the conduct and the damages alleged.
A. First Count: Breach of Covenant of Good Faith and Fair Dealing
It is asserted the decedent breached this covenant implied by both the Buy-Sell Agreement and the Amended and Restated Operating Agreement (and amendments thereto) in that Kennett: a) attempted to extort his fellow members to reduce their own membership interests so as to increase his own; b) made efforts to obtain unemployment compensation for his own benefit even though this effort would result in a substantial cost to Carlyle and was contrary to the Members' tax status; c) attempted to extort an unreasonable price for his membership interests contrary to Carlye's operating and organizational documents; and d) continued to hold himself out as a manager of Carlyle when in fact he was not and was fully aware he was not. Id., at ¶ 10. Plaintiffs allege continuing harm as a result. Id., at ¶ 11.
B. Second — Fifth Counts: Breach of Fiduciary Duty
These counts assert the decedent, "as a member of Carlyle," breached a fiduciary duty "to the other members, (sic) and to management, (sic) to render true accounts and give full information about all matters that affected Carlyle." ¶ 6. As to Carlyle, Michael Gamache, Brian Gamache, and Barton Bauers. As to each, the claim is that Kennett failed to follow management's directives, undertook "unauthorized" communications with vendors, customers, and financial institutions, misrepresented the status of members' interests; "attempted to" divest other members of their rightful membership interest, refused to consider reasonable business prospects in an effort to leverage the value of his own interest, and "impeded" management's efforts to secure financing — all of which caused damage and harm.
Michael Gamache "is a member and sole manager of Carlyle." First Count, ¶ 2.
Brian Gamache is a "member of Carlyle." Id., ¶ 4.
Barton Bauers is a "member and chief financial officer of Carlyle." First Count, ¶ 3.
C. Sixth — Eighth Counts: Tortious Interference
The assertion in these counts is that the decedent interfered intentionally and without justification with Michael and Brian Gamache's and Barton Bauers' relationship with Carlyle in all of the same ways asserted above for the Second-Fifth Counts and, additionally, that he "attempted" to force these persons to reduce their membership interests by "intimidation, extortion and through misrepresentations" (¶ 7[b]), as a result of which the plaintiffs sustained "actual loss." ¶ 8.
D. Ninth — Eleventh Counts: Fraudulent Misrepresentations
These counts assert the decedent's repudiation of an agreement, the subject of which was a relationship with certain venture capitalists, which agreement provided Bauers would obtain a membership interest in Carlyle for his contribution of $100,000 to the company. The claim is that Kennett made the initial agreement to induce the others to re-organize and undergo additional financing only to later claim he had never agreed to Bauers' obtaining of a membership interest in consideration for his $100,000 contribution. "Actual harm" is alleged. ¶ 10.
E. Fourteenth Count: CUTPA
In this count, the plaintiffs re-allege all of the wrongful conduct attributed to Kennett in the preceding counts, which conduct it is claimed violated the Connecticut Unfair Trade Practices Act and thus "have caused substantial and ascertainable losses, damage and injury" to each plaintiff. ¶ 101. Such losses, they have pled, have had a detrimental impact on Carlyle's ability to secure financing, acquire assets and merge with other companies as well as they have negatively influenced the company's relationships with vendors and increased the amount of personal loans and contributions by the individual plaintiffs to Carlyle. Id.
The defendant has categorized the "harm" alleged into four (4) groups based on discovery documents and depositions:
1) The decedent's alleged failure to affirm his personal guaranty of Carlyle's loans from People's Bank.
It is entirely relevant that, following Kennett's refusal to affirm, Brian Gamache and Bauers guaranteed these loans. The plaintiffs value this "harm" at $353,400. That amount is arrived at by taking 2% of the total value of the loans multiplied by 2 (because there are two guarantors) and then multiplied by 5 (for the number of years the guarantees were in effect). The 2% included in the calculation refers to the practice by the Connecticut Development Authority (CDA) to charge businesses a 2% fee and plaintiffs concluded they could do the same. The CDA did not guarantee these loans. Neither Brian Gamache nor Bauers had a contractual obligation to personally guaranty these debts of Carlyle. Defendant asserts — and plaintiffs do not dispute — the five-year period extended beyond Donald Kennett's lifetime. The plaintiffs suffered no actual or anticipated loss. There is no basis for recovery of this amount.
In fact, the Operating Agreement specifically provides no Member shall be required to make a capital contribution or loan to the company. Oper. Agr. Ex. 1, § 7.1.
2) The failed purchase of Regent Controls.
Plaintiffs assert the decedent's vote not to acquire this company cost Carlyle $140,000 in profits for each of five (5) years. Defendant's Ex. 10, p. 1. Defendant asserts — and plaintiffs do not dispute — the $700,000 calculation of lost profits is based not upon the actual sales figures for each of the five years but upon the first year's sales figures only, a year in which sales greatly exceeded expectations. Thus, it is an entirely speculative assessment. Further, accepting for this purpose that Kennett actively campaigned against the purchase of Regent, plaintiffs have asserted his interest in the company was 42.5% and, if so, Kennett had not the power to prevent this purchase. To further vitiate this damage claim, Kennett had suggested a way in which the acquisition could have proceeded but that suggestion was rejected by Carlyle. Neither causation nor reasonably certain damages are established.
3) Attorney Fees
Kennett had brought suit against Carlyle in Delaware. In defense of that suit, Carlyle paid Pepe Hazard $176,424 in legal fees. As part of a Stipulation of Dismissal filed in Delaware in August of 2001, the parties stipulated each would pay his own "attorneys fees and expenses." Defendant's Ex. 20. Connecticut has given effect to such "consent" agreements. See e.g., Nguyen v. Da Silva, 10 Conn.App. 527, 531-32 (1987). There is no basis for Carlyle to recover here that which it earlier volunteered to pay.
4) "Performance" Losses
This claim is in part comprised of three (3) orders Carlyle argues it would have received had decedent acted differently, as a result of which lost profits were incurred. As to Turbine Services, Inc., plaintiffs state Kennett quoted them an excessive price. They do not offer evidence the sale would have occurred (and profits therefore allegedly realized) had a lower price been quoted. Further, without evidence just how low Kennett's quote needed to be to close the sale, the profits to be realized cannot be estimated with reasonable certainty. As to General Electric Power Systems, the claim for lost profits of $200,000 is speculative because, assuming arguendo it can be established the sales were lost solely as a proximate cause of Kennett's poor conduct, the presumed number of units sold and profits recovered are not established with reasonable certainty. In fact, Bauers testified that, as to the profit remaining after costs of fabrication, it would be a "guess" and he couldn't be specific. Ex. 24, p. 143, ln. 1-9. Regarding the claimed loss of profits attributable to the non-sale to United Defense LP, this claim presumes a sale would in fact have occurred had Kennett made the trip to Pennsylvania despite Carlyle's product having no price advantage. Additionally, Bauers testified he did not know whether Kennett talked by phone to United Defense about this sale or had sent it any written material regarding product benefits. Ex. 24, p. 148, ln. 13-18. Given the claimed profit regarding this loss ($1,600,000), the number of units presumed sold is clearly significant; yet little or no consideration was given to the savings to be realized in long production runs. The jury would therefore have been required to speculate in multiple ways. Finally, there is the claimed lost profits of $60-70,000 in "receivables" attributable to Brocksapp Engineering Heat Transfer. Because this claim requires all of the same kinds of speculation involved in the just discussed claims, that Carlyle collected $35,000 of the damages claimed in connection with its bankruptcy proceeding does not render the damage estimate reasonably certain.
None of these performance losses can, with any reasonable certainty, be established to have been caused solely by the decedent's alleged wrongful conduct nor can the amount of damages be calculated with reasonable certainty in view both of the presumptions made (i.e., that, had Kennett performed better, he would have closed the sale or that it would have been of the predicted magnitude) and the factors not considered in the calculations (i.e., the cost of goods, production costs, time required for payment, etc.). It is not appropriately left to the jury to fill in the gaps and the presence of those gaps underscore the inability to prove the amount of profits — even assuming the plaintiffs can establish the remaining elements of each of the causes of action pled. The burden of proof as to damages is one borne by the plaintiffs.
While the court need not — and does not — decide the "employer-employee" issue counsel raised, the parties should note that Barton Bauers' deposition testimony regarding the Labor Department's conclusion Kennett was not an employee is inadmissible hearsay. Further, plaintiffs' claim their pleading of the Fourteenth Count (CUTPA) sets forth an exception to the intracorporate rule as enunciated in Fink v. Golenbock, 238 Conn. 183, 213-14 (1996), is questionable at best because the claimed wrongful conduct does not establish Kennett was in "direct competition with Carlyle." Plaintiffs offer no evidence of the same to establish they will prevail on that claim. Also of interest is that the Employment Agreement identifies Kennett as "Employee" and Carlyle as "Employer" throughout.
The damages alleged arise out of the Employment Agreement which is governed by Connecticut law. Def's Ex. 5, § 8.10. With regard to the performance losses, no sales were perfected and plaintiffs nowhere take into account such practices as the give and take of negotiations which often leads to price concessions. Where pecuniary damages are asserted, proof of damages should be established by a reasonable certainty and may not be speculative or problematic. Leisure Resort Technology, Inc., supra, 277 Conn., at 35. Nor can any of the other allegations of "actual loss" or "harm" or "damages" be sustained for reasons here stated. The plaintiffs' assertion they do not have to produce all of their evidence prior to trial, while correct, does not relieve them of their burden to produce sufficient evidence to successfully oppose this motion and preclude its granting. They have not done that and, on the damage evidence here produced, the defendant would be entitled to a directed verdict at trial.
Defendant's motion for summary judgment is granted in its entirety.