Opinion
No. X03-CV-0525472
December 17, 2004
MEMORANDUM OF DECISION
The plaintiff, Brigitte Nolan, filed a six-count amended complaint claiming that the defendant, Michael Nolan, committed fraud and other tortious acts in relation to the parties' 1995 divorce and separation agreement. The defendant, Michael Nolan, moves for summary judgment, asserting that the plaintiff's claims are precluded by res judicata and/or collateral estoppel. For the reasons that follow, the motion for summary judgment is granted.
The first count of the amended complaint is labeled "Civil Injury to Property-Theft," and is based upon the Securities and Exchange Commission ("SEC") proxy statements of the defendant's company for the years 1994 and 1995 and related information, which the plaintiff claims she recently discovered. The plaintiff claims that she owned a portion of the defendant's stock options in United Waste Systems, Inc. ("United Waste"), where the defendant was chief financial officer. The plaintiff also claims that the defendant extinguished and permanently injured her property by exercising and selling the United Waste stock options, that the defendant "knew he was taking, obtaining, withholding and or intended to deprive [the plaintiff] of marital property including income and [s]tock options to appropriate it to him," and that the defendant still has not given the plaintiff any proceeds from that sale. The plaintiff further claims that the defendant fraudulently stated in his 1995 financial affidavit in the parties' divorce action that the total value of the United Waste stock options was "not presently determinable," that his income was far less than the amount stated in the SEC proxy statements, that he reported far fewer stock options in his financial affidavit than what was reported in the SEC proxy statements, and that he enlisted the help of his business partners at United Waste to commit this injury to and theft of the plaintiff's property.
In the second count, labeled "Conspiracy to Commit Larceny," the plaintiff incorporates all of the allegations of the first count and further claims that the defendant "excluded at least 8,333 Stock Options exercisable and existing" at the time of the parties' divorce. The plaintiff alleges that the defendant used United Waste's offices to create and transmit the false reports, that United Waste and its officers "had knowledge, knew or should have known" of the divorce and of the defendant's concealment of a portion of his stock options from the plaintiff, and that the United Waste officers helped the defendant commit the alleged acts.
The third count of the amended complaint is captioned ""Fraud and Fraud in the Inducement." In this count, the plaintiff incorporates all of the allegations of the first and second counts, and further claims that the defendant falsely and fraudulently misrepresented the financial condition of the marital estate to the plaintiff, with the intent to deceive her. In addition, the plaintiff claims that the defendant made and perpetuated material misrepresentations of the marital estate to her and her attorney recklessly, without belief in their truth, and with the intent to deceive the plaintiff and her attorney.
The fourth count is labeled "Negligence." The plaintiff incorporates all of the allegations of the first and second counts and further alleges that the defendant "knew or should have known that he had a duty to accurately state" his financial affidavit in the divorce proceedings and that the defendant breached that duty, causing injury and loss to the plaintiff.
In the fifth count, labeled "Intentional Infliction of Emotional Distress," the plaintiff incorporates all of the allegations of the first and second counts and further alleges that the defendant "acted with extreme and outrageous behavior in willfully and intentionally" concealing property in order to diminish the marital estate, keeping the plaintiff from receiving property to which she was legally entitled, and intending to cause and causing the plaintiff serious mental distress.
Finally, in the sixth count, labeled "Negligent Infliction of Emotional Distress," the plaintiff also incorporates all of the allegations of the first and second counts and further claims that the defendant should have known that his "conduct involved an unreasonable risk of causing emotional distress" that might result in injury to the plaintiff, and, "[a]s a result of the willful and intentional acts of the defendant," the plaintiff suffered serious mental distress.
"The party seeking summary judgment has the burden of showing the absence of any genuine issue [of] material facts which, under applicable principles of substantive law, entitle him to a judgment as a matter of law . . . and the party opposing such a motion must provide an evidentiary foundation to demonstrate the existence of a genuine issue of material fact." (Citation omitted; internal quotation marks omitted.) Appleton v. Board of Education 254 Conn. 205, 209, 757 A.2d 1059 (2000). "Once the moving party has met its burden, however, the opposing party must present evidence that demonstrates the existence of some disputed factual issue . . . It is not enough, however, for the opposing party merely to assert the existence of such a disputed 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." (Citations omitted; internal quotation marks omitted.) Allstate Ins. Co. v. Stephen C. Barron, 269 Conn. 394, 405-06, 848 A.26 1165 (2004). "The existence of the genuine issue of material fact must be demonstrated by counteraffidavits and concrete evidence." (Internal quotation marks omitted.) Pion v. Southern New England Telephone, 44 Conn.App. 657, 663, 691 A.2d 1107 (1997). The court may also consider the "inferences which could be reasonably and logically drawn from" the facts contained in the plaintiff's affidavits and exhibits. United Oil Co. v. Urban Redevelopment Commission, 158 Conn. 364, 381, 260 A.2d 596 (1969). "Because res judicata or collateral estoppel, if raised, may be dispositive of a claim, summary judgment [is] the appropriate method for resolving a claim of res judicata [or collateral estoppel]." Jackson v. R.G. Whipple, Inc. 225 Conn. 705, 712, 627 A.2d 374 (1993).
The following facts are undisputed. The parties were divorced in 1995 after five years of marriage with no children. Their final separation agreement ("agreement") included a division of property requiring the defendant to pay the plaintiff fifteen percent of the net proceeds from his vested (and exercisable) stock options in United Waste when he exercised those options. The vested stock options were listed on a separate schedule incorporated in the agreement. (Defendant's Exhibit E, Separation Agreement, Schedule A.) The defendant's financial affidavit separately listed "unvested stock options" that were not exercisable: "16,667 shares at $17.00 and 20,000 shares at $25.75." His financial affidavit further stated that the total cash value of all marital assets, exclusive of the unvalued stock options, was $64,185.50. The defendant specifically noted in the affidavit that the total value of both the vested and unvested stock options was "not presently determinable." (Defendant's Exhibit C, Financial Affidavit, pp. 4-5.) The plaintiff now claims that value of the stock options was in fact determinable but the defendant failed to state their value in an attempt to keep the plaintiff from getting her share.
The parties stipulated in the agreement that "[a]ll unvested stock options and all stock options that are issued to the Husband after the date of the dissolution shall be the sole property of the Husband and the Wife hereby relinquishes any claim of right, title and interest she has or may have in such stock options." (Defendant's Exhibit E, Separation Agreement, ¶ 11.3.) The defendant represented "that he expects no significant increase in the amount of stock options he shall receive in the next twelve months. The Husband shall furnish the Wife with notice of the exercisability of any stock options in which she has an interest on each anniversary date of the dissolution decree until such stock options are either exercised or expire without exercise." (Defendant's Exhibit E, Separation Agreement, ¶ 11.3.)
In February and November 1996, the defendant exercised the vested stock options and made payments to the plaintiff pursuant to the agreement totaling almost $270,000. (Defendant's Exhibits F, G, I.) In January 1997, the plaintiff signed a "Notice of Satisfaction" stating that all financial obligations of the parties' separation agreement and judgment of dissolution had been satisfied in full. (Defendant's Exhibit H.)
More than five years after the plaintiff signed the notice of satisfaction, on April 12, 2002, the plaintiff filed a motion to open the divorce judgment. The plaintiff claimed that the agreement made between the parties "was exacted from the plaintiff by the gross fraud and deception practiced by the defendant, the realization of which was recently revealed to plaintiff. Defendant's fraud and deception consisted of misrepresentations made to plaintiff and in defendant's financial affidavit falsely claiming plaintiffs assets were [$64,185.00], when in fact plaintiff had vested and unvested shares of stock, and rights to shares of stock, having a value of [$7,500,000.00], and only a few months after the divorce he was worth many millions more." (Defendant's Exhibit K, p. 1.) The plaintiff further claimed that the defendant, as chief financial officer of United Waste at the time of the divorce, "was able to defer acquiring ownership to the shares of the corporation until after the divorce, and after the divorce their value reached $125,000,000.00 Plaintiff was unaware of this fraudulent practice until she learned of it recently, in April of 2002." (Defendant's Exhibit K, p. 2.) The plaintiff attached as exhibits to her motion the defendant's 1994 and 1995 SEC proxy statements, which the plaintiff claimed were newly discovered by her. (See Defendant's Exhibit L.)
A "probable cause" evidentiary heating was ordered by Danbury Superior Court Judge Deborah Kochiss Frankel to determine whether further discovery on the plaintiff's motion to open was justified. See Oneglia v. Oneglia, 14 Conn.App. 267, 540 A.2d 713 (1988). Judge Frankel found that the defendant had fully disclosed the sale of his stock to the plaintiff in a December 10, 1996 letter to the plaintiff's attorney. (Plaintiff's Appendix B, July 8, 2002 Hearing Transcript ("Plaintiff's Appendix B", p. 107.) At a hearing on July 8, 2002, both the plaintiff and the defendant testified. At the conclusion of the hearing, Judge Frankel denied the plaintiff's motion to open on the ground that the plaintiff did not sustain her burden of proof. (Plaintiff's Appendix B, p. 108.) Judge Frankel found "absolutely no evidence of any fraud or duress or anything that would allow me at this time, some four, five, six years later — even longer than that, five, six, seven years later, to reopen this judgment . . . There is ample evidence to this Court that there was full and complete disclosure at the time of the dissolution, so therefore, I will deny the motion." (Plaintiff's Appendix B, p. 108.)
The plaintiff appealed the judgment, which the Appellate Court affirmed, per curiam, in Nolan v. Nolan, 76 Conn.App. 583, 821 A.2d 772 (2003). The Appellate Court held that the trial court had "conducted a postjudgment probable cause hearing to determine whether any discovery, beyond the testimony of the parties, should be allowed in the future to substantiate the plaintiff's allegations of fraud. As a matter preliminary to such discovery, a plaintiff has the burden to substantiate allegations of fraud that are sufficient to open the judgment . . . The conclusion of the court that there was no evidence of any fraud or duress or anything that would allow the opening of the judgment is documented by the entire record." (Citation omitted; internal quotation marks omitted.) Id., 585. The plaintiff filed the instant action a few weeks after the release of the Appellate Court's decision.
In his motion for summary judgment, the defendant argues that the plaintiff's "civil action is the latest step in plaintiff's continuing effort to re-negotiate a property settlement to which the parties agreed in divorce proceedings in 1995," and that the plaintiff is now attempting "to recover by means of tort claims and damages what she tried, but failed, to recover by moving to open the divorce judgment." (Defendant's Memorandum in Support of Motion for Summary Judgment, pp. 1-2.) The defendant further argues that the plaintiff had a full and fair opportunity to litigate the merits of her fraud claims in the July 8, 2002 hearing before Judge Frankel. The defendant argues that Judge Frankel "denied the plaintiff's motion [to open] on the merits because she did not present evidence of any fraud, much less evidence sufficient to meet the lower standard of Oneglia v. Oneglia, supra, 14 Conn.App. 267 (evidence to substantiate her allegations of fraud beyond mere suspicion)." (Defendant's Reply, pp. 2-3.) The defendant argues that all of the plaintiff's claims are therefore barred by res judicata and/or collateral estoppel. In support of his motion, the defendant submitted several exhibits, including copies of documents related to the plaintiff's 2002 motion to open or modify judgment of the dissolution of marriage, his 1995 financial affidavit, the SEC proxy statements filed in 1995 and 1996, the parties' 1995 divorce hearing transcript, the parties' 1995 dissolution judgment, separation agreement and subsequent notice of satisfaction of the separation agreement, and correspondence related to the defendant's exercise of stock options and payments to the plaintiff.
In opposition to the defendant's motion, the plaintiff argues that there never was "a final judgment of the plaintiff's allegations of fraud, as the issues have never been litigated." (Plaintiff's Objection to Motion for Summary Judgment ("Plaintiff's Objection"), p. 3.) The plaintiff argues that her 2002 motion to open was not denied on the merits but instead on probable cause. The plaintiff further argues that no rule or case law limits a party to only one probable cause hearing. The plaintiff claims that there is "new evidence to support the plaintiff's allegations of fraud." (Plaintiff's Objection, p. 4.) The plaintiff also claims that there are "material issues of fact that deserve to be litigated;" however, the plaintiff does not elaborate on what those issues are. (See Plaintiff's Objection, p. 4.)
The plaintiff's "new evidence," attached to her objection as Appendix C, is a photocopy of a July 15, 2003 unsigned letter marked "Draft" from Ronald G. Mamrosh, CPA, JD, to the plaintiff's counsel at that time, comparing the defendant's disclosures made in his 1995 financial affidavit and separation agreement to the 1994 and 1995 SEC Proxy statements. In the letter, Mamrosh observes that the defendant, in his 1995 financial affidavit, reported only fifty percent of his actual annual compensation and omitted 8,333 of his exercisable stock options. (See Plaintiff's Appendix C.) In addition, Mamrosh found that "the Defendant received very significant grants of stock options within the year after the dissolution." (Plaintiff's Appendix C, Mamrosh letter, pp. 2-3.) Mamrosh also noted that subsequent to the divorce the defendant received, on average, "almost double the number of options granted in previous years." (Plaintiff's Appendix C, Mamrosh letter, p. 3.)
Res judicata, or claim preclusion, and collateral estoppel, or issue preclusion, have been described as related ideas on a continuum. Efthimiou v. Smith, 268 Conn. 499, 506, 846 A.2d 222 (2004); see Dowling v. Finley Associates, Inc., 248 Conn. 364, 373, 727 A.2d 1245 (1999). "[C]ollateral estoppel, or issue preclusion, is that aspect of res judicata that prohibits the relitigation of an issue when that issue was actually litigated and necessarily determined in a prior action between the same parties or those in privity with them upon a different claim." Efthimiou v. Smith, supra, 268 Conn. 506. "An issue is actually litigated if it is properly raised in the pleadings or otherwise, submitted for determination, and in fact determined . . . An issue is necessarily determined if, in the absence of a determination of the issue, the judgment could not have been validly rendered." (Citation omitted; emphasis in original.) Id., 507. "Both doctrines protect the finality of judicial determinations, conserve the time of the court, and prevent wasteful relitigation . . . and express no more than the fundamental principle that once a matter has been fully and fairly litigated, and finally decided, it comes to rest." (Citation omitted; internal quotation marks omitted.) Dowling v. Finley Associates, Inc., supra, 248 Conn. 373.
In the first count of her amended complaint labeled "Civil Injury to Property-Theft," the plaintiff sets forth the essential allegations of her claim of fraud which are fully incorporated in the subsequent five counts. The crux of the plaintiff's allegations, in all six counts of the amended complaint, is the defendant's alleged misrepresentation of his finances and the marital assets in the 1995 financial affidavit and settlement agreement. That issue was actually litigated and necessarily determined after a hearing held by Judge Frankel on June 4, and July 8, 2002, on the plaintiff's motion to open or modify the judgment of dissolution of marriage.
The hearing conducted by Judge Frankel was "a postjudgment probable cause hearing to determine whether any discovery, beyond the testimony of the parties, should be allowed in the future to substantiate the plaintiff's allegations of fraud." Nolan v. Nolan, supra, 76 Conn.App. 585. At the probable cause hearing, the plaintiff was obligated to show that she was "able to substantiate her allegation of fraud beyond mere suspicion," which would have allowed the court to open the judgment for the limited purpose of discovery prior to issuing an ultimate decision on the motion after discovery had been completed and another hearing held. See Oneglia v. Oneglia, 14 Conn.App. at 270. The standard at the probable cause hearing was therefore a lesser standard than what the plaintiff would have ultimately had to meet to substantiate fraud after such discovery.
At the July 8, 2002 session of the probable cause hearing before Judge Frankel, both parties testified regarding the separation agreement, the information contained in the defendant's financial affidavit, and the defendant's exercise of his stock options and payments to the plaintiff. At the conclusion of the hearing, Judge Frankel stated not only that there was no fraud or duress or anything that would allow her to reopen the judgment, but also stated that there was ample evidence "that there was full and complete disclosure at the time of the dissolution." (Plaintiff's Appendix B, p. 108.) The court's finding that the plaintiff could not meet the lesser standard of substantiating her allegation of fraud beyond mere suspicion so as to entitle her to conduct discovery is certainly dispositive as to any further proceedings seeking to prove actual fraud. The plaintiff cites no authority for her argument that the determination by Judge Frankel was not a determination on the merits on the issue of fraud. The transcript of the July 8, 2002 session of the hearing submitted by the plaintiff shows that the plaintiff had a full and fair opportunity to present her evidence regarding her fraud claim. As all of the counts in the plaintiff's amended complaint in this case are dependent on the defendant's alleged misrepresentation of his finances in the dissolution action, Judge Frankel's decision regarding the defendant's representations in his financial affidavit is dispositive of all of the plaintiff's claims in this case.
The unsigned draft of the accountant's letter is the only additional evidence before this court that was not presented at the July 8, 2002 hearing. The plaintiff has submitted no affidavits or anything else showing why the accountant's analysis could not have been produced in admissible form at the July 8, 2002 hearing. The unsigned draft letter merely reports Mamrosh's "observations" based upon the SEC proxy statements and financial affidavit provided to him by the plaintiff or her counsel. The letter is dated "July 15, 2003," a year after the proceedings before Judge Frankel were concluded and is unauthenticated hearsay based on the same SEC proxy statements and financial affidavit which were available and used by the plaintiff at the July 8, 2002 hearing. A photocopy of an unsigned draft of a post-July 8, 2002 letter regarding an accountant's "observations" based on evidence that was before the court in the July 8, 2002 hearing is insufficient to create a material issue of fact regarding the issues previously litigated and decided.
Neither the defendant, in the motion for summary judgment, nor the plaintiff, in opposition to the motion, raise any distinction between the causes of action alleged in each count of the plaintiff's amended complaint. Both parties address the motion for summary judgment in relation to the amended complaint as a whole. As previously stated, while the defendant has the burden of showing that no material issue of fact exists, the plaintiff has an obligation to produce some evidence that demonstrates the existence of a disputed factual issue. The plaintiff has failed to do so. Despite the labeling of the various counts of the amended complaint, the evidence presented by the defendant in support of his motion for summary judgment fully supports his argument that the allegations of the amended complaint "are stated and re-stated in considerable detail in six causes of action as variations on a theme of fraud." (Defendant's Memorandum, p. 8.) The fundamental and ultimate issue in this case is whether the defendant misrepresented information to the plaintiff at the time of the dissolution, the precise issue based on the same evidence presented to Judge Frankel in 2002. Judge Frankel's finding that there was full and complete disclosure by the defendant effectively forecloses any further litigation concerning this issue by the plaintiff.
Although not raised by the plaintiff in her opposition to the motion for summary judgment, the court notes that this case is distinguishable from Delahunty v. Massachusetts Mutual Life Insurance Co., 236 Conn. 582, 674 A.2d 1290 (1996), in which the Supreme Court found that the doctrine of res judicata did not bar a plaintiff from bringing a postdissolution tort action against her former spouse arising out of conduct that had occurred during the marriage. In Delahunty, the court also found unpersuasive the defendant's alternative claim that the plaintiff was collaterally estopped from relitigating an issue raised and decided in the dissolution action, in that the trial court "did not make any definitive findings of fact that would demonstrate resolution of any issue" relating to the plaintiff's claim of fraudulent endorsement of a life insurance check which the Supreme Court found to be a "necessary predicate for a finding of collateral estoppel." Id., 601.
Unlike Delahunty, in the present case, the "necessary predicate" for a finding of collateral estoppel does exist. Judge Frankel specifically found that the plaintiff failed to demonstrate probable cause to conduct discovery on the very issue of fraud now claimed before this court as the basis of all the counts of the complaint. Because the underlying claim of fraud herein was actually litigated and necessarily determined by Judge Frankel after a full hearing on the motion to open the judgment of dissolution, which decision was affirmed by the Appellate Court, all the counts of this complaint are barred by the doctrine of collateral estoppel.
Accordingly, for all the reasons stated herein, the defendant's motion for summary judgment is granted.
BY THE COURT
Peck, J.