Stephen Brown v. Leo Otake et al. (2011)

MEMORANDUM OF DECISION ON DEFENDANT'S MOTION TO STRIKE (# 101)

The plaintiff, Steven A. Brown, M.D., initiated this action by service of process upon the defendants, Saint Francis Hospital and Medical Center (hospital) and Leo Otake, M.D., on May 25 and 26, 2011, respectively.   The seven-count complaint alleges claims for breach of contract and unjust enrichment against Otake;  tortious interference by the hospital;  and negligent misrepresentation, false misrepresentation, breach of the duty of good faith and fair dealing and fraudulent concealment against both defendants.

Specifically, the plaintiff alleges the following facts.   The plaintiff alleges that he and Otake are plastic and reconstructive surgeons.   The plaintiff has offices in Hartford and New Britain, and privileges at the hospital, with whom he has had a relationship for approximately thirty-five years.   Because of a physical impairment that began to affect his ability to perform surgery, the plaintiff procured the services of a business broker to find a purchaser for his practice.   Otake, who has an office in New Haven, was referred to the plaintiff by the business broker.   The plaintiff alleges that prior to the connection by the broker, Otake had no interest in establishing a practice in the Hartford area and was not familiar with the hospital.   In the following months, the plaintiff and Otake worked to develop a plan to effectuate the sale of the plaintiff's practice to Otake.   The plaintiff initially wanted to complete the process by June 30, 2010, but because Otake required time to wind up his practice in New Haven, the parties agreed the sale and transition of the practice would occur by the end of August 2011.

The plaintiff alleges that he expended considerable time and effort to keep his practice operational during this time and agreed to assist Otake in the transition process.   The plaintiff alleges that these actions were taken in reliance on Otake's representations.   The plaintiff alleges that his expenses in keeping the practice operational included office expenses, salaries, overhead, rent, utilities, supplies and malpractice insurance.

The plaintiff further alleges that, as part of the transition process, Otake introduced the plaintiff to the hospital and helped him secure a financial incentive plan from the hospital.   Specifically, the hospital represented to the plaintiff that it was offering a two-year stipend at a salary of $280,000 per year to provide coverage for the hospital's reconstructive surgical needs.   The plaintiff agreed to make an introduction between Otake and the hospital for the purpose of discussing the possibility of establishing such a limited relationship.   When the plaintiff subsequently introduced Otake to the hospital, including the department of surgery, he referred to Otake as “the plastic and reconstructive surgeon who was purchasing his business and practice.”   It is alleged that instead of a two-year stipend, the hospital and Otake secretly agreed that Otake would become a full-time employee of the hospital to build its plastic surgery department, which would compete with the plaintiff's business and practice.

Ultimately, the plaintiff alleges that Otake did not complete the purchase of the plaintiff's business and practice, but rather joined the hospital as a competitor to the plaintiff.   The plaintiff alleges that he performed all of his obligations under the terms of agreements and understandings with Otake and suffered damages as a result of the defendants' conduct.   On July 7, 2011, the defendants filed a motion to strike the complaint in its entirety on the ground that each claim fails to state a claim upon which relief may be granted.

“A motion to strike challenges the legal sufficiency of a pleading ․ and, consequently, requires no factual findings by the trial court ․ [The court] take[s] the facts to be those alleged in the complaint that has been stricken and ․ construe[s] the complaint in the manner most favorable to sustaining its legal sufficiency ․ [I]f facts provable in the complaint would support a cause of action, the motion to strike must be denied ․ Thus, [the court] assume[s] the truth of both the specific factual allegations and any facts fairly provable thereunder.   In doing so, moreover, we read the allegations broadly ․ rather than narrowly ․ If facts provable in the complaint would support a cause of action, the motion to strike must be denied.”  (Citations omitted;  internal quotation marks omitted.)  Sturm v. Harb Development, LLC, 298 Conn. 124, 130, 2 A.3d 859 (2010).

I

Breach of Contract

“The elements of a breach of contract action are the formation of an agreement, performance by one party, breach of the agreement by the other party and damages.”  (Internal quotation marks omitted.)  Hawley Avenue Associates, LLC v. Robert D. Russo, MD. & Associates, P.C., 130 Conn.App. 823, 832, 25 A.3d 707 (2011).   Here, the issue is whether the plaintiff sufficiently pleaded the formation of an agreement.  “Under established principles of contract law, an agreement must be definite and certain as to its terms and requirements ․ Parties, however, may form a binding contract even if some nonessential terms of their agreement are indefinite or left to further negotiations.”  (Citation omitted;  internal quotation marks omitted.)   Bayer v. Showmotion, Inc., 292 Conn. 381, 411, 973 A.2d 1229 (2009).  “The essential provisions of a contract are the purchase price, the parties, and the subject matter for sale.”  SS–II, LLC. v. Bridge Street Associates, 293 Conn. 287, 294, 977 A.2d 189 (2009).

While the plaintiff has alleged that he and the defendant agreed to the purchase of his practice and business, he has failed to plead facts that, even in the light most favorable to sustaining their sufficiency, demonstrate that the essential provisions of the contract were determined.   For that reason, the facts alleged in the complaint fail to state a legally sufficient cause of action for breach of contract and the motion to strike is granted as to count one of the complaint.

II

Negligent Misrepresentation

“[Our Supreme Court] has long recognized liability for negligent misrepresentation ․ The governing principles [of negligent misrepresentation] are set forth in similar terms in § 552 of the Restatement (Second) of Torts (1977):  One who, in the course of his business, profession or employment ․ supplies false information for the guidance of others in their business transactions, is subject to liability for pecuniary loss caused to them by their justifiable reliance upon the information, if he fails to exercise reasonable care or competence in obtaining or communicating the information ․ As a result, [our Supreme Court has] held that even an innocent misrepresentation of fact may be actionable if the declarant has the means of knowing, ought to know, or has the duty of knowing the truth.”  (Citation omitted;  internal quotation marks omitted.)  Sturm v. Harb Development, LLC, supra, 298 Conn. 143–44.

The first issue is whether the plaintiff sufficiently pleaded the existence of a duty.   The plaintiff specifically alleged that he “assisted both Dr. Otake and the hospital in building a relationship that would culminate in the issuance of the mutually beneficial two-year stipend as well as the orderly sale and transition of his business and practice.”   Pl.'s Complaint ¶ 9.   These actions give rise to a duty because they occur in the context of a business relationship.

The next issue is whether the plaintiff sufficiently pleaded misrepresentations.   As to Otake, the plaintiff alleges that:  “In reliance on Dr. Otake's representations to purchase his practice and business, Dr. Brown agreed to keep his practice operational.”   Pl.'s Complaint ¶ 7.   Read in the light most favorable to sustaining its legal sufficiency, that allegation states that (1) Otake made alleged misrepresentations and (2) the plaintiff relied upon them to his detriment.   Therefore, the allegations contained in the complaint are legally sufficient to state a cause of action for negligent misrepresentation against Otake.

As to the hospital, the plaintiff alleges that he introduced Otake to the hospital based on representations to the plaintiff that the hospital sought only a limited engagement from a plastic and reconstructive surgeon.   It is alleged that this was untrue, and that the hospital secretly negotiated with Otake to become a full-time employee working in competition with the plaintiff's practice.   In the light most favorable to sustaining the legal sufficiency of the complaint, these allegations demonstrate that, in the course of a business relationship, the hospital supplied false information to the plaintiff, upon which the plaintiff relied to his detriment.   Therefore, the plaintiff has stated a legally sufficient cause of action for negligent misrepresentation as to the hospital.   For the forgoing reasons, the motion to strike is denied as to count two of the complaint.

III

False Representation

“A cause of action for intentional misrepresentation is essentially a claim of fraud ․ Fraud consists [of] deception practiced in order to induce another to part with property or surrender some legal right, and which accomplishes the end designed ․ The elements of a fraud action are:  (1) a false representation was made as a statement of fact;  (2) the statement was untrue and known to be so by its maker;  (3) the statement was made with the intent of inducing reliance thereon;  and (4) the other party relied on the statement to his detriment ․” (Citation omitted, internal quotation marks omitted.)   Reid v. Landsberger, 123 Conn.App. 260, 281, 1 A.3d 1149, cert. denied, 298 Conn. 933, 10 A.3d 517 (2010).

As with count two of the complaint, the plaintiff has adequately pleaded facts that demonstrate that he was owed a duty by the defendants who allegedly supplied him with false information that he relied upon to his detriment.   He has further alleged that such representations were intentional.   For these reasons, the plaintiff has stated a legally sufficient cause of action for false representation, and the motion to strike is denied as to count three of the complaint.

IV

Breach of Duty of Good Faith and Fair Dealing

“[I]t is axiomatic that the ․ duty of good faith and fair dealing is a covenant implied into a contract or a contractual relationship ․ In other words, every contract carries an implied duty requiring that neither party do anything that will injure the right of the other to receive the benefits of the agreement ․ The covenant of good faith and fair dealing presupposes that the terms and purpose of the contract are agreed upon by the parties and that what is in dispute is a party's discretionary application or interpretation of a contract term ․

“To constitute a breach of [the implied covenant of good faith and fair dealing], the acts by which a defendant allegedly impedes the plaintiff's right to receive benefits that he or she reasonably expected to receive under the contract must have been taken in bad faith.”  (Internal quotation marks omitted.)  Rafalko v. University of New Haven, 129 Conn.App. 44, 51, 19 A.3d 215 (2010).

As to the hospital, the plaintiff has failed to plead any contractual relationship between himself and the hospital, and therefore the complaint is not legally sufficient to state a cause of action for breach of the duty of good faith and fair dealing.   As to Otake, as previously discussed, the plaintiff's allegations in count one fail to state a legally sufficient claim for breach of contract.   Without the existence of a contract, the plaintiff has failed to state a legally sufficient cause of action for breach of good faith and fair dealing, and the motion to strike is granted as to count four of the complaint.

V

Fraudulent Concealment

Fraudulent concealment is discussed at General Statutes § 52–595, which states:  “If any person, liable to an action by another, fraudulently conceals from him the existence of the cause of such action, such cause of action shall be deemed to accrue against such person so liable therefor at the time when the person entitled to sue thereon first discovers its existence.”   In discussing this section, it has been held that, “[§ 52–595] is the codification of the common-law rule that fraudulent concealment is an avoidance of an affirmative defense of the statute of limitations.   It gives rise to neither an independent cause of action nor an enhancement of damages.”  Zenk–Pinter v. Henry J. Showah, DDS, P.C., Superior Court, judicial district of Danbury, Docket No. CV 10 6002725 (September 23, 2010, Maronich, J.) (50 Conn. L. Rptr. 689, 690).

Therefore, because Connecticut does not recognize an independent cause of action for fraudulent concealment, the plaintiff has failed to state a legally sufficient cause of action for fraudulent concealment, and the motion to strike is granted as to count five of the complaint.

VI

Unjust Enrichment

“Unjust enrichment applies wherever justice requires compensation to be given for property or services rendered under a contract, and no remedy is available by an action on the contract ․ A right of recovery under the doctrine of unjust enrichment is essentially equitable, its basis being that in a given situation it is contrary to equity and good conscience for one to retain a benefit which has come to him at the expense of another ․ With no other test than what, under a given set of circumstances, is just or unjust, equitable or inequitable, conscionable or unconscionable, it becomes necessary in any case where the benefit of the doctrine is claimed, to examine the circumstances and the conduct of the parties and apply this standard ․ Unjust enrichment is, consistent with the principles of equity, a broad and flexible remedy ․ Plaintiffs seeking recovery for unjust enrichment must prove (1) that the defendants were benefitted, (2) that the defendants unjustly did not pay the plaintiffs for the benefits, and (3) that the failure of payment was to the plaintiffs' detriment.”  (Internal quotation marks omitted.)  Culver v. Culver, 127 Conn.App. 236, 249, 17 A.3d 1048, cert. denied, 301 Conn. 929, 23 A.3d 724 (2011).

In count six, the plaintiff alleges that the value of introductions and services provided to Otake led to his hiring as a full-time employee at the hospital and thus the plaintiff is entitled to compensation.   While unjust enrichment is a broad doctrine, if such behavior were legally sufficient to state cause of action, every person who has recommended another for a job or spoke kindly of them to a potential employer without receiving compensation in return could survive a motion to strike on a claim of unjust enrichment.   In the present case, the plaintiff attempts to allege an agreement to purchase his surgical practice and business, but makes no allegation that he could have expected to be compensated in any way for the introductions to the hospital.   Perhaps the complaint could be read to conclude that he expected to receive a benefit from these introductions in that it would facilitate the sale of his practice and business, but there is no allegation that is legally sufficient to state a claim that Otake was unjustly enriched by accepting a full-time position at the hospital.   Therefore, the plaintiff has failed to state a legally sufficient cause of action for unjust enrichment, and the motion to strike is granted as to count seven of the complaint.

VII

Tortious Interference

“[Our Supreme Court] has long recognized a cause of action for tortious interference with contract rights ․ The essential elements of such a claim include, of course, the existence of a contractual or beneficial relationship and that the defendant(s), knowing of that relationship, intentionally sought to interfere with it;  and, as a result, the plaintiff claimed to have suffered actual loss ․ [F]or a plaintiff successfully to prosecute such an action it must prove that the defendant's conduct was in fact tortious.   This element may be satisfied by proof that the defendant was guilty of fraud, misrepresentation, intimidation or molestation ․ or that the defendant acted maliciously.”  (Internal quotation marks omitted.)  Stancuna v. Schaffer, 122 Conn.App. 484, 488, 998 A.2d 1221 (2010).  “An action for tortious interference with a business expectancy is well established in Connecticut.   The plaintiff need not prove that the defendant caused the breach of an actual contract;  proof of interference with even an unenforceable promise is enough ․ A cause of action for tortious interference with a business expectancy requires proof that the defendant was guilty of fraud, misrepresentation, intimidation or molestation ․ or that the defendant acted maliciously.”  (Internal quotation marks omitted.)  Biro v. Hirsch, 62 Conn.App. 11, 21, 771 A.2d 129, cert. denied, 256 Conn. 908, 772 A.2d 601 (2001).

As to this count, while the plaintiff has not sufficiently pleaded breach of contract, the plaintiff has pleaded that he was, at the very least, in negotiations with Otake to purchase his practice and business.   It was only based on these negotiations that he introduced Otake and to the hospital.   It is also alleged that he introduced Otake as the surgeon who was buying his practice.   Therefore, the hospital is alleged to have been on notice of the beneficial business expectancy, even if it was based on an unenforceable contract.   As previously stated, the plaintiff has adequately pleaded that the hospital made misrepresentations to him regarding the purpose of the introduction.   And finally, it is alleged that the hospital secretly hired Otake to the detriment of the defendant in that any potential deal for Otake to purchase his business was destroyed when Otake was hired as a full-time employee of the hospital.   Therefore, the plaintiff has stated a legally sufficient cause of action as to tortious interference and the motion to strike is denied as to count seven of the complaint.

CONCLUSION

In conclusion, the plaintiff has stated a legally sufficient cause of action for negligent misrepresentation, fraudulent misrepresentation and tortious interference.   Therefore, the motion to strike is DENIED as to counts two, three and seven of the complaint.   The plaintiff has failed to state a legally sufficient cause of action for breach of contract, breach of the covenant of good faith and fair dealing and unjust enrichment, and Connecticut does not recognize an independent cause of action for fraudulent concealment.   Therefore, the motion to strike is GRANTED as to counts one, four, five and six of the complaint.

Domnarski, J.

Domnarski, Edward S., J.