LLC v. Webster Bank et al. (2013)

MEMORANDUM OF DECISION RE DEFENDANT'S MOTION TO STRIKE (# 124)

I. INTRODUCTION

The defendant, Webster Bank, has filed the motion to strike now pending before the court.   For the reasons that follow, the motion to strike is granted.

II. FACTS

In the plaintiff's revised complaint dated December 17, 2012, the plaintiff alleges the following facts.   In count one, the plaintiff alleges that, on August 29, 2011, Webster Bank (“the bank”) was presented with a check in the amount of $15,000.   The check bore the name of the plaintiff and two other joint payees.   Without the plaintiff's knowledge, permission or authority, the bank negotiated the check and released the funds on a forged endorsement, wrongfully paying the proceeds to a person not entitled to enforce the instrument or receive payment.   Upon information and belief, the bank cashed the check upon presentation.   Pursuant to the provisions of General Statutes § 42a–3–110, the instrument was payable to all of the parties listed on the document together, not individually, and as such, it could not be negotiated, discharged or enforced by any of them individually.

Count two of the complaint is a negligence claim.   In this count, the plaintiff alleges that the bank owed the plaintiff a “duty to exercise due care to obtain a proper endorsement and identification prior to cashing said instrument.”   The bank acted negligently by:  cashing the check;  failing to require a proper endorsement on the check;  failing to require the “person(s) presenting the check for payment to demonstrate sufficient authority or identity to do so”;  failing to obtain sufficient identification to cash the check;  failing to have a system in place to ensure the individual presenting the check was the proper endorser of the check;  failing to have a proper system in place to verify a photo identification for an individual presenting a check;  failing to make payment to the proper payee upon presentation;  failing to make a “reasonable inquiry into whether [the individual presenting the check] was authorized by the [p]laintiff”;  failing to exercise ordinary care;  failing to act in good faith;  and failing to adhere to reasonable banking standards.

In count four, the plaintiff alleges a violation of the Connecticut Unfair Trade Practices Act (CUTPA).   Specifically, the plaintiff alleges that the conduct of the bank in failing to follow its own policies and procedures was a violation of public policy.   The bank unfairly refused to pay the plaintiff, and by doing so, the bank offended public policy.   The bank's actions were unethical, oppressive and unscrupulous and were not outweighed by the countervailing benefits.   Thus, the bank's actions constituted an unfair and deceptive act or practice in violation of CUTPA.   Furthermore, the plaintiff's loss could have reasonably been avoided.

On January 22, 2013, the bank filed a motion to strike counts two and four of the operative complaint and a memorandum of law in support.¹  The bank asserts that count two should be stricken because “it is devoid of any facts which allege a duty owed” by the bank to a non-customer.   Without said duty, the defendant argues, a cause of action cannot stand.   The bank further asserts that count four should be stricken because “the complaint is devoid of any facts which support [the plaintiff's] conclusory allegation that [the bank] violated its own policies and procedures or that the alleged actions of [the bank] amount to unethical, oppressive and unscrupulous conduct.”

The plaintiff, in contrast, asserts that a sufficient duty exists in the second count to sustain a cause of action for negligence.   The plaintiff also asserts that count four should not be stricken because the plaintiff has pleaded sufficient facts to meet the requirements for a CUTPA claim.   This matter was heard at short calendar on March 25, 2013.

III. DISCUSSION

“The purpose of a motion to strike is to contest ․ the legal sufficiency of the allegations of any complaint ․ to state a claim upon which relief can be granted.”  (Internal quotation marks omitted.)  Fort Trumbull Conservancy, LLC v. Alves, 262 Conn. 480, 498, 815 A.2d 1188 (2003).  “In ruling on a motion to strike, the court is limited to the facts alleged in the complaint.”   (Internal quotation marks omitted.)  Faulkner v. United Technologies Corp., 240 Conn. 576, 580, 693 A.2d 293 (1997).   As a result, “[t]he role of the trial court [is] to examine the [complaint], construed in favor of the [plaintiff], to determine whether the [pleading party has] stated a legally sufficient cause of action.”  (Internal quotation marks omitted.)  Dodd v. Middlesex Mutual Assurance Co., 242 Conn. 375, 378, 698 A.2d 859 (1997).

“[I]n determining the sufficiency of a complaint challenged by a defendant's motion to strike, all well-pleaded facts and those facts necessarily implied from the allegations are taken as admitted.”  (Internal quotation marks omitted.)  Violano v. Fernandez, 280 Conn. 310, 318, 907 A.2d 1188 (2006).   Although 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., supra, 240 Conn. 588.

A. Count Two:  Negligence

The bank asserts that count two should be stricken because the complaint is “devoid of any facts which allege a duty owed by [the bank] to [the plaintiff,] a non-customer.”   Specifically, the bank argues that the plaintiff has failed to “aver that [the bank] owed [the plaintiff] a duty” and that the plaintiff is not a customer of the bank, and as such, the bank does not owe it a duty.   The court agrees with the bank.

“The essential elements of a cause of action in negligence are well established:  duty;  breach of that duty;  causation;  and actual injury ․ Duty is a legal conclusion about relationships between individuals, made after the fact, and [is] imperative to a negligence cause of action ․ Thus, [t]here can be no actionable negligence ․ unless there exists a cognizable duty ․ [T]he test for the existence of a legal duty of care entails (1) a determination of whether an ordinary person in the defendant's position, knowing what the defendant knew or should have known, would anticipate that harm of the general nature of that suffered was likely to result, and (2) a determination, on the basis of a public policy analysis, of whether the defendant's responsibility for its negligent conduct should extend to the particular consequences or particular plaintiff in the case ․” (Internal quotation marks omitted.)  Murdock v. Croughwell, 268 Conn. 559, 566, 848 A.2d 363 (2004).   Ultimately, “[t]he existence of a duty [of care] is a question of law.”  Gordon v. Bridgeport Housing Authority, 208 Conn. 161, 171, 544 A.2d 1185 (1988).   Therefore, “the question of whether a defendant owed a duty of care to an injured party is properly decided in the context of a motion to strike.”  (Internal quotation marks omitted.)   Wallace v. McCray, Superior Court, judicial district of New Haven, Docket No. CV 11 6024667 (June 8, 2012, Fischer, J.).

In this case, count two of the plaintiff's revised complaint fails to allege that the plaintiff was a customer of Webster bank.   Thus, as alleged, this is an action by a non-customer.  “Where a party has failed to allege that it is a customer of a defendant bank, and therefore has not shown the existence of [a] particular contractual relationship—[to act with reasonable care towards its customers]—[then] to establish the existence of a duty of care it must ‘allege [a] contract, statute or circumstances which would give rise to a duty owed by [the bank] which would support an action in negligence.’  “ Lester Construction, LLC v. People's United Bank, Superior Court, judicial district of Fairfield, Docket No. CV 09 5024042 (December 18, 2009, Gilardi, J.T.R.), quoting Sheiman v. Lafayette Bank & Trust Co., 4 Conn.App. 39, 45, 492 A.2d 219 (1985).

Moreover, the Lester court pointed out that “the fact that an injury was foreseeable, by itself, is insufficient to establish a duty of care on the part of a bank when no such special relationship is alleged by a non-customer plaintiff.”  Lester Construction, supra, 49 Conn. L. Rptr. 110.   Therefore, as alleged in the revised complaint, the bank did not owe the plaintiff—a non-customer—a duty.

B. Count Four:  CUTPA

The defendant moves to strike the plaintiff's fourth count on the ground that “the complaint is devoid of any facts which support [the plaintiff's] conclusory allegation that [the bank] violated its own policies and procedures or that the alleged actions of [the bank] amount to unethical, oppressive and unscrupulous conduct.”

The CUTPA statute provides in relevant part that “[n]o person shall engage in unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce.”  General Statutes § 42–110b(a).   The statute further states that “[a]ny person who suffers any ascertainable loss of money or property, real or personal, as a result of the use or employment of a method, act or practice prohibited by section 42–110b, may bring an action ․ to recover actual damages.”  General Statutes § 42–110g(a).  “In a private dispute a plaintiff may recover for CUTPA violations only if the proven deceptive acts or practices of the defendant have a potential effect on the general consuming public.”  (Internal quotation marks omitted.)   Sportsmen's Boating Corp. v. Hensley, 192 Conn. 747, 755, 474 A.2d 780 (1984).

In determining whether an action violates CUTPA, the court should address the following three factors:  “(1) [W]hether the practice, without necessarily having been previously considered unlawful, offends public policy as it has been established by statutes, the common law, or otherwise—whether, in other words, it is within at least the penumbra of some common law, statutory, or other established concept of unfairness;  (2) whether it is immoral, unethical, oppressive, or unscrupulous;  (3) whether it causes substantial injury to consumers [ (competitors or other businessmen) ].”  McLaughlin Ford, Inc. v. Ford Motor Co., 192 Conn. 558, 568, 473 A.2d 1185 (1984).

The plaintiff correctly asserts that “[a]ll three criteria do not need to be satisfied to support a finding of unfairness.   A practice may be unfair because of the degree to which it meets one of the criteria or because to a lesser extent it meets all three.”  Normand Josef Enterprises, Inc. v. Connecticut National Bank, 230 Conn. 486, 522, 646 A.2d 1289 (1994).   It is therefore necessary to determine whether the plaintiff has sufficiently pleaded any of the three factors.

As to the first factor of whether the bank's alleged practices offend public policy, the plaintiff asserts that the bank's violation of § 42a–3–420, which covers the conversion of instruments, is sufficient to support a cause of action under CUTPA.  “A violation of a statute does not necessarily give rise to a violation of public policy and, in turn, a violation of CUTPA.   See Normand Josef Enterprises, Inc. v. Connecticut National Bank, supra, 230 Conn. 524 ․ Moreover, a[v]iolation of an identifiable public policy alone may be insufficient under certain circumstances to support a CUTPA violation.   Francoline v. Klatt, 26 Conn.App. 203, 211, 600 A.2d 8 (1991).”   Leaksealers v. Connecticut National Bank, Superior Court, judicial district of Hartford, Docket No. CV 92 0517952 (June 20, 1995, Hennessey, J.).  “[W]here a party claims a CUTPA violation based on an alleged violation of a public policy statute, the court's focus should be on the circumstances surrounding the violation of the statute, rather than on a technical violation of the statute itself.”  Id.

In Leaksealers, the plaintiff held an account with the defendant bank.  Id. The plaintiff was made aware of a series of checks that were issued in the plaintiff's name, on the plaintiff's account and fraudulently signed by another party.  Id. “At various times that the checks were presented for payment, the defendant accepted and cashed the checks, and paid the amount indicated on the checks to the person who presented the checks.   Although the persons were neither the named payees on the checks nor authorized to present or cash the checks, the defendant charged the plaintiff's checking account for the amount of the checks so cashed.”  Id. The plaintiff demanded that the bank restore his funds, but the bank refused.  Id. The court, Hennessey, J., held that “none of the circumstances surrounding the defendant's alleged conversion of the plaintiff's checks amounts to a deceptive or unfair trade practice, as that term is defined under CUTPA.”  Id.

In this case, although the plaintiff has alleged a cause of action for conversion, the plaintiff has failed to allege any facts that would amount to a deceptive or unfair trade practice.   The mere incantation of a violation of a statute in and of itself is insufficient.   Similar to the facts underlying the court's decision in Leaksealers, “none of the circumstances surrounding the defendant's alleged conversion of the plaintiff's checks amounts to a deceptive or unfair trade practice, as that term is defined under CUTPA.”  Leaksealers v. Connecticut National Bank, supra, Superior Court, Docket No. CV 92 0517952.   As such, the plaintiff has not satisfied the first factor.

As to the second factor, the plaintiff asserts that the bank's actions were immoral, unethical, oppressive or unscrupulous.   The plaintiff has failed to support this legal conclusion with any factual allegations from the complaint or precedent to guide the court's decision.   In contrast, the bank asserts that there are no facts in the operative complaint from which the court can reach the legal conclusion asserted by the plaintiff.   The court agrees with the bank.   See Cappellino v. People's United Bank, Superior Court, judicial district of New Britain, Docket No. CV 096002124 (October 13, 2010, Pittman, J.) (“[n]either a breach of contract nor an act of negligence constitutes a violation of CUTPA unless there are additional facts from which one can infer that the defendant's conduct was also characterized by actions that were unethical, unscrupulous, wilful or reckless ․ Without some factual allegation from which it can be inferred that this element of unfairness or deception was present, [the CUTPA count] must be stricken.”);   see also Saint Bernard School of Montville v. Bank of America, Superior Court, judicial district of New London, Docket No. CV 08 5006676 (May 20, 2009, Martin, J.) (“defendant's conduct constituted an oppressive and unethical practice is a mere legal conclusion upon which relief may not be granted”);  Brookes v. New Haven Savings Bank, Superior Court, judicial district of Hartford, Docket No. CV 94 0544390 (January 28, 1997, Hennessey, J.) (mere allegations of unethical behavior coupled with the improper payment on a forged instrument is insufficient to plead a cause of action for CUTPA violation);  Westwood Group, Inc. v. Polis, Superior Court, judicial district of Fairfield, Docket No. CV 90 0274693 (May 17, 1991, Katz, J.) (4 Conn. L. Rptr. 160) (allegations of bank's conversion of funds insufficient to support a cause of action for CUTPA).   Thus, having failed to allege any facts that would support the legal conclusion that the bank was unethical, oppressive and unscrupulous, the plaintiff has therefore failed to establish the second factor.

As to the third factor, the plaintiff asserts that it suffered an ascertainable loss, that the defendant's practice is not outweighed by countervailing benefits and that the injury could have reasonably been avoided.   The third prong of the test requires a substantial injury to consumers, competitors or other businessmen.  McLaughlin Ford, Inc. v. Ford Motor Co., supra, 192 Conn. 568.  “Although our Supreme Court repeatedly has stated that CUTPA does not impose the requirement of a consumer relationship;  see Macomber v. Travelers Property & Casualty Corp., 261 Conn. 620, 643, 804 A.2d 180 (2002);  the court also has indicated that a plaintiff must have at least some business relationship with the defendant in order to state a cause of action under CUTPA.   See Ventres v. Goodspeed Airport, LLC, [275 Conn. 105, 155, 881 A.2d 937];  see also Vacco v. Microsoft Corp., 260 Conn. 59, 88, 793 A.2d 1048 (2002) (‘[i]t strains credulity to conclude that CUTPA is so formless as to provide redress to any person, for any ascertainable harm, caused by any person in the conduct of any trade or commerce’).”  (Emphasis in original.)  Pinette v. McLaughlin, 96 Conn.App. 769, 778, 901 A.2d 1269 (2006).   Although it is clear that “[t]he Supreme Court has determined that CUTPA applies to the banking industry”;  Normand Josef Enterprises, Inc. v. Connecticut National Bank, supra, 230 Conn. 521;  at its core, CUTPA requires some sort of business relationship.

Here, the plaintiff has failed to allege that it had any sort of business relationship sufficient to meet the requirements of the third prong.   As such, the plaintiff has also failed to allege any facts to support the third prong.

In conclusion, because the allegations in count four of the plaintiff's revised complaint fail to meet any of the three factors the court considers under a CUTPA claim, even construing the facts in a manner most favorable to the plaintiff, count four is legally insufficient to state a claim under CUTPA.

IV. CONCLUSION

For the foregoing reasons, the motion to strike counts two and four is granted.   Pursuant to Practice Book § 10–44, the plaintiff may refile.

Mullins, J.

FOOTNOTES

FN1. The bank has also moved to strike the third count, which sounds in common law conversion.   The plaintiff has conceded this issue.   As a result, the court need not address the merits of the bank's arguments..  FN1. The bank has also moved to strike the third count, which sounds in common law conversion.   The plaintiff has conceded this issue.   As a result, the court need not address the merits of the bank's arguments.

Mullins, Raheem, J.