Opinion
No. CV 03 0197704
November 2, 2004
MEMORANDUM OF DECISION
This action arises out of the termination of the employment of the plaintiff, Thomas C. Wyckoff, by the defendant, Splash Management Group, LLC. (Splash). Wyckoff entered into a written employment agreement with Splash, a Connecticut limited liability company, to serve as chief financial officer, general counsel and secretary of a number of corporations and limited liability companies, all of which, including Splash, are defendants in this action. Wyckoff and the co-plaintiff, Strathmont Corporation (Strathmont), a New York corporation wholly owned by Wyckoff, brought several claims alleging that Splash and its principal officer, the defendant, Mark L. Curtis, terminated Wyckoff's employment without cause and, in addition, appropriated a certain equity interest in Splash Holdings I, LLC (Splash Holdings), a Delaware limited liability company, also a defendant, without authority.
Hereafter all of the defendants will be referred to collectively as "the defendants."
Hereafter both Strathmont Corporation and Wyckoff will be referred to as "the plaintiffs."
The plaintiffs' second amended complaint filed on June 23, 2004, includes the following counts: (1) breach of contract; (2) breach of the implied covenant of good faith and fair dealing; (3) promissory estoppel; (4) unjust enrichment; (5) constructive trust; and (6) conversion.
The defendants filed motion #117 to dismiss the claims brought by Strathmont maintaining that its lack of standing deprives the court of subject matter jurisdiction. "A motion to dismiss . . . properly attacks the jurisdiction of the court, essentially asserting that the plaintiff cannot as a matter of law and fact state a cause of action that should be heard by the court." (Internal quotation marks omitted.) Blumenthal v. Barnes, 261 Conn. 434, 442, 804 A.2d 152 (2002). "The issue of standing implicates subject matter jurisdiction and is therefore a basis for granting a motion to dismiss." St. George v. Gordon, 264 Conn. 538, 544, 825 A.2d 90 (2003). "The plaintiff bears the burden of proving subject matter jurisdiction, whenever and however raised." Fink v. Golenbock, 238 Conn. 183, 199 n. 13, 680 A.2d 1243 (1996). "The motion to dismiss . . . admits all facts which are well pleaded, invokes the existing record and must be decided upon that alone . . . Where, however . . . the motion is accompanied by supporting affidavits containing undisputed facts, the court may look to their content for determination of the jurisdictional issue and need not conclusively presume the validity of the allegations of the complaint." (Internal quotation marks omitted.) Ferreira v. Pringle, 255 Conn. 330, 346-47, 766 A.2d 400 (2001).
In their motion to dismiss, the defendants argue that Strathmont is neither a party nor a third-party beneficiary to the employment agreement because the agreement did not mention Strathmont or otherwise grant any right to it. Consequently, the defendants claim that Strathmont does not have standing to sue under the employment agreement, and therefore the court lacks subject matter jurisdiction with regard to its claims. In opposition, the plaintiffs assert that Strathmont is a third-party beneficiary because Splash agreed to transfer the equity interest in Splash Holdings, which constituted part of Wyckoff's compensation under the agreement, to Strathmont, and then took it away from Strathmont. The plaintiffs maintain that Strathmont had title to the equity interest and therefore can assert a claim for its conversion. The defendants reply that the second amended complaint refers only to Wyckoff as having an interest in Splash Holdings, and, therefore, Strathmont cannot claim its conversion.
"It is well settled that one who [is] neither a party to a contract nor a contemplated beneficiary thereof cannot sue to enforce the promises of the contract . . . The law regarding the creation of contract rights in third parties in Connecticut is . . . well settled . . . [t]he ultimate test to be applied [in determining whether a person has a right of action as a third party beneficiary] is whether the intent of the parties to the contract was that the promisor should assume a direct obligation to the third party [beneficiary] and . . . that intent is to be determined from the terms of the contract read in the light of the circumstances attending its making, including the motives and purposes of the parties . . . Although . . . it is not in all instances necessary that there be express language in the contract creating a direct obligation to the claimed third party beneficiary . . . the only way a contract could create a direct obligation between a promisor and a third party beneficiary would have to be . . . because the parties to the contract so intended." (Citations omitted; internal quotation marks omitted.) Dow Condon, Inc. v. Brookfield Development Corp., 266 Conn. 572, 579-81, 833 A.2d 908 (2003).
The employment agreement makes no mention of Strathmont and expressly provides that Wyckoff will receive the equity interest in Splash Holdings. These textual elements cannot be reconciled with an interpretation of the agreement under which the parties wanted to give Strathmont a right to receive such an interest. Had the parties intended so, they would have provided accordingly in the agreement. The fact that the equity interest was eventually transferred to Strathmont does not mean that the parties intended to give Strathmont a right to it at the time they executed the agreement. Therefore, Strathmont cannot be considered a third-party beneficiary and does not have standing to bring any claim based on the breach on the defendants' contractual promises.
Consequently, the lack of standing deprives the court of subject matter jurisdiction with regard to the first five counts of the second amended complaint. These claims are based on the contractual relationship between Wyckoff and the defendants. Although counts three through five do not allege causes of action that are strictly based on the breach of a contractual promise, they are all arising out of the employment relationship between Wyckoff and the defendants and the related mutual undertakings. The legal allegations in counts three through five make reference only to Wyckoff and not to Strathmont.
In their arguments on the motion to dismiss, neither the plaintiffs nor the defendants made any distinction between counts one and two on one hand, and counts three through five on the other. To the contrary, the parties treat all the claims made in the first five counts as equally arising out of the employment agreement.
In summary, Strathmont is neither a party nor a third-party beneficiary to the employment agreement and cannot bring any claim based on its breach. Accordingly, the first five counts of the second amended complaint are dismissed as to Strathmont for lack of standing.
The issue of whether Strathmont has standing to bring a claim for conversion of the equity interest in Splash Holdings requires a different analysis. "Conversion is some unauthorized act which deprives another of his property permanently or for an indefinite time; some unauthorized assumption and exercise of the powers of the owner to his harm. The essence of the wrong is that the property rights of the plaintiff have been dealt with in a manner adverse to him, inconsistent with his right of dominion and to his harm . . . The term owner is one of general application and includes one having an interest other than the full legal and beneficial title . . . The word owner is one of flexible meaning, and it varies from an absolute proprietary interest to a mere possessory right . . . It is not a technical term and, thus, is not confined to a person who has the absolute right in a chattel, but also applies to a person who has possession and control thereof." (Citation omitted; internal quotation marks omitted.) Label Systems Corp. v. Aghamohammadi, 270 Conn. 291, 329, 852 A.2d 703 (2004).
The record indicates that Strathmont became a partner of Splash Holdings. As such, Strathmont had control over the equity interest in Splash Holdings. It is not necessary to determine what was the title under which Strathmont held such interest. Under Label Systems Corp. v. Aghamohammadi, supra, 270 Conn. 291, the powers conferred to Strathmont as a member made it an "owner" of the related equity interest for purposes of a conversion action. Therefore, Strathmont does have standing to bring a claim for conversion because the equity interest it was holding was allegedly taken away without proper authority.
The fact that in the second amended complaint the plaintiffs refer to Wyckoff as holding the equity interest in Splash Holdings is immaterial. Not only do the same plaintiffs maintain in opposition that Strathmont had title to such an interest, but both Splash Holdings' Operating Agreement and Curtis' letter to Strathmont indicate that Strathmont, not Wyckoff, was in fact a member of Splash Holdings.
Since Strathmont held the equity interest in Splash Holdings, the motion to dismiss this claim as to that plaintiff is denied.
So Ordered.
Dated at Stamford, Connecticut, this 1st day of November 2004.
William B. Lewis, Judge (T.R.)