United Demolition & Reclamation Statewide Restoration Company et al. v. Altchem Environmental Services, Inc. et al. (2011)

MEMORANDUM OF DECISION RE MOTION TO STRIKE

BACKGROUND:

The plaintiff United Demolition & Reclamation Statewide Restoration Company [“UDR–Statewide”], a joint venture, contracted with Altchem Environmental Services, Inc. [“AES] for demolition services at an apartment complex.   The plaintiff Statewide Restoration Co., LLC [“Statewide”] is one of the members of the joint venture.   Each plaintiff alleges that it is a minority-owned business entity [“MBE”]. The plaintiffs' complaint is in eight counts directed against various defendants including AES and the Housing Authority of New Haven [“HANH”]. The allegations of the plaintiffs against the various defendants are lengthy and complex.   For the purposes of this decision, the court summarizes the relevant facts as alleged by the plaintiffs against HANH as follows.

Upon the completion of Phase 1 demolition work, AES demanded that, if UDR–Statewide did not sign an unconditional waiver and release form [“waiver document”], AES would neither pay UDR–Statewide nor provide it with Phase 2 demolition work.   Under duress, UDR–Statewide signed the waiver document but noted on the form that $76,950 remained unpaid and in dispute.

Subsequently, the waiver document was presented by AES to HANH in its request for payment, but the notation of UDR–Statewide was altered to show a zero amount unpaid and in dispute.   HANH paid funds to AES to the plaintiffs' detriment.

The plaintiffs further allege that HANH entered into a developer's agreement with “HUD,” which the court presumes to be the United States Department of Housing and Urban Development.   The plaintiffs further allege that, as an MBE, UDR–Statewide was a required contractor on the jobsite, pursuant to 12 U.S.C. § 1701u.

After beginning Phase 2 of the demolition work, UDR–Statewide, a joint venture, suffered a dispute between its individual principals and dissolved.   The plaintiffs contend that, because a required MBE was no longer on the jobsite, no further demolition could continue without violation of the applicable HUD statute, the agreement between HANH and HUD as well as HANH's agreements with its contractors.   AES allegedly completed the demolition work, both by itself without a required MBE contractor and together with Statewide.

The fifth count of the complaint is directed against HANH by UDR–Statewide and alleges negligent interference with contract.   The sixth count is directed against HANH by both plaintiffs and alleges breach of contract.   HANH has filed a motion to strike the fifth and sixth counts.   The plaintiffs have objected to the motion.   Argument was heard on November 7, 2011.

LEGAL STANDARD.

“Whenever any party wishes to contest ․ (5) the legal sufficiency of any answer to any complaint, counterclaim or cross complaint, or any part of that answer including any special defense contained therein, that party may do so by filing a motion to strike the contested pleading or part thereof.”  Practice Book § 10–39(a).  “A motion to strike challenges the legal sufficiency of a pleading ․ and, consequently, requires no factual findings by the trial court.”  (Internal quotation marks omitted.)  Greco v. United Technologies Corp., 277 Conn. 337, 347, 890 A.2d 1269 (2006).

In ruling on a motion to strike, “[t]he role of the trial court [is] to examine the [complaint], construed in favor of the [plaintiff], to determine whether the [plaintiff has] stated a legally sufficient cause of action.”   (Internal quotation marks omitted.)  Dodd v. Middlesex Mutual Assurance Co., 242 Conn. 375, 378, 698 A.2d 859 (1997).  “We take the facts to be those alleged in the complaint ․ and we construe 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, we assume 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.”  (Internal quotation marks omitted.)  Batte–Holmgren v. Commissioner of Public Health, 281 Conn. 277, 294, 914 A.2d 996 (2007).

“All well-pleaded facts and those facts necessarily implied from the allegations are taken as admitted;” (internal quotation marks omitted) Violano v. Fernandez, 280 Conn. 310, 318, 907 A.2d 1188 (2006);  what is necessarily implied [in an allegation] need not be expressly alleged (Citation omitted;  internal quotation marks omitted.)  Lombard v. Edward J. Peters, Jr., PC., 252 Conn. 623, 626, 749 A.2d 630 (2000).  “Indeed, pleadings must be construed broadly and realistically, rather than narrowly and technically.”   (Citation omitted;  internal quotation marks omitted.)  Commissioner of Labor v. C.J.M. Services, Inc., 268 Conn. 283, 292–93, 842 A.2d 1124 (2004).   However, “[a] motion to strike is properly granted if the complaint alleges mere conclusions of law that are unsupported by the facts alleged.”  (Internal quotation marks omitted.)  Fort Trumbull Conservancy, LLC v. Alves, 262 Conn. 480, 498, 815 A.2d 1188 (2003).

ANALYSIS:

I. Fifth Count

In the fifth count, UDR–Statewide alleges that HANH knew or should have known that the waiver document was not genuine, but wrongfully accepted it and paid the disputed funds to AES “in privity of contract through the chain of prime contractors on down the line, much to UDR–Statewide's detriment.”   Complaint, Fifth Count, ¶ 17.

To the extent that negligent interference with contract obligations is a cause of action recognized in Connecticut,¹ privity of contract is required in order to maintain a such a claim.  Blake v. Levy, 191 Conn. 257, 259, 464 A.2d 52 (1983).   Presuming its validity, the issue at hand is whether there is privity of contract between UDR–Statewide and HANH by virtue of successive contracts between HANH, AES and finally UDR–Statewide.

UDR–Statewide does not set forth any factual allegations that it entered into a contract with HANH. Rather, UDR–Statewide essentially maintains that there is serial privity which results from the successive contracts running from HANH to AES and from AES to itself.   UDR–Statewide offers no authority for such a position.   Privity of contract is defined as “[t]he relationship between the parties to a contract, allowing them to sue each other but preventing a third party from doing so.”   Black's Law Dictionary (9th Ed.2009).

In Avery v. Smith, 96 Conn. 223, 113 A. 313 (1921), the Supreme Court set forth the governing principle of Connecticut law concerning privity and subcontractors.   That principle provides that privity of contract only exists between a subcontractor and the immediately preceding contractor in the chain of authority.  Id., 228–29.

In Avery, the plaintiff gifted a parcel of land to the Woman's Christian Association and set out to erect a recreation building upon the land as a further gift.   Avery contracted with Truax to erect the building and Truax subcontracted with Johnson for construction of the building.   The court held that:  “No privity of contract existed between Avery and the subcontractors of Truax.   As to Avery the situation was never any other than that he became the debtor of Truax, and Truax became the debtor of Johnson and the other subcontractors, and the only way the subcontractors could come at the debt of Avery to Truax was by suit against Truax and garnishment of the money due Truax in Avery's hands ․” Id.

In much the same way, HANH became the debtor of AES and AES became the debtor of UDR–Statewide.   While there are sufficient allegations of privity between UDR–Statewide and AES, UDR–Statewide has not alleged direct privity between itself and HANH. Therefore, because of the absence of such an allegation, the motion to strike the Fifth Count is granted.²

II. Sixth Count

The plaintiffs allege that each, as an MBE, was an intended beneficiary of HANH's agreement with HUD. As intended beneficiaries, they were entitled to (1) the institution of, and adherence to, reasonable procedures to prevent payment based on an altered document and (2) and protection from AES's usurpation of their demolition work.

The defendant moves to strike count six for breach of contract on the ground that no contract exists pursuant to which the plaintiffs, UDR and Statewide, could be intended beneficiaries.   Specifically, the defendant argues that, “despite Plaintiffs' assertion, HANH does not have a developer's agreement with HUD.” The plaintiffs object to the motion to strike by arguing that paragraph twenty-nine of count six contains factual allegations sufficient to demonstrate the existence of an agreement between the defendant and HUD, to which the plaintiffs were intended beneficiaries.

“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 v. Russo, 130 Conn.App. 823, 832, 25 A.3d 707 (2011).  “When a plaintiff pleads a cause of action for breach of contract by setting forth a specific contractual obligation and alleges that it has not been met, this is sufficient to sustain a motion to strike.   It is not necessary to allege specific terms of the contract ․ Whether the terms of the contract support that allegation is a factual question to be determined by the fact finder ․” Katcher v. 3V Capital Partners, LP, Superior Court, complex litigation docket at Stamford–Norwalk, Docket No. X05 CV 08 5008383 (February 1, 2011, Blawie, J.).  “If a complaint contains the necessary elements of a cause of action, it will survive a motion to strike.”  Malizia v. Anderson, 42 Conn.Sup. 114, 116, 602 A.2d 1076 [5 Conn. L. Rptr. 55] (1991).

As a motion to strike can only be used to challenge the factual allegations regarding the existence of a contract, it is not a proper procedural vehicle through which to challenge the actual existence of a contract.   The defendant claims that the plaintiffs' assertion of a contract is untrue.   Whether an assertion is true or not is for the fact finder.   The factual allegations of the sixth count are sufficient to establish a cause of action for breach of contract.   The motion to strike the sixth count is denied.

ORDER:

The defendant's motion to strike (137.00) the fifth count is granted.   The objection to same (139.00) is overruled.   The defendant's motion to strike the sixth count is denied.   The objection to same is sustained.

Robert E. Young, J.

FOOTNOTES

FN1. The provenance of a tort of negligent interference with contract is murky.   Such a cause of action is generally not recognized.   See Prosser and Keeton on Torts, Ch. 24 § 129 (5th Ed., 1984).   It appears to have arisen in Connecticut in 1856 with Connecticut Mutual Life Ins. Co. v. New York & N.H.R. Co., 25 Conn. 265.   The Supreme Court held that such an action could not be maintained because there was no privity of contract.   Id., 276–77.   Over the last 150 years, this holding has transmuted into authority that negligent interference with contract is a recognized cause of action, requiring privity of contract.   See, e.g., Blake v. Levy, 191 Conn. 257, 259, 464 A.2d 52 (1983).   If such a cause of action is recognized, we know precious little else about it, particularly the necessary elements necessary to allege and prove it other than privity..  FN1. The provenance of a tort of negligent interference with contract is murky.   Such a cause of action is generally not recognized.   See Prosser and Keeton on Torts, Ch. 24 § 129 (5th Ed., 1984).   It appears to have arisen in Connecticut in 1856 with Connecticut Mutual Life Ins. Co. v. New York & N.H.R. Co., 25 Conn. 265.   The Supreme Court held that such an action could not be maintained because there was no privity of contract.   Id., 276–77.   Over the last 150 years, this holding has transmuted into authority that negligent interference with contract is a recognized cause of action, requiring privity of contract.   See, e.g., Blake v. Levy, 191 Conn. 257, 259, 464 A.2d 52 (1983).   If such a cause of action is recognized, we know precious little else about it, particularly the necessary elements necessary to allege and prove it other than privity.

FN2. HANH raised another ground of insufficiency of pleading as to the Fifth Count, that UDR–Statewide failed to allege facts sufficient to demonstrate that this defendant interfered with the contract between the plaintiff and SES. The court does not address this ground as the failure to sufficiently allege privity is dispositive of the Fifth Count.   Additionally, the defendant argues that UDR–Statewide fails to sufficiently allege a cause of action in the Fifth Count for intentional interference with contract.   A fair reading of the allegations of this count, together with its heading, would not lead the court to presume that such a cause of action was alleged nor does the plaintiff address it in its memorandum in opposition to the motion to strike and, therefore, the court does not consider this argument..  FN2. HANH raised another ground of insufficiency of pleading as to the Fifth Count, that UDR–Statewide failed to allege facts sufficient to demonstrate that this defendant interfered with the contract between the plaintiff and SES. The court does not address this ground as the failure to sufficiently allege privity is dispositive of the Fifth Count.   Additionally, the defendant argues that UDR–Statewide fails to sufficiently allege a cause of action in the Fifth Count for intentional interference with contract.   A fair reading of the allegations of this count, together with its heading, would not lead the court to presume that such a cause of action was alleged nor does the plaintiff address it in its memorandum in opposition to the motion to strike and, therefore, the court does not consider this argument.

Young, Robert E., J.