LLC v. Marc Cehovsky et al. (2013)

MEMORANDUM OF DECISION RE MOTION FOR SUMMARY JUDGMENT

I. INTRODUCTION

This is an action by plaintiff against the defendants, two former employees and the company they formed for damages arising out of alleged actions prior to and following termination of the individual defendants' employment.   By affidavit and supporting documents defendants have set forth the following facts in support of their motion for summary judgment.¹

The Plaintiff, G.J. Swanson, LLC d/b/a Swanson's Clambakes (“Swanson's) operates a retail seafood store and also operates a catering business pursuant to which it caters private clambake events.   Complaint.  According to their affidavits Swanson's hired the Defendant Marc Cehovsky (“Cehovsky”) in 2000 and the Defendant Jeffrey Seganos (“Seganos”) in 2004 to work at various off-site clambake events as a part-time, seasonal employee.

The affidavits of Marc Cehovsky and Jeff Seganos further state the following facts.   Their duties while working for Swanson's included picking up food from Swanson's main catering facility located at Dewey Street, Bridgeport, Connecticut, and transporting it to various locations where they cooked and served it to customers and their guests.   Swanson's did not provide either Cehovsky or Seganos with training, client lists or confidential or secret recipes.   Neither Defendant ever worked in Swanson's main kitchen, but only worked at the off-site clambake events.   According to their affidavits, both Cehovsky and Seganos worked part time on a seasonal basis for plaintiff and were paid $120.00 and $110.00 respectively per clam bake plus tips when given by clients.   Both were/are otherwise gainfully employed by other institutions.

At the time they were hired, Swanson's did not ask either Cehovsky or Seganos to sign an employment agreement, a non-compete or non-solicitation agreements or any other agreement which would restrict their employment or business enterprises while working for Swanson's or afterward.   Moreover, Swanson's never requested that any such agreement be executed at any other time during their employment.   Affidavits of Marc Cehovsky and Jeff Seganos.

In or around 2010, Swanson's clambake business volume decreased significantly.   In or around August 2010, Cehovsky and Seganos formed the Defendant LLC, Sea–House but no work was performed by the LLC at that time.   Swanson's laid off Cehovsky and Seganos in October 2010 when the clam bake season ended.   In or around December 2010, Cehovsky and Seganos wrote to Gary Swanson and requested additional remuneration for the next season or a role in the business.   A copy of the letter is attached to both Affidavits as Exhibit A. Swanson's acknowledged receipt of the letter but never provided a substantive response.   Because of the lack of a response to their letter and the significantly decreased work Swanson's had provided to them, Cehovsky and Seganos prepared to work the spring 2011 clambake season for Sea–House, LLC. Sea–House was successful and operated a number of clambakes during the 2011 season.   Following the 2011 season, Sea–House contracted to perform clambakes for the 2012 season.   Affidavits of Marc Cehovsky and Jeff Seganos.

In May 2012, at the commencement of the new clambake season, Swanson's brought the instant civil action seeking a preliminary injunction against the individual and corporate Defendants in order to prevent them from working the 2012 clambake season in competition with Swanson's.   The court scheduled a show cause hearing for June 18, 2012.   On June 15, 2012, the defendants filed their answer and counterclaim.   They also filed requests for admissions and interrogatories and production requests on July 19, 2012.   To this date, the plaintiff has failed to answer the counterclaim, reply to the request to admit or comply with the discovery request.   Finally, the plaintiff did not file any response to the subject motion for summary judgment.   Swanson did not pursue injunction.   Although Sea–House conducted business in 2012 as scheduled, as a result of Swanson's actions in attempting to prevent Sea–House from operating its business after Cehovsky and Seganos had been separated from Swanson's employ for over 18 months, defendants claim that Swanson's actions interfered with Sea–House's business resulting in damages to Sea–House.   Defendants claim that Swanson's total failure to prosecute this action, and its failure or neglect to answer Defendants' request for admissions and other discovery collectively establish that no genuine issues of material fact exist with regard to Plaintiff's claims and summary judgment should enter in Defendants' favor on Plaintiff's Complaint, as well as on Defendants' Counterclaims.

II. APPLICABLE LAW

A. Standard For Summary Judgment.

A case should be decided by summary judgment when a trial would produce no additional material evidence and when the moving party is entitled to judgment as a matter of law.   The standard for summary judgment in this state is well settled:

Practice Book § 17–49 provides that summary judgment shall be rendered forthwith if the pleadings, affidavits, and other proofs submitted show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.

Zauner v. Brewer, 220 Conn. 176, 180 (1991) (quoting Gurliacci v. Mayer, 218 Conn. 431, 561–62 (1991)).  “The party seeking summary judgment has the burden of showing the nonexistence of any material fact.”  Connell v. Colwell, 214 Conn. 242, 246 (1990).   A material fact is one that would make a difference in the result of the case.  United Oil Company, Inc. v. Urban Redevelopment Commission, 158 Conn. 364, 379, 260 A.2d 596, 604 (1969).  “It is not enough that one opposing a motion [for summary judgment] claims there is a genuine issue of material fact;  some evidence showing the existence of such an issue must be presented.”  Boyce v. Merchants Fire Insurance Co., 204 F.Sup. 311, 314 (D.Conn.1962);  Kasowitz v. Mutual Construction Co., 154 Conn. 97, 100, 228 A.2d 149, 152 (1967).   If the moving party's evidence is submitted in accordance with Practice Book § 17–46 (on personal knowledge and admissible in evidence) and is such that a jury would not be free to disbelieve it even in spite of counter affidavits, the court should grant the motion.  United Oil, 158 Conn. at 280, 260 A.2d at 604.   The Connecticut Supreme Court has stated that a court appropriately grants a motion for summary judgment only “if a fair and reasonable person could conclude only one way.”  Miller v. United Technology Corp., 233 Conn. 732, 751, 660 A.2d 810, 822 (1995).

B. Defendants' Post–Termination Right To Compete with Plaintiff.

The Plaintiff's complaint alleges misappropriation of trade secrets, breach of fiduciary duty, violation of CUTPA, unjust enrichment, tortious interference with business relations and conversion, all predicated on Defendants' work for Sea–House, LLC after leaving Swanson's employ in December 2010.   In the absence of a restrictive covenant, a former employee may compete with his or her former employer upon termination of employment.  Town & Country House & Home Service, Inc. v. Evans, 150 Conn. 314, 317 (1963);  Elm City Cheese Co. v. Federico, 251 Conn. 59, 69 (1999).   In this case, there was absolutely no written or oral agreement between the Plaintiff and either individual Defendant which would restrict their ability to work for a competitor after leaving Swanson's employ.   In this case because the Plaintiff failed to timely answer Defendants' Requests to Admit, the truth of those allegations are conclusively established against them and summary judgment in Defendants' favor must enter.  Practice Book § 13–22;  see, W. Moller & W. Horton, Connecticut Practice (3d Ed.) § 240;  Orenstien v. Old Buckingham Corp., 205 Conn. 572, 575–77 (1987).   The court takes judicial notice of the copy of the Request for Admissions served upon Plaintiff attached to the Affidavits of Cehovsky and Seganos as Exhibit C.

1. Count I Misappropriation of Trade Secrets

According to § 35–51(d), a trade secret is “information, including a formula, pattern, compilation, program, device, method, technique, process, drawing, cost data or customer list that:  (1) derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use, and (2) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.”  “A primary issue to be determined ․ is whether there is a trade secret existing which is to be protected.”  Plastic & Metal Fabricators, Inc. v. Roy, 163 Conn. 257, 267 (1972).   Swanson's never identifies the particular “trade secrets” it alleges were misappropriated or anything that would constitute a protected trade secret.   The Defendants assert that they were never given recipes, cooking techniques, or anything else that could possibly fall within the purview of the statute.   Affidavits of Cehovsky and Seganos.   Furthermore, because the Plaintiff failed to timely respond to Defendants' requests to admit, those requests, in particular Swansons' failure to provide Seganos or Cehovsky with “written confidential or secret recipes” (# 17) must be deemed conclusively admitted.  Practice Book § 13–22;  see, W. Moller & W. Horton, Connecticut Practice (3d Ed.) § 240.  Orenstien v. Old Buckingham Corp., 205 Conn. 572, 575–77 (1987).   In the absence of any evidence that would support a finding of misappropriation of trade secrets, the court grants the defendants' motion for summary judgment on Count 1.

2. Count Two Breach of Fiduciary Duty

Again:  “[generally speaking, in the absence of a restrictive covenant, a former employee may compete with his or her former employer upon termination of employment.]”  Town & Country House & Home Service, Inc. v. Evans, 150 Conn. 314, 317 (1963);  Elm City Cheese Co. v. Federico, 251 Conn. 59, 69 (1999).   Defendants argue and the court is bound by judicial authority to agree that, in the complete absence of any such restriction, the Defendants were free to compete with Swanson's after leaving its employ.   In fact, Comment (e) of § 393 of the Restatement (Second) Agency, speaking of an employee or agent, says in relevant part:

Even before the termination of the agency, he (sic) is entitled to make arrangements to compete, except that he cannot properly use confidential information peculiar to his employer's business and acquired therein.   Thus, before the end of his employment, he can properly purchase a rival business and upon termination of employment immediately compete.   He is not, however, entitled to solicit customers for such rival business before the end of his employment nor can he properly do other similar acts in direct competition with the employer's business.

“Connecticut courts have specifically refused to define a fiduciary relationship in precise detail and in such a manner as to exclude new situations ․ Instead, a fiduciary relationship exists where there is a justifiable trust confided on one side and a resulting superiority and influence on the other ․ A fiduciary relationship is characterized by a unique degree of trust and confidence between the parties, one of whom has superior knowledge, skill or expertise and is under a duty to represent the interest of the other ․ The superior position of the fiduciary or dominant party affords him great opportunity for abuse of the confidence reposed in him ․” (Citations omitted;  internal quotation marks omitted.)   See, Southbridge Assoc. v. Garofalo, 53 Conn.App. 11, 17–19, cert. denied, 249 Conn. 919 (1999).   Once again, the court is obligated to find the facts as admitted pursuant to the defendants' request for admission, i.e., that Cehovsky and Seganos were seasonal employees and did not occupy the positions of trust as commonly understood in business relationships.   Finally, the court accepts for purposes of this motion that Defendants did not compete with the Plaintiff prior to their termination.   Affidavits of Cehovsky and Seganos.

The facts establish that the individual Defendants fulfilled all of their responsibilities of employment while employed by Swanson's and continued to do their job duties until Swanson's laid them off.   Plaintiff does not allege that Defendants took any documents with them or contacted any clients about the new LLC until after they were no longer employed by Swanson's.   In fact, Cehovsky and Seganos wrote to Swanson's requesting increased hours or a share in the business in order to stay employed by Swanson's.   Cehovsky and Seganos had the right to compete with Swanson's after they were terminated without the impediment of any fiduciary duty toward their former employer.   The court therefore, grants the defendants' motion for summary judgment on Count 2.

3. Count 3 Alleged CUTPA Violation

In order to sustain a CUTPA claim, a court must consider:  “(1) whether the practice, without necessarily having been previously considered unlawful, offends public policy as it has been established by statutes, the common law, or otherwise-whether, in other words, it is within at least the penumbra of some common law, statutory, or other established concept of unfairness;  (2) whether it is immoral, unethical, oppressive, or unscrupulous;  (3) whether it causes substantial injury to consumers.”  Hartford Whalers Hockey Club v. Uniroyal Goodrich Tire Co., 231 Conn. 276, 283 (1994).   A violation of CUTPA may also be established by showing either an actual deceptive practice or a practice amounting to a violation of public policy.  Conaway v. Prestia, 191 Conn. 484 (1983).   Although Plaintiff alleges that establishing a competing business and the alleged use of trade secrets constitute CUTPA violations, as indicated there is no genuine issue of material fact with regard to the Defendants' right to set up a competing business, the absence of employment or non competition agreements or misappropriation of trade secrets.   Thus, plaintiff has failed to assert any material fact which would permit a trier to find that the defendants engaged in any unfair, unethical or deceptive practices vis-a-vis the Plaintiff or the public, or that they violated any public policy.   For these reasons the court grants summary judgment for the Defendants on Count 3.

4. Count 4 Unjust Enrichment

The law of contracts has long recognized that “[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.”  (Internal quotation marks omitted.)  Vertex, Inc. v. Waterbury, 278 Conn. 557 (2006);  Meany v. Connecticut Hosp. Ass'n, Inc., 250 Conn. 500 (1999).   The elements of unjust enrichment are well established.   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 benefit, and (3) that the failure of payment was to the plaintiffs' detriment.”  Bolmer v. Kocet, 6 Conn.App. 595, 612–13 (1986).   Here, the Plaintiff can prove neither that the Defendants were wrongfully benefitted, nor that any benefit to the Defendants was unjust.

In its Complaint, Swanson's alleges that Cehovsky and Seganos used a client's list, marketing information and pricing information to unfairly compete with Swanson's.   However, Swanson fails to allege facts which would support a finding that the Defendants' actions were prevented by contract, statutory or common law.   Moreover, Plaintiff's failure to answer Defendants' Requests to Admit conclusively establish the truth of Cehovsky's and Seganos' positions that no written client list (# 16) was ever provided to them, no confidential or secret recipes were ever conveyed (# 17), and that neither Defendant ever worked in Swanson's kitchen (# 18).   In the absence of any basis for plaintiff's claim for equitable relief the court grants the motion for summary judgment on Count 4.

5. Count 5 Tortious Interference

The Plaintiff alleges that the Defendants tortiously interfered with Swanson's business relationships.  “Connecticut has long recognized a cause of action for tortious interference with business relations.”   See, Blake v. Levy, 191 Conn. 257 (1983).   The necessary elements of a cause of action in tortious interference with business relations are the existence of a business relationship, an intentional and improper interference with that relationship and a resulting loss of benefits of the relationship.  Id. at 262.  “A plaintiff states an actionable cause [for tortious interference with a contract] by alleging that the defendant intentionally interfered with a business or contractual relationship of the plaintiff and that the plaintiff, as a result, has suffered an actual loss ․” DiNapoli v. Cook, 43 Conn.App. 419, 428, cert. denied, 239 Conn. 951 (1996).  “[N]ot every act that disturbs a contract or business expectancy is actionable.”  Blake v. Levy, supra, 191 Conn. at 260.   A defendant is guilty of tortious interference if he has engaged in improper conduct.   See, Restatement (Second) of Torts, section 766, 766B, 767 (1979).  “[T]he plaintiff [is required] to plead and prove at least some improper motive or improper means.”  Kakadelis v. DeFabritis, 191 Conn. 276, 279 (1983).  “To raise an allegation of willful conduct, the plaintiff must clearly plead that the [harm] was caused by the willful or malicious conduct of the defendants.”  Warner v. Leslie–Elliott Constructors, Inc., 194 Conn. 129, 139 (1984).

Swanson hired Cehovsky in 2000 and Seganos in 2004 to work its busy time, the summer clambake seasons.   Their duties were to pick up the food, cook and serve at various locations.   They had no role in marketing or management and never received information about clients, pricing or recipes.   The purpose of the Defendants' December 2010 letter written to Swanson's owner was to ask for more money or a share in the business, candidly stating that their reasons were related to their personal financial needs and family obligations.   The Defendants state that they “need to make more money, work less and have the flexibility of schedule we both require.”   The tone of this letter is sincere and its content is straightforward.   It clearly indicates an absence of ill will or malice toward the plaintiff.   They close the letter with the hope to remain on good terms and a request for a response.   Instead Gary Swanson sent an email acknowledging receipt of the letter saying he was busy and would contact them the following week.   Mr. Swanson never responded to their letter.

Based on the affidavits and letter of Cehovsky and Seganos to the Plaintiff, there is no material issue that would support a finding of improper motive, wilful or malicious conduct necessary to support plaintiff's claim.   Therefore, the court grants the motion for summary judgment in favor of the Defendants on Count 5.

6. Count 6 Conversion

Conversion is an unauthorized assumption and exercise of the right of ownership over goods belonging to another, to the exclusive of the owner's rights.  Discover Leasing, Inc. v. Murphy, supra at 309.  “Conversion is some unauthorized act which deprives another of his property permanently or for an indefinite time;  some unauthorized assumption and exercise of the powers of the owner to his harm.   The essence of the wrong is that the property rights of the plaintiff have been dealt with in a manner adverse to him, inconsistent with his right of dominion and to his harm ․” (Citation omitted;  internal quotation marks omitted.)  Label Systems Corp. v. Aghamorhammadi, 270 Conn. 291, 329 (2004).

In this case, it is clear that no claim for conversion can lie.   Plaintiff's failure to respond to the Requests to Admit, particularly # 16 and # 17, establishes that no client list or secret recipes were ever provided to Defendants even if these items could be considered “property” or the subject of a conversion.   The court grants the motion for summary judgment as to Count 6.

III. Defendants' Counterclaims

“Any party may move for summary judgment upon any counterclaim ․ as if it were an independent action.  Practice Book § 17–49.   Because a counterclaim is a separate and distinct action;  Practice Book § 379;  Home Oil Co. v. Todd, 195 Conn. 333, 341 (1985).   A party seeking summary judgment on both a complaint and a counterclaim must file an appropriate motion addressed to each.”   See Practice Book § 17–49.   In this case, the Defendants have asserted three Counterclaims against the Plaintiff:  Tortuous interference with Business Relations, Abuse of Process and Violation of CUTPA.   However, Defendants/Counterclaim Plaintiff's here seek summary judgment only as to Count 2, Abuse of Process.

The facts as presented establish the following.   The individual defendants worked for the plaintiff as seasonal employees in its clambake catering business from 2000 and 2004 respectively.   Their employment was not subject to any written agreement, confidentiality, noncompete or trade secret terms which would limit or restrict their work after leaving plaintiff's employ.   They did not participate in marketing or any aspect of the plaintiff's business other than transporting food to catering sites where they cooked and served it.   Cehovsky earned $120 per clambake and Seganos earned $110 per clambake.   They were not given customer lists, recipes, marketing or pricing information.   In 2009 and 2010, plaintiff experienced a decrease in business volume which also affected the income upon which Cehovsky and Seganos relied to supplement their teacher's salaries.   In August 2010 both defendants formed a business entity Sea–House, LLC but did not actively conduct any business under the LLC. Plaintiff laid both off in October 2010.   In December 2010, they wrote to Gary Swanson, plaintiff's owner explaining their financial and personal needs.   They expressed their appreciation and noted the honesty and loyalty they demonstrated as employees.   However, they also clearly stated they needed employment where they could make more money, manage their schedules to balance family obligations and reduce the physical toll of the catering business.   This December letter which followed their layoffs by two months is direct, respectful and states, “We both wish to start something new and that is our own.”   It includes a request to meet and a hope to remain on good terms.

Plaintiff acknowledged receipt of the letter but never otherwise replied or followed up.   Defendants operated their clambake catering business during the 2011 season, presumably from late spring until early fall.   It was not until the beginning of the following season in May 2012, a year and a half after the defendants' December 2010 letter that the plaintiff initiated this action.   Notably, plaintiff served defendants with an application for injunctive relief, and an order to show cause along with its complaint.   Even if the plaintiff had any ground to hold the defendants liable as alleged in its complaint, the court cannot ignore the lapse in time from December 2010 until May 2012 and the timing of seeking an injunction on the defendants' business at the busiest time.   Had plaintiff prosecuted its case with even minimal responsibility, there might be an argument to balance the defendants' counterclaim.   The unavoidable result of plaintiffs' own conduct and serious failure to reply to pleadings and discovery requests is to leave the defendants' arguments in support of the motion for summary judgment as to count 2 of their counterclaim unopposed.   Although defendants argue their position persuasively, the court cannot conclude that the plaintiff is liable to them under a theory of abuse of process without further evidence.   The fact that the court has granted the defendants' motion for summary judgment does not in itself warrant a finding of liability against the plaintiff for abuse of process.   The plaintiff's motive for initiating this action is not clear and plaintiff's utter failure to file responsive pleadings to the counterclaim and requests for admission or comply with defendants' discovery requests call his good faith into question.   The court sympathizes with the defendants' argument that they have been forced to incur attorneys fees to defend themselves and agrees that the plaintiff's timing of the lawsuit and behavior thereafter is suspect, nonetheless, it is unable to find that the present record satisfies the standard of proof required to find the plaintiff liable for abuse of process.

SOMMER, J.

FOOTNOTES

FN1. When this matter appeared on the short calendar in October 2012, the motion to withdraw appearance by plaintiff's counsel was pending.   The court thought that the motion for summary judgment had been marked off to be reclaimed once new counsel appeared for the plaintiff.   New counsel never appeared and the plaintiff has since been non-suited.   The court received notice of defendants' request to rule on the motion for summary judgment on April 22, 2013..  FN1. When this matter appeared on the short calendar in October 2012, the motion to withdraw appearance by plaintiff's counsel was pending.   The court thought that the motion for summary judgment had been marked off to be reclaimed once new counsel appeared for the plaintiff.   New counsel never appeared and the plaintiff has since been non-suited.   The court received notice of defendants' request to rule on the motion for summary judgment on April 22, 2013.

Sommer, Mary E., J.