Edward Weingarden v. Milford Anesthesia Associates, P.C. (2013)

MEMORANDUM OF DECISION RE MOTION TO DISQUALIFY (# 126);  MOTION TO STRIKE (# 136)

FACTS

The plaintiff, Edward Weingarden, commenced this action on December 17, 2010, and filed a revised six-count complaint (docket entry # 128) on October 4, 2012, against the defendants, Milford Anesthesia Associates, P.C. and its successor Milford Anesthesia Associates, LLC (collectively, “Milford Associates”),¹ Jeffrey Wagner, Thomas Verdone, Upinderjit Sidhu, Victor Eanniello, Elizabeth Moyer, Larry Shinbaum, Terence Gray, Rajendra Bobba, and Richard Given (collectively, “the individual defendants”).   The complaint contains the following allegations relevant to the present motion.

The plaintiff is a licensed physician who was professionally affiliated with Milford Associates.   The defendants Wagner and Verdone acted as managers of Milford Associates, with defendant Sidhu acting as corporate secretary.   The remaining individual defendants were directors of Milford Associates during the time of events central to the present dispute (“the directors”).²  The plaintiff and all individual defendants were at some point and time shareholders in Milford Associates.

In 2008, Milford Associates marketed its practice for sale.   Negotiations with a buyer ensued, but ultimately fell through (“the Sheridan deal”).   After the Sheridan deal was officially cancelled, the plaintiff was led to believe Milford Associates was no longer being marketed.   This belief was based largely on assurances from Wagner that selling the practice would be impossible, that the practice was stable and that the focus was on continued growth and stable leadership.   It was also promised that there would be transparency in board actions.   Unbeknownst to the plaintiff, Wagner and Verdone continued to actively hold Milford Associates out for sale.   Milford Associates had retained an investment bank to help broker a sale.   In June 2010, Milford Associates also retained Pullman & Comley, LLC (“the firm”) as counsel in navigating a potential sale.   A potential buyer, EM–I Medical Services, P.C. (“EM–I”),³ was identified prior to September 1, 2010.   EM–I's parent company, EmCare, had been an interested buyer prior to the Sheridan deal, and had entered a nondisclosure agreement with Milford Associates on October 3, 2008.

In early 2010, Sidhu announced his intention to give up shareholder status and tender his shares for repurchase by Milford Associates.   In June 2010, the plaintiff also announced his intention to give up shareholder status.   Milford Associates' shareholder agreement only allowed one shareholder buyout to be funded each year.   The plaintiff is told that he would receive payment for his shares on a note in the following calendar year after the buyout of Sidhu's shares was funded on or about December 31, 2010.   The plaintiff tendered his shares to Milford Associates on September 1, 2010.   On that same day, Milford Associates executed and delivered to the plaintiff a promissory note in the amount of $400,000 to be paid at an unspecified point in 2011.   The plaintiff was never informed of the possible sale of Milford Associates to EM–I.

A second nondisclosure agreement between EmCare and Milford Associates was executed on September 17, 2010, to replace the first agreement.   On that same day, EmCare's corporate counsel contacted Milford Associate's attorney to arrange a due diligence meeting.   In the following two weeks, Sidhu renounced his intention to tender his shares for a buyout.   This decision was prompted by information he obtained about the sale of Milford Associates to EM–I. This information was still being withheld from the plaintiff and other shareholders.   The plaintiff was informed by Verdone about Sidhu's recent decision, and Verdone offered the plaintiff immediate payment of the $400,000.   The plaintiff received payment on October 7, 2010.

On December 10, 2010, EM–I purchased Milford Associates.   Prior to the sale, Wagner was issued one hundred shares of stock in Milford Associates so that he would be a stockholder for purposes of entering into the “Membership Interest Purchase Agreement.”   Wagner had earlier been a shareholder until he redeemed his shares and resigned from call-taking duties on December 31, 2009.⁴  If the plaintiff had waited to sell his shares after the sale of Milford Associates, his shares would have been worth $2,500,000 instead of $400,000.⁵

The plaintiff filed its motion to disqualify (docket entry # 126) on August 6, 2012.   In that motion, the plaintiff references the following facts based on documents produced during discovery.⁶  Verdone was contacted in March 2010, by the investment bank concerning EmCare's interest in purchasing Milford Associates.   Verdone and Wagner met with officers from EM–I and EmCare on April 13, 2010.   By May 2010, EmCare's interest in purchasing Milford Associates was firm.   Subsequently, Milford Associates began its due diligence and valuation of shares.   On October 24, 2010, Verdone and Wagner made a secret presentation to the directors concerning their marketing of Milford Associates and the potential sale to EM–I. Verdone demanded that Wagner be allowed to share in the proceeds even though he was semi-retired and had sold his shares in 2009.   On November 23, 2010, the sale was presented as virtually completed to the shareholders of Milford Associates.   In connection with the closing of the sale, attorney Randall Mathieson, an attorney at the firm, asked the plaintiff to sign certain documents including a contract and release.   Mathieson claimed to be aware of all facts regarding the transaction, gave legal advice concerning the merit of the plaintiff's claims,⁷ did not make it clear what his or the firm's role in the transaction was, did not make it clear whether they were acting on behalf of the shareholders and did not suggest that the plaintiff should seek counsel.   In his motion, the plaintiff seeks to disqualify Mathieson and the firm.   The defendants filed its objection (docket entry # 131) on October 18, 2012.   A reply and sur-reply (docket entries # 133 and 134) on November 30, 2012 and December 27, 2012.

Milford Associates filed a motion to strike (docket entry # 136) on January 16, 2013.   The plaintiff filed its objection (docket entry # 143) on March 6, 2013.   The defendant filed its reply (docket entry # 144) on March 7, 2013.   The court heard oral arguments on the motions at short calendar on March 11, 2013.

DISCUSSION

This court will first address the motion to disqualify, as the resolution of that motion could affect the defendant's choice of counsel in this matter and the motion to disqualify was filed more than five months prior to the motion to strike.

I

The Plaintiff's Motion to Disqualify Defendants' Counsel

“The trial court has the authority to regulate the conduct of attorneys and has a duty to enforce the standards of conduct regarding attorneys ․ A trial court also has the inherent power to discipline members of the bar, and to provide for the imposition of reasonable sanctions to compel the observance of its rules.”  (Citation omitted;  internal quotation marks omitted.)  Daniels v. Alander, 268 Conn. 320, 329, 844 A.2d 182 (2004).  “The trial court has broad discretion to determine whether there exists a conflict of interest that would warrant disqualification of an attorney.”  Bergeron v. Mackler, 225 Conn. 391, 397, 623 A.2d 489 (1993).  “[T]he competing interests at stake in a determination regarding the disqualification of an attorney are:  (1) the [former client's] interest in protecting confidential information;  (2) the [current client's] interest in freely selecting counsel of [his or her] choice;  and (3) the public's interest in the scrupulous administration of justice.”  (Internal quotation marks omitted.)  Crone v. Gill, 250 Conn. 476, 484, 736 A.2d 131 (1999).  “Although considering the appearance of impropriety may be part of the inherent power of the court to regulate the conduct of attorneys, it will not stand alone to disqualify an attorney in the absence of any indication that the attorney's representation risks violating the Rules of Professional Conduct.”  (Internal quotation marks omitted.)   American Heritage Agency, Inc. v. Gelinas, 62 Conn.App. 711, 726–27, 774 A.2d 220 (2001).  “In view of the strong public policy favoring a party's right to select its own counsel, the law places the burden of showing that disqualification is required upon the moving party.”  Mettler v. Mettler, 50 Conn.Sup. 357, 361, 928 A.2d 631 (2007) [43 Conn. L. Rptr. 578].

The plaintiff presents a number of theories as to why Mathieson and Pullman & Comley should be disqualified.   Essentially, the plaintiff argues:  (1) that an attorney-client relationship between the plaintiff and Mathieson presently exists, which gives rise to a conflict of interest under rule 1.7 of the Rules of Professional Conduct that should disqualify Mathieson from representing the defendant in this matter;  (2) that an attorney-client relationship previously existed between the plaintiff and Mathieson, which gives rise to a conflict of interest under rule 1.9 that should similarly disqualify Mathieson;  (3) that any conflict of interest under the first two theories should be imputed to the entire law firm pursuant to rule 1.10 and similarly disqualify the firm;  (4) that the plaintiff communicated confidential information as a prospective client to Mathieson and therefore Mathieson and the firm should be disqualified under rule 1.8;  and (5) that Mathieson may be a necessary witness at a trial in this matter and therefore should be disqualified pursuant rule 3.7.   The defendant rejects all the above theories and argues:  (1) that there is no past or current attorney-client relationship because attorneys for organizations like Milford Associates represent the organization not its constituents, and that there are no additional facts that would independently create an attorney-client relationship between Mathieson and the plaintiff;  (2) that the plaintiff was never a prospective client and did not communicate any confidential information;  (3) that whatever conflict of interest may exist should not be imputed to disqualify the firm;  and (4) that the plaintiff has not met its heavy burden of demonstrating that Mathieson is a necessary witness, and even if he did such a showing would not disqualify the firm as a whole.   This court will address each issue in turn.

A

Disqualification Pursuant to Rule 1.9

The plaintiff's most substantive theory for disqualification is that the plaintiff is a former client of Mathieson either by being a shareholder of Milford Associates or by communications made between Mathieson and the plaintiff, and that this former relationship gives rise to a conflict of interest in the present matter under rule 1.9 of the Rules of Professional Conduct.⁸  For the reasons stated below, this court agrees with the defendant that no attorney-client relationship ever existed between Mathieson and the plaintiff and therefore there can be no conflict of interest that would justify disqualifying Mathieson.

Rule 1.9 of the Rules of Professional Conduct provides the duties that a lawyer owes to former clients.   To establish a conflict of interest that could serve as the basis for disqualification under this rule, a party must first establish the existence of a prior attorney-client relationship:  “Disqualification of an attorney is warranted if the moving party establishes first, that he had in the past enjoyed an attorney-client relationship with the attorney ․” (Internal quotation marks omitted.)  State v. Bunkley, 202 Conn. 629, 652, 522 A.2d 795 (1987);  see Bergeron v. Mackler, supra, 225 Conn. 398.   In the present case, the plaintiff has failed to establish the existence of a prior attorney-client relationship.

No rule specifically governs the creation of an attorney-client relationship.   As another Superior Court decision discusses, there is a notable absence of Connecticut appellate case law regarding the creation of an attorney-client relationship, although the principles involved are generally known:  “As to the existence of an attorney-client relationship the court could find no Connecticut Appellate cases where this was an issue ․ In several cases the relationship seems to have been conceded or taken as established.   See Lee v. Harlow, Adams and Friedman, P.C., [116 Conn.App. 389, 297 (2009) ], Davis v. Margolis, 215 Conn. 408, 409, 415 (1990), Fontanella v. Marcucci, 89 Conn.App. 690, 695 (2005).

“In the Restatement (3d) The Law Governing Lawyers, Volume 1, section 14 at page 25 says the following:

§ 14.  Formation of a Client–Lawyer Relationship

A relationship of client and lawyer arises when:

(1) a person manifests to a lawyer the person's intent that the lawyer provide legal services for the person;  and either

(a) the lawyer manifests to the person consent to do so;  or

(b) the lawyer fails to manifest lack of consent to do so, and the lawyer knows or reasonably should know that the person reasonably relies on the lawyer to provide the services;  or

(2) a tribunal with power to do so appoints the lawyer to provide the services.

“Comment b to the section notes that ‘the client-lawyer relationship is ordinarily a consensual one ․’ A client should not be forced to put legal matters in the hands of a lawyer, on the other hand the comment notes that:  ‘Lawyers generally are as free as other persons to decide with whom to deal, subject to generally applicable statutes such as those prohibiting certain kinds of discrimination.

“Comment c notes also that a client's ‘manifestation of intent that a lawyer provide legal services must be explicit ․’ but ‘the client's intent may be manifest from surrounding facts and circumstances, as when the client discusses the possibility of representation with the lawyer and then sends the lawyer relevant papers or a retainer requested by the lawyer.’

“Section e states that ‘Even when a lawyer has no communicated willingness to represent a person, a client-lawyer relationship arises when the person reasonably relies on the lawyer to provide services, and the lawyer, who reasonably should know this reliance, does not inform the person that the lawyer will not do so ․’ The comment refers in this regard to the law of implied assent based on the lawyer's conduct.”  Durante v. Martinez, Superior Court, judicial district of New Haven, Docket No. NNHCV084043410S (July 12, 2012, Corradino, J.).   Under these principles, the court must analyze the two theories presented by the plaintiff under rule 1.9.

1

Communications Between the Plaintiff and Mathieson

The plaintiff argues that an email exchange between him and Mathieson in December 2010, created an attorney-client relationship.   This court does not agree.   Simply put, nothing in the email exchange could be interpreted as the plaintiff's “manifestation of intent that [Mathieson] provide legal services” or Mathieson's “willingness to represent [the plaintiff],” nor is there any indication that “[the plaintiff] reasonably [relied] on [Mathieson] to provide services, and [Mathieson] ․ [did] not inform the [plaintiff] that [he] will not do so ․” Id. As the defendant aptly demonstrates, the exchange appears to be more of an exchange between an agent of Milford Associates and a third party or even two parties who understand their adversarial stance.

The exchange begins with Mathieson requesting that the plaintiff sign three documents, one of which was a release of claims, so that the sale of Milford Associates could be completed and the plaintiff could receive a closing bonus of $100,000.   The plaintiff sent back two of the documents, and he also requested that Mathieson amend his contract “[a]s I cannot change the employment contract independently ․” This reliance on Mathieson to make a change the plaintiff could not, strongly implies that Mathieson derives his power to act from another party, in this case Milford Associates, not the plaintiff.   Not only does this demonstrate that Mathieson was acting on behalf of Milford Associates, but it suggests the plaintiff's appreciation of that fact.   Mathieson then replied with a long email urging the plaintiff to not pursue any claims the plaintiff might think he has against Milford Associates.   Mathieson stated that if the plaintiff believes he has a claim, the plaintiff is “either ill-informed or have been poorly advised.”   Such a statement acknowledges that the plaintiff likely has, or could have, counsel from someone else.   The plaintiff does not acknowledge any of Mathieson's requests, and instead simply asked for a copy of a document.   The final email is from Mathieson acknowledging the receipt of a fax and that all further communications with the plaintiff will be through the plaintiff's retained counsel.

Although the plaintiff tries to rely on certain statements in the emails, when the complete email exchange is read it is perfectly clear that the plaintiff never believed Mathieson was his lawyer, nor did he and Mathieson have any agreement that Mathieson would be his attorney.   In the absence of any such agreement or a belief of the plaintiff and a failure to negate that belief by Mathieson, the plaintiff cannot show an attorney-client relationship existed.

The plaintiff also argues that the defendant's failure to make clear his role as counsel for Milford Associates gives rise to an attorney-client relationship.   This argument relies on rule 1.13(f) of the Rules of Professional Conduct.⁹  That provision requires that a lawyer employed by an organization explain the identity of the client when the lawyer “knows or reasonably should know that the organization's interests are adverse to those of the constituents with whom the lawyer is dealing.”   The official comment explains that “[w]hether such a warning should be given by the lawyer for the organization to any constituent individual may turn on the facts of each case.”

Without making a ruling that he did so, it is quite possible that Mathieson violated this provision, as there is no evidence that Mathieson ever explicitly explained who he was representing.   But, even if he did, the effect of any such violation is not the establishment of an attorney-client relationship.   The official comment explains subsection (f):  “Care must be taken to assure that the individual understands that, when there is such adversity of interest, the lawyer for the organization cannot provide legal representation for that constituent individual, and that discussions between the lawyer for the organization and the individual may not be privileged.”   Absent from this rule and comment is any discussion about how rule 1.13 can create an attorney-client relationship.   In fact, the comments suggest otherwise.   When discussing derivative claims, the official comment states that “[i]f the claim involves serious charges of wrongdoing by those in control of the organization, a conflict may arise between the lawyer's duty to the organization and the lawyer's relationship with the board.   In those circumstances, Rule 1.7 governs who should represent the directors and the organization.”   This implies that other rules determine conflicts of interest and creation of attorney-client relationships, not whether there has been proper disclosure under rule 1.13(f).  Furthermore, allowing the establishment of an attorney-client relationship through the mere failure of Mathieson to disclaim any attorney-client relationship, without some belief by the plaintiff that Mathieson was his attorney, would flatly contradict the principles of attorney-client relationship formation discussed in the preceding paragraphs.

2

Mathieson's Representation of Milford Associates

The other basis for the plaintiff's claim under rule 1.9 is that by representing Milford Associates, Mathieson represented the shareholders and thus the plaintiff as a shareholder is a former client of Mathieson.   Such an argument is easily rejected in light of clear legal authority to the contrary.   First, rule 1.13(a) plainly states:  “A lawyer employed or retained by an organization represents the organization acting through its duly authorized constituents.”  (Emphasis added.)   The official comment to that rule defines “constituents” as including shareholders of a corporation.   While in certain circumstances a constituent's communications with an attorney may be confidential under rule 1.6 of the Rules of Professional Conduct, the official comment clearly states that “[t]his does not mean ․ that constituents of an organizational client are the clients of the lawyer.”   Rule 1.13 makes clear that a shareholder of an organization is not the client of that organization's lawyer absent some set of facts independently creating an attorney-client relationship.

This principle is further supported in case law.   In the analogous context of partnerships, “[a] partnership usually is a legal entity and is the lawyer's client.   Thus a lawyer who represents a partnership does not thereby become counsel or owe a duty to the partners.”  Novak v. Scalesse, 43 Conn.App. 94, 101 n.6, 681 A.2d 968 (1996).  “[W]hen a lawyer represents an organization he represents the organization as an entity instead of its officers or representatives ․ Individual representation can only be found if specific circumstances exist departing from the general rule.”  Durante v. Martinez, supra, Superior Court, Docket No. NNHCV084043410S.   A law “firm's representation of [a company] ․ does not mean that the firm automatically represents [a member of the company] personally.”   Calpitano v. Fountain Pointe, LLC, Superior Court, judicial district of New Britain, Docket No. HHBCV106006235S (March 9, 2011, Tanzer, J.T.R.);   see Schwartz v. Family Dental Group, Superior Court, judicial district of Fairfield, Docket No. CV030401475S (June 8, 2005, Skolnick, J.) (“[T]he plaintiff was never represented by [the law firm] during the time [the firm] represented [the company] since the plaintiff is a shareholder ․ and never sought [the firm's] representation as an individual”);  DeLeon v. Fonda, Superior Court, Docket No. CV970059096S (April 2, 1998, Ripley, J.);   Prime Equities, Inc. v. DiScala, Superior Court, judicial district of Stamford/Norwalk at Stamford, Docket No. CV940141542 (March 28, 1995, Lewis, J.).   Even the appellate court has provided an explanation of the underlying theory at stake in a slightly different context than the present one:  “In adopting the entity theory of corporate representation, the drafters of the model rules rejected the competing view that a corporate lawyer represents the group of people who comprise corporate leadership ․ Accordingly, at the outset, when counsel are retained, they must make a diligent effort to determine whether the individual who seeks to retain legal services on behalf of the corporation [is] acting with corporate authority, and once that decision is made, counsel must exercise care to represent only the entity and not others whose interests may not be identical to that of the corporation.”  Fairfax Properties, Inc. v. Lyons, 72 Conn.App. 426, 430 n.3, 806 A.2d 535 (2002).

The plain language of rule 1.13, the official comment to that rule, appellate case law explaining entity theory and the overwhelming stance taken in other Superior Court decisions makes it abundantly clear that the plaintiff cannot establish an attorney-client relationship with Mathieson simply by relying on his status as a shareholder of an organization that Mathieson represented.   The plaintiff would have to demonstrate some other facts creating such a relationship, none of which have been shown here.

B

Disqualification Pursuant to Rule 1.7

The plaintiff's second relevant theory is that he is, or at least the other shareholders are, currently a client of Mathieson and that Mathieson's representation of the defendant in a case where the plaintiff is asserting a claim against the defendant violates rule 1.7 of the Rules of Professional Conduct ¹⁰ and justifies disqualification of Mathieson.   This argument fails for reasons identical to those discussed above in that no attorney-client relationship ever existed between the plaintiff and Mathieson and therefore, in the absence of additional facts, does not exist now.   Even if the plaintiff was a client of Mathieson under the theory that Mathieson represented the shareholders, which is not the case, he would not be a client now by virtue of the fact that he is no longer a shareholder.   Furthermore, the plaintiff cannot use whatever conflict of interest exists between Mathieson and a third party, in this case the current shareholders, to disqualify Mathieson.   The plaintiff cites no case law and makes no additional factual argument that would demonstrate a presently existing attorney-client relationship between him and Mathieson.

C

Disqualification Pursuant Rule 1.18

The plaintiff's third theory is that Mathieson owed him a duty under rule 1.18 of the Rules of Professional Conduct ¹¹ because the plaintiff was a prospective client and conveyed privileged information.   This argument fails for two reasons.   First, the plaintiff was not a prospective client under rule 1.18(a).   For reasons already explained, the plaintiff never had a reasonable expectation ¹² of forming an attorney-client relationship with Mathieson.   In all his interactions with Mathieson that the plaintiff presented for this motion, the plaintiff clearly was not communicating “concerning the possibility of forming a client-lawyer relationship,” but rather was dealing with Mathieson in his role as an agent of Milford Associates.   Second, no information shared with the defendant would justify disqualification.  Rule 1.18(c) only prohibits representation of an adverse party to a prospective client if the lawyer “received information from the prospective client that could be significantly harmful to that person in the matter ․” ¹³ The information given to Mathieson by the plaintiff in the email exchange is not only largely unrelated to the plaintiff's present claims, but is information already conveyed to Milford Associates and is not harmful to the plaintiff in this matter.   The plaintiff only requested changes to his employment contract, which does not appear to be relevant to this action.   The only information in the exchange somewhat relevant to the present dispute was conveyed by Mathieson, not the plaintiff.   Thus, there appears to be no threat that Mathieson received any “significantly harmful” information that could be used against the plaintiff, and therefore there is no basis under rule 1.18 to disqualify Mathieson.

D

Imputation of Conflicts to the Firm Pursuant to Rule 1.10

For reasons stated above, there is no conflict of interest or reason for disqualification that can be imputed to Pullman & Comley and form a basis for the disqualification of the entire firm.   The court simply wishes to elaborate that both rules 1.10 and 1.18 provide for a variety of situations in which a single lawyer in a firm can be disqualified from representing a client but other attorneys from the firm can be allowed to represent that client.   Furthermore, as will be elaborated upon below, a reason for disqualification pursuant rule 3.7 is not imputed to a law firm unless it qualifies as a conflict of interest under rules 1.7 and 1.9.

E

Disqualification Pursuant to Rule 3.7

The plaintiff next argues that Mathieson should be disqualified pursuant to rule 3.7 of the Rules of Professional Conduct because he will be a witness at trial.   The plaintiff also seems to argue that the firm as a whole should be disqualified because of Mathieson's conflicted role, and because other people at the firm might be necessary witnesses.   In regards to Mathieson, the plaintiff argues that his active participation in structuring the sale of Milford Associates, his representations to the plaintiff that nothing was completed until after September 1, 2010, the possibility of statements made to him by Wagner and Verdone intended to mislead the plaintiff and other shareholders and his knowledge of other possible issues that may be learned in discovery make him a necessary witness.   The defendants argue that Mathieson's testimony is at best only relevant, and that the plaintiff has not met his burden in showing how the testimony will be necessary.   They further argue that even if Mathieson were to be disqualified, no basis exists for the disqualification of the entire firm.

Rule 3.7 of the Rules of Professional Conduct ¹⁴ governs the situation of a lawyer acting as a witness.   That rule provides that a lawyer who is a necessary witness should not be an advocate at a trial except in three narrow situations.  “[W]henever counsel for a client reasonably foresees that he will be called as a witness to testify on a material matter, the proper action is for that attorney to withdraw from the case ․ Where, however, an attorney does not withdraw, a court exercising its supervisory power can ․ disqualify the attorney.”  (Citations omitted;  internal quotation marks omitted.)   Enquire Printing & Publishing Co. v. O'Reilly, 193 Conn. 370, 376, 477 A.2d 648 (1984);  Mettler v. Mettler, supra, 50 Conn.Sup. 361.

Before considering whether Mathieson is a necessary witness, and thus subject to disqualification, it is important to first establish that, as already noted, if Mathieson is disqualified, that rule 3.7 will not serve to disqualify the firm.  Rule 3.7(b) plainly provides that “[a] lawyer may act as advocate in a trial in which another lawyer in the lawyer's firm is likely to be called as a witness unless precluded from doing so by rule 1.7 or rule 1.9.”   This court has already determined there is no conflict of interest under rules 1.7 and 1.9, therefore the plaintiff has no avenue to disqualify the entire firm.   Furthermore, in whatever way the plaintiff argues that other individuals in the firm should be disqualified because they independently fall within rule 3.7, the plaintiff has not made any showing or argument to justify such a disqualification.¹⁵  Therefore, the only remaining issue under rule 3.7 is whether Mathieson is a necessary witness and should be disqualified.

“Under rule 3.7, the first relevant inquiry is whether the attorney whose disqualification is sought is a necessary witness in the matter.   A necessary witness is not just someone with relevant information, however, but someone who has material information no one else can provide.   Whether a witness ought to testify is not alone determined by the fact that he has relevant knowledge or was involved in the transaction at issue.   Disqualification may be required only when it is likely that the testimony to be given by the witness is necessary.   Testimony may be relevant and even highly useful but still not strictly necessary.   A finding of necessity takes into account such factors as the significance of the matters, weight of the testimony and availability of other evidence ․ A party's mere declaration of an intention to call opposing counsel as a witness is an insufficient basis for disqualification even if that counsel could give relevant testimony ․ There is a dual test for ‘necessity.’   First the proposed testimony must be relevant and material.   Second, it must be unobtainable elsewhere.”  Mettler v. Mettler, supra, 50 Conn.Sup. 360.

The plaintiff has not shown that at the present time there is a sufficient likelihood that Mathieson's testimony will be necessary.   While the terms of the sale of Milford Associates might be relevant and material to the present case, there is no showing that Mathieson's testimony would be the only source of evidence about the terms and structuring of the sale.   Testimony about the terms of the transaction and how it came to be can be provided by the numerous individuals and organizations involved in the sale of Milford Associates.   Potential similar testimony by Mathieson on that issue therefore cannot form the basis for disqualification.

Also, the plaintiff's theory that Mathieson can testify about whether Wagner and Verdone misrepresented when certain dates of events in the dealings between EM–I and Milford Associates occurred, suffers from serious problems at this stage of the case.   First, it is not entirely clear how this testimony would be relevant to the case at trial.   Whether Verdone and Wagner misrepresented to Mathieson certain dates that Mathieson subsequently relayed to the plaintiff on the eve of him filing the present action does not speak to the fundamental issues of whether Milford Associates and its directors and officers committed fraud or violated any duties of disclosure owed to the plaintiff several months earlier.   The fact that the plaintiff's communications with Mathieson only occurred several months after the alleged fraud means that Mathieson's involvement is not relevant to whether Milford Associates and its directors and officers acted wrongfully towards the plaintiff and caused his injury.   Second, it is possible that evidence about “how far the defendants' duplicity extended” could be obtained from a variety of other sources, including documents and correspondence, the testimony of Verdone and Wagner and the testimony of other people involved in the transactions, including other shareholders who might have been subject to misrepresentations and fraud.   Finally, it is unclear whether, even if the testimony was necessary, that it would be able to be given at trial due to the attorney-client privilege.   While the court will not decide sua sponte whether a privilege exists between Mathieson, Verdone and Wagner,¹⁶ it is aware of the possibility that the plaintiff would not be able to present the testimony of Mathieson due to such a privilege, if one exists.   Such a possibility diminishes the likelihood that Mathieson's testimony will be necessary, because testimony cannot be necessary for purposes of rule 3.7 if it cannot be given in the first place.

The court wishes to emphasize that this decision does not close the door to disqualification of Mathieson under rule 3.7.   The case is at an early stage of the pleadings and discovery is still ongoing.   It is quite possible that the plaintiff may be able to demonstrate the necessity of Mathieson's testimony at a point closer to trial.   The court is unwilling, however, to grant the plaintiff's motion to disqualify Mathieson without a showing of more than just a possibility of relevant testimony and a preference to have that testimony come from Mathieson.   Being mindful of the strong policy interests at stake including the defendants' right to select their counsel, the court will only give the extreme remedy of disqualifying counsel if it is shown that Mathieson's testimony is not only relevant and material but that it can only come from him.   Such a showing has not been made.

For all the foregoing reasons, the plaintiff's motion to disqualify Mathieson and the firm from representing the defendants is denied.

II

Milford Associates' Motion to Strike

“[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.)  New London County Mutual Ins. Co. v. Nantes, 303 Conn. 737, 747, 36 A.3d 224 (2012).   This court takes “the facts to be those alleged in the complaint ․ and ․ construe[s] the complaint in the manner most favorable to sustaining its legal sufficiency.”  (Internal quotation marks omitted.)  New London County Mutual Ins. Co. v. Nantes, 303 Conn. 737, 747, 36 A.3d 224 (2012).  “Moreover [the court notes] that [w]hat is necessarily implied [in an allegation] need not be expressly alleged.”  (Internal quotation marks omitted.)   Connecticut Coalition for Justice in Education Funding, Inc. v. Rell, 295 Conn. 240, 252, 990 A.2d 206 (2010).  “[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).   A motion to strike “admits all facts well pleaded;  it does not admit legal conclusions or the truth or accuracy of opinions stated in the pleadings.”   (Internal quotation marks omitted.)  Faulkner v. United Technologies Corp., 240 Conn. 576, 588, 693 A.2d 293 (1997).

“Each motion to strike raising any of the claims of legal insufficiency enumerated in the preceding sections shall separately set forth each such claim of insufficiency and shall distinctly specify the reason or reasons for each such claimed insufficiency.”  Practice Book § 10–41.  “In ruling on a motion to strike the trial court is limited to considering the grounds specified in the motion.”  Meredith v. Police Commission, 182 Conn. 138, 140, 438 A.2d 27 (1980).  “The trial court's broad case management authority simply does not extend so far as to permit the court to:  (1) initiate the pretrial disposition of a claim based on the court's perception of its legal insufficiency;  and (2) proceed to consider such disposition (a) in disregard of the procedural protections provided by our rules of practice without the agreement of counsel and (b) without notice to the parties and a reasonable opportunity for the plaintiff to oppose the disposition of its claims.”  Vertex, Inc. v. Waterbury, 278 Conn. 55, 569, 898 A.2d 178 (2006).

“[A]lthough there is a split of authority, most trial courts follow the rule that a single paragraph of a pleading is subject to a motion to strike only when it attempts to set forth all of the essential allegations of a cause of action or defense ․ Arguably under the present rules, a motion to strike may properly lie with respect to an individual paragraph in a count ․ However, the weight of authority in the Superior Court is that the motion does not lie, except possibly where the subject paragraph attempts to state a cause of action ․ [O]nly an entire count of a counterclaim or an entire special defense can be subject to a motion to strike, unless the individual paragraph embodies an entire cause of action or defense.”  (Internal quotation marks omitted.)   MacLean v. Perry, Superior Court, judicial district of New London, Docket No. CV 11 6009597 (February 16, 2012, Martin, J.) [53 Conn. L. Rptr. 497].

Milford Associates seeks to strike count one, count four as directed towards Milford Associates and count five from the plaintiff's complaint.¹⁷  It essentially argues:  (1) as a matter of law a corporation cannot be vicariously liable to a shareholder for the actions of the corporation's directors and officers because those individuals control the corporation and are not controlled by it, which prevents formation of an agency relationship;  and (2) as a matter of law a corporation owes no duties to its shareholders to affirmatively disclose the existence of a corporate transaction like the one in the plaintiff's complaint.   The plaintiff replies:  (1) its complaint contains a theory of direct, rather than vicarious, liability;  and (2) no preexisting fiduciary duty is required for its claims against Milford Associates and that a duty to disclose arose when Milford Associates voluntarily made a disclosure that was or became misleading without further disclosure of other facts.

A

Theories of Milford Associates' Liability

Because the plaintiff's complaint is a crisscross of theories of liability, and Milford Associates' brief muddles the theories of corporate liability in an attempt to achieve complete immunity from liability, the court will first explain when a corporation is and is not liable for certain acts.   This is a confusing issue because of the intersection of fiduciary duties, agency law and the legal fiction of the corporation.   After explaining the viable bases of corporate liability and the distinctions between direct and vicarious liability, this court will determine whether the plaintiff has sufficiently pleaded a claim under those theories.

1

Corporate Liability for Breaches of Fiduciary Duties

It is best to first determine for what a corporation is not liable.   Directors and officers owe certain fiduciary duties to the corporation they direct or serve.   See General Statutes §§ 33–736(a) and 33–765;  Pacelli Bros. Transp., Inc. v. Pacelli, 189 Conn. 401, 407, 456 A.2d 325 (1983) (“An officer and director occupies a fiduciary relationship to the corporation and its shareholders”).   While for practical purposes it is the shareholders that feel the injury, it is typically the corporation that directly suffers the legally recognized breach of such a fiduciary duty.   See Yanow v. Teal Industries, Inc., 178 Conn. 262, 281–82, 422 A.2d 311 (1979).   For this reason, in most situations, a breach of a fiduciary duty is remedied through a derivative suit:  “Since at least the middle of the [nineteenth] century, it has been accepted in this country that the law should permit shareholders to sue derivatively on their corporation's behalf under appropriate conditions ․ [I]t is axiomatic that a claim of injury, the basis of which is a wrong to the corporation, must be brought in a derivative suit, with the plaintiff proceeding secondarily, deriving his rights from the corporation which is alleged to have been wronged.”  (Emphasis added.)  Smith v. Snyder, 267 Conn. 456, 461, 839 A.2d 589 (2004).   In situations where a single shareholder suffered individual harm, rather than a harm felt by the entire corporation and body of shareholders, then the shareholder may sue individually rather than derivatively.  May v. Coffey, 291 Conn. 106, 114–15, 967 A.2d 495 (2009).   Nevertheless, the shareholder sues the breaching director or officer, not the corporation, for this injury.

The plaintiff has asserted claims in count three against the directors and officers of Milford Associates for breaches of their fiduciary duties owed to Milford Associates and the plaintiff.   But, whether intentionally or not, the plaintiff has also asserted those claims against Milford Associates by incorporating the allegations of count three into counts four and five and alleging that those directors or officers were agents of Milford Associates.   For reasons described above and that will be further elaborated upon below, Milford Associates cannot be liable, either vicariously or directly, for the breaches of the directors' and officers' fiduciary duties.   Therefore, Milford Associates' motion to strike any claims against Milford Associates for the breach of any fiduciary duties owed by the individual defendants is granted.   Accordingly, paragraphs 76 through 83 of counts four and five in the plaintiff's complaint are stricken.¹⁸

2

Corporate Liability for a Corporation's Acts and Acts of Its Agents

The parties spend considerable time arguing about whether Milford Associates can be vicariously liable for the acts of its directors and officers.   Milford Associates argues, based on a case from Delaware, that because directors and officers control the corporation, no agency relationship can be created and no vicarious liability can attach.   The plaintiffs reply that they are not arguing vicarious liability, but rather direct liability.   Both parties seem to confuse the concepts of a corporate principal's liability for the acts of its agent;  therefore, this court will review such principles in full.   First, it is necessary to clarify the difference between “direct” and “vicarious” liability.   Then the court will address Milford Associates' argument and further explain the contours of corporate liability.   Finally, the court will apply its discussion to the plaintiff's complaint.

A principal's liability for an agent's action has been frequently noted in Connecticut case law.  “[I]t is a general rule of agency law that the principal in an agency relationship is bound by, and liable for, the acts in which his agent engages with authority from the principal, and within the scope of the agent's employment ․ Actual authority exists when [an agent's] action [is] expressly authorized ․ or ․ although not authorized, [is] subsequently ratified by the [principal].”  (Internal quotation marks omitted.)  Ackerman v. Sobol Family Partnership, LLP, 298 Conn. 495, 508, 4 A.3d 288 (2010).   “[V]icarious liability is based on a relationship between the parties, irrespective of participation, either by act or omission, of the one vicariously liable, under which it has been determined as a matter of public policy that one person should be liable for the act [of another].   Its true basis is largely one of public or social policy under which it has been determined that, irrespective of fault, a party should be held to respond for the acts of another.”  (Emphasis added;  internal quotation marks omitted.)   Jagger v. Mohawk Mountain Ski Area, Inc., 269 Conn. 672, 692 n.16, 849 A.2d 813 (2004).  “[I]n order to hold an employer liable for the intentional torts of his employee [through vicarious liability], the employee must be acting within the scope of his employment and in furtherance of the employer's business ․ But it must be the affairs of the principal, and not solely the affairs of the agent, which are being furthered in order for the doctrine to apply.”  (Internal quotation marks omitted.)  Cornelius v. Dept. of Banking, 94 Conn.App. 547, 557, 893 A.2d 472, cert. denied, 278 Conn. 913, 899 A.2d 37 (2006).

There is, however, a subtle distinction in the above principles that creates two different types of liability of a principal for the actions of its agent.   This distinction was discussed by the Connecticut Supreme Court:

[T]he plaintiff alleged that the Pearce Company, independent of any vicarious liability, had itself committed the business related torts of interference with contractual relations and unfair competition.   It is a general rule of substantive law that corporations, like individuals, are liable for their torts ․ This liability arises apart from, and is distinguishable from, liability under the theory of [vicarious liability] ․ As we indicated previously, the theory of [vicarious liability] attaches liability to a principal merely because the agent committed a tort while acting within the scope of his employment.   It refers to those acts which are so closely connected with what the servant is employed to do, and so fairly and reasonably incidental to it, that they may be regarded as methods, even though quite improper ones, of carrying out the objective of the employment ․ A principal may be directly liable, however, for the acts of its agents that it authorizes or ratifies ․ In order to find that a corporation has committed an intentional act, a court or jury must find that the corporation committed, directed or ratified the intentional act ․

In order to hold Pearce Company directly liable for tortious conduct, therefore, the plaintiff needed to prove that Pearce Company, as a principal, had authorized or ratified the specified tortious acts.   It is well settled, however, that a corporation is a distinct legal entity that can act only through its agents ․ In order for direct liability to attach to Pearce Company, therefore, agents of the corporation, acting on behalf of the corporation, must have authorized or ratified the wrongful acts.

(Citations omitted;  emphasis added;  internal quotation marks omitted.)   Larsen Chelsey Realty Co. v. Larsen, 232 Conn. 480, 504–06, 656 A.2d 1009 (1995).   As this passage recognizes, where a principal has given an agent actual authority or subsequently ratifies an agent's act, it is directly, rather than vicariously, liable.   This distinction is also recognized by the Restatement:  “A principal is subject to direct liability to a third party harmed by an agent's conduct when ․ the agent acts with actual authority or the principal ratifies the agent's conduct ․”;  Restatement (Third) of Agency § 7.03;  “[a] principal is subject to vicarious liability to a third party harmed by an agent's conduct when ․ the agent is an employee who commits a tort while acting within the scope of employment ․ or ․ the agent commits a tort when acting with apparent authority in dealing with a third party ․” Id.

While vicarious liability rests on a public policy to hold a principal liable, i.e., where the agent committed a tort while acting within the scope of employment and such acts are so closely connected with what the servant is employed to do;  Jagger v. Mohawk Mountain Ski Area, Inc., supra, 269 Conn. 692 n.16;  direct liability rests on the culpability of a principal who actually authorizes or later ratifies the tortious act of its agent, which typically signifies that some benefit is accruing to the principal as a result of the act.   The central importance of this distinction is that a principal may be directly but not vicariously liable for punitive damages;  Matthiessen v. Vanech, 266 Conn. 822, 837, 836 A.2d 394 (2003) (“[A]t common law, there is no vicarious liability for punitive damages”);  and that the direct liability of the principal may eliminate the liability of the agent to the principal or third party.   3 Am.Jur.2d, Agency § 203 (2013).

Having explained a principal's direct and vicarious liability for agents, it is necessary to address Milford Associates' arguments.   In arguing that a corporation is not vicariously liable for the acts of its agents, the defendant relied heavily on a case from the Delaware Supreme Court, in which it was stated:

It is certainly true that a principal is liable for wrongs committed by its agents acting in the course of their agency ․ Directors, in the ordinary course of their service as directors, do not act as agents of the corporation, however ․ An agent acts under the control of the principal.   The board of directors of a corporation is charged with the ultimate responsibility to manage or direct the management of the business and affairs of the corporation ․ A board of directors, in fulfilling its fiduciary duty, controls the corporation, not vice versa.

It would be an analytical anomaly, therefore, to treat corporate directors as agents of the corporation when they are acting as fiduciaries of the stockholders in managing the business and affairs of the corporation.   Holding the corporation vicariously liable for the directors' breach of a fiduciary duty would be flatly inconsistent with the rationale of vicarious liability since it would shift the cost of the director's breach from the directors to the corporation and hence to the shareholders, the class harmed by the breach.

Arnold v. Society for Sav. Bancorp, Inc., 678 A.2d 533, 539–40 (Del.Supr.Ct.1996).   A footnote to that passage states, however, that “[t]his does not preclude an individual (whether an officer or not) who also happens to serve on the board of directors from acting as an agent of the corporation pursuant to express or implied authority granted by the board or imposed by law.”  (Emphasis added.)   Id., 540 n.15. This footnote, as well as the principles already discussed, reveals that Milford Associates' use of this case is misguided.

Connecticut case law has long recognized that officers and other individuals can act as agents of a corporation.  “It is well settled that a corporation can act only through its agents.”  Maharishi School Vedic Sciences, Inc. (Conn.) v. Connecticut Constitution Assocs.   Ltd. Partnership, 260 Conn. 598, 606, 799 A.2d 1027 (2002);  Czarnecki v. Plastics Liquidating Co., 179 Conn. 261, 267, 425 A.2d 1289 (1979) (“[T]he acts of a corporation's president will bind the corporation only where it is shown that his acts are so related to his duties as president that they may reasonably be held to have been done in the prosecution of the business of the corporation and while he was acting within the scope of his employment”).   While more modern cases have expanded or discussed the typical scope of authority an officer may have, it nevertheless remains that such an individual acts as an agent with limited authority:  “The general manager of a corporation has the implied and ostensible power to do those acts which are usual or necessary in the ordinary transaction of the corporation's business.”  Tierney v. American Urban Corp., 170 Conn. 243, 251, 365 A.2d 1153 (1976).   Thus, Milford Associates' argument that the corporation cannot be vicariously liable for the acts of its officers because those officers are not agents of the corporation simply cannot be reconciled with the well established principles of corporate agency in Connecticut law.

There is some merit to the Delaware court's discussion of how directors cannot be agents when acting in their capacity as directors.   The elements of an agency relationship are:  “(1) a manifestation by the principal that the agent will act for him;  (2) acceptance by the agent of the undertaking;  and (3) an understanding between the parties that the principal will be in control of the undertaking.”  (Internal quotation marks omitted.)  National Publishing Co. v. Hartford Fire Ins. Co., 287 Conn. 664, 678, 949 A.2d 1203 (2008).   Since directors of a corporation are, in many contexts, the highest acting authority of a corporation, for directors to be considered agents of a corporation would require the illogical result of them acting as both principal and agent.   A director would have to manifest intent that he would act for the corporation, accept that undertaking and have an understanding that he would be in control of his actions.   Such a relationship is circular, illogical and not in accordance with the hallmarks of a principal-agent relationship.

But this concept of a director not being an agent simply buttresses the well-established rule that corporations are not liable for its directors' or officers' breaches of fiduciary duties.   The quote from Arnold does not stand for what Milford Associates claims it does, namely, that corporations are not liable for the acts of their directors or officers.   All Arnold stands for is that a corporation is not vicariously liable for the injuries resulting from a director or officer's breach of a fiduciary duty.   Such a proposition relies just as much on the way a fiduciary duty flows from a director to the corporation, which is firmly established in Connecticut case law;  Pacelli Bros. Transp., Inc. v. Pacelli, supra, 189 Conn. 407;  as it does on whether or not a director is an agent of the corporation.   There is nothing in Arnold or Connecticut case law that eliminates a corporation's liability for the acts of its agents.   In fact, the footnote in Arnold explicitly recognizes that directors acting outside their role on the board of directors, as well as other officers and employees, act as agents for a corporation and can create liability for the corporation.   See Arnold v. Society for Sav. Bancorp, Inc., supra, 678 A.2d 504 n.15. Thus, while a corporation is not liable for a breach of fiduciary duty by a director, an act performed by a corporation under the direction of the board of directors can still create liability for that corporation in tort, contract or by statute.

Turning to the plaintiff's complaint, this court concludes that the plaintiff has presented three theories of Milford Associates' liability, specifically, theories of direct and vicarious liability under agency law and a theory of liability based on representations by the board of directors.   In count five, titled “Agency,” the plaintiff alleges that the individual defendants were acting as agents of Milford Associates, that the wrongful acts and omissions were made in the individual defendants' capacity as agents and that “[a]s a result of the actions taken by the defendants on behalf of and/or ratified by [Milford Associates] ․ the plaintiff suffered and will suffer substantial loss and damage.”   The quoted language includes a theory of vicarious liability in that the action was taken on behalf of Milford Associates, as well as a theory of direct liability in that the action was ratified by Milford Associates.   Although the complaint is not artfully pleaded in that the direct liability theory is seemingly divided between counts one and five and count five contains two theories of recovery, a motion to strike is not the proper means to remedy such a shortcoming.¹⁹  Thus, the court will interpret the plaintiff's complaint under the two theories described above.

The question of whether the plaintiff has sufficiently pleaded Milford Associates' direct liability for its agents' acts turns on whether he has pleaded Milford Associates' ratification of or the existence of actual authority for those acts.  “We recognize that [a]uthority in the agent of a corporation may be inferred from the conduct of its affairs, or from the knowledge of its directors and their neglect to make objection ․ Indeed, we have stated that [s]ilence, as well as affirmative acts, may imply an intent to ratify ․ The nature and extent of an agent's authority is a question of fact for the trier where the evidence is conflicting or where there are several reasonable inferences which can be drawn ․ Since ratification in a given case depends ultimately upon the intention with which the act or acts, from which ratification is claimed, were done, and since intention is a mental fact and its finding clearly one of fact, the finding in a given case of ratification is one of fact and not reviewable unless the conclusion of ratification, drawn from the facts, is plainly erroneous.”  (Citation omitted;  emphasis added;  internal quotation marks omitted.)  Il Giardino, LLC v. Belle Haven Land Company, 254 Conn. 502, 531, 757 A.2d 1103 (2000).   Since ratification and actual authority is a question of fact and the plaintiff has explicitly alleged that Milford Associates ratified the acts of the individual defendants and that the individual defendants had actual authority,²⁰ the plaintiff has sufficiently alleged a theory of Milford Associates' direct liability for whatever intentional torts of the individual defendants the plaintiff has sufficiently alleged.

The plaintiff has sufficiently alleged the vicarious liability of Milford Associates for the acts of certain individual defendants.   An agent's authority and scope of employment are issues of fact.  L and V Contractors, LLC v. Heritage Warranty Ins. Risk Retention Group, Inc., 136 Conn.App. 662, 666–67, 47 A.3d 887 (2012).   The plaintiff has alleged that the individual defendants were acting within their authority as agents of Milford Associates.   Verdone, Wagner and Sidhu were allegedly acting as officers of the corporation, therefore Milford Associates could be vicariously liable for any tortious conduct that occurred within the scope of their employment.   There are no facts in the complaint that show any of the individual defendants acting without authority or outside of their scope of employment.

As previously discussed, Milford Associates cannot be vicariously liable for its directors' breaches of their fiduciary duties.   The only other way Milford Associates could be liable is if an act or omission of its board of directors, without the use of any agents of the corporation, created liability independent of the directors' fiduciary duties.²¹  As will be discussed in the following section, the directors allegedly made a fraudulent misrepresentation that could be considered a tortious act independent of the fiduciary duties they owed to the corporation and to the plaintiff.²²  Therefore, Milford Associates could be liable for such a misrepresentation even if it is not liable for the breach of the directors' fiduciary duties.

To summarize, the plaintiff has sufficiently alleged:  (1) a theory of Milford Associates' direct liability through its ratification of or provision of actual authority for the acts or omissions of its officers and directors acting as agents;  (2) a theory of Milford Associates' vicarious liability for the acts or omissions of its officer and directors as agents;  and (3) a theory of Milford Associates' liability for acts or omissions of its board of directors that are tortious acts independent of its fiduciary duties.   The plaintiff has not, and cannot, sufficiently allege a theory of direct or vicarious liability for its directors' or officers' breaches of their fiduciary duties.   Having established which theories of Milford Associates' liability are legally sufficient, the court will now determine whether the plaintiff has sufficiently alleged a tortious act or omission to which one or all of the theories of liability could apply.

B

Allegations of Tortious Acts and Omissions

The question now is whether the plaintiff has sufficiently alleged an act or omission for which Milford Associates could be liable.   The plaintiff argues that it has sufficiently alleged fraudulent nondisclosure and negligent misrepresentation.   Milford Associates argues that a corporation does not owe any duty to disclose to a shareholder the existence of a potential or pending sale like the one at issue.   The plaintiff argues that no preexisting fiduciary duty is required for his fraud and misrepresentation claims.   The plaintiff presents two bases for his claims of fraud or negligent misrepresentation.   First, Milford Associates undertook to speak with the plaintiff about the repurchase of his shares and did not disclose the potential or impending sale of the practice.   Second, Milford Associates, acting through its agents, pledged that board actions would be “transparent,” stated that a sale of the practice was impossible after the Sheridan deal fell through and promised “stability, continued growth and stable leadership.”   The court will discuss each tort in turn.

1

Fraudulent Nondisclosure

“The essential elements of an action in common law fraud ․ are that:  (1) a false representation was made as a statement of fact;  (2) it was untrue and known to be untrue by the party making it;  (3) it was made to induce the other party to act upon it;  and (4) the other party did so act upon that false representation to his injury ․ Under a fraud claim of this type, the party to whom the false representation was made claims to have relied on that representation and to have suffered harm as a result of the reliance ․ In contrast to a negligent representation, [a] fraudulent representation ․ is one that is knowingly untrue, or made without belief in its truth, or recklessly made and for the purpose of inducing action upon it.”  (Citation omitted;  intentional quotation marks omitted.)  Sturm v. Harb Development, LLC, 298 Conn. 124, 142, 2 A.3d 859 (2010).  “Mere nondisclosure ․ does not ordinarily amount to fraud ․ however, fraudulent nondisclosure or suppression arises from a failure to disclose known facts, and, as well, a request or an occasion or circumstance which imposes a duty to speak.”  (Citations omitted;  emphasis added;  internal quotation marks omitted.)  Duart v. Department of Correction, 303 Conn. 479, 498 n.17, 34 A.3d 343 (2012).  “Regarding the duty to disclose, the general rule is that ․ silence ․ cannot give rise to an action ․ to set aside the transaction as fraudulent ․ A duty to disclose will be imposed, however, on a party insofar as he voluntarily makes disclosure.   A party who assumes to speak must make a full and fair disclosure as to matters about which he assumes to speak.”  (Citations omitted;  internal quotation marks omitted.)  Macomber v. Travelers Property and Cas. Corp., 277 Conn. 617, 622, 894 A.2d 240 (2006).²³  “There is no merit to [a] claim ․ that once [a buyer] had signed [a] contract, [a seller's] subsequent misrepresentations could not have induced the [buyer] to purchase the property ․ An action will lie for fraudulent nondisclosure that causes one to continue in a course of action.”  (Internal quotation marks omitted.)   Dockter v. Slowik, 91 Conn.App. 448, 458, 881 A.2d 479 (2005).

The defendants only contest whether there was ever a duty to speak,²⁴ thus the court will assume that whatever information could have been disclosed was sufficiently alleged to have been knowingly withheld to induce the plaintiff to act, that the plaintiff did rely on such a nondisclosure to act, and that such reliance caused him injury.   To clarify the defendants' argument in light of the discussion in part IIA of this opinion, it must be Milford Associates' duty to speak that forms the basis of the fraudulent nondisclosure.²⁵  The plaintiff does not argue or cite any cases for the proposition that a corporation has a preexisting duty to disclose a potential sale to its shareholders, nor can this court find any authority for such a proposition.   Therefore, the duty to speak must have arisen from the circumstances in the course of dealing between the parties.   For the following reasons, the court finds such a duty arose under the alleged circumstances.

The alleged circumstances that created such duty are as follows.   The Sheridan deal fell through in December 2009.   Wagner subsequently said that a new deal would be impossible.   In the summer of 2010, officers and directors promised “stability, continued growth and stable leadership” at Milford Associates and transparency in board actions.   In June 2010, Milford Associates retained Pullman & Comley to assist in carrying out a contemplated sale.   That same month, the plaintiff announced his intent to tender his shares to Milford Associates.   The plaintiff was told his shares would have to be bought out after Sidhu's shares were repurchased, since Sidhu had announced his intent to tender his shares earlier in 2010.   On August 25, 2010, Milford Associates, by election of its board of directors, agreed to repurchase the plaintiff's shares.   On September 1, 2010, the plaintiff tendered his shares and received a promissory note.   A replacement nondisclosure agreement between Milford Associates and EM–I was entered into on September 17, 2010, and the following week Sidhu announced his intention to cancel his tender of shares.   Sidhu's act was allegedly based on insider information that efforts were being made to sell Milford Associates.   On October 17, 2010, the plaintiff received payment for his shares nearly a year ahead of time.   On December 10, 2010, the sale of Milford Associates was completed.

These alleged facts directly and through reasonable inference establish a duty to disclose.   Prior to any act by the plaintiff, Wagner represented that no sale of Milford Associates would be possible and the board of directors promised transparent action and continued stability.   These statements can be reasonably interpreted to mean that Milford Associates would not be sold in the near future.   From the facts alleged, this statement appears to not only have been misleading at the time it was made, in that Milford Associates retained counsel for a contemplated sale, but was made even more misleading as the prospects of a sale seemingly became more firm through the signing of a nondisclosure agreement with EM–I, information given to Sidhu that caused him to rescind his tender of shares, and the eventual completion of a complex sale that likely took many months to structure.   Such misleading statements were voluntarily made by Milford Associates through its agents, and therefore they owed the plaintiff a duty to disclose any other facts that would make such statements a full and fair disclosure.   This would include a disclosure that Milford Associates was being actively marketed and a potential buyer had been identified.   Even though reliance is not at issue, it is worth noting that it does not matter that some of these events occurred after the plaintiff's initial tender of shares.   As inferred from Sidhu's actions, the plaintiff could likely have cancelled his tender of shares up to the day he received payment on his promissory note.   Therefore, construing the complaint in a light most favorable to sustaining its sufficiency;  New London County Mutual Ins. Co. v. Nantes, supra, 303 Conn. 747;  Milford Associates' argument that the plaintiff has failed to allege the existence of a duty to disclose is clearly insufficient to grant the defendants' motion to strike the plaintiff's claim of fraudulent nondisclosure.

2

Negligent Misrepresentation

Negligent misrepresentation is closely related to fraud:  “Traditionally, an action for negligent misrepresentation requires the plaintiff to establish (1) that the defendant made a representation of fact (2) that the defendant knew or should have known was false, and (3) that the plaintiff reasonably relied on the misrepresentation, and (4) suffered pecuniary harm as a result.”  Nazami v. Patrons Mutual Insurance Co., 280 Conn. 619, 626, 910 A.2d 209 (2006).  “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 ․ [E]ven 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.”  (Citations omitted;  internal quotation marks omitted.)  Sturm v. Harb Development, LLC, 298 Conn. 124, 143–44, 2 A.3d 859 (2010).   Nondisclosure can form the basis of a negligent misrepresentation claim.   Ochoa v. Turner, Superior Court, judicial district of Ansonia at Milford, Docket No. CV065000859 S (May 14, 2009, Radcliffe, J.).

In the present matter, the defendants have not presented any additional arguments specifically for negligent misrepresentation, but simply rely on the argument that there was no duty to disclose.   Since such a duty to disclose does exist and could have arisen under the alleged facts, Milford Associates' motion to strike the counts for negligent misrepresentation is also denied to the same extent as to the count for fraudulent nondisclosure.

CONCLUSION

For the foregoing reasons, the plaintiff's motion to disqualify is denied and Milford Associates' motion to strike is denied in part and granted as to paragraphs 76 through 83 of counts four and five in the plaintiff's complaint in that those paragraphs impermissibly seek to hold Milford Associates vicariously liable for its directors' and officers' breaches of their fiduciary duties.

Wilson, J.

FOOTNOTES

FN1. Milford Anesthesia Associates, P.C. was created on June 28, 1991.   TBM Anesthesia, LLC was created on December 2, 2010.   On that same day, the two entities were merged when a certificate of merger was filed with the Secretary of State.   TBM Anesthesia, LLC subsequently changed its name to Milford Anesthesia Associates, LLC. Because the complaint alleges that Milford Anesthesia, LLC had notice of the plaintiff's claims prior to the completion of the merger, this court will refer to the two entities as a single entity for purposes of this complaint..  FN1. Milford Anesthesia Associates, P.C. was created on June 28, 1991.   TBM Anesthesia, LLC was created on December 2, 2010.   On that same day, the two entities were merged when a certificate of merger was filed with the Secretary of State.   TBM Anesthesia, LLC subsequently changed its name to Milford Anesthesia Associates, LLC. Because the complaint alleges that Milford Anesthesia, LLC had notice of the plaintiff's claims prior to the completion of the merger, this court will refer to the two entities as a single entity for purposes of this complaint.

FN2. Verdone was also a director of Milford Associates during the events described in the complaint.   Any reference to Verdone individually will be in his capacity as manager.   Any reference to the directors will include Verdone in his capacity as director..  FN2. Verdone was also a director of Milford Associates during the events described in the complaint.   Any reference to Verdone individually will be in his capacity as manager.   Any reference to the directors will include Verdone in his capacity as director.

FN3. EM–I Medical Services, P.C. is a subsidiary of EmCare Holdings, Inc. (“EmCare”), which is owned by Emergency Medical Services Company (“Emergency Medical”)..  FN3. EM–I Medical Services, P.C. is a subsidiary of EmCare Holdings, Inc. (“EmCare”), which is owned by Emergency Medical Services Company (“Emergency Medical”).

FN4. Pursuant to the shareholder agreement, a shareholder must continue to keep his or her call-taking duties to maintain shareholder status..  FN4. Pursuant to the shareholder agreement, a shareholder must continue to keep his or her call-taking duties to maintain shareholder status.

FN5. The plaintiff only alleges the difference in share value in counts three through six..  FN5. The plaintiff only alleges the difference in share value in counts three through six.

FN6. These facts will only be considered for purposes of the motion to disqualify as they do not appear in the operative complaint..  FN6. These facts will only be considered for purposes of the motion to disqualify as they do not appear in the operative complaint.

FN7. At this stage, that Mathieson actually provided legal advice is merely an allegation by the plaintiff, not a conclusion of the court..  FN7. At this stage, that Mathieson actually provided legal advice is merely an allegation by the plaintiff, not a conclusion of the court.

FN8. Rule 1.9 of the Rules of Professional Conduct provides in relevant part:  “(a) A lawyer who has formerly represented a client in a matter shall not thereafter represent another person in the same or a substantially related matter in which that person's interests are materially adverse to the interests of the former client unless the former client gives informed consent, confirmed in writing ․“(c) A lawyer who has formerly represented a client in a matter or whose present or former firm has formerly represented a client in a matter shall not thereafter:  (1) use information relating to the representation to the disadvantage of the former client except as these Rules would permit or require with respect to a client, or when the information has become generally known;  or (2) reveal information relating to the representation except as these Rules would permit or require with respect to a client.”.  FN8. Rule 1.9 of the Rules of Professional Conduct provides in relevant part:  “(a) A lawyer who has formerly represented a client in a matter shall not thereafter represent another person in the same or a substantially related matter in which that person's interests are materially adverse to the interests of the former client unless the former client gives informed consent, confirmed in writing ․“(c) A lawyer who has formerly represented a client in a matter or whose present or former firm has formerly represented a client in a matter shall not thereafter:  (1) use information relating to the representation to the disadvantage of the former client except as these Rules would permit or require with respect to a client, or when the information has become generally known;  or (2) reveal information relating to the representation except as these Rules would permit or require with respect to a client.”

FN9. Rule 1.13 of the Rules of Professional Conduct provides in relevant part:  “(a) A lawyer employed or retained by an organization represents the organization acting through its duly authorized constituents.* * * *“(f) In dealing with an organization's directors, officers, employees, members, shareholders or other constituents, a lawyer shall explain the identity of the client when the lawyer knows or reasonably should know that the organization's interests are adverse to those of the constituents with whom the lawyer is dealing.“(g) A lawyer representing an organization may also represent any of its directors, officers, employees, members, shareholders or other constituents, subject to the provisions of Rule 1.7.   If the organization's consent to the dual representation is required by Rule 1.7, the consent shall be given by an appropriate official of the organization other than the individual who is to be represented, or by the shareholders.”.  FN9. Rule 1.13 of the Rules of Professional Conduct provides in relevant part:  “(a) A lawyer employed or retained by an organization represents the organization acting through its duly authorized constituents.* * * *“(f) In dealing with an organization's directors, officers, employees, members, shareholders or other constituents, a lawyer shall explain the identity of the client when the lawyer knows or reasonably should know that the organization's interests are adverse to those of the constituents with whom the lawyer is dealing.“(g) A lawyer representing an organization may also represent any of its directors, officers, employees, members, shareholders or other constituents, subject to the provisions of Rule 1.7.   If the organization's consent to the dual representation is required by Rule 1.7, the consent shall be given by an appropriate official of the organization other than the individual who is to be represented, or by the shareholders.”

FN10. Rule 1.7 of the Rules Professional Conduct provides:  “(a) Except as provided in subsection (b), a lawyer shall not represent a client if the representation involves a concurrent conflict of interest.   A concurrent conflict of interest exists if:  (1) the representation of one client will be directly adverse to another client;  or (2) there is a significant risk that the representation of one or more clients will be materially adverse to another client, a former client or a third person or by a personal interest of the lawyer.“(b) Notwithstanding the existence of a concurrent conflict of interest under subsection (a), a lawyer may represent a client if:  (1) the lawyer reasonably believes that the lawyer will be able to provide competent and diligent representation to each affected client;  (2) the representation is not prohibited by law;  (3) the representation does not involve the assertion of a claim by one client against another client represented by the lawyer in the same litigation or the same proceeding before any tribunal;  and (4) each affected client gives informed consent, confirmed in writing.”.  FN10. Rule 1.7 of the Rules Professional Conduct provides:  “(a) Except as provided in subsection (b), a lawyer shall not represent a client if the representation involves a concurrent conflict of interest.   A concurrent conflict of interest exists if:  (1) the representation of one client will be directly adverse to another client;  or (2) there is a significant risk that the representation of one or more clients will be materially adverse to another client, a former client or a third person or by a personal interest of the lawyer.“(b) Notwithstanding the existence of a concurrent conflict of interest under subsection (a), a lawyer may represent a client if:  (1) the lawyer reasonably believes that the lawyer will be able to provide competent and diligent representation to each affected client;  (2) the representation is not prohibited by law;  (3) the representation does not involve the assertion of a claim by one client against another client represented by the lawyer in the same litigation or the same proceeding before any tribunal;  and (4) each affected client gives informed consent, confirmed in writing.”

FN11. Rule 1.18 of the Rules of Professional Conduct provides in relevant part:  “(a) A person who discusses or communicates with a lawyer concerning the possibility of forming a client-lawyer relationship is a prospective client.“(b) Even when no client-lawyer relationship ensues, a lawyer who has had discussions with a prospective client shall not use or reveal information learned in the consultation, except as Rule 1.9 would permit with respect to information of a former client.“(c) A lawyer subject to subsection (b) shall not represent a client with interests materially adverse to those of a prospective client in the same or a substantially related matter if the lawyer received information from the prospective client that could be significantly harmful to that person in the matter, except as provided in subsection (d).  If a lawyer is disqualified from representation under this paragraph, no lawyer in a firm with which that lawyer is associated may knowingly undertake or continue representation in such a matter, except as provided in subsection (d) ․”.  FN11. Rule 1.18 of the Rules of Professional Conduct provides in relevant part:  “(a) A person who discusses or communicates with a lawyer concerning the possibility of forming a client-lawyer relationship is a prospective client.“(b) Even when no client-lawyer relationship ensues, a lawyer who has had discussions with a prospective client shall not use or reveal information learned in the consultation, except as Rule 1.9 would permit with respect to information of a former client.“(c) A lawyer subject to subsection (b) shall not represent a client with interests materially adverse to those of a prospective client in the same or a substantially related matter if the lawyer received information from the prospective client that could be significantly harmful to that person in the matter, except as provided in subsection (d).  If a lawyer is disqualified from representation under this paragraph, no lawyer in a firm with which that lawyer is associated may knowingly undertake or continue representation in such a matter, except as provided in subsection (d) ․”

FN12. The official comment to rule 1.18 provides:  “A person who transmits information unilaterally to a lawyer, without any reasonable expectation that the lawyer is willing to discuss the possibility of forming a client-lawyer relationship, is not a prospective client within the meaning of subsection (a).”.  FN12. The official comment to rule 1.18 provides:  “A person who transmits information unilaterally to a lawyer, without any reasonable expectation that the lawyer is willing to discuss the possibility of forming a client-lawyer relationship, is not a prospective client within the meaning of subsection (a).”

FN13. The official comment provides:  “[T]he lawyer is not prohibited from representing a client with interests adverse to those of the prospective client in the same or substantially related matter unless the lawyer has received from the prospective client information that could be significantly harmful if used in the matter.”.  FN13. The official comment provides:  “[T]he lawyer is not prohibited from representing a client with interests adverse to those of the prospective client in the same or substantially related matter unless the lawyer has received from the prospective client information that could be significantly harmful if used in the matter.”

FN14. Rule 3.7 of the Rules of Professional Conduct provides:  “(a) A lawyer shall not act as advocate at a trial in which the lawyer is likely to be a necessary witness unless:  (1) The testimony relates to an uncontested issue;  (2) The testimony relates to the nature and value of legal services rendered in the case;  or (3) Disqualification of the lawyer would work substantial hardship on the client.“(b) A lawyer may act as advocate in a trial in which another lawyer in the lawyer's firm is likely to be called as a witness unless precluded from doing so by rule 1.7 or rule 1.9.”.  FN14. Rule 3.7 of the Rules of Professional Conduct provides:  “(a) A lawyer shall not act as advocate at a trial in which the lawyer is likely to be a necessary witness unless:  (1) The testimony relates to an uncontested issue;  (2) The testimony relates to the nature and value of legal services rendered in the case;  or (3) Disqualification of the lawyer would work substantial hardship on the client.“(b) A lawyer may act as advocate in a trial in which another lawyer in the lawyer's firm is likely to be called as a witness unless precluded from doing so by rule 1.7 or rule 1.9.”

FN15. The plaintiff simply states that “Mathieson and Pullman & Comley's role in representing the shareholders and the counsel given to [Milford Associates] during the period in which [Milford Associates] allegedly caused harm to the plaintiff, renders it more than likely that he and others from his firm will [act as] witnesses.”   He later states that “the plaintiff does not yet know who at P & C worked with Attorney Mathieson on this matter during the relevant timeframe ․ [I]t is certainly not impossible that one or more associates and/or paralegals—and possible even other members—assisted him in his representation of [Milford Associates].”   His failure to identify any individuals who would testify and offer some theory as to why their testimony would be necessary means the plaintiff has not come close to satisfying his burden of showing why those anonymous individuals should be disqualified under rule 3.7..  FN15. The plaintiff simply states that “Mathieson and Pullman & Comley's role in representing the shareholders and the counsel given to [Milford Associates] during the period in which [Milford Associates] allegedly caused harm to the plaintiff, renders it more than likely that he and others from his firm will [act as] witnesses.”   He later states that “the plaintiff does not yet know who at P & C worked with Attorney Mathieson on this matter during the relevant timeframe ․ [I]t is certainly not impossible that one or more associates and/or paralegals—and possible even other members—assisted him in his representation of [Milford Associates].”   His failure to identify any individuals who would testify and offer some theory as to why their testimony would be necessary means the plaintiff has not come close to satisfying his burden of showing why those anonymous individuals should be disqualified under rule 3.7.

FN16. “The attorney-client privilege was ‘designed, in large part, to encourage full disclosure by a client to his or her attorney so as to facilitate effective legal representation.’  ․ State v. Davis, 98 Conn.App. 608, 631, 911 A.2d 753 (2006), aff'd, 286 Conn. 17, 942 A.2d 373 (2008).  ‘[A]lthough the existence of the privilege encourages the candor that is necessary for effective legal advice ․ the exercise of the privilege tends to prevent a full disclosure of the truth in court ․ Therefore, the privilege is strictly construed.’  ․ PSE Consulting, Inc. v. Frank Mercede & Sons, Inc., 267 Conn. 279, 330, 838 A.2d 135 (2004).   Further, ‘as with all privileges, the [party] claiming the attorney-client privilege has the burden of establishing all essential elements.’“ ‘In Connecticut, the attorney client privilege protects both the confidential giving of professional advice by an attorney acting in the capacity of a legal advisor to those who can act on it, as well as the giving of information to the lawyer to enable counsel to give sound and informed advice.’  Metropolitan Life Ins. Co. v. Aetna Casualty & Surety Co., 249 Conn. 36, 52, 730 A.2d 51 (1999).   A communication from an attorney to a client solely regarding a matter of fact is not ordinarily privileged, unless the attorney's statement is shown to be ‘inextricably linked to the giving of legal advice’ or it directly or indirectly reveals confidential information disclosed by the client to the attorney.   Ullmann v. State, 230 Conn. 698, 713–14, 647 A.2d 324 (1994).”   Thopsey v. Bridgeport Roman Catholic Diocesan Corp., Superior Court, judicial district of New Haven, Docket No. NNHCV106009360S (February 15, 2012, Young, J.)..  FN16. “The attorney-client privilege was ‘designed, in large part, to encourage full disclosure by a client to his or her attorney so as to facilitate effective legal representation.’  ․ State v. Davis, 98 Conn.App. 608, 631, 911 A.2d 753 (2006), aff'd, 286 Conn. 17, 942 A.2d 373 (2008).  ‘[A]lthough the existence of the privilege encourages the candor that is necessary for effective legal advice ․ the exercise of the privilege tends to prevent a full disclosure of the truth in court ․ Therefore, the privilege is strictly construed.’  ․ PSE Consulting, Inc. v. Frank Mercede & Sons, Inc., 267 Conn. 279, 330, 838 A.2d 135 (2004).   Further, ‘as with all privileges, the [party] claiming the attorney-client privilege has the burden of establishing all essential elements.’“ ‘In Connecticut, the attorney client privilege protects both the confidential giving of professional advice by an attorney acting in the capacity of a legal advisor to those who can act on it, as well as the giving of information to the lawyer to enable counsel to give sound and informed advice.’  Metropolitan Life Ins. Co. v. Aetna Casualty & Surety Co., 249 Conn. 36, 52, 730 A.2d 51 (1999).   A communication from an attorney to a client solely regarding a matter of fact is not ordinarily privileged, unless the attorney's statement is shown to be ‘inextricably linked to the giving of legal advice’ or it directly or indirectly reveals confidential information disclosed by the client to the attorney.   Ullmann v. State, 230 Conn. 698, 713–14, 647 A.2d 324 (1994).”   Thopsey v. Bridgeport Roman Catholic Diocesan Corp., Superior Court, judicial district of New Haven, Docket No. NNHCV106009360S (February 15, 2012, Young, J.).

FN17. Counts one and five are only directed towards Milford Associates, whereas count four is directed towards all the defendants..  FN17. Counts one and five are only directed towards Milford Associates, whereas count four is directed towards all the defendants.

FN18. Because these paragraphs set forth a separate cause of action in that they allege Milford Associates' liability for its directors' alleged breaches of their fiduciary duties, it is permissible to strike the paragraphs individually.   See MacLean v. Perry, supra, Superior Court, Docket No. CV 11 6009597..  FN18. Because these paragraphs set forth a separate cause of action in that they allege Milford Associates' liability for its directors' alleged breaches of their fiduciary duties, it is permissible to strike the paragraphs individually.   See MacLean v. Perry, supra, Superior Court, Docket No. CV 11 6009597.

FN19. Practice Book § 10–26 provides in relevant part:  “Where separate and distinct causes of action, as distinguished from separate and distinct claims of relief founded on the same cause of action or transaction, are joined, the statement of the second shall be prefaced by the words Second Count, and so on for the others;  and the several paragraphs of each count shall be numbered separately beginning in each count with the number one.”   The Supreme Court has stated:  “It is true that the plaintiff's complaint is confusing because it combines, in a single count, separate causes of action against the individual defendant and [a co-defendant].   Since there was nothing to prevent those two possible causes of action from being joined in the same complaint, however, the proper way to cure any confusion in that regard is to file a motion to revise, not a motion to strike the entire complaint.”  Rowe v. Godou, 209 Conn. 273, 279 (1988);  see Practice Book § 10–35(3) (“Whenever any party desires to obtain ․ (3) separation of causes of action which may be united in one complaint when they are improperly combined in one count ․ the party desiring any such amendment in an adverse party's pleading may file a timely request to revise that pleading”)..  FN19. Practice Book § 10–26 provides in relevant part:  “Where separate and distinct causes of action, as distinguished from separate and distinct claims of relief founded on the same cause of action or transaction, are joined, the statement of the second shall be prefaced by the words Second Count, and so on for the others;  and the several paragraphs of each count shall be numbered separately beginning in each count with the number one.”   The Supreme Court has stated:  “It is true that the plaintiff's complaint is confusing because it combines, in a single count, separate causes of action against the individual defendant and [a co-defendant].   Since there was nothing to prevent those two possible causes of action from being joined in the same complaint, however, the proper way to cure any confusion in that regard is to file a motion to revise, not a motion to strike the entire complaint.”  Rowe v. Godou, 209 Conn. 273, 279 (1988);  see Practice Book § 10–35(3) (“Whenever any party desires to obtain ․ (3) separation of causes of action which may be united in one complaint when they are improperly combined in one count ․ the party desiring any such amendment in an adverse party's pleading may file a timely request to revise that pleading”).

FN20. The plaintiff has not only said that Milford Associates “ratified the actions of the individual defendants,” but has also alleged that Milford Associates' board of directors made a decision to “repurchase the plaintiff's shares” and to sell its practice to EM–I, which could be an act of ratification..  FN20. The plaintiff has not only said that Milford Associates “ratified the actions of the individual defendants,” but has also alleged that Milford Associates' board of directors made a decision to “repurchase the plaintiff's shares” and to sell its practice to EM–I, which could be an act of ratification.

FN21. This proposition is a common sense understanding of general legal principles that is not explicitly discussed in any Connecticut case law this court could find.   A single act can generate multiple theories of liability.   See Coppola Const.   Co., Inc. v. Hoffman Enterprises Limited Partnership, 134 Conn.App. 203, 210 n.4, 38 A.3d 215 (2012) (“This argument ignores the plaintiff's right to plead alternative causes of actions based on the same facts ․ [A] plaintiff is permitted to raise alternative theories of liability and may seek damages from multiple defendants.”   (Citations omitted.)).   Specifically, it is possible for an individual to act in a way that not only violates a preexisting fiduciary duty that the individual owes to another person, but also violates some more general duty owed to that person that arises from the circumstances surrounding the act.   See Hutchinson v. Farm Family Cas. Ins. Co., 273 Conn. 33, 53, 867 A.2d 1 (2005) (“[T]his unique dependency imposes fiduciary-like duties ․ which are greater and distinct from the duties of parties to ordinary commercial contracts”).   In the present case, the directors could have violated their fiduciary duties by failing to disclose the transaction, but they also could have acted tortiously through fraudulent nondisclosure or negligent misrepresentation.   The latter ground could create liability independent of the fiduciary duties they owed, since the duties under those theories would have related to the circumstances of the transaction rather than the preexisting fiduciary duty.Furthermore, an act by a corporation through its board of directors can be distinguished from other acts performed through the corporation's agents.   The board of directors exercises corporate powers.   See General Statutes § 33–735(b) (“All corporate powers shall be exercised by or under the authority of, and the business and affairs of the corporation managed by or under the direction of, its board of directors ․”).  Those corporate powers include the ability to enter into a variety of transactions that can incur liability.   See General Statutes § 33–647 (“[E]very corporation ․ has the same powers as an individual ․ including without limitation power ․ [t]o make contracts and guarantees, [and] incur liabilities ․”).  In certain situations, the board of directors can act without relying on subsequent conduct by its agents to create liability.   For instance, the directors could pass a resolution including a statement that made certain misrepresentations.   Because “[d]irectors, in the ordinary course of their service as directors, do not act as agents of the corporation”;  Arnold v. Society for Sav. Bancorp, Inc., supra, 678 A.2d 539;  for all intents and purposes an act of the board of directors could be considered an act of the corporation.   The corporation could still be liable for such an act, even though directors acting in their capacity as directors are not agents of the corporation and a corporation cannot be liable for a breach of the directors' fiduciary duty.   In the situation where a misrepresentation by the board of directors, made without the use of an agent, fraudulently induced a shareholder to enter into a transaction with the corporation, the shareholder could have two theories of recovery:  (1) that the directors breached their fiduciary duty owed to the shareholder, in which case the corporation is not liable;  or (2) that the corporation, under the direction of its directors, committed fraud itself and is liable to the shareholder as if he were a third party defrauded by the corporation.The court acknowledges that it is a very narrow range of activity that could be considered an act of a corporation under the direction of its board of directors without the use of any corporate agents.   Any contract signed by an officer or director, physical act performed by an employee, etc., would involve an act by a corporate agent to actually incur the legal liability.   But where representations are directly made by the board of directors at a meeting, those representations can be attributed directly to the corporation without turning to agency law..  FN21. This proposition is a common sense understanding of general legal principles that is not explicitly discussed in any Connecticut case law this court could find.   A single act can generate multiple theories of liability.   See Coppola Const.   Co., Inc. v. Hoffman Enterprises Limited Partnership, 134 Conn.App. 203, 210 n.4, 38 A.3d 215 (2012) (“This argument ignores the plaintiff's right to plead alternative causes of actions based on the same facts ․ [A] plaintiff is permitted to raise alternative theories of liability and may seek damages from multiple defendants.”   (Citations omitted.)).   Specifically, it is possible for an individual to act in a way that not only violates a preexisting fiduciary duty that the individual owes to another person, but also violates some more general duty owed to that person that arises from the circumstances surrounding the act.   See Hutchinson v. Farm Family Cas. Ins. Co., 273 Conn. 33, 53, 867 A.2d 1 (2005) (“[T]his unique dependency imposes fiduciary-like duties ․ which are greater and distinct from the duties of parties to ordinary commercial contracts”).   In the present case, the directors could have violated their fiduciary duties by failing to disclose the transaction, but they also could have acted tortiously through fraudulent nondisclosure or negligent misrepresentation.   The latter ground could create liability independent of the fiduciary duties they owed, since the duties under those theories would have related to the circumstances of the transaction rather than the preexisting fiduciary duty.Furthermore, an act by a corporation through its board of directors can be distinguished from other acts performed through the corporation's agents.   The board of directors exercises corporate powers.   See General Statutes § 33–735(b) (“All corporate powers shall be exercised by or under the authority of, and the business and affairs of the corporation managed by or under the direction of, its board of directors ․”).  Those corporate powers include the ability to enter into a variety of transactions that can incur liability.   See General Statutes § 33–647 (“[E]very corporation ․ has the same powers as an individual ․ including without limitation power ․ [t]o make contracts and guarantees, [and] incur liabilities ․”).  In certain situations, the board of directors can act without relying on subsequent conduct by its agents to create liability.   For instance, the directors could pass a resolution including a statement that made certain misrepresentations.   Because “[d]irectors, in the ordinary course of their service as directors, do not act as agents of the corporation”;  Arnold v. Society for Sav. Bancorp, Inc., supra, 678 A.2d 539;  for all intents and purposes an act of the board of directors could be considered an act of the corporation.   The corporation could still be liable for such an act, even though directors acting in their capacity as directors are not agents of the corporation and a corporation cannot be liable for a breach of the directors' fiduciary duty.   In the situation where a misrepresentation by the board of directors, made without the use of an agent, fraudulently induced a shareholder to enter into a transaction with the corporation, the shareholder could have two theories of recovery:  (1) that the directors breached their fiduciary duty owed to the shareholder, in which case the corporation is not liable;  or (2) that the corporation, under the direction of its directors, committed fraud itself and is liable to the shareholder as if he were a third party defrauded by the corporation.The court acknowledges that it is a very narrow range of activity that could be considered an act of a corporation under the direction of its board of directors without the use of any corporate agents.   Any contract signed by an officer or director, physical act performed by an employee, etc., would involve an act by a corporate agent to actually incur the legal liability.   But where representations are directly made by the board of directors at a meeting, those representations can be attributed directly to the corporation without turning to agency law.

FN22. The plaintiff alleges:  the “directors ․ actively concealed from the shareholders, including the plaintiff, the fact that [Milford Associates] had retained legal counsel and investment banking professionals to effect ․ a sale”;  the directors made an “election to repurchase the plaintiff's shares”;  and that the board of directors promised stable leadership and transparency in board action.   The court will discuss how these allegations could form a basis for fraudulent nondisclosure and negligent misrepresentation in the following section..  FN22. The plaintiff alleges:  the “directors ․ actively concealed from the shareholders, including the plaintiff, the fact that [Milford Associates] had retained legal counsel and investment banking professionals to effect ․ a sale”;  the directors made an “election to repurchase the plaintiff's shares”;  and that the board of directors promised stable leadership and transparency in board action.   The court will discuss how these allegations could form a basis for fraudulent nondisclosure and negligent misrepresentation in the following section.

FN23. Milford Associates' counsel repeatedly attacks the plaintiff for distinguishing this duty from a fiduciary duty the corporation might owe to a shareholder.   Despite counsel's best efforts to confuse the discussion, this “mysterious” duty to disclose very much exists separately from fiduciary duties as is well established in the common law;  Duart v. Department of Correction, supra, 303 Conn. 498 n.17;  and counsel has not provided any authority that suggests the duty to disclose cannot arise when a corporation is entering a transaction with one of its shareholders..  FN23. Milford Associates' counsel repeatedly attacks the plaintiff for distinguishing this duty from a fiduciary duty the corporation might owe to a shareholder.   Despite counsel's best efforts to confuse the discussion, this “mysterious” duty to disclose very much exists separately from fiduciary duties as is well established in the common law;  Duart v. Department of Correction, supra, 303 Conn. 498 n.17;  and counsel has not provided any authority that suggests the duty to disclose cannot arise when a corporation is entering a transaction with one of its shareholders.

FN24. Although Milford Associates briefly mentions some other grounds in its briefs, the only stated ground in its motion to strike relating to fraudulent nondisclosure and negligent misrepresentation is that “[a]s a matter of law, a corporation as such owes no duties to its shareholders to affirmatively disclose the existence of a corporate transaction like the one that is the subject of the plaintiff's complaint.”   As explained in the standard of review, the court can only consider the grounds stated in the motion to strike.  Meredith v. Police Commission, supra, 182 Conn. 140.  FN24. Although Milford Associates briefly mentions some other grounds in its briefs, the only stated ground in its motion to strike relating to fraudulent nondisclosure and negligent misrepresentation is that “[a]s a matter of law, a corporation as such owes no duties to its shareholders to affirmatively disclose the existence of a corporate transaction like the one that is the subject of the plaintiff's complaint.”   As explained in the standard of review, the court can only consider the grounds stated in the motion to strike.  Meredith v. Police Commission, supra, 182 Conn. 140

FN25. It is possible that the individual defendants might have had some fiduciary duty that would have compelled them to disclose the existence of the potential sale, but, as this court has already discussed, Milford Associates cannot be liable for any breach of the individual defendants' fiduciary duties owed to the plaintiff..  FN25. It is possible that the individual defendants might have had some fiduciary duty that would have compelled them to disclose the existence of the potential sale, but, as this court has already discussed, Milford Associates cannot be liable for any breach of the individual defendants' fiduciary duties owed to the plaintiff.

Wilson, Robin L., J.