LLC v. LLC (2013)

MEMORANDUM OF DECISION

The trial of the captioned matter occurred on February 21 and 22, 2013.   Thereafter, the parties filed post-trial briefs dated March 26, 2013 and April 2, 2013.

The plaintiff filed a Four–Count Complaint dated January 27, 2005.   The defendant, Wampus Milford Associates, LLC (WM), filed a counterclaim on May 27, 2005, answered and filed two special defenses on July 25, 2005, and later added a Third Special Defense dated December 5, 2006.   As a consequence of a series of pleadings, the three individual defendants and one individual plaintiff have been removed from the case, only the captioned business entities remain.   The defense counsel, at the conclusion of the plaintiff's case in chief, orally withdrew the May 27, 2005 Counterclaim.

Therefore, the case currently has one plaintiff, one defendant, a Four–Count Complaint which has been narrowed to Three Counts by virtue of the most recent Appellate Court decision.   The proposed February 22, 2007 Amended Complaint of the Fourth Count was timely opposed, no court ruling obtained and hence this pleading is not considered.   This decision addresses Counts One, Three and Four of the January 27, 2005 Complaint, together with the July 27, 2005 Answer and Two Special Defenses, as well as the December 5, 2006 Third Special Defense.   The Court was unable to locate any Reply to the various Special Defenses though the defendant sought no relief due to its absence.

The case was first tried in February of 2007.   In September of 2009, the Appellate Court reversed and remanded the case for a new trial.   A second trial was held, appeal taken and on September 4, 2012, the Appellate Court reversed and remanded the case for a new trial only on Counts One, Three and Four, the Special Defenses and a then existing Counterclaim.   The Counterclaim has since been orally withdrawn, though the Withdrawal of Action has not yet been filed.

I. FACTS

1. The remaining plaintiff and defendant are Connecticut limited liability companies.

2. In 2003 and 2004, the defendant owned a property known as 80 Wampus Lane in Milford, CT. That property was an approximately 168,000 square foot former manufacturing facility, mostly one floor, between fifty and eighty years of age depending on what section of the building was considered.   The facility was largely vacant in 2003.

3. A group of real estate investors formed the Wampus Development, LLC for the purpose of purchasing, improving and leasing the above-mentioned property.   One of the investors was Edward Lapidus.

4. Until December of 2004, Lapidus was a relatively passive member/investor in the defendant.   Lapidus testified that he was not actively involved in the management of the property prior to December 2004.   The property was managed out of an office in Brooklyn, N.Y. by other members of the company including Josh Yashar, a former defendant.   Other of defendant's members were Morty Yashar, Terry Jacobs, Diane Winston, Edward Lapidus and Robert Altman.

5. In December 2004, Lapidus, in his capacity as Trustee, agreed to acquire the entire ownership interest of the defendant limited liability company, see Trial Ex. H. Prior thereto, Lapidus did not have access to the books and records, checkbook, leases and other documentation of the defendant.

6. In late 2003, Kathleen Rorick and her two sons, Matthew Rorick and Timothy Rorick, expressed an interest in leasing a portion of the subject property, for purposes of creating an indoor paintball court/business.   Matthew Rorick, employed full time as a credit analyst for the People's United Bank, described that he also owned and operated an indoor paintball facility in Stamford, CT and saw the subject property as an opportunity for such a venture.   Timothy Rorick is employed as a commercial real estate broker.   Kathleen Rorick is employed by Heyman Properties, for more than 40 years, as a real estate property manager.   Her employment duties with Heyman included negotiating many commercial leases.   In short, the members of the plaintiff limited liability company were well educated, well informed, and relatively sophisticated in matters of real estate leasing and paint ball business operation.

7. The Roricks contacted the listing agent and began a several month long series of negotiations culminating on February 10, 2004 with the execution of the Lease Agreement, Plaintiff's Exhibit # 1.

8. Tim and Kathleen Rorick negotiated with Terry Jacobs and Josh Yashar, representatives for the defendant and its real estate agent Marvin Schnee, for the rental of a portion of the subject property.   Both Roricks repeatedly described their business plan to Jacobs, Yashar, and Schnee explaining the “season” for an indoor paintball facility was between September and April, i.e. the “bad weather” months when potential paintball players could not play outdoors, and the economic necessity of having the facility open and operating by September 2004 to start the “season.”   The negotiations occurred in Connecticut and in Brooklyn, N.Y. and included several face to face meetings as well as electronic communications.   The Roricks made the trip to Brooklyn, N.Y. so as to continue face to face negotiations with the defendant's principals, to examine and appraise the defendant's offices, and see a renovation project that the defendant was completing so as to evaluate defendant's capacity to renovate.

9. As a consequence of the meetings and negotiations Jacobs, Yashar and Schnee understood the Roricks' requirement that the leased property be ready for occupancy by September 2004 so that the business could operate during the fall, winter and spring months of 2004 and early 2005.

10. Prior to the lease execution, Jacobs and Yashar, defendant's representatives, repeatedly assured the Roricks that the landlord was ready, willing and able to timely fulfill the landlord's “fit up,” see Exhibit 1, appendix D, “Landlord's Work” so as to allow the Paint Ball business to open and operate in the fall of 2004.   Jacobs, Yashar, Schnee, Altman and Jason Cohen failed to appear at trial.   Roricks relied upon these assurances when executing the lease, tendering the security deposit to the landlord, hiring an engineering firm and legal counsel, and incurring other expenses in anticipation of opening the paintball business.

11. The Lease Agreement was signed on February 10, 2004 by both parties.   Thereafter, the tenant provided a $32,083.52 security deposit to the defendant.

12. The requirement that the leased premises be available for occupancy by September 2004 is not mentioned anywhere in the Lease Agreement between the parties.

13. Immediately after lease execution, the plaintiff retained, and paid, an engineering firm to design plans and drawings necessary for an application for a municipal zoning approval, and retained, and paid, legal counsel to prepare and prosecute an application for a special exception permit to operate an indoor paintball field on the premises.   This was done in fulfillment of Lease provision § 3.02. The City of Milford approved the zoning application on April 23, 2004.   The plaintiff tenant immediately provided written notice of the zoning approval to the defendant, Exhibit # 3.

14. The lease agreement required the defendant landlord to complete the Landlord's Work, “fit up,” Trial Exhibit 1, appendix D, within ninety (90) days of the receipt of notice of tenant's zoning approval.   Therefore the Landlord's Work was to be completed by July 26, 2004.

15. The landlord failed to do any work on the premises before July 26, 2004—or at any time thereafter.   The landlord, defendant, offered no evidence that any agent, servant or employee was assigned the task of organizing the Landlord's Work. Nor was there evidence that the Landlord hired any designer, architect, contractor, mechanic, or any person to do any preparation for or effort toward completion of Landlord's Work. Nor was there evidence that Landlord ever sought any permit for building, demolition, environmental or any permit of any sort from any governmental entity in connection with the Landlord's Work. There was no credible evidence that the defendant ever did or ever had any intention of doing any of the “fit up” it was obligated to do.

16. The plaintiff's members repeatedly contacted the defendant's members and representatives between April 23, 2004 and August 2004 seeking compliance with Lease provision § 3.06. Landlord's representatives, Jason Cohen and Robert Altman, consistently promised imminent performance, but such performance never materialized.   The defendant's assurances that the Landlord's Work would be timely performed were repeatedly made both prior to lease execution and subsequent thereto, though the evidence established that the landlord made no substantial efforts to fulfill its obligations under Appendix D of the Lease.

17. On May 11, 2004, Kathleen Rorick wrote to the defendant, Plaintiff's Exhibit # 6, alerting the defendant that the plaintiff had hired a manager to operate the Milford Paintball facility, the manager was actually moving to Connecticut from out of state on that very weekend, that plaintiff was ordering equipment for the operation of the paintball facility and that “it is critically important that the Landlord move expeditiously with the Landlord's Work,” reminding the defendant of Appendix D of the Lease, requesting a schedule of when the landlord would obtain a building permit, and reminding the landlord that the plaintiff “is looking forward to a Grand Opening in your 80 Wampus this Fall. We look forward to receiving a construction schedule and update on the status of Landlord's Work.” Defendant did not deny receipt of such letter.

18. All three Roricks described a series site visits to check on construction progress, and discovered no progress, and of meetings and/or telephone conferences with defendant's representatives during the summer of 2004, wherein Mr. Yashar, Mr. Cohen, Mr. Jacobs and Mr. Altman, among others, assured the plaintiff's members that the landlord would complete its work in time for the plaintiff to open its business to the public in the fall of 2004.   The court finds their testimony credible on this topic.

19. By August of 2004, the plaintiff's members expressed their doubt to each other that the facility would timely open.   In October and November of 2004, the plaintiff's members had a series of meetings and concluded that the defendant would not perform the Landlord's Work. In October and November of 2004, the plaintiff's members made a strategic decision that they would not provide notice to the landlord of default under Lease provision § 14.07 for failure to complete the Landlord's Work in accordance with the provisions of the Lease Agreement § 3.06. Tenant/plaintiff's members calculated that if, in October or November of 2004, they gave the Landlord notice of claimed default for failure of Landlord to start and complete the “fit up” then Landlord's performance of that work could extend through the spring of 2005, thereby eliminating the entire “indoor paintball season” from September 2004 through April 2005, and all the revenues that plaintiffs would rely upon to fund the operation of the business during the May through September in 2005, “off-season” period would be lost, and the business could not afford that loss.

20. The Roricks understood that § 14.07 required tenant to give written notice of alleged nonperformance or default to the landlord and, thereafter, the landlord had thirty (30) days to cure or to commence cure if the cure could not be reasonably completed within a thirty-day period. § 14.07 allowed Tenant to perform Landlord's obligations, request reimbursement of Tenant's expenses from Landlord, and, if Landlord failed to reimburse Tenant, then Tenant was entitled to set off such costs against its Rent payment obligations owing to Landlord.   Tenant did not have the contractual right to terminate the Lease due to Landlord's non-performance or default.   Instead of pursuing their remedies under the Lease, Tenants requested Landlord return the $32,083.35 security deposit, pay $18,351.57 for expenses and costs incurred by Tenant to obtain the municipal zoning approval and hire/train a facility manager, and terminate the Lease.

21. On November 28 and 30, 2004, Matthew Rorick, on behalf of the plaintiff, faxed invoices and spreadsheet calculations to Jason Cohen, a representative of the defendant, requesting the return of the security deposit and $18,351.57 of detailed expenses that Milford Paintball had incurred for legal representation, bank fees, engineering fees and retention of a business manager for Milford Paintball, LLC. See Plaintiff's Exhibit # 7 and 8.

22. Plaintiff's Exhibit # 7 contains a cover letter to the spreadsheet directed to Jason Cohen indicating “you (Jason) expressed on the phone that you did not expect a problem getting us our deposit and various losses we incurred after becoming involved with Wampus Ln.,” Exhibit # 8.   The November 30, 2004 spreadsheet and cover letter to Jason Cohen provides a more detailed explanation for the charges, previously described in the November 28, 2004 correspondence, and is consistent with Rorick's testimony that Rorick was in telephonic communication with Jason Cohen who requested Rorick to provide a more detailed description of the expenses so as to allow Cohen to present those calculations to the members of the defendant for their consideration and payment.

23. Rorick waited for the payment or further word from Jason Cohen, but in early December of 2004 was advised that the members of Wampus Milford Associates, LLC had sold all their interests to Edward Lapidus.   Rorick never received funds or otherwise heard from Cohen again.

24. Mr. Lapidus, previously a relatively passive investor in this property, testified he had no knowledge of the status of the negotiations and representations made by the defendant's agents to the plaintiff prior to December 1, 2004.   But Ex. H contradicts that testimony.   Paragraph 6.B., page 13 of Ex. H, identifies a $60,300.00 (sixty thousand, three hundred dollar) escrow “to cover the cost of certain anticipated tenant work for the “Paint Ball” tenant (the Tenant Work Escrow Deposit) ․ The Sellers, (all the members of the defendant LLC other than Edward Lapidus), including Yashar covenant and agree forever not to, directly or indirectly, disclose any of the provisions of this paragraph 6B to the Paint Ball tenant, unless such disclosure is required by applicable law.”   Mr. Lapidus signed Ex. H on December 1, 2004.   Mr. Lapidus knew or should have known of the $60,300.00 escrow to complete the work for the “Paint Ball” tenant, the purpose of the escrow, and had the ability to inquire of Jason Cohen and the other members of the defendant as to the status of the promises made to the Roricks prior to and subsequent to lease execution, the status of the performance of Landlord's obligations and negotiations with the plaintiff including the telephone calls between Cohen and Rorick and the written communications sent by Rorick and received by Cohen on November 28 and November 30, 2004 immediately prior to the December 1, 2004 agreement to sell the membership interests in the defendant LLC to Lapidus.

25. Lapidus confirmed Roricks' testimony that in late December 2004, he met briefly with Matt and Tim Rorick in Stamford, CT. The Roricks described the history of the relationship between the parties, the current status of the demised premises, and requested a return of their security deposit, payment for their expenses, expressed their desire to terminate any continuing relationship with the lessor in the subject property, and indicated that the Tenant would not be performing under the Lease.   Lapidus made no commitment to the Roricks on any point during the meeting, but on January 4, 2005 defendant's counsel, Ex. C, rejected Tenant's “anticipatory repudiation of the lease” and insisted that Tenant “abide by the terms of the lease.”

25. Later in January 2005, the plaintiff initiated the instant action.

II. LEGAL ANALYSIS

The plaintiff has asserted three theories of recovery:  the First Count alleges a violation of the Connecticut Unfair Trade Practices Act, C.G.S. § 42–110a et seq.  (CUTPA);  the Second Count alleges breach of lease by defendant;  the Third Count alleges in fraud or intentional misrepresentation, and the Fourth Count seeks rescission of the lease and restitution of the $32,083.52 security deposit.

The defendant, on July 27, 2005, answered the Complaint and asserted two Special Defenses.   The First Special Defense asserts that, because the tenant did not provide notice to landlord of tenant's assertion of nonperformance by landlord in accordance with § 14.07 of the Lease and provide the landlord with an opportunity to cure the alleged default, there is no such default and consequently no breach of contract.   The Appellate Court agreed.   The September 4, 2012 Appellate Court decision remanded the case to the trial court and directed judgment for the defendant on the second count of the plaintiff's complaint (sounding in breach of lease/contract) and a new trial on the defendant's counterclaim (since Withdrawn) and the first, third and fourth counts of the plaintiff's complaint.

The Second Special Defense asserts that, at a December 21, 2004 meeting Matthew Rorick informed Edward Lapidus that Milford Paintball did not intend to perform its agreed upon obligations under the Lease, thereby constituting an anticipatory breach of contract which relieved Wampus of its remaining duties under the Lease Agreement.   In support thereof is Defendant's Ex. C:  a January 5, 2005 letter from defendant's counsel to plaintiff confirming Rorick's testimony that during the December 21, 2003 meeting with Lapidus, Rorick said Tenant was not going to fulfill its obligations under the Lease.   The letter alerted tenant that the Lease obligations continue in spite of the Tenant's pronouncement, that the anticipatory breach of lease by Tenant was rejected by Landlord, and that Landlord was ready, willing and able to perform its Lease obligations including “Landlord's Work.” The alleged misrepresentations from defendant to plaintiff all pre-date the aforementioned December 21, 2004 Landlord–Tenant meeting.

The Third Amended Special Defense dated December 5, 2006 asserts a Special Defense of partial payment.   This defense asserts that in the event the defendant is found liable to the plaintiff for money damages, then those damages should be reduced by the $18,000.00 payment the plaintiff received from the former co-defendants.   The defendant offered no evidence in support of this defense.

The operative paragraphs of plaintiff's First Count of the Complaint asserted a CUTPA violation based upon defendant's misrepresentation of the defendant being ready, willing and able to timely perform the “Landlord's Work,” First Count, ¶ 10, made by the defendants to induce the plaintiffs to execute the Lease, which representations were reasonably relied upon by the plaintiff to its detriment.   Plaintiff alleges further misrepresentations by the defendants, following the plaintiff's receipt of the zoning permit from the Town of Milford in April 2004, First Count, ¶ 19, made to induce the plaintiff to expend funds in anticipation of opening the business in the fall of 2004, which representations were reasonably relied upon by the plaintiff to its detriment.

The plaintiff asserts in ¶ 22 that defendant was never ready, willing or able to perform Landlords' Work but rather that defendant engaged in a scheme to enhance the value of the Property by securing long-term leases and large security deposits from tenants under false pretenses.   The plaintiff offered the evidence of a fellow tenant, James Benas, a member of a co-tenant named “Hot Laps, LLC” (an indoor go cart racing track) at the property.   Mr. Benas testified that Landlord agreed to “fit up” work as part of their lease, Ex. B. Landlord, through its general contractor, O & G Industries, Inc., did obtain a building permit and did some of the fit up work.   However, Landlord and Hot Laps, LLC., agreed to disagree about the scope of the “fit up” work, and, consequently the parties amicably agreed to discontinue their relationship and Hot Laps, LLC. vacated the property.   Lapidus confirmed and amplified those facts during his testimony for the defense.   Lapidus also testified and produced documentary evidence, Trial Exhibits I and J, of building permit applications for “fit up” work done by Landlord's general contractor, O & G, for two other tenants, American Dry Stripping and Milford Marble, in the Wampus Ln. property.   The plaintiff failed to prove that defendant engaged in a scheme to enhance the value of the Property by securing long-term leases and large security deposits from multiple tenants under false pretenses.

The plaintiff asserts in ¶ 23 of the First Count that the defendant sought to compel the plaintiff to pay for the cost of the “Landlord's Work” so as to avoid forfeiture of Tenant's business investment and a security deposit pursuant to § 14.07 of the Lease Agreement.   However, as noted above, sophisticated commercial parties voluntarily negotiated and signed a lengthy lease which, in pertinent part, describes Tenant's remedies for Landlord's default.   The Lease Agreement provides, in § 14.07, tenant may notify Landlord of default, Landlord has time to cure the default, and, if Landlord fails to cure the default Tenant may cure the default and later, if Landlord fails to reimburse Tenant for the cost of cure, Tenant may set off Rent obligations by the Tenant's cost of cure of Landlord's default.   This court will not rewrite the lease agreement of these commercially sophisticated parties voluntarily entering into a commercial lease agreement.

However, the court does find that the plaintiff has proved, as alleged in part in the First Count paragraphs 22 and 23, by a fair preponderance of the evidence, that the defendant negligently misrepresented material facts concerning the landlord's being ready, willing and able to timely initiate and complete landlord's leasehold obligations so as to allow the plaintiff to open for business during the fall of 2004, seeking to induce plaintiff's reliance with such representations including the execution of the lease and part performance of the tenant's leasehold obligations, that plaintiff did reasonably rely upon said misrepresentations, and plaintiff suffered loss and harm as a consequence.

CUTPA

CUTPA, Connecticut Unfair Trade Practices Act, C.G.S. 42–110 et seq., is a broad prohibition of unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce.”  General Statutes 42–110b(a).

“A party seeking to recover damages under CUTPA must meet two threshold requirements.   First, he [or she] must establish that the conduct at issue constitutes an unfair or deceptive trade practice ․ Second, he [or she] must present evidence providing the court with a basis for a reasonable estimate of the damages suffered.”  (Internal quotation marks omitted.)  MacMillan v. Higgins, 76 Conn.App. 261, 279, 822 A.2d 246, cert. denied, 264 Conn. 907, 826 A.2d 177 (2003).

“It is well settled that in determining whether a practice violates CUTPA we have adopted the criteria set out in the cigarette rule by the federal trade commission for determining when a practice is unfair:  (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 [or competitors or other businessmen] ․” (Internal quotation marks omitted.)  Cheshire Mortgage Services, Inc. v. Montes, 223 Conn. 80, 105–06, 612 A.2d 1130 (1992) [fn11].   We also noted 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 ․ Thus a violation of CUTPA may be established by showing either an actual deceptive practice ․ or a practice amounting to a violation of public policy.   Furthermore, a party need not prove an intent to deceive to prevail under CUTPA.”  (Citations omitted;  internal quotation marks omitted.)  Id., 106.

The expansive nature of the CUTPA scheme, which we have described as establishing “an action more flexible and a remedy more complete than did the common law”;  Hinchliffe v. American Motors Corp., 184 Conn. 607, 617, 440 A.2d 810 (1981);  may be traced directly to 5(a)(1) of the Federal Trade Commission Act (FTCA);  15 U.S.C. § 45(a)(1);  [fn12] the statutory provision on which CUTPA is modeled and the interpretation of which “serve[s] as a lodestar for interpretation of the open-ended language of CUTPA.”   Russell v. Dean Witter Reynolds, Inc., 200 Conn. 172, 179, 510 A.2d 972 (1986).   The FTCA, enacted in 1914, authorizes the Federal Trade Commission to define, identify and prevent “unfair methods of competition” and “unfair or deceptive acts or practices,” language used by Congress to reach conduct beyond that proscribed at common law.  Federal Trade Commission v. R.F. Keppel & Bro., Inc., 291 U.S. 304, 310–12, 54 S.Ct. 423, 78 L.Ed. 814 (1934) [fn13].   Indeed, “[w]hen Congress created the Federal Trade Commission in 1914 and charted its power and responsibility under 5 [of the FTCA], it explicitly considered, and rejected, the notion that it reduce the ambiguity of the phrase ‘unfair methods of competition’ by tying the concept of unfairness to a common-law or statutory standard or by enumerating the particular practices to which it was intended to apply.”  Federal Trade Commission v. Sperry & Hutchinson Co., 405 U.S. 233, 239–40, 92 S.Ct. 898, 31 L.Ed.2d 170 (1972).   Instead, it adopted a concept that does not “admit of precise definition but the meaning and application of which must be arrived at by ․ the gradual process of judicial inclusion and exclusion.”  (Internal quotation marks omitted.)  Federal Trade Commission v. R.F. Keppel & Bro., Inc., supra, 312 [fn14].

Likewise, our General Assembly, in adopting the sweeping language of 5(a)(1) of the FTCA, “deliberately chose not to define the scope of unfair or deceptive acts proscribed by CUTPA so that courts might develop a body of law responsive to the marketplace practices that actually generate such complaints.”   Sportsmen's Boating Corp. v. Hensley, 192 Conn. 747, 755, 474 A.2d 780 (1984).  “Predictably, [therefore,] CUTPA has come to embrace a much broader range of business conduct than does the common law tort action.”  Id., 756.   Moreover, “[b]ecause CUTPA is a self-avowed ‘remedial’ measure, General Statutes 42–110b(d), it is construed liberally in an effort to effectuate its public policy goals.”  Id. Indeed, there is “no ․ unfair method of competition, or unfair [or] deceptive act or practice that cannot be reached [under CUTPA].”   Conn. Joint Standing Committee Hearings, General Law, Pt. 2, 1973 Sess., p. 705, remarks of Attorney Robert Sils, Dept. of Consumer Protection.

In addition to establishing a standard of conduct more flexible than traditional common-law claims, the expansive language of CUTPA prohibits unfair or deceptive trade practices without requiring proof of intent to deceive, to defraud or to mislead.   See, e.g., Web Press Services Corp. v. New London Motors, Inc., 203 Conn. 342, 362–63, 525 A.2d 57 (1987) (common-law claims for fraud, deceit and misrepresentation require proof that defendant knew of falsity of representation, whereas CUTPA claimant need not prove defendant's knowledge that representation was false);  Sportsmen's Boating Corp. v. Hensley, supra, 192 Conn. 754–57 (unlike tort claim for interference with business expectancies, which requires proof of malicious or deliberate interference with competitor's business expectations, CUTPA liability may be based solely on proof of unfair or deceptive acts);  Hinchliffe v. American Motors Corp., supra, 184 Conn. 617 (CUTPA proscribes broader range of conduct than common-law action for innocent misrepresentation).   Moreover, “[t]he CUTPA plaintiff need not prove reliance or that the representation became part of the basis of the bargain.”  Id.;  see also Conaway v. Prestia, 191 Conn. 484, 493, 464 A.2d 847 (1983) (collection of rents by landlord prior to obtaining certificate of occupancy, although not prohibited by landlord-tenant statutes, constituted unfair trade practice as violation of public policy).   Because CUTPA removes these common-law obstacles to recovery;  Hinchliffe v. General Motors Corp., supra, 617;  the private cause of action created by CUTPA reaches conduct well beyond that proscribed by any common law analogue.  Associated Investment Co. v. Williams Assoc., 230 Conn. 148, 155–58 (1994).

The plaintiff established by a fair preponderance of the evidence, but not by clear, convincing and unequivocal evidence applicable to the cause of action for fraud or intentional misrepresentation alleged in the Third Count of the plaintiff's complaint, that the defendant negligently misrepresented material facts, i.e. its intentions to timely fulfill its Landlord's Work obligation, the plaintiff reasonably relied upon such misrepresentations and such misrepresentations induced the Tenant to execute the lease, to pay the $32,083.34 security deposit to the Landlord and to reasonably incur $18,351.57 in costs and expenses for engineering and legal work to obtain a Special Permit from the municipal zoning authorities, to purchase equipment for the business and to hire and train a facility manager.

The defendant's repeated representations that it would timely commence and complete the Landlord's Work so as to allow the paintball business to open in September 2004 was a material misrepresentation of fact.   The materiality of those representations is manifest in the testimony of the three members of the plaintiff concerning their numerous conferences with the defendant's principals prior and subsequent to signing the Lease and in the plaintiff's members' actions:  tendering a substantial security deposit, immediate retention of engineering and legal experts and prompt securing of the Special Exception Permit to allow the business to operate in the Premises, many communications with the defendant urging immediate “fit up” work so as to allow the “grand opening in the Fall,” and incurring expense in purchasing equipment and locating, hiring and training a facility manager ready to start in September of 2004.   The court found convincing and persuasive the plaintiff's members' testimony that had the defendant not promised to complete the Landlord's Work prior to the start of the September 2004 “paintball season,” the subject Lease would not have been executed.

The defendant's representations that the Landlord's Work would be timely commenced and completed were false.   As noted above, the defendant took no action to fulfill its Lease obligations.   The lease provided, Paragraph 3.06, Landlord's Work, “Landlord shall perform, at its sole expense, certain work at the Premises as described on Exhibit D hereto (the Landlord's Work).   Landlord's Work will be completed on or before ninety (90) days following notice of Tenant's receipt of Zoning Approval (it being understood that Landlord may commence Landlord's Work prior to notice of Tenant's receipt of Zoning Approval.   Landlord shall procure at Landlord's sole expense all necessary permits and licenses before undertaking Landlord's Work and shall perform such work in a workmanlike manner employing materials of good quality and so as to conform with all applicable zoning, building, fire, health and other codes, ․”

Defendant offered no evidence that any permits were obtained or any substantial effort of any kind was ever made to fulfill the Lease obligations by performing Landlord's Work.

The Court does find that the defendant, through multiple agents, both before the execution of the Lease and during the months after the plaintiffs had approved zoning approval, negligently misrepresented that the defendant was going to timely perform the Landlord's Work as described in Appendix D of the Lease so as to allow the plaintiff to open for business during the fall of 2004.   There is no credible evidence that the defendant took any steps to plan, initiate or complete any phase of the work described as the Landlord's Work in the Lease.

The plaintiffs reasonably relied upon these misrepresentations to their detriment.   The reasonableness of their reliance was proved by the plaintiff's investigation of the defendant's offices and construction/renovation abilities determined during the plaintiff's Brooklyn, N.Y. visit to the defendant's office and worksite of a different renovation project being completed by defendant.   The plaintiffs incurred legal and engineering expense to secure the zoning permit and communicate the same to the landlord, expenses to locate, retain, train, hire and pay a manager of the facility, purchase equipment, and paid a substantial security deposit to the landlord, all in expectation and reliance upon the landlord's repeated assurances that the Landlord's promised “fit up” would be timely performed.

All three Roricks testified as to a variety of meetings and telephone conversations with several different representatives of the defendant during the summer of 2004 concerning the initiation and completion of the defendant's fit up work on the premises so that the plaintiff could timely open its business.   Their testimony was persuasive and largely uncontested.   The plaintiffs relied upon these representations in providing the defendant the security deposit accompanying the Lease, incurring expenses for legal and engineering work to secure the zoning permit approval, purchasing equipment and hiring and training a facility manager for the fall of 2004.   The plaintiff's members believed that Landlord's representations right up until August 2004 when the time expired for the landlord's fit up work being completed, or even started, before the much discussed September “grand opening” of the paintball field and business.

The November 28 and 30, 2004 communications from Rorick to Cohen, Plaintiff's Exhibits # 7 and 8, reflect the continuing deception by defendant when dealing with the plaintiff's members.   The Roricks' communications document the plaintiff's expenses.   Cohen's request for further breakdown and explanation of the expenses, coupled with assurances that Cohen believed the Landlord's members would voluntarily return plaintiff's security deposit and reimburse plaintiff for its detailed expenses, evidences the untrustworthiness and deceptive practices of the defendant.   Cohen never mentioned that the very next day, December 1, 2004, rather than refund the security deposit and reimburse the plaintiff for its expenses, the membership interests in the defendant limited liability company were agreed to be transferred from the several members with whom the Roricks had dealt:  Yashar, Jacobs and Altman, to Lapidus, as Trustee, with whom the Roricks had never dealt.   And the Roricks never again heard from Mr. Cohen.

The court does find that the plaintiff has proved by a fair preponderance of the evidence material misrepresentations of fact negligently made by the defendant, intended to induce reliance by the plaintiff, reasonable reliance by the plaintiff and consequential damage.

The second prong of the CUTPA “cigarette rule” is at issue.   The negligent misrepresentations of material facts, in the context of the instant dispute, are “immoral, unethical, oppressive, or unscrupulous” practices.   Negotiations, with the above-described persistent misrepresentations by landlord's agents intended to induce execution of the subject lease by the plaintiff, is behavior CUTPA is designed to address.   The court finds such negotiations to be “immoral, unethical, ․ or unscrupulous” practices.   The conduct was destitute of integrity and good faith, conscienceless, deceitful and underhanded.   The lack of any credible evidence that the landlord took any steps to perform its promised “fit up” of the leased space in spite of the numerous pre-lease execution promises to do so, its knowledge that the timing of the “fit up” was essential to plaintiff's business success, and plaintiff's many timely communications to landlord post-lease execution that timely completion “fit up” was essential, persuade the court that the defendant negligently misrepresented that landlord was ready, willing and able to timely complete the “fit up” work so as to allow plaintiff/tenant to open and operate its business in the fall of 2004.

CUTPA allows a broad range of relief including the award of legal and equitable relief.   In this instance, the court orders rescission of the contract, restitution of the plaintiff's security deposit, $32,082.52, and an award of compensatory damages in the amount of $18,351.57 pursuant to C.G.S. 42–110g(a) & (d).

The court declines to either pre-judgment interest or award punitive damages.

“In relevant part, General Statutes § 37–3a(a) provides that “interest at the rate of ten per cent a year, and no more, may be recovered and allowed in civil actions ․ as damages for the detention of money after it becomes payable.” [fn2.]  Section 37–3a(a) authorizes, but does not mandate, the recovery of interest.   The law is established that the entry of a monetary judgment makes money payable within the meaning of § 37–3a(a) and that “an award of postjudgment interest is authorized by § 37–3a ․ This statute has been construed to make the allowance of interest depend upon whether the detention of the money is or is not wrongful under the circumstances.”   (Citations omitted;  internal quotation marks omitted).  Urich v. Fish, 112 Conn.App. 837, 843, 965 A.2d 567 (2009).   The Appellate Court has explained that “in the context of § 37–3a, wrongful is not synonymous with bad faith conduct.   Rather, wrongful means simply that the act is performed without the legal right to do so.   Nevertheless, the allowance of interest as an element of damages is primarily an equitable determination and a matter lying within the discretion of the trial court ․” (Citations omitted;  internal quotation marks omitted.)  Hartford Steam Boiler v. Underwriters at Lloyd's, 121 Conn.App. 31, 63, 994 A.2d 262 (2010);  accord Sosin v. Sosin, 300 Conn. 205, 244 n. 25, 14 A.3d 307 (2011) (“the case law interpreting § 37–3a has equated ‘wrongful’ with the withholding of funds without the legal right to do so” and “a finding of wrongfulness in this context does not require the trial court to assess blameworthiness”);  Bower v. D'Onfro, 45 Conn.App. 543, 696 A.2d 1285 (1997) (citation omitted;  internal quotation marks omitted) (“A decision to deny or grant post-judgment interest is primarily an equitable determination and a matter lying within the discretion of the trial court”).   The rate of interest under § 37–3a is not a required rate, but rather is the maximum rate of interest that a trial court, in its discretion, can award.   Sears, Roebuck & Co. v. Board of Tax Review, 241 Conn. 749, 765, 699 A.2d 81 (1997).  Ulibrich v. Groth et al., No. X06 CV 08 4016022 S (July 26, 2011), Stevens, J. [52 Conn. L. Rptr. 340].

This court does not find the requisite wrongful withholding of funds without legal right to do so by the defendant necessary for the imposition of pre-judgment interest pursuant to C.G.S. 37–3a.   Until the lease was rescinded, with this judgment, or the defendant otherwise had an obligation to return the security deposit to the tenant, the defendant was not wrongfully withholding the plaintiff's funds without legal right to do so.   Until this judgment was entered, the amount of the compensatory damages was not fixed and consequently the defendant was not wrongfully withholding plaintiff's funds without legal right to do so.

General Statutes § 42–110g(a) provides in relevant part that “[t]he court may, in its discretion, award punitive damages ․” Whereas Connecticut common law adopts a compensatory purpose for punitive damages based on the costs of litigation, punitive damages are imposed under CUPTA for “punishment, deterrence and profit disgorgement.”  Bridgeport Harbour Place I, LLC v. Ganim, supra;  accord, Lenz v. CNA Assurance Co., 42 Conn.Sup. 514, 516, 630 A.2d 1082 [9 Conn. L. Rptr. 87] (1993) (CUTPA “allows for punitive damages based on a theory of deterrence”).   A plaintiff must prove punitive damages by a preponderance of the evidence.  Whitaker v. Taylor, 99 Conn.App. 719, 735, 916 A.2d 834 (2007).   The award and the amount of punitive damages under CUTPA are discretionary with the court.  Gargano v. Heyman, 203 Conn. 616, 622, 525 A.2d 1343 (1987).

“Although the law is not well developed as to how the court's discretion should be guided in determining punitive damages under CUTPA, a basic criterion for such an award is evidence revealing ‘a reckless indifference to the rights of others or an intentional and wanton violation of those rights.’  Id. ‘In fact, the flavor of the basic requirement to justify an award of punitive damages is described in terms of wanton and malicious injury, evil motive and violence.’  Id. ‘Recklessness' has been described as ‘more than negligence, more than gross negligence.’  Dubay v. Irish, 207 Conn. 518, 533, 542 A.2d 711 (1988).  ‘Wanton misconduct is reckless misconduct ․ It is such conduct as indicates a reckless disregard of the just rights or safety of others or of the consequences of the action ․ [W]ilful, wanton or reckless conduct tends to take on the aspect of highly unreasonable conduct, involving an extreme departure from ordinary care ․’ (Citations omitted;  internal quotation marks omitted.)  Id. 532–33.”  Bridgeport Harbour Place I, LLC v. Ganim, supra, Ulbrich v. Groth et al., No. X06 CV 08 4016022 S (Mar. 22, 2011), Stevens, J.

While the defendant's conduct is a violation of the second prong of the “cigarette rule,” this court holds that the plaintiff has failed to prove by clear, convincing evidence the claims of fraud or intentional misrepresentation, but has proved, by a preponderance of evidence, negligent misrepresentation of material fact, reasonably relied upon by the plaintiff to its detriment.   Having failed to prove “more than negligence,” and not proved “willful, wanton or reckless misconduct,” and, in the context of the facts of this case the court declines to award punitive damages.

In Ulbrich v. Groth et al., No. X06 CV 08 4016022 S (Mar. 22, 2011), the court, Stevens, J., thoughtfully analyzed the award of attorneys fees in connection with CUTPA.  “General Statutes § 42–110g(d) provides that ‘[i]n any action brought by a person under [CUTPA], the court may award, to the plaintiff, in addition to the relief provided in this section, costs and reasonable attorneys fees based on the work reasonably performed by an attorney and not on the amount of recovery.’  ‘The cases interpreting the attorneys fees provisions of CUTPA also indicate that the awarding of attorneys fees is within the discretion of the trial court.’  Staehle v. Michael's Garage, Inc., 35 Conn.App. 455, 460, 646 A.2d 888 (1994).  ‘The statute contains no standard by which a court is to award attorneys fees, thus leaving it to the sole discretion of the trial court to determine if attorneys fees should be awarded and the amount of such award.’  Id., 461.   The court's discretionary decision to award attorney fees should be premised on reasonable determinations and tenable grounds.   See Thames River Recycling, Inc. v. Gallo, 50 Conn.App. 767, 800, 720 A.2d 242 (1998) ‘A court has few duties of a more delicate nature than that of fixing counsel fees.’  Laudano v. New Haven, 58 Conn.App. 819, 822, 755 A.2d 907 (2000).”   Bridgeport Harbour Place I, LLC v. Ganim, Superior Court, Complex Litigation Docket, Judicial District of Waterbury, Docket No. CV X06 04 0184523 S, Memorandum of Decision on the Plaintiff's Claims for Attorney Fees and Punitive Damages (October 31, 2008;  Stevens, J.).

A proper and recognized method for determining an award of attorney fees is to consider a “lodestar calculation” (multiplying the number of hours reasonably expended on the litigation times a reasonable hourly rate) and to evaluate this calculation by the criteria set forth in Johnson v. Georgia Highway Express, Inc., 488 F.2d 414 (5th Cir.1974)).   The Appellate Court in Steiger v. J.S. Builders, 39 Conn.App. 32, 39, 663 A.2d 432 (1995), explicitly held that the guidelines delineated in Johnson v. Georgia Highway Express, Inc., supra, 488 F.2d 414, are applicable in determining reasonable attorney fees under CUTPA.   Those factors are as follows:  “(1) the time and labor required;  (2) the novelty and difficulty of the questions;  (3) the skill requisite to perform the legal service properly;  (4) the preclusion of other employment by the attorney due to acceptance of the case;  (5) the customary fee for similar work in the community;  (6) whether the fee is fixed or contingent;  (7) time limitations imposed by the client or the circumstances;  (8) the amount involved and the results obtained;  (9) the experience, reputation and ability of the attorneys;  (10) the ‘undesirability’ of the case;  (11) the nature and length of the professional relationship with the client;  and (12) awards in similar cases.”  Johnson v. Georgia Highway Express, Inc., supra, 488 F.2d 717–19.   The trial court is required to consider and not necessarily explicitly address all of the factors articulated in the Johnson case.   See Riggio v. Orkin Exterminating Co., 58 Conn.App. 309, 318–19, 753 A.2d 423, cert. denied, 254 Conn. 917, 759 A.2d 507 (2000) (the trial court “was not required to consider each of the twelve factors individually, but instead was required to consider the full panoply of factors and not base its decision solely on one of the elements”).

Having carefully considered the evidence of the conduct of the parties, considered the stated goals and purposes of CUTPA recited above, the twelve factors cited in Johnson v. Georgia Highway Express, Inc., supra, 488 F.2d 717–19, for the consideration and award of attorneys fees, the documentary evidence of attorneys fees incurred by the plaintiff in this case, and pursuant to C.G.S. 42–100g(d), the court awards reasonable attorneys fees to the plaintiff in the amount of $108,345.75 (see Plaintiff's Supplemental Affidavit of Attorneys Fees, docket # 169, filed by agreement of counsel and remains without objection to the content since filed).

Therefore, the court grants the relief of rescission, restitution, compensatory damages and statutory attorneys fees, but declines to exercise its discretion to award pre-judgment interest or punitive damages in these circumstances.

Breach of Contract

In accordance with the Appellate Court decision, judgment enters for the defendant on the Second Count of the Plaintiff's Complaint.

Fraud

“A cause of action for intentional misrepresentation is essentially a claim of fraud.”  (Internal quotation marks omitted.)  Reid v. Landsberger, 123 Conn.App. 260, 281, 1 A.3d 1149, cert. denied, 298 Conn. 933, 10 A.3d 517 (2010).  “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 claim 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).   The party asserting such a cause of action must prove the existence of the first three elements of fraud by a higher standard of proof than the usual fair preponderance of the evidence standard, but rather by a standard of “clear and satisfactory” or “clear, precise and unequivocal” proof.  Barbara Weisman Trustee v. Kaspar, 233 Conn. 531, 540 (1995).

The plaintiff failed to establish the elements of the cause of action for fraud by clear, convincing and unequivocal evidence.   Element (2), above, of the cause of action requires clear, convincing and unequivocal proof that the defendant's statements were known to be false, or made with reckless disregard for the honesty and accuracy, at the time the statements were made.   The plaintiff did not satisfy this standard of proof with respect to that element of the cause of action.

Rescission and Restitution

Rescission of a contract is an appropriate remedy if there has been a material misrepresentation of fact upon which a party relied and which caused it to enter the contract, State v. Hartford Accident & Indemnity Co., 136 Conn 157, 167 (1949).   The material misrepresentation, when made in connection with the sale of land, may be an innocent misrepresentation. (citations omitted), Kim v. Magnotta, 49 Conn.App. 203, 223 (1998).

Rescission is the unmaking of a contract.   It is a renouncement of the contract and any property obtained pursuant to the contract, and places the parties, as nearly as possible, in the same situation as existed just prior to the execution of the contract.   Rescission of a contract is an appropriate remedy if there has been a material misrepresentation of fact upon which a party relied and which caused it to enter the contract.  Kavarco v. T.J.E., Inc., 2 Conn.App. 294, 298, 478 A.2d 257 (1984), overruled, in part, on other grounds, Kaczynski v. Kaczynski, 294 Conn. 121, 130, 981 A.2d 1068 (2009).

However, the remedy sought in the Fourth Count of the Complaint, rescission, is also available, with the same relief, in the CUTPA cause of action stated in the First Count of the Complaint.

The court has rescinded the contract, pursuant to the statutory authority found with CUTPA, supra, C.G.S. 42–110g, and awarded compensatory damages as well as restitution of the security deposit requested by the plaintiff in the Third Count of the Plaintiff's Complaint.   Further relief under this theory would be duplicative of the relief previously granted.

SPECIAL DEFENSES

As noted above the defendant asserted three Special Defenses.   The court finds that the First and Second Special Defenses are factually and legally inapplicable to the decision at hand.   The court found the actionable material misrepresentations made by the defendant inducing the plaintiff's reliance predate the signing of the Lease and are simply repeated following the signing of the Lease.   These material misrepresentations induced the formation of the lease agreement, and later, the continuation of that agreement all to the plaintiff's loss and detriment.   Therefore, the plaintiff's willful failure to give Landlord notice of default and opportunity to cure the default for failure to perform Landlord's Work is irrelevant to the basis for imposition of liability in this matter.   Liability is imposed for misrepresentation inducing the formation of the contract and not for the non-performance of the contract by the defendant.

The Second Special Defense:  anticipatory breach of contract for tenant's pronouncement on December 21, 2004 of its intention not to fulfill its Lease obligations is also irrelevant to the facts that give rise to the imposition of liability.   The material misrepresentations by defendant, noted above, all predate the December 21, 2004 pronouncement by Tenant/plaintiff.   Liability is imposed for misrepresentation inducing the formation of the contract and not for the non-performance of the contract by the defendant.

The Third Special Defense:  partial payment, is rejected as the defendant failed to offer sufficient evidence of the same.   Payment is a valid Special Defense, P.B. 10–50, however, the burden of proof with respect to such defense rests upon the defendant, Braffman v. Bank of America Corp., 297 Conn. 501, 520 (2010).   The defendant failed to prove the alleged payment to the plaintiff or that the payment was made to the plaintiff to compensate for damages claimed by the plaintiff in connection with the current matter.

III. CONCLUSIONS

Wherefore, the court finds the issues in favor of the defendant on the Second and Third Counts of the Plaintiff's Complaint.

Wherefore, the court finds the issues in favor of the plaintiff on the First and Fourth Counts of the Plaintiff's Complaint and awards the following relief:

1. Rescission of the Lease Agreement between Wampus Milford Associates, LLC, as Landlord, and Milford Paintball, LLC, as Tenant, Exhibit 1.

2. Compensatory damages of $18,351.57.

3. Restitution of the plaintiff's $32,083.34 security deposit.

4. Attorneys fees in the amount of $108,345.75.

BY THE COURT

ZEMETIS, T.

Zemetis, Terence A., J.