Maarten De Jong v. JEM (2012)

MEMORANDUM OF DECISION RE MOTION TO STRIKE [# 129]

FACTS

On July 5, 2012, following a request to revise, the plaintiff, Maarten De Jong, filed a four-count revised complaint against the defendants, JEM Builders, Inc. (JEM) and Mark Jakan, alleging breach of contract, personal liability and negligent misrepresentation.   In counts two and four ¹ of the revised complaint, which are at issue in the present motion, the plaintiff alleges the following facts.   On February 5, 2010, the plaintiff and JEM entered into an agreement after extensive meetings and discussions.   Pursuant to the agreement, JEM was to construct three structures, a boathouse, a family home and a guesthouse/garage, on the plaintiff's property located at 48 Front Street, Noank, Connecticut.   The plaintiff agreed to pay $557,959.62 to JEM in exchange for its services in constructing the structures to the required specifications.   JEM was to perform the work in a proper workman like manner.   JEM began performing the agreed upon work.   The town of Groton issued a certificate of occupancy on August 18, 2011.   Soon after, the windows of the main structure and the guest house developed leaks.   Upon investigation, it was discovered that the windows were not installed properly causing water damage to the interior of the structures.   In addition, numerous other items were not completed or were installed in a defective condition.   Despite demand to repair these issues, JEM refused to correct the uncompleted and defective work.   As a result, the plaintiffs suffered damages in excess of $350,000.

The plaintiff further alleges that Jakan operated JEM as his alter ego and has not maintained the corporate identity of the company.  “Jakan is the sole owner and director of JEM;  Jakan operates JEM out of his home residence, together with at least one other business entity;  Jakan has operated JEM as his personal checkbook, having to[tal] domination of how the funds paid by De Jong were used for personal and other company debt;  Jakan has not maintained the formal corporate identity of the company;  JEM was not properly capitalized during the time of the [w]ork or prior;  Jakan used his business email account as his personal email account.   Upon information and belief, Jakan further took the funds that De Jong provided to JEM and used these funds for his personal use and did not pay the subcontractors or other suppliers that provided services and materials to the project.   As a result, these subcontractors and suppliers will not provide the completion of the work due to non-payment and De Jong has been forced to hire others to complete portions of the work and expend additional funds for work that should have been completed and for which De Jong had previously paid JEM.”

In count four of the revised complaint directed at JEM, the plaintiff further alleges that prior to hiring JEM to perform the work, there were extensive meetings to discuss the plans and specifications for the project.   At each meeting, JEM expressly represented that it had the requisite experience and training to perform in a workmanlike manner that was appropriate for the project.   In particular, JEM represented that it was local to the geographic area of Noank and knew the project was located on waterfront property.   JEM also represented it understood the importance of building the structures to be watertight and to withstand the elements from heavy rainstorms.   After leaks were discovered, the defendant applied temporary corrective measures that were insufficient in a water front environment to resolve the problem.   Numerous other defects exist due to JEM's lack of requisite skill in performing the work.   JEM misrepresented its special knowledge and competence to provide the services requested and the plaintiff suffered pecuniary damages as a result.

On July 19, 2012, the defendants filed a motion to strike count two against Jakan on the ground that the plaintiff has failed to allege facts to justify piercing the corporate veil based on the conclusory language used in the complaint.   The defendants also moved to strike count four on the ground that the plaintiff has failed to allege facts to support a claim of negligent misrepresentation against JEM. The motion was accompanied by a memorandum of law.   The plaintiff filed a memorandum of law in opposition on August 2, 2012.   The matter was heard at short calendar on August 6, 2012.

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).  “It is fundamental that in determining the sufficiency of a complaint challenged by a defendant's motion to strike, all well-pleaded facts and those facts necessarily implied from the allegations are taken as admitted.”  (Internal quotation marks omitted.)  Coe v. Board of Education, 301 Conn. 112, 116–17, 19 A.3d 640 (2011).  “[P]leadings must be construed broadly and realistically, rather than narrowly and technically.”  (Internal quotation marks omitted.)   Connecticut Coalition for Justice in Education Funding, Inc. v. Rell, 295 Conn. 240, 253, 990 A.2d 206 (2010).  “[I]f facts provable in the complaint would support a cause of action, the motion to strike must be denied ․ Moreover, we note that [w]hat is necessarily implied [in an allegation] need not be expressly alleged ․ It is fundamental that in determining the sufficiency of a complaint challenged by a defendant's motion to strike, all well-pleaded facts and those facts necessarily implied from the allegations are taken as admitted.”  Coppola Construction Co. v. Hoffman Enterprises Ltd. Partnership, 134 Conn.App. 203, 207, 38 A.3d 215, cert. granted in part, 304 Conn. 923, 41 A.3d 663 (2012).

The defendants argue that count two is legally insufficient to state a claim that supports piercing the corporate veil because use of the language “upon information and belief” is conclusory and fails to allege sufficient facts to meet the requirements of the identity rule.   The plaintiff counters that count two alleges sufficient facts and his use of the language is descriptive of the conclusion rather than of his litany of factual allegations.

“The identity rule has been stated as follows:  If [the] plaintiff can show that there was such a unity of interest and ownership that the independence of the corporations had in effect ceased or had never begun, an adherence to the fiction of separate identity would serve only to defeat justice and equity by permitting the economic entity to escape liability arising out of an operation conducted by one corporation for the benefit of the whole enterprise.”   (Citation omitted;  internal quotation marks omitted.)  Labbe v. Carusone, 115 Conn.App. 832, 838, 974 A.2d 738 (2009).  “Although the identity or alter ego doctrine has been primarily applied to reach beyond the veil to another corporation, it may also be employed to hold an individual liable.”  (Internal quotation marks omitted.)  Klopp v. Thermal–Sash, Inc., 13 Conn.App. 87, 89 n.3, 534 A.2d 907 (1987).  “Although Superior Court decisions differ as to what extent a complaint must allege the elements of ․ the identity rule, the decisions are consistent in holding that, at a minimum, the complaint must allege a sufficient factual basis for a court to pierce the corporate veil.”   Ward v. RAK Construction, LLC, Superior Court, judicial district of Ansonia–Milford at Derby, Docket No. CV 09 5010067 (April 8, 2010, Bellis, J.).   “[C]ourts have repeatedly denied claims for piercing the corporate veil where the allegations merely set forth legal conclusions that are unsupported by particularized facts.”   Goldblatt, Marquette & Rashba, P.C. v. Ford, Superior Court, judicial district of New Haven, Docket No. CV 09 6005583 (June 25, 2012, Wilson, J.).  “[A] motion to strike can be granted on the ground that an allegation based upon information and belief is conclusory.”  (Internal quotation marks omitted.)  Ward v. RAK Construction, LLC, supra, Superior Court, Docket No. CV 09 5010067.

In the present case, as to count two, the plaintiff claims that Jakan is individually liable.   To support such a cause of action the plaintiff must allege facts to support piercing the corporate veil.   The plaintiff applies the identity rule to assert his claim of individual liability against Jakan.   As noted by the defendants, the plaintiff's allegations preceded by “upon information and belief” that Jakan operated JEM as his alter ego and that Jakan took funds provided to JEM by the plaintiff for his personal use are conclusory.   These statements alone are insufficient to support piercing the corporate veil.   Even construing the complaint broadly, the plaintiff does not allege particularized facts which, in the aggregate, support these conclusions nor does he provide a sufficient factual basis for the court to pierce the corporate veil.   Accordingly, the defendant's motion to strike count two must be granted.

The defendants also argue that count four is legally insufficient to support a claim of negligent misrepresentation because the plaintiff fails to allege facts that JEM knew or should have known representations it made were false and that the plaintiff reasonably relied on these representations.   The plaintiff counters that his complaint contains sufficient facts such that the necessary elements of negligent misrepresentation are met because the facts alleged in the complaint, although not stated using “talismanic words” of the elements, necessarily imply all the elements are met.

As to count four, “[t]his 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, [w]e have 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, 298 Conn. 124, 143–44, A.3d 859 (2010).  “A viable claim for negligent misrepresentation includes the elements of a misrepresentation of fact, reliance and damages.”   Cunningham Aquatics, LLC v. Yerwood Center, Inc., Superior Court, judicial district of Stamford–Norwalk, Docket No. CV 11 6009661 (August 6, 2012, Adams, J.T.R.).

In count four the plaintiff alleges JEM is liable for damages incurred as a result of JEM's negligent misrepresentation (see Sturm v. Harb Development LLC, supra, 298 Conn. 143–44).   The plaintiff alleges that extensive meetings were conducted prior to the plaintiff hiring JEM for the project and at each meeting JEM expressly represented that it had the requisite experience and training to perform the requested work.   Among these representations was JEM's understanding of the importance of building watertight structures.   After leaks developed in the windows, it was discovered the windows were installed improperly and other aspects of the construction were defective as well.   The implication of these allegations is that the plaintiff hired JEM in reliance on the statements made during meetings and that JEM had a duty to know the truth with regard to its statements concerning its expertise in the conduct of waterfront construction.   Construed broadly, the facts necessarily implied by the allegations in count four of the revised complaint are legally sufficient to support the elements of negligent misrepresentation against JEM. Accordingly, the defendants' motion to strike count four must be denied.

CONCLUSION

For the foregoing reasons, the defendants' motion to strike count two is granted and the motion to strike count four is denied.

Martin, J.

FOOTNOTES

FN1. Although the revised complaint contains four separate counts, the plaintiff utilized “count four” as a heading for each of the counts for negligent representation, there is no “count three” in the revised complaint.   The court construes the language contained in the motion to strike to be an attack on the “count four” related to the negligent misrepresentation claim against JEM and conducts its analysis on this premise..  FN1. Although the revised complaint contains four separate counts, the plaintiff utilized “count four” as a heading for each of the counts for negligent representation, there is no “count three” in the revised complaint.   The court construes the language contained in the motion to strike to be an attack on the “count four” related to the negligent misrepresentation claim against JEM and conducts its analysis on this premise.

Martin, Robert A., J.