LLC v. LLC (2011)

MEMORANDUM OF DECISION

I

PROCEDURAL HISTORY AND BACKGROUND

The parties in this action are the plaintiffs, Danbury Sports, LLC and Indoor Courts of America, Inc. (ICA) and the defendants, Harry N. Pharr/Architect & Planner, LLC (Pharr Architects), Harry N. Pharr and Jason T. Anderson.

On April 2, 2011, both of the plaintiffs commenced this action by filing a seven-count complaint as against all of the defendants.   In that complaint both plaintiffs allege the following claims:  (1) breach of contract;  (2) breach of implied warranty;  (3) negligence;  (4) intentional misrepresentation;  (5) breach of fiduciary duty;  (6) breach of good faith and fair dealing;  and (7) a violation of the Connecticut Unfair Trade Practices Act, General Statutes § 42–110b, et seq.

On June 16, 2011, the defendants moved to dismiss the plaintiffs' complaint in its entirety on the following grounds implicating this court's subject matter jurisdiction:  (1) ICA is not registered or authorized to do business in Connecticut;  (2) ICA is not a party to the contract entered into between the parties;  (3) the plaintiffs filed a demand for arbitration pursuant to the terms of the contract entered into between the parties.   The defendants Harry Pharr and Jason Anderson have also moved to dismiss on the grounds of lack of personal jurisdiction due to insufficiency of process.   The plaintiffs filed a memorandum in opposition to the motion to dismiss and the defendants filed a reply memorandum.   The defendants did not move to stay these proceedings based on the prior filed arbitration proceeding.   Oral argument was scheduled on the motions and was heard by this court on September 26, 2011.

II

FACTUAL BACKGROUND

For purposes of this motion to dismiss, the court accepts as true the following relevant facts alleged in the complaint.   The plaintiffs allege in their complaint that on or beginning November 2007, plaintiffs requested that Pharr Architects provide them with an estimate to provide architectural and planning design services in connection with the renovation of the Beaverbrook Tennis Building in Danbury, Connecticut.   The complaint also alleges that on or about November 6, 2007, defendant Pharr Architects provided plaintiffs with the requested proposal and that according to the terms of the proposal, Pharr Architects agreed to provide architectural and planning design services for $66,400.   The complaint further alleges that on or about December 12, 2007, the parties executed a written agreement regarding architectural and planning design services for the project and utilized a standard form agreement (the Agreement).   These allegations were made in the first count of the complaint and were asserted by both plaintiffs.   The plaintiffs also alleged that as a result of its substandard performance of certain required duties, Pharr Architects breached the agreement which it entered into with the plaintiffs.”   (Emphasis added.)

The Agreement section 11.5.1 specifically provided that “any claims, disputes or controversies between the parties arising out of or relating to the Agreement, or the breach thereof shall be decided by arbitration in accordance with the Construction Industry Arbitration Rules of the AAA then in effect, unless the parties mutually agree otherwise.

On or about March 10, 2011, the plaintiffs filed a demand for arbitration with the American Arbitration Association.   In that demand, the plaintiffs claimed that Pharr Architects had breached the agreement entered into between the parties on December 12, 2007 and was negligent in preparing faulty drawings and for failing to comply with contract times and legal requirements.   On April 4, 2011, the defendant Pharr Architects filed an answering statement and counterclaim with the American Arbitration Association (AAA).   On or about April 29, 2011, the plaintiffs served the complaint in this action on defendants.

III

DISCUSSION

“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 ․ A motion to dismiss tests, inter alia, whether, on the face of the record, the court is without jurisdiction.”  (Internal quotation marks omitted.)  Beecher v. Mohegan Tribe of Indians of Connecticut, 282 Conn. 130, 134, 918 A.2d 880 (2007).  “The grounds which may be asserted in [a motion to dismiss] are:  (1) lack of jurisdiction over the subject matter;  (2) lack of jurisdiction over the person;  (3) improper venue;  (4) insufficiency of process;  and (5) insufficiency of service of process.”  Zizka v. Water Pollution Control Authority, 195 Conn. 682, 687, 490 A.2d 509 (1985).

“[A]ny claim of lack of jurisdiction over the person as a result of an insufficiency of service of process is waived unless it is raised by a motion to dismiss filed within thirty days ․ (Emphasis in original.)  Pitchell v. Hartford, 247 Conn. 422, 433, 722 A.2d 797 (1999).  “Facts showing the service of process in time, form, and manner sufficient to satisfy the requirements of mandatory statutes in that regard are essential to jurisdiction over the person.”  (Emphasis in original;  internal quotation marks omitted.)   Bridgeport v. Debek, 210 Conn. 175, 179–80, 554 A.2d 728 (1989).

1. Insufficient Service of Process

The defendants have moved to dismiss the claims asserted as against Harry Pharr and Jason Anderson on the grounds that the plaintiffs' service of process on the individual defendants Pharr and Anderson was insufficient and therefore the court lacks personal jurisdiction over them.   The defendants contend that the plaintiffs failed to comply with the service of process requirements pursuant to General Statutes § 52–59b because the process served on Anderson lacked “an endorsement thereon of the service upon the Secretary of the State” while process was never served on Pharr.   The plaintiffs do not dispute that such service failed to have the requisite endorsement, but argue that such requirement is a technicality that should not result in the dismissal of the claims as against Pharr and Anderson.

“Where a particular method of serving process is pointed out by statute, that method must be followed.”  Board of Education v. Local 1282, 31 Conn.App. 629, 632, 626 A.2d 1314, cert. granted, 227 Conn. 909, 632 A.2d 688 (1993).  “Unless service of process is made as the statute prescribes, the court to which it is returnable does not acquire jurisdiction.”  Id. “One who is not served with process does not have the status of a party to the proceeding ․ A court has no jurisdiction over persons who have not been made parties to the action before it.”  (Internal quotation marks omitted.)   Security Ins. Co of Hartford v. Lumbermens Mutual Casualty Co., 264 Conn. 688, 722, 826 A.2d 107 (2003).

The plaintiffs have failed to comply with the statutory provisions regarding service of process both on Pharr and Anderson.   Based on the foregoing, the defendants' Motion to Dismiss the claims as against Pharr and Anderson on the grounds of insufficiency of process is granted.

2. Subject Matter Jurisdiction and Filing of Demand for Arbitration

The defendants next move to dismiss the complaint against them on the grounds that the court is without subject matter jurisdiction to decide the present action as the plaintiffs have filed a demand for arbitration with the AAA relating to the claims in this action.

The defendants also argue that the plaintiffs lack standing as the written December 7, 2007 Agreement required the plaintiffs to arbitrate.   In particular the defendants cite to section 11.5.1 of the December 7, 2007 Agreement.   The Agreement section 11.5.1 specifically provided that “any claims, disputes or controversies between the parties arising out of or relating to the Agreement, or the breach thereof ․ shall be decided by arbitration in accordance with the Construction Industry Arbitration Rules of the AAA then in effect, unless the parties mutually agree otherwise.”   The plaintiffs contend they accidentally filed the demand for arbitration and that their true intent was to be in Superior Court.

“Pursuant to the rules of practice, a motion to dismiss is the appropriate motion for raising lack of subject matter jurisdiction.”  St. George v. Gordon, 264 Conn. 538, 545, 825 A.2d 90 (2003).  “[T]he plaintiff bears the burden of proving subject matter jurisdiction, whenever and however raised.”   (Internal quotation marks omitted.)  Fort Trumbull Conservancy, LLC v. New London, 265 Conn. 423, 430 n.12, 829 A.2d 801 (2003).  “[I]n determining whether a court has subject matter jurisdiction, every presumption favoring jurisdiction should be indulged.”  (Internal quotation marks omitted.)   Connor v. Statewide Grievance Committee, 260 Conn. 435, 443, 797 A.2d 1081 (2002).

General Statutes § 52–408 specifically provides that a written agreement to arbitrate “shall be valid, irrevocable and enforceable except when there exists sufficient cause at law or in equity for the avoidance of written contracts generally.”  “Arbitration is a creature of contract.   It is the province of the parties to set the limits of the authority of arbitrators, and the parties will be bound by the limits they have fixed.”  Turner Construction Co. v. Eppoliti, Inc., 28 Conn.App. 139, 142, 609 A.2d 1064 (1992).  “Whether the parties have agreed to submit to arbitration not only the merits of the dispute, but the very question of arbitrability, as well, depends upon the intention manifested in the agreement they have made.”  Id., at 142–43.   “The intent to submit the question of arbitrability to an arbitrator may be demonstrated in an agreement by an express provision or by the use of broad terms.”  Id., at 143.

The court agrees that the subject arbitration clause relied upon by the defendants and agreed to by the plaintiffs, is valid, enforceable and binding on the parties and does apply to these proceedings.   However, the court disagrees that dismissal of the claims asserted in this action on the grounds of lack of subject matter jurisdiction is the proper remedy.¹

In Catrini v. Erickson, 113 Conn.App. 195, 966 A.2d 275 (2009), the Appellate Court held that the fact that General Statutes § 52–409 allows a court to enter a stay involving an arbitration agreement negates any concept that an arbitration remedy deprives the court of jurisdiction.  “In short, because the power to order a stay implies that the court has jurisdiction over a matter, the legislature could not have empowered the court to enter a stay in such a matter unless the court has jurisdiction over it.”  Id., at 197.   In addition, the Appellate Court held that “[s]imilarly, courts have jurisdiction to enforce arbitration agreements and to enforce, modify or vacate arbitration awards, and are often called upon to interpret and construe the enforceability and scope of such agreements.”  Id., at 197 n.2.

Based on the foregoing, the defendants' motion to dismiss on the grounds this court lacks subject matter jurisdiction due to the plaintiffs' filing of a demand for arbitration and pending arbitration proceeding is denied.

3. ICA's Failure to Have Certificate of Authority

The defendants next move to dismiss the claims asserted by plaintiff Indoor Courts of America, Inc. (ICA) on the grounds that ICA is not registered nor authorized to do business in Connecticut.   In support of their position, the defendants cite to General Statutes § 33–921(a) which provides that “a foreign corporation transacting business in this state without a certificate of authority may not maintain any proceeding in any court in this state until it obtains a certificate of authority.”

The plaintiff ICA does not dispute that it was transacting business in Connecticut and as a result the court does not need to make factual findings as to this issue.   Moreover, the plaintiff ICA does not dispute that a certificate of authority is required.   While it has asserted that it is in the process of obtaining such a certificate of authority, it has not moved for a stay of these proceedings pursuant to General Statutes § 33–921(c) until it obtains said certificate of authority.   Moreover, the plaintiff ICA has not made any supplemental filing regarding the obtaining a certificate of authority since oral argument on this motion in September 2011.   Instead the plaintiff ICA requests the court to proceed with the case on the promise that one will be obtained.

As it is clear that the plaintiff ICA is bound by the requirements of General Statutes § 33–921(a), it is required to have a certificate of authority in order to proceed with its claims in this case.   Given the plaintiff's representations, which the court at this time will accept as good faith representations, that it is in the process of obtaining a certificate of authority, pursuant to General Statute § 33–921(c) all claims of plaintiff ICA shall be stayed pending its obtaining a certificate of authority from the State of Connecticut.   If the plaintiff ICA fails to obtain such certificate of authority, its claims will be dismissed.

Based on the foregoing, at this time the defendant's motion to dismiss on these grounds is denied without prejudice.

IV

CONCLUSION

Defendants Jason Anderson's and Harry N. Pharr's motion to dismiss claims against them on the grounds of lack of personal jurisdiction due to insufficiency of process is granted.   Defendants' motion to dismiss all of the claims in the complaint against them on the grounds that this court lacks subject matter jurisdiction over said claims as a demand for arbitration was filed and the claims involved are arbitrable is denied.   Finally, defendants' motion to dismiss ICA's claims against them is denied without prejudice at this time.   Said claims are stayed pending ICA's obtaining a certificate of authority.

BY THE COURT

Ozalis, J.

FOOTNOTES

FN1. The defendants did not move in the alternative to stay these proceedings.   Thus, the court cannot order a stay nor address this issue at this time..  FN1. The defendants did not move in the alternative to stay these proceedings.   Thus, the court cannot order a stay nor address this issue at this time.

Ozalis, Sheila A., J.