LLC v. Wideband Solutions, Inc. (2013)

MEMORANDUM OF DECISION RE MOTION TO DISMISS (# 325)

FACTUAL AND PROCEDURAL BACKGROUND

The plaintiff, Amos Financial, LLC, is a limited liability company.   The moving defendant, Lonny Bowers, was the president of a co-defendant, Wideband Solutions, Inc. (Wideband), a for-profit corporation.   On April 9, 2012, the plaintiff filed its four-count operative complaint against the defendants Wideband, Lonny Bowers, Andrew Chiang, and Jun Yang. Count two alleges a breach of contract claim against the moving defendant.   This count alleges the following facts.

On or about August 10, 2007, Wideband entered into a promissory note agreement with Sovereign Bank, the plaintiff's predecessor in interest, under which Sovereign Bank would provide a line of credit to Wideband.   On April 13, 2009, Sovereign Bank and Wideband entered into a modification agreement whereby Sovereign Bank would continue to provide a line of credit to Wideband.   The moving defendant, Lonny Bowers, signed the note and agreement, as well as the modification agreement, as a guarantor and is therefore liable for all or part of the debt in the amount of $111,650.48 plus further contractual interest.   The plaintiff purchased the promissory note and credit agreement from Sovereign Bank on or about November 23, 2010, and is entitled to full enforcement of the debt.   The plaintiff has demanded full payment from the defendant, and the defendant has neglected or refused to pay the debt in bad faith.   The plaintiff has been damaged by the moving defendant's actions and seeks money damages, contractual interest, attorneys fees, costs of suit, and postjudgment statutory interest.

The defendant filed an answer and special defenses on May 30, 2012.   The plaintiff filed a reply to the defendant's special defenses on June 7, 2012.   The defendant then filed a four-count counterclaim on September 5, 2012.   In the counterclaim, the defendant alleges the following facts.   In September of 2009, Wideband notified Sovereign Bank that an unsecured creditor was transferring assets which served as collateral for the loan.   Sovereign Bank took no action to enforce its superior interest in the assets, and subsequently sold their rights on the loan to the plaintiff on November 16, 2010.   On March 7, 2011, the defendant notified the plaintiff of the status of the assets used as collateral and offered to assist the plaintiff in receiving fair market value for the collateral.   The plaintiff failed to make any effort to obtain the full market value for the collateral assets, or to take any action relating to its interest in the collateral.

Count one of the counterclaim states that in taking no action, the plaintiff breached its obligation under the UCC to make a sincere effort to obtain the full market value of the property, and is therefore liable to the defendant for breach of contract.   Count two sounds in promissory estoppel resulting from the plaintiff's refusal “to enforce the conditions and requirements relating to the security interest ․ in violation of the UCC.” Count three asserts that the plaintiff breached its covenant of good faith dealings in refusing to take action regarding the collateral and ignoring the defendant's request and offer of assistance.   Finally, count four claims bad faith initiation of litigation and alleges that the plaintiff was aware when it filed the initial action that the Stamford court was not the proper venue and lacked jurisdiction, and brought the action against the defendant in Stamford in bad faith.   The defendant seeks money damages, contractual damages, contractual interest, and punitive damages.¹

On February 1, 2013, the plaintiff filed an answer to the defendant's counterclaims in which it denied all allegations.   On March 1, 2013 the plaintiff filed an amended answer and asserted special defenses.²  The defendant filed a reply to the plaintiff's special defenses on March 28, 2013.   On August 2, 2013, the plaintiff filed the present motion to dismiss the defendant's counterclaims on the ground that the court lacks subject matter jurisdiction, along with a memorandum of law in support of the motion.   The plaintiff also attached as exhibits to the motion a copy of a case cited in its brief and a copy of the modification agreement.   The defendant filed an objection and memorandum of law on August 19, 2013.   The plaintiff filed a reply memorandum on August 27, 2013, and the defendant filed a surreply on August 30, 2013.   The matter was heard at short calendar on September 3, 2013.

DISCUSSION

“[A] motion to dismiss ․ 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.”  (Internal quotation marks omitted.)  Santorso v. Bristol Hospital, 308 Conn. 338, 350, 63 A.3d 940 (2013).  “[A] motion to dismiss is the proper procedural vehicle to raise a claim that the court lacks subject matter jurisdiction over the action.”   Bellman v. West Hartford, 96 Conn.App. 387, 392, 900 A.2d 82 (2006).  “When a trial court decides a jurisdictional question raised by a pretrial motion to dismiss on the basis of the complaint alone, it must consider the allegations of the complaint in their most favorable light ․ In this regard, a 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.”  (Internal quotation marks omitted.)  Conboy v. State, 292 Conn. 642, 651, 974 A.2d 669 (2009).  “In contrast, if the complaint is supplemented by undisputed facts established by ․ other types of undisputed evidence ․ the trial court, in determining the jurisdictional issue, may consider these supplementary undisputed facts ․” (Citations omitted;  emphasis in original;  internal quotation marks omitted.)  Id., 651–52.

In the present motion, the plaintiff contends that the court lacks subject matter jurisdiction over the defendant's counterclaims because a “Release of the Lender” clause contained in the April 13, 2009 modification agreement precludes the defendant from filing any counterclaims.³  The plaintiff emphasizes that this defendant has judicially admitted to signing the modification agreement during discovery.   The defendant counters that the “Release of the Lender” clause does not prevent him from filing counterclaims in the present action because the clause only applies to claims for causes of action existing at the time the modification was signed.   Because the allegations in the counterclaim occurred after the modification agreement was signed, the defendant asserts that he is not barred from filing his counterclaim by the “Release of the Lender” clause.   The defendant buttresses his position by referring to language in the purchase agreement which he claims demonstrates that the plaintiff understood that it may be subject to legal claims by the defendant.⁴

“Subject matter jurisdiction involves the authority of a court to adjudicate the type of controversy presented by the action before it ․ A court does not truly lack subject matter jurisdiction if it has competence to entertain the action before it ․ Once it is determined that a tribunal has authority or competence to decide the class of cases to which the action belongs, the issue of subject matter jurisdiction is resolved in favor of entertaining the action ․ It is well established that, in determining whether a court has subject matter jurisdiction, every presumption favoring jurisdiction should be indulged.”  (Internal quotation marks omitted.)  Ed Lally & Associates, Inc. v. DSBNC, LLC, 145 Conn.App. 718, 727–28 (2013).

In the present case, the plaintiff insists that the existence of the “Release of the Lender” clause in the modification agreement, which purports to release the plaintiff from any claims against it by the defendant, deprives the defendant of standing to bring a claim and strips this court of subject matter jurisdiction.   The mere existence of a release clause is not dispositive of the issue of whether a claim may be brought by the defendant.   The defendant has standing as a signatory to the agreement to challenge its interpretation or applicability to the present matter.   An otherwise valid release of liability clause may be void for a variety of reasons.   See Interpharm, Inc. v. Wells Fargo Bank, National Association, 655 F.3d 136, 142 (2d Cir.2011) (“An otherwise valid release may, however, be void on several grounds ․”).

While the existence of a “Release of the Lender” clause, if valid, may provide the plaintiff a defense against the counterclaims brought by the defendant, such a clause does not affect the court's subject matter jurisdiction.   Connecticut courts have regularly addressed matters regarding the existence and applicability of contract clauses which purportly release a party from liability.   See, e.g., Bank of Boston Connecticut v. Avon Meadow Associates, 40 Conn.App. 536, 540, 671 A.2d 1310, cert. denied, 237 Conn. 905, 674 A.2d 1329 (1996) (a release of liability contained in a forbearance clause required a determination of what the parties intended and was a question of fact for the fact-finder);  Callender v. Reflexite Corp., 143 Conn.App. 351, 383–84, 70 A.3d 1084, cert. denied, 310 Conn. 905 (2013) (evaluating whether a release clause waived the plaintiff's claim of employment discrimination).   Accordingly, the existence of a release clause in the parties' contract does not remove the matter from this court's jurisdiction.

CONCLUSION

For the foregoing reasons, the plaintiff's motion to dismiss is denied.

BY THE COURT

Gleeson, J.

FOOTNOTES

FN1. The plaintiff filed a motion to strike this defendant's counterclaims on September 14, 2012, on the grounds that the counterclaims were untimely filed and failed to state legally sufficient causes of action upon which relief could be granted.   That motion was denied by the court, Abrams, J. The plaintiff then filed a motion for summary judgment on its claims against the defendant on November 13, 2012.   That motion was denied by the court, Abrams, J., upon finding the existence of genuine issues of material fact..  FN1. The plaintiff filed a motion to strike this defendant's counterclaims on September 14, 2012, on the grounds that the counterclaims were untimely filed and failed to state legally sufficient causes of action upon which relief could be granted.   That motion was denied by the court, Abrams, J. The plaintiff then filed a motion for summary judgment on its claims against the defendant on November 13, 2012.   That motion was denied by the court, Abrams, J., upon finding the existence of genuine issues of material fact.

FN2. The plaintiff asserted special defenses of estoppel, failure to mitigate damages, failure to state a legally cognizable claim, and waiver by the defendant of any claims and/or defenses..  FN2. The plaintiff asserted special defenses of estoppel, failure to mitigate damages, failure to state a legally cognizable claim, and waiver by the defendant of any claims and/or defenses.

FN3. The modification agreement was attached to the plaintiff's motion to dismiss as Exhibit B..  FN3. The modification agreement was attached to the plaintiff's motion to dismiss as Exhibit B.

FN4. The defendant also claims that the court has already considered the plaintiff's argument regarding the “Release of the Lender” clause.   The record does not appear to support that claim..  FN4. The defendant also claims that the court has already considered the plaintiff's argument regarding the “Release of the Lender” clause.   The record does not appear to support that claim.

Gleeson, Marcia J., J.