Ruben Baker dba Liberty Tax v. James Cox dba Liberty Tax (2013)

MEMORANDUM OF DECISION re MOTION TO DISMISS (# 108.00)

Nature of the Proceeding

This is an action brought by one Liberty Tax franchisee (plaintiff) against another Liberty Tax franchisee (defendant Cox) and two of his former employees who went to work for defendant franchisee.   Plaintiff claims to have a franchise covering the Norwalk area while defendant Cox is alleged to have a franchise for Stamford.   Liberty Tax is a franchise business that provides tax preparation services—each franchisee is given an exclusive area of operation, and franchisees are prohibited from providing services in another franchisee's designated area.

The complaint alleges that defendants Herrera and Navarro, while employed by plaintiff, signed employment agreements with plaintiff.   The employment agreements contained non-compete provisions that, in the event of separation from plaintiff, prohibited them from working for another tax preparation service within 25 miles of plaintiff, for a period of two years.

The complaint alleges that defendants Herrera and Navarro worked for plaintiff through the 2012 tax season (¶¶ 12–13), and are believed to have started working for defendant Cox for the 2013 tax season (¶¶ 17–18).   Defendant Cox's business is well under 25 miles away from plaintiff's business (¶ 14).   Plaintiff received calls from customers leading him to believe that after they had begun working for defendant Cox, defendants Herrera and Navarro began soliciting business from clients of plaintiff (¶¶ 19–20, 23–25).

Based on the foregoing allegations, plaintiff has alleged that defendants Herrera and Navarro breached their contracts with plaintiff (first count), that all defendants were tortiously interfering with plaintiff's business (second count), that all defendants were acting in violation of the Connecticut Uniform Trade Secrets Act (third count), and that all defendants were in violation of the Connecticut Unfair Trade Practices Act (CUTPA), all of which plaintiff claims entitles him to damages and equitable/injunctive relief.

Defendants Herrera and Navarro have moved to dismiss portions of the complaint as directed to them, submitting individual affidavits ¹ in support of the motion.   They claim that plaintiff lacks standing as to the claims that are the subject of their motion.

Legal standards

Defendants' memorandum in support of their motion to dismiss recites the appropriate standards for this motion:

“A motion to dismiss ․ properly attacks the jurisdiction of the court, essentially asserting that the plaintiff cannot as a matter of law and fact state a cause of action that should be heard by the court ․ A motion to dismiss tests, inter alia, whether, on the face of the record, the court is without jurisdiction.   In ruling upon a motion to dismiss, the trial court must take the facts to be those alleged in the complaint, including those facts necessarily implied from the allegations, construing them in a manner most favorable to the pleader ․ A motion to dismiss tests, inter alia, whether, on the face of the record, the court is without jurisdiction.   Where, however ․ the motion is accompanied by supporting affidavits containing undisputed facts, the court may look to their content for determination of the jurisdictional issue.

“It is well established that [a] party must have standing to assert a claim in order for the court to have subject matter jurisdiction over the claim ․ Standing is the legal right to set judicial machinery in motion.   One cannot rightfully invoke the jurisdiction of the court unless he has, in an individual or representative capacity, some real interest in the cause of action, or a legal or equitable right, title or interest in the subject matter of the controversy.   Standing may be raised at any point in the lawsuit.”  (Citations and internal quotation marks, omitted.)

Discussion

Reading the motion and supporting documentation, it appears that defendants are arguing that the expiration of the two-year period in their employment agreements is jurisdictional in nature.²  As worded, the motion appears to address the merits of plaintiff's contentions rather than jurisdiction/standing.

Standing is the legal right to set judicial machinery in motion.   One cannot rightfully invoke the jurisdiction of the court unless he [or she] has, in an individual or representative capacity, some real interest in the cause of action, or a legal or equitable right, title or interest in the subject matter of the controversy.  Equity One, Inc. v. Shivers, 310 Conn. 119, 125 (2013) (internal quotation marks and citation, omitted).

Courts cannot and will not look at the ability to prove elements of a cause of action, and upon a plaintiff's eventual failure to prove (or demonstrated inability to prove) an element, effectively retroactively state that the plaintiff lacked standing so as to require dismissal rather than a judgment on the merits.   See, e.g. Gurilacci v. Mayer, 218 Conn. 531, 544–45 (1991).   Prior to argument, the court believed that a fair reading of defendants' motion indicated that that was what defendants were trying to do.

However, at argument on September 9, 2013, counsel for defendants attempted to clarify the focus of the motion, and from that alternate perspective, the court recognized that there may be a jurisdictional issue that can be addressed at this time.   The issue as identified at argument is not simply whether moving defendants began working for the named defendant more than two years after they stopped working for plaintiff but rather whether the identified plaintiff is the correct party to enforce whatever contractual rights there might be, due to a claimed change in the actual entity/party operating the Norwalk franchise.

As discussed above, at argument, there was a certain level of refocusing such that a claim that initially appeared to simply be a matter of the limited time frame for a non-compete clause in an agreement, became an issue of whether plaintiff or someone else is the proper party to assert any claims that might have risen under the contracts.   Because the claim presented to the court is or may be subject matter jurisdictional in nature, the clarity with which the issue was initially presented is immaterial—the court is required to address subject matter jurisdictional issues whenever and however raised.  Honan v. Dimyan, 85 Conn.App. 66, 69 (2004).   However, “[i]t is well established that, in determining whether a court has subject matter jurisdiction, every presumption favoring jurisdiction should be indulged ․” Ed Lally and Associates, Inc. v. DSBNC, LLC, 145 Conn.App. 718, 728 (2013).

The court has reviewed (re-reviewed) all of the paperwork submitted with respect to this motion, keeping in mind the refocusing proposed by defendants during argument.   The court has concluded, for reasons discussed below, that there is no subject matter jurisdictional issue that needs to be addressed at this time.  (The court recognizes that the case might evolve in such a manner as to present the issue that defendants claim already exists, but that is not the current status.)

At the risk of oversimplification (and hopefully not mischaracterization), at argument, defendants contended that a business entity, Snapshot Computer and Financial Services, LLC (according to plaintiff's submission in opposition to the motion, formed by plaintiff and his wife in February 2011), was the only party who could enforce the employment contracts identified in the complaint, because Snapshot was the assignee of the original employment contracts entered into in 2010.   Assuming the correctness of the conclusion in the preceding sentence, there is nothing in the complaint nor defendants' submissions establishing the essential premise—that contract rights or contracts were assigned by plaintiff to Snapshot.

Indeed, the affidavits submitted by defendants seem to suggest something different, albeit with some level of ambiguity.   The affidavits seem to be trying to imply that their employment terminated in April 2010—¶ 10 of each affidavit recites that “[a]fter April 15, 2010, I was no longer an employee of Mr. Baker or Norwalk Liberty Tax Service and did not receive any wages from Mr. Baker or Norwalk Liberty Tax Service [after April 2010].”   Each affidavit goes on, in ¶ 11, to recite that the affiant was hired by Snapshot in January 2011.

Given the contractually-defined seasonal nature of the work (tax season), the fact that one or both affiants may have stopped working for plaintiff as of April 2010 does not inherently much less necessarily imply that their contracts were terminated as of April 2010.  (In essence, the contracts assumed something of a hiatus every year, from May through December.)   And if, as argued on September 9, the contracts had been assigned rather than terminated, plaintiff has established that Snapshot did not exist until mid-February 2011, such that at least some of the alleged misconduct occurred before any possible assignment could have taken place.  (In their affidavits, moving defendants state that they began working for defendant Cox in January 2013, less than two years after mid-February 2011.)

The court cannot grant a motion that, ultimately (as argued), is premised on an assignment of contract rights, when neither party has formally asserted (i.e. in pleadings) that an assignment took place, much less offered any evidence that an assignment took place (and secondarily, but no less important, when such an assignment might have occurred).   Alternatively, if an assignment of the contracts is not the premise of defendants' motion, then the court's initial impression that this is not a jurisdictional issue but rather a time-limitation issue—did the non-compete provisions expire—is a matter of defense rather than jurisdiction.

The motion is denied.

POVODATOR, J.

FOOTNOTES

FN1. Ms. Navarro's affidavit uses her current name, Medina..  FN1. Ms. Navarro's affidavit uses her current name, Medina.

FN2. “Defendants Sonia Herrera and Milagros Navarro ․ move to dismiss Count One and so much of Counts Two through Four of the Complaint ․ as are predicated on an alleged breach of the 2010 employment agreements.   Plaintiff has no standing to bring the breach of contract claim since the two-year restrictive covenants in the Defendants' employment agreement with Plaintiff expired in 2012, two years after Defendants' employment with Plaintiff was terminated and, therefore, when Defendants began working for Defendant James Cox in January 2013, they were no longer bound by the restrictive covenant and therefore, the employment agreements were not breached.   Accordingly, Plaintiff lacks standing to bring a breach of contract claim against the Defendants based on the two-year restrictive covenant and this Court, therefore, lacks subject matter jurisdiction over all claims relating to that contract.”.  FN2. “Defendants Sonia Herrera and Milagros Navarro ․ move to dismiss Count One and so much of Counts Two through Four of the Complaint ․ as are predicated on an alleged breach of the 2010 employment agreements.   Plaintiff has no standing to bring the breach of contract claim since the two-year restrictive covenants in the Defendants' employment agreement with Plaintiff expired in 2012, two years after Defendants' employment with Plaintiff was terminated and, therefore, when Defendants began working for Defendant James Cox in January 2013, they were no longer bound by the restrictive covenant and therefore, the employment agreements were not breached.   Accordingly, Plaintiff lacks standing to bring a breach of contract claim against the Defendants based on the two-year restrictive covenant and this Court, therefore, lacks subject matter jurisdiction over all claims relating to that contract.”

Povodator, Kenneth B., J.