SNET v. Nancy M. O'Neal et al. (2011)

MEMORANDUM OF DECISION RE MOTION TO STRIKE # 153

FACTS & PROCEDURAL HISTORY

The plaintiff, SNET Information Services, Inc., commenced the present action by filing a summons and complaint against the defendants, Nancy M. O'Neal and Donald R. Beebe on November 29, 2007.   The plaintiff filed a four-count second amended complaint on May 10, 2010, which states causes of action for breach of contract and unjust enrichment against each defendant.   Therein, the plaintiff alleges that the defendant breached a contract for advertising services that existed between the parties, and claims economic damages of $156,861.43.   On October 4, 2010, the defendants filed an answer and special defense, together with a two-count counterclaim stating causes of action for breach of contract and negligence.

The plaintiff filed an answer and special defense to the defendants' counterclaim on October 13, 2010.   Therein, the plaintiff pleads that it “is entitled to a setoff of $156,861.43 for advertising charges owed ․ by the defendants.”   As a special defense, the plaintiff pleads that “[t]o the extent that the [plaintiff] has any liability ․ the defendants ․ are limited by the respective limitation of liability provisions in the advertising contracts” between the parties.

On November 22, 2010, the defendants filed the present motion to strike the plaintiff's special defense and claim for a right of setoff, together with a memorandum of law in support thereof.   The plaintiff filed an objection to the defendants' motion to strike on December 16, 2010.¹  The defendants filed a reply brief on February 2, 2011.   The court heard oral argument on the defendants' motion and the plaintiff's objection at short calendar on February 7, 2011.

DISCUSSION

“The purpose of a motion to strike is to contest ․, the legal sufficiency of the allegations of any complaint ․ to state a claim upon which relief can be granted.”  (Internal quotation marks omitted.)  Fort Trumbull Conservancy, LLC v. Alves, 262 Conn. 480, 498, 815 A.2d 1188 (2003).  “A party wishing to contest the legal sufficiency of a special defense may do so by filing a motion to strike ․ In ruling on a motion to strike, the court must accept as true the facts alleged in the special defenses and construe them in the manner most favorable to sustaining their legal sufficiency.  (Citations omitted;  internal quotation marks omitted.)  Barasso v. Rear Still Hill Road, LLC, 64 Conn.App. 9, 13, 779 A.2d 198 (2001).  “[G]rounds other than those specified should not be considered by the trial court in passing upon a motion to strike.”  (Internal quotation marks omitted.)  Gazo v. Stamford, 255 Conn. 245, 259, 765 A.2d 505 (2001).

A

Setoff

In their memorandum of law in support of their motion to strike, the defendants argue that the “[t]hese two claims to the counterclaim should not be brought in response to a tort and related actions brought in the counterclaim filed by the [defendant].”

The plaintiff replies in its objection that it is proper to plead a claim for a right of setoff, either pursuant to General Statutes § 51–139 et seq. or as a general equitable defense, in response to a counterclaim for breach of contract.   The plaintiff asserts that its “setoff claim applies to count one of the defendants' counterclaim grounded in breach of contract.   The defendants specifically allege that they incurred damages as a result of [the plaintiff's] alleged breach of contract.   Accordingly, [the plaintiff] is entitled to plead a claim for setoff of advertising charges because the dispute involves mutual debts.”

A claim for a right of setoff “shall be pleaded and replied to according to the rules governing complaints and answers.”  Practice Book § 10–54.  “A [setoff] is made where the defendant has a debt against the plaintiff arising out of a transaction independent of the contract on which the plaintiff sues, and desires to avail himself of that debt, in the existing suit, either to reduce the plaintiff's recovery, or to defeat it altogether, and, as the case may be, to recover a judgment in his own favor for a balance.”  (Internal quotation marks omitted.)  Mariculture Products, Ltd. v. Certain Underwriters at Lloyd's of London, 84 Conn.App. 688, 703, 854 A.2d 1100, cert. denied, 272 Conn. 905, 863 A.2d 698 (2004).  “In Connecticut, a setoff may be legal or equitable in nature.”  Croall v. Kohler, 106 Conn.App. 788, 791, 943 A.2d 1112 (2008).

A legal setoff pursuant to General Statutes § 52–139(a) is available where:  “In any action brought for the recovery of a debt, if there are mutual debts between the plaintiff or plaintiffs, or any of them, and the defendant or defendants, or any of them, one debt may be set off against the other.”   Setoff was not available at common law, but was “early recognized in equity, which exercised its broad powers to prevent circuity of action ․ to enforce the maxim that he who seeks equity must himself do equity ․ and, in general, to do equity between the parties where such legal right of set-off as existed was not adequate to accomplish this result and the case fell within the limits of recognized equitable principles.”  (Citations omitted.)  Savings Bank of New London v. Santaniello, supra, 130 Conn. 210–11, 33 A.2d 126, 128 (1943).

“To constitute mutuality, the debts must be due to and from the same persons in the same capacity ․ Mutual debts ․ are cross debts in the same capacity and right and of the same kind and quality ․ It is the [proponent's] burden to demonstrate its right of setoff by affirmatively and adequately alleging such a claim in the pleadings.”  (Citations omitted;  internal quotation marks omitted.)  Mariculture Products, Ltd. v. Certain Underwriters at Lloyd's of London, supra, 84 Conn.App. 704.

In the present case, the $156,861.43 in advertising costs claimed by the plaintiff in response to the defendants' counterclaim for breach of contract is the same amount and of the same character as the damages claimed in the plaintiffs' cause of action for breach of contract.   The plaintiff's alleged debt is not a cross debt, but a statement of alleged economic damages.   Therefore, the plaintiff's claim for a right of setoff lacks the requisite mutuality of debts.   Furthermore, the plaintiff's claim for a right of setoff does not grow out of an independent transaction.   Accordingly, the plaintiff has failed to meet its burden to set forth adequately a claim for a right of setoff.

B

Limitation of Liability

The defendants did not set forth a cogent argument in their memorandum of law in support of their motion to strike the plaintiff's special defense of limitation of liability.   In its objection to the defendants' motion to strike, the plaintiff argues that its special defense of limitation of liability applies to the defendants' counterclaim for negligence because the language in the written agreement between the parties limits the plaintiffs' liability “regardless of whether [the defendant] alleges claims against [the plaintiff] in contract or in tort [or any] other basis in law or equity.”

In their reply memorandum, the defendants maintain that the plaintiff's attempt to plead limitation of liability as a special defense is insufficient because, under Hanks v. Powder Ridge, 276 Conn. 314, 885 A.2d 734 (2005), such clauses violate established public policy.   In support of their position, the defendants rely upon the recognized public policy against limitation of liability clauses in contracts of adhesion entered into between operators of recreational facilities and members of the general public.   See Hanks v. Powder Ridge, 276 Conn. 314, 335–36, 885 A.2d 734 (2005).

“A limitation of liability, whether contractual or statutory is, in substance and effect, a partial release of liability and, as such, is properly the subject of a special defense.”  New England Savings Bank v. FTN Properties Ltd. Partnership, 32 Conn.App. 143, 146, 628 A.2d 30 (1993).  “Courts have shown a tendency to hold [preprinted form] contracts ․ against public policy when entered into by professional service providers in the course of dealing with the general public ․ Such provisions have been upheld, however, under appropriate conditions, such as the assent of both parties.”  (Citation omitted.)  Mattegat v. Klopfenstein, 50 Conn.App. 97, 103–04, 717 A.2d 276 (1998).  “When applied to contracts to which the parties are sophisticated business entities, the law, reflecting the economic realities, will recognize an agreement to relieve one party from the consequences of his negligence on the strength of a broadly worded clause framed in less precise language than would normally be required, though even then it must evince the unmistakable intent of the parties.”  (Internal quotation marks omitted.)  B & D Associates, Inc. v. Russell, 73 Conn.App. 66, 73, 807 A.2d 1001 (2002).  “The intention of the parties in executing a contract is a question of fact.”   (Citation omitted.)  McClintock v. Rivard, 219 Conn. 417, 431, 593 A.2d 1375 (1991).

The public policy relied upon by the defendants does not apply to the present case because both parties represent sophisticated business entities.   The defendants do not seek to strike the plaintiff's limitation of liability defense on the ground that it is a bare legal conclusion lacking the essential factual allegations required by Practice Book § 10–50.   See SNET Information Services, Inc. v. Prime One/Prime Direc, Inc., Superior Court, judicial district of New Haven, Docket No. CV 07 008131 (December 30, 2009, Robinson, J.).   Rather, the plaintiff has adequately stated its special defense to the defendants' counterclaim.   Whether the parties intended the limitation of liability clause claimed by the plaintiff in its special defense is an issue of fact for trial.   Accordingly, because the defendants' conclusion that prospective releases from liability are unenforceable is erroneous, the defendants' motion to strike the plaintiff's special defense is overruled, and the plaintiff's objection is sustained.

CONCLUSION

For the foregoing reasons, the court overrules the plaintiff's objection to the defendants' motion to strike, grants the defendants' motion to strike the plaintiff's claim for a right of setoff and sustains the plaintiff's objection to the defendants' motion to strike the plaintiff's special defense of limitation of liability.

Brian T. Fischer, J.

FOOTNOTES

FN1. Practice Book § 10–42(b) provides:  “Any adverse party who objects to [a motion to strike] shall, at least five days before the date the motion is to be considered on the short calendar, file and serve in accordance with Sections 10–12 through 10–17 a memorandum of law.”   The plaintiff failed to file a memorandum of law in support of its objection.   Nevertheless, the plaintiff does specify the legal authority relied upon for its objection in the body of the objection itself.   Accordingly, for the purposes of the present motion to strike, the court will treat the plaintiff's objection as though it is an objection and memorandum of law in support thereof filed in compliance with § 10–42(b)..  FN1. Practice Book § 10–42(b) provides:  “Any adverse party who objects to [a motion to strike] shall, at least five days before the date the motion is to be considered on the short calendar, file and serve in accordance with Sections 10–12 through 10–17 a memorandum of law.”   The plaintiff failed to file a memorandum of law in support of its objection.   Nevertheless, the plaintiff does specify the legal authority relied upon for its objection in the body of the objection itself.   Accordingly, for the purposes of the present motion to strike, the court will treat the plaintiff's objection as though it is an objection and memorandum of law in support thereof filed in compliance with § 10–42(b).

Fischer, Brian T., J.