Boston Property Exchange Transfer Company, Inc. v. Merrill Lynch Pierce, Fenner & Smith, Inc. et al. (2013)

MEMORANDUM OF DECISION RE PLAINTIFF'S MOTION FOR PARTIAL SUMMARY JUDGMENT (# 256) and DEFENDANT'S MOTION FOR SUMMARY JUDGMENT (# 258)

Before the court are the parties' cross motions for summary judgment.   The plaintiff, Boston Property Exchange Transfer Company, Inc. has moved for summary judgment as to liability only on five of the seven remaining counts in the complaint.   The defendant Merrill Lynch, Pierce, Fenner & Smith, Inc. has moved for summary judgment in its favor on all seven remaining counts of the complaint.

I. FACTS AND PROCEDURAL BACKGROUND

From October 1998 until December 2000, the plaintiff, Boston Property Exchange Transfer Company, Inc. (“BPETCO”) ¹ acted as a qualified intermediary for “like-kind” property exchanges under Section 1031 of the Internal Revenue Code.²

BPETCO entered into a number of written agreements with clients seeking to engage in like-kind transactions.   Pursuant to those agreements, BPETCO was to receive the proceeds from the sale of investment real estate, hold those funds in “escrow custodial accounts” and eventually return the funds to the client along with either 3% or 6% interest (depending on how long the funds were held), to be used to purchase replacement investment real estate.

In October 1998, BPETCO opened two accounts with the defendant Merrill Lynch, Pierce, Fenner & Smith, Inc. (“Merrill Lynch”).  One account, which came to be referred to as “the B01 account” was for the purpose of receiving deposited client funds and disbursing the funds when requested.   A second account, which came to be referred to as “the B10 account,” was also opened and client funds were periodically transferred between the B01 account and the B10 account.   Over the next two years, using the B10 account, BPETCO's Chairman, Daniel Carpenter actively and aggressively engaged in high-risk, high volume, uncovered options trading, typically in the technology sector.   In 2000, technology sector stocks began to drop and BPETCO began to experience heavy trading losses.   As of August 2000, BPETCO had sustained nearly $2 Million in losses.

Concerned with the mounting losses, in September 2000, Merrill Lynch restricted BPETCO's ability to trade.   Basically, BPETCO would be permitted to finish out its existing options transactions, but would not be allowed to purchase any new options.   BPETCO's Chairman, Daniel Carpenter, vigorously protested these restrictions and repeatedly requested permission to resume trading.   Merrill Lynch refused, but did suggest that it would “ACAT” (automated customer account transfer) the accounts to another brokerage firm that would permit him to trade in options.   In October 2000, Carpenter authorized the transfer of the accounts to PaineWebber.   At the time the accounts were transferred, Carpenter believed that Merrill Lynch was holding $12 million worth of actual shares (not options) of Broadcom, Qualcomm and Yahoo stock which was owned by BPETCO.   However, the stock was never transferred into the PaineWebber accounts and “went missing.”

At PaineWebber, BPETCO continued to engage in options trading.   By December 2000, BPETCO had sustained an additional $3.3 Million in trading losses.   In January 2001, PaineWebber closed the BPETCO accounts.   Soon after, BPETCO began to meet with clients who had requested return of the funds deposited with BPETCO to inform the clients that their money had been “lost in the stock market.”   On January 17, 2001, BPETCO's attorney wrote to seven of those clients to tell them that their funds deposited with BPETCO, totaling $8,951,171.41, would not be returned.   Later that month, the seven clients brought separate suits against BPETCO, Daniel Carpenter (BPETCO's chairman), Martin Paley (BPETCO's president), Molly Carpenter (BPETCO managing director and treasurer),³ Merrill Lynch, and others in Massachusetts Superior Court.   Those cases were consolidated and tried together in what has become referred to as “the Cahaly litigation.” ⁴

In July 2002, the Massachusetts trial court granted summary judgment on the Cahaly plaintiffs' claims against BPETCO for conversion and breach of contract.   In late fall of 2002, a lengthy trial took place on the plaintiff's remaining causes of action.   In December 2002, the jury returned a verdict for the plaintiffs against both the BPETCO defendants and Merrill Lynch.   BPETCO was found liable for breach of contract, conversion, breach of fiduciary duty, and fraud.   Merrill Lynch was found liable for aiding and abetting conversion, aiding and abetting breach of fiduciary duty, and for violating the New York and Connecticut consumer protection statutes.   The jury awarded the plaintiffs compensatory damages of $8.6 million.⁵

Merrill Lynch moved for judgment notwithstanding the verdict, arguing that there was not sufficient evidence that Merrill had actual knowledge of BPETCO's wrongdoing.   The trial court granted Merrill Lynch's motion, concluding that the evidence did not establish that Merrill Lynch had knowledge of, or substantially assisted in, BPETCO's wrongful conduct, as required for aiding or abetting liability.   The Cahaly plaintiffs appealed the overturning of the verdict against Merrill Lynch, and BPETCO appealed from the jury verdict against it.

In March 2004, while the appeal was pending, the plaintiffs moved to reinstate the jury verdict against Merrill Lynch on the ground that newly discovered evidence established that Merrill Lynch in fact had knowledge of BPETCO's wrongdoing.   The plaintiffs presented a post-trial affidavit of Martin Paley (president of BPETCO) describing an October 1998 conversation with a broker at Merrill Lynch responsible for setting up and handling the BPETCO accounts in which Paley informed the broker that BPETCO was in the business of serving as a qualified intermediary and that the money in BPETCO accounts was client funds to be held in escrow.   In addition, the plaintiffs had become aware of an attorney, David Patterson, who was willing to testify that he had directly and explicitly notified the same Merrill Lynch broker that the funds in BPETCO's account were Section 1031 clients' funds belonging to his (Patterson's) client.   After an evidentiary hearing, the trial judge declined to reinstate the jury verdict, but did order a new trial on the plaintiffs' claims against Merrill Lynch.   Merrill Lynch appealed from that ruling.

The BPETCO defendants also moved for a new trial based on the newly discovered evidence that had been presented by the Cahaly plaintiffs as grounds for a new trial against Merrill Lynch.   The court denied that motion, and the BPETCO defendants appealed from that ruling.

The Appeals Court of Massachusetts heard the matter and in April of 2007 rendered a decision affirming all of the trial court's rulings.   As to the BPETCO defendants' motion for new trial, the Court of Appeals affirmed the trial court's ruling, citing “the overwhelming evidence in favor of the plaintiffs” and holding that the newly discovered evidence

does not satisfy the requirement that it will likely affect the outcome of a trial against the [BPETCO] defendants.

Cahaly v. Benistar Prop. Exch. Trust Co., Inc., 68 Mass.App.Ct. 668, 678, 864 N.E.2d 548 (2007).

The appeal was certified to the Massachusetts Supreme Judicial Court.   In May of 2008, that court affirmed all of the trial court's rulings and remanded the case against Merrill Lynch for trial.⁶  In affirming the trial court's denial of the BPETCO defendants' motion for a new trial, the court stated:

The [BPETCO] defendants also appeal from the judge's denial of their motion for a new trial.   Again, after careful consideration of the arguments, and for essentially the reasons articulated by the judge and by the Appeals Court, we affirm.   See [68 Mass.App.Ct.] at 677–78.

Cahaly v. Benistar Prop. Exch. Trust Co., Inc., 451 Mass. 343, 369, 885 N.E.2d 800 (2008).

In March of 2009, prior to the new trial on the claims against Merrill Lynch, its lawyers disclosed the existence of more than 10,000 pages of documents that had been collected in response to discovery requests served on Merrill Lynch prior to the 2002 trial, but withheld on a claim of attorney work product.   BPETCO asserts that these documents showed that Merrill Lynch knew from the inception of BPETCO's accounts with Merrill Lynch that the money it was investing belonged to BPETCO's Section 1031 clients, rather than BPETCO itself or Daniel Carpenter personally.

Based on the newly disclosed documentation, BPETCO again sought a new trial.   On May 19, 2009, the court denied the motion for a new trial.   The trial court explained:

In substance [BPETCO] argues that the recent discovery provides strong evidence that Merrill Lynch was committing a fraud on the parties and the Court when it denied, in pretrial discovery and at trial, such knowledge as it has recently admitted to, and therefore that Merrill Lynch's trial tactic of painting [BPETCO] as the only fraudulent actor was so unfair as to warrant a new trial on the plaintiff's fraud claims against [BPETCO].   After considering the parties' submissions, the motion for a new trial will be denied.

The principal reason for denial is that the Supreme Judicial Court has already ruled that earlier, “newly discovered evidence” (described in Cahaly v. Benistar Property Exchange Trust Company, Inc., 451 Mass. 343, 362–68 (2008)) did not warrant a new trial for [BPETCO].   Attorney Patterson's and Martin Paley's alleged communications with Merrill Lynch's Levine occurred in 1998.   If accepted by the fact finder, those communications constituted direct information to Merrill Lynch—near the beginning of its relationship with Daniel Carpenter and [BPETCO]—not only that Carpenter was investing other people's money, but that Carpenter's specific relationship with those third parties was as a “qualified intermediary” holding their funds in escrow under 26 U.S.C. § 1031.  Id. at 363.

The documents recently disclosed by Merrill Lynch, by contrast, were generated beginning in September 2000, shortly before the end of Merrill Lynch's relationship with Carpenter and [BPETCO], and months after the losses in [BPETCO]'s accounts had begun.  [BPETCO] offers them as further evidence that Merrill Lynch knew that [BPETCO] was trading with other people's money.   If the 1998 newly discovered evidence did not support [BPETCO]'s motion for new trial in the view of the Supreme Judicial Court, there is little reason to believe that the September 2000 evidence would do so.

May 19, 2009 “Memorandum and Order on Benistar Defendants' Motion for a New Trial.”  (Exhibit 41 to Defendant's Motion for Summary Judgment.)

In October of 2011, BPETCO brought the present action in Connecticut Superior Court against Merrill Lynch and Bingham McCutchen, LLP ⁷ in twenty counts.   The court, Bright, J., granted motions dismissing or striking all but seven of the counts.⁸  In its present posture, the case consists of the following claims:

Count One seeks indemnification, claiming that Merrill Lynch's “active negligence in strongly recommending to BPETCO that it make certain investments, notwithstanding its knowledge that BPETCO was investing on behalf of Section 1031 clients, and its conduct in abruptly shutting down trading in the accounts, rather than any negligence by BPETCO, was the direct and immediate cause of the Cahaly plaintiffs' injuries.”  (Complaint, Count One, ¶ 133.)

Count Two seeks contribution, alleging that Merrill Lynch and BPETCO are joint tortfeasors and BPETCO has paid more than its fair proportionate share of the damages to the Cahaly plaintiffs and is thus entitled to contribution.   (Complaint, Count Two, ¶ 135, ¶ 137.)

Count Three claims that Merrill Lynch was unjustly enriched when the judgment against it was reduced by the $15 Million paid to the Cahaly plaintiffs by BPETCO.  (Complaint, Count Three, ¶ 135.)

Count Five asserts that “the defendants intentionally prevented BPETCO from presenting exculpatory evidence during the Cahaly trial” by deleting or destroying computer evidence that was subject to a discovery request.   As a result, BPETCO was subjected to “an extraordinarily high judgment” which would not have been entered “but for the defendant's intentional spoliation of evidence.”  (Complaint, Count Five, ¶ 137, ¶ 140, ¶ 143.)

Count Eight alleges that Merrill Lynch breached its written agreement with BPETCO by failing to account for BPETCO's ownership of common stock in three publicly traded securities (Broadcomm, Yahoo and Qualcomm) valued at $12 Million.   Thereafter, Merrill Lynch fraudulently concealed the misappropriation of the stock, in violation of an implied contractual duty of good faith and fair dealing.  (Complaint, Count Eight, ¶ 135.)

Count Nine claims conversion in connection with Broadcomm, Yahoo and Qualcomm stock valued at $12 Million, alleging that the stocks were “cashed in,” and paid out in bonuses to Merrill Lynch employees.  (Complaint, Count Nine, ¶ 136.)

Count Ten alleges unjust enrichment in connection with Broadcomm, Yahoo and Qualcomm stock valued at $12 Million, alleging that the stocks were “cashed in,” and paid out in bonuses to Merrill Lynch employees.  (Complaint, Count Ten, ¶ 134.)

BPETCO has moved for summary judgment as to Count One (Indemnification), Count Two (Contribution), Count Three (Unjust Enrichment), Count Five (Intentional Spoliation of Evidence), and Count Eight (Breach of Contract).   BPETCO contends that it has demonstrated the absence of any genuine issue of material fact as to those five counts, and based on the applicable substantive law of Connecticut and New York, is entitled to summary judgment in its favor.

Merrill Lynch has moved for summary judgment in its favor on all counts of the complaint on a number of grounds:

BPETCO is collaterally estopped from re-litigating its liability to the Cahaly plaintiffs.

as a matter of law, BPETCO is not entitled to indemnification for its own wrongful conduct.

BPETCO cannot obtain contribution where it has not paid more than its fair share of the parties' joint liability, and has failed to state a claim for contribution under the applicable law.

BPETCO cannot claim unjust enrichment because Merrill Lynch has not been “enriched.”

BPETCO's spoliation claim is not recognized by the law applicable to this dispute;  also there is no genuine issue of fact as to whether Merrill Lynch deprived BPETCO of a cause of action by intentionally destroying evidence.

BPETCO's claim of breach of contract is time-barred, and there are no genuine issues of fact regarding whether the contract was breached.

BPETCO's claim of conversion is time-barred, and there are no genuine issues of fact regarding whether BPETCO's property was converted.

There are no genuine issues of fact regarding BPETCO's claim of unjust enrichment (based on missing securities).

The cross motions have been fully briefed and argued and the parties have supplied nearly 1,000 pages of documentary and testimonial evidence in support of their respective positions.

II. ANALYSIS

A. Summary Judgment, Generally

Practice Book § 17–49 provides that summary judgment shall be rendered forthwith if the pleadings, affidavits and any other proof submitted show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.   The party moving for summary judgment has the burden of showing the absence of any genuine issue as to all the material facts, which, under applicable principles of substantive law, entitle him to a judgment as a matter of law.  Zielinski v. Kotsoris, 279 Conn. 312, 318, 901 A.2d 1207 (2006).  “A material fact has been defined adequately and simply as a fact which will make a difference in the result of the case.”   (Internal quotation marks omitted.)  United Oil Co. v. Urban Development Commission, 158 Conn. 364, 379, 260 A.2d 596 (1969).

In reviewing the evidence offered, the trial court must “view the evidence in the light most favorable to the nonmoving party.”  (Internal quotation marks omitted.)  Johnson v. Atkinson, 283 Conn. 243, 253, 926 A.2d 656 (2007).   When deciding a summary judgment motion, the trial court may not decide issues of material fact, but only determine whether such genuine issues exist.   Nolan v. Borkowski, 206 Conn. 495, 500, 538 A.2d 1031 (1988).

“The courts are in entire agreement that the moving party for summary judgment has the burden of showing the absence of any genuine issue as to all the material facts, which, under applicable principles of substantive law, entitle him to a judgment as a matter of law.   The courts hold the movant to a strict standard.   To satisfy his burden the movant must make a showing that it is quite clear what the truth is, and that excludes any real doubt as to the existence of any genuine issue of material fact.”  Ramirez v. Health Net of the Northeast, Inc., 285 Conn. 1, 11, 938 A.2d 576 (2008).

B. Discussion:  Choice of Law

The court cannot reach the merits of the summary judgment motions until it resolves the threshold issue of which law to apply to the substantive issues in this case.   The defendant urges the application of Massachusetts law to some of the claims and New York law to others, while the plaintiff maintains that Connecticut law applies to all but the breach of contract cause of action.   Accordingly, the court must address the choice of law issue first.

“In determining the governing law, a forum applies its own conflict-of-law rules ․” Gibson v. Fullin, 172 Conn. 407, 411–12, 374 A.2d 1061 (1977).   In applying those rules, “[t]he threshold choice of law issue in Connecticut, as it is elsewhere, is whether there is an outcome determinative conflict between applicable laws of the states with a potential interest in the case.   If not, there is no need to perform a choice of law analysis, and the law common to the jurisdiction should be applied.”  (Citations omitted;  emphasis in original.)  Cohen v. Roll–A–Cover, LLC, 131 Conn.App. 443, 465–66, 27 A.3d 1 (2011).   Thus, as to the various causes of action in dispute, the court must first determine whether there is a conflict between Massachusetts, New York and Connecticut law.⁹  If there is an actual conflict, the court must then proceed through a choice of law analysis to determine the applicable law.

“It is only after a determination is made that there is indeed an actual conflict between the laws of the particular jurisdictions that the interests of the respective jurisdictions are analyzed.”  (Internal quotation marks omitted.)  Haymond v. Statewide Grievance Committee, 45 Conn.Sup. 481, 489, 723 A.2d 821 (1997), aff'd, 247 Conn. 436, 723 A.2d 808 (1998).  “Under modern conflicts-of-law theory, where there is a false conflict such that the laws of both states relevant to the set of facts are the same, or would produce the same decision in the lawsuit, there is no real conflict between them ․ In such a case, the case ought to be decided under the law that is common to both states.”  (Citation omitted;  emphasis added;  internal quotation marks omitted.)  Id., 488–89.  “When the applicable law of a foreign state is not shown to be otherwise, we presume it to be the same as our own.”  Walzer v. Walzer, 173 Conn. 62, 76, 376 A.2d 414 (1977).

1. Conflict of Laws Analysis—Indemnification

In Massachusetts, common-law indemnification has been available traditionally only to one who is exposed to derivative or vicarious liability for the wrongful act of another.  Economy Engineering Co. v. Commonwealth, 413 Mass. 791, 793–94, 604 N.E.2d 694 (1992);  Elias v. Unisys Corp., 410 Mass. 479, 481–82, 573 N.E.2d 946 (1991);  Rathbun v. Western Mass. Elec. Co., 395 Mass. 361, 364, 479 N.E.2d 1381 (1985);  Decker v. Black & Decker Mfg. Co., 389 Mass. 35, 40–41, 449 N.E.2d 641 (1983).   The general rule is that a person who negligently causes injury to a third person is not entitled to indemnification from another person who also negligently caused that injury.   Rathbun, 395 Mass. at 364;  Black and Decker, 389 Mass. at 40.  “Only in exceptional cases ․ has indemnity been allowed to one who was not free from fault.”  Rathbun, supra.   In those rare situations where “indemnity has been allowed to a negligent indemnitee, the indemnitee's negligence has been insignificant in relation to that of the indemnitor.”  Id.

Within the State of New York, “[c]ommon-law indemnification is available to one who has committed no wrong but is held liable to the injured party because of some relationship with the tortfeasor or obligation imposed by law.”   Elkman v. Southgate Owners Corp., 246 A.D.2d 314 (1st Dept.1998).  “It is well settled that a party is not entitled to common-law indemnification unless that party establishes that it cannot be held responsible for the underlying injuries to any degree.”  Buchwald v. Verizon, 52 A.D.3d 1301 (4th Dept.2008), citing Rosado v. Proctor & Schwartz, 66 N.Y.2d 21, 24–25 (1985).

Under Connecticut law, “[i]n an action for indemnity ․ one tortfeasor seeks to impose total liability upon another [tortfeasor] ․ [I]ndemnity involves a claim for reimbursement in full from one on whom a primary liability is claimed to rest ․ Ordinarily there is no right of indemnity ․ between joint tortfeasors ․ Where, however one of the defendants is in control of the situation and his negligence alone is the direct immediate cause of the injury and the other defendant does not know of the fault, has no reason to anticipate it and may reasonably rely upon the former not to commit a wrong, it is only justice that the former should bear the burden of damages due to the injury ․ Under the circumstances described, [the court has] distinguished between active or primary negligence, and passive or secondary negligence ․ Indemnity shifts the impact of liability from passive joint tortfeasors to active ones ․ Thus, the common-law doctrine of indemnification permits a tortfeasor to assert a claim only against another liable tortfeasor.”  (Citations omitted;  internal quotation marks omitted.)  Bristol v. Dickau Bus Co., 63 Conn.App. 770, 773, 779 A.2d 152 (2001).   Contiecticut's indemnification approach of active or primary negligence versus passive or secondary negligence represents a marked departure from the laws of New York and Massachusetts which, in almost all cases, prohibits recovery in common-law indemnification by a negligent indemnitee.

Moreover, there is no controlling appellate authority on the question of whether Connecticut would permit indemnification among intentional tortfeasors.   Merrill Lynch urges the court to recognize the view of the majority of Superior Court judges (including the undersigned) to the effect that an action for common-law indemnity is not legally cognizable when the underlying cause of action arises out of intentional tortious conduct.   However, there is a contrary, minority view,¹⁰ and adopting the “majority view” of the Superior Court judges as the settled law of this state would be improper in these circumstances.   See Dugan v. Mobile Medical Testing Services, Inc., 265 Conn. 791, 798, 830 A.2d 752 (2002) (when comparing the law of different states, a court may only consider law that is binding authority, such as statutory or appellate law;  trial court incorrectly concluded that no conflict existed when it relied solely upon Superior Court cases and no controlling Connecticut appellate precedent existed).

In view of the foregoing, it cannot be said that the law on this issue is common to all three jurisdictions, such that the same decision would be produced in all three states.   Thus, a choice of law analysis is warranted.

2. Conflict of Laws Analysis—Contribution

Each of the states whose law arguably governs this dispute permits contribution among parties jointly liable for damages in tort.   Massachusetts General Laws ch.   231B, § 1 “provides for a right to contribution ‘where two or more persons become jointly liable in tort,’ ․ and permits a tortfeasor to seek partial reimbursement from a party who is jointly liable if he has paid more than his ‘pro rata share’ of the damages.”  (Thomas v. EDI Specialists, 437 Mass. 536, 538–39, 773 N.E.2d 415 (2002) (Citation omitted) (noting that the “statute does not distinguish between intentional torts and negligence”).

Under New York's contribution statute, “two or more persons who are subject to liability for damages for the same personal injury, injury to property or wrongful death, may claim contribution among them whether or not an action has been brought or a judgment has been rendered against the person from whom contribution is sought.”  N.Y. C.P.L.R. § 1401;  Again, the section applies to intentional tortfeasors.   See Schauer v. Joyce, 54 N.Y.2d 1, 5 (1981).¹¹

Connecticut has, by statute, abrogated the concept of joint and several liability and permitted contribution among joint tortfeasors for damages “caused by negligence.” ¹²  However, tortfeasors who commit intentional torts are not entitled to contribution under Connecticut law.  Skuzinski v. Bouchard Fuels, Inc., 240 Conn. 694, 697, 862 694 A.2d 788 (1997);  Preferred Accident Ins. v. Musante, Berman & Steiberg, 133 Conn. 536, 541–45, 52 A.2d (1947).   Connecticut's law of contribution is markedly different from the other two states, and that difference would doubtless impact the outcome of the claim.   There is, therefore, an outcome determinative conflict between the laws of the three states and a need to perform a choice of law analysis.

3. Conflict of Laws Analysis—Unjust Enrichment

In Count Three, the plaintiff claims that Merrill Lynch was unjustly enriched when the judgment against it was reduced by the $15 Million paid to the Cahaly plaintiffs by BPETCO.   In Count Ten, the plaintiff claims that the defendant is unjustly enriched as a result of misappropriating $12 Million in securities from BPETCO's accounts and retaining millions of dollars in commissions.

In Connecticut, “[c]onsistent with the principals of equity, unjust enrichment is a broad and flexible remedy ․ A plaintiff seeking recovery for unjust enrichment must prove (1) that the defendants were benefitted, (2) that the defendants unjustly did not pay the (plaintiff) for the benefits, and (3) that the failure of payment was to the (plaintiff's) detriment.”  Marlin Broadcasting v. Law Office of Kent Avery, 101 Conn.App. 638, 648–49, 922 A.2d 1131 (2007);  Gagne v. Vaccaro, 255 Conn. 390, 409, 766 A.2d 416 (2001);  Weisman Trustee v. Kaspar, 233 Conn. 531, 550, 661 A.2d 530 (1995).  “A right of recovery under the doctrine of unjust enrichment is essentially equitable, its basis being that in a given situation it is contrary to equity and good conscience for one to retain a benefit which has come to him at the expense of another.”  (Internal quotation marks omitted.)  Vertex v. Waterbury, 278 Conn. 557, 573, 898 A.2d 178 (2006).

Under New York law, in order to prevail on an unjust enrichment cause of action, a plaintiff “must establish that the defendant benefitted at the plaintiff's expense and that equity and good conscience require restitution.”   Whitman Realty Group, Inc. v. Galano, 41 A.D.3d 590, 593 (2d Dept.2007).   “The essential inquiry in any action for unjust enrichment or restitution is whether it is against equity and good conscience to permit the defendant to retain what is sought to be recovered.”  Mandarin Trading Ltd. v. Wildenstein, 65 A.D.3d 448, 451 (1st Dept.2009).

In Massachusetts, “[a] plaintiff asserting a claim for unjust enrichment must establish not only that the defendant received a benefit, but also that such a benefit was unjust ․ The party seeking restitution has the burden of proving its entitlement thereto.”  (Citations omitted.)  Metropolitan Life Insurance Company v. Cotter, 464 Mass. 623, 644, 984 N.E.2d 835 (2013).   The plaintiff must show “that a defendant holds assets that in fairness and good conscience should be plaintiff's.”  Santagate v. Tower, 64 Mass.App.Ct. 324, 329 (2005);  see also M. McDonough Corp. v. Connolly, 313 Mass. 62, 67, 46 N.E.2d 576 (1943) (“[W]hen in equity and good conscience, one has property without right that ought to go to another, he cannot retain it”).

Having examined the relevant case law, the court does not discern any outcome determinative conflict between the laws of the three states with a potential interest in the case with respect to the cause of action for unjust enrichment.   Also, the parties' briefs on this subject do not raise any distinction.   Hence, there is no need to perform a choice of law analysis, and the law of this court's jurisdiction will be applied to claims for unjust enrichment.

4. Conflict of Laws Analysis—Spoliation of Evidence

Count Five of the Plaintiff's complaint seeks to recover in tort for intentional spoliation of evidence.   The Connecticut Supreme Court recognized intentional spoliation as an independent cause of action in Rizzuto v. Davidson Ladders, Inc., 280 Conn. 225, 905 A.2d 1165 (2006).  “Intentional spoliation of evidence is defined as the intentional destruction, mutilation, or significant alteration of potential evidence for the purpose of defeating another person's recovery in a civil action ․ [T]he tort of intentional spoliation of evidence consists of the following essential elements:  (1) the defendant's knowledge of a pending or impending civil action involving the plaintiff;  (2) the defendant's destruction of evidence;  (3) in bad faith, that is, with intent to deprive the plaintiff of his cause of action;  (4) the plaintiff's inability to establish a prima facie case without the spoliated evidence;  and (5) damages.”  (Citations omitted;  internal quotation marks omitted.)  Id., 280 Conn. 243–45.

Massachusetts has not yet recognized an independent tort based on spoliation of evidence.  Fletcher v. Dorchester Mut. Ins. Co., 437 Mass. 544, 551, 573 N.E.2d 420 (2002).   Instead, rather than allowing a separate cause of action for spoliation, Massachusetts courts retain the power to impose sanctions on counsel who participate in spoliation of evidence.  Id. at 553 (explaining that Massachusetts has “gone farther than other jurisdictions in imposing sanctions for spoliation ․ [and,] [i]n our view, appropriately tailored sanctions imposed in the underlying action are a more efficacious remedy for spoliation than allowing a separate, inherently speculative cause of action for such litigation misconduct”).

Similarly, New York has not recognized a cause of action based on the withholding or destruction of evidence.   Instead, sanctions up to and including dismissal of the action are permitted within the discretion of the court.   See N.Y. CPLR 3126(3);  VOOM HD Holdings, LLC v. EchoStar Satellite, L.L.C. 93 A.D.3d 33, 45 (1st Dept.2012) (reviewing standards for spoilation sanctions).

There is clearly a conflict of laws as to this issue and a choice of law analysis is necessary.

5. Conflict of Laws Analysis—Breach of Contract

The parties appear to agree that New York Law applies to claims arising under the Merrill Lynch–BPETCO account agreement.¹³  In Connecticut, “the law of the state chosen by the parties governs their contractual rights unless one of two exceptions applies:  (a) the chosen state has no substantial relationship to the parties or the transaction and there is no other reasonable basis for the parties' choice, or (b) application of the law of the chosen state would be contrary to a fundamental policy of a state which has a materially greater interest than the chosen state in the determination of the particular issue and which ․ would be the state of the applicable law in the absence of an effective choice of law by the parties.”  (Internal quotation marks omitted.)   Merrick v. Cummin, 100 Conn.App. 664, 668 n.3, 919 A.2d 495 (2007).

The Merrill Lynch—BPETCO brokerage agreement provides that it is governed by the laws of New York. One of the parties to the agreement, Merrill Lynch, has its principal place of business in the State of New York and performed much of its obligations under the agreement within the State of New York. Thus, New York has a substantial relation to the transaction which is the subject of the contract and New York law is a logical and reasonable choice.   The court is not aware of any other reason, public policy or otherwise, to disturb the parties' choice of law as to the performance of their agreement.   Accordingly, New York law governs the breach of contract dispute, although the court will apply Connecticut procedure.   PaineWebber Jackson & Curtis, Inc. v. Winters, 22 Conn.App. 640, 650, 579 A.2d 545, cert. denied, 216 Conn. 820, 581 A.2d 1055 (1990).

6. Conflict of Laws Analysis—Conversion

Count Nine alleges a cause of action for the common-law tort of conversion.   Connecticut law provides that

The tort of conversion occurs when one, without authorization, assumes and exercises ownership over property belonging to another, to the exclusion of the owner's rights ․ Thus, conversion is some unauthorized act which deprives another of his property permanently or for an indefinite time;  some unauthorized assumption and exercise of the powers of the owner to his harm.   The essence of the wrong is that the property rights of the plaintiff have been dealt with in a manner adverse to him, inconsistent with his right of dominion and to his harm ․ To establish a prima facie case of conversion, the plaintiff had to demonstrate that (1) the material at issue belonged to the plaintiff, (2) that [the defendant] deprived the plaintiff of that material for an indefinite period of time, (3) that [the defendant's] conduct was unauthorized and (4) that [the defendant's] conduct harmed the plaintiff.

(Internal citations and punctuation marks omitted) Coster v. Duquette, 119 Conn.App. 827, 831–32, 990 A.2d 362 (2010).

Under New York law, “[t]o establish a cause of action to recover damages for conversion, a plaintiff must show legal ownership or an immediate superior right of possession to a specific identifiable thing and must show that the defendant exercised an unauthorized dominion over the thing in question to the exclusion of the plaintiff's rights.”  National Center for Crisis Management, Inc. v. Lerner, 91 A.D.3d 920, 920 (2nd Dept.2012).   Finally, under Massachusetts law, in order to establish conversion, a plaintiff must show that the defendant “intentionally or wrongfully exercise[d] acts of ownership, control or dominion over personal property to which he has no right of possession at the time ․” Grand Pacific Fin. Corp. v. Brauer, 57 Mass.App.Ct. 407, 412 (2003).

Based on the case authority, the court does not perceive any outcome determinative conflict between the laws of the three states with a potential interest in the case with respect to the common-law tort of conversion.   The parties do not argue that there is a substantive difference between the law of the three jurisdictions.   Hence, there is no need to perform a choice of law analysis, and the law of this court's jurisdiction will be applied to that claim.

7. Conflict of Laws Analysis—Summary

There is an actual conflict of laws only as to the claims for indemnification (Count One), contribution (Count Two) and for spoliation of evidence (Count Five).   As to Count Eight, the parties' contractual choice of law controls, and the breach of contract claim will be decided under New York law.   As to the remaining common-law claims of unjust enrichment and conversion, there is no outcome determinative difference in the substantive law governing those claims in the three pertinent states.   Those claims will be decided using Connecticut law.

C. Choice of Law Analysis—Law Applicable to Indemnification, Contribution and Spoliation of Evidence Claims

Having determined that there is an actual conflict between the laws of the three pertinent states as to the plaintiff's claims for indemnification, contribution and spoliation of evidence, the court will now turn to consideration of applicable choice of law criteria in light of the allegations of the complaint.   The Connecticut Supreme Court has moved away from the “place of the injury” rule for tort actions and adopted the “most significant relationship” test found in §§ 6 and 145 of the Restatement (Second) of Conflict of Laws. See Dugan v. Mobile Medical Testing Services, Inc., 265 Conn. 791, 800–02, 830 A.2d 752 (2003);  Williams v. State Farm Mutual Automobile Ins. Co., 229 Conn. 359, 371–72, 641 A.2d 783 (1994);  O'Connor v. O'Connor, 201 Conn. 632, 649–50, 519 A.2d 13 (1986).

“Subsection (2) of § 6 of the Restatement (Second) of Conflict of Laws ․ provides:  ‘When there is no [statutory] directive, the factors relevant to the choice of the applicable rule of law include (a) the needs of the interstate and international systems, (b) the relevant policies of the forum, (c) the relevant policies of other interested states and the relative interests of those states in the determination of a particular issue, (d) the protection of justified expectations, (e) the basic policies underlying the particular field of law, (f) certainty, predictability and uniformity of result, and (g) ease in the determination and application of the law to be applied.’   Id., § 6(2), p. 10.”  (Internal quotation marks omitted.)  Jaiguay v. Vasquez, 287 Conn. 323, 351, 948 A.2d 955 (2008).

In turn, § 145(2) “establishes [the] black-letter rules of priority to facilitate the application of the principles of § 6 to tort cases ․ Subsection (2) of § 145 ․ provides:  ‘Contacts to be taken into account in applying the principles of § 6 to determine the law applicable to an issue include:  (a) the place where the injury occurred, (b) the place where the conduct causing the injury occurred, (c) the domicile, residence, nationality, place of incorporation and place of business of the parties, and (d) the place where the relationship, if any, between the parties is centered.   These contacts are to be evaluated according to their relative importance with respect to the particular issue.’  [Id.], § 145(2), p. 414.”  (Internal quotations omitted.)  Id., 352.

“[I]t is the significance, and not the number, of § 145(2) contacts that determines the outcome of the choice of law inquiry under the Restatement approach.”  O'Connor v. O'Connor, supra, 201 Conn. 652–53.

In this case the court concludes, after considering the Restatement factors, that Massachusetts is the jurisdiction with the most significant relationship to plaintiff's indemnification, contribution and spoliation of evidence claims.   The place of the alleged injury was Massachusetts, where Merrill's alleged strategy of denying knowledge of BPETCO's wrongdoing was set in motion and where its ultimate legal consequences were brought about.   In a similar sense, Massachusetts was also the jurisdiction in which the conduct causing the injury occurred.   Massachusetts was where the pre-trial withholding of evidence occurred, where the allegedly false trial testimony was offered, where the jury verdict and judgment entered, and where the postjudgment activities described in this lawsuit all took place.   All of the wrongful acts and omissions of Merrill which purportedly led to the finding of liability against BPETCO took place in the context of a civil lawsuit administered in Massachusetts under the rules of practice and procedure of the Massachusetts Superior Court.¹⁴

Although the parties were domiciled and resided in states other than Massachusetts, that factor holds little significance in the court's view because the parties were engaged in litigation in the Massachusetts courts.   See Second Restatement § 145 cmt. e (“The fact ․ that one of the parties is domiciled ․ in a given state will usually carry little weight of itself”).

The last § 145 contact considers “when the injury was caused by an act done in the course of [a ] relationship, the place where the relationship is centered.”  (Emphasis added).   Second Restatement § 145 cmt. e. Although the parties' contractual broker-customer “relationship” was not centered in Massachusetts, there is no denying that Merrill Lynch's alleged acts of withholding, destroying and falsifying evidence were done in the course of a litigation “relationship” between the parties that was predominantly centered in Massachusetts.   At the time of the events that are alleged to have given rise to BPETCO's claims for indemnification, contribution and spoliation of evidence, Merrill Lynch and BPETCO's contractual broker-customer relationship had ended.   The only “relationship” between the parties at that point was as co-defendants in the Massachusetts courts, and the alleged wrongful conduct occurred in the course of that relationship.

Thus, three of the four § 145(2) contacts strongly favor Massachusetts.   New York and Connecticut's contacts with the claims are of marginal significance.

Second Restatement § 6 provides “basic policy considerations” that “underlie all rules of choice-of-law and are used in evaluating the significance of a relationship with respect to a particular issue, to the potentially interested states, the occurrence, and the parties.”   See Second Restatement § 145(1) cmt. a. Those policy considerations are:  (a) the needs of the interstate and international systems, (b) the relevant policies of the forum, (c) the relevant policies of other interested states and the relative interests of those states in the determination of a particular issue, (d) the protection of justified expectations, (e) the basic policies underlying the particular field of law, (f) certainty, predictability and uniformity of result, and (g) ease in the determination and application of the law to be applied.   See Second Restatement § 145 cmt. b (describing that § 6 requires evaluating “the relevant policies of other interested states and particularly of the state with the dominant interest in the determination of the particular issue”).

Weighing these policy considerations in light of the § 145 contacts, the court concludes that § 6 favors the application of Massachusetts law to plaintiff's indemnification, contribution and spoliation of evidence claims.   Massachusetts has a legitimate interest in applying its own substantive laws to claims such as contribution and indemnification that affect the judgments rendered by its courts.   Massachusetts also has a strong interest and recognizable stake in deciding matters related to the intentional, bad faith destruction or withholding of potential evidence in civil lawsuits being litigated in its courts.   Moreover, application of the law of a foreign jurisdiction to litigation misconduct occurring in the Massachusetts courts would seriously impair the “certainty, predictability and uniformity of result” and “ease of determination and application of the law” with respect to those issues.   If the position of the plaintiff were adopted, every out-of-state litigant in appearing before the Massachusetts courts might be entitled to import the law of its home state with respect to litigation misconduct.

Therefore, for the reasons stated, the court will apply Massachusetts law to the plaintiff's indemnification, contribution and spoliation of evidence claims.

D. Collateral Estoppel

The fundamental factual premise of BPETCO's entire lawsuit is its allegation that Merrill Lynch's concealment of evidence, destruction of evidence and false testimony was the only reason that BPETCO, rather than Merrill Lynch, was found liable in the Cahaly litigation.   BPETCO's pleadings and briefs are replete with references to this hypothesis.¹⁵

Merrill Lynch argues that the factual question of whether, but for the alleged litigation misconduct of Merrill Lynch, BPETCO would have been found liable for any intentional tort has been fully and fairly litigated and conclusively decided in the Massachusetts courts as part of the Cahaly litigation.   Merrill Lynch maintains that the doctrine of collateral estoppel bars BPETCO from re-litigating that issue before this court.   BPETCO argues that collateral estoppel does not apply, and that this court is free to make its own determination with respect to the respective liability of the parties in light of the information disclosed after the 2002 trial.

When collateral estoppel may be dispositive of a claim, summary judgment is the appropriate method for resolving that issue.  Jackson v. R.G. Whipple, Inc., 225 Conn. 705, 712, 627 A.2d 374 (1993);  see also Zanoni v. Lynch, 79 Conn.App. 325, 338, 830 A.2d 314, cert. denied, 266 Conn. 928, 837 A.2d 803 (2003).  “[T]he party asserting a defense of collateral estoppel ․ bears the burden of establishing its applicability.”  (Internal quotation marks omitted.)  Tarro v. Mastriani Realty, LLC, 142 Conn.App. 419, 429, cert. denied, 309 Conn. 912 (2013);  State v. Knight, 266 Conn. 658, 664, 835 A.2d 47 (2003).

“The common-law doctrine of collateral estoppel, or issue preclusion, embodies a judicial policy in favor of judicial economy, the stability of former judgments and finality.”  (Internal quotation marks omitted.)  Lighthouse Landings, Inc. v. Connecticut Light & Power Co., 300 Conn. 325, 343, 15 A.3d 601 (2011).  “Collateral estoppel ․ prohibits the relitigation of an issue when that issue was actually litigated and necessarily determined in a prior action between the same parties upon a different claim.”  (Emphasis in original;  internal quotation marks omitted.)  State v. Charlotte Hungerford Hospital, 308 Conn. 140, 145–46, 60 A.3d 946 (2013).

While historically mutuality of parties was required for a collateral estoppel claim, “mutuality of parties is no longer required to invoke collateral estoppel.”  Aetna Casualty & Surety Co. v. Jones, 220 Conn. 285, 300, 596 A.2d 414 (1991).   Thus, where “collateral estoppel is being invoked against a party to the prior proceeding ․ the privity requirement is not an issue.”   Wiacek Farms, LLC v. Shelton, 132 Conn.App. 163, 167 n.3, 30 A.3d 27 (2011), cert. denied, 303 Conn. 918 (2012).  “[A] party may assert the doctrine of collateral estoppel successfully when three requirements are met:  [1][t]he issue must have been fully and fairly litigated in the first action, [2] it must have been actually decided, and [3] the decision must have been necessary to the judgment.”  (Internal quotation marks omitted.)  Id., 132 Conn. 169.

The court will consider each of these requirements in turn.

1. Was the issue fully and fairly litigated in the first action?

“Collateral estoppel should be applied only when there exists such an identification in interest of one person with another as to represent the same legal rights so as to justify preclusion.”  Mazziotti v. Allstate Ins. Co., 240 Conn. 799, 814, 695 A.2d 1010 (1997).

BPETCO was an active participant in the Cahaly litigation and is also the party against whom issue preclusion is asserted in the present case.   Given the serious accusations made and the punitive damages claims asserted by the Cahaly plaintiffs, there is no doubt that BPETCO actively participated in that proceeding and was “sufficiently motivated” to fully and fairly litigate all questions of liability.   See Aetna Casualty & Surety Co. v. Jones, 220 Conn. 285, 306, 596 A.2d 414 (1991) (whenever collateral estoppel is asserted, court must make certain that there was a full and fair opportunity to litigate;  the seriousness of the allegations is a factor to be considered;  trivial or insignificant consequences might not give the party reason to challenge the allegations).   After a review of the evidence presented by both parties regarding the proceedings in Massachusetts, the court concludes that the interests of BPETCO were sufficiently represented in the prior action so that the application of collateral estoppel would not be inequitable.   See Mazziotti v. Allstate Ins. Co., supra.¹⁶

2. Was the Issue Actually Decided?

“[T]he linchpin of collateral estoppel is the identity of the issues decided by both tribunals,” Corcoran v. Soc. Ser., 271 Conn. 679, 691, 859 A.2d 533 (2004).   The issue sought to be precluded in this case must be identical to an issue that was actually litigated and decided in the Cahaly litigation.   “[T]he court must determine what facts were necessarily determined in the first trial, and must then assess whether the [party] is attempting to relitigate those facts in the second proceeding.”  (Internal quotation marks omitted.)   Aetna Casualty & Surety Co. v. Jones, 220 Conn. 285, 297, 596 A.2d 414 (1991).  “An issue is actually litigated if it is properly raised in the pleadings or otherwise, submitted for determination and in fact determined.”   Lighthouse Landings, Inc. v. Connecticut Light & Power Co., 300 Conn. 325, 343–45, 15 A.3d 601 (2011).

The courts of our state “have been reluctant to uphold the invocation of the doctrine [of collateral estoppel] unless the issues are completely identical.”  Corcoran v. Dept. of Social Services, supra, 271 Conn. 691.   Accordingly, “[o]ur Supreme Court has held ․ that an overlap in issues does not necessitate a finding of identity of issues for the purposes of collateral estoppel.”  Wiacek Farms, LLC v. Shelton, 132 Conn.App. 163, 172, 30 A.3d 27 (2011).

In the Cahaly case, a jury trial was held on common-law claims of breach of fiduciary duty, conversion, and intentional misrepresentation.   At that trial, according to BPETCO, “[t]he central issue ․ was whether Merrill Lynch knew in 1998–2000 that BPETCO and Mr. Carpenter were investing money of the Exchangors, BPETCO' s Section 1031 property exchange clients.”  (BPETCO July 16, 2013 Memorandum in Support of Motion for Partial Summary Judgment) at p. 7. Merrill Lynch employees testified at the trial and were cross examined on this issue.

The jury determined that the BPETCO defendants owed a fiduciary duty to the Cahaly plaintiffs and breached that duty, converted funds belonging to the Cahaly plaintiffs, and made intentional misrepresentations to the Cahaly plaintiffs.   The trial judge properly characterized this as “intentional conduct.”   See September 23, 2003 “Memorandum of Decision and Order on Plaintiffs' Claims under G.L.c. 93A.”

In 2004, the BPETCO defendants moved for a new trial, arguing that “newly discovered” evidence (in the form of two previously unknown or unavailable witnesses) proved that Merrill Lynch had in fact known that BPETCO and Carpenter were investing Section 1031 funds belonging to property exchange clients.   The BPETCO defendants specifically argued that a new trial was warranted on the basis that, had the jury been presented this evidence, the outcome of the trial would have likely been different.

Under Massachusetts procedure, a party seeking a new trial pursuant to Mass.R.Civ.P. Rule 60(b)(2) on grounds of “newly discovered evidence” must satisfy four requirements:  “(1) the evidence has been discovered since the trial;  (2) the evidence could not by due diligence have been discovered earlier by the movant;  (3) the evidence is not merely cumulative or impeaching;  and (4) the evidence is of such a nature that it would probably change the result were a new trial to be granted.”  Cahaly v. Benistar Prop. Exch., 451 Mass. 343, 361 (2008).   Therefore, an issue raised and submitted for determination by the court was whether evidence that Merrill Lynch had in fact known from the beginning of the customer relationship with BPETCO that BPETCO was investing Section 1031 funds belonging to property exchange clients, if offered and admitted at the 2002 trial, would likely have produced a different result.

The trial court denied the motion for a new trial, and the Massachusetts Supreme Judicial Court ultimately affirmed that ruling.  Cahaly v. Benistar Prop. Exch. Trust Co., Inc., 451 Mass. 343, 369, 885 N.E.2d 800 (2008).

The plaintiff dismisses the preclusive effect of the trial court's ruling, describing it as “hardly a well-reasoned decision.”  (September 6, 2013 Reply to Opposition to Motion for Summary Judgment at p. 2).   Apparently, the decision's brevity gives the plaintiff cause to question its reasoning.   Nonetheless, the Massachusetts appellate courts found the reasoning sufficiently lucid to affirm the ruling, making it a valid judgment for collateral estoppel purposes.   Also, the plaintiff claims that the 2004 decision has no preclusive effect because “the present lawsuit is not about new evidence discovered by the Exchangors in 2004, but is rather about new evidence produced by [Merrill Lynch lawyers] in 2009 and 2010.”

But that “new evidence” also came before the Massachusetts courts on a claim that, had the 2002 jury heard that “new evidence,” the outcome of that trial would have been different.   BPETCO raised that claim as the centerpiece of a second motion for a new trial, submitted it for determination, and on May 19, 2009, a second judge (different from the judge that had ruled on the 2004 motion) in fact decided the question and denied the motion for a new trial.   In its Order, the trial court held that “further evidence that Merrill Lynch knew that [BPETCO] was trading with other people's money” would not change the outcome of the trial.   Even assuming that the 2004 decision on the motion for new trial involved a different issue, it is hard to conceive how the 2009 decision on the motion for a new trial (which considered exactly the same “new evidence” that BPETCO claims “this case is about”) could be said to relate to a different issue.

Thus, the identical issue that BPETCO raises in this lawsuit—that new or different evidence regarding Merrill Lynch's knowledge of and involvement in BPETCO's trading of client funds would alter the outcome of the Cahaly trial regarding BPETCO's liability—has been twice raised in the Massachusetts courts in pleadings filed by BPETCO, submitted to the court for determination, and in fact determined adverse to BPETCO.

3. Was the Decision Necessary to the Judgment?

“An issue is necessarily determined if, in the absence of a determination of the issue, the judgment could not have been validly rendered.”  (Internal quotation marks omitted.)  Lighthouse Landings, Inc. v. Connecticut Light & Power Co., 300 Conn. 325, 343–45, 15 A.3d 601 (2011).   As previously stated, Mass.R.Civ.P. Rule 60(b)(2) requires that a court considering a motion for new trial determine whether “the evidence is of such a nature that it would probably change the result were a new trial to be granted.”   Therefore, by definition, a determination of that issue was necessary to the ruling denying the motion for a new trial.   See Cahaly v. Benistar Prop. Exch. Trust Co., Inc., 68 Mass.App.Ct. 668, 678, 864 N.E.2d 548 (2007), affirmed by Cahaly v. Benistar Prop. Exch. Trust Co., Inc., 451 Mass. 343, 369, 885 N.E.2d 800 (2008) (the newly discovered evidence “does not satisfy the requirement that it will likely affect the outcome of a trial against the [BPETCO] defendants”).

The issue of whether, had the Cahaly jury been presented this information, it would “have led to a different result and a lessening of liability, if not a complete exoneration of BPETCO ․” ¹⁷ has been fully and fairly litigated in the Massachusetts courts, was actually decided, and the decision on that issue was necessary to the denial of the motions for a new trial.   Therefore, collateral estoppel should apply to protect the finality of judicial determinations, conserve the time of the court and prevent wasteful relitigation.   See Doran v. First Connecticut Capital, LLC, 143 Conn.App. 318, 322, cert. denied, 310 Conn. 917 (2013), citing Mazziotti v. Allstate Ins. Co., 240 Conn. 799, 812, 695 A.2d 1010 (1997).

E. Substantive Claims

1. Count One (Indemnification)

As previously explained, Massachusetts law controls the plaintiff's indemnification claim in Count One. “[I]ndemnification ․ is a common-law right available to one who is without fault, [and] compelled by operation of law to defend himself against the wrongful act of another.”  Thomas v. EDI Specialists, Inc., 437 Mass. 536, 538 n.1 (2002);  Decker v. Black & Decker Mfg. Co., 389 Mass. 35, 40 (1983).  “The general rule is that a person who negligently causes injury to a third person is not entitled to indemnification from another person who also negligently caused that injury.”  Rathbun v. Western Mass. Elec. Co., 395 Mass. 361, 364 (1985) (“[I]ndemnity is permitted only when the would-be indemnitee does not join in the negligent act”).   Therefore, indemnification is proper “where the person seeking indemnification did not join in the negligent act of another but was exposed to liability because of that negligent act.”  Rathbun, 395 Mass. at 364 (holding that indemnification permits someone who is blameless to be reimbursed for damages caused by the wrongful act of its employee).  “Only in exceptional cases ․ has indemnity been allowed to one who was not free from fault.”  Id. In those rare situations where “indemnity has been allowed to a negligent indemnitee, the indemnitee's negligence has been insignificant in relation to that of the indemnitor.”  Id.

There are no genuine issues of material fact with respect to BPETCO's wrongful acts and its resulting liability directly to the Cahaly plaintiffs.   By virtue of the jury verdict rendered in Massachusetts, BPETCO cannot be said to be “without fault.”   Nor can it be argued that BPETCO's wrongdoing was “insignificant” in relation to that of Merrill Lynch, such that this might be one of the “rare” situations described in Rathbun where indemnification is allowed to an indemnitee who is not “free from fault.”   BPETCO has been adjudicated as liable for three intentional common-law torts and a violation of Massachusetts unfair trade practices statute.   Merrill Lynch was adjudicated as liable for aiding and abetting BPETCO in the commission of those wrongful acts.   Even in relative terms, BPETCO's culpability is hardly insignificant.   And, as previously noted, the doctrine of collateral estoppel precludes BPETCO from re-litigating the question of its liability relative to Merrill Lynch.

The court denies the plaintiff's motion for summary judgment, but grants the defendant's motion for summary judgment as to Count One of the complaint, since the plaintiff BPETCO is not entitled to indemnification as a matter of law.

2. Count Two (Contribution)

Massachusetts General Laws ch.   231B, § 1 “provides for a right to contribution ‘where two or more persons become jointly liable in tort,’ ․ and permits a tortfeasor to seek partial reimbursement from a party who is jointly liable if he has paid more than his ‘pro rata share’ of the damages.”   Thomas v. EDI Specialists, 437 Mass. 536, 538–39, 773 N.E.2d 415 (2002) (noting that the “statute does not distinguish between intentional torts and negligence”).   The defendant argues that BPETCO cannot seek contribution because it “has not paid more than its fair share of the judgment.”  (Memo in support at p. 22.)   In response, BPETCO argues that it has “paid over $15 million” to the Cahaly plaintiffs, and Merrill has paid nothing.  (BPETCO's August 27, 2013 Memorandum in Opposition (# 271) at p. 18.)

Central to the parties' dispute are the proceeds from a 2005 NASD arbitration brought in BPETCO's name against PaineWebber.¹⁸  BPETCO insists that, by reason of that $15 Million credit, it has “paid” far in excess of its proportionate share of the liability to Merrill Lynch.   Merrill Lynch counters that PaineWebber paid this amount directly to the Cahaly plaintiffs (meaning that BPETCO has “paid” nothing to the Cahaly plaintiffs) and a portion of the PaineWebber payment was reimbursed to PaineWebber by Merrill Lynch as part of a confidential agreement.

The court has reviewed all of the briefing and documentary evidence with respect to this subject and cannot find that the basic facts necessary to resolving the issue of contribution are in any way “undisputed.”   Genuine disputes exist as to material issues such as the total liability to the Cahaly plaintiffs, the extent to which either party can claim “credit” against that liability for the amounts paid by PaineWebber directly to the Cahaly plaintiffs, and the vexing question of what each party's “pro-rata” share of the damages is, such that calculation can be made as to whether payment has been made in excess of that amount.   These are, at best, mixed questions of fact and law which must be resolved by a trial before a finder of fact.¹⁹

The court denies both motions for summary judgment as to Count Two of the complaint, since there are genuine disputes as to material issues of fact.

3. Count Three (Unjust Enrichment)

In Massachusetts, unjust enrichment is the “retention of money or property of another against the fundamental principles of justice or equity and good conscience.”  Santagate v. Tower, 64 Mass.App.Ct. 324, 329 (2005).   To recover for unjust enrichment, a plaintiff must proffer facts demonstrating:  (1) a benefit conferred upon the defendant by the plaintiff;  (2) an appreciation or knowledge by the defendant of the benefit;  and (3) acceptance or retention by the defendant of the benefit under the circumstances would be inequitable without payment for its value.   See Massachusetts Eye & Ear Infirmary v. QLT Phototherapeutics, Inc., 552 F.3d 47, 57 (1st Cir.2009) (citing 26 Samuel Williston & Richard A. Lord, A Treatise on the Law of Contracts § 68:5 (4th ed.1993);  Foster v. Hurley, 61 Mass.App.Ct. 414, 420–22, 810 N.E.2d 1266 (2004).

In its complaint, BPETCO alleges that the benefit conferred upon Merrill Lynch was a reduction of its monetary liability by reason of the $15 Million in compensatory damages paid by the BPETCO defendants to the Cahaly plaintiffs.   BPETCO contends that it would be unjust and inequitable for Merrill Lynch to retain that benefit without payment for its value, because (in BPETCO's view) Merrill Lynch was “solely and/or primarily responsible for the damages to the Cahaly plaintiffs.”  (Complaint, Count Three, ¶ 135.)

Merrill Lynch observes that “BPETCO's unjust enrichment claim based on the Cahaly litigation mirrors its contribution claim.   Each demands ‘repayment’ of the over $15 Million allegedly paid by BPETCO to the Cahaly plaintiffs, on the theory that this amount should by rights have been paid by Merrill Lynch.”  (July 16, 2103 Memorandum of Law in Support of Motion for Summary Judgment (# 261.25) at p. 14.)   It is true that Count Three simply re-states the factual claims made in Count Two and re-casts them as a claim for unjust enrichment, but that does not necessarily mean that the claim is subject to the same legal analysis.   Some authority would suggest that those allegations, if proven, would constitute the unjust “conferral of a benefit” sufficient to support a claim for unjust enrichment.   See, e.g., 41 C.J.S. Implied Contracts § 9 (“A ‘benefit’ for purposes of an unjust enrichment claim is any form of advantage that has a measurable value, including the advantage of being saved from an expense or loss”).

But, in the end, just as with Count Two, summary judgment is inappropriate because the essential facts underlying the plaintiff's unjust enrichment claim are the subject of serious factual disputes between the litigants.   For example, Merrill Lynch claims that it “has paid roughly $31 Million, which vastly exceeds anything paid by BPETCO.”   For its part, BPETCO claims that it has “paid” over $15 Million, and Merrill Lynch has paid “$0.” ²⁰

Merrill Lynch argues that the equitable remedy for unjust enrichment should not be available to BPETCO because it has a contractual remedy, and on the basis of the equitable doctrines of in pari delicto and unclean hands.   But, given the stark disagreement between the parties as to the basic facts that would inform the court's decision as to the legal and equitable aspects of those defenses, then court cannot consider, much less resolve them, in the context of a motion for summary judgment.

The court denies both motions for summary judgment as to Count Three of the complaint, since there are genuine disputes as to material issues of fact.

4. Count Five (Intentional Spoliation of Evidence)

As previously stated, Massachusetts law controls the plaintiff's claim in Count Five for spoliation of evidence, and Massachusetts does not recognize an independent tort based on spoliation of evidence.  Fletcher v. Dorchester Mut. Ins. Co., 437 Mass. 544, 551, 773 N.E.2d 420 (2002).   Summary judgment will enter for the defendant as to Count Five of the complaint for the reason that the plaintiff is not entitled to judgment as a matter of law.

5. Count Eight (Breach of Contract)

Count Eight, as pled in the complaint, alleges that the broker-customer agreements between BPETCO and Merrill were breached (Complaint, Count Eight, ¶¶ 134, 138, 140).   The nature of the breaches is as follows:

134.  Merrill Lynch breached those agreements when it failed to account for BPETCO's ownership of common stock in three publicly traded securities—Broadcom, Yahoo and Qualcomm—which at that time of their disappearance were valued at nearly $12 Million.

138. New York law, applicable to the parties' agreement by its terms, implies a duty of good faith and fair dealing between the parties in connection with their rights and responsibilities.   Merrill Lynch breached, and continued to breach until 2009, its duty of good faith and fair dealing by failing to provide truthful information to the authorities and to the Courts regarding the accounts.

Both parties have moved for summary judgment as to Count Eight.   The plaintiff has offered no evidence to support its breach of contract claim based on “failure to account” for BPETCO's $12 Million in stock at the time the accounts were transferred to PaineWebber, and the court assumes that basis for the breach of contract claim is abandoned.²¹

As to the claim for breach of contract based on the duty of good faith and fair dealing, under New York law, implicit in every contract is a promise of good faith and fair dealing, Rowe v. Great Atlantic & Pacific Tea Co., 46 N.Y.2d 62, 69, 385 N.E.2d 566 (1978), which is breached when a party “acts in a manner that, although not expressly forbidden by any contractual provision, would deprive the other party of the right to receive the benefits under their agreement.”  Jaffe v. Paramount Communications, Inc., 222 A.D.2d 17, 22, 644 N.Y.S.2d 42 (1st Dept.1996).

BPETCO argues that Merrill Lynch's allegedly false testimony at the Cahaly trial, although it occurred well after the parties' contractual relationship had terminated and although it was not in violation of any express provision of the agreement, nonetheless deprived BPETCO of the benefit of its bargain under the agreement.   The plaintiff supports its bold assertion that it was denied benefits under the agreement not with facts, but only with conclusory arguments as to liability.   As for the proposition that a duty of good faith and fair dealing can occur in the absence of an ongoing contractual relationship, the plaintiff supplies no case authority whatsoever.   The defendant asserts that “no claim lies under the implied covenant where there is no contract,” citing Four Winds of Saratoga, Inc. v. Blue Cross & Blue Shield of Cent. New York, Inc., 241 A.D.2d 906, 907, 660 N.Y.S.2d 236 (3d Dept.1997).   That particular decision is not quite on point (it relies on a finding that there was never a contract), but the concept it relies upon is comparable.   It is illogical for a duty which arises in the “performance and enforcement” of a contract to exist in the absence of a contract, or to exist indefinitely after the contract has been fully performed or otherwise terminated.   See Restatement (Second) of Contracts § 205 (“Every contract imposes upon each party a duty of good faith and fair dealing in its performance and enforcement”).   Conceivably, scenarios might be imagined where the duty of good faith and fair dealing might survive the performance of a contract, but those extraordinary circumstances are not present here.

The plaintiff has failed to establish a contractual duty—express or implied—that was breached and would entitle it to judgment as a matter of law.   The plaintiff has failed to meet its burden on summary judgment, Gupta v. New Britain General Hospital, 239 Conn. 574, 582, 687 A.2d 111 (1996), while the defendant has demonstrated that it is entitled to summary judgment in its favor.

Accordingly, the court denies the plaintiff's motion for summary judgment, but grants the defendant's motion for summary judgment as to Count Eight of the complaint.

6. Count Nine (Conversion)

Count Nine alleges that at the time its accounts were transferred to PaineWebber, Broadcomm, Yahoo and Qualcomm stock valued at $12 Million (which were “assets” of BPETCO, see Complaint, Count Nine, ¶ 145) “went missing” (Complaint, Count Nine, ¶ 134).   The Complaint further alleges that the stocks were “stolen” by Merrill Lynch (Complaint, Count Nine, ¶ 135), then “cashed in,” and paid out in bonuses to Merrill Lynch employees.  (Complaint, Count Nine, ¶ 136.)

Merrill Lynch has offered evidence calling into question the underlying factual premise of BPETCO's claim that it “owned” the stocks in question at the time its accounts were transferred to PaineWebber.   Contemporaneous account statements demonstrate that BPETCO did not have actual ownership of the stock, rather its securities brokerage account with Merrill Lynch had offsetting “long” and “short” positions in those securities.²²

The plaintiff opposes Merrill Lynch's evidence with a deposition comment by a BPETCO expert to the effect that theft “may have” occurred, and Merrill Lynch's expert's inability to explain why short and long positions were shown on the account statements.   BPETCO argues that this “evidence” is sufficient to create a genuine issue of material fact for the jury as to the conversion and unjust enrichment claims (see Merrill Lynch July 16, 2013 Memorandum in Support of Motion for Summary Judgment (# 261.25) at p. 32).

“The existence of the genuine issue of material fact must be demonstrated by counteraffidavits and concrete evidence.”  (Internal quotation marks omitted.)  Gianetti v. Health Net of Connecticut, Inc., 116 Conn.App. 459, 465, 976 A.2d 23 (2009).  “Demonstrating a genuine issue requires a showing of evidentiary facts or substantial evidence outside the pleadings from which material facts alleged in the pleadings can be warrantably inferred.”   (Internal quotation marks omitted.)  New Milford Savings Bank v. Roina, 38 Conn.App. 240, 244, 659 A.2d 1226, cert. denied, 235 Conn. 915, 665 A.2d 609 (1995).   Only evidence that would be admissible at trial may be used to support or oppose a motion for summary judgment.  Practice Book § 17–46.

An expert's speculation or conjecture that theft “may have occurred” does not satisfy the requirement that evidence proffered in opposition to summary judgment be admissible at trial.   Also, Merrill Lynch's expert's inability to explain why certain entries were made on an account statement (which he obviously did not prepare) may provide an issue for purposes of weighing that expert's opinion, but it does not reveal a material issue of fact as to the question of ownership of the stock.

To establish a prima facie case of conversion, the plaintiff must demonstrate that the securities at issue belonged to BPETCO.  Coster v. Duquette, 119 Conn.App. 827, 831–32, 990 A.2d 362 (2010).   After careful consideration of the documentary proof submitted and the affidavits and relevant testimony of Messrs.   Eubank, Sullivan and Paulukaitis, the court finds that the plaintiff has not offered evidence demonstrating the existence of a genuine issue of material fact as to whether, at the time Merrill Lynch transferred the BPETCO accounts to PaineWebber, BPETCO had “ownership of common stock in three publicly traded securities—Broadcom, Yahoo and Qualcomm.”

The defendant has met its burden of proving that there are no genuine issues of material fact as to whether BPETCO “owned” the stock in question, which is an essential element of its claim of conversion.   The plaintiff, on the other hand, has failed to provide an evidentiary foundation to demonstrate that a genuine issue of fact exists.   Summary judgment will enter in favor of the defendant as to Count Nine of the Complaint.

7. Count Ten (Unjust Enrichment)

Count Ten of the Complaint alleges that the $12 Million in securities that BPETCO assumed were in its Merrill Lynch account and that “went missing” when the accounts were transferred to PaineWebber “were cashed in and paid out in year-end bonuses to Merrill Lynch employees,” (Complaint ¶¶ 133 and 134) and that by “stealing BPETCO's $12 Million in equities,” Merrill Lynch has been unjustly enriched.  (Complaint ¶¶ 135.)

As explained in the discussion regarding Count Nine, the court finds that there is no real doubt as to the existence of any genuine issue of material fact regarding whether BPETCO “owned” the stocks in question.   Moreover, viewing the evidence in the light most favorable to the plaintiff, and drawing all reasonable inferences in the plaintiff's favor, the court finds that BPETCO has produced no evidence at all that reveals a material, factual dispute as to its allegation that Merrill Lynch “cashed in” the securities and “paid out” the proceeds to its employees.   The purpose of motion for summary judgment is to dispose of actions lacking a triable issue of material fact.  Dorazio v. M.B. Foster Electric Co., 157 Conn. 226, 228, 253 A.2d 22 (1968).   A party opposing a summary judgment motion “must provide an evidentiary foundation to demonstrate the existence of a genuine issue of material fact.”  Harvey v. Boehringer Ingelheim Corp., 52 Conn.App. 1, 4, 724 A.2d 1143 (1999).

Because the plaintiff has not produced evidence sufficient to demonstrate the existence of a genuine issue of material fact as to its ownership of the securities in question and Merrill Lynch's “enrichment” from the proceeds of the sale of those securities, summary judgment will enter in favor of the defendant as to Count Ten of the Complaint.

III. CONCLUSION

For the foregoing reasons, summary judgment is granted in favor of the defendant on the claims in Counts One, Five, Eight, Nine and Ten.²³

Summary judgment is denied as to Count Two and Three.

BY THE COURT,

Sheridan, J.

FOOTNOTES

FN1. At times during the 15–year course of events described herein, the entity now known as BPETCO has also operated under the name of Benistar Property Exchange Trust Company, Inc. For clarity, regardless of the date in question, that entity is referred to as “BPETCO” throughout this decision..  FN1. At times during the 15–year course of events described herein, the entity now known as BPETCO has also operated under the name of Benistar Property Exchange Trust Company, Inc. For clarity, regardless of the date in question, that entity is referred to as “BPETCO” throughout this decision.

FN2. Section 1031 permits a taxpayer to avoid taxes on the sale of an investment property by using the proceeds to purchase a similar property, provided that, in between the sale and subsequent purchase, the funds are held by a “qualified intermediary.”   The qualified intermediary enters into a written agreement with the taxpayer where the intermediary transfers the relinquished property to the buyer, and transfers the replacement property to the taxpayer pursuant to the exchange agreement.   The Intermediary holds the proceeds from the sale of the relinquished property in a trust or escrow account in order to ensure the taxpayer never has actual or constructive receipt of the sale proceeds..  FN2. Section 1031 permits a taxpayer to avoid taxes on the sale of an investment property by using the proceeds to purchase a similar property, provided that, in between the sale and subsequent purchase, the funds are held by a “qualified intermediary.”   The qualified intermediary enters into a written agreement with the taxpayer where the intermediary transfers the relinquished property to the buyer, and transfers the replacement property to the taxpayer pursuant to the exchange agreement.   The Intermediary holds the proceeds from the sale of the relinquished property in a trust or escrow account in order to ensure the taxpayer never has actual or constructive receipt of the sale proceeds.

FN3. For convenience, BPETCO, Daniel Carpenter, Molly Carpenter and Martin Paley are referred to herein in the context of the Cahaly litigation as “the BPETCO defendants.”.  FN3. For convenience, BPETCO, Daniel Carpenter, Molly Carpenter and Martin Paley are referred to herein in the context of the Cahaly litigation as “the BPETCO defendants.”

FN4. Gail A. Cahaly et al. v. Benistar Property Exchange Trust Co., Inc., 68 Mass.App.Ct. 668, 678, 864 N.E.2d 548 (2007);  Cahaly v. Benistar Prop. Exch. Trust Co., 451 Mass. 343, 885 N.E.2d 800 (Mass.2008)..  FN4. Gail A. Cahaly et al. v. Benistar Property Exchange Trust Co., Inc., 68 Mass.App.Ct. 668, 678, 864 N.E.2d 548 (2007);  Cahaly v. Benistar Prop. Exch. Trust Co., 451 Mass. 343, 885 N.E.2d 800 (Mass.2008).

FN5. After a bench trial on the plaintiff's statutory unfair trade practices claim, the court assessed punitive double damages, interest, attorneys fees and costs against BPETCO, and in November 2004 entered judgment against BPETCO in the amount of $19.2 million..  FN5. After a bench trial on the plaintiff's statutory unfair trade practices claim, the court assessed punitive double damages, interest, attorneys fees and costs against BPETCO, and in November 2004 entered judgment against BPETCO in the amount of $19.2 million.

FN6. Following a trial in June 2009, a jury once again found for the plaintiffs on all of their claims against Merrill Lynch.   In February 2011 the Cahaly plaintiffs were awarded $19.4 million in damages, interest, attorneys fees and costs for their claims against Merrill Lynch..  FN6. Following a trial in June 2009, a jury once again found for the plaintiffs on all of their claims against Merrill Lynch.   In February 2011 the Cahaly plaintiffs were awarded $19.4 million in damages, interest, attorneys fees and costs for their claims against Merrill Lynch.

FN7. All claims against defendant Bingham McCutchen, LLP were dismissed based on litigation privilege grounds..  FN7. All claims against defendant Bingham McCutchen, LLP were dismissed based on litigation privilege grounds.

FN8. See October 16, 2012 Memorandum of Decision on Defendant's Motion to Dismiss (# 176) and May 16, 2013 Order Regarding Motion to Strike (# 234) [56 Conn. L. Rptr. 125]..  FN8. See October 16, 2012 Memorandum of Decision on Defendant's Motion to Dismiss (# 176) and May 16, 2013 Order Regarding Motion to Strike (# 234) [56 Conn. L. Rptr. 125].

FN9. Those three jurisdictions potentially have an interest in this dispute by reason of, inter alia, 1) Merrill Lynch's significant presence in the State of New York;  2) BPETCO's presence in Connecticut and Massachusetts, and 3) the trial and judgment in the Cahaly litigation, which was brought by plaintiff's resident in Massachusetts and adjudicated in the Massachusetts state courts..  FN9. Those three jurisdictions potentially have an interest in this dispute by reason of, inter alia, 1) Merrill Lynch's significant presence in the State of New York;  2) BPETCO's presence in Connecticut and Massachusetts, and 3) the trial and judgment in the Cahaly litigation, which was brought by plaintiff's resident in Massachusetts and adjudicated in the Massachusetts state courts.

FN10. See, e.g., A & G Contracting, Inc. v. Design/Build Collaborative, LLC, Superior Court, Judicial District of New Haven at New Haven, Docket No. CV 10–6008755 (August 23, 2012, Blue, J.) (“Since tortious indemnification is an equitable remedy, it hardly makes sense to allow the action for a nonintentional tort, such as negligence, and disallow it for an intentional tort, such as fraudulent misrepresentation Such a priority would turn the concept of equity on its head”)..  FN10. See, e.g., A & G Contracting, Inc. v. Design/Build Collaborative, LLC, Superior Court, Judicial District of New Haven at New Haven, Docket No. CV 10–6008755 (August 23, 2012, Blue, J.) (“Since tortious indemnification is an equitable remedy, it hardly makes sense to allow the action for a nonintentional tort, such as negligence, and disallow it for an intentional tort, such as fraudulent misrepresentation Such a priority would turn the concept of equity on its head”).

FN11. The defendant's reliance on Georchelle Enter., Inc. v. Public Service Mutual Ins. Co., 67 A.D.2d 633, 634 (1979) is misplaced.   That decision stands for the proposition that for purposes of the statute of limitations, a cause of action for contribution does not accrue until the party seeking contribution has made payment on the underlying claim in excess of his proportionate share.   It does not stand for the proposition that a joint tortfeasor cannot seek contribution in the absence of payment in excess of its proportionate share.   Nonetheless, it is implicit in the definition of “contribution” adopted and employed by New York courts that payment “in discharge of the joint liability” is an essential element of a claim for contribution.   See, e.g. Rosado v. Proctor & Schwartz, 66 N.Y.2d 21 (1985) (“Basically, in contribution the loss is distributed among tortfeasors, by requiring joint tortfeasors to pay a proportionate share of the loss to one who has discharged their joint liability ․”).  FN11. The defendant's reliance on Georchelle Enter., Inc. v. Public Service Mutual Ins. Co., 67 A.D.2d 633, 634 (1979) is misplaced.   That decision stands for the proposition that for purposes of the statute of limitations, a cause of action for contribution does not accrue until the party seeking contribution has made payment on the underlying claim in excess of his proportionate share.   It does not stand for the proposition that a joint tortfeasor cannot seek contribution in the absence of payment in excess of its proportionate share.   Nonetheless, it is implicit in the definition of “contribution” adopted and employed by New York courts that payment “in discharge of the joint liability” is an essential element of a claim for contribution.   See, e.g. Rosado v. Proctor & Schwartz, 66 N.Y.2d 21 (1985) (“Basically, in contribution the loss is distributed among tortfeasors, by requiring joint tortfeasors to pay a proportionate share of the loss to one who has discharged their joint liability ․”)

FN12. General Statutes § 52–572h(c) provides in relevant part:  “In a negligence action to recover damages resulting from personal injury, wrongful death or damage to property occurring on or after October 1, 1987, if the damages are determined to be proximately caused by the negligence of more than one party, each party against whom recovery is allowed shall be liable to the claimant only for such party's proportionate share of the recoverable economic damages and the recoverable noneconomic damages ․”.  FN12. General Statutes § 52–572h(c) provides in relevant part:  “In a negligence action to recover damages resulting from personal injury, wrongful death or damage to property occurring on or after October 1, 1987, if the damages are determined to be proximately caused by the negligence of more than one party, each party against whom recovery is allowed shall be liable to the claimant only for such party's proportionate share of the recoverable economic damages and the recoverable noneconomic damages ․”

FN13. See Complaint Count Eight, ¶ 138;  August 27, 2013 BPETCO Opposition to Summary Judgment (# 271) at p. 5, n.1;  July 16, 2013 Merrill Lynch Memorandum in Support of Motion for Summary Judgment (# 261.25) at pp. 15–16..  FN13. See Complaint Count Eight, ¶ 138;  August 27, 2013 BPETCO Opposition to Summary Judgment (# 271) at p. 5, n.1;  July 16, 2013 Merrill Lynch Memorandum in Support of Motion for Summary Judgment (# 261.25) at pp. 15–16.

FN14. Although the Plaintiff argues for the application of Connecticut law, it concedes that “the conduct and injury giving rise to the indemnification (and contribution) claims is actually the conduct of Merrill in withholding and concealing key documents and evidence that led to the finding of liability of BPETCO in 2002.”  (Plaintiff's August 27, 2013 Opposition to Motion for Summary Judgment (# 271) at p. 10.).  FN14. Although the Plaintiff argues for the application of Connecticut law, it concedes that “the conduct and injury giving rise to the indemnification (and contribution) claims is actually the conduct of Merrill in withholding and concealing key documents and evidence that led to the finding of liability of BPETCO in 2002.”  (Plaintiff's August 27, 2013 Opposition to Motion for Summary Judgment (# 271) at p. 10.)

FN15. See, e.g. BPETCO's July 16, 2013, Memorandum in Support of Plaintiff's Motion for Partial Summary Judgment (# 257) as follows:Had Merrill been honest, forthright and fair in its original defense of the Cahaly litigation in, among other things, the production of documents and truthful testimony ․ BPETCO would not have suffered tens of millions of dollars of judgments and legal fees that it has since the Cahaly Litigation first commenced. (p. 3.)Had Merrill been honest from the beginning of the litigation ․ such honesty would have resulted in a different result for BPETCO and Mr. Carpenter. (p. 6.)Thus, Merrill Lynch's active concealment and destruction of evidence, combined with its perjury and fraud on the court, is the proximate cause of all of BPETCO's damages alleged in this lawsuit. (p. 7.)Simply put, but for the perjury and knowing concealment and destruction of material evidence by Merrill, BPETCO would not have been found primarily liable to the Exchangors and would not have incurred tens of millions of dollars in collateral damage and legal fees arising from the Cahaly Litigation. (pp. 7–8.)Had Merrill simply admitted this basic fact [that it knew that Carpenter was trading with Section 1031 client funds] the original judgment would, as BPETCO asserts, have primarily been against Merrill and not BPETCO. (p. 9.)[Had the documents been produced by Merrill in discovery prior to trial] it “would undoubtedly have led to a different result and a lessening of liability, if not a complete exoneration of BPETCO ․” (p. 14.)Had the jury been provided the evidence outlined above [that Merrill Lynch had actual knowledge that BPETCO was investing client funds] during the 2002 trial, the result of the trial would have undoubtedly been different and Merrill would likely have been found fully liable or would have at least shared in BPETCO's liability. (p. 22.)․ Merrill employees testified during the trial that it had no such knowledge [that BPETCO was investing client funds] ․ As a result of this false evidence, BPETCO was held primarily liable after the 2002 trial. (p. 25.)The withholding of that evidence led to a finding of primary liability by the jury in 2002 and a finding of no liability on Merrill ․ (p. 26.)Had Merrill properly produced the relevant documents and truthfully testified during the 2002 trial, it would have most certainly been found liable to the Exchangors for the full amount of the judgment or at least a large portion. (p. 28.)Had the evidence been produced in 2002, as it should have been, Merrill would have been liable to the Exchangors for the full amount of the judgment or at least a majority of the amount. (p. 30.)․ because of Merrill's concealment and destruction of evidence, BPETCO was unable to present a prima facie defense during the 2002 trial and as a result, it was held primarily liable for the damages suffered by the Exchangors. (p. 31.)As a result of this false evidence, BPETCO was held primarily liable after the 2002 trial. (p. 33.)Had Merrill properly disclosed the relevant evidence in 2002, it would have been found liable then and BPETCO's liability would have disappeared or been significantly reduced ․ (p. 34.)See also, BPETCO's August 27, 2013 Opposition to Motion for Summary Judgment (# 271), as follows:If not for Merrill, BPETCO would not have been found liable. (p. 3.)BPETCO contends it would never have been a tortfeasor at all but for Merrill's conduct (p. 5–6.)BPETCO contends it would not have been found liable for any intentional tort but for the actions of Merrill ․ (p. 12.).  FN15. See, e.g. BPETCO's July 16, 2013, Memorandum in Support of Plaintiff's Motion for Partial Summary Judgment (# 257) as follows:Had Merrill been honest, forthright and fair in its original defense of the Cahaly litigation in, among other things, the production of documents and truthful testimony ․ BPETCO would not have suffered tens of millions of dollars of judgments and legal fees that it has since the Cahaly Litigation first commenced. (p. 3.)Had Merrill been honest from the beginning of the litigation ․ such honesty would have resulted in a different result for BPETCO and Mr. Carpenter. (p. 6.)Thus, Merrill Lynch's active concealment and destruction of evidence, combined with its perjury and fraud on the court, is the proximate cause of all of BPETCO's damages alleged in this lawsuit. (p. 7.)Simply put, but for the perjury and knowing concealment and destruction of material evidence by Merrill, BPETCO would not have been found primarily liable to the Exchangors and would not have incurred tens of millions of dollars in collateral damage and legal fees arising from the Cahaly Litigation. (pp. 7–8.)Had Merrill simply admitted this basic fact [that it knew that Carpenter was trading with Section 1031 client funds] the original judgment would, as BPETCO asserts, have primarily been against Merrill and not BPETCO. (p. 9.)[Had the documents been produced by Merrill in discovery prior to trial] it “would undoubtedly have led to a different result and a lessening of liability, if not a complete exoneration of BPETCO ․” (p. 14.)Had the jury been provided the evidence outlined above [that Merrill Lynch had actual knowledge that BPETCO was investing client funds] during the 2002 trial, the result of the trial would have undoubtedly been different and Merrill would likely have been found fully liable or would have at least shared in BPETCO's liability. (p. 22.)․ Merrill employees testified during the trial that it had no such knowledge [that BPETCO was investing client funds] ․ As a result of this false evidence, BPETCO was held primarily liable after the 2002 trial. (p. 25.)The withholding of that evidence led to a finding of primary liability by the jury in 2002 and a finding of no liability on Merrill ․ (p. 26.)Had Merrill properly produced the relevant documents and truthfully testified during the 2002 trial, it would have most certainly been found liable to the Exchangors for the full amount of the judgment or at least a large portion. (p. 28.)Had the evidence been produced in 2002, as it should have been, Merrill would have been liable to the Exchangors for the full amount of the judgment or at least a majority of the amount. (p. 30.)․ because of Merrill's concealment and destruction of evidence, BPETCO was unable to present a prima facie defense during the 2002 trial and as a result, it was held primarily liable for the damages suffered by the Exchangors. (p. 31.)As a result of this false evidence, BPETCO was held primarily liable after the 2002 trial. (p. 33.)Had Merrill properly disclosed the relevant evidence in 2002, it would have been found liable then and BPETCO's liability would have disappeared or been significantly reduced ․ (p. 34.)See also, BPETCO's August 27, 2013 Opposition to Motion for Summary Judgment (# 271), as follows:If not for Merrill, BPETCO would not have been found liable. (p. 3.)BPETCO contends it would never have been a tortfeasor at all but for Merrill's conduct (p. 5–6.)BPETCO contends it would not have been found liable for any intentional tort but for the actions of Merrill ․ (p. 12.)

FN16. Citing Mazziotti v. Allstate, the plaintiff argues that, since none of its seven remaining causes of action in this lawsuit were actually litigated in Cahaly, BPETCO's interests were not “sufficiently represented” as Mazziotti requires.   The court disagrees.  Mazziotti does not require identity as to causes of action, only that “the interest of the party to be precluded must have been sufficiently represented in the prior action so that the application of collateral estoppel is not inequitable.”  (Emphasis added.)  Id., 818..  FN16. Citing Mazziotti v. Allstate, the plaintiff argues that, since none of its seven remaining causes of action in this lawsuit were actually litigated in Cahaly, BPETCO's interests were not “sufficiently represented” as Mazziotti requires.   The court disagrees.  Mazziotti does not require identity as to causes of action, only that “the interest of the party to be precluded must have been sufficiently represented in the prior action so that the application of collateral estoppel is not inequitable.”  (Emphasis added.)  Id., 818.

FN17. See BPETCO's July 16, 2013, Memorandum in Support of Plaintiff's Motion for Partial Summary Judgment (# 257) at pp. 7–8..  FN17. See BPETCO's July 16, 2013, Memorandum in Support of Plaintiff's Motion for Partial Summary Judgment (# 257) at pp. 7–8.

FN18. In addition to entering judgment in favor of the Cahaly plaintiffs against BPETCO, the Massachusetts trial court assigned to the Cahaly plaintiffs any claims that BPETCO might have against PaineWebber.   Lawyers for the Cahaly plaintiffs prosecuted a claim against PaineWebber, in BPETCO's name, before a NASD arbitration panel in Hartford and were awarded approximately $12.5 Million in damages.   PaineWebber's payment pursuant to that awarded was turned over to the plaintiffs and BPETCO received a $15 Million credit against the judgment..  FN18. In addition to entering judgment in favor of the Cahaly plaintiffs against BPETCO, the Massachusetts trial court assigned to the Cahaly plaintiffs any claims that BPETCO might have against PaineWebber.   Lawyers for the Cahaly plaintiffs prosecuted a claim against PaineWebber, in BPETCO's name, before a NASD arbitration panel in Hartford and were awarded approximately $12.5 Million in damages.   PaineWebber's payment pursuant to that awarded was turned over to the plaintiffs and BPETCO received a $15 Million credit against the judgment.

FN19. Merrill Lynch also argues that Count Two is an impermissible “collateral attack” on the Massachusetts judgment.   The court disagrees.   The court can locate nothing in the record of the Massachusetts proceedings—and the parties have not pointed out anything in that record—which indicates that the Massachusetts courts have taken up the task of measuring the relative responsibility of these two tortfeasors with respect to the injuries and losses sustained by the Cahaly plaintiffs.   The same argument is also made as to Count Three and rejected for the same reason..  FN19. Merrill Lynch also argues that Count Two is an impermissible “collateral attack” on the Massachusetts judgment.   The court disagrees.   The court can locate nothing in the record of the Massachusetts proceedings—and the parties have not pointed out anything in that record—which indicates that the Massachusetts courts have taken up the task of measuring the relative responsibility of these two tortfeasors with respect to the injuries and losses sustained by the Cahaly plaintiffs.   The same argument is also made as to Count Three and rejected for the same reason.

FN20. See, e.g., Merrill Lynch July 16, 2013 Memorandum in Support of Motion for Summary Judgment (# 261.25) at p. 25;  BPETCO's August 27, 2013 Opposition to Motion for Summary Judgment (# 271) at p. 23..  FN20. See, e.g., Merrill Lynch July 16, 2013 Memorandum in Support of Motion for Summary Judgment (# 261.25) at p. 25;  BPETCO's August 27, 2013 Opposition to Motion for Summary Judgment (# 271) at p. 23.

FN21. Even if the court's assumption that the claim is abandoned is mistaken, based on the evidence submitted by the defendant with respect to the “missing” $12 Million in stock (discussed herein in connection with the conversion and unjust enrichment), “it is quite clear what the truth is, and that excludes any real doubt as to the existence of any genuine issue of material fact.”  Ramirez v. Health Net of the Northeast, Inc., 285 Conn. 1, 11, 938 A.2d 576 (2008).   That basis for breach of contract cannot be factually supported..  FN21. Even if the court's assumption that the claim is abandoned is mistaken, based on the evidence submitted by the defendant with respect to the “missing” $12 Million in stock (discussed herein in connection with the conversion and unjust enrichment), “it is quite clear what the truth is, and that excludes any real doubt as to the existence of any genuine issue of material fact.”  Ramirez v. Health Net of the Northeast, Inc., 285 Conn. 1, 11, 938 A.2d 576 (2008).   That basis for breach of contract cannot be factually supported.

FN22. In options trading, “position” refers to a binding commitment to buy or sell a given amount of securities for a given price.   Taking a “short” position in stock involves borrowing shares of stock from a broker and selling them with the expectation that the asset will fall in value.   The investor returns the borrowed stock by purchasing it back from the open market.   If the stock has fallen in price, the investor buys it for less than he sold it, thus realizing a profit.   By contrast, a “long position” in stock is created by purchasing shares of the stock.   The investor is said to be in a long position until he sells or transfers the stock..  FN22. In options trading, “position” refers to a binding commitment to buy or sell a given amount of securities for a given price.   Taking a “short” position in stock involves borrowing shares of stock from a broker and selling them with the expectation that the asset will fall in value.   The investor returns the borrowed stock by purchasing it back from the open market.   If the stock has fallen in price, the investor buys it for less than he sold it, thus realizing a profit.   By contrast, a “long position” in stock is created by purchasing shares of the stock.   The investor is said to be in a long position until he sells or transfers the stock.

FN23. The defendant has also sought summary judgment as to several of these counts based on the statutes of limitation.   Based on the court's findings as to the non-existence of issues of fact and the defendant's entitlement to judgment as a matter of law, the court does not reach the question of whether the claims are time-barred..  FN23. The defendant has also sought summary judgment as to several of these counts based on the statutes of limitation.   Based on the court's findings as to the non-existence of issues of fact and the defendant's entitlement to judgment as a matter of law, the court does not reach the question of whether the claims are time-barred.

Sheridan, David M., J.